UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
---------
(X) QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
MARCH 31, 1998
--------------
OR
( ) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
COMMISSION FILE NO.
1-6479-1
-------------------
OVERSEAS SHIPHOLDING GROUP, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2637623
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication No.)
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
-----------------
No Change
- ----------------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report
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
---- ----
Common Shares outstanding as of May 11, 1998 - 36,794,121
<PAGE>
<TABLE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
<CAPTION>
MARCH DECEMBER
31, 1998 31, 1997 (A)
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash, including interest-bearing
deposits of $113,648,000 and
$109,835,000 $ 116,964,000 $ 113,195,000
Receivables 30,590,000 30,806,000
Prepaid expenses 30,032,000 26,379,000
-------------- --------------
Total Current Assets 177,586,000 170,380,000
Investments in Marketable Securities 36,158,000 26,792,000
Capital Construction Fund 184,143,000 174,892,000
Vessels, at cost, less accumulated
depreciation of $475,424,000
and $459,965,000 - Notes F and H6 1,100,281,000 1,106,790,000
Vessels Under Capital Leases, less
accumulated amortization of
$63,513,000 and $87,392,000 -
Note H6 58,577,000 65,475,000
Vessels included in Disposal Program,
at estimated fair value - Note H1 127,132,000 135,860,000
Investment in Cruise Business -
Note B 160,269,000
Investments in Bulk Shipping Joint
Ventures - Note C 95,845,000 95,542,000
Other Assets 81,346,000 87,224,000
-------------- --------------
$1,861,068,000 $2,023,224,000
============== ==============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
- -------------------
<S> <C> <C>
Accounts payable $ 3,508,000 $ 6,099,000
Sundry liabilities and accrued
expenses 54,689,000 36,649,000
-------------- --------------
58,197,000 42,748,000
Current installments of long-term
debt - Note F 22,588,000 22,430,000
Current obligations under capital
leases - Note H6 3,815,000 5,867,000
-------------- --------------
Total Current Liabilities 84,600,000 71,045,000
Advance Time Charter Revenues 6,980,000 7,433,000
Long-term Debt - Notes F and H6 765,603,000 966,212,000
Obligations Under Capital Leases -
Note H6 80,684,000 90,094,000
Deferred Federal Income Taxes
($113,039,000 and $102,514,000)
and Deferred Credits - Note E 119,385,000 108,643,000
-------------- --------------
Shareholders' Equity - Notes E and H2 803,816,000 779,797,000
Other Comments - Note H
-------------- --------------
$1,861,068,000 $2,023,224,000
============== ==============
<FN>
(A)The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
(See Accompanying Notes)
</TABLE>
<PAGE>
<TABLE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(UNAUDITED)
------------------------------------------------------------
<CAPTION>
MARCH MARCH
31, 1998 31, 1997
------------ ------------
<S> <C> <C>
Shipping Revenues:
Revenue from voyages $105,033,000 $126,781,000
Income attributable to bulk
shipping joint ventures -
Note C 303,000 1,012,000
------------ ------------
105,336,000 127,793,000
------------ ------------
Shipping Expenses:
Vessel and voyage - Note D 64,245,000 78,548,000
Depreciation of vessels and
amortization of capital leases 16,781,000 19,668,000
Agency fees - Note D 8,819,000 8,844,000
General and administrative 2,874,000 3,129,000
------------ ------------
92,719,000 110,189,000
------------ ------------
Income from Vessel Operations 12,617,000 17,604,000
Equity in Results of Cruise Business
- Note B (1,472,000)
Other Income (net) - Note G 7,311,000 7,771,000
------------ ------------
19,928,000 23,903,000
Interest Expense 18,965,000 19,816,000
------------ ------------
963,000 4,087,000
Gain on Sale of Investment in Cruise
Business - Note B 42,288,000
Provision for Loss on Vessel Disposal
Program - Note H1 (5,100,000)
---------- ---------
Income before Federal Income Taxes 38,151,000 4,087,000
Provision for Federal Income Taxes,
reflecting deferred provision
of $7,425,000 and $2,040,000 -
Note E 14,325,000 2,040,000
------------ ------------
Net Income $ 23,826,000 $ 2,047,000
============ ============
Per Share Amounts - Note H:
Basic and diluted net income $.65 $.06
==== ====
Cash dividends declared $.15 $.15
===== ====
<FN>
(See Accompanying Notes)
</TABLE>
<PAGE>
<TABLE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(UNAUDITED)
-------------------------------------------------------------
<CAPTION>
MARCH MARCH
31, 1998 31, 1997
------------ ------------
<S> <C> <C>
Net cash provided by Operating
Activities $ 24,708,000 $30,033,000
----------- ------------
Cash Flows from Investing Activities:
Proceeds from sale of
investment in cruise business 198,474,000
Purchase of vessel under capital lease ( 7,700,000)(b)
Purchases of marketable securities ( 319,000)(c) (27,440,000)
Proceeds from sales of marketable
securities 384,000 15,406,000
Purchase of minority interest ( 5,102,000)
Additions to vessels ( 378,000) ( 63,325,000)(a)
Proceeds from sale of vessels included
in disposal program 3,628,000
Other - net ( 866,000) (75,000)
------------ ------------
Net cash provided by/(used in)
investing activities 193,223,000 ( 80,536,000)
------------ ------------
Cash Flows from Financing Activities:
Issuance of long-term debt 86,000,000 (a)
Payments on long-term debt and
obligations under capital leases (208,805,000) (11,957,000)
Cash dividends paid ( 5,519,000) ( 5,438,000)
Other - net 162,000 374,000
------------ ------------
Net cash (used in)/provided by
financing activities (214,162,000) 68,979,000
------------ ------------
Net Increase in Cash 3,769,000 18,476,000
Cash, including interest-bearing
deposits, at beginning of period 113,195,000 109,120,000
------------ ------------
Cash, including interest-bearing
deposits, at end of period $116,964,000 $127,596,000
============ ============
<FN>
(a)Excludes $38,000,000 in connection with the delivery of a vessel.
(b)Excludes $7,906,000, representing the outstanding principal balance of
debt assumed in connection with the purchase of a vessel under capital
lease.
(c)Excludes $4,083,000, representing the carrying amount of 131,400 shares
of Royal Caribbean Cruises Ltd. ("RCCL") retained and reclassified upon
sale of 3,650,000 shares of RCCL.
(See Accompanying Notes)
</TABLE>
<PAGE>
<TABLE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(UNAUDITED)
---------------------------------------------------------------------
<CAPTION>
Paid-in Accumulated Other
Common Additional Retained Treasury Stock Comprehensive
Stock* Capital Earnings Shares Amount Income/(Loss)** Total
-------- ---------- ----------- ------- ------ ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1998 $39,591,000 $96,149,000 $685,128,000 2,798,196 ($41,719,000) $ 648,000 $779,797,000
------------
Net Income 23,826,000 23,826,000
Unrealized Gain
on Available-
For-Sale
Securities 5,687,000 5,687,000
------------
Comprehensive
Income 29,513,000
------------
Cash Dividends
Declared ( 5,519,000) (5,519,000)
Options Exercised 4,000 ( 1,558) 21,000 25,000
----------- ----------- ------------ --------- ------------ ----------- ------------
Balance at
March 31, 1998 $39,591,000 $96,153,000 $703,435,000 2,796,638 ($41,698,000) $6,335,000 $803,816,000
=========== =========== ============ ========= ============ =========== ============
Balance at
January 1, 1997 $39,591,000 $93,725,000 $687,981,000 3,355,390 ($49,210,000) ($2,649,000) $769,438,000
------------
Net Income 2,047,000 2,047,000
Unrealized (Loss)
on Available-
For-Sale
Securities (5,691,000) ( 5,691,000)
-----------
Comprehensive
(Loss) ( 3,644,000)
-----------
Cash Dividends
Declared ( 5,438,000) ( 5,438,000)
Options Exercised 108,000 ( 21,335) 256,000 364,000
----------- ----------- ----------- --------- ----------- ---------- -----------
Balance at
March 31, 1997 $39,591,000 $93,833,000 $684,590,000 3,334,055 ($48,954,000) ($8,340,000) $760,720,000
=========== =========== ============ ========= ============ =========== ============
<FN>
*Par value $1 per share; 60,000,000 shares authorized and 39,590,759 shares
issued.
**Represents unrealized gains/(losses) on available-for-sale securities, net of
tax.
(See Accompanying Notes)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
General - As contemplated by the Securities and Exchange Commission, the
accompanying financial statements and footnotes, which have been
rounded to the nearest thousand dollars, have been condensed and
therefore do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the Company's
Annual Report to Shareholders for the year ended December 31, 1997.
