<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 1996
REGISTRATION STATEMENT NO. 33-65139
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 1
TO
Form F-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
TEEKAY SHIPPING CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
REPUBLIC OF LIBERIA 4412 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER
NAME INCORPORATION CLASSIFICATION CODE NUMBER IDENTIFICATION NUMBER
- ---------------------------------- ---------------------------- -------------------------- ---------------------
<S> <C> <C> <C>
VSSI Oceans Inc. ................. Republic of Liberia 4412 Not Applicable
VSSI Atlantic Inc. ............... Republic of Liberia 4412 Not Applicable
VSSI Appian Inc. ................. Republic of Liberia 4412 Not Applicable
Senang Spirit Inc. ............... Commonwealth of The Bahamas 4412 Not Applicable
Exuma Spirit Inc. ................ Commonwealth of The Bahamas 4412 Not Applicable
Nassau Spirit Inc. ............... Commonwealth of The Bahamas 4412 Not Applicable
Andros Spirit Inc. ............... Commonwealth of The Bahamas 4412 Not Applicable
</TABLE>
The Additional Registrants are issuers of the Guarantees which are covered
by this Registration Statement and which guarantee the obligations of Teekay
Shipping Corporation under its First Preferred Ship Mortgage Notes due 2008.
TRADEWINDS BUILDING, SIXTH FLOOR,
BAY STREET, P.O. BOX SS-6293
NASSAU, THE BAHAMAS (809) 322-8020
(Address and telephone number of each Registrant's principal executive office)
------------------------------------
LAWCO OF OREGON, INC.
1211 S.W. FIFTH AVENUE, SUITE 1500, PORTLAND, OR 97204
ATTN: KAREN M. DODGE (503) 727-2000
(Name, address and telephone number of agent for service)
------------------------------------
Copies to:
<TABLE>
<S> <C>
ROY W. TUCKER, ESQ. ANDREW B. JANSZKY, ESQ.
PERKINS COIE SHEARMAN & STERLING
1211 S.W. FIFTH AVENUE 599 LEXINGTON AVENUE
SUITE 1500 NEW YORK, NEW YORK 10022 (212) 848-4000
PORTLAND, OR 97204 (503) 727-2000
</TABLE>
------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE (1) PRICE (1) FEE
- ------------------------------------------------------------------------------------------------------------------------------
First Preferred Ship Mortgage Notes due 2008........ $225,000,000 100% $225,000,000 $45,000(3)
- ------------------------------------------------------------------------------------------------------------------------------
Guarantees of the First Preferred Ship Mortgage
Notes due 2008.................................... $225,000,000 (2) (2) (2)
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee.
(2) No additional consideration for the Guarantees will be paid by the
purchasers of First Preferred Ship Mortgage Notes. Pursuant to Rule 457(n)
under the Securities Act of 1933, no separate fee is payable with respect to
the Guarantees.
(3) Previously paid. ------------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 19, 1996
$225,000,000
TEEKAY SHIPPING CORPORATION
% FIRST PREFERRED SHIP MORTGAGE NOTES DUE , 2008
---------------------
Interest on the Notes will be payable semiannually on and
of each year, commencing , 1996. The Notes will be senior
obligations of Teekay Shipping Corporation, a Liberian corporation ("Teekay"),
are guaranteed by certain subsidiaries of Teekay (the "Guarantors") and are
secured by first preferred ship mortgages on seven double-hull Aframax tankers
(the "Mortgaged Vessels") owned by the Guarantors and by certain other property
and contract rights (collectively, the "Collateral"). The Notes will rank pari
passu with all existing and future senior indebtedness of Teekay and the
guarantees of the Guarantors will rank pari passu with all existing and future
senior indebtedness of each Guarantor. Notes may be redeemed, at 100% of their
principal amount, plus accrued interest to the redemption date, upon the
occurrence of an Event of Loss with respect to a Mortgaged Vessel. Notes will
also be redeemed, at 100% of their principal amount plus accrued interest to the
redemption date, pursuant to a sinking fund, which will retire up to $45 million
principal amount of Notes on each , commencing , 2004.
Upon the occurrence of a Change of Control Triggering Event, holders of the
Notes may require Teekay to repurchase the Notes at a price equal to 101% of
their principal amount, plus accrued interest to the date of purchase. See
"Description of the Notes."
Upon the Notes achieving Investment Grade Status and subject to certain
other conditions, the guarantees of the Guarantors will terminate, all of the
Collateral securing the obligations of Teekay and the Guarantors under the
Indenture and the Security Documents will be released (whereupon the Notes will
become general unsecured obligations of Teekay) and certain covenants under the
Indenture will no longer be applicable to Teekay and the Restricted
Subsidiaries. See "Description of the Notes--Fall-away Event," "--Certain
Restrictive Covenants" and "--Covenants After Fall-away Event."
The Notes will settle initially in immediately available funds, and
settlement of any secondary market trading in the Notes will be made in
immediately available funds. See "Description of the Notes--Same-Day Settlement
and Payment."
SEE "RISK FACTORS" BEGINNING AT PAGE 14 OF THIS PROSPECTUS FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) TEEKAY(1)(3)
------------------------------------------------------
<S> <C> <C> <C>
Per Note................................ % % %
Total................................... $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from , 1996.
(2) Teekay has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting estimated expenses of $625,000 payable by Teekay.
---------------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Notes
will be ready for delivery in New York, New York on or about ,
1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
---------------------
The date of this Prospectus is , 1996.
<PAGE> 3
[WORLDWIDE OFFICES]
[MAP]
<PAGE> 4
[HIGH QUALITY TANKER OPERATIONS FOR THE NEW ERA]
[PHOTOS]
<PAGE> 5
[TEEKAY SHIPPING CORPORATION]
[PHOTOS]
<PAGE> 6
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES OFFERED
HEREBY AND TEEKAY'S 9 5/8% FIRST PREFERRED SHIP MORTGAGE NOTES DUE 2003 AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE (WITH RESPECT TO THE
NOTES OFFERED HEREBY) OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Teekay and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form F-3 (the
"Registration Statement", which term shall encompass all amendments and exhibits
thereto) under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth or incorporated by reference in the Registration
Statement, as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete; with respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Items of information omitted from
this Prospectus but contained in the Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the following
regional offices of the Commission: 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates.
Teekay is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. All such
reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at the locations referred to
above. Such reports and other information may also be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005,
on which exchange Teekay's common stock is listed.
The indenture pursuant to which the Notes will be issued (the "Indenture")
contains a covenant which requires Teekay to provide to each holder of record of
the Notes, upon request, and to the Trustee under the Indenture, annual reports
containing audited financial statements and a report thereon expressed by
independent chartered accountants, and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
2
<PAGE> 7
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by Teekay with the Commission are hereby
incorporated by reference in this Prospectus: (a) Annual Report of Teekay on
Form 20-F for the fiscal year ended March 31, 1995, as amended, and (b) Reports
of Teekay on Form 6-K, dated August 11, 1995 and November 9, 1995, relating to
the fiscal quarters ended June 30, 1995 and September 30, 1995, respectively.
In addition, all documents filed by Teekay with the Commission pursuant to
Sections 13(a), 13(c) or 15(d) of the Exchange Act, including any Report on Form
6-K which so provides, after the date hereof and prior to the termination of the
offering of the Notes, shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof commencing on the respective dates on which
such documents are filed with the Commission. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
Teekay will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents that have been
incorporated by reference herein, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Written requests for such copies may be directed to Teekay Shipping Corporation,
200 Burrard Street, Suite 2100, Vancouver, B.C., Canada V6C 3L6. Telephone
requests may be directed to (604) 683-3529.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER THE FEDERAL SECURITIES LAWS
Teekay and most of its subsidiaries are incorporated in Liberia, and
certain other of its subsidiaries are incorporated in The Bahamas (where four of
the seven Guarantors are incorporated), Japan, Singapore, Australia and Panama.
Most of the directors and executive officers of Teekay and its subsidiaries are
residents of countries other than the United States. Substantially all of the
assets of Teekay and its subsidiaries and a substantial portion of the assets of
such directors and officers are located outside the United States. As a result,
it may be difficult or impossible for United States investors to effect service
of process within the United States upon Teekay, its subsidiaries or such
directors and officers or to realize against them in the United States upon
judgments of courts of the United States predicated upon civil liabilities of
Teekay, its subsidiaries or such directors and officers under the federal
securities laws of the United States or the securities or blue sky laws of any
state within the United States. In addition, because of a lack of precedent,
investors should not assume that courts of Liberia, The Bahamas or Panama, or in
the countries where directors or officers reside or in which the assets of
Teekay, its subsidiaries or such directors and officers are located (i) would
enforce judgments of United States courts obtained in actions against Teekay,
its subsidiaries or such persons predicated upon the civil liability provisions
of the United States federal securities laws or the securities or blue sky laws
of any state within the United States or (ii) would enforce, in original
actions, liabilities against Teekay, its subsidiaries or such persons predicated
upon the United States federal securities laws or any such state securities or
blue sky laws.
3
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context otherwise requires, "Teekay" refers to Teekay Shipping
Corporation (formerly named Viking Star Shipping Inc.), a Liberian corporation,
and "Company" refers to Teekay and its consolidated subsidiaries. Certain
shipping industry terms used in this Prospectus are defined in Exhibit A to this
Prospectus, "Definitions of Shipping Terms." Unless otherwise specifically noted
or the context otherwise requires, the term "tankers" refers to tankers and
oil/bulk/ore carriers.
Certain statistical and graphical information contained in this Prospectus
is drawn or calculated from the Clarkson Research Studies Ltd. ("Clarkson")
database, the Drewry Shipping Consultants Ltd. ("Drewry") database and other
sources. While the Company has no reason to believe that such information is
inaccurate in any material respect, readers of this Prospectus are advised that
some information in such databases is based on estimates or subjective
judgments.
THE COMPANY
The Company is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium size
oil tankers. The Company's modern fleet provides such transportation services to
major oil companies, major oil traders and government agencies, principally in
the region spanning from the Red Sea to the U.S. West Coast (the "Indo-Pacific
Basin"). The Company believes that in each of the last four years it has
transported more crude oil and petroleum products via Aframax tankers in the
Indo-Pacific Basin than any other shipping company and estimates it has
approximately a one quarter share of the Indo-Pacific Basin Aframax market.
The Company pursues an intensively customer- and operations-oriented
business strategy, emphasizing market concentration and service quality to
achieve superior operating results. The Company believes that it has four key
competitive advantages: (i) geographic market concentration in the Indo-Pacific
Basin, which facilitates comprehensive coverage of charterer requirements, (ii)
a uniform-size fleet of Aframax tankers containing many sister ships, which
affords scheduling flexibility and permits greater capacity utilization, (iii) a
modern, well-maintained fleet that operates with high fuel efficiency and low
maintenance costs and affords greater acceptance among charterers with high
quality standards, and (iv) a full-service ship management and chartering
capability which affords a focused marketing effort, tight cost controls, and
effective operational and safety monitoring. As a result of its business
strategy, the Company has achieved consistently higher operating cash flow per
ship per day than other public bulk shipping companies. Although the Company's
business strategy has been, and in the foreseeable future will be, primarily
focused on providing services via Aframax tankers in the Indo-Pacific Basin,
management intends to closely monitor the evolution of the shipping industry and
to adapt its strategy according to changing market dynamics. The Company intends
to continue to consider strategic opportunities that may arise from time to
time, including joint ventures and business acquisitions.
The Company's fleet consists of 41 tankers: 36 Aframax (75,000-115,000 dwt)
oil tankers and oil/bulk/ore carriers ("O/B/Os"), two smaller oil tankers, one
Very Large Crude Carrier ("VLCC") and, through a joint venture, a 50% interest
in two additional Aframax oil tankers. The Company's vessels are all of Liberian
or Bahamian registry. The Company's fleet has a total cargo capacity of
approximately 4.1 million tons and its Aframax vessels represent approximately
7.0% of the total tonnage of the world Aframax fleet. While its fleet
modernization program is effectively complete, the Company intends to continue
selective purchases of modern, predominantly second-hand, high-quality tankers
should such vessels become available.
The Company's fleet is one of the most modern fleets in the world, having
an average age of approximately 6.9 years, compared to an average age for the
world oil tanker fleet of approximately 14.1 years and for the world Aframax
tanker fleet of approximately 12.3 years. A substantial portion of the world
tanker fleet will reach 20 years of age in the next three years, including
approximately 31% of Aframax tankers; none of the Company's Aframax tankers is
more than 16 years of age. In addition, the
4
<PAGE> 9
Company has been recognized by customers and rating services for safety, quality
and service. In each of the last five years, Tanker Advisory Center, Inc. (New
York) has rated the Company's fleet a "meritorious tanker fleet," a designation
which, in the latest publication (March 1995), placed it in the top quarter of
fleets containing 10 or more tankers. Given the age profile of the world tanker
fleet, the increasing emphasis among customers on quality as a result of
stringent environmental regulations, and heightened concerns about liability for
oil pollution, the Company believes that its modern fleet and its emphasis on
quality and safety provide it with a favorable competitive profile. See "Risk
Factors--Competition" and "--Environmental and Other Regulation" and
"Business--The International Tanker Market--Supply and Demand."
The Company's operating results in fiscal 1995 (year ended March 31, 1995)
were adversely affected by a weakened charter market caused by low tanker
demand, which resulted from a shift in crude oil distribution patterns.
Historically, incremental oil demand growth has been satisfied principally from
oil produced in the Arabian Gulf; however, in calendar 1994, incremental global
oil demand was primarily met by oil production in the North Sea and Caribbean
regions. Because of the relative proximity of the North Sea and Caribbean to
discharge points, increased production in these regions resulted in a reduction
in the average length of tanker voyages, thus adversely affecting tanker demand.
In spite of adverse charter market conditions, in fiscal 1995 the Company
generated income from vessel operations of $50.8 million and EBITDA of $146.8
million, and reduced debt by $102.6 million from internally generated cash.
Management believes that the Company's operating performance is exhibiting
near-term improvement. During the first half of fiscal 1996, despite a smaller
fleet size, the Company's income from vessel operations rose to $34.2 million
and EBITDA rose to $79.0 million, improvements of 34.6% and 7.0%, respectively,
over the first half of fiscal 1995. Based on current estimates, income from
vessel operations and EBITDA for the third quarter fiscal 1996 are anticipated
to show continued improvement in the Company's operating performance, stemming
from stronger Aframax charter rates in the Indo-Pacific Basin and, in
particular, better market conditions in the Company's core Aframax trade routes
to Australia, Japan, and the United States West Coast.
In addition, management believes that tanker supply/demand fundamentals are
improving through a combination of tanker scrapping in excess of deliveries, and
an anticipated resumption of tanker demand growth. According to Clarkson, the
worldwide tanker fleet declined by 2.5% from December 31, 1993 to November 30,
1995, with calendar 1994 marking the first annual decline in tanker fleet size
since 1986. The International Energy Agency forecasts that global oil
consumption will grow 2.3% in 1996. Management believes that longer term, due to
the expected deceleration of North Sea oil production growth, a larger
percentage of future oil demand growth will be met by Arabian Gulf oil
producers, thereby increasing tanker demand. Maritime Strategies Inc. forecasts
that tanker demand will grow 2.4% in 1996 and 3.3% in 1997. A continuation of
these trends should result in an increase in tanker charter rates which would
have a positive impact on the Company's operating results.
During the first half of fiscal 1996, the Company took steps to improve its
financial condition and flexibility. In May 1995, the Company entered into a
$243 million eight-year secured reducing revolving credit agreement (the
"Revolver") which increased liquidity, extended its debt repayment schedule, and
reduced its cost of borrowing. In July 1995, the Company completed an initial
public offering of 6.9 million shares of common stock, resulting in net cash
proceeds of $137.6 million, of which $135.0 million was used to reduce amounts
outstanding under the Revolver. As a result of these transactions, as well as
improved operating performance, as of September 30, 1995, the Company's total
liquidity, as measured by the aggregate of its cash, marketable securities and
availability under the Revolver, increased to $244.3 million from $85.7 at
fiscal 1995 year-end; and the Company's ratio of net debt to capitalization had
declined to 52% from 63% over the same period.
5
<PAGE> 10
THE OFFERING
SECURITIES OFFERED.................. $225,000,000 principal amount of %
First Preferred Ship Mortgage Notes due
2008.
MATURITY............................ , 2008.
INTEREST PAYMENT DATES.............. and of each year,
commencing , 1996.
INTEREST RATE....................... per annum.
SECURITY AND GUARANTEES............. The Notes will be (i) secured by first
preferred ship mortgages (the
"Mortgages") on seven double-hull
Aframax tankers with an average age of
31 months owned by subsidiaries of
Teekay (the "Mortgaged Vessels") and
certain other related collateral and
(ii) guaranteed by the subsidiaries of
Teekay that own the Mortgaged Vessels
(each referred to as a "Guarantor" and,
collectively, as the "Guarantors"). See
"The Subsidiary Guarantees" and "The
Mortgaged Vessels." Upon the occurrence
of the Fall-away Event (as defined
herein), the guarantees of the
Guarantors (the "Subsidiary
Guarantees") will terminate and all of
the Collateral securing the obligations
of Teekay and the Guarantors under the
Indenture and the Security Documents
(as defined herein) will be released,
whereupon the Notes will become general
senior unsecured obligations of Teekay.
See "Description of the
Notes--Fall-away Event."
LOAN TO VALUE RATIO................. At the closing of the Offering, Teekay
will deliver appraisals by two
independent shipbrokers of the values
of the Mortgaged Vessels, which values
will show that such brokers' aggregate
appraised values of such vessels, as of
December 13, 1995, were $308.5 million
and $305.5 million, respectively,
resulting in ratios of the initial
aggregate principal amount of Notes
outstanding to the aggregate appraised
value of the Mortgaged Vessels of
approximately 0.73 to 1 and 0.74 to 1,
respectively. See "The Mortgaged
Vessels." In order to release a
Mortgaged Vessel from the Collateral
securing the Notes following a
redemption or other retirement of
Notes, the Loan to Value Ratio (as
defined herein) must not exceed 0.75 to
1. See "Description of the
Notes--Release of Mortgaged Vessels."
RANKING............................. The Notes will be senior secured
indebtedness of Teekay ranking pari
passu with all other existing and
future senior indebtedness of Teekay,
and senior to any subordinated
indebtedness of Teekay. Prior to the
occurrence of the Fall-away Event, the
Subsidiary Guarantees will be senior
secured indebtedness of each Guarantor,
ranking pari passu
6
<PAGE> 11
with all other existing and future
senior indebtedness of such Guarantor.
SINKING FUND........................ The Notes will be subject to a sinking
fund, which will retire $45 million
principal amount of the Notes, subject
to adjustment upon certain redemption
events or cancellations of Notes, on
each , commencing 2004, at a
redemption price equal to 100% of their
principal amount, plus accrued interest
to the redemption date. See
"Description of the
Notes--Redemptions--Sinking Fund."
SALES OF MORTGAGED VESSELS.......... A Guarantor may sell a Mortgaged Vessel
or Teekay may sell all of the capital
stock of a Guarantor at any time
provided that (i) no Event of Default
(as defined herein) shall have occurred
and be continuing, (ii) the sale is to
a person that is not an "affiliate" (as
defined in Rule 405 under the
Securities Act) of Teekay, (iii) the
sale is effected in a commercially
reasonable manner, (iv) the Net Cash
Proceeds (as defined herein) from such
sale are not less than the Appraised
Value (as defined herein) of the
relevant Mortgaged Vessel as of the
date of such sale (the "Sale Date") and
(v) Teekay shall deposit with the
Trustee funds in an amount (the "Sale
Redemption Amount") equal to the Vessel
Percentage (as defined herein)
applicable to the Mortgaged Vessel sold
multiplied by the principal amount of
Notes outstanding on the Sale Date. See
"Description of the Notes--Certain
Restrictive Covenants--Limitation on
Asset Sales."
MANDATORY REDEMPTION UPON SALE OF A
MORTGAGED VESSEL.................. If a Mortgaged Vessel or the capital
stock of a Guarantor is sold in
accordance with the terms of the
Indenture, Teekay must: (a) (i) redeem
Notes in an aggregate principal amount
equal to the Sale Redemption Amount at
a redemption price equal to the greater
of (1) 100% of the principal amount of
such Notes and (2) the sum of the
present values of the remaining
scheduled payments of principal and
interest thereon discounted to the
redemption date on a semiannual basis
(assuming a 360-day year consisting of
twelve 30-day months) at the Treasury
Rate (as defined herein) plus 50 basis
points, plus accrued interest thereon
to the date of redemption and (ii)
treat any net proceeds from such sale
in excess of the aggregate principal
amount of the Notes redeemed as Sale
Excess Proceeds (as defined herein); or
(b) (i) substitute a Qualified
Substitute Vessel (as defined herein)
for the Mortgaged Vessel sold within
180 days of the Sale Date, provided
that no Event of Default shall have
occurred and be continuing and (ii)
apply the
7
<PAGE> 12
proceeds from such sale to repay
certain indebtedness, to invest in
certain assets or to fund working
capital and treat such proceeds, to the
extent not so applied, as Sale Excess
Proceeds. See "Description of the
Notes--Redemptions-- Mandatory
Redemption Upon Sale of a Mortgaged
Vessel." If the amount of Sale Excess
Proceeds exceeds $10 million in any
period of 12 consecutive months, Teekay
must make an offer to purchase Notes at
a purchase price at least equal to 101%
of their principal amount, plus accrued
interest. See "Description of the
Notes--Certain Restrictive
Covenants--Excess Proceeds Offers."
The requirement for mandatory
redemption or the substitution of a
Qualified Substitute Vessel upon the
sale of a Mortgaged Vessel will not
apply after the occurrence of the
Fall-away Event. See "Description of
the Notes--Fall-away Event."
MANDATORY REDEMPTION UPON LOSS OF A
MORTGAGED VESSEL.................. If an Event of Loss (as defined herein)
occurs with respect to a Mortgaged
Vessel, Teekay must: (a) (i) redeem the
Notes at 100% of their principal
amount, plus accrued interest thereon
to the date of redemption, in an
aggregate principal amount (the "Loss
Redemption Amount") equal to the Vessel
Percentage applicable to the Mortgaged
Vessel lost multiplied by the principal
amount of Notes outstanding on the date
such Event of Loss was deemed to have
occurred (the "Loss Date") and (ii)
treat any net proceeds from such Event
of Loss in excess of the Loss
Redemption Amount as Loss Excess
Proceeds (as defined herein); or (b)
(i) substitute a Qualified Substitute
Vessel for the Mortgaged Vessel lost
within 180 days of the Loss Date,
provided that no Event of Default shall
have occurred and be continuing and
(ii) apply the proceeds from such Event
of Loss to repay certain indebtedness,
to invest in certain assets or to fund
working capital and treat such
proceeds, to the extent not so applied,
as Loss Excess Proceeds. See
"Description of the
Notes--Redemptions-- Mandatory
Redemption Upon Loss of a Mortgaged
Vessel." If the amount of Loss Excess
Proceeds exceeds $10 million in any
period of 12 consecutive months, Teekay
must make an offer to purchase the
Notes at a purchase price at least
equal to 100% of their principal
amount, plus accrued interest. See
"Description of the Notes--Certain
Restrictive Covenants--Excess Proceeds
Offers."
The requirement for mandatory
redemption or the substitution of a
Qualified Substitute Vessel upon the
8
<PAGE> 13
loss of a Mortgaged Vessel will not
apply after the occurrence of the
Fall-away Event. See "Description of
the Notes--Fall-away Event."
COVENANTS........................... The Indenture limits, among other
things, (i) the incurrence of
additional indebtedness, (ii) the
making of restricted payments, (iii)
the incurrence of liens, (iv) the use
of proceeds from certain asset sales,
(v) the issuance of subsidiary stock,
(vi) transactions with affiliates and
(vii) mergers, consolidations and sales
of substantially all assets. See
"Description of the Notes--Certain
Restrictive Covenants." Upon the
occurrence of the Fall-away Event, the
Company will be released from its
obligation to comply with certain
restrictive covenants and will become
subject to certain other less
restrictive covenants. See "Description
of the Notes--Fall-away Event,"
"--Certain Restrictive Covenants" and
"--Covenants After Fall-away Event."
RELEASE OF MORTGAGED VESSELS........ To the extent that Teekay acquires or
cancels Notes in accordance with the
terms of the Indenture in an aggregate
principal amount in excess of $10
million, Teekay may request the Trustee
to release a Mortgaged Vessel from the
Lien (as defined herein) of the
Indenture and related Security
Documents, provided that (i) no Event
of Default shall have occurred and be
continuing, (ii) appropriate
documentation is delivered to the
Trustee, (iii) the Appraised Value of
such Mortgaged Vessel at the time of
such release does not exceed 133% (the
reciprocal of the Maximum Loan To Value
Ratio) of the aggregate principal
amount of the Notes so acquired or
cancelled and (iv) the Loan To Value
Ratio after giving effect to such
release shall not exceed the Maximum
Loan To Value Ratio, using the
appraised values of the remaining
Mortgaged Vessels at the time of, and
after giving effect to, such release to
calculate such Loan To Value Ratio. See
"Description of the Notes--Certain
Restrictive Covenants--Release of
Mortgaged Vessels."
CHANGE OF CONTROL................... Upon the occurrence of a Change of
Control Triggering Event (as defined
herein), each holder of the Notes will
have the right (unless Teekay elects to
redeem the Notes) to require Teekay to
purchase such Holder's Notes at 101% of
their principal amount, plus accrued
interest to the date of purchase. See
"Description of the Notes--Certain
Restrictive Covenants--Repurchase of
Notes upon a Change of Control
Triggering Event."
9
<PAGE> 14
TERMINATION OF GUARANTEES, RELEASE
OF
ALL COLLATERAL AND COVENANTS
AFTER FALL-AWAY EVENT............. Upon the occurrence of the Fall-away
Event, the Subsidiary Guarantees will
terminate and Teekay may request the
Trustee to release all of the
Collateral and the Liens of the
Indenture and the Security Documents,
whereupon the Notes will become general
senior unsecured obligations of Teekay.
In addition, the Company will no longer
be obligated to comply with certain
covenants as described in the first
paragraph under "Description of the
Notes--Certain Restrictive Covenants."
While Teekay will remain obligated to
comply with the provisions described
under "Description of the
Notes--Covenants After Fall-away
Event," the effect of the modifications
described above will be to make the
Notes general senior unsecured
obligations of Teekay and to reduce
substantially the level of covenant
protection benefitting Holders of the
Notes. See "Description of the
Notes--Fall-away Event."
SAME-DAY SETTLEMENT AND PAYMENT..... The Notes will settle initially in
immediately available funds, and
settlement of any secondary market
trading in the Notes will be made in
immediately available funds. See
"Description of the Notes--Same-Day
Settlement and Payment."
RISK FACTORS........................ Holders of Notes should carefully
consider the matters set forth in this
Prospectus under the caption "Risk
Factors."
10
<PAGE> 15
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following summary consolidated financial and other data were derived
from more detailed information and financial statements appearing elsewhere in
this Prospectus and should be read in conjunction therewith. For a discussion of
the Company's recent operating results, see "Management's Discussion and
Analysis of Results of Operations and Financial Condition." The Company changed
its fiscal year end from April 30 to March 31, effective March 31, 1994, in
order to facilitate comparison of the Company's operating results to those of
other companies within the transportation industry on a calendar quarter basis.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR 11 MONTH
SEPTEMBER 30, ENDED PERIOD ENDED FISCAL YEAR ENDED APRIL 30,
----------------------- MARCH 31, MARCH 31, ---------------------------------------
1995 1994 1995 1994(1) 1993 1992 1991
--------- --------- ----------- ------------ ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER DAY DATA AND RATIOS)
STATEMENT OF INCOME DATA:
Voyage revenues.............. $ 160,944 $ 162,771 $ 319,966 $ 317,742 $ 336,994 $ 414,104 $ 396,542
Voyage expenses.............. 43,452 42,515 84,957 81,052 108,805 118,678 138,954
Net voyage revenues.......... 117,492 120,256 235,009 236,690 228,189 295,426 257,588
Income from vessel
operations.................. 34,228 25,426 50,833 59,128 36,915 123,354 115,992
Interest expense............. (31,230) (31,364) (64,321 ) (48,064 ) (47,374) (39,015) (41,021)
Interest income.............. 3,182 2,903 5,904 2,904 1,156 2,369 3,982
Other income (loss).......... 4,364 979 11,848 11,777 37,862 9,981 (564)
Income (loss) from continuing
operations before foreign
exchange gain (loss)........ 10,544 (2,056) 4,264 25,745 28,559 96,689 78,389
Foreign exchange gain
(loss)(2)................... (513) 39 991 (1,532 ) (77,917) (7,026) (28,581)
Net income (loss) from
continuing operations....... 10,031 (2,017) 5,255 24,213 (49,358) 89,663 49,808
Net income from discontinued
operations.................. -- -- -- 5,945 1,890 1,323 1,014
Net income (loss)............ 10,031 (2,017) 6,368 30,158 (47,468) 90,986 50,822
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and marketable
securities.................. $ 109,267 $ 96,079 $ 85,739 $ 107,246 $ 48,770 $ 26,239 $ 41,864
Total assets................. 1,365,916 1,356,054 1,306,474 1,405,147 1,368,966 1,237,942 1,073,530
Total debt................... 755,784 894,797 842,874 945,611 884,813 756,454 679,032
Total stockholders' equity... 587,048 431,163 439,066 433,180 403,022 442,990 345,004
OTHER FINANCIAL DATA:
EBITDA(3).................... $ 79,002 $ 73,848 $ 146,756 $ 151,364 $ 136,123 $ 214,196 $ 189,968
Cash earnings(4)............. 51,500 46,182 100,699 115,647 126,170 183,164 149,934
Cash earnings to net
debt(1)(4)(5)............... 15.9% 11.6% 13.3 % 14.7 % 15.1% 25.1% 23.5%
EBITDA to interest
expense(3)(6)............... 2.52x 2.35x 2.28 x 3.04 x 2.59x 4.70x 4.04x
Pro forma EBITDA to interest
expense(3)(6)(7)............ 2.65 -- 2.47 -- -- -- --
Total debt to EBITDA(1)(3)... 4.78 6.06 5.74 5.83 6.50 3.53 3.57
Net debt to
EBITDA(1)(3)(5)............. 4.09 5.41 5.16 5.17 6.14 3.41 3.35
Ratio of earnings to fixed
charges(8).................. 1.33 -- 1.09 1.45 -- 2.81 1.94
Total debt to
capitalization.............. 56.3% 67.5% 65.7 % 68.6 % 68.7% 63.1% 66.3%
Net debt to
capitalization(5)........... 52.4 64.9 63.3 65.9 67.5 62.2 64.9
Capital expenditures:
Vessel purchases, gross..... $ 92,077 $ 4,273 $ 7,465 $ 163,509 $ 334,733 $ 373,501 $ 303,262
Drydocking.................. 4,193 7,121 11,917 13,296 16,440 6,240 33,934
FLEET DATA:
Average number of ships(9)... 39 43 42 45 50 46 41
Average age of Company's
Aframax fleet (in
years)(10).................. 6.9 7.8 6.7 7.4 8.0 7.7 7.5
TCE per ship per
day(9)(11).................. $ 17,828 $ 16,575 $ 16,552 $ 17,431 $ 13,722 $ 19,270 $ 19,083
Vessel operating expenses per
ship per day(9)(12)......... 4,731 4,886 4,748 4,879 4,276 4,245 3,859
Operating cash flow per ship
per day(13)................. 10,030 8,732 8,944 9,133 6,511 10,999 11,159
</TABLE>
(Footnotes on following page)
11
<PAGE> 16
(Footnotes for previous page)
(1) For the 12 months ended March 31, 1994, voyage revenues were $345.0
million; income from vessel operations was $62.7 million; net income was
$32.0 million; EBITDA was $162.3 million; and cash earnings were $123.2
million. For periods presented that are less than 12 months, EBITDA and
cash earnings were annualized for purposes of computing total debt to
EBITDA, net debt to EBITDA, and cash earnings to net debt, in order to
facilitate comparisons to other periods. See "Change in fiscal year end" in
Note 1 to the Consolidated Financial Statements.
(2) Prior to fiscal 1993, a significant portion of the Company's debt was
denominated in Japanese Yen. In fiscal 1993, the Company experienced a
foreign exchange translation loss of $77.9 million. Because all of the
Company's Yen-denominated debt has been converted to U.S. Dollar-
denominated debt, and because a large portion of the Company's revenues and
costs are denominated in U.S. Dollars, the Company's foreign exchange rate
risk has been substantially eliminated. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Foreign Exchange
Rate Fluctuation."
(3) EBITDA represents net income from continuing operations before interest
expense, income tax expense, depreciation expense, amortization expense,
minority interest, and gains or losses arising from foreign exchange
translation and disposal of assets. EBITDA is included because such data is
used by certain investors to measure a company's financial performance.
EBITDA is not required by generally accepted accounting principles and
should not be considered as an alternative to net income or any other
indicator of the Company's performance required by generally accepted
accounting principles.
(4) Cash earnings represents income from continuing operations before foreign
exchange gain (loss) and before depreciation and amortization expense. Cash
earnings is included because it is used by certain investors to measure a
company's financial performance as compared to other companies in the
shipping industry. Cash earnings is not required by generally accepted
accounting principles and should not be considered as an alternative to net
income or any other indicator of the Company's performance required by
generally accepted accounting principles.
(5) Net debt represents total debt less cash and marketable securities.
(6) For purposes of computing EBITDA to interest expense and pro forma EBITDA
to interest expense, interest expense includes capitalized interest.
(7) Pro forma EBITDA to interest expense reflects the incremental net interest
expense resulting from the Offering (using an assumed interest rate of
8.5%) and the interest savings resulting from the Company's initial public
offering of common stock in July 1995, as if both transactions had occurred
on April 1, 1994. Pro forma interest expense is calculated as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ -----------------
<S> <C> <C>
Interest expense................................ $ 31,230 $ 64,321
Interest expense for the period on the Notes.... 9,563 19,125
Interest savings from loan repayments resulting
from:
Notes offered hereby.......................... (7,921) (14,565)
Initial public offering of common stock....... (3,135) (9,526)
------------------ -----------------
Pro forma interest expense...................... $ 29,737 $ 59,355
================ ==============
</TABLE>
(8) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before interest expense,
amortization of capitalized interest and amortization of deferred financing
costs. Fixed charges consist of interest expense, capitalized interest and
amortization of deferred financing costs. Earnings for the six months ended
September 30, 1994 and for the fiscal year ended April 30, 1993 were
insufficient to cover fixed charges. The amounts of the coverage
deficiencies were $1.5 million and $53.9 million, respectively. The
deficiency in fiscal 1993 resulted from a foreign exchange translation
loss. (See footnote 2). The ratio of earnings to fixed charges before
taking into account such loss for fiscal 1993 would have been 1.45 x.
(Footnotes continue on following page)
12
<PAGE> 17
(Footnotes continued from previous page)
(9) Excludes vessels of discontinued operations and the joint venture.
(10) Average age of Company's Aframax fleet is the average age, at the end of
the relevant period, of the Aframax tankers and O/B/Os owned or leased by
the Company (including joint venture vessels).
(11) TCE (or "time charter equivalent") is a measure of the revenue performance
of a vessel, which, on a per voyage basis, is generally determined by
Clarkson and other industry data sources by subtracting voyage expenses
(except commissions) incurred in transporting cargo (primarily bunker fuel,
canal tolls and port fees) from gross revenue per voyage and dividing the
remaining revenue by the total number of days required for the round-trip
voyage. For purposes of calculating the Company's average TCE for the year,
TCE has been calculated consistent with Clarkson's method, by deducting
total voyage expenses (except commissions) from total voyage revenues and
dividing the remaining sum by the Company's total voyage days in the year.
See "Exhibit A--Definitions of Shipping Terms."
(12) Vessel operating expenses consist of all expenses relating to the operation
of vessels (other than voyage expenses), including crewing, repairs and
maintenance, insurance, stores and lubes, and miscellaneous expenses,
including communications. Ship days are calculated on the basis of a
365-day year multiplied by the average number of vessels in the Company's
fleet for the respective year.
(13) Operating cash flow represents income from vessel operations, plus
depreciation and amortization expense, less drydock expense. Ship days are
calculated on the basis of a 365-day year multiplied by the average number
of vessels in the Company's fleet for the respective year. Operating cash
flow is not required by generally accepted accounting principles and should
not be considered as an alternative to net income or any other indicator of
the Company's performance required by generally accepted accounting
principles.
13
<PAGE> 18
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Notes.
INDEBTEDNESS OF THE COMPANY AND RESTRICTIONS IN DEBT AGREEMENTS
To finance its fleet expansion program during the period 1988-1993, the
Company incurred substantial indebtedness. As a result, a substantial portion of
cash flow from operations must be dedicated to the payment of principal of and
interest on such indebtedness, thereby limiting the amount of funds available
for working capital, capital expenditures and other purposes. The Company's
existing financing agreements impose operating and financial restrictions on the
Company that affect, and in many respects significantly limit or prohibit, the
ability of the Company to, among other things, incur additional indebtedness,
create liens, sell capital stock of subsidiaries or other assets, make certain
investments, engage in mergers and acquisitions, make certain capital
expenditures or pay dividends. Several of the Company's existing financing
agreements impose restrictions on changes of control of Teekay and/or its
ship-owning subsidiaries, including a requirement for prior consent, and a
requirement that the Company make an offer to redeem certain indebtedness.
Additionally, certain of the financing arrangements between subsidiaries of
Teekay that are not Guarantors and their respective lenders contain restrictions
on dividends by and distributions from such subsidiaries to Teekay. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
A failure to comply with any of the covenants in the Company's existing
financing agreements could result in a default thereunder or under other
agreements containing cross-default provisions, which would permit lenders to
accelerate the maturity of the indebtedness under such agreements and to
foreclose upon any collateral securing such indebtedness. Under any of these
circumstances, there can be no assurance that the Company would have sufficient
funds or other resources to satisfy all of its obligations, including its
obligations under the Notes. In addition, the secured nature of the Notes and
certain other indebtedness of the Company, together with the limitations imposed
by the Indenture and the Company's other financing agreements on its ability to
incur additional indebtedness and to take certain other actions, might
significantly impair the Company's ability to obtain other financing. See
"Description of Certain Indebtedness" and "Description of the Notes."
POTENTIAL INSUFFICIENCY OF COLLATERAL
In the event that Teekay and the Guarantors default on their obligations to
make payments in respect of the Notes, Holders of the Notes should be entitled
to payment out of the proceeds from the sale of the Collateral, prior in right
to any general unsecured creditors of the Guarantors or Teekay. In the event
that the assets and cash flow of the Guarantors are insufficient to satisfy the
Obligations under the Notes, the Holders' claims against Teekay will be
effectively against the shares of stock of subsidiaries other than the
Guarantors and any other assets owned by Teekay, and not direct claims against
the assets of such subsidiaries. Therefore, such claims would have value only to
the extent that the shares of stock of such subsidiaries have value after the
payment of the claims of the creditors of such subsidiaries or to the extent
that Teekay has other assets.
MARKET VALUE OF VESSELS
The market value of tankers can be expected to fluctuate, depending upon
general economic and market conditions affecting the tanker industry and
competition from other shipping companies, types and sizes of vessels, and other
modes of transportation. See "Business--The International Tanker Market."
Furthermore, as vessels become older, they can be expected to decline
significantly in value. Declining vessel values could affect the collateral
value of the Mortgaged Vessels as well as the Company's ability to raise cash by
refinancing vessels and, thereby, adversely impact the Company's liquidity. See
"Management's Discussion and Analysis of Results of Operations and Financial
14
<PAGE> 19
Condition--Liquidity and Capital Resources." In addition, declining vessel
values could result in a breach of certain loan covenants, which could give rise
to events of default under the relevant financing agreements. There can be no
assurance that the market value of the Mortgaged Vessels or the remainder of the
Company's fleet will not decline. See "Business--The International Tanker
Market--Supply and Demand."
CYCLICAL NATURE OF THE TANKER INDUSTRY; DEPENDENCE ON OIL MARKETS
Historically, the tanker industry has been cyclical, experiencing
volatility in profitability and asset values resulting from changes in the
supply of, and demand for, tanker capacity. The supply of tanker capacity is a
function of the number of new vessels built and older vessels scrapped,
converted and lost. The demand for tanker capacity is influenced by global and
regional economic conditions, increases and decreases in industrial production
and demand for crude oil and petroleum products, developments in international
trade and changes in seaborne and other transportation patterns. In particular,
because the Company is primarily engaged in transporting crude oil and petroleum
products, demand for the Company's vessels and its services in transporting
crude oil and petroleum products has been dependent upon world and regional oil
markets. Any decrease in shipments of crude oil in those markets could have a
material adverse effect on the Company. Historically, those markets have been
volatile as a result of the many conditions and events that affect the price,
production and transport of oil, as well as competition from alternative energy
sources. Because many of the factors influencing the supply of, and demand for,
vessel capacity are unpredictable, the nature, timing and degree of changes in
tanker industry conditions are also unpredictable.
RISK OF LOSS AND INSURANCE
The operation of any ocean-going vessel carries an inherent risk of
catastrophic marine disasters and property losses, caused by adverse weather
conditions, mechanical failures, human error, war, terrorism, piracy, labor
stoppages and other circumstances or events. In addition, the transportation of
crude oil is subject to the risk of crude oil spills, and business interruptions
due to political action. Any such event may result in loss of revenues or
increased costs.
The Company carries insurance to protect against most of the
accident-related risks involved in the conduct of its business and it maintains
environmental damage and pollution insurance coverage. There can be no
assurance, however, that all risks are adequately insured against, that any
particular claim will be paid or that the Company will be able to procure
adequate insurance coverage at commercially reasonable rates in the future. In
particular, more stringent environmental regulations may result in increased
costs for, or the lack of availability of, insurance against the risks of
environmental damage or pollution. See "Business--Risk of Loss and Insurance"
and "--Regulation."