The statements as of and for the three month period ended March 31, 1998 and
for the three month period ended March 31, 1997 are unaudited. In the
opinion of the Company, all adjustments (which were of a normal
recurring nature) have been made to present fairly the results for such
unaudited interim periods.
The results of operations for the three month period ended March 31, 1998
are not necessarily indicative of those for a full fiscal year.
Note A - Foreign Subsidiaries:
A condensed summary of the combined assets and liabilities of the Company's
foreign (incorporated outside the U.S.) subsidiaries, whose operations
are principally conducted in U.S. Dollars, follows:
<TABLE>
<CAPTION>
AS OF
--------------------------------
MARCH DECEMBER
31, 1998 31, 1997
-------------- ---------------
<S> <C> <C>
Current Assets $ 32,256,000 $ 27,004,000
Vessels, net and Vessels Included
in Disposal Program 1,032,196,000 1,048,945,000
Investment in Cruise
Business 160,269,000
Other Assets 120,423,000 121,976,000
-------------- --------------
1,184,875,000 1,358,194,000
-------------- --------------
Current Installments
of Long-term Debt, including
intercompany of $66,800,000 and
$35,800,000 77,167,000 46,086,000
Other Current Liabilities 16,262,000 19,613,000
-------------- --------------
Total Current Liabilities 93,429,000 65,699,000
Long-term Debt, including
intercompany of $183,700,000
and $107,400,000, and Deferred
Credits, etc. 300,227,000 350,177,000
-------------- --------------
393,656,000 415,876,000
-------------- --------------
Net Assets $ 791,219,000 $ 942,318,000
============== ==============
<FN>
(See Notes on Following Pages)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note B - Investment in Cruise Business:
In March 1998, the Company recognized a gain of $42,288,000 ($26,500,000
after tax), from the sale of 3,650,000 shares of Royal Caribbean
Cruises Ltd. ("RCCL") common stock, that it had acquired in July 1997
in connection with the disposal of its joint venture interest in
Celebrity Cruise Lines Inc. The Company has applied the proceeds from
this sale, approximately $180,000,000 net of taxes, to reduce amounts
outstanding under its long-term credit facility.
Note C - Bulk Shipping Joint Ventures:
<TABLE>
Certain subsidiaries have investments in bulk shipping joint ventures. A
condensed summary of the combined assets and liabilities and results of
operations of the bulk shipping joint ventures follows:
<CAPTION>
AS OF
--------------------------
MARCH DECEMBER
31, 1998 31, 1997
----------- ------------
<S> <C> <C>
Cash ($40,443,000 and $38,432,000) and
other current assets (including
$1,645,000 and $2,640,000 due
from owners) $ 48,472,000 $ 47,003,000
Vessels, net 200,956,000 205,770,000
Other assets (including $715,000
and $557,000 due from owners) 3,145,000 3,486,000
----------- ------------
252,573,000 256,259,000
------------ ------------
Current installments of long-term debt 7,500,000 7,500,000
Other current liabilities 5,657,000 6,176,000
------------ ------------
13,157,000 13,676,000
Long-term debt 45,000,000 48,750,000
------------ ----------
58,157,000 62,426,000
------------ ------------
Net assets (principally undistributed
net earnings) $194,416,000 $193,833,000
=========== ============
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
---------- -----------
<S> <C> <C>
Revenue, primarily from
voyages (including $6,385,000 and
$8,089,000 from vessels chartered
to owners) $14,388,000 $11,857,000
Costs and expenses 13,805,000 9,849,000
----------- -----------
Net income $ 583,000 $ 2,008,000
=========== ===========
<FN>
(See Notes on Following Pages)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note D - 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 subsidiaries to render services
related to the chartering and operation of the vessels and certain
general and administrative services for which Maritime and subsidiaries
receive specified compensation. Vessel and voyage expenses include
$1,304,000 (three months ended March 31, 1998) and $1,524,000 (three
months ended March 31, 1997) 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 $1,221,000 for 1998). 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 E - Taxes:
Effective from January 1, 1987, earnings of the foreign shipping companies
are subject to U.S. income taxation currently; post-1986 taxable income
may be distributed to the U.S. parent without further tax. Prior
thereto, tax on such earnings was deferred as long as the earnings were
reinvested in foreign shipping operations. Foreign income,
substantially all of which was earned by companies which are not subject
to income taxes in their country of incorporation, including $42,288,000
from the sale of 3,650,000 shares of RCCL, aggregated $46,096,000 (three
months ended March 31, 1998) and $3,747,000 (three months ended March
31, 1997), before any U.S. income tax effect. No provision for U.S.
income taxes on the undistributed income of the foreign shipping
companies accumulated through December 31, 1986 was required, since such
undistributed earnings have been reinvested or are intended to be
reinvested in foreign shipping operations so that the qualified
investment therein is not expected to be reduced below the corresponding
amount at December 31, 1986.
No payments of Federal income taxes were required or made during the three
month period ended March 31, 1998. Federal income taxes paid (which
related to a prior period) amounted to $200,000 in the three months
ended March 31, 1997.
Note F - Long-term Debt:
Agreements relating to long-term debt provide for prepayment privileges (in
certain instances with penalties), a limitation on the amount of total
borrowings, and acceleration of payment under certain circumstances,
including if any of the consolidated financial covenants contained in
certain of such agreements are not met. The amount that the Company can
use for Restricted Payments, as defined, including dividends and
purchases of its capital stock, is limited as of March 31, 1998 to
$32,000,000.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note F - Long-term Debt (continued):
As of March 31, 1998, 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 (5.8%
as of March 31, 1998) 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
$81,000,000, pursuant to which it pays fixed rates ranging from 6.7% to
7.1% and receives LIBOR. These agreements contain no leverage features
and have various maturity dates from late 1998 to 2008.
Approximately 11% of the net book amount of the Company's vessels and vessels
under capital leases, representing three foreign flag and six U.S. flag
vessels, is pledged as collateral for certain long-term debt.
Interest paid approximated $16,284,000 (three months ended March 31, 1998)
and $15,837,000 (three months ended March 31, 1997, excluding
capitalized interest).
Note G - Other Income - net:
<TABLE>
Other income - net consists of the following:
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Investment income:
Interest and dividends $ 2,942,000 $ 2,150,000
Gain on sale of securities 4,046,000 6,089,000
Provision for loss on investments ( 714,000)
----------- -----------
6,988,000 7,525,000
Miscellaneous - net 323,000 246,000
----------- -----------
$ 7,311,000 $ 7,771,000
============ ===========
</TABLE>
(See Note on Following Page)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note H - Other Comments:
1. As a result of the current weakness in world dry bulk markets, reflecting,
in particular, the Asian economic downturn, the Company decided to
extend the period over which it expects to dispose of its 10 older and
less competitive dry bulk vessels included in the program for which a
reserve was established in 1997; accordingly, it recorded a charge of
$5,100,000 ($3,315,000 after tax) in the first quarter of 1998,
representing an increase in the reserve, primarily a provision for
discount of the cash proceeds expected to be realized subsequent to
March 31, 1998. To date, three vessels have been sold and a fourth is
under contract for sale by midyear, with aggregate proceeds for the four
vessels expected to be approximately $53,000,000.
2. Basic net income per share is based on the following weighted average
number of common shares outstanding during each period: 36,793,000
shares (three months ended March 31, 1998) and 36,250,000 shares (three
months ended March 31, 1997). Diluted net income per share, which gives
effect to stock options, is based on the following weighted average
number of shares during each period: 36,867,000 shares (three months
ended March 31, 1998) and 36,339,000 shares (three months ended March
31, 1997).
3. The Company has hedged its exchange rate risk with respect to contracted
future charter revenues receivable in Japanese yen by entering into
currency swaps with a major financial institution that will result in
the Company receiving approximately $100,000,000 for such foreign
currency from April 1, 1998 through 2004.
4. In April 1998, the Company's Board of Directors adopted a stock option
plan covering up to 1,300,000 shares of the Company's common stock, for
which options may be granted at exercise prices of at least fair market
value of the common stock at the time of grant. The plan is subject to
and conditioned upon shareholder approval.
5. The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("FAS 130"), effective with the
first quarter of 1998. FAS 130 requires the presentation of
comprehensive income, which (in the Company's case) presently comprises
net income plus or minus the change in unrealized gains or losses on
the available-for-sale securities portfolio. Comprehensive income for
the three months ended March 31, 1998 and 1997 has been shown in the
Statement of Changes in Shareholders' Equity.
6. In March 1998, a subsidiary of the Company purchased a vessel under
capital lease. This vessel had a net carrying amount of $5,241,000.
The purchase price was $16,242,000, including the assumption of
$7,906,000 of debt to which the vessel was subject. The excess,
$5,044,000, of the purchase price over the carrying amount,
$11,198,000, of the lease obligation (which was removed from the
balance sheet) was recorded as an adjustment to the carrying amount of
the vessel.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
-----------------------------------
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.
Rates in the first quarter of 1998 in the international tanker markets
averaged above those of the same period of 1997 for VLCCs (over 200,000
dwt) but were disappointing for most of the other sectors. Rates for
modern VLCCs peaked in November 1997 at above $50,000 per day, then
plunged to around $20,000 per day in early 1998. Thereafter, VLCC
rates, supported by increased crude export movements from the Middle
East and increased deployment of VLCCs for floating storage, rose
throughout the first quarter reaching $40,000 per day early in the
second quarter, comfortably above the comparable 1997 period.
Rates for Aframax tankers (80,000 to 120,000 dwt) in the Caribbean market
(the Company's primary Aframax trading area) began 1998 at above $25,000
per day, fell to below $10,000 per day, then rose briefly before
declining (as the above mentioned long-haul VLCC oil movements displaced
short-haul shipments in the Caribbean) to around $11,000 per day early
in the second quarter. Average Aframax rates are presently below the
level of the comparable 1997 period by a wide margin. The Company's
Aframax tanker pool with PDV Marina continues to augment its base of
Petroleos de Venezuela cargoes with backhauls and contracts of
affreightment, resulting in increased operating efficiencies and reduced
idle time for OSG's 10 pool vessels. Suezmax (120,000 to 200,000 dwt)
rates in the first quarter of 1998, on average, were a bit higher than
levels prevailing in the first quarter of 1997. Early in the second
quarter, these vessels were earning rates between $15,000 and $20,000
per day, somewhat below comparable 1997 levels. Product tanker rates
have generally been at unsatisfactory levels throughout early 1998.
Dry bulk rates for both Capesize (over 100,000 dwt) and Panamax (50,000 to
80,000 dwt) vessels moved lower in the first quarter of 1998 compared to
both the fourth and first quarters of 1997 and continued at these low
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Income from Vessel Operations (continued)
- -----------------------------
levels early in the second quarter of 1998. The current weakness in world
dry bulk markets reflects, in particular, the Asian economic downturn.
As a result of these conditions, the Company decided to extend the period over
which it expects to dispose of its 10 older and less competitive dry
bulk vessels included in the program for which a reserve was established
in 1997; accordingly, it recorded a charge of $5.1 million ($3.3 million
after tax) in the first quarter of 1998, representing an increase in the
reserve, primarily a provision for discount of the cash proceeds
expected to be realized subsequent to March 31, 1998. To date, three
vessels have been sold and a fourth is under contract for sale by
midyear, with aggregate proceeds for the four vessels expected to be
approximately $53 million.
As one indication of recent trends in various charter markets, set forth
below are selected average daily spot market rates for various types and
sizes of vessels in the first quarter of both 1998 and 1997 based on the
published reports of one well-known industry research organization. It
is important to note that rates tend to fluctuate significantly over the
course of time, and can vary widely based on factors such as the age,
condition and position of a particular vessel. Accordingly, the rates
shown are not necessarily indicative of rates achieved by the Company's
vessels during either period.
<TABLE>
<CAPTION>
First First
Quarter Quarter
Tankers 1998* 1997*
- ------- ------- -------
<S> <C> <C>
Modern VLCCs $34,200 $29,800
Suezmaxes (W. Africa - U.S.) 24,700 21,500
Aframaxes (Caribbean market) 19,600 24,700
Products carriers 10,700 17,800
Dry Bulk Carriers
- -----------------
Capesize 12,900 15,000
Panamaxes 6,400 9,700
<FN>
*Average market rates as reported by industry sources.
</TABLE>
Income from vessel operations for the quarter ended March 31, 1998 decreased
by approximately $5,000,000 from the results for the first quarter of
1997. Income from foreign flag vessel operations decreased about
$2,600,000, as a result of reduced rates obtained for certain of the
Company's Aframaxes and products carriers and fewer terminated voyage
days for certain Suezmax tonnage. This decline was partially offset by
the inclusion in the 1998 operating results of one VLCC delivered at the
end of the first quarter of 1997 and improved rates earned by another
VLCC. Overall, the number of operating days for the foreign flag fleet
was approximately the same in the first quarter of 1998 as in the
comparable 1997 period. The balance of the $5,000,000 decrease was
attributable to reduced income from operations of the Company's U.S.
flag fleet reflecting the lay-up of one small crude tanker for the whole
first quarter of 1998 and of two small U.S. flag dry cargo ships
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Income from Vessel Operations (continued)
- -----------------------------
for part of the period, whereas there were no layup days for the U.S. flag
fleet in the comparable period of 1997. Also, lower rates were obtained
in 1998 for certain U.S. flag petroleum products carriers. Operating
days for the U.S. flag crude tanker fleet decreased to approximately 600
days in the 1998 quarter from approximately 700 days in the comparable
1997 period. Since October 1, 1997, depreciation of the dry cargo
vessels included in the aforementioned disposal program ceased. Income
from vessel operations for the first quarter of 1997 includes the
results of these 10 ships, as follows:
Revenue from voyages $12,322,000
Costs and expenses, including
agency fees ( 11,181,000)
Depreciation ( 3,384,000)
------------
(Loss) from vessel operations ($ 2,243,000)
------------
Equity in Results of Cruise Business
- ------------------------------------
In March 1998, the Company recognized a gain of $42,288,000 ($26,500,000
after tax) from the sale of 3,650,000 shares of Royal Caribbean Cruises
Ltd. ("RCCL") common stock, that it had acquired in July 1997 in
connection with the disposal of its joint venture interest in Celebrity
Cruise Lines Inc. ("CCLI"). The Company has applied the proceeds from
this sale of approximately $180,000,000, net of taxes, to reduce amounts
outstanding under its long-term credit facility (see Interest Expense
and Liquidity and Sources of Capital below). Accordingly, in the first
quarter of 1998 the Company did not record any equity in the earnings of
RCCL, whereas in the comparable period of 1997 the Company recorded a
loss of $1,472,000 from its then investment in CCLI.
Other Income - Net
- ------------------
The details of other income are shown in Note G. Aggregate interest and
dividends increased in the 1998 quarter as compared to 1997 because of
increased amounts utilized for interest-bearing deposits and
investments. Gain on sale of securities approximated $4,000,000 in the
first quarter of 1998 compared to approximately $6,100,000 in the
corresponding 1997 period.
Interest Expense
- ----------------
Interest expense decreased in the first quarter of 1998 as a result of a
substantial decrease in the average amount of debt outstanding in the
1998 period compared with 1997, reflecting the reduction of debt with
the cash proceeds of $120,000,000 from the sale of the Company's
investment in CCLI in July 1997 and the proceeds of approximately
$180,000,000, net of taxes, from the sale of RCCL common stock referred
to above. Interest expense in the 1997 first quarter was reduced by
$1,000,000 of interest capitalized in connection with vessel
construction. Interest expense reflects $500,000 in the 1998 period and
$1,400,000 in the 1997 period of net benefits from the interest rate
swaps referred to below in Liquidity and Sources of Capital.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Provision for Federal Income Taxes
- ----------------------------------
The provision for federal income taxes in the first quarter of 1998 increased
from the comparable period of 1997 because of the increase in pretax
income (reflecting a pretax gain on the sale of shares of RCCL of
$42,288,000). The provision includes approximately $1,000,000 in the
first quarter of 1998 of tax on previously untaxed RCCL earnings and reflects
items that are not subject to tax and the dividends received deduction in both
periods.
Liquidity and Sources of Capital
- --------------------------------
Working capital at March 31, 1998 was approximately $93,000,000. 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 the Capital Construction Fund, with a market
value of approximately $36,000,000 at March 31, 1998.
Net cash provided by operating activities in the first three months of 1998
approximated $25,000,000 (which is not necessarily indicative of the
cash to be provided by operating activities for a full fiscal year).
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 the next year. The Company has an
unsecured long-term credit facility of $600,000,000, of which
$142,000,000 was used at March 31, 1998, and an unsecured short-term
credit facility of $30,000,000, of which $27,000,000 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. The cash
received from the sale of RCCL common stock referred to under Equity in
Results of Cruise Business was used to reduce amounts outstanding under
the long-term credit facility.
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 March 31, 1998, 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 (5.8% as of
March 31, 1998) 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 $81,000,000, pursuant to
which it pays fixed rates ranging from 6.7% to 7.1% and receives LIBOR.
These agreements contain no leverage features and have various maturity
dates from late 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 $100,000,000 for such foreign currency from April 1, 1998
through 2004.