ENVIRONMENTAL AND OTHER REGULATION
The operations of the Company are affected by changing environmental
protection laws and other regulations, compliance with which has entailed
significant expenses, including expenses for ship modifications and changes in
operating procedures. In particular, the United States Oil Pollution Act of
1990, as amended ("OPA 90"), provides for the phase-in of the exclusive use of
certain double-hull tankers at United States ports, as well as potentially
unlimited liability for owners, operators and demise or bareboat charterers for
certain oil pollution accidents in the United States and in U.S. waters. In
complying with OPA 90, tanker owners generally will incur additional costs in
meeting additional maintenance and inspection requirements, in developing
contingency arrangements for potential spills and in obtaining insurance
coverage as required by OPA 90. OPA 90 expands the pre-existing financial
responsibility requirements for vessels operating in United States waters and
requires owners and operators of vessels to establish and maintain with the
United States Coast Guard evidence of insurance or of qualification as a
self-insurer or other evidence of financial responsibility sufficient to meet
their potential liabilities under OPA 90.
15
<PAGE> 20
Following the example of OPA 90, the International Maritime Organization
(the United Nations' agency for maritime safety, referred to herein as the
"IMO") has adopted new regulations for tanker design and inspection which will
be phased in on a schedule depending upon vessel age. In addition, certain U.S.
states, the European Community (the "EC") and other countries are considering
stricter technical and operational requirements for tankers and legislation that
will affect the liability of tanker owners and operators for oil pollution.
Additional laws and regulations may be adopted which could limit the ability of
the Company to do business or increase the cost of its doing business and which
may have a material adverse affect on the operations of the Company. See
"Business--Regulation." The Company currently maintains $700 million in
insurance coverage for liability for pollution, spillage or leakage of oil for
each of its vessels. See "Business--Risk of Loss and Insurance."
DEPENDENCE ON SPOT OIL VOYAGES
During the first half of fiscal 1996, the Company derived approximately 75%
of its net voyage revenue (voyage revenues minus voyage expenses) from spot
voyages. Although dependence on the spot charter market is typical in the
Aframax segment of the tanker industry, the spot charter market is highly
competitive and spot charter rates are subject to significant fluctuations based
upon tanker and oil supply and demand. In addition, an oversupply of tankers
relative to demand has heightened price competition and adversely affected
charter rates and profitability for the tanker industry in general. Although the
Company's focus on the spot charter market may enable it to benefit from
strengthened tanker industry conditions should they occur, to do so the Company
must consistently procure spot voyage business. There can be no assurance that
future spot charters will be available at rates that will be sufficient to
enable the Company's vessels to be operated profitably. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--General" and "Business--The International Tanker Market."
COMPETITION
The Company obtains employment for its vessels in a highly competitive
market. Competition arises primarily from other Aframax tanker owners (including
major oil companies as well as independent companies) and, to a lesser extent,
owners of other size tankers. The Company's market share is insufficient to
enforce any degree of pricing discipline in the markets in which the Company
competes. There can be no assurance that the Company's competitive position will
not erode in the future. See "Business--Competition" and "--Business Strategy."
OPERATION OF SECOND-HAND AND AGING VESSELS
The Company's fleet, as at November 30, 1995, included 9 tankers over 10
years of age, all of which were acquired second-hand. The economic lives of
properly maintained tankers are estimated by the Company to be approximately 20
years. In general, expenditures necessary for maintaining a vessel in good
operating condition increase as the age of the vessel increases. Due to
improvements in engine technology, older vessels are typically less fuel
efficient than more recently constructed vessels. In addition, changes in
governmental regulations, safety or other equipment standards may require
expenditures for alterations, or the addition of new equipment, to the Company's
vessels and may restrict the trades in which the vessels may engage. Cargo
insurance rates may increase with the age of a vessel, making older vessels less
desirable to charterers. There is no assurance that market conditions will
justify such expenditures or enable the Company to operate its vessels
profitably during the remainder of their economic lives. The Company's current
fleet replacement plan includes newbuildings and the opportunistic acquisition
of quality second-hand vessels. Second-hand vessels typically carry very limited
warranties with respect to the condition of the vessels in comparison to
warranties available for a newbuilding.
16
<PAGE> 21
EXPOSURE TO CURRENCY EXCHANGE RATE AND INTEREST RATE FLUCTUATIONS
While virtually all of the Company's revenues are earned in U.S. dollars, a
portion of the Company's operating costs are incurred in currencies other than
U.S. dollars. This partial mismatch in operating revenues and expenses could
lead to fluctuations in net income due to changes in the value of the U.S.
dollar relative to other currencies, in particular the Japanese Yen and the
Singapore dollar. See "Management's Discussion and Analysis of Operations and
Financial Condition--Foreign Exchange Rate Fluctuation."
With respect to interest rate exposure, at September 30, 1995, and on a pro
forma basis after giving effect to the Offering, approximately $384.3 million
(50.5%) of the Company's then outstanding indebtedness bore interest at floating
interest rates. Therefore, increases in prevailing interest rates could
adversely affect the amounts that would be required for the payment of interest
on such indebtedness. In order to partially mitigate this exposure, the Company
has subsequently entered into $250.0 million of long-term interest rate swaps
with an average term of 36.0 months and an average fixed rate of 5.85 %. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources" and Notes 7, 11 and 16 to the
Consolidated Financial Statements.
OPERATIONS OUTSIDE THE UNITED STATES
The operations of the Company are primarily conducted outside of the United
States and, therefore, may be affected by currency fluctuations and by changing
economic, political and governmental conditions in the countries where the
Company is engaged in business or where its vessels are registered. During the
first half of fiscal 1996, the Company derived 90% of its total revenues from
its operations in the Indo-Pacific Basin. In the past, political conflicts in
such regions, particularly in the Arabian Gulf, have included attacks on
tankers, mining of waterways and other efforts to disrupt shipping in the area.
Vessels trading in such regions have also been subject to, in limited instances,
acts of terrorism and piracy. Future hostilities or other political instability
in the region could affect the Company's trade patterns and adversely affect the
Company's operations and performance.
ENFORCEMENT OF MORTGAGES
Each of the Mortgaged Vessels is, and during the term of the Notes will be,
registered under either Bahamian flag or Liberian flag. The Mortgages on the
Liberian flag Mortgaged Vessels are preferred mortgage liens under Liberian
maritime law; the Mortgages on the Bahamian flag Mortgaged Vessels have similar
status under Bahamian law. Bahamian law and Liberian law provide that such
mortgages may be enforced by the mortgagee by a suit in admiralty in a
proceeding against the Mortgaged Vessel. Historically, Bahamian and Liberian
ship mortgages have been enforced in major commercial ports throughout the
world, including U.S. ports. However, the Company has been advised by Graham,
Thompson & Co., Bahamian counsel to the Company, with respect to matters of
Bahamian law, and Haight, Gardner, Poor & Havens, special counsel to the
Company, with respect to matters of United States maritime law and Liberian law,
that the priority that any of the Mortgages would have against the claims of
other lien creditors in an enforcement proceeding is generally determined by,
and will vary in accordance with, the laws of the country where the proceeding
is brought. Both Bahamian ship mortgages and Liberian ship mortgages may be
enforced against a vessel physically present in the United States, but the claim
under any such mortgage would rank behind preferred maritime liens, including
those for supplies and other necessaries provided in the United States. Since
the Mortgaged Vessels trade primarily in the Indo-Pacific Basin, there is no
assurance that, if enforcement proceedings are commenced against a Mortgaged
Vessel, the Mortgaged Vessel will be located in a jurisdiction having the same
mortgage enforcement procedures and lien priorities as the Bahamas, Liberia or
the United States, although, upon the occurrence of an Event of Default, the
Trustee may be able to effect control over the Mortgaged Vessels to direct them
to a desirable jurisdiction to arrest such vessels pursuant to judicial
foreclosure proceedings. See "The Mortgaged Vessels--The Mortgages."
17
<PAGE> 22
Although each of the Mortgaged Vessels is separately owned by a subsidiary
of Teekay, under certain circumstances a parent company and all of the
shipowning affiliates in a group under common control engaged in a joint venture
could be held liable for damages or debts owed by one of the affiliates,
including liabilities for oil spills under OPA 90 or other environmental laws.
Therefore, it is possible that all of the assets of the Company could be subject
to execution upon a judgment against Teekay or any one of its subsidiaries. The
Company currently maintains $700 million in insurance coverage for liability for
pollution, spillage or leakage of oil for each of its vessels. See
"Business--Risk of Loss and Insurance" and "--Regulation."
FRAUDULENT CONVEYANCE STATUTES
The granting of the Mortgages by the Guarantors and any payment under the
Subsidiary Guarantees could be subject to review under relevant fraudulent
conveyance statutes in the event of a bankruptcy or other similar filing by
Teekay or the Guarantors, or could be attacked in certain other circumstances by
a creditor of a Guarantor. In the event of such a filing or attack, the relevant
court could make a determination detrimental to the holders of the Notes. See
"Description of the Notes--Fraudulent Conveyance Statutes."
CONCENTRATION OF VOTING POWER
The Cirrus Trust, a trust organized under the laws of the Turks and Caicos
Islands, and the JTK Trust, a trust owned under the laws of the Bahamas (the
"Trusts"), own, as of the date of this Prospectus, approximately 75% of the
outstanding common stock of Teekay. As a result, the Trusts have the power to
elect all of the directors of Teekay and to control the vote on substantially
all other matters, including significant corporate actions, without the approval
of other stockholders. See "Ownership of Teekay."
POSSIBLE TAXATION OF THE COMPANY'S UNITED STATES SOURCE INCOME
Under the United States Internal Revenue Code of 1986, as amended (the
"Code"), the Company's shipping income and gains from United States sources may
be taxable by the United States, if not entitled to the benefits of certain
equivalent exemption provisions of the Code. Due to the absence of interpretive
regulations or other applicable authority under the relevant Code sections,
Perkins Coie, United States special tax counsel to the Company, is unable to
render an opinion in this regard and the Company, therefore, cannot provide any
assurances as to the actual effective United States tax rate (if any) which will
be imposed on the Company's U.S. source income. See "Business--Taxation of the
Company--United States Taxation."
LITIGATION
In May 1993, a lawsuit was filed in the Supreme Court of British Columbia
(the "B.C. Court") against the original representative of the estate (the
"Estate") of the Company's founder, J. Torben Karlshoej, by Mr. Karlshoej's
first wife claiming certain rights in the assets of the Estate based upon
expressed and implied contract theories, unjust enrichment and specific
performance. In April 1995, the plaintiff filed a notice of motion to amend her
claim to add the Trusts, Teekay and certain of its directors, officers and other
affiliates as defendants in the lawsuit. The B.C. Court has not yet made a
determination as to whether to grant the plaintiff's motion to amend her
statement of claim. While Teekay believes that it has meritorious defenses
against the plaintiff's claims and intends, if added as a defendant, to defend
vigorously against the claims, there can be no assurance that Teekay and its
affiliates will not be added as defendants or, if added, that they will be
successful in defending against the claims. If plaintiff were successful on her
claims, a change in control of the Company could result. See "Business--Legal
Proceedings--Litigation against the Estate of the Company's Founder."
18
<PAGE> 23
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There is currently no trading market for the Notes. Although Teekay intends
to cause the Notes to be authorized for listing on the New York Stock Exchange,
there can be no assurance, even if such authorization is obtained, that an
active market for the Notes will develop or, if any such market develops, that
it will continue to exist or as to the liquidity of such market. In addition, no
assurance can be given that a Holder of the Notes will be able to sell them in
the future or that such sale will be at a price equal to or higher than the
initial public offering price. Furthermore, the Notes may trade at a discount
from the initial public offering price depending upon many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. The Underwriters have informed the Company that, subject to
applicable laws and regulations, they currently intend to make a market in the
Notes. However, the Underwriters are not obligated to do so, and any such market
making may be discontinued at any time without notice. Therefore, no assurance
can be given as to whether an active trading market will develop for the Notes.
See "Underwriting."
USE OF PROCEEDS
The aggregate net proceeds to be received by Teekay from the Note Offering
(after deducting Underwriters fees and commissions and estimated expenses
attributable to the offering) are estimated to be approximately $220.2 million.
Teekay intends to apply the net proceeds to prepay all outstanding indebtedness
on the Mortgaged Vessels, which indebtedness (i) bears interest at rates of
between 1.0 to 1.5 percentage points over LIBOR and (ii) is scheduled to mature
over the next twelve years. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Liquidity and Capital Resources" and
"Description of Certain Indebtedness."
19
<PAGE> 24
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1995, and as adjusted to give effect to the sale of the Notes and
the application of the net proceeds therefrom to prepay certain indebtedness of
the Guarantors. This table should be read in conjunction with the consolidated
financial statements of the Company and the related notes thereto set forth
elsewhere in this Prospectus. See also "Use of Proceeds" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-------------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
(UNAUDITED)
(U.S. DOLLARS IN THOUSANDS)
Cash and marketable securities....................... $ 109,267 $ 109,267
========== ============
Current obligations(2):
Current portion of long-term debt.................. 58,906 37,358
Current portion of capital lease obligation........ 2,709 --
----------- --------------
Total current obligations....................... 61,615 37,358
----------- --------------
Long-term obligations(2):
Long-term debt..................................... 652,969 498,226
Capital lease obligation........................... 41,200 --
Notes offered hereby............................... -- 225,000
----------- --------------
Total long-term obligations..................... 694,169 723,226
----------- --------------
Stockholders' equity:
Capital stock...................................... 230,613 230,613
Retained earnings.................................. 356,578 356,578
Less net unrealized loss on marketable
securities...................................... 143 143
----------- --------------
Total stockholders' equity...................... 587,048 587,048
----------- --------------
Total capitalization.......................... $ 1,342,832 $ 1,347,632
========== ============
</TABLE>
- ------------
(1) Reflects the net proceeds from the Offering estimated to be approximately
$220.2 million.
(2) For information concerning the Company's borrowing arrangements and lease
commitments, see "Description of Certain Indebtedness."
20
<PAGE> 25
THE COMPANY
The Company is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium size
oil tankers. The Company's modern fleet provides such transportation services to
major oil companies, major oil traders and government agencies, principally in
the Indo-Pacific Basin. The Company believes that in each of the last four years
it has transported more crude oil and petroleum products via Aframax tankers in
the Indo-Pacific Basin than any other shipping company and estimates it has
approximately a one quarter share of the Indo-Pacific Basin Aframax market.
The Company pursues an intensively customer- and operations-oriented
business strategy, emphasizing market concentration and service quality to
achieve superior operating results. The Company believes that it has four key
competitive advantages: (i) geographic market concentration in the Indo-Pacific
Basin, which facilitates comprehensive coverage of charterer requirements, (ii)
a uniform-size fleet of Aframax tankers containing many sister ships, which
affords scheduling flexibility and permits greater capacity utilization, (iii) a
modern well-maintained fleet that operates with high fuel efficiency and low
maintenance costs and affords greater acceptance among charterers with high
quality standards, and (iv) a full-service ship management and chartering
capability which affords a focused marketing effort, tight cost controls, and
effective operational and safety monitoring. As a result of its business
strategy, the Company has achieved consistently higher operating cash flow per
ship per day than other public bulk shipping companies. Although the Company's
business strategy has been, and in the foreseeable future will be, primarily
focused on providing services via Aframax tankers in the Indo-Pacific Basin,
management intends to closely monitor the evolution of the shipping industry and
to adapt its strategy according to changing market dynamics. The Company intends
to continue to consider strategic opportunities that may arise from time to
time, including joint ventures and business acquisitions.
The Company's fleet consists of 41 tankers: 36 Aframax oil tankers and
O/B/Os, two smaller oil tankers, one VLCC, and through a joint venture, a 50%
interest in two additional Aframax oil tankers. The Company's vessels are all of
Liberian or Bahamian registry. The Company's fleet has a total cargo capacity of
approximately 4.1 million tons and its Aframax vessels represent approximately
7.0% of the total tonnage of the world Aframax fleet. While its fleet
modernization program is effectively complete, the Company intends to continue
selective purchases of modern, predominantly second-hand, high-quality tankers
should such vessels become available.
The Company's fleet is one of the most modern fleets in the world, having
an average age of approximately 6.9 years, compared to an average age for the
world oil tanker fleet of approximately 14.1 years and for the world Aframax
tanker fleet of approximately 12.3 years. A substantial portion of the world
tanker fleet will reach 20 years of age in the next three years, including
approximately 31% of Aframax tankers; none of the Company's Aframax tankers is
more than 16 years of age. In addition, the Company has been recognized by
customers and rating services for safety, quality and service. In each of the
last five years, Tanker Advisory Center, Inc. (New York) has rated the Company's
fleet a "meritorious tanker fleet," a designation which, in the latest
publication (March 1995) placed it in the top quarter of fleets containing 10 or
more tankers. Given the age profile of the world tanker fleet, increasing
emphasis among customers on quality as a result of stringent environmental
regulations, and heightened concerns about liability for oil pollution, the
Company believes that its modern fleet and its emphasis on quality and safety
provide it with a favorable competitive profile. See "Risk Factors--Competition"
and "--Environmental and Other Regulation" and "Business--The International
Tanker Market--Supply and Demand."
Teekay has in the past occasionally entered into joint ventures with other
shipping companies, an activity that is common among large shipping companies.
Currently, Teekay is actively engaged in one such joint venture: it owns 50% of
Viking Consolidated Shipping Corporation ("VCSC"), which in turn owns two
Aframax tankers. One of the VCSC tankers is on long-term charter to a major oil
company; the other is currently trading on the spot market. Teekay is
negotiating the purchase of the latter vessel from VCSC.
21
<PAGE> 26
The Teekay organization was founded in 1973 by J. Torben Karlshoej to
manage and operate oil tankers. Mr. Karlshoej died in October 1992 and was
succeeded as Chief Executive Officer by Captain James Hood, who has been with
the Company since 1977. Prior to 1985, the Company chartered-in most of the
tonnage that it subsequently provided to its transportation customers. As the
availability of acceptable chartered-in tonnage declined, management began an
expansion of its owned fleet. Since 1985, the Company has significantly expanded
and modernized its owned fleet by taking delivery of 38 new vessels and
acquiring 24 vessels in the second-hand market, as well as disposing of 13 older
(mid-1970's built) tankers over the past two and one half years.
The Company's operating results in fiscal 1995 (year ended March 31, 1995)
were adversely affected by a weakened charter market caused by low tanker
demand, which resulted from a shift in crude oil distribution patterns.
Historically, incremental oil demand growth has been satisfied principally from
oil produced in the Arabian Gulf; however, in calendar 1994, incremental global
oil demand was primarily met by oil production in the North Sea and Caribbean
regions. Because of the proximity of the North Sea and Caribbean to discharge
points, increased production in these regions resulted in a reduction in the
average length of tanker voyages, thus adversely affecting tanker demand. In
spite of adverse charter market conditions, in fiscal 1995 the Company generated
income from vessel operations of $50.8 million and EBITDA of $146.8 million, and
reduced debt by $102.6 million from internally generated cash.
Management believes that the Company's operating performance is exhibiting
near-term improvement. During the first half of fiscal 1996, the Company's
income from vessel operations rose to $34.2 million and EBITDA rose to $79.0
million, improvements of 34.6% and 7.0% respectively, over the first half of
fiscal 1995. Based on current estimates, income from vessel operations and
EBITDA for the third quarter fiscal 1996 are anticipated to show continued
improvement in the Company's operating performance, stemming from stronger
Aframax charter rates in the Indo-Pacific Basin and, in particular, better
market conditions in the Company's core Aframax trade routes to Australia,
Japan, and the United States West Coast.
In addition, management believes that tanker supply/demand fundamentals are
improving through a combination of tanker scrapping in excess of deliveries, and
an anticipated resumption of tanker demand growth. According to Clarkson, the
worldwide tanker fleet declined by 2.5% from December 31, 1993 to November 30,
1995, with calendar 1994 marking the first annual decline in tanker fleet size
since 1986. The International Energy Agency forecasts that global oil
consumption will grow 2.3% in 1996. Management believes that due to the expected
topping out of North Sea oil production a large percentage of future oil demand
growth will be met by Arabian Gulf oil producers, thereby increasing tanker
demand. Maritime Strategies Inc. forecasts that tanker demand will grow 2.4% in
1996 and 3.3% in 1997. A continuation of these trends should result in an
increase in tanker charter rates which would have a positive impact on the
Company's operating results.
During the first half of fiscal 1996, the Company took steps to improve its
financial condition and flexibility. In May 1995, the Company entered into a
$243 million eight-year secured reducing revolving credit agreement (the
"Revolver") which increased liquidity, extended its debt repayment schedule, and
reduce its cost of borrowing. In July 1995, the Company completed an initial
public offering of 6.9 million shares of common stock, resulting in net cash
proceeds of $137.6 million, of which $135.0 million was used to reduce amounts
outstanding under the Revolver. As a result of these transactions, as well as
improved operating performance, as of September 30, 1995, the Company's total
liquidity, as measured by the aggregate of its cash, marketable securities and
availability under the Revolver, increased to $244.3 million from $85.7 at
fiscal 1995 year-end; and the Company's ratio of net debt to capitalization had
declined to 52 percent from 63 percent over the same period.
Teekay is incorporated under the laws of the Republic of Liberia and
maintains its principal executive headquarters at the Tradewinds Building, Sixth
Floor, Bay Street, P.O. Box SS-6293, Nassau, Commonwealth of The Bahamas. Its
telephone number at such address is (809) 322-8020. The Company's principal
operating offices are located at 200 Burrard Street, Suite 2100, Vancouver,
British Columbia, Canada, V6C 3L6. Its telephone number at such address is (604)
683-3529.
22
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
Set forth below are selected consolidated financial and other data of the
Company for the six-month periods ended September 30, 1995 and 1994 and five
fiscal periods ended March 31, 1995. The selected financial and other data set
forth below with respect to the Company's statements of income for each of the
three fiscal periods ended March 31, 1995 and the Company's balance sheets as of
March 31, 1995 and 1994 are derived from consolidated financial statements of
the Company, which are included elsewhere in this Prospectus, that have been
audited by Ernst & Young, independent chartered accountants. The statement of
income data for each of the two fiscal years in the period ended April 30, 1992
and the balance sheet data as of April 30, 1993, 1992 and 1991 are derived from
consolidated financial statements audited by Ernst & Young but not included in
this Prospectus. The selected financial and other data set forth below with
respect to the Company's statements of income for each of the six-month periods
ended September 30, 1995 and 1994 and the Company's balance sheets as of
September 30, 1995 and 1994 have been derived from the unaudited consolidated
financial statements of the Company included elsewhere in this Prospectus,
which, in management's opinion, reflect all adjustments necessary (consisting
only of normal recurring adjustments) for a fair presentation of such financial
data. The Company's results for the six months ended September 30, 1995 are not
necessarily indicative of the eventual results for the fiscal year ending March
31, 1996.
The data below should be read in conjunction with the consolidated
financial statements and the notes thereto, the other financial information and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" that appear elsewhere in this Prospectus. The Company changed its
fiscal year end from April 30 to March 31, effective March 31, 1994, in order to
facilitate comparison of the Company's operating results to those of other
companies within the transportation industry on a calendar quarter basis.
23
<PAGE> 28
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR 11 MONTH
SEPTEMBER 30, ENDED PERIOD ENDED FISCAL YEAR ENDED APRIL 30,
------------------------- MARCH 31, MARCH 31, ---------------------------------------
1995 1994 1995 1994(1) 1993 1992 1991
----------- ----------- ----------- ------------ ----------- ----------- -----------
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER DAY DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Voyage revenues............. $ 160,944 $ 162,771 $ 319,966 $ 317,742 $ 336,994 $ 414,104 $ 396,542
Voyage expenses............. 43,452 42,515 84,957 81,052 108,805 118,678 138,954
----------- ----------- ----------- ------------ ----------- ----------- -----------
Net voyage revenues......... 117,492 120,256 235,009 236,690 228,189 295,426 257,588
Operating expenses:
Vessel operating
expenses(2)............. 33,496 38,446 72,723 73,597 79,649 71,227 57,064
Depreciation and
amortization............ 40,956 48,238 96,435 89,902 97,611 86,475 71,545
General and
administrative.......... 8,812 8,146 15,018 14,063 14,014 14,370 12,987
----------- ----------- ----------- ------------ ----------- ----------- -----------
Total operating expenses.... 83,264 94,830 184,176 177,562 191,274 172,072 141,596
----------- ----------- ----------- ------------ ----------- ----------- -----------
Income from vessel
operations................ 34,228 25,426 50,833 59,128 36,915 123,354 115,992
Interest expense............ (31,230) (31,364) (64,321 ) (48,064 ) (47,374 ) (39,015) (41,021)
Interest income............. 3,182 2,903 5,904 2,904 1,156 2,369 3,982
Other income (loss)......... 4,364 979 11,848 11,777 37,862 9,981 (564)
----------- ----------- ----------- ------------ ----------- ----------- -----------
Income (loss) from
continuing operations
before foreign exchange
gain (loss)............... 10,544 (2,056) 4,264 25,745 28,559 96,689 78,389
Foreign exchange gain
(loss)(3)................. (513) 39 991 (1,532 ) (77,917 ) (7,026) (28,581)
----------- ----------- ----------- ------------ ----------- ----------- -----------
Net income (loss) from
continuing operations..... 10,031 (2,017) 5,255 24,213 (49,358 ) 89,663 49,808
Net income from discontinued
operations................ -- -- -- 5,945 1,890 1,323 1,014
Cumulative effect of change
in accounting for
marketable securities..... -- -- 1,113 -- -- -- --
----------- ----------- ----------- ------------ ----------- ----------- -----------
Net income (loss)........... $ 10,031 $ (2,017) $ 6,368 $ 30,158 $ (47,468 ) $ 90,986 $ 50,822
========== ========== =========== ============= =========== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and marketable
securities................ $ 109,267 $ 96,079 $ 85,739 $ 107,246 $ 48,770 $ 26,239 $ 41,864
Total assets................ 1,365,916 1,356,054 1,306,474 1,405,147 1,368,966 1,237,942 1,073,530
Total debt.................. 755,784 894,797 842,874 945,611 884,813 756,454 679,032
Total stockholders'
equity.................... 587,048 431,163 439,066 433,180 403,022 442,990 345,004
OTHER FINANCIAL DATA:
EBITDA(4)................... $ 79,002 $ 73,848 $ 146,756 $ 151,364 $ 136,123 $ 214,196 $ 189,968
Cash earnings(5)............ 51,500 46,182 100,699 115,647 126,170 183,164 149,934
Cash earnings to net
debt(1)(5)(6)............. 15.9% 11.6% 13.3 % 14.7 % 15.1 % 25.1% 23.5%
EBITDA to interest
expense(4)(7)............. 2.52x 2.35x 2.28 x 3.04 x 2.59 x 4.70x 4.04x
Pro forma EBITDA to interest
expense(4)(7)(8).......... 2.65 -- 2.47 -- -- -- --
Total debt to EBITDA(1)(4).. 4.78 6.06 5.74 5.83 6.50 3.53 3.57
Net debt to
EBITDA(1)(4)(6)........... 4.09 5.41 5.16 5.17 6.14 3.41 3.35
Ratio of earnings to fixed
charges(9)................ 1.33 -- 1.09 1.45 -- 2.81 1.94
Total debt to
capitalization............ 56.3% 67.5% 65.7 % 68.6 % 68.7 % 63.1% 66.3%
Net debt to
capitalization(6)......... 52.4 64.9 63.3 65.9 67.5 62.2 64.9
Capital expenditures:
Vessel purchases, gross... $ 92,077 $ 4,273 $ 7,465 $ 163,509 $ 334,733 $ 373,501 $ 303,262
Drydocking................ 4,193 7,121 11,917 13,296 16,440 6,240 33,934
FLEET DATA:
Average number of
ships(10)................. 39 43 42 45 50 46 41
Average age of Company's
Aframax fleet
(in years)(11)............ 6.9 7.8 6.7 7.4 8.0 7.7 7.5
TCE per ship per
day(10)(12)............... $ 17,828 $ 16,575 $ 16,552 $ 17,431 $ 13,722 $ 19,270 $ 19,083
Vessel operating expenses
per ship per day(2)(10)... 4,731 4,886 4,748 4,879 4,276 4,245 3,859
Operating cash flow per ship
per day(13)............... 10,030 8,732 8,944 9,133 6,511 10,999 11,159
</TABLE>
(Footnotes on following page)
24
<PAGE> 29
(Footnotes for previous page)
(1) For the 12 months ended March 31, 1994, voyage revenues were $345.0
million; income from vessel operations was $62.7 million; net income was
$32.0 million; EBITDA was $162.3 million; and cash earnings were $123.2
million. For periods presented that are less than 12 months, EBITDA and
cash earnings were annualized for purposes of computing total debt to
EBITDA, net debt to EBITDA, and cash earnings to net debt, in order to
facilitate comparisons to other periods. See "Change in fiscal year end" in
Note 1 to the Consolidated Financial Statements.
(2) Vessel operating expenses consist of all expenses relating to the operation
of vessels (other than voyage expenses), including crewing, repairs and
maintenance, insurance, stores and lubes, and miscellaneous expenses,
including communications. Voyage expenses comprise all expenses relating to
particular voyages, including bunker fuel expenses, port fees and canal
tolls.
(3) Prior to fiscal 1993, a significant portion of the Company's debt was
denominated in Japanese Yen. In fiscal 1993, the Company experienced a
foreign exchange translation loss of $77.9 million. Because all of the
Company's Yen-denominated debt has been converted to U.S. Dollar-
denominated debt, and because a large portion of the Company's revenues and
costs are denominated in U.S. Dollars, the Company's foreign exchange rate
risk has been substantially eliminated. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Foreign Exchange
Rate Fluctuation."
(4) EBITDA represents net income from continuing operations before interest
expense, income tax expense, depreciation expense, amortization expense,
minority interest, and gains or losses arising from foreign exchange
translation and disposal of assets. EBITDA is included because such data is
used by certain investors to measure a Company's financial performance.
EBITDA is not required by generally accepted accounting principles and
should not be considered as an alternative to net income or any other
indicator of the Company's performance required by generally accepted
accounting principles.
(5) Cash earnings represents income from continuing operations before foreign
exchange gain (loss) and before depreciation and amortization expense. Cash
earnings is included because it is used by certain investors to measure a
company's financial performance as compared to other companies in the
shipping industry. Cash earnings is not required by generally accepted
accounting principles and should not be considered as an alternative to net
income or any other indicator of the Company's performance required by
generally accepted accounting principles.
(6) Net debt represents total debt less cash and marketable securities.
(7) For purposes of computing EBITDA to interest expense and pro forma EBITDA
to interest expense, interest expense includes capitalized interest.
(8) Pro forma EBITDA to interest expense reflects the incremental net interest
expense resulting from the Offering (using an assumed interest rate of
8.5%) and the interest savings resulting from the Company's initial public
offering of common stock in July 1995, as if both transactions had occurred
on April 1, 1994. Pro forma interest expense is calculated as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ -----------------
<S> <C> <C>
Interest expense................................ $ 31,230 $ 64,321
Interest expense for the period on the Notes.... 9,563 19,125
Interest savings from loan repayments resulting
from:
Notes offered hereby.......................... (7,921) (14,565)
Initial public offering of common stock....... (3,135) (9,526)
------------------ -----------------
Pro forma interest expense...................... $ 29,737 $ 59,355
================ ==============
</TABLE>
(Footnotes continue on following page)
25
<PAGE> 30
(Footnotes continued from previous page)
(9) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before interest expense,
amortization of capitalized interest and amortization of deferred financing
costs. Fixed charges consist of interest expense, capitalized interest and
amortization of deferred financing costs. Earnings for the six months ended
September 30, 1994 and for the fiscal year ended April 30, 1993 were
insufficient to cover fixed charges. The amounts of the coverage
deficiencies were $1.5 million and $53.9 million, respectively. The
deficiency in fiscal 1993 resulted from a foreign exchange translation
loss. (See footnote 3.) The ratio of earnings to fixed charges before
taking into account such loss for fiscal 1993 would have been 1.45x.
(10) Excludes vessels of discontinued operations and the joint venture.
(11) Average age of Company's Aframax fleet is the average age, at the end of
the relevant fiscal period, of the Aframax tankers and O/B/Os owned or
leased by the Company (including joint venture vessels).
(12) TCE (or "time charter equivalent") is a measure of the revenue performance
of a vessel, which, on a per voyage basis, is generally determined by
Clarkson and other industry data sources by subtracting voyage expenses
(except commissions), which are incurred in transporting cargo (primarily
bunker fuel, canal tolls and port fees) from gross revenue per voyage and
dividing the remaining revenue by the total number of days required for the
round-trip voyage. For the purposes of calculating the Company's average
TCE for the year, TCE has been calculated consistent with Clarkson's method
by deducting total voyage expenses (except commissions) from total voyage
revenues and dividing the remaining sum by the Company's total voyage days
in the year. See "Exhibit A--Definitions of Shipping Terms."
(13) Operating cash flow represents income from vessel operations, plus
depreciation and amortization expense, less drydock expense. Ship days are
calculated on the basis of a 365-day year multiplied by the average number
of vessels in the Company's fleet for the respective year. Operating cash
flow is not required by generally accepted accounting principles and should
not be considered as an alternative to net income or any other indicator of
the Company's performance required by generally accepted accounting
principles.
26
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
The Company is a leading provider of international crude oil and petroleum
product transportation services through its fleet of predominantly Aframax
tankers. The charter rates that the Company is able to obtain for these services
are determined in a highly competitive global tanker charter market.
Historically, the tanker industry has been cyclical, experiencing volatility in
profitability and asset values resulting from changes in the supply of and
demand for vessel capacity. The Company's future operating results will be
subject to a number of uncertainties, many of which reflect the cyclical nature
of the tanker industry.
During the first half of fiscal 1996, approximately 75% of the Company's
net revenue was derived from spot voyages. This high dependence on spot voyages
contributes to the volatility of the Company's revenue, cash flow from
operations and net income. However, the Company's dependence on spot voyages is
within industry norms: the most recent comprehensive study on Aframax tankers by
Drewry, dated August 1993, shows that 90% of Aframax tankers traded on the spot
market in 1992.
Tanker charter markets have been affected by changes in the supply of, and
demand for, tanker capacity. Significant over-capacity developed in the
mid-1970s as large numbers of new vessels, ordered based on pre-1973 oil crisis
tanker demand growth expectations, were delivered into a depressed market.
Tankers built in the mid-1970s, many of which are still in service today, have
been the most significant factor in tanker supply from the time of their
delivery to this day. Management believes that many of these tankers will reach
the ends of their useful lives during the latter half of the 1990s. With the
exception of a strong tanker charter market in 1979-80 due to geo-political
events, conditions remained adverse for tanker owners from 1974 to 1986. In
particular, a persistent over-supply of tankers in a then-young world fleet (its
average age was only approximately 10 years in 1985) adversely affected the
charter market.
Charter market conditions began to improve in 1986 as a result of the
cumulative effect of several years of significant scrapping as well as increased
tanker demand. By 1988, charter rates and newbuilding orders had begun to
increase. During the period 1988-1991, significant new tonnage was delivered
into a strong charter market. Scrapping of older tonnage, which had been
expected to continue through this period as the fleet aged, slowed considerably
because it was economically feasible to operate older vessels in the prevailing
strong charter market conditions. In addition, the tanker industry had not yet
entered the current stringent regulatory environment, which management believes
has a generally adverse effect on older, substandard tonnage.
The tanker charter market experienced a decline in early 1992 as a result
of the expansion in tanker supply during the previous four years, as well as the
impact of the global recession on demand and pricing. Tanker charter rates
increased temporarily in calendar 1993 as a result of a short-term increase in
tanker demand, but declined again in calendar 1994, due to lower demand
resulting from shorter average tanker voyage distances, and in spite of a
decline in tanker supply for the first time since 1986. During the first eleven
months of calendar 1995, scrapping continued to exceed deliveries, resulting in
a further decline in tanker supply. Currently, newbuilding ordering activity has
declined and scrapping has now returned to levels which, if sustained, should
lead to a tanker market recovery.
The Company operates its tankers in markets that have historically
exhibited seasonal variations in demand and, therefore, charter rates. Tanker
markets are typically stronger in the winter months as a result of increased oil
consumption in the northern hemisphere. In addition, unpredictable weather
patterns in the winter months tend to disrupt vessel scheduling. The oil price
volatility resulting from these factors has historically led to increased oil
trading activities. As a result, revenues have historically been strongest for
the Company in its third and fourth fiscal quarters.
Throughout the periods discussed in this Prospectus, the Company's average
TCE rate was higher than the industry average as calculated by the Company
(based upon data reported by Clarkson) as a consequence of higher capacity
utilization and the fuel efficiency of its modern fleet. Management
27
<PAGE> 32
believes that average TCE is an appropriate measure of a bulk shipping company's
net revenues for the purpose of comparisons to published industry data and
companies with similar ships. TCE, as generally calculated by industry sources,
deducts from gross revenue all direct voyage costs except for commissions. It
does not account for the opportunity cost of off-hire and idle days.
Over the past five years, certain countries have developed environmental
protection laws and regulations affecting the tanker industry. The new
requirements, in particular OPA 90 in the United States, have imposed higher
operating standards, greater liability, and a variety of higher costs upon
tanker owners and operators. One costly requirement of OPA 90 is that all
tankers ordered after June 1990 calling at U.S. ports be constructed with double
hulls. As a result, the Company's new vessels are of double hull construction
and the Company has plans to replace the older single hull vessels with double
hull vessels.
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1995 VERSUS SIX MONTHS ENDED SEPTEMBER 30,
1994
Operating results for the second quarter of fiscal 1996 reflected the
improvement in average TCE rates experienced by the Company's fleet during the
past 12 months. Despite a 9.3% decrease in the average size of the Company's
fleet of 100%-owned vessels from 43 vessels in the first half of fiscal 1995 to
39 in the first half of fiscal 1996, voyage revenues decreased by only 1.1% to
$160.9 million in the first half of fiscal 1996 from $162.8 million for the
first half of fiscal 1995. Net voyage revenue was down only 2.3%, to $117.5
million in the first half of fiscal 1996, from $120.3 million in the first half
of fiscal 1995. This reflects an improvement in TCE rates, as well as the
increased capacity and fuel efficiency associated with the Company's newer
fleet. In November 1995 the Company completed the sale of its last mid-1970s
built tanker. The disposal of these older and less efficient vessels over the
past two years has reduced the Company's fleet size, and has reduced voyage
expenses without reducing voyage revenues to the same extent.
Vessel operating expenses decreased 12.9% to $33.5 million in the first
half of fiscal 1996 from $38.4 million in the first half of fiscal 1995, a
result of the decline in fleet size, as well as the result of a stable operating
cost environment.
Depreciation and amortization decreased 15.1% to $41.0 million in the first
half of fiscal 1996 from $48.2 million in the first half of fiscal 1995, again a
function of the reduction in fleet size, and as a result of a revision to
estimates of residual values of the Company's vessels. This change in estimate
had the effect of reducing depreciation expense by approximately $4.8 million in
the first half of fiscal 1996. Depreciation and amortization expense included
amortization of drydocking costs of $4.2 million in the first half of fiscal
1996 and $5.0 million in the first half of fiscal 1995.
General and administrative expenses increased 8.2% to $8.8 million in the
first half of fiscal 1996 from $8.1 million in the first half of fiscal 1995,
primarily as a result of increased administrative costs subsequent to the
acquisition of Teekay Shipping Limited in March, 1995.
The combination of improved TCE rates, a more modern and efficient fleet,
and stable costs, resulted in a 34.6% increase in income from vessel operations
to $34.2 million in the first half of fiscal 1996 from $25.4 million in the
first half of fiscal 1995.
Interest expense remained virtually unchanged at $31.2 million in the first
half of fiscal 1996, compared to $31.4 million in the first half of fiscal 1995.
A continued decline in the Company's total debt and a reduction in the Company's
average credit spread on commercial bank borrowings were offset by the increase
in short-term interest rates which occurred during 1994. Changes in market
interest rates have had a delayed effect on interest expense, as rates on the
Company's floating rate debt are set in advance, for three to six month periods.
Interest income increased 9.6% to $3.2 million in the first half of fiscal 1996
from $2.9 million in the first half of fiscal 1995 as a result of higher cash
and marketable securities balances.
28
<PAGE> 33
Other income during the first half of fiscal 1996 was $4.4 million,
consisting primarily of a $3.7 million gain on sale of a vessel. Other income
during the first half of fiscal 1995 was $1.0 million, consisting primarily of a
$3.7 million gain on the sale of a vessel, offset by a $2.7 million loss on
marketable securities.
FISCAL 1995 VERSUS FISCAL 1994
The Company changed its fiscal year end from April 30 to March 31,
effective March 31, 1994, in order to facilitate comparison of the Company's
operating results with those of other companies within the transportation
industry on a calendar quarter basis. As a result, while the fiscal 1995 results
are for the twelve-month period ending March 31, 1995, the comparable fiscal
1994 results are for the eleven-month period ending March 31, 1994. Where
indicated in the following discussions, percentage change figures have been
annualized by adjusting fiscal 1994 results to include the unaudited results for
the month of April 1993.
Voyage revenues were $320.0 million in fiscal 1995 as compared to $317.7
million in fiscal 1994, representing an 7.2% decrease on an annualized basis
from fiscal 1994, primarily as a result of a decline in average fleet size from
45 to 42 vessels and continuing weak charter markets.
Voyage expenses were $85.0 million in fiscal 1995 as compared to $81.1
million in fiscal 1994, a decrease of 4.5% on an annualized basis, primarily as
a result of a decline in fleet size, partially offset by an increase in fuel
costs.
Vessel operating expenses were $72.7 million in fiscal 1995 as compared to
$73.6 million in fiscal 1994, representing a 9.9% decrease on an annualized
basis from fiscal 1994, primarily as a result of the decline in fleet size.