May 11, 1998
--------------------------------------------------------------
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Independent Accountant's Report on Review of Interim Financial Information
- --------------------------------------------------------------------------
The accompanying financial statements as of March 31, 1998 and for the three
months ended March 31, 1998 and 1997 are unaudited; however, such
financial statements have been reviewed by the Company's independent
accountants.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
PART II
--------
Item 6(a). Exhibits
- --------- --------
See Exhibit Index on page 19.
Item 6(b). Reports on Form 8-K
- --------- -------------------
The Registrant was not required to file any report on Form 8-K during the
quarter ended March 31, 1998.
<PAGE>
Ernst & Young LLP 787 Seventh Avenue Phone: 212 773 3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
To the Shareholders
Overseas Shipholding Group, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Overseas Shipholding Group, Inc. and subsidiaries as of March 31, 1998
and the related condensed consolidated statements of income, cash flows
and changes in shareholders' equity for the three month periods ended
March 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally
accepted auditing standards, which will be performed for the full year
with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Overseas Shipholding
Group, Inc. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, cash flows and changes in
shareholders' equity for the year then ended, not presented herein, and
in our report dated February 23, 1998 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1997, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from
which it has been derived.
ERNST & YOUNG LLP
May 11, 1998
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC.
AND SUBSIDIARIES
---------------------------------
SIGNATURES
Pursuant to the requirements 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.
--------------------------------
(Registrant)
Date: May 13, 1998 S/MORTON P. HYMAN
------------ ---------------------------------
Morton P. Hyman
President
Date: May 13, 1998 S/ALAN CARUS
------------ --------------------------------
Alan Carus
Controller
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
EXHIBIT INDEX
--------------
10. 1998 Stock Option Plan adopted for employees of the Registrant
and its affiliates.
15. Letter from Ernst & Young LLP.
27. Financial Data Schedule.
NOTE: Instruments authorizing long-term debt of the
Registrant and subsidiaries, which do not exceed
10% of their total assets on a consolidated basis,
are not being filed herewith. The Registrant
agrees to furnish a copy of each such instrument
to the Commission upon request.
EXHIBIT 10
- ----------
OVERSEAS SHIPHOLDING GROUP, INC.
1998 STOCK OPTION PLAN
ARTICLE I.
PURPOSE
The purpose of the Overseas Shipholding Group, Inc. 1998
Stock Option Plan (the "Plan") is to enhance the profitability
and value of Overseas Shipholding Group, Inc. (the "Company") for
the benefit of their stockholders by enabling the Company to
offer employees of the Company and its Affiliates, stock based
incentives in the Company, thereby creating a means to raise the
level of stock ownership by employees in order to attract, retain
and reward such individuals and strengthen the mutuality of
interests between such individuals and the Company's
stockholders. The Plan is effective as of the date set forth in
Article XII.
ARTICLE II.
DEFINITIONS
For purposes of the Plan, the following terms shall have the
following meanings:
ARTICLE II.1. "Acquisition Events" shall have the meaning
set forth in Section 4.2(d).
ARTICLE II.2. "Affiliate" shall mean other than the
Company, (i) any corporation in an unbroken chain of corporations
beginning with the Company, or in the event the Company is a
subsidiary within the meaning of Code Section 424(f), beginning
with the Company's parent within the meaning of Code Section
424(e), which owns stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one
of the other corporations in such chain; (ii) any corporation,
trade or business (including, without limitation, a partnership
or limited liability company) which is controlled fifty percent
(50%) or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company
or one of its Affiliates; or (iii) any other entity, approved by
the Committee as an Affiliate under the Plan, in which the
Company or any of its Affiliates has a material equity interest.
ARTICLE II.3. "Board" shall mean the Board of Directors of
the Company.
ARTICLE II.4. "Cause" shall mean, unless otherwise
determined by the Committee at grant, or, if no rights of the
Participant are reduced, thereafter, termination due to a
Participant's dishonesty, fraud, insubordination, willful
misconduct or refusal to attempt to perform services (for any
reason other than illness or incapacity), as determined by the
Committee in its sole discretion.
ARTICLE II.5. "Change of Control" shall have the meaning
set forth in Article VIII.
ARTICLE II.6. "Code" shall mean the Internal Revenue Code
of 1986, as amended. Any reference to any section of the Code
shall also be a reference to any successor provision.
ARTICLE II.7. "Committee" shall mean a committee or
subcommittee of the Board appointed from time to time by the
Board, which committee or subcommittee shall be intended to
consist of two (2) or more non-employee directors, each of whom
shall be, to the extent required by Rule 16b-3 a "non-employee
director" as defined in Rule 16b-3 and, to the extent required by
Section 162(m) of the Code, an "outside director" as defined
under Section 162(m) of the Code. Notwithstanding the foregoing,
if and to the extent that no Committee exists which has the
authority to administer the Plan, the functions of the Committee
shall be exercised by the Board. If for any reason the appointed
Committee does not meet the requirements of Rule 16b-3 or Section
162(m) of the Code, such noncompliance with the requirements of
Rule 16b-3 or Section 162(m) of the Code shall not affect the
validity of the awards, grants, interpretations or other actions
of the Committee.
ARTICLE II.8. "Common Stock" shall mean, subject to Section
4 hereof, the common stock, $1.00 par value per share, of the
Company.
ARTICLE II.9. "Company" shall mean Overseas Shipholding
Group, Inc., a Delaware corporation, and its successors and
assigns.
ARTICLE II.10. "Disability" shall mean, unless otherwise
determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, (i) with respect to
Incentive Stock Options, an individual's inability, as determined
by the Committee, to engage in any substantial gainful activity
by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not
less than twelve (12) months or, (ii) with respect to Non-
Qualified Stock Options, an individual's inability, as determined
by the Committee, to substantially perform the duties for which
such Participant was hired for a period of at least six (6)
months.
ARTICLE II.11. "Effective Date" shall mean the effective
date of the Plan as defined in Article XII.
ARTICLE II.12. "Eligible Employees" shall mean the
employees of the Company and its Affiliates who are eligible
pursuant to Section 5.1 to be granted Stock Options under the
Plan. Notwithstanding the foregoing, with respect to the grant
of Incentive Stock Options, Eligible Employees shall mean the
employees of the Company, its Subsidiaries and its parent (within
the meaning of Code Section 424(e)) who are eligible pursuant to
Section 5.2 to be granted Stock Options under the Plan.
ARTICLE II.13. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
ARTICLE II.14. "Fair Market Value" for purposes of the
Plan, unless otherwise required by any applicable provision of
the Code or any regulations issued thereunder, shall mean, as of
any date, the last sales price reported for the Common Stock on
the applicable date (i) as reported on the principal national
securities exchange on which it is then traded or the Nasdaq
Stock Market, Inc. or (ii) if not traded on any such national
securities exchange or the Nasdaq Stock Market, Inc., as quoted
on an automated quotation system sponsored by the National
Association of Securities Dealers. If the Common Stock is not
readily tradable on a national securities exchange, the Nasdaq
Stock Market, Inc., or any automated quotation system sponsored
by the National Association of Securities Dealers, its Fair
Market Value shall be set in good faith by the Committee. For
purposes of the grant of any Stock Option, the applicable date
shall be the date on which the Option is granted or, if the sale
of the Common Stock shall not have been reported or quoted on
such date, on the first day prior thereto on which the sale of
the Common Stock was reported or quoted.
ARTICLE II.15. "Incentive Stock Option" shall mean any
Stock Option awarded under the Plan intended to be and designated
as an "incentive stock option" within the meaning of Section 422
of the Code.
ARTICLE II.16. "Non-Qualified Stock Option" shall mean any
Stock Option awarded under the Plan that is not an Incentive
Stock Option.
ARTICLE II.17. "Participant" shall mean any Eligible
Employee of the Company or its Affiliates who has been granted a
Stock Option pursuant to Article VI.
ARTICLE II.18. "Retirement" shall mean a Termination of
Employment by a Participant who has attained (i) at least age
sixty-five (65); or (ii) such earlier date after age fifty-five
(55) as approved by the Committee, in its sole discretion, with
regard to such Participant as a Retirement.
ARTICLE II.19. "Rule 16b-3" shall mean Rule 16b-3 under
Section 16(b) of the Exchange Act as then in effect or any
successor provisions.
ARTICLE II.20. "Section 162(m) of the Code" shall mean the
exception for performance-based compensation under Section 162(m)
of the Code and any Treasury regulations thereunder.
ARTICLE II.21. "Stock Option" or "Option" shall mean any
Option to purchase shares of Common Stock granted to Eligible
Employees pursuant to Article VI.
ARTICLE II.22. "Subsidiary" shall mean any subsidiary
corporation of the Company within the meaning of Section 424(f)
of the Code.