Depreciation and amortization was $96.4 million in fiscal 1995 as compared
to $89.9 million in fiscal 1994, representing a 1.0% decrease on an annualized
basis from fiscal 1994, primarily due to the decline in fleet size, partially
offset by a higher average cost base during fiscal 1995 resulting from the sale
of some of the Company's older vessels, whose annual depreciation charges were
lower than the fleet average.
General and administrative expenses were $15.0 million in fiscal 1995 as
compared to $14.1 million in fiscal 1994. On an annualized basis, this is
virtually unchanged from fiscal 1994.
As a result of the decrease in fleet size and continuing weak charter
markets, income from vessel operations decreased to $50.8 million in fiscal 1995
from $59.1 million in fiscal 1994. On an annualized basis, this represents a
19.0% decline from fiscal 1994.
Interest expense increased to $64.3 million in fiscal 1995 from $48.1
million in fiscal 1994, representing a 22.0% increase on an annualized basis
from fiscal 1994, as a result of an increase in interest rates mitigated in part
by the repayment and prepayment of long-term debt totalling $102.6 million.
Interest income was $5.9 million in fiscal 1995 as compared to $2.9 million in
fiscal 1994, representing an increase of 93.8% on an annualized basis from
fiscal 1994, as a result of increased interest rates and higher cash and
marketable securities balances; however, there were related losses of $4.3
million and $1.6 million on marketable securities included in other income
during fiscal years 1995 and 1994, respectively.
Other income during fiscal 1995 was $11.8 million, consisting primarily of
an $18.2 million gain on the sale of six vessels, partially offset by a $4.3
million loss on available-for-sale securities and a $2.1 million equity loss
from the Company's 50% investment in VCSC during the period. Other income during
fiscal 1994 was $11.8 million, consisting primarily of a $12.3 million gain on
the sale of six vessels and $1 million in equity income from VCSC, partially
offset by a $1.6 million loss on marketable securities.
There was no income from discontinued operations during fiscal 1995. Net
income from discontinued operations was $5.9 million during fiscal 1994,
primarily as a result of a $5.7 million gain arising on the
29
<PAGE> 34
sale of nine multipurpose dry cargo vessels obtained in connection with the
divestiture of the Company's investment in Baltimar Overseas Limited.
As a result of the foregoing factors, the Company's net income decreased to
$6.4 million in fiscal 1995 from $30.2 million in fiscal 1994, representing an
80.1% decrease on an annualized basis.
FISCAL 1994 VERSUS FISCAL 1993
As the Company has changed its fiscal year end from April 30 to March 31,
the fiscal 1994 results are for the eleven-month period ending March 31, 1994,
while the comparable fiscal 1993 results are for the twelve-month period ending
April 30, 1993. Where indicated in the following discussion, percentage change
figures have been annualized by adjusting fiscal 1994 results by a factor of
12/11. No assurance can be given that the fiscal 1994 annualized figures used to
calculate percentage changes herein accurately approximate actual results for
the month of April 1994.
Voyage revenues were $317.7 million in fiscal 1994 as compared to $337.0
million in fiscal 1993, representing a 2.8% increase on an annualized basis from
fiscal 1993, primarily as a result of higher charter rates caused by improved
spot market conditions, partially offset by a decline in average fleet size from
50 to 45 vessels.
Voyage expenses were $81.1 million in fiscal 1994 as compared to $108.8
million in fiscal 1993, a decrease of 18.7% on an annualized basis, as a result
of a reduction in fleet size and lower fuel costs.
Vessel operating expenses were $73.6 million in fiscal 1994 as compared to
$79.6 million in fiscal 1993, representing a 1.0% increase on an annualized
basis from fiscal 1993, which was primarily a result of increased insurance
costs, partially offset by a reduction in fleet size.
Depreciation and amortization was $89.9 million in fiscal 1994 as compared
to $97.6 million in fiscal 1993. On an annualized basis, depreciation and
amortization was virtually unchanged between the two periods despite a reduction
in the size of the fleet as a result of a higher average cost base in fiscal
1994 as compared to fiscal 1993 arising from six newbuildings delivered during
fiscal 1993 and three newbuildings delivered during fiscal 1994.
General and administrative expenses were $14.1 million in fiscal 1994 as
compared to $14.0 million in fiscal 1993, representing a 9.9% increase on an
annualized basis from fiscal 1993, reflecting additional administrative expenses
associated with new environmental legislation and with increased financing
activity.
Income from vessel operations was $59.1 million in fiscal 1994 as compared
to $36.9 million in fiscal 1993, representing a 74.7% increase on an annualized
basis from fiscal 1993, primarily the result of improved charter market
conditions.
Interest expense was $48.1 million in fiscal 1994 as compared to $47.4
million in fiscal 1993, representing a 10.7% increase on an annualized basis
from fiscal 1993, reflecting higher average outstanding debt during the 1994
period. The issuance of $175.0 million of 9 5/8% First Preferred Ship Mortgage
Notes in July 1993, together with borrowings associated with the delivery of
newbuildings during fiscal 1993, contributed to the higher average outstanding
debt during fiscal 1994.
During fiscal 1994, other income was $11.8 million, consisting primarily of
gains of $12.3 million from the sale of six vessels during the period. Other
income during fiscal 1993 was $37.9 million, consisting primarily of gains of
$12.2 million from the sale of six vessels and a gain of $25.0 million arising
from insurance proceeds receivable on the loss of one of the Company's vessels.
Foreign currency exchange loss decreased from $77.9 million in the fiscal
1993 to $1.5 million in fiscal 1994 reflecting the conversion into U.S. dollars
of substantially all of the Company's Japanese Yen-denominated debt by June
1993. The Company has now substantially eliminated its remaining foreign
currency exposure (other than exposure relating to its 50% interest in VCSC) and
as a result, has not incurred any material foreign exchange gains or losses
subsequent to June 1993.
30
<PAGE> 35
Net income from discontinued operations increased from $1.9 million in
fiscal 1993 to $5.9 million in fiscal 1994, primarily as a result of a $5.7
million gain arising on the sale of the nine multipurpose dry cargo vessels
obtained in connection with the divestiture of the Company's investment in
Baltimar Overseas Limited.
Net income improved to $30.2 million in fiscal 1994 from a loss of $47.5
million in fiscal 1993, primarily as a result of the decreased foreign exchange
loss, as well as improved charter market conditions.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the Company relate to servicing its debt,
funding the equity portion of investments in vessels, funding working capital
and maintaining cash reserves against fluctuations in operating cash flow. Net
cash flow generated by continuing operations is the main source of liquidity for
the Company. Additional sources of liquidity include proceeds from asset sales
and refinancings.
The Company operates in a capital-intensive industry requiring extensive
investment in revenue-producing assets. Funds invested are raised mainly from
borrowings and the Company's internally generated liquidity. The equity portion
of an investment in a newbuilding is usually paid in installments, commencing
one to three years in advance of delivery, for 10% to 80% of the vessel purchase
price. The equity portion of an investment in a second-hand vessel is usually
paid in two portions: 10% on signing a purchase agreement, and an additional 20%
to 50% (depending on financing) upon delivery to buyers. Repayment of the debt
incurred to purchase the vessel is made from vessel operating cash flow,
typically over 8 to 10 years, compared to the vessel's asset life of
approximately 20 years.
During the first half of fiscal 1996, the Company has undertaken further
steps to improve its financial position and liquidity. During the first quarter
of fiscal 1996, the Company refinanced certain of its existing term debt as well
as $23.8 million of 9 5/8% First Preferred Ship Mortgage Notes (the "1993
Notes") with funds available under the $243 million Revolver at improved rates
and credit terms. The Revolver also provided an additional $20 million of
liquidity to the Company. In July 1995, the Company received $137.6 million net
proceeds from its initial public offering of common stock, thereby further
boosting liquidity and reducing debt through a $135 million reduction in the
amount outstanding under the revolving credit facility.
Net cash flow from continuing operations decreased to $41.9 million in the
first half of fiscal 1996 from $51.2 million during the first half of fiscal
1995. The decrease was mainly caused by an increase in non-cash working capital
balances, partially offset by higher income from operations. Net cash flow from
continuing operations decreased 30.1% on an annualized basis (adjusting fiscal
1994 results to include April 1993 results) to $87.5 million in fiscal 1995 from
$117.4 million in the eleven months ended March 31, 1994, due to declining fleet
size, declining TCE rates and rising interest expense. Net cash flow from
continuing operations increased 52.5% on an annualized basis (adjusting fiscal
1994 results by a factor of 12/11) in fiscal 1994 from $84.0 million during
fiscal 1993, primarily as a result of a temporary improvement in charter market
conditions.
No additional debt was incurred during fiscal 1995, consistent with the
Company's decision not to take delivery of any vessels during that period.
Long-term debt increased $220.0 million in the eleven months ended March 31,
1994 as a result of the issuance of $175.0 million of the 1993 Notes and
borrowings associated with the delivery of one newbuilding. Proceeds from
long-term debt and capital leases provided $292.5 million toward the financing
of newbuildings during fiscal 1993.
During fiscal 1995, in addition to scheduled debt repayment of $87.6
million, the Company prepaid, from internally generated funds, $15.0 million of
long-term debt secured by vessels sold during the year. The Company prepaid
long-term debt and capital lease obligations of $243.3 million in the
eleven-month fiscal period ended March 31, 1994, primarily representing
prepayments out of the proceeds of the Company's issue of the 1993 Notes and the
prepayment of debts associated with vessels which were
31
<PAGE> 36
sold during the period. Total prepayments of long-term debt and capital lease
obligations were $131.9 million in fiscal 1993, primarily reflecting the level
of vessel sales during that period.
Capitalized loan costs were approximately $866,000 in the first half of
fiscal 1996 and $1.6 million in fiscal 1995, compared to $10.0 million in fiscal
1994. The high level of capitalized loan costs in fiscal 1994 resulted primarily
from capitalization of costs incurred on the issuance of the 1993 Notes.
The Company had outstanding a number of interest rate swap agreements with
commercial banks covering a total notional principal amount of $175 million as
at September 30, 1995. The agreements expire between October 1995 and April 1996
and have an average remaining life of 4.5 months. These agreements effectively
change the Company's interest rate exposure on $175 million of debt from a
floating LIBOR rate to an average fixed rate of 5.68%. Subsequent to September
30, 1995, the Company entered into an additional $250 million in interest rate
swap agreements with three commercial banks. These new swap agreements have an
average life of 3 years, expiring between October 1998 and December 1998, and
effectively change the Company's interest rate exposure on $250 million of debt
from a floating LIBOR rate to an average fixed rate of 5.85%. The Company also
has outstanding $200 million of interest rate caps with a strike price of 8.00%
vs. 3 month LIBOR. These caps expire in April 1997.
One vessel was sold during the second quarter of fiscal 1996, resulting in
net proceeds of $5.6 million. In addition, the Company received $17.2 million in
the first quarter of fiscal 1996 as a result of a vessel sale and the receipt of
proceeds from vessel sales receivable at the end of fiscal 1995. Subsequent to
September 30, 1995, the Company sold a vessel for $6.0 million. The Company
received cash proceeds from the disposition of assets totalling $16.8 million in
fiscal 1995 as a result of the sale of six older vessels. Proceeds from the
disposition of assets totalled $86.4 million and $156.9 million in fiscal 1994
and 1993, respectively. Proceeds from the disposition of vessels in fiscal 1994
and 1993 resulted from vessel sales which were intended to enhance the Company's
liquidity, the disposition of older vessels, and the receipt of insurance
proceeds relating to the loss of one of the Company's vessels during the fiscal
1993 period.
While its fleet modernization program is effectively complete, the Company
intends to continue selective purchases of modern, predominantly second-hand,
high quality tankers should such vessels become available. Actual acquisition of
additional tankers will be subject to a number of factors, including the
Company's expectations for future market rates, supply and demand within the
tanker industry generally, and the Company's ability to obtain financing upon
favorable terms. The Company took delivery of two modern second-hand Aframax
tankers and one newbuilding during the first half of fiscal 1996, as
replacements for older tankers recently sold, resulting in expenditures of $46.9
million net of capital lease financing of $44.6 million. Subsequent to September
30, 1995, the Company acquired a 1987-built Aframax tanker, which the Company
will time-charter for a period of one year and then purchase for $26.5 million.
In addition, the Company is negotiating the purchase of a 1989-built Aframax
tanker from VCSC and the potential purchase of one Aframax newbuilding from a
shipyard. The Company intends to finance these purchases by using existing cash
balances or credit lines. Capital expenditures for vessels and equipment, net of
capital lease financing, decreased to $7.5 million in fiscal 1995 from $65.7
million during the eleven months ended March 31, 1994 and $190.0 million in
fiscal 1993, reflecting a slowing of the Company's fleet expansion program.
Capital expenditures for drydocking decreased to $11.9 million in fiscal 1995
from $13.3 million during the eleven months ended March 31, 1994 and $16.4
million in fiscal 1993, reflecting the reduction in fleet size during these
periods.
Teekay declared its first quarterly cash dividend of $0.215 per share on
its common stock in October 1995 and currently intends to continue paying
quarterly dividends in that amount, subject to the Company's financial results
and condition and declaration by the Board of Directors. Teekay has implemented
a dividend reinvestment plan pursuant to which holders of its common stock are
permitted to choose, in lieu of receiving cash dividends, to reinvest any
dividends in additional shares of common stock. The Trusts informed Teekay, at
the time of Teekay's initial public offering, that it was their intention to
reinvest through the dividend reinvestment plan, or apply to open market
purchases, at least 50% of
32
<PAGE> 37
any dividends to which they are entitled through the first quarter of fiscal
1998. Since the initial public offering, the Trusts have reinvested through the
dividend reinvestment plan at least 50% of the dividends declared by Teekay to
which they were entitled.
As at September 30, 1995, the Company's total liquidity, including cash,
marketable securities and undrawn lines of credit, totalled $244.3 million, as
compared to $85.7 million as at March 31, 1995 and $107.2 million as at March
31, 1994. The Company believes that, assuming a continuation of current market
conditions, its financial resources are sufficient to meet its liquidity needs.
INFLATION
Although inflation has had a moderate impact on operating expenses,
drydocking expenses and corporate overhead, management does not consider
inflation to be a significant risk to direct costs in the current and
foreseeable economic environment. However, in the event that inflation becomes a
significant factor in the world economy, inflationary pressures could result in
increased operating and financing costs.
FOREIGN EXCHANGE RATE FLUCTUATION
The international tanker industry's functional currency is the U.S. dollar.
Virtually all of the Company's revenues are in U.S. dollars and most of its
operating costs are incurred in U.S. dollars. The Company incurs certain
operating expenses in foreign currencies, the most significant of which are in
Japanese Yen and Singapore dollars. During the first half of fiscal 1996,
approximately 13% of vessel and voyage costs, overhead and drydock expenditures
were denominated in these currencies. However, the Company has the ability to
shift its purchase of goods and services from one country to another and, thus,
from one currency to another, on relatively short notice.
From 1986 to 1991, a period of high growth and strong operating performance
for the Company, management borrowed funds denominated in Japanese Yen. This led
to fluctuations in net income and retained earnings, recorded as gains or losses
from foreign exchange translations in the Company's financial statements, with
corresponding increases or decreases in long-term debt. In fiscal 1993, the
Company commenced an aggressive foreign exchange hedging policy in order to
reduce its exposure to fluctuating Yen/U.S. dollar exchange rates. The Company
completed this program in July 1994 and does not intend to undertake any
unnecessary material exposure to foreign exchange fluctuations henceforth. While
the Company no longer has any Yen-denominated debt, the Company's net income may
be affected by fluctuations in equity income caused by foreign exchange gains or
losses from approximately $17.5 million (at current exchange rates) of
Yen-denominated debt held by VCSC, a joint venture in which the Company owns a
50% interest. However, the Company's 50% portion of this Yen-denominated debt is
presently hedged through a foreign exchange contract. See Note 11 to the
Consolidated Financial Statements.
33
<PAGE> 38
BUSINESS
The Company is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium-size
oil tankers. The Company's modern fleet consists of 41 tankers: 36 Aframax oil
tankers and oil/bulk/ore carriers, two smaller oil tankers, one VLCC, and,
through a joint venture, a 50% interest in two additional Aframax oil tankers.
The Company's fleet has a total cargo capacity of approximately 4.1 million tons
and its Aframax vessels represent approximately 7.0% of the total tonnage of the
world Aframax fleet. The Company owns a very modern fleet, with an average age
of approximately 6.9 years, compared to an average age for the world oil tanker
fleet, including Aframax tankers, of approximately 14.1 years and for the world
Aframax tanker fleet of approximately 12.3 years.
THE INTERNATIONAL TANKER MARKET
OVERVIEW
International seaborne oil and petroleum products transportation services
are provided by two main types of operators: major oil company captive fleets
(both private and state-owned) and independent ship owner fleets. Both types of
operators transport oil under short-term contracts (including single-voyage
"spot charters") and long-term time charters with oil companies, oil traders,
large oil consumers, petroleum product producers and government agencies. The
oil companies own, or control through long-term time charters, approximately
one-third of the current world tanker capacity, while independent companies own
or control the balance of the fleet. The oil companies use their fleets not only
to transport their own oil, but also to transport oil for third party charterers
in direct competition with independent owners and operators in the tanker
charter market. Management believes that the seaborne oil transportation
business is decentralized. According to Lloyd's World Shipowning Groups (April
1995), the largest owner by tonnage, Bergesen d.y. A/S, controls 2.7% of the
total world tanker fleet and the top 10 participants control approximately 19%
of the world tanker fleet, in each case measured by deadweight tonnage.
A significant and ongoing shift toward quality in vessels and operations
has been taking place in the tanker industry over the past several years as
charterers and regulators increasingly focus on safety and protection of the
environment. The oil transportation industry has historically been subject to
regulation by national authorities and through international conventions;
however, since 1990 there has been an ever-increasing emphasis on environmental
protection through legislation and regulations such as OPA 90, IMO protocols,
and Classification Society procedures, demanding higher quality tanker
construction, maintenance, repair, and operations. In addition, oil companies
acting as charterers, terminal operators, shippers and receivers are becoming
increasingly selective in their acceptance of tankers, inspecting and vetting
both vessels and companies on a periodic basis, and often excluding tankers on
the basis of age alone. In calendar 1994, the Company's vessels were inspected
237 times by oil companies and port states, as compared to 134 and 87 times in
1993 and 1992, respectively. Management believes that the increasingly stringent
regulatory environment and emphasis on quality relating to environmental
protection will accelerate the obsolescence of older, poor-quality tankers, and
provide a competitive advantage to modern tankers with high quality management.
See "--Regulation," "--Crewing and Staff ," "--The Company's Fleet."
Pricing of oil transportation services is set in a highly competitive and
efficient global tanker charter market with tanker brokers acting as
intermediaries between ship owners and charterers. While some business is
conducted directly between ship owners and charterers, at least one broker, and
sometimes as many as three, act as intermediaries in most transactions. Tanker
chartering is executed around the clock in several shipping centers, including
London, New York, Tokyo, Singapore and Oslo. Business is transacted regionally
according to the location of the charterer or ship owner, rather than the
cargo's origin or destination. Time charters, as well as vessel sale and
purchase transactions, are negotiated through brokers in the same centers in a
similar pattern.
34
<PAGE> 39
In order to benefit from economies of scale, tanker charterers will
typically charter the largest possible vessel to transport oil or products,
consistent with port and canal dimensional restrictions and optimal cargo lot
sizes. The oil tanker fleet is generally divided into the following six major
types of vessels, based on vessel carrying capacity: (i) Ultra Large Crude
Carriers ("ULCCs") of approximately 320,000 dwt or more; (ii) Very Large Crude
Carriers ("VLCCs") of approximately 200,000 to 320,000 dwt; (iii) Suezmax size
range of approximately 115,000 to 200,000 dwt; (iv) Aframax size range of
approximately 75,000 to 115,000 dwt; (v) Panamax size range of approximately
50,000 to 75,000 dwt; and (vi) small tankers of less than approximately 50,000
dwt. ULCCs and VLCCs typically transport crude oil in long-haul trades, such as
from the Arabian Gulf to Rotterdam via the Cape of Good Hope. Suezmax size
tankers also engage in long-haul crude oil trades as well as in medium-haul
crude oil trades, such as from West Africa to the U.S. East Coast. Aframax size
vessels engage in both medium-and short-haul trades of less than 1,500 miles and
carry crude oil or petroleum products. Panamax size tankers and smaller tankers
mostly transport petroleum products in short-haul to medium-haul trades.
In addition to the six foregoing types of tankers, oil/bulk/ore carriers or
"O/B/Os" are typically considered part of the world tanker fleet in industry
statistics. O/B/Os represent approximately 7.6% of the world tanker fleet based
on total cargo capacity. O/B/Os are of various sizes and are capable of carrying
oil or dry bulk cargoes. According to Drewry, as of October 1995, 29% of all
existing O/B/Os were trading as tankers.
Because of the size of VLCCs and ULCCs and their predominance in the
long-haul trades, more than half of the world's seaborne oil transportation (by
ton-miles) is conducted by these vessels. While the ULCC/VLCC market differs in
several respects from smaller size tanker markets, VLCCs and ULCCs have a
significant influence on the tanker charter market in general. The current
average age of the VLCC and ULCC fleet is 14.2 years compared to an average age
for the world Aframax fleet of 12.3 years.
The graphs set forth below indicate the size composition of the world
tanker fleet as of November 30, 1995.
WORLD TANKER FLEET
FIGURE
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE DEADWEIGHT PERCENTAGE
VESSEL TYPE TANKERS OF TANKERS METRIC TONS OF TONNAGE
- ----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Smaller Tanker 1,649 49.5% 47,053 15.9%
(10,000-50,000 dwt.)
Panamax 300 9.1% 18,000 6.4%
(50,000-75,000 dwt.)
Aframax 586 17.5% 53,015 17.9%
(75,000-115,000 dwt.)
Suezmax 354 10.6% 49,862 16.9%
(115,000-200,000 dwt.)
VLCC/ULCC 443 13.3% 126,643 42.9%
(200,000 + dwt.)
----- ----- ------- -----
Totals: 3,332 100.0% 295,233 100.0%
===== ===== ======= =====
</TABLE>
According to industry data, at November 30, 1995, the world fleet of
Aframax tankers and O/B/Os (excluding an estimated 67 O/B/Os trading dry)
consisted of 519 vessels, constituting approximately
35
<PAGE> 40
16% of the vessels in the world tanker and O/B/O fleet. By virtue of their size,
Aframax vessels are large enough to benefit from economies of scale yet have
access to a wide range of ports, and are particularly well-suited for trading in
regional markets, including the Mediterranean, the Caribbean, the Northwestern
European area and the Indo-Pacific Basin. The Company owns, or controls through
joint ventures, 38 Aframax tankers and O/B/Os, which comprise roughly 7.3% of
the tankers and O/B/Os trading in oil in the current world Aframax tanker fleet.
Management estimates that approximately 30% of the ship days of the world's
Aframax tankers are spent trading in the Company's main trading region, the
Indo-Pacific Basin. The Company estimates that it has a one quarter share of the
Indo-Pacific Basin Aframax market based on ship days spent in the region. This
area contains a large number of loading and discharging points capable of
receiving Aframax size vessels. Aframax tankers in the Indo-Pacific Basin (i)
transport crude oil from three primary production locations--the Arabian Gulf,
Australia and Indonesia--to refineries and storage points located short to
medium distances away, (ii) transport petroleum products in medium-and long-haul
trades, and (iii) engage in some inter-regional trades.
SUPPLY AND DEMAND
Tanker charter rates are strongly influenced by the supply of, and demand
for, tanker capacity because of the highly competitive nature of the tanker
charter market, in large part attributable to the limited differentiation
between the transportation services provided by tanker companies of comparable
quality. Small changes in tanker utilization have historically led to relatively
large changes in tanker charter rates. Using the most recent peak and trough as
an example, according to Drewry's Shipping Statistics and Economics (May 1993),
there was an excess supply of capacity in the Aframax tanker market equal to
6.6% of the existing Aframax fleet as of April 30, 1993, compared to 3.1% as of
April 30, 1990; yet, according to information based on Drewry data, industry
average Aframax TCE rates during the Company's fiscal 1993 were approximately
40% lower than TCE rates during the Company's fiscal 1990.
SUPPLY. The supply of tankers is a function of new vessel deliveries and
the scrapping, conversion and loss of tonnage. According to Clarkson, from the
end of 1988 through the end of 1993, the world supply of tankers increased by
31.4 million dwt, which represents an average annual increase of approximately
3%. New vessels were ordered during this period largely in anticipation of the
scrapping of older and substandard tonnage as well as increased tanker demand,
which, according to Maritime Strategies International Ltd., also grew by
approximately 3% per annum during this time period. Scrapping levels remained
low due to the strong charter rates that prevailed in the industry from 1988
until 1992. Since the decline in charter rates in 1992 and the emergence of a
more stringent environmental regime, the scrapping of older tonnage has
substantially accelerated. According to Clarkson, in calendar 1994 scrapping
exceeded deliveries by 4.9 million tonnes, resulting in the first annual
decrease in tanker supply since 1986. In the first eleven months of calendar
1995, scrapping has exceeded deliveries by an additional 2.7 million tonnes,
resulting in a cumulative 2.5% decrease in tanker supply since December 31,
1993. The following graph illustrates the development of tanker supply since
1988:
36
<PAGE> 41
WORLD TANKER FLEET DEVELOPMENT
DEADWEIGHT-METRIC TONS (MILLIONS)
FIGURE
<TABLE>
<CAPTION>
CALENDAR YEAR DELIVERIES SCRAPPINGS FLEET SIZE
- ------------- ---------- ---------- ----------
<S> <C> <C> <C>
1988 7.3 2.6 271.9
1989 8.6 1.1 275.5
1990 8.6 3.1 283.4
1991 12.3 2.2 288.6
1992 17.0 11.3 298.2
1993 17.5 12.5 304.9
1994 10.3 15.2 308.7
Nov 1995 9.0 11.7 295.2
</TABLE>
- ------------
Information based upon Clarkson data.
* Delivery and scrapping data reflects activity for the first eleven months of
calendar 1995.
Management anticipates a continued decrease in tanker supply relative to
demand due to (i) the aging of the significant portion of the fleet that was
built prior to or in the mid-1970s and the significant costs associated with the
drydocking of these vessels to achieve a rated classification during their
fourth or fifth special surveys (described below), (ii) increased customer
emphasis on safety and quality as a result of stringent environmental
regulations and heightened concern about liability for oil spills and (iii) a
low charter rate environment which has discouraged newbuilding ordering. In
addition, a number of developments have combined to effectively increase
operating costs for the industry in general and to raise barriers to entry for
smaller, undercapitalized ship owners, operators and speculators while providing
a potential competitive advantage for well-managed companies that can operate
quality tonnage in large scale operations and have the financial strength to
weather the current weakness in charter rates. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--General."
37
<PAGE> 42
The Company owns a very modern fleet, with an average age of approximately
6.9 years, compared to an average age for the world oil tanker fleet, including
Aframax tankers, of approximately 14.1 years and for the world Aframax tanker
fleet of approximately 12.3 years. The following chart compares, at November 30,
1995, the age profiles of the Company's Aframax fleet, the world Aframax tanker
fleet (excluding Teekay vessels) and the world tanker fleet.
COMPARISON OF FLEET AGE PROFILES
FIGURE
<TABLE>
<CAPTION>
Percentage of Fleet
-------------------
0-4 Years 5-9 Years 10-14 Years 15-19 Years 20 + Years
--------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Teekay Aframax
Tanker Fleet 38 % 40 % 8 % 14 % 0 %
World Aframax
Tanker Fleet 22 % 17 % 19 % 21 % 21 %
(excluding Teekay
vessels)
World Tanker Fleet 23 % 14 % 11 % 25 % 27 %
</TABLE>
- ------------
Information based upon Clarkson data.
Vessels built during the peak building period of the mid-1970s, and
earlier, shown above in the 15-19 Years and 20+ Years age ranges, are now
approaching their fourth or fifth "Special Survey." Special Surveys involve
thorough inspections and typically necessitate improvements to maintain a vessel
to industry standards which would allow continued operation. Special Surveys,
required every four to five years, are conducted by independent classification
societies, the five largest of which are Lloyds Register, Nippon Kaiji Kyokai,
the American Bureau of Shipping, Det Norske Veritas and Bureau Veritas.
Insurance companies and charterers rely to some degree on the survey and
classification regime to provide reasonable assurance of a vessel's
seaworthiness and vessels must be certified as "in-class" in order to continue
to trade. Because the costs of maintaining a vessel in-class rise substantially
as the age of the vessel increases, vessel owners often conclude that it is more
economical to scrap a vessel that has exhausted its anticipated useful life,
which averages approximately 20 years, than to upgrade it to maintain it in
class, particularly at a time when charter rates are at relatively low levels
and when the market has become increasingly biased against older vessels.
Approximately 35% to 45% of the vessels in the current world Aframax fleet will
face their fourth or fifth Special Survey between 1995 and 1999 and, therefore,
these ships are potential candidates for scrapping in the near future.
38
<PAGE> 43
As an illustration of the aging Aframax fleet and the substantial decline
in vessels on order that are available to replace the aging tankers, the
following chart shows, on a calendar year-end basis, the historical development
of the proportion of the Aframax tanker fleet that is 18 years or older, and the
Aframax tanker orderbook:
HISTORICAL DEVELOPMENT OF AFRAMAX FLEET
FIGURE
<TABLE>
<CAPTION>
VESSELS 18 YEARS
AND OLDER
YEAR AFRAMAX ORDERBOOK (PERCENTAGE OF
(AS AT DECEMBER 31) (# OF SHIPS) AFRAMAX FLEET)
- ------------------- ----------------- ----------------
<S> <C> <C>
1985 42 10 %
1986 33 13 %
1987 40 15 %
1988 45 15 %
1989 81 17 %
1990 83 20 %
1991 99 25 %
1992 73 29 %
1993 47 32 %
1994 42 31 %
Nov 30, 1996 43 31 %
</TABLE>
- ------------
Information based upon Clarkson data.
At any point in time, the level of scrapping activity is a function
primarily of current and prospective charter market conditions, as well as
factors which are heavily influenced by the age of the relevant vessel such as
second-hand vessel values in relation to scrap prices, current and anticipated
operating costs, and expected repair and survey costs. According to Clarkson,
scrapping of Aframax tankers and O/B/Os occurred at an average annual rate of
approximately six vessels per year for the period 1988 to 1991; 26 scrappings
occurred during 1992, 22 in 1993, 24 in 1994, and 11 as at November 1995.
At December 31, 1991, the Aframax newbuilding orderbook contained orders
for 99 vessels, equivalent to 17% of the existing fleet; at November 30, 1995,
the orderbook contained orders for 41 vessels, equivalent to approximately 7% of
the existing fleet. Orders placed for Aframax tankers occurred at an annual
average rate of 35 vessels per year for the period 1988 through 1991. Twelve
orders were placed in 1992, 15 in 1993, 20 in 1994, and 13 as at November 1995.
Typically, delivery of a vessel occurs within 18 to 36 months after ordering.
Newbuilding deliveries of Aframax tankers, which were limited during the
depressed market conditions of the early to mid-1980s, increased after 1987 with
improved market conditions and in anticipation of the replacement of an aging
fleet. Newbuilding deliveries of Aframax tankers occurred at an annual average
rate of 22 vessels for the period 1988 through 1991. Forty deliveries occurred
in 1992, 34 deliveries occurred in 1993, 23 deliveries occurred in 1994, and 9
deliveries to November 1995. Management does not anticipate newbuilding rates
will return to the levels of the late 1980s unless a substantial recovery in
charter rates justifies such increase.
DEMAND. Tanker demand is expressed in "ton-miles" and is measured as the
product of (a) the amount of oil transported in tankers, times (b) the distance
over which this oil is transported. Tonnage of oil shipped is primarily a
function of global oil consumption, which is driven by economic activity as well
as the long-term impact of oil prices on the location and related volume of oil
production. Tonnage of oil shipped is also influenced by transportation
alternatives such as pipelines.
39
<PAGE> 44
The distance over which oil is transported is the more variable element of
the ton-mile demand equation. It is determined by seaborne trading and
distribution patterns, which are principally influenced by the locations of
production and the optimal economic distribution of such production to
destinations for refining and consumption. Seaborne trading patterns are also
periodically influenced by geo-political events which divert tankers from normal
trading patterns, as well as by inter-regional oil trading activity created by
oil supply/demand imbalances. Tankers are also sometimes used as "floating
storage" by oil companies and oil traders, particularly during times of supply
uncertainty such as during the 1991 Persian Gulf War.
Two different trends in the oil market over the last few years have
strongly affected the development of the tanker market. First, the rapid
economic expansion in the Indo-Pacific Basin, the Company's primary area of
focus, has resulted in a steady and strong growth in oil consumption in that
region. According to the International Energy Agency ("IEA"), oil consumption in
the Indo-Pacific Basin increased by 5.3% in 1994 as compared to an increase of
0.2% in oil consumption in the rest of the world. In addition, between 1990 and
1994, oil consumption in the Indo-Pacific Basin increased by a compounded annual
growth rate of 4.4% as compared to a decrease of 0.7% in oil consumption in the
rest of the world.
The second trend affecting the tanker market relates to the location of oil
production relative to major discharge points, which affects the average length
of voyages. Total world oil production increased by 1.5% in 1994. Most of this
increase, however, was provided by non-Arabian Gulf production, primarily from
the North Sea and the Caribbean regions. Production in the North Sea increased
by 19.1% in 1994 as compared to an increase of 0.6% in Arabian Gulf OPEC
production during the same time period.
The tables set forth below indicate the geographic breakdown of world oil
demand and supply.
WORLD OIL DEMAND (MILLIONS OF BARRELS PER DAY)(1)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 CAGR*
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
United States West Coast(2)........................... 2.7 2.7 2.6 2.6 2.7 --
Pacific(3)............................................ 6.1 6.2 6.3 6.3 6.6 2.0 %
Asia.................................................. 7.8 8.3 9.1 9.8 10.4 7.5
---- ---- ---- ---- ---- -----
Total Indo-Pacific Basin............................ 16.6 17.2 18.0 18.7 19.7 4.4
Other World........................................... 49.8 49.7 49.2 48.4 48.5 (0.7 )
---- ---- ---- ---- ---- -----
Total Demand........................................ 66.4 66.9 67.2 67.1 68.2 0.7
==== ==== ==== ==== ==== ======
</TABLE>
- ------------
(1) Information based on International Energy Agency -- Monthly Oil Market
Report.
(2) Information based on U.S. Department of Energy data.
(3) Includes Australia, New Zealand, and Japan.
* Compounded annual growth rate.
WORLD OIL SUPPLY (MILLIONS OF BARRELS PER DAY)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 CAGR*
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
North Sea............................................. 3.8 4.0 4.3 4.7 5.6 10.2 %
Other non-OPEC........................................ 38.4 37.8 36.7 35.8 35.6 (1.9 )
---- ---- ---- ---- ---- -----
Total non-OPEC...................................... 42.2 41.8 41.0 40.5 41.2 (0.6 )
Arabian Gulf OPEC..................................... 15.3 14.9 16.0 16.8 16.9 2.5
Other OPEC............................................ 9.5 10.2 10.2 10.1 10.4 2.3
---- ---- ---- ---- ---- -----
Total OPEC.......................................... 24.8 25.1 26.2 26.9 27.3 2.4
---- ---- ---- ---- ---- -----
Total Supply........................................ 67.0 66.9 67.2 67.4 68.5 0.6
==== ==== ==== ==== ==== ======
</TABLE>
- ------------
Information based on International Energy Agency -- Monthly Oil Market Report.
* Compounded annual growth rate.
Incremental production from the North Sea and the Caribbean results in a
less significant increase in demand for tanker services than incremental
production from the Arabian Gulf, because of the closer proximity of the North
Sea and the Caribbean to discharge points and the associated shorter average
length of voyage for oil tankers. For example, the tanker tonnage required to
ship the incremental production of one million barrels per day from the North
Sea to the United States is approximately 5 million dwt as compared to
approximately 13 million dwt of tanker tonnage required to ship the
40
<PAGE> 45
incremental production of one million barrels per day from the Middle East to
the United States, as illustrated in the graph below.
TANKER TONNAGE REQUIREMENTS TO SHIP ONE MILLION BARRELS PER DAY
FIGURE
<TABLE>
<CAPTION>
MILLION OF DEAD WEIGHT
TONNES
----------------------
<S> <C>
Total oil trade 6.4
M. East Exports 8.8
M. East -- US 13.0
M. East -- WE 10.0
M. East -- JPN 8.0
M. East -- Asia 6.0
Non-M. East Exp 3.8
FSU Exp 2.4
N. Sea -- US 5.2
N. Sea -- NWE 1.3
OPEC Exp 7.5
Non-OPEC 4.3
</TABLE>
- ------------
Information based on rough estimates from R.S. Platou Economic Research a.s.,
1995.
The recent shift in the origin of oil production, which resulted in a
reduction in the average voyage length for oil tankers, adversely affected total
tanker demand. According to industry sources, total tanker demand remained flat
during 1994, in spite of overall higher global oil consumption. For 1996, the
IEA forecasts a global oil consumption growth of 2.3% and a continued higher
growth rate in the Indo-Pacific Basin as compared to the rest of the world.
Management believes that, over the longer term, a larger percentage of future
oil demand growth will be met by Arabian Gulf oil producers, thereby increasing
tanker demand. Maritime Strategies Inc. forecasts that tanker demand will grow
2.4% in 1996 and 3.3% in 1997.
BUSINESS STRATEGY
The Company has always maintained a service-oriented business strategy,
seeking first to define a trading strategy and develop business relationships,
and only then to secure tanker tonnage to meet its needs. This approach to the
business was evidenced by the Company's initial reliance on high-quality
chartered-in tonnage during the period of 1976-1986 as the most cost-effective
source of tonnage. When the availability of acceptable third party vessels for
chartering-in declined, the Company decided to acquire its own high-quality
in-house fleet to service its tonnage needs.
The Company's business strategy is customer- and operations-oriented and
focuses on the transportation of crude oil and petroleum products via its
Aframax tankers for clients with transport requirements in the Indo-Pacific
Basin. With the largest concentration of Aframax tankers and O/B/Os in this
region, management believes that it provides the most comprehensive service via
Aframax tankers in the Indo-Pacific Basin.
The Company believes that its business strategy, executed with a modern,
homogenous fleet and a skilled staff, yields strong operating returns, relative
to competitors, in all charter market conditions. Specifically, the Company
believes that it has the following competitive advantages:
- GEOGRAPHICAL CONCENTRATION: By focusing on the Indo-Pacific Basin, the
Company has been able, with a relatively small share (7.0% of total
tonnage) of the world Aframax fleet, to develop a significant presence in
this region with charterers of medium-size tankers, facilitating
comprehensive coverage of charterers' requirements and providing a base
for efficient operation and a high degree of capacity utilization. The
Company estimates that it has a market share of
41
<PAGE> 46
approximately one quarter based upon ship days in this region. The
Company's principal discharge ports are in Japan, Korea, China, Taiwan,
Malaysia, Thailand, Singapore, Australia and the United States.
- LARGE FLEET OF UNIFORM-SIZE VESSELS: The Company's large fleet of
Aframax tankers, many of which are in sister vessel series (substantially
identical vessels), affords greater scheduling flexibility due to vessel
substitution opportunities.
- HIGH-QUALITY, MODERN TONNAGE: The Company's modern fleet operates with
high fuel efficiency and low maintenance and operating costs, and, in an
environment of increasingly stringent operating and safety standards,
enjoys a high level of acceptance by charterers.
- OPERATIONAL SCALE AND CONTROL: By virtue of the size of the Company's
operations which are concentrated in one geographical region, the Company
is able to service substantially all of its needs in-house, without
having to rely on outside ship managers or crewing agencies. The Company
has an experienced staff at sea and ashore, which affords a focused
marketing effort, tight cost controls, and effective operations and
safety monitoring.
The Company's business strategy has resulted in TCE rates and operating
costs that are superior to averages indicated by industry data. As a result, the
Company has achieved consistently higher operating cash flow per vessel as
compared to an average of certain other publicly traded bulk shipping companies,
which is illustrated in the graph below.
OPERATING CASH FLOW PER SHIP PER DAY
(Calendar Year Basis)
FIGURE
<TABLE>
<CAPTION>
DOLLARS PER DAY
---------------------------------------------------
*AVERAGE OF OTHER
YEARS TEEKAY FLEET AVERAGE BULK SHIPPING COMPANIES
- --------------- -------------------- -----------------------
<S> <C> <C>
1990 11,014 8,190
1991 11,048 9,389
1992 7,393 4,947
1993 8,426 5,034
1994 9,033 4,020
First half of 1995 9,835 3,437
</TABLE>
- ---------------
Information based upon respective company financial data.
* Vessel weighted average of the following companies: Bergesen d.y. A/S, Bona
Shipholding Ltd., London & Overseas Freighters Limited, OMI Corp., Overseas
Shipholding Group, and Smedvig Tankships Limited.
Due to its adherence to stringent maintenance standards for its vessels and
operational standards for its personnel, the Company is recognized by
high-quality charterers for transportation excellence. The Company believes that
acceptance of a vessel and its operators by charterers will be as important in
the future as regulatory constraints, since charterers are increasingly
inspecting and monitoring the quality of vessels and operators.
The Company's marketing strategy has been, and in the foreseeable future
will be, focused on Aframax-size tankers in the Indo-Pacific Basin. However,
management intends to closely monitor the long-term evolution of the tanker
industry and to adapt its strategy according to changing market dynamics or
fundamentals.
42
<PAGE> 47
THE COMPANY'S FLEET
The following fleet list provides information with respect to the Company's
vessels.