ARTICLE II.23. "Ten Percent Stockholder" shall mean a
person owning stock of the Company possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or its Subsidiaries or its parent corporations as defined
in Section 424(e) of the Code.
ARTICLE II.24. "Termination of Employment," except as
provided in the next sentence, shall mean (i) a termination of
service of a Participant from the Company and its Affiliates; or
(ii) when an entity which is employing a Participant ceases to be
an Affiliate, unless the Participant thereupon becomes employed
by the Company or another Affiliate. The Committee may otherwise
define Termination of Employment in the Option grant or, if no
rights of the Participant are reduced, may otherwise define
Termination of Employment thereafter, including, but not limited
to, defining Termination of Employment with regard to entities
controlling, under common control with or controlled by the
Company rather than just the Company and its Affiliates and/or
entities that provide substantial services to the Company or its
Affiliates to which the Participant has transferred directly from
the Company or its Affiliates at the request of the Company.
ARTICLE II.25. "Transfer" or "Transferred" shall mean
anticipate, alienate, attach, sell, assign, pledge, encumber,
charge or otherwise transfer.
ARTICLE III.
ADMINISTRATION
ARTICLE III.1. THE COMMITTEE. The Plan shall be
administered and interpreted by the Committee.
ARTICLE III.2. AWARDS. The Committee shall have full
authority to grant, pursuant to the terms of the Plan (including
Article V hereof), Stock Options to Eligible Employees and to
otherwise administer the Plan. In particular, the Committee
shall have the authority:
(a) to select the Eligible Employees to whom Stock Options may
from time to time be granted hereunder;
(b) to determine whether and to what extent Stock Options are to
be granted hereunder to one or more Eligible Employees;
(c) to determine, in accordance with the terms of the Plan, the
number of shares of Common Stock to be covered by each Stock
Option granted to an Eligible Employee;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Stock Option granted hereunder to
an Eligible Employee (including, but not limited to, the exercise
or purchase price (if any), any restriction or limitation, any
vesting schedule or acceleration thereof, or any forfeiture
restrictions or waiver thereof, regarding any Stock Option, and
the shares of Common Stock relating thereto, based on such
factors, if any, as the Committee shall determine, in its sole
discretion);
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash and/or Common Stock under Section
6.3(d);
(f) to determine whether, to what extent and under what
circumstances to provide loans (which may be on a recourse basis
and shall bear interest at the rate the Committee shall provide)
to Eligible Employees in order to exercise Stock Options under
the Plan;
(g) to modify, extend or renew a Stock Option, subject to
Section 9.1 hereof, provided, however, that if a Stock Option is
modified, extended or renewed and thereby deemed to be the
issuance of a new Stock Option under the Code or the applicable
accounting rules, the exercise price of such Stock Option may
continue to be the original exercise price even if less than the
Fair Market Value of the Common Stock at the time of such
modification, extension or renewal; and
(h) to offer to buy out an Option previously granted, based on
such terms and conditions as the Committee shall establish and
communicate to the Participant at the time such offer is made.
ARTICLE III.3. GUIDELINES. Subject to Article IX hereof,
the Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the
Plan and perform all acts, including the delegation of its
administrative responsibilities, as it shall, from time to time,
deem advisable; to construe and interpret the terms and
provisions of the Plan and any Stock Option issued under the Plan
(and any agreements relating thereto); and to otherwise supervise
the administration of the Plan. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the
Plan or in any agreement relating thereto in the manner and to
the extent it shall deem necessary to carry the Plan into effect,
but only to the extent any such action would be permitted under
the applicable provisions of both Rule 16b-3 and Section 162(m)
of the Code. The Committee may adopt special guidelines and
provisions for persons who are residing in, or subject to, the
taxes of, countries other than the United States to comply with
applicable tax and securities laws. To the extent applicable,
the Plan is intended to comply with the applicable requirements
of Rule 16b-3 and Section 162(m) of the Code and shall be
limited, construed and interpreted in a manner so as to comply
therewith.
ARTICLE III.4. DECISIONS FINAL. Any decision,
interpretation or other action made or taken in good faith by or
at the direction of the Company, the Board, or the Committee (or
any of its members) arising out of or in connection with the Plan
shall be within the absolute discretion of the Company, the Board
or the Committee, as the case may be, and shall be final, binding
and conclusive on the Company and all employees and Participants
and their respective heirs, executors, administrators, successors
and assigns.
ARTICLE III.5. RELIANCE ON COUNSEL. The Company, the Board
or the Committee may consult with legal counsel, who may be
counsel for the Company or other counsel, with respect to its
obligations or duties hereunder, or with respect to any action or
proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith
pursuant to the advice of such counsel.
ARTICLE III.6. PROCEDURES. If the Committee is appointed,
the Board may, but need not, designate one of the members of the
Committee as chairman and the Committee shall hold meetings,
subject to the By-Laws of the Company, at such times and places
including, without limitation, by telephone conference or by
written consent, as the Committee shall deem advisable. A
majority of the Committee members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of
its members. Any decision or determination reduced to writing
and signed by all the Committee members in accordance with the
By-Laws of the Company shall be fully as effective as if it had
been made by a vote at a meeting duly called and held. The
Committee may keep minutes of its meetings and may make such
rules and regulations for the conduct of its business as it shall
deem advisable.
ARTICLE III.7. DESIGNATION OF CONSULTANTS/LIABILITY.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the
administration of the Plan and may grant authority to employees
to execute agreements or other documents on behalf of the
Committee.
(b) The Committee may employ such legal counsel, consultants and
agents as it may deem desirable for the administration of the
Plan and may rely upon any opinion received from any such counsel
or consultant and any computation received from any such
consultant or agent. Expenses incurred by the Committee or Board
in the engagement of any such counsel, consultant or agent shall
be paid by the Company. The Committee, its members and any
person designated pursuant to paragraph (a) above shall not be
liable for any action or determination made in good faith with
respect to the Plan. To the maximum extent permitted by
applicable law, no officer of the Company or member or former
member of the Committee or of the Board shall be liable for any
action or determination made in good faith with respect to the
Plan or any Stock Options granted under it. To the maximum
extent permitted by applicable law and the Certificate of
Incorporation and By-Laws of the Company and to the extent not
covered by insurance, each officer and member or former member of
the Committee or of the Board shall be indemnified and held
harmless by the Company against any cost or expense (including
reasonable fees of counsel reasonably acceptable to the Company)
or liability (including any sum paid in settlement of a claim
with the approval of the Company), and advanced amounts necessary
to pay the foregoing at the earliest time and to the fullest
extent permitted, arising out of any act or omission to act in
connection with the Plan, except to the extent arising out of
such officer's, member's or former member's own fraud or bad
faith. Such indemnification shall be in addition to any rights
of indemnification the officers, directors or members or former
officers, directors or members may have under applicable law or
under the Certificate of Incorporation or By-Laws of the Company
or Affiliate. Notwithstanding anything else herein, this
indemnification will not apply to the actions or determinations
made by an individual with regard to Stock Options granted to him
under the Plan.
ARTICLE IV.
SHARE AND OTHER LIMITATIONS
ARTICLE IV.1. SHARES.
(a) GENERAL LIMITATION. The aggregate number of shares of
Common Stock which may be issued under the Plan shall not exceed
1,300,000 shares (subject to any increase or decrease pursuant to
Section 4.2), which may be either authorized and unissued Common
Stock or Common Stock held in or acquired for the treasury of the
Company or both. If any Stock Option granted under the Plan
expires, terminates or is cancelled for any reason without having
been exercised in full, the number of shares of Common Stock
underlying the unexercised Option shall again be available under
the Plan. In addition, in determining the number of shares of
Common Stock available for awards other than awards of Incentive
Stock Options, if Common Stock has been exchanged by a
Participant as full or partial payment to the Company, or for
withholding, in connection with the exercise of a Stock Option or
the number shares of Common Stock otherwise deliverable has been
reduced for withholding, the number of shares of Common Stock
exchanged as payment in connection with the exercise or for
withholding or reduced shall again be available under the Plan.
Any shares of Common Stock that are issued by the Company for,
and any awards that are granted through the assumption of or in
substitution for, outstanding awards previously granted by an
acquired entity shall not be counted against the shares of Common
Stock available for issuance under the Plan other than with
regard to determining the number of shares available for
Incentive Stock Options.
(b) INDIVIDUAL PARTICIPANT LIMITATIONS. The maximum number of
shares of Common Stock subject to any Option which may be granted
under the Plan to each Participant during each calendar year
during the term of the Plan shall not exceed 500,000 shares
(subject to any increase or decrease pursuant to Section 4.2).
To the extent that shares of Common Stock for which Options are
permitted to be granted to a Participant pursuant to this Section
4.1(b) during a calendar year are not covered by a grant of an
Option to a Participant issued in such calendar year, such shares
of Common Stock shall automatically increase the number of shares
available for grant of Options to such Participant in the
subsequent calendar year during the term of the Plan.
ARTICLE IV.2. CHANGES.
(a) The existence of the Plan and the Stock Options granted
hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in
the Company's capital structure or its business, any merger or
consolidation of the Company or Affiliates, any issue of bonds,
debentures, preferred or prior preference stock ahead of or
affecting Common Stock, the authorization or issuance of
additional shares of Common Stock, the dissolution or liquidation
of the Company or Affiliates, any sale or transfer of all or part
of its assets or business or any other corporate act or
proceeding.
(b) In the event of any change in the capital structure or
business of the Company by reason of any stock dividend or
extraordinary dividend, stock split or reverse stock split,
recapitalization, reorganization, merger, consolidation, split-
up, combination or exchange of shares, non-cash distributions
with respect to its outstanding Common Stock or capital stock
other than Common Stock, reclassification of its capital stock,
any sale or transfer of all or part of the Company's assets or
business, or any similar change affecting the Company's capital
structure or business and the Committee determines in good faith
that an adjustment is necessary or appropriate under the Plan to
prevent substantial dilution or enlargement of the rights granted
to, or available for, Participants under the Plan or as otherwise
necessary to reflect the change, then the aggregate number and
kind of shares which thereafter may be issued under the Plan, the
number and kind of shares or other property (including cash) to
be issued upon exercise of an outstanding Option granted under
the Plan and the purchase or exercise price thereof shall be
appropriately adjusted consistent with such change in such manner
as the Committee may deem equitable to prevent substantial
dilution or enlargement of the rights granted to, or available
for, Participants under the Plan or as otherwise necessary to
reflect the change, and any such adjustment determined by the
Committee in good faith shall be binding and conclusive on the
Company and all Participants and employees and their respective
heirs, executors, administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any
adjustment in Options pursuant to Section 4.2(a) or (b) shall be
aggregated until, and eliminated at, the time of exercise. No
fractional shares of Common Stock shall be issued under the Plan.
The Committee may, in its sole discretion, pay cash in lieu of
any fractional shares of Common Stock in settlement of awards
under the Plan. Notice of any adjustment shall be given by the
Committee to each Participant whose Option has been adjusted and
such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.
(d) In the event of a merger or consolidation in which the
Company is not the surviving entity or in the event of any
transaction that results in the acquisition of all or
substantially all of the Company's outstanding Common Stock by a
single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all
or substantially all of the Company's assets (all of the
foregoing being referred to as "Acquisition Events"), then the
Committee may, in its sole discretion, terminate all outstanding
Options of Eligible Employees, effective as of the date of the
Acquisition Event, by delivering notice of termination to each
such Participant at least twenty (20) days prior to the date of
consummation of the Acquisition Event; provided, that during the
period from the date on which such notice of termination is
delivered to the consummation of the Acquisition Event, each such
Participant shall have the right to exercise in full all of his
Options that are then outstanding (whether vested or not vested
and without regard to any limitations on exercisability otherwise
contained in the Option) but contingent on the occurrence of the
Acquisition Event, and, provided that, if the Acquisition Event
does not take place within a specified period after giving such
notice for any reason whatsoever, the notice and exercise shall
be null and void. If an Acquisition Event occurs, to the extent
the Committee does not terminate the outstanding Options pursuant
to this Section 4.2(d), then the provisions of Section 4.2(b)
shall apply.
ARTICLE IV.3. PURCHASE PRICE. Notwithstanding any
provision of the Plan to the contrary, if authorized but
previously unissued shares of Common Stock are issued under the
Plan, such shares shall not be issued for a consideration which
is less than par value.
ARTICLE V.
ELIGIBILITY
ARTICLE V.1. NON-QUALIFIED STOCK OPTIONS. All employees of
the Company and its Affiliates are eligible to be granted Non-
Qualified Stock Options under the Plan. Eligibility under the
Plan shall be determined by the Committee in its sole discretion.
ARTICLE V.2. INCENTIVE STOCK OPTIONS. All employees of the
Company, its Subsidiaries and its parent (within the meaning of
Code Section 424(e)) are eligible to be granted Incentive Stock
Options under the Plan. Eligibility under the Plan shall be
determined by the Committee in its sole discretion.
ARTICLE VI.
STOCK OPTION GRANTS
ARTICLE VI.1. OPTIONS. Stock Options granted hereunder
shall be one of two types: (i) an Incentive Stock Option
intended to satisfy the requirements of Section 422 of the Code
or (ii) a Non-Qualified Stock Option.
ARTICLE VI.2. GRANTS. The Committee shall have the
authority to grant to any Eligible Employee one or more Incentive
Stock Options, Non-Qualified Stock Options, or both types of
Stock Options. To the extent that any Stock Option does not
qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise),
such Stock Option or the portion thereof which does not so
qualify, shall constitute a separate Non-Qualified Stock Option.
ARTICLE VI.3. TERMS OF OPTIONS. Options granted under the
Plan shall be subject to the following terms and conditions,
shall be subject to Section 3.2 hereof and the other provisions
of this Plan, and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms
of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock
subject to an Incentive Stock Option shall be determined by the
Committee at the time of grant, but shall not be less than 100%
of the Fair Market Value of a share of Common Stock at the time
of grant; provided, however, that if an Incentive Stock Option is
granted to a Ten Percent Stockholder, the purchase price shall be
no less than 110% of the Fair Market Value of the Common Stock.
The purchase price of shares of Common Stock subject to a
Non-Qualified Stock Option shall be determined by the Committee
but shall not be less than the 100% of the Fair Market Value of a
share of Common Stock at the time of grant.
(b) OPTION TERM. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more
than ten (10) years after the date the Option is granted,
provided, however, the term of an Incentive Stock Option granted
to a Ten Percent Stockholder may not exceed five (5) years.
(c) EXERCISABILITY. Unless otherwise determined by the
Committee at the time of grant, one-third (1/3) of each Stock
Option, subject to the terms and conditions contained herein and
the respective Stock Option agreement, shall vest and become
exercisable on each anniversary of the date of grant of the
Option, provided that the Participant has not incurred a
Termination of Employment prior to the applicable vesting date.
If any Stock Option is exercisable subject to certain limitations
(including, without limitation, that it is exercisable only in
installments or within certain time periods), the Committee may
waive such limitations on the exercisability at any time at, or
after, grant in whole or in part (including, without limitation,
that the Committee may waive the installment exercise provisions
or accelerate the time at which Options may be exercised), based
on such factors, if any, as the Committee shall determine, in its
sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment
exercise and waiting period provisions apply under subsection (c)
above, Stock Options may be exercised in whole or in part at any
time during the Option term, by giving written notice of exercise
to the Company specifying the number of shares to be purchased,
accompanied by payment in full of the purchase price. Common
Stock purchased pursuant to the exercise of a Stock Option shall
be paid for at the time of exercise as follows: (i) in cash or
by check, bank draft or money order payable to the order of
Company; (ii) if the Common Stock is traded on a national
securities exchange, the Nasdaq Stock Market, Inc. or quoted on a
national quotation system sponsored by the National Association
of Securities Dealers, through the delivery of irrevocable
instructions to a broker to deliver promptly to the Company an
amount equal to the purchase price; or (iii) on such other terms
and conditions as may be acceptable to the Committee (which may
include payment in full or part in the form of Common Stock owned
by the Participant for a period of at least six (6) months (and
for which the Participant has good title free and clear of any
liens and encumbrances) based on the Fair Market Value of the
Common Stock on the payment date as determined by the Committee
or the surrender of vested Options owned by the Participant). No
shares of Common Stock shall be issued until payment therefore,
as provided herein, has been made or provided for.
(e) FORM, MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
Subject to the terms and conditions and within the limitations of
the Plan, an Option shall be evidenced by such form of Stock
Option agreement as is approved by the Committee, and the
Committee may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding Options
(up to the extent not theretofore exercised) and authorize the
granting of new Options in substitution therefor (to the extent
not theretofore exercised).
(f) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the
foregoing terms of the Plan, as the Committee shall deem
appropriate including, without limitation, permitting "reloads"
such that the same number of Options are granted as the number of
Options exercised, shares used to pay for the exercise price of
Options or shares used to pay withholding taxes ("Reloads").
With respect to Reloads, the exercise price of the new Stock
Option shall be the Fair Market Value on the date of the "reload"
and the term of the Stock Option shall be the same as the
remaining term of the Options that are exercised, if applicable,
or such other exercise price and term as determined by the
Committee.