<TABLE>
<CAPTION>
YEAR %
SERIES/YARD BUILT TYPE DWT-MT FLAG OWNERSHIP
----------- ---- ---- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
AFRAMAX TANKERS (38)
POUL SPIRIT.................... Onomichi 1995 DH 98,600 Liberian 100%
TORBEN SPIRIT.................. Onomichi 1994 DH 98,500 Bahamian 100%
SAMAR SPIRIT................... Onomichi 1992 DH 98,640 Bahamian 100%
LEYTE SPIRIT................... Onomichi 1992 DH 98,744 Bahamian 100%
LUZON SPIRIT................... Onomichi 1992 DH 98,629 Bahamian 100%
MAYON SPIRIT................... Onomichi 1992 DH 98,507 Bahamian 100%
TEEKAY SPIRIT.................. Onomichi 1991 SH 100,336 Bahamian 100%
PALMSTAR LOTUS................. Onomichi 1991 SH 100,314 Bahamian 100%
PALMSTAR THISTLE............... Onomichi 1991 SH 100,289 Bahamian 100%
PALMSTAR ROSE.................. Onomichi 1990 SH 100,202 Bahamian 100%
PALMSTAR POPPY................. Onomichi 1990 SH 100,031 Bahamian 100%
ONOZO SPIRIT................... Onomichi 1990 SH 100,020 Bahamian 100%
PALMSTAR CHERRY................ Onomichi 1990 SH 100,024 Bahamian 100%
PALMSTAR ORCHID................ Onomichi 1989 SH 100,047 Bahamian 100%
VICTORIA SPIRIT (OBO).......... Hyundai 1993 DH 103,153 Bahamian 100%
VANCOUVER SPIRIT (OBO)......... Hyundai 1992 DH 103,203 Bahamian 100%
SHILLA SPIRIT.................. Hyundai 1990 SH 106,677 Liberian 100%
ULSAN SPIRIT................... Hyundai 1990 SH 106,679 Liberian 100%
NAMSAN SPIRIT.................. Hyundai 1988 SH 106,670 Liberian 100%
PACIFIC SPIRIT................. Hyundai 1988 SH 106,665 Liberian 100%
PIONEER SPIRIT................. Hyundai 1988 SH 106,671 Liberian 100%
FRONTIER SPIRIT................ Hyundai 1988 SH 106,668 Liberian 100%
SENANG SPIRIT.................. Imabari 1994 DH 95,649 Bahamian 100%
SEBAROK SPIRIT................. Imabari 1993 DH 95,700 Liberian 100%
SERAYA SPIRIT.................. Imabari 1992 DS 97,119 Bahamian 100%
SENTOSA SPIRIT................. Imabari 1989 DS 97,163 Liberian 100%
ALLIANCE SPIRIT................ Imabari 1989 DS 97,088 Bahamian 50%
SUDONG SPIRIT.................. Imabari 1987 DS 98,215 Liberian 100%
GALAXY RIVER*.................. Imabari 1987 DS 96,960 Liberian 0%
KYUSHU SPIRIT.................. Mitsubishi 1991 DS 95,562 Bahamian 100%
KOYAGI SPIRIT.................. Mitsubishi 1989 SH 95,987 Liberian 100%
AMERSHAM....................... Sumitomo 1981 SH 88,360 Liberian 50%
OPPAMA SPIRIT.................. Sumitomo 1980 SH 90,333 Bahamian 100%
MAGELLAN SPIRIT................ Hitachi 1985 SH 95,000 Liberian 100%
PALM MONARCH................... Mitsui 1981 SH 89,922 Liberian 100%
MENDANA SPIRIT................. Namura 1980 SH 81,657 Bahamian 100%
HONSHU SPIRIT.................. Tsuneishi 1979 SH 88,250 Bahamian 100%
TASMAN SPIRIT**................ Onomichi 1979 SH 87,588 Liberian 100%
OTHER TANKERS (3)
MUSASHI SPIRIT................. Sasebo 1993 SH 280,654 Bahamian 100%
SCOTLAND....................... Mitsubishi 1982 DS 40,794 Bahamian 100%
CHIBA SPIRIT................... Mitsui 1980 DB 60,874 Bahamian 100%
---------
4,112,144
=========
</TABLE>
- ------------
DH Double-hull tanker
DB Double-bottom tanker
DS Double-sided tanker
SH Single-hull tanker
OBO Oil/Bulk/Ore carrier
* Vessel time-chartered for one year ending November 1996 at which time the
Company is committed to purchase.
**Pre-MARPOL vessel, i.e., non-segregated ballast tanks.
43
<PAGE> 48
Many of the Company's vessels have been designed and constructed as
substantially identical sister ships. Such vessels can, in many situations, be
interchanged, providing scheduling flexibility and greater capacity utilization.
In addition, spare parts and technical knowledge can be applied to all the
vessels in the particular series, thereby generating operating efficiencies.
The Company has disposed of several vessels as part of its fleet
modernization program. During fiscal 1994 and fiscal 1995, the Company disposed
of 13 older Aframax tankers: two 1976-built Aframax tankers that were on
bareboat charter to the Company were redelivered to their owners, and 11 1975-to
1977-built Aframax tankers owned by the Company were sold. The total gain on
disposition of these vessels was $26.4 million. During fiscal 1994, the Company
took delivery of three Aframax double-hull newbuildings and during the first
half of fiscal 1996, the Company acquired one second-hand double-sided Aframax
tanker (SUDONG SPIRIT) and one second-hand single-hull Aframax tanker (MAGELLAN
SPIRIT). In addition, the Company has entered into an agreement to time-charter
a second-hand double-sided Aframax tanker (GALAXY RIVER) for a period of one
year and, at the end of which time, to purchase the vessel for $26.5 million and
is negotiating the purchase of a 1989-built Aframax tanker owned by VCSC and the
potential purchase of a newbuilding Aframax tanker from a shipyard.
Teekay participates in a joint venture, VCSC, which owns two Aframax
tankers. One joint venture vessel is completing a long-term time charter to a
major oil company; the other vessel currently trades on the spot market and, as
discussed above, may be sold to Teekay. Both of these vessels are included in
the above fleet list. VCSC is 50% directly owned by Teekay and 50% owned by a
company associated with Mr. Thomas Kuo-Yuen Hsu, a director of Teekay.
CLASSIFICATION AND INSPECTION
All of the Company's vessels have been certified as being "in class" by
their respective classification societies: Nippon Kaiji Kyokai, Lloyds Register,
Det Norske Veritas or American Bureau of Shipping. Every commercial vessel's
hull and machinery is "classed" by a classification society authorized by its
country of registry. The classification society certifies that the vessel has
been built and maintained in accordance with the rules of such classification
society and complies with applicable rules and regulations of the country of
registry of the vessel and the international conventions of which that country
is a member. Each vessel is inspected by a surveyor of the classification
society every year ("Annual Survey"), every two to three years ("Intermediate
Survey") and every four to five years ("Special Survey"). Most vessels are also
required, as part of the Intermediate Survey process, to be dry-docked every 24
to 30 months for inspection of the underwater parts of the vessel and for
necessary repair related to such inspection. A number of the Company's vessels
have qualified with their respective classification societies for drydocking
only every five years in connection with the Special Survey and are no longer
subject to the Intermediate Survey drydocking process. To so qualify, the
Company was required to enhance the resiliency of the underwater coatings of
each such vessel as well as to install apparatus on each vessel to accommodate
thorough underwater inspection by divers.
In addition to the classification inspections, many of the Company's
customers, including the major oil companies, regularly inspect the Company's
vessels as a precondition to chartering voyages on such vessels. In each of the
last four years, Tanker Advisory Center, Inc. (New York) has rated the Company's
fleet a "meritorious tanker fleet," a designation which, in the latest
publication (March 1995), placed it in the top quarter of fleets containing 10
or more tankers. Management believes that the Company's well-maintained, high
quality tonnage should provide it with a competitive advantage in the current
environment of increasing regulation and customer emphasis on quality of
service.
Company employees perform much of the necessary ordinary course maintenance
and regularly inspect all of the Company's vessels, both at sea and while the
vessels are in port. Vessels are inspected two to four times per year using
predetermined and rigorous criteria. Each vessel is examined and specific
notations are made, and recommendations are given for improvements to the
overall condition of the vessel, maintenance, safety and crew welfare.
44
<PAGE> 49
OPERATIONS AND SHIP MANAGEMENT
Through wholly owned subsidiaries located worldwide, the Company provides
substantially all of the operations, ship maintenance, crewing, technical
support, shipyard supervision, insurance and financial management services
necessary to support its fleet. While certain ship management and commercial
operations services are contracted out, the Company believes that it could
obtain a replacement provider of these services, or could provide these services
internally, without any negative impact on its operations.
Each of the Company's vessels is owned, or controlled through a capital or
operating lease, by a separate wholly owned subsidiary of Teekay. Substantially
all of the Company's vessels have been chartered to Palm under long-term
time-charters (the "Palm Charters"). Each of the Palm Charters is based upon an
industry standard form and conforms generally to industry standards for time
charters. To the extent that the freight that Palm is paid by charterers in the
employment of the Company's vessels exceeds the amounts that Palm is obligated
to pay to the Company's subsidiaries under their respective Palm Charter, Palm
retains such excess earnings. However, if such freight is less than the charter
hire under the Palm Charters, Palm is obligated to make the charter hire payment
without any adjustment. Palm is required to make fixed monthly charter hire
payments in advance to the owner or lessee of the vessel, except for periods
when the vessel is off-hire.
Under the Palm Charters, the owner or lessee, as the case may be, equips,
insures and mans its vessel so that it is fit to trade through such party's
management agreement with Teekay Shipping Limited. Each of the owners or lessees
has a lien on all of its vessel's cargoes as security for any amounts due to
Palm under the Palm Charters and Palm has a lien on the vessel for certain
amounts due and not otherwise paid by the owner or lessee. Each of the Palm
Charters terminates if the vessel is lost or title is otherwise requisitioned by
a government authority. Absent such termination, the Palm Charters' termination
dates range from February 2002 to February 2006. Certain aspects of the Palm
Charters with respect to the Mortgaged Vessels are described under "The
Mortgaged Vessels--Charters."
The Company has a worldwide chartering staff located in Vancouver, Tokyo,
London and Singapore. Each office serves the Company's clients headquartered in
such office's region. Fleet operations, vessel positions and charter market
rates are monitored around the clock. Management believes that monitoring such
information is critical to making informed bids on competitive brokered
business. Approximately 75% of the Company's net revenues were derived from spot
voyages during first half of fiscal 1996.
CREWING AND STAFF
The Company employs approximately 260 captains, chief engineers, chief
officers and first engineers, approximately 1,200 additional personnel at sea
and approximately 125 personnel ashore.
The Company places great emphasis on attracting, through its recruiting
offices in Manila and Glasgow, qualified crew members for employment on the
Company's tankers. Recruiting has become an increasingly difficult task for
operators in the tanker industry. The Company pays competitive salaries to its
personnel and tries to promote, when possible, from within their ranks.
Management believes that the well maintained quarters and equipment on the
Company's vessels help to attract and retain motivated and qualified seamen and
officers. Although the Company's employees have not historically been
represented by a union, the Company is currently negotiating a collective
bargaining agreement with a union that would, if completed, cover substantially
all of its junior officers and seamen. The Company believes that, if completed,
the collective bargaining agreement will contain wage and other terms
substantially similar to those applying to the covered personnel under the
Company's existing policies.
The Company has a cadet training program, the purpose of which is to
develop a cadre of future senior officers for the Company, with two specially
equipped vessels that are staffed with instructors and trainees. In addition to
the basic training that all seamen are required to undergo to achieve
certification, the Company provides additional training of as much as one month
for all newly hired seamen and junior officers at training facilities in the
Philippines. Safety procedures are a critical element of this training and
45
<PAGE> 50
continue to be emphasized through the Company's onboard training program.
Management believes that high quality manning and training policies will play an
increasingly important role in distinguishing larger independent tanker
companies which have in-house (or affiliate) capabilities, from smaller
companies that must rely on outside ship managers and crewing agents.
The Company has retained Det Norske Veritas, the Norwegian classification
society, to audit the Company's commercial and technical operations and
management procedures worldwide with a view to obtaining accreditation to ISO
9000/9002 standards of total quality management. The first stage of the process
was completed in November 1994 when the Company was found to be in compliance
with the ISO 9002 standards and was presented with its Safety and Environmental
Protection certificate. ISO 9000 is a series of international standards for
quality systems; ISO 9002 is the standard most commonly used in the shipping
industry.
CUSTOMERS
Customers of the Company include major oil companies, major oil traders,
large oil consumers and petroleum product producers, government agencies, and
various other entities dependent upon the Aframax trade. No single customer has
accounted for more than 10% of the Company's consolidated revenues or net income
in any of the last three fiscal years.
COMPETITION
International seaborne oil and petroleum products tanker transportation
services are provided by two main types of operators: major oil company captive
fleets (both private and state-owned) and independent ship owner fleets. Many
major oil companies and other oil trading companies, the primary charterers of
the vessels owned or controlled by the Company, also operate their own vessels
and use such vessels not only to transport their own oil, but also to transport
oil for third party charterers in direct competition with independent owners and
operators in the tanker charter market. Competition for charters is intense and
is based upon price, location, size, age, condition and acceptability of the
vessel and its manager to charterers. In addition, an oversupply of tankers
relative to demand and depressed charter market rates have heightened price
competition and have adversely affected the Company's charter rate performance.
Competition in the Aframax segment is also affected by the availability of other
size vessels to compete in the trades in which the Company engages. Suezmax size
vessels as well as Panamax size vessels can compete for many of the same
charters for which the Company competes. ULCCs and VLCCs rarely compete directly
with Aframax tankers for specific charters. However, because ULCCs and VLCCs
comprise a substantial portion of the total capacity of the market, movements by
such vessels into Suezmax trades and of Suezmax vessels into Aframax trades
would heighten the already intense competition. See "--The International Tanker
Market--Supply and Demand--Demand" and "Risk Factors--Competition."
The Company competes principally with other Aframax owners through the
global tanker charter
market, comprised of tanker broker companies which represent both charterers and
ship owners in chartering transactions. Within this market, some transactions,
referred to as "market cargoes," are offered by charterers through two or more
brokers simultaneously and shown to the widest possible range of owners; other
transactions, referred to as "private cargoes," are given by the charterer to
only one broker and shown selectively to a limited number of owners whose
tankers are most likely to be acceptable to the charterer and are in position to
undertake the voyage. Management estimates that the Company transacts
approximately one-third of its spot voyages from market cargoes, the remainder
being either private cargoes or direct cargoes transacted directly with
charterers outside this market.
Other large operators of Aframax tonnage include Shell International
Marine, a subsidiary of Royal Dutch/Shell Petroleum Corporation, with
approximately 24 vessels trading globally (6 of which are on charter from Sanko
Steamship Co. Ltd., an independent Japanese shipping company), Neptune Orient
Lines Ltd. (owned partially by the Singapore government), with approximately 14
vessels (10 of which are currently trading in the Caribbean), and Bona
Shipholding Limited, which controls approximately
46
<PAGE> 51
25 vessels. The Company believes that it has significant competitive advantages
in the Aframax tanker market as a result of the age, quality, type and
dimensions of its vessels and its large market share in the Indo-Pacific Basin.
Some competitors of the Company, however, may have greater financial strength
and capital resources than the Company. See "Business--Business Strategy."
RISK OF LOSS AND INSURANCE
The business of the Company is affected by a number of risks, including
mechanical failure of the vessels, collisions, property loss to the vessels,
cargo loss or damage and business interruption due to political circumstances in
foreign countries, hostilities and labor strikes. In addition, the operation of
any ocean-going vessel is subject to the inherent possibility of catastrophic
marine disaster, including oil spills and other environmental mishaps, and the
liabilities arising from owning and operating vessels in international trade.
OPA 90, by imposing potentially unlimited liability upon owners, operators and
demise (bareboat) charterers for certain oil pollution accidents in the United
States, has made liability insurance more expensive for ship owners and
operators and has also caused insurers to consider reducing available liability
coverage.
The Company maintains marine hull and machinery and war risks insurance,
which includes the risk of actual or constructive total loss, and protection and
indemnity insurance with mutual assurance associations. The Company does not
carry insurance covering the loss of revenue resulting from vessel off-hire
time. The Company believes that its current insurance coverage is adequate to
protect against most of the accident-related risks involved in the conduct of
its business and that it maintains appropriate levels of environmental damage
and pollution insurance coverage. Currently, the available amount of coverage
for pollution is $700 million per vessel per incident. However, there can be no
assurance that all risks are adequately insured against, that any particular
claim will be paid or that the Company will be able to procure adequate
insurance coverage at commercially reasonable rates in the future.
LEGAL PROCEEDINGS
GENERAL
The Company is party, as plaintiff or defendant, to a variety of lawsuits
for damages arising principally from personal injury and property casualty
claims. Such claims are covered by insurance, subject to customary deductibles.
Management believes that such claims will not have a material adverse effect on
the financial position, results of operations or liquidity of the Company.
NAGASAKI SPIRIT
On September 20, 1992, the Nagasaki Spirit, a vessel capital leased by one
of the wholly owned shipowning subsidiaries of Teekay, was struck by another
ship, the Ocean Blessing, in the Strait of Malacca, between Malaysia and
Indonesia. The Nagasaki Spirit was towed to Singapore where after inspection it
was declared a constructive total loss. The Company received approximately $53
million in insurance proceeds from the hull underwriters of the Nagasaki Spirit,
a portion of which was used to repay indebtedness on the vessel.
A number of claims have arisen as a result of the collision, and
proceedings are presently pending in the High Court of Singapore in order to
determine liability for the collision and the amount of damages recoverable.
Claims by the dependents of the crew of the Nagasaki Spirit have been settled. A
claim of approximately $1.4 million for the cost of clean up of the oil
pollution caused by the Nagasaki Spirit and associated costs has been made by
the Department of Environment for the Government of Malaysia. Another
pollution-based claim, for approximately $2.5 million plus unspecified damages,
has been filed by the Government of Indonesia in an Indonesian District Court.
Any payment made in settlement of these claims will be covered by insurance.
While it is possible that pollution damage claims may be asserted by others, the
Company believes that any liability it may have for such claims will be well
within the applicable limit of $700 million of insurance coverage per vessel per
incident. There is no deductible applicable to the pollution liability coverage.
There are also claims pending by some of the owners of
47
<PAGE> 52
cargo aboard the Ocean Blessing against the Company in excess of $27 million.
The liability, if any, of the Company in respect of these claims is covered by
insurance. The owners of the cargo aboard the Nagasaki Spirit have agreed not to
pursue any claims they may have against the Company.
A claim by a salvor for salvage and special compensation was arbitrated in
London. The award for salvage will be a priority claim against the proceeds of
the sale of the Nagasaki Spirit, which are currently lodged with the Singapore
Court. The proceeds of the sale were approximately $9.0 million; the salvage
award was approximately $4.9 million against the owners. The award for special
compensation in the amount of approximately $2.25 million was appealed and
overturned by the appeal arbitrator. On successive appeals, both the High Court
of Justice and the Court of Appeals in London upheld the appeal arbitrator's
findings that no special compensation was payable. The salvor is entitled to
make a final appeal to the House of Lords. The liability for salvage is covered
by the sale proceeds presently lodged with the Singapore Court and any special
compensation is covered by insurance.
Management does not believe that the result of the pending litigation
involving the Nagasaki Spirit will have a material adverse effect upon the
Company. However, no assurance can be given that additional litigation will not
be commenced as a result of such collision. The Company believes that any claims
established by additional litigation arising out of such collision would be
fully covered by insurance.
LITIGATION AGAINST THE ESTATE OF THE COMPANY'S FOUNDER
In May 1993, a lawsuit against the original representative of the estate
(the "Estate") of the Company's founder, J. Torben Karlshoej, was filed in the
Supreme Court of British Columbia (the "B.C. Court") by Mr. Karlshoej's first
wife. The plaintiff, who was divorced from Mr. Karlshoej in 1971, two years
prior to the founding of the Teekay organization, alleges that she is entitled
to, among other things, an accounting of the Estate, a share of the Estate or
support from the Estate, specific performance of an express or an implied
agreement to compensate her or, alternatively, damages for breach of that
agreement, quantum meruit and/or restitution for unjust enrichment. In April
1995, the plaintiff filed with the B.C. Court a notice of motion to amend her
statement of claim to add a number of additional parties as defendants,
including Teekay, certain of Teekay's subsidiaries, the Trusts, and certain of
Teekay's officers and directors, including Mr. James Hood and Mr. Arthur Coady,
and to amend her claim to include an interim order preventing transfers or other
dispositions of Estate property, declaring that all or a portion of certain
assets are held by the Estate or other proposed additional defendants in trust
for her and conveying such interest in the property to her. The B.C. Court has
not yet made a determination as to whether to grant the plaintiff's motion to
amend her statement of claim.
In materials filed in support of her motion, plaintiff alleges the need to
add the proposed additional defendants as parties based upon their control of
property in which she is claiming an interest and their ability to provide
plaintiff with information required to inform her of the size and nature of the
assets to which she claims entitlement. The proposed amended statement of claim,
which has not yet been filed or served upon Teekay or the other proposed
additional defendants, sets forth certain factual allegations and legal theories
not contained in the original statement of claim, including allegations as to
the existence of an express or constructive trust that would give plaintiff an
undivided interest in up to one-half of the assets directly or indirectly held
by Mr. Karlshoej at any time following the divorce, including the capital stock
of Teekay. In the statement of claim, as proposed to be amended, plaintiff
alleges various facts to support her claims, including, among other things,
that: (i) a separation agreement executed by plaintiff and Torben Karlshoej in
connection with their divorce in 1971 should be declared null and void because
plaintiff lacked the capacity to enter into such an agreement (or, in the
alternative, that plaintiff executed such agreement under duress, undue
influence, unconscionability, fraud, mistake and unfairness); and (ii)
notwithstanding their divorce and the plaintiff's and Torben Karlshoej's
subsequent marriages, they "re-commenced" their "spousal relationship" and,
based on Mr. Karlshoej's promise to provide financial support to the plaintiff,
plaintiff provided certain services to Mr. Karlshoej. The amended statement of
claim also seeks certain additional relief, including a declaration that the
Estate and the proposed additional defendants hold a portion of any interest in
Teekay and its
48
<PAGE> 53
assets in trust for the plaintiff, and an order to prevent Teekay and the other
proposed additional defendants from disposing of any assets in which plaintiff
claims an interest.
The Company believes that plaintiff's proposed claims are without merit and
that there are several meritorious defenses to such claims. First, the Company
believes that the plaintiff faces many obstacles to any successful claim against
the Estate or the proposed additional defendants, including establishing the
invalidity of the separation agreement and of the property transfers made by Mr.
Karlshoej during his lifetime, including the transfers of the capital stock of
the Company into the Trusts. The Company also believes that there may be
insufficient jurisdictional grounds for the plaintiff to add Teekay or its
subsidiaries as defendants in the lawsuit and that, even if Teekay and its
subsidiaries do become named defendants, the plaintiff has not stated a
sustainable basis for a claim against Teekay or its assets. The Company believes
that, in the unlikely event that the plaintiff were successful at all phases of
the lawsuit, the result would be an award of money damages against the Estate or
of specific property held by the Estate or brought into the Estate through
invalidation of the transfers of property made by Mr. Karlshoej to the Trusts.
If plaintiff were awarded shares of Teekay's capital stock currently held by the
Trusts, or if such shares were otherwise required to be sold in order to satisfy
a judgment in the plaintiff's favor, a change in control of Teekay could result.
The Company believes that the possibility of invalidations of the property
transfers, including transfers of the capital stock of the Company to the
Trusts, and the possible change of control that could occur, are remote. Teekay
intends, if added as a defendant, to vigorously defend against the plaintiff's
claims. Based upon the advice of its counsel, including an assessment of the
defenses available to the Company and the defects in plaintiff's claims, the
Company does not anticipate that the outcome of the lawsuit will have a material
adverse effect upon it or its assets.
REGULATION
The business of the Company and the operation of its vessels are materially
affected by government regulation in the form of international conventions,
national, state and local laws and regulations in force in the jurisdictions in
which the vessels operate, as well as in the country or countries of their
registration. Because such conventions, laws, and regulations are often revised,
the Company cannot predict the ultimate cost of complying with such conventions,
laws and regulations or the impact thereof on the resale price or useful life of
its vessels. The Company is required by various governmental and quasi-
governmental agencies to obtain certain permits, licenses and certificates with
respect to its operations. Subject to the discussion below and to the fact that
the kinds of permits, licenses and certificates required for the operations of
the vessels owned by the Company will depend upon a number of factors, the
Company believes that it has been and will be able to obtain all permits,
licenses and certificates material to the conduct of its operations.
The Company believes that the heightened environmental and quality concerns
of insurance underwriters, regulators and charterers will impose greater
inspection and safety requirements on all vessels in the tanker market and will
accelerate the scrapping of older vessels throughout the industry.
ENVIRONMENTAL REGULATION--IMO. With respect to the following discussions
of the IMO regulations and OPA 90, the Company believes that, because all of the
Mortgaged Vessels are double hulled, the Company is in compliance with such
regulations and statutes. Moreover, under the current regulations, the vessels
of the Company's current fleet will be able to operate for substantially all of
their respective economic lives before being required to have double-hulls.
On March 6, 1992, the IMO adopted regulations which set forth new and
upgraded requirements for pollution prevention for tankers. These regulations,
which went into effect on July 6, 1995 in many jurisdictions in which the tanker
fleet owned by the Company may be anticipated to be operating on and after such
date, provide that (i) 25 year-old tankers must be of double-hull construction
or of a mid-deck design with double side construction, unless they have wing
tanks or double-bottom spaces, not used for the carriage of oil, which cover at
least 30% of the length of the cargo tank section of the hull or bottom or are
capable of hydrostatically balanced loading which ensures at least the same
level of protection against oil spills in the event of collision or stranding,
(ii) 30 year-old tankers must be of double-hull
49
<PAGE> 54
construction or mid-deck design with double-side construction, and (iii) all
tankers will be subject to enhanced inspections. Some classification societies
may implement these requirements prior to the effective date of such
regulations. Also, under IMO regulations, a tanker must be of double-hull
construction or a mid-deck design with double side construction or be of another
approved design ensuring the same level of protection against oil pollution in
the event that such tanker (i) is the subject of a contract for a major
conversion or original construction on or after July 6, 1993, (ii) commences a
major conversion or has its keel laid on or after January 6, 1994, or (iii)
completes a major conversion or is a newbuilding delivered on or after July 6,
1996.
Although 4 of the Company's vessels are 15 years or older, the oldest of
such vessels are only 16 years old and, therefore, the requirements currently in
effect regarding 25 and 30 year-old tankers will not affect the Company's fleet
in the near future. However, compliance with the new regulations regarding
inspections of all vessels may adversely affect the Company's operations. The
Company cannot at the present time evaluate the likelihood or magnitude of any
such adverse effect on the Company's operations due to uncertainty of
interpretation of the IMO regulations.
ENVIRONMENTAL REGULATIONS--OPA 90. OPA 90 established an extensive
regulatory and liability regime for the protection and cleanup of the
environment from oil spills. OPA 90 affects all owners and operators whose
vessels trade to the United States or its territories or possessions or whose
vessels operate in United States waters, which include the United States
territorial sea and the two hundred nautical mile exclusive economic zone of the
United States.
Under OPA 90, vessel owners, operators and bareboat (or "demise")
charterers are "responsible parties" and are jointly, severally and strictly
liable (unless the spill results solely from the act or omission of a third
party, an act of God or an act of war) for all oil spill containment and
clean-up costs and other damages arising from oil spills pertaining to their
vessels. These other damages are defined broadly to include (i) natural
resources damages and the costs of assessment thereof, (ii) real and personal
property damages, (iii) net loss of taxes, royalties, rents, fees and other lost
revenues, (iv) lost profits or impairment of earning capacity due to property or
natural resources damage, (v) net cost of public services necessitated by a
spill response, such as protection from fire, safety or health hazards, and (vi)
loss of subsistence use of natural resources. OPA 90 limits the liability of
responsible parties to the greater of $1,200 per gross ton or $10 million per
tanker that is over 3,000 gross tons (subject to possible adjustment for
inflation). These limits of liability would not apply if the incident were
proximately caused by violation of applicable United States federal safety,
construction or operating regulations or by the responsible party's gross
negligence or willful misconduct, or if the responsible party fails or refuses
to report the incident or to cooperate and assist in connection with the oil
removal activities. The Company currently insures and plans to insure each of
its vessels with pollution liability insurance in the amount of $700 million. A
catastrophic spill could exceed the insurance coverage available, in which event
there could be a material adverse effect on the Company.
OPA 90 does not by its terms impose liability on lenders or the holders of
mortgages on vessels. The Company believes, therefore, that neither the Holders
of the Notes nor the Trustee are exposed to liability under OPA 90 unless such
Holders or the Trustee participates so substantially in the overall operation or
management of the Company's vessels as to be considered the "operator" of a
vessel prior to or following an Event of Default.
Under OPA 90, with certain limited exceptions, all newly built or converted
tankers operating in United States waters must be built with double-hulls, and
existing vessels which do not comply with the double-hull requirement must be
phased out over a 25-year period (1990-2015) based on size, age and place of
discharge, unless retrofitted with double-hulls. Notwithstanding the phase-in
period, OPA 90 currently permits existing single-hull tankers to operate until
the year 2015 if their operations within United States waters are limited to
discharging at the Louisiana Off-Shore Oil Platform, or off-loading by means of
lightering activities within authorized lightering zones more than 60 miles
off-shore.
OPA 90 expands the pre-existing financial responsibility requirements for
vessels operating in United States waters and requires owners and operators of
vessels to establish and maintain with the United
50
<PAGE> 55
States Coast Guard (the "Coast Guard") evidence of insurance or of qualification
as a self-insurer or other evidence of financial responsibility sufficient to
meet their potential liabilities under OPA 90. In December 1994, the Coast Guard
enacted regulations requiring evidence of financial responsibility in the amount
of $1,500 per gross ton for tankers, coupling the OPA limitation on liability of
$1,200 per gross ton with the Comprehensive Environmental Response Compensation
and Liability Act liability limit of $300 per gross ton. Under the regulations,
such evidence of financial responsibility may be demonstrated by insurance,
surety bond, self-insurance, or guaranty. Under OPA 90, an owner or operator of
more than one tanker will be required only to demonstrate evidence of financial
responsibility for the tanker having the greatest maximum liability under OPA
90.
The Coast Guard's regulations concerning certificates of financial
responsibility provide, in accordance with OPA 90, that claimants may bring suit
directly against an insurer or guarantor that furnishes certificates of
financial responsibility; and, in the event that such insurer or guarantor is
sued directly, it is prohibited from asserting any defense that it may have had
against the responsible party and is limited to asserting those defenses
available to the responsible party and the defense that the incident was caused
by the willful misconduct of the responsible party. Certain insurance
organizations, which typically provide certificates of financial responsibility,
including the major protection and indemnity organizations which the Company
would normally expect to provide a certificate of financial responsibility on
its behalf, declined to furnish evidence of insurance for vessel owners and
operators if they are subject to direct actions or required to waive insurance
policy defenses.
The Coast Guard's regulations may also be satisfied by evidence of surety
bond, guaranty or by self-insurance. Under the self-insurance provisions, the
ship owner or operator must have a net worth and working capital, measured in
assets located in the United States against liabilities located anywhere in the
world, that exceeds the applicable amount of financial responsibility. The
Company has complied with the Coast Guard regulations by providing evidence of
sufficient self-insurance.
OPA 90 specifically permits individual states to impose their own liability
regimes with regard to oil pollution incidents occurring within their
boundaries, and some states have enacted legislation providing for unlimited
liability for oil spills. In some cases, states which have enacted such
legislation have not yet issued implementing regulations defining tanker owners'
responsibilities under these laws. The Company intends to comply with all
applicable state regulations in the ports where the Company's vessels call.
Also, under OPA 90 the liability of responsible parties, United States or
foreign, with regard to oil pollution damage in the United States is not subject
to any international convention.
Owners or operators of tankers operating in United States waters were
required to file vessel response plans with the Coast Guard, and their tankers
were required to be operating in compliance with their Coast Guard approved
plans by August 18, 1993. Such response plans must, among other things, (i)
address a "worst case" scenario and identify and ensure, through contract or
other approved means, the availability of necessary private response resources
to respond to a "worst case discharge," (ii) describe crew training and drills,
and (iii) identify a qualified individual with full authority to implement
removal actions. The Company filed vessel response plans with the Coast Guard
for the tankers owned by the Company and has received approval for all vessels
in its fleet to operate in United States waters.
Outside the United States, many countries have ratified and follow the
liability scheme set out in the International Convention on Civil Liability for
Oil Pollution Damage 1969 ("CLC"). Under the CLC, a vessel's registered owner is
strictly liable for pollution damage caused on the territorial waters of a
contracting state by a discharge of persistent oil, subject to certain complete
defenses. Liability currently is limited to approximately $188 per gross
registered ton, with the exact amount tied to a unit of account which varies
according to a basket of currencies. The right to limit liability is forfeited
only where the spill is caused by the owner's actual fault or the fault of a
third party with whom the owner has a direct contractual relationship. Vessels
trading to contracting states must establish evidence of insurance covering the
limited liability of the owner.
51
<PAGE> 56
In jurisdictions where the CLC has not been adopted, various legislative
schemes or common law govern, and liability is imposed either on the basis of
fault or in a manner similar to the CLC.
ENVIRONMENTAL REGULATION--OTHER ENVIRONMENTAL INITIATIVES. The EC is
considering legislation that will affect the operation of oil tankers and the
liability of owners for oil pollution. It is impossible to predict what
legislation, if any, may be promulgated by the EC or any other country or
authority.
TAXATION OF THE COMPANY
The following discussion is a summary of the principal Liberian tax laws,
Bahamian tax laws and U.S. federal income tax laws applicable to the Company.
The following discussion of tax matters, as well as the conclusions regarding
certain issues of tax law that are reflected in that discussion are based on
current law and upon the advice received by the Company from its counsel. Such
advice is based, in part, on representations made by officers of the Company,
some of which relate to anticipated future factual matters and circumstances. No
assurance can be given that changes in existing laws or their interpretation
will not occur or that such changes will not be retroactive or that anticipated
factual matters and circumstances will in fact occur. The Company's and its
counsels' views have no binding effect or official status of any kind, and no
assurance can be given that the conclusions discussed below would be sustained
if challenged by taxing authorities.
UNITED STATES TAXATION
The following discussion is based on the advice of Perkins Coie, special
United States tax counsel to the Company. The following discussion is based upon
the currently existing provisions of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed U.S. Treasury Department
regulations, current administrative rulings and court decisions.
It is anticipated that substantially all of the gross income of the
Company's subsidiaries will be derived from the ownership, use and operation of
vessels in international commerce and that such income will principally consist
of freights from the transportation of cargoes and hire or lease from time
charters and from the performance of services directly related to the use and
operation of such vessels, including services related to the chartering of such
vessels ("Shipping Income"). In general, unless exempt from U.S. taxation under
Section 883 of the Code as discussed below, Teekay's subsidiaries' Shipping
Income will be subject to U.S. federal income taxation (in the manner discussed
below) to the extent that such Shipping Income is derived from sources within
the United States. For these purposes, Shipping Income that is attributable to
transportation that begins or ends (but that does not both begin and end) in the
United States will be considered to be 50% derived from sources within the
United States. Shipping Income attributable to transportation that begins and
ends in the United States is considered to be 100% derived from sources within
the United States. Based upon the Company's anticipated shipping operations, the
vessels of Teekay's subsidiaries will be operated in various parts of the world
and, although they may transport cargoes to or from what might be viewed to be
U.S. ports for U.S. tax purposes, they will not be permitted by law to transport
cargoes between U.S. ports. On average, in fiscal years 1993, 1994 and 1995, the
Company derived approximately 37% of its gross revenues from voyages originating
or terminating in U.S. ports. Therefore, based on past experience the Company
currently expects that approximately 19% of Teekay's subsidiaries' Shipping
Income would be treated as derived from U.S. sources.
All Shipping Income attributable to transportation exclusively between
non-U.S. ports will be considered to be 100% derived from sources outside the
United States. Shipping Income derived by Teekay's subsidiaries from sources
outside the United States will not be subject to U.S. federal income tax.
Management estimates that, should it not qualify for the Section 883
exemption described below, the Company's U.S. tax liability for fiscal 1995
would not be material.
52
<PAGE> 57
THE CODE SECTION 883 EXEMPTION
The Company believes that, under Code Section 883, Teekay's ship owning and
operating subsidiaries are exempt from United States taxation on their Shipping
Income derived from sources within the United States.
A corporation will qualify for the benefits of Code Section 883 if, in
relevant part, (i) it is organized in a foreign country that grants an
equivalent exemption from tax to corporations organized in the United States
("the country of organization requirement"), and (ii) more than 50% of the value
of its shares is treated as owned, directly or indirectly, by individuals who
are "residents" of such country or of another foreign country that grants an
equivalent exemption to corporations organized in the United States (the
"ownership requirement"). The ownership requirement is not applicable if the
stock of the corporation (or the direct or indirect corporate parent thereof,
provided the parent is organized in a country that satisfies the country of
organization requirement) is "primarily and regularly traded on an established
securities market" in such country, in another country that grants the
equivalent exemption from tax to U.S. corporations, or in the United States (the
"publicly traded exception"), or if the subsidiary is a "controlled foreign
corporation" (the "CFC exception").
The U.S. Treasury Department has recognized the Republic of Liberia, The
Bahamas, and Panama as jurisdictions that grant an equivalent exemption to U.S.
corporations. Teekay and each of its ship owning and operating subsidiaries are
incorporated or organized in either Liberia, The Bahamas, or Panama. Therefore,
the subsidiaries' Shipping Income will be exempt from U.S. federal income
taxation if the ownership requirement is met or the Company qualifies for the
publicly traded exception. It is not anticipated that the Company will qualify
for the CFC exception.
The Company believes that the ultimate indirect owners of more than 50% of
the value of the capital stock of the Company and its subsidiaries are
individuals who would satisfy the ownership requirements on the date hereof. The
Company does not anticipate that it will have to rely on the publicly traded
exception for purposes of the Code Section 883 exemption. Compliance with the
ownership requirement and qualification for the publicly traded exception depend
upon the resolution of certain factual issues and the interpretation of the
Code. No Treasury regulations have been promulgated for purposes of the
ownership requirement and the publicly traded exception under Section 883. In
the absence of statutory and regulatory guidance under Code Section 883, special
U.S. tax counsel to the Company is unable to render an opinion in this regard.
The Company does not know of any plan regarding (i) disposition of the
interests held by the current ultimate individual holders of Teekay's common
stock or (ii) any changes in the residency of the current ultimate individual
holders of Teekay's common stock that would cause the loss of the availability
of Section 883 of the Code (or, in either case, any agreements with respect to
any of the foregoing). However, there is no agreement that would preclude the
current direct or indirect holders of Teekay's common stock from disposing of
their interests in the Company, or from changing their residence, and there can
be no assurance that such holders of such common stock will not do so, nor is
there any assurance that a person or persons who are not qualifying holders of
Teekay's common stock for purposes of Section 883 will not acquire sufficient
beneficial ownership of the outstanding shares of such common stock through
purchase on the New York Stock Exchange or otherwise to preclude the
availability of an exemption under Section 883. Any change in the holdings of
the current direct or indirect holders of Teekay's common stock or the residence
of such holders of common stock (both as determined for United States tax
purposes), or the issuance of shares of stock or any other change in the
capitalization of the Company (other than as a result of this Offering) could
affect the continued availability of Section 883 of the Code. Accordingly, no
assurance can be given that the subsidiaries' Shipping Income derived from
sources in the United States will be treated as exempt from taxation by the
United States.
TAXATION IN THE ABSENCE OF A CODE SECTION 883 EXEMPTION
NET BASIS AND BRANCH TAX REGIME. To the extent the benefits of the Section
883 exemption are unavailable, the U.S. source Shipping Income (and any U.S.
source chartering income not treated as
53
<PAGE> 58
Shipping Income) of each subsidiary that was "effectively connected" with the
conduct of a U.S. trade or business would be subject to U.S. federal corporate
income tax, which currently is imposed at rates of up to 35% on taxable income.
Taxable income would be determined after allowance for allocable deductions,
provided the subsidiary files true and accurate U.S. federal income tax returns
as required by the Code. In addition, under certain circumstances, the 30%
branch profits tax imposed under Section 884 of the Code would apply to the
earnings effectively connected with the conduct of such trade or business, as
determined after allowance for certain adjustments, and a branch interest tax on
certain interest paid or deemed paid by a subsidiary's U.S. trade or business.
A subsidiary's U.S. source Shipping Income (and any U.S. source chartering
income not treated as Shipping Income) would be considered "effectively
connected" with the conduct of a U.S. trade or business only if the subsidiary
has (or is considered to have) a fixed place of business in the United States
involved in the earning of such income and certain other requirements are met.
Neither Teekay nor any of its subsidiaries maintains an office or other fixed
place of business in the United States. Accordingly, based on the expected mode
of the Company's shipping operations, the Company anticipates that the
subsidiaries' U.S. source Shipping Income will not be "effectively connected"
with the conduct of a U.S. trade or business and thus will not be subject to the
net-basis U.S. federal corporate income tax.
THE 4% GROSS BASIS TAX REGIME. To the extent the benefits of Code Section
883 are unavailable, the U.S. source Shipping Income derived by Teekay's
subsidiaries that is not "effectively connected" with the conduct of a U.S.
trade or business (as described above) will be subject to a special 4% tax on a
gross basis (without benefit of deduction). As discussed above, the Company
expects that substantially less than half of the subsidiaries' gross Shipping
Income will be considered U.S. source income. Therefore, the Company believes
that the maximum effective rate of U.S. federal income tax on the subsidiaries'
gross Shipping Income would not exceed 2%. The Company does not expect that any
potential liability it may have with respect to its U.S. source Shipping Income
for prior years would be material in amount.