ARTICLE VI.4. TERMINATION OF EMPLOYMENT. The following
rules apply with regard to Options upon the Termination of
Employment of a Participant unless otherwise determined by the
Committee at grant or, if no rights of the Participant are
reduced, thereafter:
(a) TERMINATION BY REASON OF DEATH. If a Participant's
Termination of Employment is by reason of death, any Stock Option
held by such Participant may be exercised, to the extent
exercisable at the Participant's death, by the legal
representative of the estate at any time within a period of one
(1) year from the date of such death, but in no event beyond the
expiration of the stated term of such Stock Option.
(b) TERMINATION BY REASON OF DISABILITY OR RETIREMENT. If a
Participant's Termination of Employment is by reason of
Disability or Retirement, any Stock Option held by such
Participant, may be exercised, to the extent exercisable at the
Participant's Termination of Employment, by the Participant at
any time within a period of one (1) year from the date of such
Termination of Employment, but in no event beyond the expiration
of the stated term of such Stock Option; provided, however, that,
in the case of Retirement, if the Participant dies within such
exercise period, any unexercised Stock Option held by such
Participant shall thereafter be exercisable, to the extent to
which it was exercisable at the time of death, for a period of
one (1) year from the date of such death, but in no event beyond
the expiration of the stated term of such Stock Option.
(c) INVOLUNTARY TERMINATION WITHOUT CAUSE. If a Participant's
Termination of Employment is by involuntary termination without
Cause, any Stock Option held by such Participant, may be
exercised, to the extent exercisable at Termination of
Employment, by the Participant at any time within a period of
ninety (90) days from the date of such Termination of Employment,
but in no event beyond the expiration of the stated term of such
Stock Option.
(d) VOLUNTARY TERMINATION. If a Participant's Termination of
Employment is voluntary and occurs prior to, or more than ninety
(90) days after, the occurrence of an event which would be
grounds for Termination of Employment by the Company for Cause
(without regard to any notice or cure period requirements), any
Stock Option held by such Participant, may be exercised, to the
extent exercisable at Termination of Employment, by the
Participant at any time within a period of thirty (30) days from
the date of such Termination of Employment, but in no event
beyond the expiration of the stated term of such Stock Option.
(e) TERMINATION FOR CAUSE. If a Participant's Termination of
Employment (i) is for Cause or (ii) is a voluntary termination
(as provided in subsection (d) above) within ninety (90) days
after an event which would be grounds for a Termination of
Employment for Cause, any Stock Option held by such Participant
shall thereupon terminate and expire as of the date of
termination.
ARTICLE VI.5. INCENTIVE STOCK OPTION LIMITATIONS. To the
extent that the aggregate Fair Market Value (determined as of the
time of grant) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an
Eligible Employee during any calendar year under the Plan and/or
any other stock option plan of the Company, any Subsidiary or
parent corporation (within the meaning of Section 424(e) of the
Code) exceeds $100,000, such Options shall be treated as Options
which are not Incentive Stock Options. In addition, if an
Eligible Employee does not remain employed by the Company, any
Subsidiary or parent corporation (within the meaning of Section
424(e) of the Code) at all times from the time the Option is
granted until three (3) months prior to the date of exercise (or
such other period as required by applicable law), such Option
shall be treated as an Option which is not an Incentive Stock
Option.
Should the foregoing provision not be necessary in order for
the Stock Options to qualify as Incentive Stock Options, or
should any additional provisions be required, the Committee may
amend the Plan accordingly, without the necessity of obtaining
the approval of the stockholders of the Company.
ARTICLE VII.
NON-TRANSFERABILITY
ARTICLE VII.1. NON-TRANSFERABILITY. Except as provided in
the last sentence of this Section 7.1, no Stock Option shall be
Transferred by the Participant otherwise than by will or by the
laws of descent and distribution, all Stock Options shall be
exercisable, during the Participant's lifetime, only by the
Participant, no Stock Option shall, except as otherwise
specifically provided by law or herein, be Transferred in any
manner, and any attempt to Transfer any such Stock Option shall
be void. No such Stock Option shall in any manner be used for
the payment of, subject to, or otherwise encumbered by or
hypothecated for the debts, contracts, liabilities, engagements
or torts of any person who shall be entitled to such Stock
Option, nor shall it be subject to attachment or legal process
for or against such person. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter, that
a Stock Option, other than an Incentive Stock Option, that is
otherwise not transferable pursuant to this Article VII is
transferable in whole or part and in such circumstances, and
under such conditions, as specified by the Committee.
ARTICLE VIII.
CHANGE OF CONTROL PROVISIONS
8.1 . BENEFITS. In the event of a Change of Control of the
Company (as defined below), except as otherwise provided by the
Committee upon the grant of a Stock Option or, if no rights of
the Participant are reduced, thereafter, the Participant shall be
entitled to the following benefits:
(a) Subject to paragraph (b) below, all outstanding Stock
Options granted prior to the Change of Control shall be fully
vested and immediately exercisable in their entirety. The
Committee, in its sole discretion, may provide for the purchase
of any such Stock Options by the Company or its Affiliates for an
amount of cash equal to the excess of the Change of Control Price
(as defined below) of the shares of Common Stock covered by such
Stock Options, over the aggregate exercise price of such Stock
Options. For purposes of this Section 8.1, Change of Control
Price shall mean the higher of (i) the highest price per share of
Common Stock paid in any transaction related to a Change of
Control of the Company, or (ii) the highest Fair Market Value per
share of Common Stock at any time during the sixty (60) day
period preceding a Change of Control.
(b) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise, at the time an Option is granted to
a Participant hereunder or, if no rights of the Participant are
reduced, thereafter, no acceleration of exercisability shall
occur with respect to such Option if the Committee reasonably
determines in good faith, prior to the occurrence of the Change
of Control, that the Options shall be honored or assumed, or new
rights substituted therefor (each such honored, assumed or
substituted option hereinafter called an "Alternative Option"),
by a Participant's employer (or the parent or a subsidiary of
such employer) immediately following the Change of Control,
provided that any such Alternative Option must meet the following
criteria:
(i) the Alternative Option must be based on stock which is
traded on an established securities market, or which will be so
traded within thirty (30) days of the Change of Control;
(ii) the Alternative Option must provide such Participant with
rights and entitlements substantially equivalent to or better
than the rights, terms and conditions applicable under such
Option, including, but not limited to, an identical or more
favorable exercise schedule; and
(iii) the Alternative Option must have economic value
substantially equivalent to the value of such Option (determined
at the time of the Change of Control).
For purposes of Incentive Stock Options, any assumed or
substituted Option shall comply with the requirements of Treasury
regulation Section 1.425-1 (and any amendments thereto).
8.2 . CHANGE OF CONTROL. For purposes of the Plan, a "Change
of Control" shall be deemed to have occurred if:
(a) any person (as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof), excluding
the Company or any Subsidiary, Maritime Overseas Corporation
("MOC") or any subsidiary of MOC, any employee benefit plan
sponsored or maintained by the Company or any Subsidiary, MOC or
any subsidiary of MOC (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, becomes the
beneficial owner (as defined in Rule 13(d)-3 under the Exchange
Act) of shares of Common Stock having at least thirty percent
(30%) of the total number of votes that may be cast for the
election of directors of the Company;
(b) the stockholders 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 Transac-
tion involving only the Company and one or more of its
Subsidiaries, or a Transaction immediately following which the
stockholders 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 stockholder 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
stockholder 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); or
(c) 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 (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
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.
ARTICLE IX.
TERMINATION OR AMENDMENT OF THE PLAN
ARTICLE IX.1. TERMINATION OR AMENDMENT. Notwithstanding
any other provision of the Plan, the Board or the Committee may
at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of the Plan (including any amendment
deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in this Article IX), or
suspend or terminate it entirely, retroactively or otherwise;
provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with
respect to Stock Options granted prior to such amendment,
suspension or termination, may not be impaired without the
consent of such Participant and, provided further, that the Plan
may not be amended without the approval of the stockholders of
the Company in accordance with the laws of the State of Delaware,
to (i) increase the aggregate number of shares of Common Stock
that may be issued under the Plan (subject to Section 4.2); (ii)
decrease the minimum Option price of any Stock Option; or (iii)
make any other amendment that would require stockholder approval
under the rules of any exchange or system on which the Company's
securities are listed or traded. In addition, solely to the
extent required by the applicable provisions of Rule 16b-3 or
Section 162(m) of the Code, or with respect to Incentive Stock
Options, Section 422 of the Code, no amendment may be made
without the approval of stockholders of the Company in accordance
with the laws of the State of Delaware which would (i) increase
the maximum individual Participant limitations for a calendar
year under Section 4.1(b); (ii) change the classification of
employees eligible to receive Stock Options under the Plan; or
(iii) extend the maximum Option term under Section 6.3(b).