GAIN ON SALE OF VESSELS
To the extent the vessel of any subsidiary of Teekay makes more than an
occasional voyage to U.S. ports, that subsidiary may be considered to be engaged
in the conduct of a U.S. trade or business. As a result, unless that subsidiary
is entitled to the benefits of Code Section 883, any U.S. source gain on the
sale of such subsidiary's vessel may be partly or wholly subject to U.S. federal
income tax as "effectively connected" income (determined under rules different
from those discussed above) under the above-described net basis and branch tax
regime. The U.S. Treasury Department has recognized the Republic of Liberia, but
neither Panama nor The Bahamas, as a jurisdiction that provides an exemption
from tax for gains realized by a U.S. corporation from the sale of a vessel, to
the extent, as the Company expects, that such gains are incidental to shipping
operations. Accordingly, if Teekay's subsidiaries incorporated in Liberia
otherwise qualify for the benefits of Section 883, gain on the sale of their
vessels (to the extent such gain is incidental to Shipping Income) should be
exempt from U.S. federal income taxation under Section 883. U.S. source gain
from the sale of vessels owned by Teekay's subsidiaries incorporated in The
Bahamas or Panama, however, may not be exempt from U.S. taxation under Section
883.
However, in general, gain from the sale by a non-U.S. corporation of a
vessel used in shipping operations will not be U.S. source gain except for the
following: (1) the aggregate of depreciation adjustments attributable to
depreciation deductions allowable for the vessel in computing U.S. source
taxable income; (2) gain in excess of such depreciation adjustments if the
vessel is sold within the U.S. and (3) the entire gain if attributable to an
office or fixed place of business maintained by the corporation in the United
States.
As the Company (1) does not expect to be earning Shipping Income that is
"effectively connected" with the conduct of a U.S. trade or business subject to
tax under the net basis and branch tax regime (described above under "--Taxation
in the Absence of a Code Section 883 Exemption"), (2) does not
54
<PAGE> 59
intend to permit any of its vessels to be sold in the United States and (3) does
not now and does not expect in the future to maintain an office or fixed place
of business in the United States, the Company does not expect that any gain from
the sale of the vessel by it would be subject to U.S. federal income tax.
LIBERIAN TAXATION
Based on the advice of Haight, Gardner, Poor & Havens, Liberian tax counsel
to the Company, because Teekay does not expect that it and its subsidiaries will
conduct business or operations in the Republic of Liberia, Teekay and its
subsidiaries will not be subject to taxation under the laws of the Republic of
Liberia, and distributions by its subsidiaries to Teekay will not be subject to
Liberian tax.
BAHAMIAN TAXATION
Based on the advice of Graham, Thompson & Co., Bahamian counsel to the
Company, Teekay and its subsidiaries will not be subject to taxation under the
laws of The Bahamas, and distributions by its subsidiaries to Teekay also will
not be subject to any Bahamian tax.
55
<PAGE> 60
MANAGEMENT
The directors, executive officers and senior management of the Company are
listed below:
<TABLE>
<CAPTION>
AGE POSITION
--- ---------------------------------------------------------
<S> <C> <C>
Karlshoej, Axel 55 Director and Chairman of the Board
Hood, James N. 60 Director, President and Chief Executive Officer
Coady, Arthur F. 62 Director, EVP and General Counsel
Dingman, Michael D. 64 Director
Feder, Morris L. 78 Director
Hsu, Steve G. K. 62 Director
Hsu, Thomas Kuo-Yuen 49 Director
Alsleben, Veronica A. E. 44 Managing Director (London)
Antturi, Peter S. 36 Controller (Vancouver)
Chad, Greg 44 VP, Corporate Services (Vancouver)
Gibson, Esther E. 40 Secretary (Nassau)
Glendinning, David 41 VP, Marine and Commercial Operations (Vancouver)
Gurnee, Anthony 35 VP, Treasurer and Chief Financial Officer (Vancouver)
Meldgaard, Mads T. 31 Managing Director (Singapore)
Moller, Bjorn 38 VP, Group Chartering and Business Development (Vancouver)
Nagao, Yoshio 49 Managing Director (Tokyo)
Patwardhan, Vinay S. 54 SVP, Marine Operations (Vancouver)
</TABLE>
Certain biographical information about each of these individuals is set
forth below:
VERONICA A. E. ALSLEBEN has been employed in ship chartering since 1973.
She joined the Company in 1989 as Chartering Manager and was subsequently
promoted to her current position as Managing Director (London). Prior to joining
the Company, Ms. Alsleben served as Vice President of a chartering office of an
international tanker company in New York City for five years.
PETER S. ANTTURI joined the Company in September 1991 as Manager,
Accounting and was promoted to his current position of Controller in March 1992.
Prior to joining the Company, Mr. Antturi held senior accounting and finance
roles in the shipping industry since 1985.
ARTHUR F. COADY is an Executive Vice President and the General Counsel of
the Company. He has served as a Director of Teekay since 1989. He joined the
Company after 30 years in private law practice in Canada, having specialized in
corporate and commercial law. In July 1995, Mr. Coady was appointed as a
director of the Bahamas Maritime Authority.
GREG CHAD joined the Company in August 1991 as Manager, Personnel. He was
promoted in June 1993 to Director, Personnel and in March 1995 to his current
position of Vice President, Corporate Services. Mr. Chad has held a number of
senior human resources and administration roles in the transportation and
communication industries since 1976.
MICHAEL D. DINGMAN is a private investor, industrial company executive and
corporate director. He was elected as a Director of Teekay in May 1995. He is
Chairman and Chief Executive Officer of The Shipston Group Limited, a
diversified international holding company, Chairman of Fisher Scientific
International Inc., and a Director of Ford Motor Company. Mr. Dingman also
serves as Director/Executive to a number of other industrial concerns.
MORRIS L. FEDER is currently President of Worldwide Cargo Inc., a recently
formed New York based chartering firm. Mr. Feder has been employed in the
shipping industry in excess of 45 years, of which 43 were spent with Maritime
Overseas Corporation, from which he retired as Executive Vice President and
Director in December 1991. He has also served as Senior Vice President and
Director of Overseas
56
<PAGE> 61
Shipholding Group Inc. and was a member of the Finance and Development Committee
of the Board of such company. He has served as a Director of Teekay since June
1993. Mr. Feder is a member of the American Bureau of Shipping, the Connecticut
Maritime Association and the Association of Shipbrokers and Agents USA Inc.
ESTHER E. GIBSON joined the Company in June 1988. In 1991, she was
appointed to the position of Secretary.
CAPTAIN DAVID GLENDINNING joined the Chartering Department of the Company's
London office in January 1987. Since then, he has worked in a number of senior
positions within the organization including Vice President, Commercial
Operations, a position he held for two years prior to his January 1995 promotion
to the position of Vice President, Marine and Commercial Operations. Captain
Glendinning has 18 years' sea service on oil tankers of various types and sizes
and is a Master Mariner with British Class 1 Foreign Going Certificate of
Competency.
ANTHONY GURNEE joined the Company in May 1992, as General Manager, Finance
and served in that capacity until October 1992, at which time he was promoted to
the position of Vice President, Finance & Accounting. In January 1995, his title
was changed to Vice President and Chief Financial Officer. Mr. Gurnee is a
graduate of the United States Naval Academy and served six years with the United
States Navy. Prior to joining the Company, he was a shipping banker with
Citibank, N.A. for four years. He is a Member of the Institute of Chartered
Shipbrokers (MICS).
CAPTAIN JAMES N. HOOD has held a number of senior positions with the
Company since joining the organization in 1977. He was appointed President and
Chief Executive Officer of the Company in October 1992. He has served as a
Director of Teekay since June 1993. Captain Hood's qualifications include an
Extra Master's Certificate of Competency. He is a Fellow of the Institute of
Chartered Shipbrokers (FICS), a Fellow of the Nautical Institute (FNI) and a
director of Britannia Steam Ship Insurance Association Limited. In addition to
his 23 years of shore service in various senior management positions, Captain
Hood has served at sea for 19 years, including four years of command experience.
STEVE G. K. HSU is Chairman and Managing Director of Oak Steamship Company
Limited, a ship management company based in Hong Kong. Mr. Hsu is a member of
the Executive Committee of Hong Kong Shipowners Association and of the Executive
Committee of the International Association of Dry Cargo Shipowners (Intercargo),
and a council member of the International General Committee of Bureau Veritas.
He has served as a Director of Teekay since June 1993.
THOMAS KUO-YUEN HSU has served 23 years with, and is presently Executive
Director of, Expedo & Company (London) Ltd, which is part of the Expedo Group of
Companies that manages a fleet of eight vessels, ranging in size from 80,000 dwt
to 280,000 dwt. He has been a Committee Director of the Brittania Steam Ship
Insurance Association Limited since 1988, and a Lloyd's Underwriting Member
since 1983. He has served as a Director of Teekay since June 1993.
AXEL KARLSHOEJ is President of Nordic Industries, a California general
construction firm with whom he has served for the past 22 years. He is the older
brother of the late J. Torben Karlshoej, the founder of the Company. He has
served as a Director and Chairman of the Board of Teekay since June 1993.
MADS T. MELDGAARD joined the Company's Chartering Department in January
1986 and served in the European and Singapore offices until December 1991, when
he was appointed Chartering Manager in the Vancouver office. Mr. Meldgaard was
promoted in January 1994 to General Manager, Chartering and again in September
1995 to his current position as Managing Director (Singapore).
BJORN MOLLER spent three years in the Company's European office before
being promoted to the position of Vice President, Chartering in 1988. Mr. Moller
served in this capacity for six years until his January 1994 appointment to the
position of Vice President, Planning and Development, later being promoted in
January 1995 to his current position as Vice President, Group Chartering and
Business Development. Prior to joining the Company, Mr. Moller spent 10 years
with East Asiatic Company, including four years in tanker chartering and
operations.
57
<PAGE> 62
YOSHIO NAGAO has been employed in the shipping industry for the past 28
years and is qualified as a Chief Engineer. He joined the Company from Sanko
Steamship Co. Ltd., a Japanese ship owning company, where he served as Manager
of their Technical Department. Mr. Nagao has served as Managing Director (Tokyo)
since joining the Company in 1985.
CAPTAIN VINAY S. PATWARDHAN has held senior positions with the Company
since joining the organization in 1981 including Vice President, Ship
Management, a position he held from January 1986 through January 1995, when he
was promoted to his current position: Senior Vice President, Marine Operations.
Captain Patwardhan has been employed in the shipping industry for the past 34
years, having experience in crude tanker, product carrier, O/B/O, ore oiler,
container, general cargo and bulk carrier operations, with 11 years of command
experience. Captain Patwardhan is a Master Mariner with Foreign Going
Certificate of Competency.
MANAGEMENT SUCCESSION
The Resource Committee of Teekay's Board of Directors is conducting a
search to identify a potential candidate for the position of Chief Operating
Officer of the Company. The creation of the Chief Operating Officer position is
intended to facilitate an orderly leadership succession upon the eventual
retirement of Captain James N. Hood as Chief Executive Officer.
EXECUTIVE COMPENSATION
The aggregate annual compensation paid to the 12 executive officers and
senior managers listed above was $1,650,000 for fiscal 1995, a portion of which
was attributable to payments made pursuant to bonus plans of the Company, which
consider both Company and individual performance for a given period. Currently,
the non-employee directors of Teekay receive, in the aggregate, approximately
$100,000 for their services and reimbursement of their out-of-pocket expenses in
each fiscal year during which they are directors of Teekay. In fiscal 1995, the
Company contributed an aggregate amount of $77,000 to provide pension and
similar benefits for the 12 executive officers and senior managers listed above.
Teekay's 1995 Stock Option Plan (the "Plan") entitles certain eligible
officers, key employees (including senior sea staff), and directors of the
Company to receive options to acquire common stock of Teekay. A total of
2,148,571 shares of common stock have been reserved for issuance under the Plan,
and options to purchase up to 796,750 shares of Teekay's common stock have been
granted by Teekay. Such outstanding options are exercisable at a price of $21.50
per share and expire July 19, 2005, ten years after the date of grant.
OWNERSHIP OF TEEKAY
The following table sets forth certain information regarding (i) ownership
of Teekay's common stock as of November 30, 1995 by all persons known to Teekay
to own more than 10 percent of the common stock and (ii) the total amount of
capital stock owned by all officers and directors of Teekay as a group as of
such date:
<TABLE>
<CAPTION>
IDENTITY OF PERSON
TITLE OF CLASS OR GROUP AMOUNT OWNED PERCENT OF CLASS
- ----------------------------- ------------------------- ------------------ ----------------
<S> <C> <C> <C>
Common Stock, no par value Cirrus Trust 18,082,781 shares 65.1%
JTK Trust 2,803,575 shares 10.4%
All officers and * *
directors as a group
(17 persons)
</TABLE>
- ---------------
* Less than one percent of outstanding shares.
58
<PAGE> 63
The activities of Cirrus Trust and JTK Trust are under the common
supervision of Messrs. Coady, Karlshoej and Thomas Hsu, directors of Teekay, and
Mr. Shigeru Matsui, President of Matsui & Company, a Tokyo based ship brokerage
firm. The beneficiaries of such trusts include charitable institutions and
affiliated trusts.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company. Such
summary is qualified in its entirety by reference to the full text of the
documents which govern the transactions so summarized.
As of September 30, 1995, the subsidiaries of Teekay had obligations for
outstanding indebtedness for borrowed money under existing credit agreements in
the aggregate principal amount of $604.6 million, all of which is guaranteed by
Teekay. In addition, Teekay had indebtedness of $151.2 million of its 9 5/8%
First Preferred Ship Mortgage Notes (the "1993 Notes"). After giving effect to
the Offering and the application of the proceeds therefrom, the Company's
indebtedness, on a consolidated basis, would be approximately $760.6 million.
The following chart indicates, on a consolidated basis after giving effect to
the Offering and the application of the proceeds therefrom, the aggregate
principal amount of indebtedness that will be due and payable in each of the
next 10 fiscal years of the Company.
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT FISCAL YEAR AMOUNT
- --------------------- ------------- ----------- --------------
<S> <C> <C> <C>
1997 $37.4 million 2002 $ 72.0 million
1998 $38.6 million 2003 $ 46.5 million
1999 $62.4 million 2004 $154.4 million
2000 $62.4 million 2005 $ 47.3 million
2001 $78.3 million 2006 $ 45.8 million
</TABLE>
Credit agreements, and guarantees executed by Teekay in connection
therewith, contain various covenants which restrict the operations of the
obligors and Teekay. Such credit agreements and guarantees contain covenants
which require the obligors thereunder or Teekay, as the case may be, to conduct
their operations, including, for such obligors, the operations of their
respective vessels, in accordance with certain standards set forth in such
credit agreements or guarantees, as the case may be. The Company's Revolver
(discussed below) contains a "hull covenant" which requires the obligors to
deliver additional collateral to the lenders under such credit agreement, or
prepay a certain amount of the indebtedness under such credit agreement, in the
event that the value of the subject vessels falls below a fixed percentage of
the amount of the indebtedness under such credit agreement then outstanding. The
percentage at which the combined value of the subject vessels must remain is
120% of the outstanding indebtedness under the Revolver, with the percentage
increasing to 140% over the term of the Revolver. The Company believes that as
of September 30, 1995 it was in compliance with all of the covenants in effect
at that time.
In addition to the hull covenants, certain of the credit agreements
prohibit the payment of dividends by, or the making of distributions from, the
respective obligors during the time in which any of the indebtedness thereunder
remains outstanding. As of September 30, 1995, the amount of retained earnings
in subsidiaries of Teekay that was prohibited from being distributed as a
dividend to Teekay was $65,184.
On July 15, 1993, Teekay issued $175.0 million of its 1993 Notes in a
private placement. On December 30, 1993, Teekay completed, pursuant to a
registration rights agreement, an exchange offer whereby such privately-placed
Notes were, at the option of each holder, exchanged for Notes registered under
the Securities Act. The 1993 Notes are not listed for trading on any foreign or
United States exchange and there is currently no regular trading market for such
Notes.
The Company has a reducing revolving credit facility (the "Revolver") with
three commercial banks providing for borrowings of up to $243.0 million to
refinance certain indebtedness of the Company, to
59
<PAGE> 64
finance certain vessel acquisitions and to provide working capital. The Revolver
is secured by first priority mortgages granted on 14 of the Company's Aframax
tankers, together with certain other related collateral, and a guarantee from
Teekay for all amounts outstanding under the Revolver. The commitment amount
will be reduced by $9.5 million in semiannual instalments which commenced on
December 6, 1995, together with a final balloon payment coincident with the
final semiannual reduction. Interest payments are based on LIBOR plus a margin
ranging from 0.80% to 1.25% which is dependent on the financial leverage of the
Company, as calculated on a quarterly basis. Principal repayments are required
when borrowings under the Revolver exceed the commitment amount, which was
$223.0 million as of September 30, 1995.
CERTAIN TRANSACTIONS WITH RELATED PARTIES
Approximately 75% of the issued and outstanding shares of Teekay voting
common stock are owned by affiliated trusts, the activities of which are
supervised by Messrs. Coady, Karlshoej, and Thomas Hsu, directors of Teekay, and
Mr. Shigeru Matsui, President of Matsui & Company, a Tokyo based ship brokerage
firm.
Mr. Thomas Hsu, a director of Teekay, is associated with the company that
owns the other 50% of VCSC. Teekay and its partner in VCSC have guaranteed
certain loans of VCSC. See Note 11 to the Consolidated Financial Statements
included elsewhere in this Prospectus. Certain directors of Teekay are also
officers and directors of VCSC.
In April 1993, Teekay acquired all of the issued and outstanding shares of
common stock of Palm Shipping Inc. from an affiliate of Teekay for a nominal
purchase price, plus an amount to be paid at a later date (up to a maximum of
$5.0 million plus accrued interest), contingent upon certain future events. The
payment of such purchase price by Teekay shall not occur until after the 1993
Notes have been paid in full.
On March 31, 1995, Teekay acquired 100% of the outstanding stock of Teekay
Shipping Limited ("TSL"), an affiliated company, for cash consideration of $1.27
million representing the net book value of TSL at March 31, 1995. The impact of
this transaction on the financial position and results of operations of Teekay
is not considered significant. The assets and liabilities of TSL have been
combined with those of Teekay effective March 31, 1995. Teekay's results of
operations include those of TSL subsequent to that date.
60
<PAGE> 65
DESCRIPTION OF THE NOTES
The Notes will be issued under an Indenture, to be dated as of ,
1996 (the "Indenture"), among Teekay, the Guarantors and United States Trust
Company of New York, as Trustee (the "Trustee"). The following summaries of
certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions of certain terms therein.
The definitions of certain of the capitalized terms used in this "Description of
the Notes" section are summarized below under "--Certain Definitions." Wherever
particular provisions or defined terms of the Indenture not otherwise defined
herein are referred to, such provisions or defined terms are incorporated herein
by reference. Unless otherwise indicated, all references under this caption to
sections, "sec." or articles are references to the Indenture, a copy of which
will be filed with the Commission as an exhibit to the Registration Statement of
which this Prospectus is a part.
GENERAL
The Notes will represent general secured obligations of Teekay, will be
limited to $225 million in aggregate principal amount and will mature on
, 2008.
Payment of the principal of, premium, if any, and interest on the Notes
will be irrevocably and unconditionally guaranteed on a senior secured basis by
each of the Guarantors. See "The Subsidiary Guarantees." The Notes will bear
interest at the rate per annum shown on the front cover of this Prospectus from
, 1996 or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semi-annually on
and of each year, commencing
, 1996 to the Person in whose name the Note (or any predecessor
Note) is registered at the close of business on the preceding
or , as the case may be. Interest on the
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
(Sections 2.01, 2.07 and 2.11)
Initial settlement of the Notes will be made in immediately available
funds. The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. (Section 2.02)
Principal of, premium, if any, and interest on the Notes will be payable, and,
except as described below, the Notes are transferable, at the office or agency
of Teekay in The City of New York maintained for such purpose (which initially
shall be the corporate trust office of the Trustee, at 114 West 47th Street, New
York, New York 10036-1552); provided that, at the option of Teekay, payment of
interest may be made by check mailed to the address of the person entitled
thereto as such address appears in the Security Register. (Sections 2.03, 2.04
and 2.05) No service charge will be made for any registration of transfer or
exchange of Notes, except in certain circumstances to cover any transfer tax or
other similar governmental charge that may be payable in connection therewith.
(Section 2.06)
BOOK ENTRY SYSTEM
Notes may be held (1) in definitive certificated form registered in the
name of the Holder or (2) through the facilities of the Depository Trust Company
(the "Depository"). Notes held through the Depository will be issued as fully
registered securities registered in the name of Cede & Co. (the Depository's
partnership nominee). One fully registered Global Note (the "Global Note") will
be issued for such Notes, in the aggregate principal amount of such issue, and
will be deposited with the Depository. If, however, the aggregate principal
amount of the issue exceeds $200 million, one Global Note will be issued with
respect to each $200 million of principal amount and an additional Global Note
will be issued with respect to any principal amount of such issue in excess
thereof.
The Depository is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the U.S.
Securities Exchange Act of 1934, as amended. The Depository holds securities
that its participants
61
<PAGE> 66
("Participants") deposit with the Depository. The Depository also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants ("Direct Participants")
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depository is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depository's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either directly
or indirectly ("Indirect Participant"). The rules applicable to the Depository
and its Participant are on file with the Securities and Exchange Commission.
Purchases of Notes held through the Depository's system must be made by or
through Direct Participants, which will receive a credit for such Notes on the
Depository's records. The ownership interest of each actual purchaser of each
Note represented by a Global Note ("Beneficial Owner") is, in turn, to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depository of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests in a Global Note
representing Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners.
To facilitate subsequent transfers, all Global Notes representing Notes
which are deposited with the Depository are registered in the name of the
Depository's nominee, Cede & Co. The deposit of Global Notes with the Depository
and their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depository has no knowledge of the actual Beneficial Owners of
the Global Notes representing the Notes; the Depository's records reflect only
the identity of the Direct Participants to whose accounts such Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depository to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, the Depository's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be redeemed.
Neither the Depository nor Cede & Co. will consent or vote with respect to
the Global Notes representing the book-entry Notes. Under its usual procedures,
the Depository mails an omnibus proxy (an "Omnibus Proxy") to the issuer of the
applicable securities as soon as possible after the applicable record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Notes are credited on the applicable record
date (identified in a listing attached to the Omnibus Proxy).
Payment of principal, premium, if any, and interest on the Global Notes
representing the Notes will be made to the Depository. The Depository's practice
is to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depository's records
unless the Depository has reason to believe that it will not receive payment on
such date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street name",
and will be the responsibility of such Participant and not of the Depository,
the Trustee or Teekay, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal, premium, if any, and
interest to the Depository is the responsibility of Teekay or the Trustee;
disbursement of such payments to Direct Participants shall be the responsibility
of the Depository, and
62
<PAGE> 67
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants. Neither Teekay nor the
Trustee will have any responsibility or liability for the disbursements of
payments in respect of ownership interests in the Notes by the Depository or the
Direct or Indirect Participants or for maintaining or reviewing any records of
the Depository or the Direct or Indirect Participants relating to ownership
interests in the Notes or the disbursement of payments in respect thereof.
The Depository may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable notice to
Teekay or the Trustee. Under such circumstances, and in the event that a
successor securities depository is not obtained, Notes in definitive form are
required to be printed and delivered.
Teekay may decide to discontinue use of the system of book-entry transfers
through the Depository (or a successor securities depository). In that event,
Notes in definitive form will be printed and delivered to replace any Global
Notes.
The information concerning the Depository has been furnished by the
Depository, but is subject to any changes to the arrangements between Teekay and
the Depository and any changes to such procedures that may be instituted
unilaterally by the Depository.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal of, premium, if any, and interest on
the Notes will be made in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
will trade in the Depository's Same-Day Funds Settlement System, and secondary
market trading activity in the Notes will, therefore, be required by the
Depository to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
FALL-AWAY EVENT
In the event that (i) the Notes achieve Investment Grade Status on a pro
forma basis after giving effect to the release of the Collateral, (ii) no Event
of Default shall have occurred and be continuing and (iii) on a pro forma basis,
after giving effect to the release of the Collateral, the aggregate amount of
all Indebtedness of Teekay that is secured by a Lien plus all Indebtedness of
Restricted Subsidiaries is not greater than 15% of the Company's Consolidated
Tangible Assets (the occurrence of the events described in the foregoing clauses
(i), (ii) and (iii) being collectively referred to as the "Fall-away Event"),
upon the request of Teekay and the Guarantors and subject to the delivery of
appropriate documentation to the Trustee, the Subsidiary Guarantees will be
terminated, the Collateral securing the Obligations of Teekay and the Guarantors
under the Indenture and the Security Documents will be released and certain
covenants under the Indenture will no longer be applicable to Teekay and the
Restricted Subsidiaries. See "--Certain Restrictive Covenants." In addition,
Teekay's mandatory redemption obligations upon a loss or sale of a Mortgaged
Vessel shall no longer be applicable. As a result of such modifications, upon
the occurrence of the Fall-away Event the Notes will become general senior
unsecured obligations of Teekay and will be entitled to a substantially reduced
level of covenant protection. See "--Covenants After Fall-away Event." (Section
5.01)
RANKING
The Indebtedness evidenced by the Notes will rank pari passu in right of
payment with all other existing and future senior indebtedness of Teekay. The
Indenture virtually prohibits the Guarantors from incurring additional
indebtedness for money borrowed. However, the Indenture permits Teekay and its
subsidiaries that are not Guarantors to incur substantial indebtedness and to
secure such indebtedness
63
<PAGE> 68
with mortgages on their assets. Certain additional indebtedness, including
indebtedness incurred upon the satisfaction of certain financial tests, may be
incurred by Teekay. As of September 30, 1995 and after giving effect to the
consummation of the Offering, the Guarantors have virtually no other
indebtedness, the other subsidiaries of Teekay have outstanding approximately
$535.6 million of indebtedness all of which is secured by mortgages on other
vessels and guaranteed by Teekay, and Teekay has no other outstanding
indebtedness except for approximately $17.8 million of other guarantees issued
by Teekay for the benefit of VCSC.
With respect to each Guarantor, claims of Holders of the Notes will rank
pari passu with claims of the creditors of such Guarantor, but will rank ahead
of such claims to the extent of the value, priority and validity of such
Guarantor's Mortgage of its respective Mortgaged Vessel. Although the Holders of
the Notes should be entitled to payment of their indebtedness out of the
proceeds of their collateral prior to the holders of any general unsecured
obligations of the Guarantors or Teekay, in the event that the assets and cash
flow of the Guarantors are insufficient to meet the obligations under the Notes,
creditors' claims against Teekay will be effectively against the shares of stock
of subsidiaries other than the Guarantors and any other assets owned by Teekay
and not direct claims against the assets of such subsidiaries. Therefore, such
claims would have value only to the extent that the shares of stock of such
subsidiaries have value after the payment of the claims of the creditors of such
subsidiaries or that Teekay has other assets.
Certain of the financing arrangements between subsidiaries of Teekay that
are not Guarantors and their respective lenders contain restrictions on
dividends by and distributions from such subsidiaries to Teekay as well as
prohibitions on other financial dealings between Teekay and such subsidiaries.
However, Palm is not restricted in such fashion and any amounts that Palm
receives as charter payments for the chartering of the Company's Vessels that
are in excess of the amount that Palm is obligated to pay to the Company's
vessel-owning subsidiaries under their respective Palm Charters would be
available to Teekay as a dividend, distribution or advance from Palm.
Upon the occurrence of the Fall-away Event, at the request of Teekay and
the Guarantors and subject to delivery of appropriate documentation to the
Trustee, the Subsidiary Guarantees will be terminated, certain covenants
described above, together with certain other covenants under the Indenture, will
no longer be applicable to Teekay and the Guarantors and the Collateral securing
the Obligations of Teekay and the Guarantors under the Indenture and the
Security Documents will be released, whereupon the Notes will become general
senior unsecured obligations of Teekay. See "--Fall-away Event," "--Certain
Restrictive Covenants" and "--Covenants After Fall-away Event."
GUARANTEES
Teekay's obligations for payment of the principal of, and premium, if any,
and interest on the Notes, the Guarantors' obligations for payment of all sums
of money payable under the Security Documents and performance of all other
provisions contained in the Indenture and the Security Documents (collectively,
the "Obligations") will be irrevocably and unconditionally guaranteed on a
senior secured basis by each of the Guarantors in the Subsidiary Guarantees. See
"The Subsidiary Guarantees."
Upon the occurrence of the Fall-away Event, the Subsidiary Guarantees will
be terminated. See "--Fall-away Event," "--Certain Restrictive Covenants" and
"--Covenants After Fall-away Event."
SECURITY
Teekay will pledge in favor of the Trustee all of the issued and
outstanding capital stock of each Guarantor and its interest in the Investment
Account to secure the Obligations.
Each Guarantor will pledge and assign certain of its assets to the Trustee
to secure, among other things, the Notes, its Subsidiary Guarantee of the Notes
and the other Obligations. The assets to be so pledged and assigned by each
Guarantor shall include all of its right, title and interest in and to (i) its
Mortgaged Vessel, pursuant to a Mortgage issued by such Guarantor in favor of
the Trustee, which
64
<PAGE> 69
Mortgage contains covenants pursuant to which such Guarantor, among other
things, will be prohibited from selling, mortgaging or transferring any of its
interest in such vessel (other than as permitted under the Indenture); (ii) the
Charter with Palm relating to its Mortgaged Vessel, including the right to
receive all monies due and to become due under such Charter or in respect of
such Mortgaged Vessel and all claims for damages arising under such Charter or
relating to such Mortgaged Vessel; (iii) the freights and hires relating to its
Mortgaged Vessel; and (iv) all of its policies and contracts of insurance taken
out from time to time in respect of its Mortgaged Vessel. See "The Mortgaged
Vessels."
In addition, each Guarantor will grant the Trustee a security interest in
an account into which charter hire under the Palm Charters are required to be
paid following the occurrence of an Event of Default (a "Cash Collateral
Account"). See "The Mortgaged Vessels."
Upon performance and payment in full of all the Obligations, all such
pledges and assignments in favor of the Trustee shall terminate.
Upon the occurrence of the Fall-away Event, all of the Collateral securing
the obligations of Teekay and the Guarantors under the Indenture and the
Security Documents will be released. See "--Fall-away Event," "--Certain
Restrictive Covenants" and "--Covenants After Fall-away Event."
REDEMPTIONS
SINKING FUND
The Indenture will provide for the redemption on in each year,
commencing in the year 2004, of $45 million principal amount of Notes, subject
to adjustment as provided below, at a redemption price equal to 100% of their
principal amount, plus accrued interest to the redemption date. (Section 3.01)
Upon a redemption of Notes in connection with a reduction in the number of
Mortgaged Vessels securing the Notes, whether as a result of the sale of a
Mortgaged Vessel, or an Event of Loss with respect to a Mortgaged Vessel, each
sinking fund payment payable after the occurrence of such event will be
proportionately reduced (the amount of such reduction being equal to the product
of the sinking fund payment otherwise due multiplied by the Vessel Percentage of
the Mortgaged Vessel so released). Teekay may, at its option, receive a credit
against sinking fund obligations equal to the aggregate principal amount of
Notes acquired by Teekay and surrendered to the Trustee for cancellation.
(Section 3.02)
MANDATORY REDEMPTION UPON LOSS OF A MORTGAGED VESSEL
If an Event of Loss occurs at any time with respect to a Mortgaged Vessel
(the Mortgaged Vessel suffering such Event of Loss being the "Lost Mortgaged
Vessel"), Teekay shall deposit funds in an amount equal to the Vessel Percentage
applicable to the Lost Mortgaged Vessel multiplied by the principal amount of
Notes outstanding on the date (the "Loss Date") such Event of Loss was deemed to
have occurred ("the Loss Redemption Amount") (or, if an Event of Default shall
have occurred and be continuing at the time of receipt of such Event of Loss
Proceeds, such funds shall be in an amount equal to the greater of (x) the Loss
Redemption Amount and (y) the Event of Loss Proceeds) with the Trustee upon the
earlier to occur of (A) the receipt of Event of Loss Proceeds with respect to
such Event of Loss and (B) 90 days after the Loss Date, to be held in the
Investment Account until applied in accordance with subsections (a) or (b)
below, and:
(a) (i) redeem Notes, in whole or in part, at a redemption price equal
to 100% of their principal amount, plus accrued interest to the Redemption
Date, in an aggregate principal amount equal to the Loss Redemption Amount
and (ii) treat the amount equal to the excess of the Net Event of Loss
Proceeds from such Event of Loss over the Loss Redemption Amount, if any,
as Loss Excess Proceeds; or
(b) if no Event of Default shall have occurred and be continuing (i)
notify the Trustee within 30 days of the Loss Date of its intention to
substitute a Qualified Substitute Vessel for the Lost Mortgaged Vessel,
(ii) substitute a Qualified Substitute Vessel for the Lost Mortgaged Vessel
within
65
<PAGE> 70
180 days of the Loss Date and (iii) within 12 months after the Vessel
Tender Date (A)(1) apply an amount equal to the Net Event of Loss Proceeds
from such Event of Loss to repay unsubordinated Indebtedness of Teekay or a
Guarantor or Indebtedness of any Restricted Subsidiary or (2) invest the
amount not so applied pursuant to clause (1) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in, generally, property or assets which will be used in a
business similar to the business of Teekay and its Restricted Subsidiaries,
or allocate such amount to working capital for general corporate purposes
and (B) treat any remaining Net Event of Loss Proceeds, to the extent not
applied pursuant to clause (A), as Loss Excess Proceeds. (Section 3.03)
The requirement for mandatory redemption upon an Event of Loss will not
apply after the occurrence of the Fall-away Event. See "--Fall-away Event,"
"--Certain Restrictive Covenants" and "--Covenants After Fall-away Event."
MANDATORY REDEMPTION UPON SALE OF A MORTGAGED VESSEL
If a Mortgaged Vessel or the Capital Stock of a Guarantor is sold in
accordance with the terms of the Indenture (the Mortgaged Vessel so sold or
owned by the Guarantor whose Capital Stock is so sold being the "Sold Mortgaged
Vessel"), Teekay shall deposit funds in an amount (the "Sale Redemption Amount")
equal to the Vessel Percentage applicable to the Sold Mortgaged Vessel
multiplied by the principal amount of Notes outstanding on the date of such sale
(the "Sale Date") with the Trustee upon the earlier to occur of (A) the receipt
of Net Cash Proceeds with respect to such sale and (B) 30 days after the Sale
Date, to be held in the Investment Account until applied in accordance with
subsections (a) or (b) below, and:
(a) (i) redeem Notes, in whole or in part, in an aggregate principal
amount equal to the Sale Redemption Amount, at a Redemption Price equal to
the greater of (A) 100% of the principal amount of such Notes and (B) the
sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus 50 basis points, in each case plus accrued interest on
the Notes to the date of redemption; and (ii) treat the amount equal to the
excess of the Net Cash Proceeds from such sale over the aggregate principal
amount of the Notes redeemed pursuant to clause (i) above, if any, as Sale
Excess Proceeds; or
(b) (i) notify the Trustee within 30 days of the Sale Date of its
intention to substitute a Qualified Substitute Vessel for the Sold
Mortgaged Vessel, (ii) substitute a Qualified Substitute Vessel for the
Sold Mortgaged Vessel within 180 days of the Sale Date and (iii) within 12
months after the Vessel Tender Date, (A)(1) apply an amount equal to the
Net Cash Proceeds from such sale to repay unsubordinated Indebtedness of
Teekay or a Guarantor or Indebtedness of any Restricted Subsidiary or (2)
invest the amount not so applied pursuant to clause (1) (or enter into a
definite agreement committing to so invest within 12 months after the date
of such agreement), in, generally, property or assets which will be used in
a business similar to the business of Teekay and its Restricted
Subsidiaries, or allocate such amount to working capital for general
corporate purposes and (B) treat any remaining Net Cash Proceeds, to the
extent not applied pursuant to clause (A), as Sale Excess Proceeds. Teekay
shall not be permitted to substitute a Qualified Substitute Vessel for the
Sold Mortgaged Vessel, and shall be obligated to redeem Notes as set forth
in subparagraph (a) above, if (A) an Event of Default shall have occurred
and be continuing, (B) Teekay does not deposit the Sale Redemption Amount
with the Trustee as required above, (C) the Appraised Value of the
Qualified Substitute Vessel at the Vessel Tender Date is less than the
product of the Vessel Percentage applicable to the Sold Mortgaged Vessel
multiplied by the principal amount of the Notes outstanding at the Vessel
Tender Date or (D) other requirements for the tender of the Qualified
Substitute Vessel to the Trust Estate are not satisfied for any reason.
(Section 3.04)
For purposes of subsection (a) above, the following definitions shall
apply:
66
<PAGE> 71
"Treasury Rate" is defined to mean, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" is defined to mean the United States Treasury
security elected by an Independent Investment Banker as having a maturity
comparable to the weighted average maturity of the remaining term of the Notes
outstanding that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to such weighted average maturity of such
Notes. "Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" is defined to mean, with respect to any
redemption date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
on the third business day preceding such redemption date, as set forth in the
daily statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m., Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Treasury Reference Dealer at 5:00 p.m. (New York City time) on the third
business day preceding such redemption date.
"Reference Treasury Dealer" is defined to mean each of Goldman, Sachs &
Co., Morgan Stanley & Co. Incorporated and Smith Barney Inc. and their
respective successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New York City (a
"Primary Treasury Dealer"), Teekay shall substitute therefor another Primary
Treasury Dealer.
The requirement for mandatory redemption upon sale of a Mortgaged Vessel
will not apply after the occurrence of the Fall-away Event. See "-- Fall-away
Event," "-- Certain Restrictive Covenants" and "-- Covenants After Fall-away
Event."
SELECTION OF NOTES TO BE REDEEMED
In the case of any partial redemption pursuant to the provisions referred
to under this caption "--Redemption", selection of the Notes for redemption will
be made on a pro rata basis among all the Holders; provided that no Note of
$1,000 in original principal amount or less shall be redeemed in part. If any
Note is to be redeemed in part only, the notice of redemption relating to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Note.
(Sections 3.05, 3.06, 3.10) Unless the Company defaults in payment of the
redemption price, on and after the redemption date interest will cease to accrue
on the Notes or portions thereof called for redemption. (Section 3.09)
CERTAIN RESTRICTIVE COVENANTS
The Indenture will provide that all of the following restrictive covenants
will be applicable to the Company unless and until the Fall-away Event occurs.
In such event, the Company will be released from its obligations to comply with
certain of the restrictive covenants described below as well as certain other
obligations. The covenants that will be released upon the Fall-away Event are
"--Limitation of Indebtedness," "--Limitation on Restricted Payments,"
"--Limitation on Dividend and Other Restrictions Affecting Restricted
Subsidiaries," "--Limitation on the Issuance of Capital Stock of
67
<PAGE> 72
Restricted Subsidiaries," "--Limitation on Transactions with Shareholders and
Affiliates," "--Limitation of Liens," "--Limitation on Asset Sales," the second
paragraph under "--Excess Proceeds Offer," "--Maintenance of Properties,"
subsection (a) of "--Insurance," "--Performance of Agreements," "--Modification
of Material Contracts," "--Management of Mortgaged Vessels, "--Change of Flag,"
"--Release of Mortgaged Vessels," "--Tender of a Qualified Substitute Vessel"
and clauses (4) and (5) under the "Consolidation, Merger and Sale of Assets"
covenant. (Section 5.01)
Upon the release of the covenants listed above after the occurrence of the
Fall-away Event, certain other less restrictive covenants under the Indenture
will become applicable to Teekay and the Restricted Subsidiaries. See
"--Covenants After Fall-away Event."
LIMITATION ON INDEBTEDNESS
Under the terms of the Indenture, Teekay will not, and will not permit any
Restricted Subsidiary to, Incur any Indebtedness (other than the Notes and
Indebtedness existing (or for which a written commitment has been made on or
prior to the Closing Date) on the Closing Date); provided that Teekay or any
Restricted Subsidiary (other than a Guarantor and Palm) may Incur Indebtedness
if, after giving effect to the Incurrence of such Indebtedness and the receipt
and application of the proceeds therefrom, the Interest Coverage Ratio of Teekay
would be greater than 2:1.
Notwithstanding the foregoing, under the Indenture (except as expressly
provided otherwise below), Teekay or any Restricted Subsidiary (other than a
Guarantor or Palm, except as provided in clause (vii) below) also may Incur
certain types of Indebtedness, including, in general, the following: (i)
Indebtedness in an aggregate principal amount such that the aggregate principal
amount of the Indebtedness of Teekay and its Restricted Subsidiaries outstanding
immediately after such Incurrence does not exceed the aggregate principal amount
of Indebtedness existing (or for which a written commitment has been made on or
prior to the Closing Date) on the Closing Date, after giving effect to the Note
Offering and the application of proceeds therefrom, plus $50 million; (ii)
Indebtedness of Teekay to any of its Wholly Owned Restricted Subsidiaries, or of
a Restricted Subsidiary to Teekay or to any other Wholly Owned Restricted
Subsidiary; (iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, certain outstanding Indebtedness of
Teekay or any of its Restricted Subsidiaries, subject to certain conditions,
including that such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness so exchanged, refinanced or refunded and the Average Life of such
new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness so exchanged, refinanced or refunded; (iv) Indebtedness (A) in
respect of performance, surety or appeal bonds provided in the ordinary course
of business, (B) under certain Currency Agreements and Interest Rate Agreements,
and (C) arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of Teekay or any of
its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of Teekay or any of its Restricted Subsidiaries and not exceeding the gross
proceeds therefrom, other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted Subsidiary
of Teekay or any of its Restricted Subsidiaries for the purpose of financing
such acquisition; (v) Indebtedness under Guarantees in respect of obligations of
Unrestricted Subsidiaries in an aggregate amount not to exceed $5 million at any
one time outstanding; (vi) Acquired Indebtedness; provided that, after giving
effect to the Incurrence thereof, Teekay could Incur at least $1.00 of
Indebtedness under the first paragraph of this covenant; and (vii) Indebtedness
of Palm (A) Incurred in the ordinary course of business in connection with the
operation of any Vessel in an aggregate principal amount not to exceed $25
million outstanding at any one time or (B) to Teekay resulting from advances to
Palm by Teekay. The covenant defines certain terms relating to how certain
amounts of Indebtedness are calculated for purposes of this covenant.
Teekay may not Incur any Indebtedness that is expressly subordinated to any
other Indebtedness of Teekay unless such Indebtedness, by its terms or the terms
of any agreement or instrument pursuant to
68
<PAGE> 73
which such Indebtedness is issued or remains outstanding, is also expressly made
subordinate to the Notes at least to the extent that it is subordinated to such
other Indebtedness.
No Guarantor may Incur any Indebtedness other than pursuant to its Security
Documents. (Section 4.03)
LIMITATION ON RESTRICTED PAYMENTS
Under the terms of the Indenture, Teekay will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on its Capital Stock (other than dividends or
distributions payable solely in shares of its or such Restricted Subsidiary's
Capital Stock (other than Redeemable Stock or Capital Stock of a Guarantor or
Palm) of the same class held by such holders or in options, warrants or other
rights to acquire such shares of Capital Stock) held by Persons other than
Teekay or any of its Wholly Owned Restricted Subsidiaries, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of
Teekay or any of its Subsidiaries held by Persons other than Teekay or any of
its Wholly Owned Restricted Subsidiaries, (iii) make any voluntary or optional
principal payment, or voluntary or optional redemption, repurchase, defeasance,
or other voluntary acquisition or retirement for value, of Indebtedness of
Teekay that is subordinated in right of payment to the Notes, or (iv) make any
Investment in any Affiliate of Teekay (other than a Restricted Subsidiary) or
any Unrestricted Subsidiary (such payments or any other actions described in
clauses (i) through (iv) being collectively "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted Payment: (A) a
Default or Event of Default shall have occurred and be continuing or (B) the
aggregate amount expended for all Restricted Payments after the date of the
Indenture shall exceed the sum of (1) 50% of the aggregate amount of the
Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is
a loss, minus 100% of such amount) of Teekay accrued on a cumulative basis
during the period beginning on the first day of the month immediately following
the Closing Date and ending on the last day of the last fiscal quarter preceding
the Transaction Date plus (2) the aggregate net proceeds received by Teekay
(including the amount of any dividends reinvested in the capital stock of
Teekay) from the issuance and sale permitted by the Indenture of the Capital
Stock of Teekay (other than Redeemable Stock) to a Person who is not a
Restricted Subsidiary or an Unrestricted Subsidiary of Teekay, plus (3) an
amount equal to the net reduction in Investments in Unrestricted Subsidiaries
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to Teekay or any
Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by Teekay or
any Restricted Subsidiary in such Unrestricted Subsidiary plus (4) $50 million.
In general, the foregoing paragraph shall not take into account, and shall
not be violated by reason of: (i) the payment of any dividend within 60 days
after the date of declaration thereof if, at said date of declaration, such
payment would comply with the foregoing paragraph; (ii) the redemption,
repurchase, defeasance or other acquisition or retirement for value (other than
by a Guarantor) of Indebtedness of Teekay that is subordinated in right of
payment to the Notes, with the proceeds of, or in exchange for, Indebtedness
Incurred under clause (iii) of the second paragraph of "--Certain Restrictive
Covenants--Limitation on Indebtedness"; (iii) the repurchase, redemption or
other acquisition by Teekay of Capital Stock of Teekay in exchange for, or out
of the proceeds of a substantially concurrent offering of, shares of Capital
Stock (other than Redeemable Stock) of Teekay; (iv) the acquisition by Teekay of
Indebtedness of Teekay that is subordinated in right of payment to the Notes in
exchange for, or out of the proceeds of, a substantially concurrent offering of,
shares of Capital Stock of Teekay (other than Redeemable Stock); (vi) payments
or distributions pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the applicable provisions of the
Indenture; or (vii) certain purchases, redemptions, acquisitions, cancellations
or other retirements for a nominal value per right of any rights granted
pursuant to any shareholders' rights plan (i.e., a "poison pill"); provided
that, in the case of foregoing clauses (i) and (ii), no Default or Event of
Default shall have
69
<PAGE> 74
occurred and be continuing or occur as a consequence of the actions or payments
set forth therein. (Section 4.04)
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES
Under the terms of the Indenture, Teekay will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by Teekay or any other Restricted Subsidiary, (ii)
pay any Indebtedness owed to Teekay or any other Restricted Subsidiary, (iii)
make loans or advances to Teekay or any other Restricted Subsidiary or (iv)
transfer any of its property or assets to Teekay or any other Restricted
Subsidiary.
In general, the foregoing provision shall not restrict or prohibit any
encumbrances or restrictions: (i) existing pursuant to: (A) the Indenture, the
Notes, the Security Documents or any agreements in effect on the Closing Date or
in any Indebtedness containing any such encumbrance or restriction that is
permitted pursuant to clause (iv) below or, subject to certain conditions, in
any such extensions, refinancings, renewals or replacements of the foregoing or
(B) any agreement which imposes such encumbrances or restrictions on Persons
other than a Guarantor, Palm or any Subsidiary of a Guarantor or Palm; (ii)
existing under certain other agreements providing for the Incurrence of
Indebtedness of any Restricted Subsidiary (other than a Guarantor or Palm) that
is permitted to be Incurred under "--Certain Restrictive Covenants--Limitation
on Indebtedness"; (iii) existing under and by reason of applicable law; (iv)
existing with respect to any Person or the property or assets of such Person
(other than a Guarantor or Palm) acquired by Teekay or any Restricted Subsidiary
and existing at the time of such acquisition, which encumbrances or restrictions
are not applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired; (v) in
the case of clause (iv) of the first paragraph of this covenant, certain
encumbrances and restrictions that arise in the ordinary course of business; or
(vi) with respect to a Restricted Subsidiary (other than a Guarantor or Palm)
imposed pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or all, or
substantially all, of the property and assets of, such Restricted Subsidiary.
Nothing contained in this covenant shall prevent Teekay or any Restricted
Subsidiary from (1) entering into any agreement permitting the incurrence of
Liens otherwise permitted by "--Certain Restrictive Covenants--Limitation on
Liens", (2) restricting the sale or other disposition of property or assets of
Teekay or any of its Restricted Subsidiaries that secure Indebtedness (other
than the Notes and the Subsidiary Guarantees) of Teekay or any of its Restricted
Subsidiaries or (3) amending, modifying or supplementing any charter or similar
arrangement between Palm and a vessel-owning Subsidiary of Teekay(other than the
Palm Charters) solely (A) to lower the rates paid by Palm to such vessel-owning
Subsidiary under such charter or similar arrangement or (B) to increase the
rates paid by Palm to such vessel-owning Subsidiary under such charter or
similar arrangement to the extent required to service (x) Indebtedness for money
borrowed, Incurred in good faith (as determined by the Board of Directors) and
not with the purpose of evading the requirements of this covenant, in connection
with the financing or the refinancing of Indebtedness of such Subsidiary and (y)
expenses incurred by such Subsidiary in the ordinary course of business.
(Section 4.05)
LIMITATION ON THE ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
Under the terms of the Indenture, Teekay will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, issue or sell any shares of
the Capital Stock of a Restricted Subsidiary except (i) to Teekay or, except
shares of Capital Stock of a Guarantor or Palm, to another Wholly Owned
Restricted Subsidiary, (ii) other than with respect to shares of Capital Stock
of a Guarantor or Palm, to management employees of Teekay or a Restricted
Subsidiary pursuant to the exercise of stock options or stock appreciation
rights, (iii) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary for
purposes of the Indenture or (iv) other
70
<PAGE> 75
than with respect to shares of Capital Stock of a Guarantor or Palm, to Persons
who are entering into joint ventures or other similar business relationships
with Teekay or any Subsidiary other than a Guarantor or Palm, provided that
transactions pursuant to this clause (iv) are approved in the manner set forth
in clause (i) of the second paragraph under "--Certain Restrictive
Covenants--Limitation on Transactions with Shareholders and Affiliates."
(Section 4.06)
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
Under the terms of the Indenture, Teekay will not, and will not permit any
Restricted Subsidiary of Teekay to, directly or indirectly, enter into, renew or
extend any transaction or series of related transactions with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of Teekay
or with any Affiliate of Teekay, except upon fair and reasonable terms no less
favorable to Teekay or such Restricted Subsidiary than could be obtained in a
comparable arm's-length transaction with a Person that is not such a holder or
Affiliate.
In general, the foregoing limitation does not limit, and shall not apply to
(i) transactions or series of related transactions (A) approved by a majority of
the disinterested members of the Board of Directors as fair to Teekay or such
Restricted Subsidiary or (B) for which Teekay delivers to the Trustee a written
opinion of a nationally recognized United States investment banking firm stating
that the transaction is fair to Teekay or such Restricted Subsidiary from a
financial point of view; (ii) any transaction or series of related transactions
among Teekay and any Wholly Owned Restricted Subsidiaries (other than a
Guarantor or Palm) or among Wholly Owned Restricted Subsidiaries (other than a
Guarantor or Palm); (iii) the payment of reasonable and customary regular fees
to directors of Teekay or any Restricted Subsidiary who are not employees of
Teekay or any Restricted Subsidiary; or (iv) any Restricted Payments not
prohibited by "--Certain Restrictive Covenants--Limitation on Restricted
Payments." Notwithstanding the foregoing, any transaction or series of related
transactions that are permitted by clause (iii) or (iv) of this paragraph, the
aggregate amount of which exceeds $5 million in value, must be approved or
determined to be fair in the manner set forth in clause (i) of this paragraph.
Nothing contained in this covenant shall prevent Teekay or any Restricted
Subsidiary from amending, modifying or supplementing any charter or similar
arrangement between Palm and a vessel-owning Subsidiary of Teekay (other than
the Palm Charters) solely (A) to lower the rates paid by Palm to such
vessel-owning Subsidiary under such charter or similar arrangement or (B) to
increase the rates paid by Palm to such vessel-owning Subsidiary under such
charter or similar arrangement to the extent required to service (x)
Indebtedness for money borrowed, Incurred in good faith (as determined by the
Board of Directors) and not with the purpose of evading the requirements of this
covenant, in connection with the financing or refinancing of Indebtedness of
such Subsidiary and (y) expenses incurred by such Subsidiary in the ordinary
course of business. (Section 4.07)
LIMITATION ON LIENS
Under the terms of the Indenture, Teekay will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on
any of its assets or properties without making effective provision for all of
the Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or prior to) the obligation or liability secured by
such Lien for so long as such Lien affects such assets or properties.
In general, under the terms of the Indenture, the foregoing limitation does
not apply to (i) Liens securing obligations under the Indenture, the Notes and
the Security Documents; (ii) other Liens existing or securing Indebtedness
existing (or for which a written commitment has been made on or prior to the
Closing Date) on the Closing Date; (iii) Liens granted after the Closing Date in
favor of the Holders; (iv) Liens on assets or properties or Capital Stock of
Teekay or a Restricted Subsidiary (other than a Guarantor and Palm) securing
Indebtedness permitted to be Incurred pursuant to "--Certain Restrictive
Covenants--Limitation on Indebtedness;" (v) Liens with respect to Acquired
Indebtedness, provided that such Liens do not extend to or cover any assets or
properties of Teekay or any Subsidiary of Teekay
71
<PAGE> 76
other than the assets or properties acquired; (vi) Liens with respect to the
assets of a Restricted Subsidiary (other than a Guarantor and Palm) granted by
such Restricted Subsidiary to Teekay to secure Indebtedness owing to Teekay by
such Restricted Subsidiary; (vii) certain Liens securing permitted Indebtedness
which is Incurred to refinance secured Indebtedness; (viii) Liens on any
accounts receivable accrued in the ordinary course of business; and (ix)
Permitted Liens.
Notwithstanding the foregoing, (a) Teekay will not, and will not permit a
Guarantor or Palm to, create, incur, assume or suffer to exist any Lien upon
Capital Stock pledged pursuant to the Pledge Agreements and (b) no Guarantor
will, and Teekay will not permit a Guarantor or Palm to, create, incur, assume
or suffer to exist any Lien upon any of its assets or properties, except for
Liens securing obligations under the Indenture, the Notes and the Security
Documents and Permitted Liens. (Section 4.08)
LIMITATION ON ASSET SALES
Under the terms of the Indenture, neither Teekay nor any Guarantor may
sell, assign, convey, transfer or otherwise dispose of a Mortgaged Vessel or any
other portion of the Trust Estate (other than an Incidental Asset), provided
that a Guarantor may sell a Mortgaged Vessel (together with the applicable
charters, freights and hires and other related agreements) or Teekay may sell
all of the Capital Stock of a Guarantor (any such asset proposed to be sold is
referred to herein as a "Mortgaged Vessel Asset") if such sale of a Mortgaged
Vessel Asset shall be made in compliance with each of the following conditions:
(i) no Event of Default shall have occurred and be continuing;
(ii) the sale shall be effected in a commercially reasonable manner;
(iii) the entire consideration for such sale shall be cash and the Net
Cash Proceeds of such sale shall be not less than the Appraised Value of
such Mortgaged Vessel Asset as of the date of such sale;
(iv) the sale shall be to a Person who is not an Affiliate of Teekay,
and the Board of Directors of Teekay shall have determined that the sale
was effected in a commercially reasonable fashion, which determination
shall be evidenced by a board resolution;
(v) funds in an amount equal to the Sale Redemption Amount shall be
paid in full directly to the Trustee to be held in the Investment Account
and shall be received by the Trustee free of any Lien (other than the Lien
of the Indenture); and
(vi) Teekay shall have complied with the other provisions of the
Indenture applicable to such sale.
Teekay must apply the proceeds from such sale as described above under
"--Redemptions--Mandatory Redemption upon Sale of a Mortgaged Vessel."
Teekay shall not, and shall not permit any of its Restricted Subsidiaries
to, engage in any Asset Sales (other than Asset Sales permitted by the first
paragraph of this covenant) unless (x) (A) such Asset Sale is by Teekay or by a
Restricted Subsidiary that is not a Guarantor or (B) such Asset Sale is an
Incidental Asset Sale and (y) in the event and to the extent that the Net Cash
Proceeds received by Teekay or any of its Restricted Subsidiaries from one or
more of such Asset Sales occurring on or after the Closing Date in any period of
12 consecutive months exceed $10 million, then Teekay shall or shall cause a
Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds
so received exceed $10 million in any period of 12 consecutive months, in
general, apply an amount equal to such excess Net Cash Proceeds to repay certain
unsubordinated Indebtedness, to invest in the business or as working capital for
general corporate purposes and (ii) treat (no later than the end of such
12-month period referred to in clause (i) above) such excess Net Cash Proceeds
(to the extent not applied pursuant to clause (i) above) as Sale Excess
Proceeds. (Section 4.09)
72
<PAGE> 77
EXCESS PROCEEDS OFFERS
If, as of the first day of any calendar month, the aggregate amount of Sale
Excess Proceeds not theretofore subject to a Sale Excess Proceeds Offer (as
defined below) totals at least $10 million, Teekay must, not later than the
fifteenth Business Day of such month, make an offer (a "Sale Excess Proceeds
Offer") to purchase from the holders on a pro rata basis an aggregate principal
amount of Notes equal to the Sale Excess Proceeds on such date, at a purchase
price at least equal to 101% of their principal amount, plus, in each case,
accrued interest (if any) to the date of purchase (the "Sale Excess Proceeds
Payment").
If, as of the first day of any calendar month, the aggregate amount of Loss
Excess Proceeds not theretofore subject to a Loss Excess Proceeds Offer (as
defined below) totals at least $10 million, Teekay must, not later than the
fifteenth Business Day of such month, make an offer (a "Loss Excess Proceeds
Offer," and together with a Sale Excess Proceeds Offer, an "Excess Proceeds
Offer") to purchase from the holders on a pro rata basis an aggregate principal
amount of Notes equal to the Loss Excess Proceeds on such date, at a purchase
price at least equal to 100% of their principal amount, plus, in each case,
accrued interest (if any) to the date of purchase (the "Loss Excess Proceeds
Payment," and together with a Sale Excess Proceeds Payment, an "Excess Proceeds
Payment").
The Indenture prescribes detailed procedures for making any required Excess
Proceeds Offer. (Section 4.10)
MAINTENANCE OF PROPERTIES
The Indenture will provide that Teekay will (a) at all times and without
cost or expense to the Trustee maintain and preserve, or cause to be maintained
and preserved, the Mortgaged Vessels in accordance with the provisions of the
Mortgages, (b) at all times and without cost or expense to the Trustee cause all
other properties used or useful in the conduct of its business or the business
of any of its Subsidiaries, to be maintained and kept in good condition, repair
and working order and supplied with and (c) cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of Teekay may be necessary. (Section 4.13)
INSURANCE
The Indenture will provide that (a) Teekay and the Guarantors will at all
times maintain all insurance relating to the Mortgaged Vessels in accordance
with the provisions of the Mortgages and (b) each of Teekay and its Restricted
Subsidiaries will at all times keep all of its assets and properties (other than
the Mortgaged Vessels) which are of an insurable nature insured with insurers,
believed by Teekay and each Restricted Subsidiary to be responsible, against
loss or damage to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties. (Section
4.14)
PERFORMANCE OF AGREEMENTS
The Indenture will provide that each of Teekay and the Guarantors will, and
Teekay will cause Palm to, perform in accordance with their terms their
respective obligations under the Palm Charters, the Security Documents, and the
insurance policies assigned to the Trustee from time to time pursuant to the
Assignments of Insurance and any other agreements assigned to the Trustee to
secure obligations under the Indenture, the Notes and the Security Documents.
(Section 4.15)
MODIFICATION OF MATERIAL CONTRACTS
The Indenture will provide that, subject to the exceptions summarized
below, neither Teekay nor any of the Guarantors may amend or otherwise modify,
agree to any variation of, waive any breach of, release any other party from any
obligations under or consent to any act or omission by any other party which
would constitute a breach under the material provisions of any charter, freights
and hires or other
73
<PAGE> 78
agreement assigned as security for the Notes, in each case in a manner adverse
to the Holders unless the Holders of a majority of the aggregate principal
amount of Notes Outstanding consent to such amendment, modification, variation,
waiver, release or consent.
In the Indenture, Teekay and each Guarantor ratifies and confirms the Palm
Charters and agrees that they will not, and Teekay will cause Palm not to,
except as permitted in the Indenture, take or omit to take any action, the
taking or omission of which might result in an impairment of the Palm Charters,
the Indenture or the Security Documents. (Section 4.16)
MANAGEMENT OF MORTGAGED VESSELS
The Indenture will provide that, at all times while any Notes are
outstanding, the Mortgaged Vessels shall be managed and operated by Teekay or an
operator acceptable to the Trustee pursuant to management agreements on fair and
reasonable terms no less favorable to Teekay or the Guarantors than could be
obtained in a comparable arm's-length transaction with a Person that is not an
Affiliate of Teekay or a Guarantor. (Section 4.22)
CHANGE OF FLAG
So long as no Event of Default shall have occurred and be continuing,
Teekay and the Guarantors, at any time and from time to time, may cause one or
more Mortgaged Vessels to be transferred from Liberian flag to Bahamian flag or
from Bahamian flag to Liberian flag upon delivery of appropriate security
agreements and other documentation to the Trustee. After an Event of Default
shall have occurred and be continuing, the Trustee may cause one or more
Mortgaged Vessels to be transferred from Liberian flag to Bahamian flag or from
Bahamian flag to Liberian flag upon the delivery of appropriate documentation to
Teekay. (Section 9.07)
RELEASE OF MORTGAGED VESSELS
In the event that Teekay redeems Notes or acquires and delivers Notes to
the Trustee for cancellation, in each case in an aggregate principal amount not
theretofore applied pursuant to this provision in excess of $10 million, Teekay
may request the Trustee to release a Mortgaged Vessel Asset from the Trust
Estate and from the Liens of the Indenture and the Security Documents; provided
that (i) no Event of Default shall have occurred and be continuing, (ii)
appropriate documentation is delivered to the Trustee, (iii) the Appraised Value
of the Mortgaged Vessel to be released at the time of such release does not
exceed 133% (the reciprocal of the Maximum Loan To Value Ratio) of the aggregate
principal amount of the Notes so redeemed, acquired or retired and (iv) the Loan
to Value Ratio after giving effect to such release shall not exceed the Maximum
Loan To Value Ratio, using the Appraised Value of the remaining Mortgaged
Vessels at the time of, and after giving effect to, such release to calculate
such Loan To Value Ratio. (Section 9.04)
TENDER OF A QUALIFIED SUBSTITUTE VESSEL
On the date on which a Qualified Substitute Vessel is tendered to the Trust
Estate (a "Vessel Tender Date"), Teekay shall deliver to the Trustee, or shall
cause the owner of such vessel, which shall be a Wholly Owned Subsidiary of
Teekay (the "Tendered Vessel Owner"), to deliver to the Trustee, as the case may
be, the documents and certificates required by the Indenture, including, among
other things: (i) a Subsidiary Guarantee substantially in the form required by
the Indenture; and (ii) a Mortgage with respect to such vessel dated the Vessel
Tender Date and substantially in the form required by the Indenture (such
Mortgage having been duly received for recording in the appropriate registry
office). (Section 9.08)
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL TRIGGERING EVENT
The Indenture will provide that upon the occurrence of a Change of Control
Triggering Event, each Holder of Notes will have the right to require Teekay to
repurchase such Holder's Notes, in whole or in
74
<PAGE> 79
part, in integral multiples of $1,000, at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture.
A "Change of Control" also constitutes an event of default under several of the
Company's other debt agreements. There can be no assurance that the Company will
have sufficient funds to pay the purchase price referred to above at the time of
the Change of Control Triggering Event. The existence of a Holder's right to
require Teekay to repurchase Notes upon the occurrence of a Change of Control
Triggering Event may deter a third party from acquiring Teekay in a transaction
which would constitute a Change of Control. (Section 4.23)
CONSOLIDATION, MERGER AND SALE OF ASSETS
Teekay may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge with or into any other Person or
permit any other Person to consolidate with or merge with or into Teekay, or
(ii) directly or indirectly, transfer, sell, lease or otherwise dispose of all
or substantially all of its assets, unless: (1) in a transaction in which Teekay
does not survive or in which Teekay sells, leases or otherwise disposes of all
or substantially all of its assets, the successor entity to Teekay is organized
under (a) the laws of the United States or any State thereof or the District of
Columbia, (b) the laws of the Republic of Liberia, (c) the laws of the
Commonwealth of the Bahamas or (d) the laws of any other country recognized by
the United States of America and which, in the case of any of (a), (b), (c) or
(d), shall expressly assume, by a supplemental indenture executed and delivered
to the Trustee in the form satisfactory to the Trustee, all of the Company's
obligations under the Indenture and, if applicable, the Security Documents; (2)
immediately before and after giving effect to such transaction and treating any
Indebtedness which becomes an obligation of Teekay or a Restricted Subsidiary as
a result of such transaction as having been incurred by Teekay or such
Restricted Subsidiary at the time of the transaction, no Default or Event of
Default shall have occurred and be continuing; (3) immediately after giving
effect to such transaction, the Consolidated Net Worth of Teekay (or other
successor entity to Teekay) and its Restricted Subsidiaries is equal to or
greater than that of Teekay and its Restricted Subsidiaries immediately prior to
the transaction; (4) immediately after giving effect to such transaction and
treating any Indebtedness which becomes an obligation of Teekay or a Restricted
Subsidiary as a result of such transaction as having been incurred by Teekay or
such Restricted Subsidiary at the time of the transaction, Teekay (including any
successor entity to Teekay) could incur at least $1.00 of additional
Indebtedness pursuant to the provisions of the Indenture described in the first
paragraph under "--Certain Restrictive Covenants--Limitation on Indebtedness";
(5) if, as a result of any such transaction, property or assets of Teekay would
become subject to a Lien prohibited by the provisions of the Indenture described
under "--Certain Restrictive Covenants--Limitation on Liens", Teekay or the
successor entity to Teekay shall have secured the Notes as required by said
covenant; and (6) certain other conditions are met. (Article Six)
COVENANTS AFTER FALL-AWAY EVENT
Upon the occurrence of the Fall-away Event and subject to certain other
conditions, the Company will no longer be obligated to comply with certain
covenants as described in the first paragraph under "--Certain Restrictive
Covenants." Under such circumstances, Teekay will remain obligated to comply
with the provisions described under "--Certain Restrictive Covenants--Excess
Proceeds Offer" (except for the second paragraph thereof), "--Repurchase of
Notes Upon a Change of Control Triggering Event," subsection (b) under
"--Insurance" and "Consolidation, Merger and Sale of Assets" (except for clauses
(4) and (5) thereof), and will be obligated to comply with the following
restrictive covenants:
LIMITATION ON LIENS
Following the occurrence of the Fall-away Event, Teekay will not, and will
not permit any Restricted Subsidiary to, Incur any Lien on any of its assets or
properties without making effective provision for all of the Notes and all other
amounts due under the Indenture to be directly secured equally and ratably with
(or prior to) the obligation or liability secured by such Lien for so long as
such Lien affects such assets or properties unless, at the time of the
Incurrence of such Lien, the aggregate amount of all Indebtedness of
75
<PAGE> 80
the Restricted Subsidiaries plus the aggregate amount of all Indebtedness of
Teekay secured by a Lien on Teekay's assets shall not be greater than 15% of
Teekay's Consolidated Tangible Assets.
The foregoing limitation does not apply to (i) Liens on assets or
properties or Capital Stock of Teekay or a Restricted Subsidiary (other than
Palm) securing Indebtedness permitted to be incurred pursuant to "--Covenants
After Fall-away Event--Limitation on Indebtedness of Restricted Subsidiaries";
(ii) Liens on certain assets and properties securing Indebtedness which are
incurred to refinance Indebtedness secured by Liens on the same assets or
properties; (iii) Liens with respect to Acquired Indebtedness, provided that
such Liens do not extend to or cover any assets or properties of Teekay or any
Subsidiary of Teekay other than the assets or properties acquired; (iv) Liens
with respect to the assets of a Restricted Subsidiary (other than Palm) granted
by such Restricted Subsidiary to Teekay to secure Indebtedness owing to Teekay
by such Restricted Subsidiary; (v) Liens on any accounts receivable accrued in
the ordinary course of business; and (vi) Permitted Liens.
Notwithstanding the foregoing, Teekay will not, and will not permit Palm
to, create, incur, assume or suffer to exist any Lien upon any of Palm's assets
or properties, except for Permitted Liens. (Section 5.02)
LIMITATION ON INDEBTEDNESS OF RESTRICTED SUBSIDIARIES
Following the occurrence of a Fall-away Event, Teekay will not permit any
Restricted Subsidiary to Incur any Indebtedness unless, after giving effect to
the Incurrence of such Indebtedness and the application of the net proceeds
therefrom, the aggregate amount of Indebtedness of all Restricted Subsidiaries
plus the aggregate amount of all Indebtedness of Teekay secured by a Lien on
Teekay's assets is not greater than 15% of Teekay's Consolidated Tangible
Assets.
Notwithstanding the foregoing, under the Indenture (except as expressly
provided otherwise below), any Restricted Subsidiary (other than Palm, except as
provided in clause (v) below) also may Incur certain types of Indebtedness,
including, in general, the following: (i) Indebtedness of a Restricted
Subsidiary to Teekay or to any other Wholly Owned Restricted Subsidiary; (ii)
Indebtedness issued in exchange for, or the net proceeds of which are used to
refinance or refund, certain outstanding Indebtedness of any Restricted
Subsidiary, subject to certain conditions, including that such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, does not
mature prior to the Stated Maturity of the Indebtedness so exchanged, refinanced
or refunded and the Average Life of such new Indebtedness is at least equal to
the remaining Average Life of the Indebtedness so exchanged, refinanced or
refunded; (iii) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under certain Currency
Agreements and Interest Rate Agreements, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of any Restricted Subsidiary pursuant
to such agreements, in any case incurred in connection with the disposition of
any business, assets or Restricted Subsidiary of Teekay or any of its Restricted
Subsidiaries and not exceeding the gross proceeds therefrom, other than
guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary of Teekay or any of its
Restricted Subsidiaries for the purpose of financing such acquisition; (iv)
Acquired Indebtedness; provided that, after giving effect to the Incurrence
thereof, the Restricted Subsidiaries could Incur at least $1.00 of Indebtedness
under the first paragraph of this covenant; and (v) Indebtedness of Palm (A)
Incurred in the ordinary course of business in connection with the operation of
any Vessel in an aggregate principal amount not to exceed $25 million
outstanding at any one time or (B) to Teekay resulting from advances to Palm by
Teekay.
In addition, Teekay may not incur any Indebtedness that is expressly
subordinated to any other Indebtedness of Teekay unless such Indebtedness, by
its terms or the terms of any agreement or instrument pursuant to which such
Indebtedness is issued or remains outstanding, is also expressly made
subordinate to the Notes at least to the extent that it is subordinated to such
other Indebtedness. (Section 5.03)
76
<PAGE> 81
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES
Following the occurrence of the Fall-away Event, Teekay will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by Teekay or any other Restricted Subsidiary, (ii)
pay any Indebtedness owed to Teekay or any other Restricted Subsidiary, (iii)
make loans or advances to Teekay or any other Restricted Subsidiary or (iv)
transfer any of its property or assets to Teekay or any other Restricted
Subsidiary.
In general, the foregoing provision shall not restrict or prohibit any
encumbrances or restrictions: (i) existing pursuant to the Indenture, the Notes,
or agreements in effect on the date of the Fall-away Event or in any
Indebtedness containing any such encumbrance or restriction that is permitted
pursuant to clause (iii) below or, subject to certain conditions, in any
extensions, refinancings, renewals or replacements of the foregoing; (ii)
existing under and by reason of applicable law; (iii) existing with respect to
any Person or the property or assets of such Person (other than Palm) acquired
by Teekay or any Restricted Subsidiary and existing at the time of such
acquisition, which encumbrances or restrictions are not applicable to any Person
or the property or assets of any Person other than such Person or the property
or assets of such Person so acquired and, subject to certain conditions, any
extensions, refinancings, renewals or replacements of the foregoing; (iv) in the
case of clause (iv) of the first paragraph of this covenant, certain
encumbrances and restrictions that arise in the ordinary course of business; (v)
existing pursuant to any agreement governing Indebtedness permitted to be
incurred by "--Covenants After Fall-away Event--Limitations on Indebtedness of
Restricted Subsidiaries" and, subject to certain conditions, any extensions,
refinancings, renewals or replacements of the foregoing; or (vi) with respect to
a Restricted Subsidiary (other than Palm) and imposed pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock of, or all, or substantially all, of the property and
assets of, such Restricted Subsidiary. Nothing contained in this covenant shall
prevent Teekay or any Restricted Subsidiary from (1) entering into any agreement
permitting the incurrence of Liens otherwise permitted by "--Covenants After
Fall-away Event--Limitation on Liens", (2) restricting the sale or other
disposition of property or assets of Teekay or any of its Restricted
Subsidiaries that secure Indebtedness (other than the Notes) of Teekay or any of
its Restricted Subsidiaries or (3) amending, modifying or supplementing any
charter or similar arrangement between Palm and a vessel-owning Subsidiary of
Teekay (other than the Palm Charters) solely (A) to lower the rates paid by Palm
to such vessel-owning Subsidiary under such charter or similar arrangement or
(B) to increase the rates paid by Palm to such vessel-owning Subsidiary under
such charter or similar arrangement to the extent required to service (x)
Indebtedness for money borrowed, Incurred in good faith (as determined by the
Board of Directors) and not with the purpose of evading the requirements of this
covenant, in connection with the financing or the refinancing of Indebtedness of
such Subsidiary and (y) expenses incurred by such Subsidiary in the ordinary
course of business. (Section 5.04)
LIMITATION ON THE ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
Following the occurrence of the Fall-away Event, Teekay will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, issue or sell
any shares of the Capital Stock of a Restricted Subsidiary except (i) to Teekay
or, except shares of Capital Stock of Palm, to another Wholly Owned Restricted
Subsidiary, (ii) other than with respect to shares of Capital Stock of Palm, to
management employees of Teekay or a Restricted Subsidiary pursuant to the
exercise of stock options or stock appreciation rights, (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary for purposes of the Indenture or
(iv) other than with respect to shares of Capital Stock of Palm, to Persons who
are entering into joint ventures or other similar business relationships with
Teekay or any Subsidiary other than Palm. (Section 5.05)
77
<PAGE> 82
LIMITATION ON SALES AND LEASEBACKS
Following the occurrence of the Fall-away Event, neither Teekay nor any
Restricted Subsidiary may enter into any sale and leaseback transaction
involving any property or assets owned or leased by Teekay or any Restricted
Subsidiary, the acquisition of which, or completion of construction and
commencement of full operation of which, has occurred more than 120 days prior
to such sale and leaseback transaction, unless Teekay or such Restricted
Subsidiary, within 360 days after the sale or transfer of such property, (1)
applies the Net Cash Proceeds from such sale, first, to the purchase,
acquisition or construction of property or assets to be used in the business of
Teekay and its Restricted Subsidiaries (which includes the entering into, within
such 360 day period, of an agreement for such purchases, acquisition or
construction of property or assets) and, second, to the repayment or reduction
of certain unsubordinated Indebtedness or as working capital for general
corporate purposes and (2) treats (no later than the end of such 12-month period
referred to in clause (1) above) such excess Net Cash Proceeds (to the extent
not applied pursuant to clause (1) above) as Sale Excess Proceeds. (Section
5.06)
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture: (a) Teekay defaults in the payment of principal of (or premium, if
any, on) any Notes when the same become due and payable at maturity, upon
acceleration, redemption or otherwise; (b) Teekay defaults in the payment of
interest on any Notes when the same become due and payable, and such default
continues for a period of 30 days; (c) Teekay defaults in the deposit of any
Sinking Fund or other mandatory redemption payment, when and as due by the terms
of the Indenture; (d) Teekay or, if prior to the occurrence of the Fall-away
Event, any Guarantor, defaults in the performance of or breaches any other
covenant or agreement of Teekay or such Guarantor in the Indenture or under the
Notes or in the Security Documents, if applicable, and such default or breach
continues for a period of 30 consecutive days after the date on which written
notice of such default or breach requiring Teekay or a Guarantor to remedy the
same, shall have been given to Teekay or such Guarantor by the Trustee, or to
Teekay, such Guarantor and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes; (e) there occurs with respect to any
issue or issues of Indebtedness of Teekay or any of its Restricted Subsidiaries
having an outstanding aggregate principal amount of $10 million or more
individually or $20 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall hereafter be
created, an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled (by cure, waiver or otherwise) within 30 days of such
acceleration; provided, however, that any secured Indebtedness in excess of the
limits set forth above shall be deemed to have been declared due and payable if
the lender in respect thereof takes any action to enforce a security interest
against, or an assignment of, or to collect on, seize, dispose of or apply any
assets of Teekay or its Subsidiaries (including lock-box and other similar
arrangements) securing such Indebtedness, or to set off against any bank account
of Teekay or its Subsidiaries (in excess of $10 million); (f) any final judgment
or order (not covered by insurance) for the payment of money in excess of $10
million individually or $20 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against Teekay
or any Restricted Subsidiary and shall not be paid or discharged, and there
shall be any period of 30 consecutive days following entry of the final judgment
or order in excess of $10 million individually or that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $20 million during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (g) Teekay or any Restricted Subsidiary shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
Teekay or any Restricted Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for
78
<PAGE> 83
relief or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 60 days, or
any of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or Teekay or any Restricted Subsidiary shall take any
corporate action to authorize any of the actions set forth above in this
subsection (g); (h) Teekay and/or one or more Restricted Subsidiaries fails to
make (1) at the final (but not any interim) fixed maturity of any issue of
Indebtedness a principal payment of $10 million or more or (2) at the final (but
not any interim) fixed maturity of more than one issue of such Indebtedness
principal payments aggregating $20 million or more and, in the case of clause
(1), such defaulted payment shall not have been made, waived or extended within
30 days of the payment default and, in the case of clause (2), all such
defaulted payments shall not have been made, waived or extended within 30 days
of the payment default that causes the amount described in clause (2) to exceed
$20 million; (i) if prior to the occurrence of the Fall-away Event, any Security
Document ceases to be in full force and effect for a period of 30 days; or (j)
if prior to the occurrence of the Fall-away Event, any Charter ceases to be in
full force and effect or is repudiated prior to the expiration of the term of
such Charter. (Section 7.01)
If an Event of Default (other than an Event of Default specified in clause
(g) above occurs) and is continuing under the Indenture, the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by written notice to Teekay (and to the Trustee if such notice is
given by the Holders (the "Acceleration Notice")), may, and the Trustee at the
request of the Holders shall, declare the entire unpaid principal of, premium,
if any, and accrued interest on the Notes to be immediately due and payable.
Upon a declaration of acceleration, such principal of, premium, if any, and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (d)
or (h) above has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event triggering such Event
of Default pursuant to clause (d) or (h) shall be remedied or cured by Teekay
and/or the relevant Restricted Subsidiaries or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) above occurs,
all unpaid principal of, premium, if any, and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to Teekay and to the Trustee, may waive all past defaults and
rescind and annul a declaration of acceleration and its consequences if (a)
Teekay has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and
premium, if any, on any Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate
prescribed therefor by such Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest at the rate prescribed
therefor by such Notes, (b) all existing Events of Default, other than the
non-payment of the principal of the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (c) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction. (Section 7.02) For information as to the waiver of defaults, see
"--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture or that may expose the
Trustee to personal liability. (Section 7.05) A Holder may not pursue any remedy
with respect to the Indenture or the Notes unless (i) the Holder gives to the
Trustee written notice of a continuing Event of Default; (ii) the Holders of at
least 25% in aggregate principal amount of outstanding Notes make a written
request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer
to the Trustee indemnity reasonably satisfactory to
79
<PAGE> 84
the Trustee against any costs, liabilities or expenses to be incurred in
compliance with such request; (iv) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of indemnity; and (v)
during such 60-day period, the Holders of a majority in aggregate principal
amount of the outstanding Notes do not give the Trustee a direction that is
inconsistent with the request. (Section 7.06) However, such limitations do not
apply to the right of any Holder of a Note to receive payment of the principal
of, premium, if any, or interest on, such Note or to bring suit for the
enforcement of any such payment on or after the due dates expressed in the
Notes, which right shall not be impaired or affected without the consent of the
Holder. (Section 7.07)
The Indenture will require certain officers of Teekay to certify, on or
before a date not more than 120 days after the end of each fiscal year, that a
review has been conducted of the activities of Teekay and its Restricted
Subsidiaries and Teekay's and its Restricted Subsidiaries' performance under the
Indenture and that Teekay has fulfilled all obligations thereunder, or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default and the nature and status thereof. (Section 4.19) Teekay is also
obligated to notify the Trustee of any default or defaults in the performance of
any covenants or agreements under the Indenture. (Section 4.18)
DEFEASANCE
DEFEASANCE AND DISCHARGE
The Indenture will provide that Teekay will be deemed to have paid and will
be discharged from any and all obligations in respect of the Notes and the
provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) and assets
and property held in the Trust Estate will be released, on the 123rd day after
the date referred to below if, among other things, (A) Teekay has deposited with
the Trustee, in trust, money and/or U.S. Government Obligations that, through
the payment of interest and principal in respect thereof in accordance with
their terms, will provide money in an amount sufficient to pay the principal of,
premium, if any, and accrued interest on the Notes on the Stated Maturity of
such payments in accordance with the terms of the Indentures and the Notes, (B)
Teekay has delivered to the Trustee (i) either (x) an Opinion of Counsel to the
effect that Holders will not recognize income, gain or loss for federal income
tax purposes as a result of Teekay's exercise of its option under this
"Defeasance" provision and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred, which Opinion of
Counsel must be based upon (and accompanied by copy of) a ruling of the Internal
Revenue Service to the same effect or based upon a change in applicable federal
income tax law after the date of the Indenture or (y) a ruling directed to the
Trustee received from the Internal Revenue Service to the same effect as the
aforementioned Opinion of Counsel and (ii) an Opinion of Counsel to the effect
that the creation of the defeasance trust does not violate the Investment
Company Act of 1940, as amended, and, after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law, (C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or lapse of
time or both would become an Event of Default, shall have occurred and be
continuing on the date of such deposit or during the period ending on the 123rd
day after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which Teekay is a party or by which Teekay is bound and (D) if at
such time the Notes are listed on a national securities exchange, Teekay has
delivered to the Trustee an Opinion of Counsel to the effect that the Notes will
not be delisted as a result of such deposit, defeasance and discharge. (Section
11.02)
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Indenture will provide that certain provisions of the Indenture will no
longer be in effect, and assets and property held in the Trust Estate will be
released upon, among other things, the deposit with
80
<PAGE> 85
the Trustee, in trust, of money and/or U.S. Government Obligations that through
the payment of interest and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient to pay the principal of,
premium, if any, and accrued interest on the Notes on the Stated Maturity of
such payments in accordance with the terms of the Indenture and the Notes, the
satisfaction of the provisions described in clauses (B)(ii), (C) and (D) of the
preceding paragraph and the delivery by Teekay or the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred. (Section 11.03)
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
In the event Teekay exercises its option to omit compliance with certain
covenants and provisions of the Indenture with respect to the Notes as described
in the immediately preceding paragraph and the Notes are declared due and
payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Notes at the time of the acceleration resulting from such Event of Default.