The Committee may amend the terms of any Stock Options
theretofore granted, prospectively or retroactively, but, subject
to Article IV above or as otherwise specifically provided herein,
no such amendment or other action by the Committee shall impair
the rights of any Option holder without the Option holder's
consent.
ARTICLE X.
UNFUNDED PLAN
ARTICLE X.1. UNFUNDED STATUS OF PLAN. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments as to which a
Participant has a fixed and vested interest but which are not yet
made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
ARTICLE XI.
GENERAL PROVISIONS
ARTICLE XI.1. LEGEND. The Committee may require each
person receiving shares pursuant to the exercise of a Stock
Option under the Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a
view to distribution thereof. In addition to any legend required
by the Plan, the certificates for such shares may include any
legend which the Committee deems appropriate to reflect any
restrictions on Transfer.
All certificates for shares of Common Stock delivered under
the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is
then listed or any national securities association system upon
whose system the Common Stock is then quoted, any applicable
Federal or state securities law, and any applicable corporate
law, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such
restrictions.
ARTICLE XI.2. OTHER PLANS. Nothing contained in the Plan
shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if
such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
ARTICLE XI.3. NO RIGHT TO EMPLOYMENT. Neither the Plan nor
the grant or exercise of any Stock Options hereunder shall give
any Participant or other employee any right with respect to
continuance of employment by the Company or any Affiliate, nor
shall they be a limitation in any way on the right of the Company
or any Affiliate by which an employee is employed to terminate
his employment at any time.
ARTICLE XI.4. WITHHOLDING OF TAXES. The Company shall have
the right to deduct from any payment to be made to a Participant,
or to otherwise require, prior to the issuance or delivery of any
shares of Common Stock or the payment of any cash hereunder,
payment by the Participant of, any Federal, state or local taxes
required by law to be withheld.
The Committee may permit any such withholding obligation
with regard to any Participant to be satisfied by reducing the
number of shares of Common Stock otherwise deliverable or by
delivering shares of Common Stock already owned. Any fraction of
a share of Common Stock required to satisfy such tax obligations
shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
ARTICLE XI.5. LISTING AND OTHER CONDITIONS.
(a) Unless otherwise determined by the Committee, as long as the
Common Stock is listed on a national securities exchange or
system sponsored by a national securities association, the
issuance of any shares of Common Stock pursuant to the exercise
of an Option shall be conditioned upon such shares being listed
on such exchange or system. The right to exercise any Option
with respect to such shares shall be suspended until such listing
has been effected.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock
pursuant to the exercise of an Option is or may in the
circumstances be unlawful or result in the imposition of excise
taxes on the Company under the statutes, rules or regulations of
any applicable jurisdiction, the Company shall have no obligation
to make such sale or delivery, or to make any application or to
effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise with respect to
shares of Common Stock, and the right to exercise any Option
shall be suspended until, in the opinion of said counsel, such
sale or delivery shall be lawful or will not result in the
imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this
Section 11.5, any Stock Option affected by such suspension which
shall not then have expired or terminated shall be reinstated as
to all shares available before such suspension and as to shares
which would otherwise have become available during the period of
such suspension, but no such suspension shall extend the term of
any Option.
(d) A Participant shall be required to supply OSG with any
certificates, representations and information that OSG requests
and otherwise cooperate with OSG in obtaining any listing,
registration, qualification, exemption, consent or approval OSG
deems necessary or appropriate.
ARTICLE XI.6. GOVERNING LAW. The Plan shall be governed
and construed in accordance with the laws of the State of
Delaware (regardless of the law that might otherwise govern under
applicable Delaware principles of conflict of laws).
ARTICLE XI.7. CONSTRUCTION. Wherever any words are used in
the Plan in the masculine gender they shall be construed as
though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein
in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so
apply. To the extent applicable, the Plan shall be limited,
construed and interpreted in a manner so as to comply with the
applicable requirements of Rule 16b-3 and Section 162(m) of the
Code; however, noncompliance with Rule 16b-3 or Section 162(m) of
the Code shall have no impact on the effectiveness of a Stock
Option granted under the Plan.
ARTICLE XI.8. OTHER BENEFITS. No Stock Option granted or
exercised under the Plan shall be deemed compensation for
purposes of computing benefits under any retirement plan of the
Company or its Affiliates nor affect any benefits under any other
benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of
compensation.
ARTICLE XI.9. COSTS. The Company shall bear all expenses
included in administering the Plan, including expenses of issuing
Common Stock pursuant to the exercise of any Stock Options
hereunder.
ARTICLE XI.10. NO RIGHT TO SAME BENEFITS. The provisions
and terms of Stock Options need not be the same with respect to
each Participant, and the Stock Options granted to individual
Participants need not be the same in subsequent years.
ARTICLE XI.11. DEATH/DISABILITY. The Committee may in its
discretion require the transferee of a Participant's Stock
Options to supply it with written notice of the Participant's
death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as
the Committee deems necessary to establish the validity of the
Transfer of a Stock Option. The Committee may also require the
agreement of the transferee to be bound by all of the terms and
conditions of the Plan.
ARTICLE XI.12. SECTION 16(B) OF THE EXCHANGE ACT. All
elections and transactions under the Plan by persons subject to
Section 16 of the Exchange Act involving shares of Common Stock
are intended to comply with all exemptive conditions under Rule
16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with
Section 16(b) of the Exchange Act, as it may deem necessary or
proper for the administration and operation of the Plan and the
transaction of business thereunder.
ARTICLE XI.13. SEVERABILITY OF PROVISIONS. If any
provision of the Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
ARTICLE XI.14. HEADINGS AND CAPTIONS. The headings and
captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
ARTICLE XII.
EFFECTIVE DATE OF PLAN
The Plan has been adopted by the Board effective as of April
1, 1998, subject to and conditioned upon the approval of the Plan
by the stockholders of the Company in accordance with the laws of
the State of Delaware and the requirements of any applicable
national securities exchange or automated quotation system.
ARTICLE XIII.
TERM OF PLAN
No Stock Option shall be granted pursuant to the Plan on or
after the tenth (10th) anniversary of the earlier of the
Effective Date or the date of stockholder approval, but such
Stock Options granted prior to such date may extend beyond that
date.
ARTICLE XIV.
NAME OF PLAN
The Plan shall be known as the "Overseas Shipholding Group,
Inc. 1998 Stock Option Plan."
<PAGE>
THE OVERSEAS SHIPHOLDING GROUP, INC.
1998 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PURPOSE 1
ARTICLE II. DEFINITIONS 1
ARTICLE III. ADMINISTRATION 4
ARTICLE IV. SHARE AND OTHER LIMITATIONS 7
ARTICLE V. ELIGIBILITY 9
ARTICLE VI. STOCK OPTION GRANTS 9
ARTICLE VII. NON-TRANSFERABILITY 13
ARTICLE VIII. CHANGE OF CONTROL PROVISIONS 13
ARTICLE IX. TERMINATION OR AMENDMENT OF THE PLAN 15
ARTICLE X. UNFUNDED PLAN 16
ARTICLE XI. GENERAL PROVISIONS 16
ARTICLE XII. EFFECTIVE DATE OF PLAN 19
ARTICLE XIII. TERM OF PLAN 19
ARTICLE XIV. NAME OF PLAN 19
<PAGE>
EXHIBIT 15
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May 11, 1998
To the Shareholders
Overseas Shipholding Group, Inc.
We are aware of the incorporation by reference in the
Registration Statement (Form S-8 No. 33-44013) of Overseas
Shipholding Group, Inc. of our report dated May 11, 1998 relating
to the unaudited condensed consolidated interim financial
statements of Overseas Shipholding Group, Inc. which are included
in its Form 10-Q for the quarter ended March 31, 1998.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report
is not part of the registration statement prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
ERNST & YOUNG LLP
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 116,964
<SECURITIES> 0
<RECEIVABLES> 30,590
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 177,586
<PP&E> 1,824,927
<DEPRECIATION> 538,937
<TOTAL-ASSETS> 1,861,068
<CURRENT-LIABILITIES> 84,600
<BONDS> 846,287
<COMMON> 39,591
0
0
<OTHER-SE> 764,225
<TOTAL-LIABILITY-AND-EQUITY> 1,861,068
<SALES> 0
<TOTAL-REVENUES> 154,935
<CGS> 0
<TOTAL-COSTS> 97,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,965
<INCOME-PRETAX> 38,151
<INCOME-TAX> 14,325
<INCOME-CONTINUING> 23,826
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,826
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