However, Teekay will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by Teekay and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the principal amount of, or premium, if
any, or interest on, any Note, (iii) adversely affect any right of repayment at
the option of any Holder, (iv) change the place or currency of payment of
principal of, or premium, if any, or interest on, any Note, (v) impair the right
to institute suit for the enforcement of any payment on or after the Stated
Maturity (or, in the case of a redemption, on or after the Redemption Date) of
any Note, (vi) reduce the percentage of outstanding Notes the consent of whose
Holders is necessary to modify or amend the Indenture, (vii) waive a default in
the payment of principal of, premium, if any, or interest on the Notes, (viii)
reduce the percentage of aggregate principal amount of outstanding Notes, the
consent of whose Holders is necessary for waiver of compliance with certain
provisions of such Indenture or for waiver of certain defaults or (ix) prior to
the Fall-away Event, except as permitted by the Indenture, permit the creation
of any Lien ranking prior to or on a parity with the Lien of the Indenture or
any Security Document, or terminate the Lien of the Indenture or any Security
Document on any property at any time subject hereto or thereto or deprive the
Holders of the security afforded by the Lien of the Indenture or the Security
Document. (Article Twelve)
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture will provide that no recourse for the payment of the
principal of, premium, if any, or interest on, any of the Notes, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of Teekay in the Indenture, or in any
of the Notes, or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, shareholder, officer, director,
employee, Affiliate or controlling person of Teekay or of any successor Person
thereof. Each Holder, by accepting such Notes, waives and releases all such
liability. (Section 13.09)
CONCERNING THE TRUSTEE
The Indenture will provide that, except during the continuance of a
Default, the Trustee will not be liable, except for the performance of such
duties as are specifically set forth in such Indenture. If an Event
81
<PAGE> 86
of Default has occurred and is continuing, the Trustee will use the same degree
of care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of Teekay, to obtain payment of claims
in certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and each of the Security Documents, other than the
Mortgages, shall be governed by the laws of the State of New York.
CONSENT TO JURISDICTION AND SERVICE
Teekay and each Guarantor has irrevocably appointed Haight, Gardner, Poor &
Havens, New York, New York, as its respective agent for service of process in
any suit, action or proceeding with respect to the Indenture or the Notes
brought in any federal or state court located in New York City and have
submitted to such jurisdiction.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person became a Subsidiary and not Incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary.
"Adjusted Consolidated Net Income" is defined to mean, with respect to any
Person for any period, the aggregate net income (or loss) of such Person and its
consolidated Subsidiaries for such period determined in conformity with GAAP;
provided that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income (or loss) of
such Person (other than net income (or loss) attributable to a Subsidiary of
such Person) in which any other Person (other than such Person or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or any of its
Subsidiaries on account of such joint interest during such period; (ii) solely
for the purposes of calculating the amount of Restricted Payments that may be
made pursuant to clause (B) of the first paragraph of "--Certain Restrictive
Covenants--Limitation on Restricted Payments" (and in such case, except to the
extent includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of any other Person or
is merged into or consolidated with such other Person or any of its Subsidiaries
or all or substantially all of the property and assets of such Person are
acquired by such other Person or any of its Subsidiaries; (iii) the effects of
foreign currency exchange adjustments under GAAP; (iv) any gains or losses (on
an after-tax basis) attributable to Asset Sales or to prepayment of
Indebtedness; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (B) of the first paragraph of
"--Certain Restrictive Covenants--Limitation on Restricted Payments," any amount
paid or accrued as dividends on Preferred Stock of such Person or Preferred
Stock of any Subsidiary of such Person owned by Persons other than such Person
and any of its Subsidiaries; and (vi) all extraordinary gains and extraordinary
losses; provided that, solely for the purposes of calculating the Interest
Coverage Ratio (and in such case, except to the extent includable pursuant to
clause (i) above), "Adjusted Consolidated Net Income" of Teekay shall include
the amount of all cash dividends received by Teekay or any Restricted Subsidiary
of Teekay from an Unrestricted Subsidiary.
82
<PAGE> 87
"Appraised Value" is defined to mean the fair market sale value as of a
specified date of a specified asset that would be obtained in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined by
an Appraiser mutually acceptable to the Trustee and Teekay. The Appraised Value
of any tanker or oil/bulk/ore carrier shall be determined free of any charters
with respect to such vessel. If the Trustee and Teekay shall not agree on an
Appraiser within 20 days of the first giving of notice by Teekay to the Trustee
requesting a determination of an Appraised Value (the "Appraisal Request Date"),
such Appraised Value shall be determined by a panel of three Appraisers, one of
whom shall be selected by Teekay, another of whom shall be selected by the
Trustee and the third of whom shall be selected by such other two Appraisers or,
if such Appraisers shall be unable to agree upon a third Appraiser within 10
days of the selection date of the second of such two Appraisers, by the American
Arbitration Association; provided that, if either party shall not select its
Appraiser within 35 days after the Appraisal Request Date, such Appraised Value
shall be determined solely by the Appraiser selected by the other party. The
Appraiser or Appraisers appointed pursuant to the foregoing procedure shall be
instructed to determine such Appraised Value within 45 days after the final
appointment of any Appraiser pursuant hereto (but in no event may such
determination be made more than 75 days following the Appraisal Request Date),
and such determination shall be final and binding upon the parties. If three
Appraisers shall be appointed, (a) if the median of the determinations of the
Appraisers shall equal the average of such determinations, such average shall
constitute the determination of the Appraisers, otherwise (b) the determination
of the Appraiser that shall differ most from the other two Appraisers shall be
excluded, the remaining two determinations shall be averaged and such average
shall constitute the determination of the Appraisers. Fees and expenses relating
to the determination of an Appraised Value shall be payable by Teekay. If any
provision of this Indenture requires a determination of Appraised Value by an
Independent Appraiser, then all Appraisers shall be Independent.
"Appraiser" means a Person engaged in the business of appraising
ocean-going vessels, including tankers, including Simpson, Spence & Young
Shipbrokers Ltd., H. Clarkson & Company Limited, E.A. Gibson Shipbrokers Ltd. or
P.F. Bassoe, who, except as otherwise required by this Indenture, need not be
independent and may be employed by or affiliated with Teekay.
"Asset Sale" is defined to mean with respect to any Person, any sale,
transfer or other disposition (including by way of merger, consolidation or
sale-leaseback transactions) in one transaction or a series of related
transactions by such Person or any of its Subsidiaries to any Person other than
Teekay or any of its Restricted Subsidiaries of (A) all or any of the Capital
Stock of any Subsidiary of such Person, (B) any Vessel, or all or substantially
all of the property and assets of an operating unit or business of such Person
or any of its Subsidiaries or (C) any other property and assets of such Person
or any of its Subsidiaries outside the ordinary course of business of such
Person or such Subsidiary and, in each case, that is not governed by
"--Consolidation, Merger and Sale of Assets;" provided that sales or other
dispositions of inventory, receivables and other current assets shall not be
included within the meaning of "Asset Sale".
"Capitalized Lease" is defined to mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person, as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital stock, whether
outstanding prior to or issued after the date of the Indenture, including,
without limitation, all Common Stock and Preferred Stock.
"Cash Collateral Account" is defined to mean each account so designated and
maintained with the Trustee pursuant to a Cash Collateral Account Agreement.
"Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act),
other than the Trusts or any holding
83
<PAGE> 88
company, more than 50% of the total voting power of the Voting Stock of which is
"beneficially owned" by the Trusts, becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act and including by reason of any
change in the ultimate "beneficial ownership" of the Capital Stock of Teekay) of
more than 50% of the total voting power of the Voting Stock of Teekay
(calculated on a fully diluted basis), or (ii) individuals who at the beginning
of any period of two consecutive calendar years constituted the board of
directors of Teekay (together with any new directors whose election by such
board of directors or whose nomination for election was approved by a vote of at
least two-thirds of the members of such board of directors then still in office
who either were members of such board of directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute at least 50% of the members of such board of
directors then in office.
"Change of Control Triggering Event" is defined to mean the occurrence of a
Change of Control and a Rating Decline.
"Charters" is defined to mean each time charter party between a Guarantor
and Palm with respect to such Guarantor's Mortgaged Vessel, as amended through
the date of the Indenture or a Vessel Tender Date, as the case may be, and as
the same may be further amended from time to time hereafter in accordance with
the terms of the Indenture, or as the same may be extended or renewed in
accordance with the terms of the Indenture.
"Collateral" is defined to mean, in each case as pledged and assigned to
the Trustee pursuant to the Security Documents, (1) all of the issued and
outstanding capital stock of each Guarantor, pledged in favor of the Trustee
pursuant to the Pledge Agreement; (2) Teekay's interest in the Investment
Account to secure the Obligations, pledged in favor of the Trustee pursuant to
the Investment Account Agreement; and (3) all of each Guarantor's right, title
and interest in and to (i) its respective Mortgaged Vessel, pursuant to a
Mortgage issued by such Guarantor in favor of the Trustee, which Mortgage
contains covenants pursuant to which such Guarantor, among other things, will be
prohibited from selling, mortgaging or transferring any of its interest in such
vessel (other than as permitted under the Indenture); (ii) the Charter with Palm
relating to its Mortgaged Vessel, including the right to receive all monies due
and to become due under such Charter or in respect of such Mortgaged Vessel and
all claims for damages arising under such Charter or relating to such Mortgaged
Vessel; (iii) the freights and hires relating to its Mortgaged Vessel; (iv) all
of its policies and contracts of insurance taken out from time to time in
respect of its Mortgaged Vessel; and (v) the Cash Collateral Accounts.
"Consolidated EBITDA" is defined to mean, with respect to any Person for
any period, the sum of the amounts for such period of (i) Adjusted Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) income taxes (other than
income taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation expense,
(v) amortization expense and (vi) all other non-cash items reducing Adjusted
Consolidated Net Income (including last-in-first-out adjustment for inventory),
less all non-cash items increasing Adjusted Consolidated Net Income (including
last-in-first-out adjustment for inventory), all as determined on a consolidated
basis for such Person and its Subsidiaries in conformity with GAAP; provided
that, if a Person has any Subsidiary that is not a Wholly Owned Subsidiary of
such Person, Consolidated EBITDA of such Person shall be reduced (to the extent
not otherwise reduced in accordance with GAAP) by an amount equal to (A) the
Adjusted Consolidated Net Income of such Subsidiary multiplied by (B) the
quotient of (1) the number of shares of outstanding Common Stock of such
Subsidiary not owned on the last day of such period by such Person or any
Subsidiary of such Person divided by (2) the total number of shares of
outstanding Common Stock of such Subsidiary on the last day of such period.
"Consolidated Interest Expense" is defined to mean, with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation,
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; the net costs associated with
Interest Rate Agreements; and Indebtedness that is guaranteed by such Person)
and all
84
<PAGE> 89
but the principal component of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by such
Person and its consolidated Subsidiaries during such period, all as determined
on a consolidated basis in conformity with GAAP.
"Consolidated Net Worth" is defined to mean, at any date of determination,
shareholders' equity as set forth on the most recently available consolidated
balance sheet of Teekay and its Restricted Subsidiaries (which shall be as of a
date not more than 60 days prior to the date of such computation), less any
amounts attributable to Redeemable Stock or any equity security convertible into
or exchangeable for Indebtedness, the cost of treasury stock and the principal
amount of any promissory notes receivable from the sale of the Capital Stock of
Teekay or any Restricted Subsidiary of Teekay, each item to be determined in
accordance with GAAP (excluding the effects of foreign currency exchange
adjustments under GAAP).
"Consolidated Tangible Assets" of any Person means the sum of the Tangible
Assets of such Person after eliminating inter-company items, determined on a
consolidated basis in accordance with generally accepted accounting principles,
including appropriate deductions for any minority interest in Tangible Assets of
such Person's Restricted Subsidiaries, provided, however, that, with respect to
the Company, adjustments following the date of the Indenture to the accounting
books and records of the Company in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto), or otherwise resulting
from the acquisition of control of the Company by another Person shall not be
given effect.
"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Event of Default" has the meaning set forth under "-- Events of Default."
"Event of Loss" is defined to mean any of the following events: (a) the
actual or constructive total loss of a Vessel or the agreed or compromised total
loss of a Vessel, (b) the destruction of a Vessel, (c) damage to a Vessel to an
extent, determined in good faith by Teekay within 90 days after the occurrence
of such damage (and evidenced by an Officers' Certificate to such effect
delivered to the Trustee, within such 90-day period), as shall make repair
thereof uneconomical or shall render such Vessel permanently unfit for normal
use (other than obsolescence) or (d) the condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use of a Vessel
that shall not be revoked within six months. An Event of Loss shall be deemed to
have occurred: (i) in the event of the destruction or other actual total loss of
a Vessel, on the date of such loss; (ii) in the event of a constructive, agreed
or compromised total loss of a Vessel, on the date of the determination of such
total loss pursuant to the relevant insurance policy; (iii) in the case of any
event referred to in clause (c) above, upon the delivery of Teekay's Officers'
Certificate to the Trustee; or (iv) in the case of any event referred to in
clause (d) above, on the date six months after the occurrence of such event.
"Event of Loss Proceeds" is defined to mean all compensation, damages and
other payments (including insurance proceeds other than certain liability
insurance proceeds) received by Teekay, any Guarantor or the Trustee, jointly or
severally, from any Person, including any governmental authority, with respect
to or in connection with an Event of Loss.
"Fall-away Event" has the meaning set forth under "--Fall-away Event."
"GAAP" is defined to mean generally accepted accounting principles in the
United States of America as in effect as of the date of the Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of the
Indenture shall be made without giving effect to (i) except as otherwise
provided, the amortization of any amounts required or permitted by Accounting
Principles Board Opinion Nos. 16 and 17 and (ii) any non-recurring charges
associated with the adoption, after the Closing Date, of Financial Accounting
Standard Nos. 106 and 109.
85
<PAGE> 90
"Gradation" is defined to mean a gradation within a Rating Category or a
change to another Rating Category, which shall include: (i) "+" and "-" in the
case of S&P's current Rating Categories (e.g., a decline from BB+ to BB would
constitute a decrease of one gradation), (ii) 1 and 2 in the case of Moody's
current Rating Categories (e.g., a decline from B1 to B2 would constitute a
decrease of one gradation), or (iii) the equivalent in respect of successor
Rating Categories of S&P or Moody's or Rating Categories used by Rating Agencies
other than S&P and Moody's.
"Guarantors" is defined to mean the following Wholly Owned Subsidiaries of
Teekay: VSSI Oceans Inc., VSSI Atlantic Inc., and VSSI Appian Inc. (each of
which is a Liberian corporation) and Exuma Spirit Inc., Nassau Spirit Inc.,
Senang Spirit Inc. and Andros Spirit Inc. (each of which is a Bahamian
corporation), each the owner of a Mortgaged Vessel, and their respective
successors and assigns. If all of the capital stock of one of such Wholly Owned
Subsidiaries, or the Mortgaged Vessel owned by such Subsidiary, shall be sold as
permitted by the Indenture, such Subsidiary will cease to be a Guarantor upon
compliance with the requirements of the Indenture relating to the release of its
Mortgaged Vessel in connection with such sale. Owners of Qualified Substitute
Vessels that are tendered to become part of the Trust Estate pursuant to, and in
accordance with, the terms of the Indenture shall become Guarantors upon such
tender in accordance with the terms of the Indenture.
"Incidental Asset" is defined to mean any equipment, outfit, furniture,
furnishings, appliances, spare or replacement parts or stores owned by Teekay or
a Guarantor that have become obsolete or unfit for use or no longer useful,
necessary or profitable in the conduct of the business of Teekay or such
Guarantor, as the case may be. In no event shall the term "Incidental Asset"
include a Vessel or a Mortgaged Vessel.
"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred purchase price of property or services, which
purchase price is due more than six months after the date of placing such
property in service or taking delivery thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as lessee
under Capitalized Leases, (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
guaranteed by such Person to the extent such Indebtedness is guaranteed by such
Person, and (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided that the amount outstanding
at any time of any Indebtedness issued with original issue discount is the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP; and provided further that Indebtedness shall not include
any liability for federal, state, local or other taxes.
"Interest Coverage Ratio" means, with respect to any Person on any
Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA
of such Person for the four fiscal quarters for which financial information in
respect thereof is available immediately prior to such Transaction Date to (ii)
the aggregate Consolidated Interest Expense of such Person during such four
fiscal quarters. In making the foregoing calculation, (A) pro forma effect shall
be given to (1) any Indebtedness Incurred subsequent to the end of the
four-fiscal-quarter period referred to in clause (i) and prior to the
Transaction Date (other than Indebtedness Incurred under a revolving credit or
similar arrangement to the extent of the commitment thereunder (or under any
predecessor revolving credit or similar arrangement) in effect on the last day
of such period), (2) any Indebtedness Incurred during such period to the extent
such
86
<PAGE> 91
Indebtedness is outstanding at the Transaction Date and (3) any Indebtedness to
be Incurred on the Transaction Date, in each case as if such Indebtedness had
been Incurred on the first day of such four-fiscal-quarter period and after
giving pro forma effect to the application of the proceeds thereof as if such
application had occurred on such first day; (B) Consolidated Interest Expense
attributable to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on the date of computation (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months) had been
the applicable rate for the entire period; (C) there shall be excluded from
Consolidated Interest Expense any Consolidated Interest Expense related to any
amount of Indebtedness that was outstanding during such four-fiscal-quarter
period or thereafter but that is not outstanding or is to be repaid on the
Transaction Date, except for Consolidated Interest Expense accrued (as adjusted
pursuant to clause (B)) during such four-fiscal-quarter period under a revolving
credit or similar arrangement to the extent of the commitment thereunder (or
under any successor revolving credit or similar arrangement) in effect on the
Transaction Date; (D) pro forma effect shall be given to Asset Dispositions and
Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during such four-fiscal-quarter
period or thereafter and prior to the Transaction Date as if they had occurred
and such proceeds had been applied on the first day of such four-fiscal-quarter
period; and (E) pro forma effect shall be given to asset dispositions and asset
acquisitions (including giving pro forma effect to the application of proceeds
of any asset disposition) that have been made by any Person that has become a
Restricted Subsidiary or has been merged with or into Teekay or any Restricted
Subsidiary during the four-fiscal-quarter period referred to above or subsequent
to such period and prior to the Transaction Date and that would have constituted
Asset Dispositions or Asset Acquisitions had such transactions occurred when
such Person was a Restricted Subsidiary as if such asset dispositions or asset
acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the
first day of such period; provided that to the extent that clause (D) or (E) of
this sentence requires that pro forma effect be given to an asset acquisition or
asset disposition, such pro forma calculation shall be based upon the four full
fiscal quarters immediately preceding the Transaction Date of the Person, or
division or line of business of the Person, that is acquired or disposed for
which financial information is available; and provided further that for purposes
of determining the Interest Coverage Ratio with respect to the acquisition of a
Vessel or the financing thereof, the Company may apply Consolidated EBITDA for
such Vessel based upon historical earnings of such Vessel or, if none, of its
most comparable Vessel (in the good faith determination of the Board of
Directors) during the applicable four-fiscal quarter period, or if the Company
does not have a comparable Vessel, based upon industry average earnings for
comparable vessels (as determined in good faith by the Board of Directors).
"Investment Grade" is defined to mean (i) BBB- or above in the case of S&P
(or its equivalent under any successor Rating Categories of S&P), (ii) Baa3 or
above, in the case of Moody's (or its equivalent under any successor Rating
Categories of Moody's), and (iii) the equivalent in respect of the Rating
Categories of any Rating Agencies substituted for S&P or Moody's.
"Investment Grade Status" is defined to mean the existence as of a date and
thereafter if at such date the Notes are rated Investment Grade by both Rating
Agencies.
"Lien" is defined to mean any mortgage, lien, pledge, security interest,
encumbrance or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Loan To Value Ratio" is defined to mean, at any time, the ratio of the
aggregate principal amount of the Notes Outstanding at such time to the
aggregate Appraised Value of all Mortgaged Vessels at such time. If the Loan To
Value Ratio is required to be calculated or adjusted at a time when cash is on
deposit with the Trustee in the Investment Account as part of the Trust Estate
in connection with the sale of a Mortgaged Vessel, the occurrence of an Event of
Loss with respect to a Mortgaged Vessel, the amount of such cash on deposit
shall be deemed to be the Appraised Value of the Vessel giving rise to such cash
87
<PAGE> 92
on deposit and such Vessel shall be deemed to be a Mortgaged Vessel for purposes
of such computation or adjustment of Loan To Value Ratio.
"Loss Excess Proceeds" is defined to mean the total of (i) amounts treated
as Loss Excess Proceeds under "--Redemptions--Mandatory Redemption Upon Loss of
a Mortgaged Vessel" and (ii) the amount by which the Net Event of Loss Proceeds
received by Teekay or any of its Restricted Subsidiaries from one or more Events
of Loss with respect to Vessels other than Mortgaged Vessels occurring on or
after the Closing Date in the most recent period of 12 consecutive months exceed
$10 million, less (in the case of clause (ii)) the amount of such excess Net
Event of Loss Proceeds (A) used to repay unsubordinated Indebtedness of Teekay
or a Guarantor or Indebtedness of any Restricted Subsidiary, in each case owing
to a Person other than Teekay or any of its Subsidiaries or (B) invested in
property or assets of a nature or type of which will be used in a business (or
in a company having property or assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and assets
of, or the business of, Teekay and its Restricted Subsidiaries existing on the
date of such investment or allocated to working capital for general corporate
purposes (in each case, as determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board resolution).
"Maximum Loan To Value Ratio" is defined to mean, during any period, 0.75
to 1.
"Moody's" is defined to mean Moody's Investor Service, Inc. and its
successors.
"Mortgaged Vessels" is defined to mean the Aframax tankers owned by the
Guarantors and being, on the Closing Date, (i) the Poul Spirit, Official Number
10328, of approximately 57,463 gross and 31,958 net tons, having its home port
at the Port of Monrovia, Republic of Liberia, which vessel was built by Onomichi
Dockyard, Japan, in the year 1995, and is documented under the laws and flag of
the Republic of Liberia and is owned by VSSI Oceans Inc., (ii) the Torben
Spirit, Official Number 723526, of approximately 57,486 gross and 28,742 net
tons, having its home port at the Port of Nassau, Commonwealth of The Bahamas,
which vessel was built by Onomichi Dockyard, Japan, in the year 1994, and is
documented under the laws and flag of the Commonwealth of The Bahamas and is
owned by VSSI Atlantic Inc., (iii) the Senang Spirit, Official Number 723521, of
approximately 52,508 gross and 28,208 net tons, having its home port at the Port
of Nassau, Commonwealth of The Bahamas, which vessel was built by Imabari
Shipbuilding, Japan, in the year 1994, and is documented under the laws and flag
of the Commonwealth of The Bahamas and is owned by Senang Spirit Inc., (iv) the
Mayon Spirit, Official Number 720752, of approximately 57,448 gross and 28,742
net tons, having its home port at the Port of Nassau, Commonwealth of The
Bahamas, which vessel was built by Onomichi Dockyard, Japan, in the year 1991,
and is documented under the laws and flag of the Commonwealth of The Bahamas and
is owned by VSSI Appian Inc., (v) the Leyte Spirit, Official Number 720790, of
approximately 57,448 gross and 28,742 net tons, having its home port at the Port
of Nassau, Commonwealth of The Bahamas, which vessel was built by Onomichi
Dockyard, Japan, in the year 1992, and is documented under the laws and flag of
the Commonwealth of The Bahamas and is owned by Exuma Spirit Inc., (vi) the
Luzon Spirit, Official Number 720776, of approximately 57,448 gross and 28,742
net tons, having its home port at the Port of Nassau, Commonwealth of The
Bahamas, which vessel was built by Onomichi Dockyard, Japan, in the year 1992,
and is documented under the laws and flag of the Commonwealth of The Bahamas and
is owned by Nassau Spirit Inc., (vii) the Samar Spirit, Official Number 723134,
of approximately 57,448 gross and 28,742 net tons, having its home port at the
Port of Nassau, Commonwealth of The Bahamas, which vessel was built by Onomichi
Dockyard, Japan, in the year 1992, and is documented under the laws and flag of
the Commonwealth of The Bahamas and is owned by Andros Spirit Inc. If an Event
of Loss occurs with respect to one of such vessels, such vessel shall cease to
be a Mortgaged Vessel from and after the Loss Date. If one of such vessels shall
be sold pursuant to the terms of the Indenture, such vessel shall cease to be a
Mortgaged Vessel from and after the Sale Date. A Qualified Substitute Vessel may
be substituted for a Mortgaged Vessel in certain circumstances and such
substituted vessel shall become a Mortgaged Vessel upon substitution in
accordance with the terms of the Indenture.
88
<PAGE> 93
"Net Cash Proceeds" is defined to mean, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes (whether or not such taxes will actually be paid or are payable) as a
result of such Asset Sale without regard to the consolidated results of
operations of Teekay and its Restricted Subsidiaries, taken as a whole, (iii)
payments made to repay Indebtedness or any other obligation outstanding at the
time of such Asset Sale that either (A) is secured by a Lien on the property or
assets sold or (B) is required to be paid as a result of such sale and (iv)
appropriate amounts to be provided by Teekay or any Restricted Subsidiary as a
reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP.
"Net Event of Loss Proceeds" is defined to mean, with respect to any Event
of Loss, the Event of Loss Proceeds from such Event of Loss net of related fees
and expenses and payments made to repay Indebtedness or any other obligation
outstanding at the time of such Event of Loss, provided that such Indebtedness
or other obligation is either (A) secured by a Lien on the property or assets
that suffered the Event of Loss or (B) required to be paid as a result of such
Event of Loss.
"Permitted Liens" means with respect to Teekay and Restricted Subsidiaries
(i) Liens for taxes, assessments, governmental charges or claims that are being
contested in good faith by appropriate legal proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made; (ii)
statutory Liens or Liens otherwise arising by operation of law of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens for crews' wages and Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (v) prior
to the Fall-away Event, charters, leases or subleases granted to others in the
ordinary course of business that are subject to the relevant Mortgage and that
do not materially interfere with the ordinary course of business of Teekay and
its Restricted Subsidiaries, taken as a whole; (vi) any interest or title of a
lessor in the property subject to any Capitalized Lease or operating lease;
(vii) Liens on property of, or on shares of stock or Indebtedness of, any
corporation (other than a Guarantor, if prior to the Fall-away Event, or Palm)
existing at the time such corporation becomes, or becomes a part of, any
Restricted Subsidiary; (viii) except in the case of a Guarantor, if prior to the
Fall-away Event, or Palm, Liens in favor of Teekay or any Restricted Subsidiary;
(ix) except in the case of a Guarantor, if prior to the Fall-away Event, or
Palm, Liens arising from the rendering of a final judgment or order against
Teekay or any Restricted Subsidiary that does not give rise to an Event of
Default; (x) except in the case of a Guarantor, if prior to the Fall-away Event,
or Palm, Liens securing reimbursement obligations with respect to letters of
credit that encumber documents and other property relating to such letters of
credit and products and proceeds thereof; (xi) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods and (xii) Liens for salvage.
"Qualified Substitute Vessel" is defined to mean, as of any date, a tanker
or oil/bulk/ore carrier of at least 80,000 dwt, which (i) was completed no
earlier than 1991 and is no older than one year older than
89
<PAGE> 94
the Vessel for which it is being substituted, (ii) is not a Mortgaged Vessel as
of such date, (iii) is Wholly Owned by a Wholly Owned Subsidiary of Teekay, (iv)
is registered under the laws of the Republic of Liberia or the Commonwealth of
the Bahamas and (v) has an Appraised Value at the Vessel Tender Date at least
equal to (and being in as good operating condition as) the vessel for which it
is being substituted, assuming compliance by the applicable Guarantor with all
the terms of the applicable Mortgage.
"Rating Agencies" is defined to mean (i) S&P and Moody's or (ii) if S&P or
Moody's or both of them are not making ratings of the Notes publicly available,
a nationally recognized U.S. rating agency or agencies, as the case may be,
selected by Teekay, which will be substituted for S&P or Moody's or both, as the
case may be.
"Rating Category" is defined to mean (i) with respect to S&P, any of the
following categories (any of which may include a "+" or "-"): AAA, AA, A, BBB,
BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect
to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C
and D (or equivalent successor categories), and (iii) the equivalent of any such
categories of S&P or Moody's used by another Rating Agency, if applicable.
"Rating Decline" is defined to mean that at any time within 90 days (which
period shall be extended so long as the rating of the Notes is under publicly
announced consideration for possible downgrade by any Rating Agency) after the
date of public notice of a Change of Control, or of the intention of the Company
or of any Person to effect a Change of Control, the rating of the Notes is
decreased by both Rating Agencies by one or more Gradations and the rating by
such Rating Agencies on the Notes following such downgrade is below Investment
Grade.
"Redemption Date", when used with respect to any Note to be redeemed, is
defined to mean the date fixed for such redemption by or pursuant to the
Indenture.
"Restricted Subsidiary" is defined to mean the Guarantors, if prior to the
Fall-away Event, Palm and any Subsidiary of Teekay that is not designated an
Unrestricted Subsidiary.
"Sale Excess Proceeds" is defined to mean (i) all amounts treated as Sale
Excess Proceeds under "--Redemptions--Mandatory Redemption Upon Sale of a
Mortgaged Vessel" and under the second paragraph of "--Certain Restrictive
Covenants--Limitation on Asset Sales" and (ii) the amount of excess Net Cash
Proceeds from Asset Sales not applied (or committed to be applied) as set forth
in subclause (i) of the third paragraph of "--Certain Restrictive
Covenants--Limitation on Asset Sales."
"Security Documents" has the meaning specified in the Indenture and
includes the Mortgages, Subsidiary Guarantees, Assignments of Time Charter,
Assignments of Freights and Hires, Assignments of Insurance, Pledge Agreements
and Cash Collateral Account Agreements.
"S&P" is defined to mean Standard & Poor's Ratings Group, a division of
McGraw Hill Inc., a New York Corporation and its successors.
"Subsidiary" is defined to mean, with respect to any Person, any business
entity of which more than 50% of the outstanding Voting Stock is owned directly
or indirectly by such Person and one or more other Subsidiaries of such Person;
provided that, except as the term "Subsidiary" is used in the definition of
"Unrestricted Subsidiary" set forth below, an Unrestricted Subsidiary shall not
be deemed to be a Subsidiary of the Company for purposes of the Indenture.
"Tangible Assets" of any Person means, at any date, the gross book value as
shown by the accounting books and records of such Person of all its property
both real and personal, less (i) the net book value of all its licenses,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
non-compete agreements or organizational expenses and other like intangibles,
(ii) unamortized Indebtedness discount and expenses, (iii) all reserves for
depreciation, obsolescence, depletion and amortization of its properties and
(iv) all other proper reserves which in accordance with generally accepted
accounting principles should be provided in connection with the business
conducted by such Person, provided, however, that, with respect to Teekay and
its Restricted Subsidiaries, adjustments
90
<PAGE> 95
following the date of the Indenture to the accounting books and records of the
Company and its Restricted Subsidiaries in accordance with Accounting Principles
Board Opinions Nos. 16 and 17 (or successor opinions there), or otherwise
resulting from the acquisition of control of Teekay by another Person shall not
be given effect.
"Trusts" is defined to mean, collectively, the Cirrus Trust, a trust
organized under the laws of the Turks and Caicos Islands, the JTK Trust, a trust
organized under the laws of the Bahamas, which as of December 31, 1995 owned
approximately 65.1% and 10.4% of the outstanding Common Stock of Teekay,
respectively.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of Teekay
(other than a Guarantor, if prior to the Fall-away Event, and Palm) that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary of Teekay (including any newly acquired or newly formed Subsidiary
(other than a Guarantor, if prior to the Fall-away Event, and Palm)) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, Teekay or any other Subsidiary of
Teekay that is not a Subsidiary of the Subsidiary to be so designated; provided
that either (A) the Subsidiary so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets greater than $1,000, that such designation
would be permitted under "--Certain Restrictive Covenants--Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that immediately after giving
effect to such designation (x) Teekay could incur $1.00 of additional
Indebtedness under the first paragraph of either "--Certain Restrictive
Covenants-- Limitation on Indebtedness" or, if after the Fall-away Event,
"--Covenants After Fall-away Event-- Limitation on Indebtedness" and (y) no
Default or Event of Default shall have occurred and be continuing or shall
result as a consequence thereof. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Vessel Percentage" is defined to mean as of and after the Closing Date and
prior to any subsequent adjustment as provided below, for each of the initial
seven Mortgaged Vessels, the percentage set forth below opposite such Mortgaged
Vessel:
<TABLE>
<CAPTION>
VESSEL PERCENTAGE
---------------------------- ----------
<S> <C>
Poul Spirit................. 15.5%
Torben Spirit............... 15.1
Senang Spirit............... 15.0
Mayon Spirit................ 13.6
Leyte Spirit................ 13.6
Luzon Spirit................ 13.6
Samar Spirit................ 13.6
-----
100.0%
=====
</TABLE>
provided, however, that each Vessel Percentage shall be adjusted in each case
upon the occurrence of, and after giving effect to, the delivery of any
Qualified Substitute Vessel as part of the Trust Estate pursuant to the terms of
the Indenture, an Event of Loss with respect to any Mortgaged Vessel, the sale
of any Mortgaged Vessel Asset or the release of any Mortgaged Vessel from the
Lien of this Indenture and the Security Documents, in each case effected in
accordance with the terms of the Indenture, to be, for each Mortgaged Vessel
remaining after such an occurrence, the percentage that the Appraised Value of
such Mortgaged Vessel at the time of and after giving effect to such occurrence
bears to the aggregate Appraised Value of the remaining Mortgaged Vessels at the
time of and after giving effect to such occurrence. Notwithstanding the
foregoing, if any Vessel Percentage is required to be calculated or
91
<PAGE> 96
adjusted at a time when cash is on deposit with the Trustee in the Investment
Account as part of the Trust Estate as a result of the sale of a Mortgaged
Vessel or the occurrence of an Event of Loss with respect to a Mortgaged Vessel,
the amount of such cash on deposit shall be deemed to be the Appraised Value of
such Vessel giving rise to such cash on deposit and such Vessel shall be deemed
to remain a Mortgaged Vessel for purposes of such computation or adjustment of
Vessel Percentage.
FRAUDULENT CONVEYANCE STATUTES
The making of the Subsidiary Guarantees and the granting of the Mortgages
might be subject to review under relevant fraudulent conveyance statutes (the
"Fraudulent Conveyance Statutes") in a bankruptcy proceeding or proceedings
involving one or more of the Guarantors. Due to the nature of the business of
Teekay and the Guarantors and uncertainty as to where a Mortgaged Vessel
foreclosure proceeding might be commenced, it is not possible to predict where
any such proceeding or attack might be brought or made or the law that the court
might apply, although applicable law would be likely to be the law of Liberia,
The Bahamas, the State of New York in the United States or the U.S. Bankruptcy
Code.
The following discussion is based, as to U.S. Bankruptcy and New York law,
on the advice of Perkins Coie, special counsel to the Company, as to Liberian
law, on the advice of Haight, Gardner, Poor & Havens, special Liberian counsel
to the Company, and, as to Bahamian law, on the advice of Graham, Thompson &
Co., Bahamian counsel to the Company.
Under U.S. Bankruptcy, New York or Liberian fraudulent conveyance law, if a
court were to find that, with respect to any particular Guarantor, at the time
the Subsidiary Guarantee was made or the security was granted (collectively, the
"Transfer") by such Guarantor, it (a) made such Transfer with actual intent to
hinder, delay, or defraud any present or future creditor or (b) received less
than a reasonably equivalent value or fair consideration for the Transfer and
(i) was insolvent at the time such Transfer was made or was rendered insolvent
by virtue of such Transfer, (ii) was engaged in a business or transaction, or
was about to engage in a business or transaction for which any property
remaining with such subsidiary was an unreasonably small capital or (iii)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as they matured (as the foregoing terms are defined in or interpreted under
the relevant Fraudulent Conveyance Statutes), such court could avoid the
Transfer in whole or in part. Generally, for the purposes of the Fraudulent
Conveyance Statutes, a company is considered insolvent at a particular time if
the sum of its debts (including probable liabilities or contingent obligations)
is greater than all of its property at a fair valuation, or if the present fair
salable value of its assets was then less than the amount that would be required
to pay its probable liabilities on its existing debts as they became absolute
and matured.
Under Bahamian fraudulent conveyance law, if a court were to find that, at
the time of a particular Transfer, the Guarantor made such Transfer with intent
to defraud any existing creditor and at an undervalue, such court could void the
Transfer to the extent necessary to satisfy the obligation of the Guarantor to
the creditor at whose instance the Transfer was challenged. The laws of the
Bahamas also provide that a Transfer would be deemed fraudulent and void, except
as against a good faith purchaser, payee or encumbrancer who gave valuable
consideration, if (a) made (i) when a Guarantor were unable to pay its debts as
they became due from its own money and (ii) with a view to giving a particular
creditor of the Guarantor a preference over other creditors and (b) the
Guarantor were to enter into a winding up within three months after the date of
the Transfer.
The proceeds of the sale of the Notes will be distributed to the Guarantors
and used to pay off debt. See "Use of Proceeds." To the extent of the funds
advanced by Teekay to any particular Guarantor (and since it is the view of
Teekay that the instant transaction can in no circumstances be considered an
attempt to hinder, defraud or delay creditors), the Transfer by any Guarantor
should not be considered a fraudulent transfer under the tests set forth above,
because such Guarantor has received fair or reasonably equivalent consideration
for such Transfer.
To the extent that the Subsidiary Guarantee by any Guarantor exceeds the
value of the funds distributed to it, the determination of whether the Transfer
in question is a fraudulent transfer depends on
92
<PAGE> 97
(1) whether the Transfer--a prerequisite for the funds received by such
Guarantor then used to pay off its mortgage or the other debt--so exceeds the
value and benefit received by such Guarantor that, at least to the extent of
such excess, the Guarantor did not receive reasonably equivalent value or fair
consideration for the Transfer; and, if the answer to the foregoing question is
"yes," then, under all but Bahamian law, (2) whether following the valuation of
the assets of such Guarantor, including its rights of indemnity and contribution
created in connection with the Subsidiary Guarantee, and also of its
liabilities, including an estimation of the value of the contingent liability
created by the Subsidiary Guarantee, it is determined that such Guarantor is or
has been rendered insolvent. The Subsidiary Guarantees and the other Security
Documents contain provisions limiting each Guarantor's maximum liability under
such agreements to a percentage of its Adjusted Net Assets (as defined in the
Subsidiary Guarantee) or the total amount of proceeds received by such Guarantor
from Teekay from the sale of the Notes. See "The Subsidiary Guarantees." While
there can be no assurance that a court, viewing the transaction with hindsight,
would determine that a particular Guarantor received reasonably equivalent value
or fair consideration for its transfer, or was not rendered insolvent by the
pertinent Transfer, to the extent it exceeded the value of the funds advanced to
that Guarantor, Teekay believes that each of the Guarantors will receive proper
consideration for its respective Transfer and that no such Guarantor will be
rendered insolvent by the contemplated Transfers. However, no assurance can be
given that a court would concur with such belief.
THE SUBSIDIARY GUARANTEES
Each Subsidiary Guarantee provides for the irrevocable and unconditional
guarantee by a Guarantor of the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of the principal of (and premium, if
any) and interest on the Notes and the payment of all fees, expenses and other
sums of money from time to time payable by Teekay under the Indenture and all
other Obligations. Each Subsidiary Guarantee also guarantees performance and
observance of all agreements, covenants and provisions contained in the
Indenture and the Security Documents. Each Subsidiary Guarantee provides that
the liability of each Guarantor under its Subsidiary Guarantee is absolute and
unconditional and extends to all amounts which constitute part of the
Obligations and would be owed by Teekay under the Indenture but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving Teekay. The
obligations of each Guarantor are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against each Guarantor to
enforce its Subsidiary Guarantee, irrespective of whether any action is brought
against the Company or whether the Company is joined in any such action or
actions. The liability of each Guarantor will not exceed the greater of (a) 95%
of such Guarantor's adjusted net assets on the date the Subsidiary Guarantee is
delivered, (b) 95% of its adjusted net assets on the date any payment is made
under the Subsidiary Guarantee and (c) the total amount of proceeds received by
such Guarantor from Teekay from the sale of the Notes.
Each Guarantor will irrevocably waive any claim or right that it may
acquire against the Company arising from the existence, payment, performance or
enforcement of the Guarantor's obligations under the Subsidiary Guarantee or the
Indenture by way of subrogation, reimbursement, exoneration, contribution or
indemnification under its Subsidiary Guarantee.
In the event that a Guarantor is required by any applicable law to make,
with respect to any payment to be made pursuant to its Subsidiary Guarantee, any
deduction or withholding for or on account of any taxes, assessments or other
governmental charges imposed on such payment by any governmental or taxing
authority (other than the United States or any political subdivision or taxing
authority thereof) the Guarantor will agree to pay such additional amount as may
be necessary in order that the net amount received by the Trustee in respect of
such payment will not be less than the amount of the payment the Trustee would
have received had no deduction or withholding been required; provided, however,
that the Guarantor shall not be required to pay any additional amount on account
of a tax, assessment or other governmental charge imposed by reason of any
present or former connection between a Holder of Notes (or between a fiduciary,
settlor, beneficiary, member or shareholder of, or possessor of a power over,
93
<PAGE> 98
such Holder, if such Holder is an estate, trust, partnership or corporation) and
the governmental or taxing authority, including, without limitation, such Holder
(or a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of
a power over, such Holder) having been a citizen or resident of the jurisdiction
of such governmental or taxing authority or treated as a resident thereof or
being or having been engaged in a trade or business therein or having or having
had a permanent establishment therein.
The Subsidiary Guarantees will terminate upon the occurrence of the
Fall-away Event. See "Description of the Notes -- Fall-away Event."
THE MORTGAGED VESSELS
The following vessels shall be mortgaged in favor of the Trustee to secure
the Notes and the obligations of each Guarantor under the Indenture and the
Security Documents:
<TABLE>
<CAPTION>
APPRAISED VALUE AS OF
COUNTRY DECEMBER 13, 1995
YEAR OF WHERE -----------------------------------
VESSEL DELIVERY BUILT FLAG DWT APPRAISAL NO. 1 APPRAISAL NO. 2
- ---------------------- -------- ------- -------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Poul Spirit........... 1995 Japan Liberian 98,600 $ 48.0 $ 47.5
Torben Spirit......... 1994 Japan Bahamian 98,500 46.5 46.0
Senang Spirit......... 1994 Japan Bahamian 95,649 46.0 46.0
Mayon Spirit.......... 1992 Japan Bahamian 98,507 42.0 41.5
Leyte Spirit.......... 1992 Japan Bahamian 98,744 42.0 41.5
Luzon Spirit.......... 1992 Japan Bahamian 98,629 42.0 41.5
Samar Spirit.......... 1992 Japan Bahamian 98,640 42.0 41.5
------ ------
Total............... $ 308.5 $ 305.5
====== ======
</TABLE>
Each of the Mortgaged Vessels is constructed with a double hull. The
appraised values of the Mortgaged Vessels set forth above have been determined,
at the Company's expense, by E.A. Gibson Shipbrokers Limited (Appraisal No. 1)
and Simpson, Spence & Young Shipbrokers Ltd. (Appraisal No. 2), each independent
ship brokers (the "Appraisers"). Each of the Appraisers is an internationally
recognized appraisal firm with respect to the appraisal of tankers and is one of
the firms that has traditionally been used by the Company and its creditors for
appraisal matters relating to the Company's debt agreements. No limitations were
imposed by the Company on either of the Appraisers on the scope of their
investigation or the procedures followed in rendering their appraisals. The
valuations were generally based upon the prevailing market for each Mortgaged
Vessel, assuming the presence of a willing buyer and a willing seller, and
assumptions by the Appraisers that each Mortgaged Vessel is in good condition
and charter-free. In performing their appraisals of the mortgaged vessels, the
Appraisers conducted procedures which, in their opinion, are standard among
London shipbrokers. From their internal databases (compiled from various sources
of publicly available information), each of the Appraisers reviewed the vessels'
main details and characteristics. They did not perform physical inspections of
the vessels. Each of the Appraisers then reviewed the available information
regarding market trends, charter rates and recent sales of comparable vessels in
order to arrive at their appraisal estimates. The valuation calculations
attempted to account for any pertinent differences in vessel characteristics
such as deadweight tonnage, and allowed 7% per year for age differences between
the Mortgaged Vessels and recently sold comparable vessels. The Company believes
that the Mortgaged Vessels are in better condition than the Appraisers'
assumptions as to the condition of such Mortgaged Vessels.
The Mortgages, together with all other Collateral securing the Obligations
of Teekay and the Guarantors under the Indenture and the Security Documents will
be released upon the occurrence of the Fall-away Event. See "Description of the
Notes--Fall-away Event."
94
<PAGE> 99
CHARTERS
Each of the Mortgaged Vessels has been time chartered to Palm under a
charter. The Palm Charters are based on an industry standard form and are
similar in all material respects except as set forth below.
General. The term and the charter hire clauses under each of the Palm
Charters provide for full amortization of the financings for the building of the
Mortgaged Vessel to which such Palm Charter relates. The Palm Charters for the
Poul Spirit, Torben Spirit, Senang Spirit, Mayon Spirit, Leyte Spirit, Luzon
Spirit, and the Samar Spirit began on 1995, 1994, 1994, 1992, 1992, 1992 and
1992, respectively. Upon issuance of the Notes, Teekay intends to cause Palm and
each of the Guarantors to amend each of the Palm Charters in order to provide
for a charter hire and a term such that the aggregate hire payable under the
Palm Charters will fully amortize the principal amount of the Notes. Each
Guarantor has a lien upon all of its Mortgaged Vessel's cargoes and sub-freights
as security for any amounts due under the Palm Charters, and Palm has a lien on
the Mortgaged Vessel as security for any amounts paid in advance and not earned,
the cost of fuel used, all amounts due Palm under the Palm Charters and for
claims for damages arising from any breach of the Palm Charters by the
Guarantor.
Off-hire. The revenue from the Mortgaged Vessels would be adversely
affected if any of the Mortgaged Vessels were out of service for a significant
period of time. The Palm Charters provide that in certain events a Mortgaged
Vessel will be considered off-hire, in which event it is likely that the
Mortgaged Vessel would not be available to Palm for chartering in the spot
charter market. The Company does not carry insurance covering the loss of
revenue resulting from a Mortgaged Vessel being out of service. Prolonged out of
service periods with respect to the Mortgaged Vessels would therefore adversely
affect the Company's cash flow from such Mortgaged Vessels, although the Company
believes that it could continue to meet its obligations to make principal and
interest payments on the Notes even if the amount of time the Mortgaged Vessels
were out of service rose significantly. The Mortgaged Vessels have never
incurred any significant off-hire since being delivered to the Company.
Termination. Each of the Palm Charters terminates if the Mortgaged Vessel
is lost, and also automatically terminates if the Mortgaged Vessel is
requisitioned or seized by any government authority, and such requisition or
seizure is the equivalent to requisition of title of the Mortgaged Vessel.
As of the date of this Prospectus, each of the Mortgaged Vessels was
operating on a spot voyage basis, the terms of which are set forth in a
recapitulation telex between Palm, as owner, and either a broker or charterer.
The recapitulation telex recites in detail the fundamental aspects of the
transaction: vessel, charterer, cargo, rate of hire, demurrage or overage fees,
port of loading, and port of unloading. The telex usually makes reference to a
standard form of charter-party and also recites any special provisions to be
included in such form. The parties' obligations are based on the recapitulation
telexes. The spot charter-party document is usually executed at a later date.
DRYDOCKING AND SURVEYS
Each of the Mortgaged Vessels is drydocked once every five years, the main
purpose of which is to inspect and maintain those areas of such Mortgaged Vessel
below the waterline. Drydocking usually takes one to two weeks. In addition, the
Company expects to purchase spare parts and perform repairs on its vessels from
time to time.
Since the average age of the Mortgaged Vessels is less than five years, and
because of the extensive and regular inspections carried out by Teekay, the
Company does not believe that it will incur in the foreseeable future any
material expenses on account of the results of inspections and drydocking.
95
<PAGE> 100
The following table sets forth the next periodic survey and drydocking
dates for the Mortgaged Vessels:
<TABLE>
<CAPTION>
ANNUAL INTERMEDIATE SPECIAL CLASSIFICATION
VESSEL DRYDOCKING SURVEY SURVEY SURVEY SOCIETY
- ------------------------------ ---------- ------ ------------ ------- --------------
<S> <C> <C> <C> <C> <C>
Poul Spirit................... 08/00 08/96 08/98 08/00 NKK
Torben Spirit................. 01/97 11/96 07/99 01/98 NKK
Senang Spirit................. 01/97 01/96 07/99 01/98 NKK
Mayon Spirit.................. 02/97 02/96 02/00 02/97 NKK
Leyte Spirit.................. 08/97 08/96 02/00 08/97 NKK
Luzon Spirit.................. 06/97 06/96 12/99 06/97 NKK
Samar Spirit.................. 11/97 11/96 05/00 11/97 NKK
</TABLE>
THE MORTGAGES
GENERAL
Each Guarantor will grant to the Trustee a Mortgage on its Mortgaged Vessel
to secure the payment of all sums of money (whether for principal, premium, if
any, interest, fees, expenses or otherwise) from time to time payable by such
subsidiary under its Subsidiary Guarantee, the payment of the principal of (and
premium, if any) and interest on the Notes, the payment of all other sums
payable by Teekay under the Indenture and the payment of all other sums payable
under the Security Documents. The Mortgages will be recorded in accordance with
the provisions of Liberian or Bahamian law, as applicable. The maximum liability
of each Guarantor under its Mortgage is limited to the same extent as such
Guarantor's maximum liability under its Subsidiary Guarantee. See "The
Subsidiary Guarantees."
CERTAIN COVENANTS
Each Mortgage contains, among other things, the following covenants:
Registration and Documentation of the Mortgaged Vessel. The Guarantor will
not permit its Mortgaged Vessel to be operated in any manner contrary to law,
will not engage in unlawful trade, carry any cargo that would expose the
Mortgaged Vessel to penalty, forfeiture or capture, and will not permit to be
done anything which can or may injuriously affect the registration of its
Mortgaged Vessel under the laws and regulations of the Republic of Liberia or
the Commonwealth of the Bahamas, as applicable, and will at all times keep its
Mortgaged Vessel duly documented thereunder.
Restrictions on Liens. Except for its time charter and the lien of the
Mortgage and certain other permitted liens, the Guarantor will not suffer to be
continued any lien, encumbrance or charge on its Mortgaged Vessel for longer
than 30 days after the same becomes due and payable and will pay or cause to be
discharged or make adequate provision for the satisfaction or discharge of all
claims or demands, or will cause its Mortgaged Vessel to be released or
discharged from any lien, encumbrance or charge therefor.
Maintenance of the Mortgaged Vessel. The Guarantor will at all times and
without cost or expense to the Trustee maintain and preserve, or cause to be
maintained and preserved, its Mortgaged Vessel (i) in good running order and
repair, so that the Mortgaged Vessel shall be, in every respect, seaworthy and
(ii) in at least as good condition as when originally delivered by her builder,
ordinary wear and tear excepted; and will keep the Mortgaged Vessel, or cause
her to be kept, in such condition as will entitle her to the highest
classification rating for vessels of the same type, size, age and flag in the
classification society, currently +1A1 Tanker (or its equivalent with Lloyd's
Registry of Shipping, currently +100A1), and annually will furnish the Trustee a
certificate by such classification society that such classification is
maintained.
Transfer of Flag or Sale of the Mortgaged Vessel. The Guarantor will not
transfer or change the flag or port of documentation of its Mortgaged Vessel,
except to the Commonwealth of the Bahamas or the
96
<PAGE> 101
Republic of Liberia as permitted by the terms of the Indenture. Except as
permitted by the terms of the Indenture, no Guarantor will sell, mortgage,
demise charter or transfer its Mortgaged Vessel.
Insurance. The Guarantor will at all times and at its own cost and expense
cause to be carried and maintained in respect of its Mortgaged Vessel insurance
payable in United States Dollars in amounts, against risks (including, without
limitation, marine hull and machinery (including excess value) insurance, marine
protection and indemnity insurance, war risks insurance and liability arising
out of pollution and the spillage or leakage of cargo and cargo liability
insurance) and in a form which is substantially equivalent to the coverage
carried by other responsible and experienced companies engaged in the operation
of vessels similar to its Mortgaged Vessel and with insurance companies,
underwriters, funds, mutual insurance associations or clubs of recognized
standing. No insurance will provide for a deductible amount in excess of
$1,000,000 per occurrence.
In the case of all marine and war risk hull and machinery policies, the
Guarantor will cause the Trustee to be named an additional insured and will use
its best efforts (and cause its insurance broker to use its best efforts) to
cause the insurers under such policies to waive any liability of the Trustee for
premiums or calls payable under such policies. No policy is to be cancelable or
subject to lapse without at least seven business days' prior notice to the
Trustee.
For purposes of insurance against total loss, each Mortgaged Vessel is to
be insured for an amount not less than its fair value and not less, when
aggregated with the insurance on the other Mortgaged Vessels, than an amount
equal to the aggregate outstanding principal amount of the Notes, premium, if
any, and accrued interest thereon. Unless the Trustee shall have otherwise
directed, any loss involving damage to a Mortgaged Vessel which is not in excess
of $1,000,000 may be paid directly for repair or salvage or to reimburse the
Guarantor for the same.
In the event of an actual, constructive or compromised total loss of its
Mortgaged Vessel, any adjustment or compromise of such loss by the Guarantor
will be at the highest amount reasonably obtainable, and all insurance or other
payments for such loss will be applied as set forth above under "Description of
the Notes -- Redemptions -- Mandatory Redemption Upon Loss of a Mortgaged
Vessel."
EVENTS OF DEFAULT AND REMEDIES
An Event of Default under the Indenture will constitute an Event of Default
under the Mortgages and, in case any one or more Events of Default under the
Mortgages shall have occurred and be continuing, then, in each and every such
case the Trustee will have the right to:
(1) declare immediately due and payable all of the Obligations (in
which case all of the same shall be immediately due), and bring suit at
law, in equity or in admiralty, as it may be advised, to recover judgment
for the Obligations and collect the same out of any and all property of the
Guarantor whether covered by the Mortgage or otherwise;
(2) exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable law;
(3) take and enter into possession of the Mortgaged Vessel, at any
time, wherever the same may be, without legal process and without being
responsible for loss or damage, and the Guarantors or other person in
possession forthwith upon demand of the Trustee will surrender to the
Trustee possession of the Mortgaged Vessel and the Trustee may, without
being responsible for loss or damage, hold, lay-up, lease, charter, operate
or otherwise use such Mortgaged Vessel for such time and upon such terms as
it may deem to be for its best advantage, and demand, collect and retain
all hire, freights, earnings, issues, revenues, income, profits, return
premiums, salvage awards or recoveries, recoveries in general average, and
all other sums due or to become due in respect of such Mortgaged Vessel or
in respect of any insurance thereon from any person whomsoever, in
accordance with the terms of the Mortgage; and
97
<PAGE> 102
(4) take and enter into possession of the Mortgaged Vessel, at any
time, wherever the same may be, without legal process, and if it seems
desirable to the Trustee and without being responsible for loss or damage,
sell such Mortgaged Vessel, at any place and at such time as the Trustee
may specify and in such manner and such place (whether by public or private
sale) as the Trustee may deem advisable, in accordance with the terms of
the Mortgage.
Any sale of a Mortgaged Vessel made in pursuance of the Trustee's right
under the Mortgage will operate to divest all right, title and interest of any
nature whatsoever of the Guarantor therein and thereto and shall bar any claim
from the Guarantor, its successors and assigns, and all persons claiming by,
through or under them.
All of the Mortgaged Vessels are registered under Liberian flag or Bahamian
flag. The Mortgage on the Liberian flag Mortgaged Vessel will be a preferred
mortgage lien under Liberian maritime law. The Mortgages on Bahamian flag
Mortgaged Vessels will have similar status under Bahamian law. Liberian law and
Bahamian law provide that such mortgages may be enforced by the mortgagee by
suit in admiralty in a proceeding against the vessel covered by the mortgage.
The priority that such a mortgage would have against the claims of other
lien creditors in an enforcement proceeding is generally determined by, and will
vary in accordance with, the law of the country where the proceeding is brought.
Liberian maritime law provides that a "preferred mortgage" is prior to all
claims except (1) costs imposed by the enforcing court, (2) liens against the
vessel arising prior in time to recording or filing of the mortgage, (3) liens
for damages arising out of tort, (4) wages of a stevedore when employed directly
by the owner, operator or master of the vessel, (5) wages of the crew of the
vessel and (6) general average and salvage, including contract salvage. Liberian
law also provides that unpaid vessel tonnage taxes, annual fees and penalties
imposed by the Liberian government are liens prior to the liens of the mortgage.
Bahamian law provides that a first priority ship mortgage has priority over all
other claims except (i) costs allowed by the court arising out of the arrest and
sale proceedings, (ii) wages and other sums due to the master, officers and
other members of the ship's complement in respect of their employment on the
ship, (iii) port, canal, and other waterway dues and pilotage dues and any other
outstanding fees payable under the Merchant Shipping Act of the Bahamas in
respect of the ship, (iv) claims against the owner in respect of loss of life or
personal injury occurring, whether on land or on water, in direct connection
with the operation of the ship, (v) claims against the owner, based on tort and
not capable of being based on contract, in respect of loss of or damage to
property occurring, whether on land or on water, in direct connection with the
operation of the ship, and (vi) claims for salvage, wreck removal and
contribution in general average.
Both Liberian ship mortgages and Bahamian ship mortgages may be enforced
against a vessel physically present in the United States, but the claim under
the mortgage would rank behind preferred maritime liens, including those for
supplies and other necessaries provided in the United States. Since the
Mortgaged Vessels will be trading primarily between the Arabian Gulf and the
West Coast of the United States, there is no assurance that, if enforcement
proceedings must be commenced against a Mortgaged Vessel, the Mortgaged Vessel
will be located in a jurisdiction having the same procedures and lien priorities
as Liberia, the Bahamas or the United States. Other jurisdictions may provide no
legal remedy at all for the enforcement of the Mortgages, or a remedy dependent
on court proceedings so expensive and time consuming as to be impractical.
Furthermore, certain jurisdictions, unlike Liberia, the Bahamas or the United
States, may not permit the Mortgaged Vessel to be sold prior to entry of a
judgment, entailing a long waiting time that could result in increased custodial
costs, deterioration in the condition of the Mortgaged Vessel and substantial
reduction in her value.
Since the Notes will also be secured by a pledge by Teekay of all the stock
of each of the Guarantors, enforcement of this pledge, including foreclosure,
may provide in effect an alternative method to transfer control over a Mortgaged
Vessel and to realize value from such collateral.
As additional security for the Obligations, each Guarantor will assign to
the Trustee, among other things, all of its rights under the Charter, the
earnings of its Mortgaged Vessel and the insurance carried
98
<PAGE> 103
thereon. Each Guarantor's maximum liability under such security agreements is
limited to the same extent as such Guarantor's maximum liability under its
Subsidiary Guarantee. See "The Subsidiary Guarantees."
All of the Collateral, including the Mortgages, will be released from the
Lien of the Indenture and the Security Documents upon the occurrence of the
Fall-away Event. See "Description of the Notes-- Fall-away Event."
TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of Notes by an initial purchaser thereof in the
Offering. Except where noted, it deals only with Notes held as capital assets by
United States Holders and does not deal with special situations, such as those
of dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Notes as a part of a hedging or conversion
transaction or a straddle or United States Holders whose "functional currency"
is not the U.S. dollar. Furthermore, the following discussion, as well as the
conclusions regarding certain issues of United States federal income tax law
that are reflected in that discussion, are based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings
and judicial decisions thereunder existing as of the date hereof, and upon the
advice received by the Company from special U.S. tax counsel. No assurance can
be given that changes in existing laws or regulations or their interpretation
will not occur, or that such changes will not be retroactive. Such authorities
may be repealed, revoked or modified so as to result in federal income tax
consequences different from those discussed below. The Company's and special
U.S. tax counsel's views have no binding effect or official status of any kind,
and no assurance can be given that the conclusions discussed below would be
sustained by a court if challenged by the Internal Revenue Service.
THE DISCUSSION BELOW IS A SUMMARY FOR GENERAL INFORMATION ONLY AND DOES NOT
ADDRESS ALL POTENTIAL TAX CONSIDERATIONS THAT DEPEND UPON CIRCUMSTANCES SPECIFIC
TO EACH INVESTOR. IN ADDITION THIS DISCUSSION DOES NOT ADDRESS THE TAX
CONSEQUENCES THAT MAY BE RELEVANT TO PARTICULAR CATEGORIES OF INVESTORS SUBJECT
TO SPECIAL TREATMENT UNDER CERTAIN UNITED STATES FEDERAL INCOME TAX LAWS, SUCH
AS DEALERS IN SECURITIES, TAX-EXEMPT ENTITIES, FINANCIAL INSTITUTIONS, INSURANCE
COMPANIES AND NON-UNITED STATES HOLDERS. PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP OR DISPOSITION OF NOTES SHOULD THEREFORE SATISFY THEMSELVES AS TO THE
OVERALL TAX CONSEQUENCES OF THEIR OWNERSHIP OF THE NOTES, INCLUDING THE NON-
UNITED STATES, STATE, AND LOCAL TAX CONSEQUENCES THEREOF (WHICH ARE NOT REVIEWED
HEREIN) AND CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR
CIRCUMSTANCES.
As used herein, a "United States Holder" of a Note means a Holder that is
an individual citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source. A "Non-United States Holder" of a Note is a Holder that is not a
United States Holder.
PAYMENTS OF INTEREST
The Company believes that the Notes will not be issued with "original issue
discount" ("OID") within the meaning of Section 1273 of the Code and the
Treasury Department Regulations issued under that section and other related
sections of the Code relating to OID ("OID Regulations"), and the Company will
report payments to Holders accordingly. Thus, any payment of interest on a Note
will
99
<PAGE> 104
generally be taxable to a United States Holder as ordinary income at the time it
is paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes.
MARKET DISCOUNT
If a United States Holder purchases a Note for an amount that is less than
its stated redemption price at maturity, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified de minimis amount. Under the market discount
rules, a United States Holder will be required to treat any principal payment
on, or any gain on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent of the market discount which has not
previously been included in income and is treated as having accrued on such Note
at the time of such payment or disposition. In addition, the United States
Holder may be required to defer, until the maturity of the Note or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest (as defined in the OID Regulations) will generally be
considered to have purchased the Note at a "premium." A United States Holder
generally may elect to amortize the premium over the remaining term of the Note
on a constant yield method. The amount amortized in any year will be treated as
a reduction of the United States Holder's interest income from the Note. Bond
premium on a Note held by a United States Holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Note. The election to amortize premium on a constant yield
method once made applies to all debt obligations held or subsequently acquired
by the electing United States Holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the Internal Revenue Service.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will, in general, be the
United States Holder's cost therefor, increased by any market discount
previously included in income by the United States Holder and reduced by any
amortized premium. Upon the sale, exchange or retirement of a Note, a United
States Holder will recognize gain or loss equal to the difference between the
amount realized upon the sale, exchange or retirement (less any accrued
interest, which will be taxable as such) and the adjusted tax basis of the Note.
In general, subject to the market discount rules discussed above, such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
at the time of sale, exchange or retirement the Note has been held for the
period specified for capital gain treatment (currently a holding period of more
than one year). Under current law, net capital gains of individuals are, under
certain circumstances, taxed at lower rates than items of ordinary income. The
deductibility of capital losses is subject to limitations.
100
<PAGE> 105
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to certain
payments of principal and interest paid on the Notes and to the proceeds of sale
of a Note made to United States Holders other than certain exempt recipients. A
31 percent backup withholding tax will apply to such payments if the United
States Holder fails to provide a correct taxpayer identification number or
certification of exempt status or fails to report in full dividend and interest
income or otherwise fails to comply with applicable requirements of the backup
withholding rules.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF ANY INVESTMENT IN THE NOTES, INCLUDING
THE APPLICATION OF UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX
LAWS.
LIBERIAN TAXATION
Based on the advice of Haight, Gardner, Poor & Havens, special Liberian
counsel to the Company, since (i) the Company is and intends to maintain its
status as a "nonresident Liberian entity" under the Liberian Internal Revenue
Code, (ii) the Company is not now carrying on, and in the future does not expect
to carry on, any operations within the Republic of Liberia, and (iii) the Notes
and all related documentation will be executed outside the Republic of Liberia,
and assuming that the holders of the Notes will neither reside in, maintain
offices in, nor engage in business in, the Republic of Liberia, under current
Liberian law no taxes or withholding will be imposed by the Republic of Liberia
on payments to be made in respect of the Notes and the Subsidiary Guarantees.
BAHAMIAN TAXATION
Based on the advice of Graham, Thompson & Co., Bahamian counsel to the
Company, under current Bahamian law no taxes or withholding will be imposed by
The Bahamas on payments to be made in respect of the Notes and the Subsidiary
Guarantees.
101
<PAGE> 106
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, Teekay has agreed to sell to each of the Underwriters named below,
and each of the Underwriters, has severally agreed to purchase from Teekay, the
principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
-------------
<S> <C>
Goldman, Sachs & Co............................................ $
Morgan Stanley & Co. Incorporated..............................
Smith Barney Inc...............................................
-------------
Total.................................................... $
=============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes offered hereby,
if any are taken.
The Underwriters propose to offer the Notes in part directly to retail
purchasers at the initial public offering price set forth on the cover page of
this Prospectus, and in part to certain securities dealers at such price less a
concession of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession of not in excess of % of
the principal amount of the Notes to certain brokers and dealers. After the
Notes are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes and the Guarantees offered hereby and certain
legal matters will be passed upon for Teekay and the Guarantors by Perkins Coie,
Portland, Oregon, with respect to matters of United States law, and certain
legal matters will be passed upon for Teekay and the Guarantors by Haight,
Gardner, Poor & Havens, New York, New York, with respect to matters of Liberian
law and U.S. Maritime law, and by Graham, Thompson & Co., Nassau, The Bahamas,
with respect to matters of Bahamian law. Certain legal matters will be passed
upon for the Underwriters by Shearman & Sterling, New York, New York, with
respect to matters of United States law.
EXPERTS
The consolidated financial statements of Teekay and its subsidiaries as of
March 31, 1995 and 1994, and for the year ended March 31, 1995, the eleven-month
period ended March 31, 1994 and the year ended April 30, 1993, included herein
and elsewhere in the Registration Statement have been audited by Ernst & Young,
independent chartered accountants, as set forth in their report appearing
elsewhere herein and in the Registration Statement and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing. The consolidated financial statements and schedule of Teekay and
its subsidiaries incorporated in this Prospectus by reference to the Annual
Report of Teekay on Form 20-F, as amended, for the fiscal year ended March 31,
1995, have been audited by Ernst & Young, independent chartered accountants, as
indicated in their report with respect thereto, and
102
<PAGE> 107
have been so incorporated in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the
six-month periods ended September 30, 1995 and 1994, included herein, the
independent chartered accountants have reported that they applied limited
procedures in accordance with professional standards for a review of such
information. However, their report with respect thereto, included herein, states
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the
review procedures applied. The independent chartered accountants are not subject
to the liability provisions of section 11 of the Securities Act for their report
on the unaudited interim financial information because that report is not a
"report" or a "part" of the registration statement prepared or certified by the
auditors within the meaning of section 7 or 11 of the Securities Act.
103
<PAGE> 108
TEEKAY SHIPPING CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Auditors' Report....................................................................... F-3
Accountants' Review Engagement Report.................................................. F-4
Consolidated Statements of Income and Retained Earnings for the six-month periods ended
September 30, 1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994
and April 30, 1993................................................................... F-5
Consolidated Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and
1994................................................................................. F-6
Consolidated Statements of Cash Flows for the six-month periods ended September 30,
1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994 and April 30,
1993................................................................................. F-7
Notes to the Consolidated Financial Statements......................................... F-8
Schedule A to the Consolidated Financial Statements.................................... F-22
Auditors' Report....................................................................... F-27
ANDROS SPIRIT INC.
Statements of Income and Retained Earnings for the six-month periods ended September
30, 1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994 and
April 30, 1993.................................................................... F-28
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and 1994......... F-29
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal periods ended March 31, 1995 and 1994 and April 30, 1993....... F-30
EXUMA SPIRIT INC.
Statements of Income and Retained Earnings for the six-month periods ended September
30, 1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994 and
April 30, 1993.................................................................... F-31
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and 1994......... F-32
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal periods ended March 31, 1995 and 1994 and April 30, 1993....... F-33
NASSAU SPIRIT INC.
Statements of Income and Retained Earnings for the six-month periods ended September
30, 1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994 and
April 30, 1993.................................................................... F-34
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and 1994......... F-35
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal periods ended March 31, 1995 and 1994 and April 30, 1993....... F-36
SENANG SPIRIT INC.
Statements of Income and Retained Earnings for the six-month periods ended September
30, 1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994........ F-37
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and 1994......... F-38
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal periods ended March 31, 1995 and 1994.......................... F-39
VSSI APPIAN INC.
Statements of Income and Retained Earnings for the six-month periods ended September
30, 1995 and 1994 and for the fiscal periods ended March 31, 1995 and 1994 and
April 30, 1993.................................................................... F-40
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and 1994......... F-41
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal periods ended March 31, 1995 and 1994 and April 30, 1993....... F-42
</TABLE>
F-1
<PAGE> 109
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
VSSI ATLANTIC INC.
Statement of Income and Retained Earnings for the six-months ended September 30, 1995
and 1994 and for the fiscal periods ended March 31, 1995 and 1994................. F-43
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995 and 1994......... F-44
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal periods ended March 31, 1995 and 1994 and April 30, 1993....... F-45
VSSI OCEANS INC.
Statements of Income and Retained Earnings for the six-month period ended
September 30, 1995................................................................ F-46
Balance Sheets as at September 30, 1995 and 1994 and March 31, 1995.................. F-47
Statements of Cash Flows for the six-month periods ended September 30, 1995 and 1994
and for the fiscal year ended March 31, 1995...................................... F-48
Notes to the Financial Statements (for ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU
SPIRIT INC., SENANG SPIRIT INC., VSSI APPIAN INC., VSSI ATLANTIC INC., AND VSSI
OCEANS INC.)......................................................................... F-49
</TABLE>
F-2
<PAGE> 110
AUDITORS' REPORT
To the Board of Directors
TEEKAY SHIPPING CORPORATION
We have audited the accompanying consolidated balance sheets of Teekay
Shipping Corporation and subsidiaries as of March 31, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash flows
for the year ended March 31, 1995 and the eleven month period ended March 31,
1994 and the year ended April 30, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Teekay Shipping Corporation and subsidiaries at March 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the year ended
March 31, 1995 and the eleven month period ended March 31, 1994 and the year
ended April 30, 1993 in conformity with accounting principles generally accepted
in the United States.
Nassau, Bahamas,
May 15, 1995 (except for Note 16, ERNST & YOUNG
which is as of December 15, 1995). Chartered Accountants
F-3
<PAGE> 111
REVIEW ENGAGEMENT REPORT
To the Board of Directors
TEEKAY SHIPPING CORPORATION
We have reviewed the accompanying consolidated balance sheets of Teekay
Shipping Corporation and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash flows
for the six-month periods ended September 30, 1995 and 1994. These consolidated
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards generally accepted in
the United States. 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 conducted 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 accompanying consolidated financial statements referred to
above for them to be in conformity with accounting principles generally accepted
in the United States.
Nassau, Bahamas ERNST & YOUNG
December 15, 1995 Chartered Accountants
F-4
<PAGE> 112
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED MARCH YEAR ENDED
--------------------------- MARCH 31, 31, APRIL 30,
1995 1994 1995 1994 1993
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
NET VOYAGE REVENUES
Voyage revenues..................... $ 160,944 $ 162,771 $ 319,966 $ 317,742 $ 336,994
Voyage expenses..................... 43,452 42,515 84,957 81,052 108,805
------------ ------------ ------------ ------------- ------------
Net voyage revenues................. 117,492 120,256 235,009 236,690 228,189
------------ ------------ ------------ ------------- ------------
OPERATING EXPENSES
Vessel operating expenses (note
3)................................ 33,496 38,446 72,723 73,597 79,649
Depreciation and amortization....... 40,956 48,238 96,435 89,902 97,611
General and administrative (note
3)................................ 8,812 8,146 15,018 14,063 14,014
------------ ------------ ------------ ------------- ------------
83,264 94,830 184,176 177,562 191,274
------------ ------------ ------------ ------------- ------------
Income from vessel operations....... 34,228 25,426 50,833 59,128 36,915
------------ ------------ ------------ ------------- ------------
Other items
Interest expense.................... (31,230) (31,364) (64,321) (48,064 ) (47,374)
Interest income..................... 3,182 2,903 5,904 2,904 1,156
Other income (notes 3 and 12)....... 4,364 979 11,848 11,777 37,862
------------ ------------ ------------ ------------- ------------
(23,684) (27,482) (46,569) (33,383 ) (8,356)
------------ ------------ ------------ ------------- ------------
Income (loss) before foreign
currency exchange gain (loss)..... 10,544 (2,056) 4,264 25,745 28,559
Foreign currency exchange gain
(loss)............................ (513) 39 991 (1,532 ) (77,917)
------------ ------------ ------------ ------------- ------------
Net income (loss) from continuing
operations........................ 10,031 (2,017) 5,255 24,213 (49,358)
Net income from discontinued
operations (note 4)............... 5,945 1,890
------------ ------------ ------------ ------------- ------------
Net income (loss) before cumulative
effect of accounting change....... 10,031 (2,017) 5,255 30,158 (47,468)
Cumulative effect of change in
accounting for marketable
securities (notes 1 and 5)........ 1,113
------------ ------------ ------------ ------------- ------------
Net income (loss)................... 10,031 (2,017) 6,368 30,158 (47,468)
Retained earnings, beginning of
period............................ 406,547 400,179 400,179 370,021 409,989
Exchange of redeemable preferred
stock (note 10)................... (60,000)
Contribution arising on continuity
of interest combination (note
1)................................ 7,500
------------ ------------ ------------ ------------- ------------
Retained earnings, end of the
period............................ $ 356,578 $ 398,162 $ 406,547 $ 400,179 $ 370,021
========== ========== ========== ============ ==========
Earnings (loss) per share amounts (note 1)
Continuing operations............. $ 0.46 $ (0.11) $ 0.29 $ 1.35 $ (2.74)
Cumulative effect of change in
accounting for marketable
securities...................... $ 0.06
Net income (loss) per common
share........................... $ 0.46 $ (0.11) $ 0.35 $ 1.68 $ (2.64)
Weighted average number of common
shares outstanding................ 21,865,688 18,000,000 18,000,000 18,000,000 18,000,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 113
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AS AT SEPTEMBER 30, AS AT MARCH 31,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash......................................... $ 60,465 $ 28,093 $ 16,500 $ 38,614
Marketable securities (notes 5 and 12)....... 48,802 67,986 69,239 68,632
Restricted cash (note 7)..................... 3,623 6,828 7,634 6,338
Accounts receivable
- -- trade..................................... 20,948 16,516 16,875 18,061
- -- vessel sales (note 12).................... 17,283 4,877
- -- other..................................... 2,812 6,534 3,271 5,776
Prepaid expenses and other assets............ 13,574 14,196 13,273 10,893
---------- ---------- ---------- ----------
Total current assets.................. 150,224 140,153 144,075 153,191
---------- ---------- ---------- ----------
Vessels and equipment (notes 1, 7, 8,
14 and 16)
At cost, less accumulated depreciation
(September 30, 1995--$343,838;
1994--$311,245;
March 31, 1995 -- $312,281;
1994--$270,833)............................ 1,152,171 1,193,580 1,142,972 1,232,754
Acquired under capital lease, less
accumulated amortization of $398........... 49,813
Advances on vessels.......................... 2,481 5,066
---------- ---------- ---------- ----------
Total vessels and equipment........... 1,201,984 1,196,061 1,148,038 1,232,754
---------- ---------- ---------- ----------
Investment................................... 4,468 8,807 3,758 8,407
Other assets................................. 9,240 11,033 10,603 10,795
---------- ---------- ---------- ----------
$ 1,365,916 $ 1,356,054 $ 1,306,474 $ 1,405,147
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable (note 3).................... $ 10,542 $ 13,738 $ 11,480 $ 11,306
Accrued liabilities (note 6)................. 12,542 16,356 13,054 15,050
Current portion of long-term debt
(note 7 and 11)............................ 58,906 86,474 74,479 89,482
Current portion of capital lease obligation
(note 8 and 11)............................ 2,709
---------- ---------- ---------- ----------
Total current liabilities............. 84,699 116,568 99,013 115,838
---------- ---------- ---------- ----------
Long-term debt (note 7 and 11)............... 652,969 808,323 768,395 856,129
Capital lease obligation (note 8 and 11)..... 41,200
---------- ---------- ---------- ----------
Total liabilities..................... 778,868 924,891 867,408 971,967
---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY
Capital stock (note 10)...................... 230,613 33,001 33,001 33,001
Retained earnings............................ 356,578 398,162 406,547 400,179
Less net unrealized loss on marketable
securities (notes 1 and 5)................. 143 482
---------- ---------- ---------- ----------
Total stockholders' equity............ 587,048 431,163 439,066 433,180
---------- ---------- ---------- ----------
$ 1,365,916 $ 1,356,054 $ 1,306,474 $ 1,405,147
========== ========== ========== ==========
</TABLE>
Commitments and contingencies (note 11)
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 114
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
----------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash provided by (used for)
OPERATING ACTIVITIES
Net income (loss) from continuing
operations................................. $ 10,031 $ (2,017) $ 5,255 $ 24,213 $ (49,358)
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization.............. 40,956 48,238 96,435 89,902 97,611
Foreign currency exchange loss (gain)...... (84) (305) (1,050) 2,583 76,728
Gain on disposition of assets.............. (3,728) (3,698) (18,245) (12,347) (37,213)
Loss on marketable securities.............. 2,719 1,553
Loss on available-for-sale securities...... 110 4,303
Equity loss (income) (net of dividend
received: March 31, 1994--$500).......... (704) 2,089 (483) (441)
Minority interest.......................... (19) (208)
Other...................................... 709
Change in non-cash working capital items
related to continuing operations (note
13)...................................... (5,402) 6,301 (1,263) 11,966 (3,085)
---------- ---------- ---------- ------------- ----------
Net cash flow from continuing operations..... 41,888 51,238 87,505 117,387 84,034
Net cash flow from discontinued operations... 347 4,492
---------- ---------- ---------- ------------- ----------
Net cash flow from operating activities...... 41,888 51,238 87,505 117,734 88,526
---------- ---------- ---------- ------------- ----------
FINANCING ACTIVITIES
Proceeds from long-term debt................. 223,000 220,000 147,782
Scheduled repayments of long-term debt....... (34,880) (44,147) (87,570) (37,067) (20,750)
Prepayments of long-term debt................ (317,901) (6,533) (15,033) (132,416) (92,100)
Scheduled payments on capital lease
obligations................................ (640) (18,472) (13,139)
Prepayments of capital lease obligations..... (110,839) (39,827)
Decrease (increase) in restricted cash....... 4,011 (490) (1,296) 8,143 (1,653)
Net proceeds from stock issuance............. 137,613
Net capital contribution..................... 7,500
Payment received on direct financing
leases..................................... 2,241
Capitalized loan costs....................... (866) (942) (1,565) (9,955)
Financing activities associated with
discontinued operations.................... (20,077) (9,894)
---------- ---------- ---------- ------------- ----------
Net cash flow from financing activities...... 10,337 (52,112) (105,464) (100,683) (19,840)
---------- ---------- ---------- ------------- ----------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (net
of
capital lease financing of: September 30,
1995--$44,550; 1994--$Nil; March 31,
1995--$Nil; 1994--$97,776; April 30, 1993--
$144,696).................................. (47,527) (4,273) (7,465) (65,733) (190,037)
Expenditures for drydocking.................. (4,193) (7,121) (11,917) (13,296) (16,440)
Proceeds from disposition of assets.......... 22,794 4,220 16,817 86,351 156,909
Repayments of advances to investee........... 2,650 1,479
Increase in marketable securities............ (2,073) (70,185)
Proceeds on sale of available-for-sale
securities................................. 53,332 110,806
Purchases of available-for-sale securities... (32,666) (115,085)
Other........................................ (400) 39 (50) (3,563)
Investing activities associated with
discontinued operations.................... 35,706 5,497
---------- ---------- ---------- ------------- ----------
Net cash flow from investing activities...... (8,260) (9,647) (4,155) (27,207) (46,155)
---------- ---------- ---------- ------------- ----------
(Decrease) increase in cash.................. 43,965 (10,521) (22,114) (10,156) 22,531
Cash, beginning of the period................ 16,500 38,614 38,614 48,770 26,239
---------- ---------- ---------- ------------- ----------
Cash, end of the period...................... $ 60,465 $ 28,093 $ 16,500 $ 38,614 $ 48,770
========= ========= ========= ========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 115
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
On April 30, 1993, Teekay Shipping Corporation ("Teekay") acquired 100% of
the outstanding stock of Palm Shipping Inc. ("Palm"), an affiliated company, for
nominal consideration. This transaction has been presented using the continuity
of interest method of accounting under which it is assumed the companies have
been combined from their inception. Accordingly, the consolidated balance sheets
include the assets and liabilities of Teekay and Palm at their carrying values,
after adjustments to conform the accounting policies of the two companies, and
the consolidated statements of income and retained earnings and cash flows
include the results of their operations for all years presented.
On March 31, 1995, Teekay acquired 100% of the outstanding stock of Teekay
Shipping Limited ("TSL"), an affiliated company, for cash consideration of $1.27
million representing the net book value of TSL at March 31, 1995. The impact of
this transaction on the financial position and results of operations of Teekay
is not considered significant. The assets and liabilities of TSL have been
combined with those of Teekay effective March 31, 1995. Teekay's results of
operations include those of TSL subsequent to that date.
In the opinion of management, the unaudited interim consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals), necessary to present fairly, in all material respects, the Company's
consolidated financial position as at September 30, 1995 and 1994 and the
related consolidated results of operations and cash flows for the six-month
periods ended September 30, 1995 and 1994. The results of operations for the
six-month period ended September 30, 1995 are not necessarily indicative of
those for a full fiscal year.
Reporting currency
The consolidated financial statements are stated in U.S. dollars because
the Company operates in international shipping markets which utilize the U.S.
dollar as the functional currency.
Consolidation
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States. They include the
accounts of Teekay Shipping Corporation (which is incorporated under the laws of
Liberia) and its wholly owned or controlled subsidiaries (the "Company").
Significant intercompany items and transactions have been eliminated upon
consolidation.
F-8
<PAGE> 116
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Change in fiscal year end
The Company changed its fiscal year end from April 30 to March 31,
effective March 31, 1994. The following is a summary of selected financial
information for the comparative twelve month periods ended March 31, 1995 and
1994, and the comparative eleven-month periods ended March 31, 1994 and 1993,
respectively:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
MARCH 31,
---------------------------
1995 1994
--------- -----------
<S> <C> <C>
(UNAUDITED)
RESULTS OF OPERATIONS
Voyage revenues................................................ $ 319,966 $ 344,960
Voyage expenses................................................ 84,957 88,974
Vessel operating expenses...................................... 72,723 80,738
Depreciation and amortization.................................. 96,435 97,300
General and administrative expenses............................ 15,018 15,208
Income from vessel operations.................................. 50,833 62,740
Interest expense............................................... (64,321) (52,709)
Interest income................................................ 5,904 3,046
Other income................................................... 11,848 12,857
Income before foreign currency exchange gain (loss)............ 4,264 25,934
Foreign currency exchange gain (loss).......................... 991 (43)
Net income from continuing operations.......................... 5,255 25,891
Net income from discontinued operations........................ 6,103
Cumulative effect of change in accounting for marketable
securities................................................... 1,113
Net income..................................................... 6,368 31,994
CASH FLOWS
Net cash flow from continuing operations....................... 87,505 125,189
Net cash flow from discontinued operations..................... 505
Net cash flow used for financing activities.................... (105,464) (144,592)
Net cash flow provided by (used for) investing activities...... (4,155) 7,990
</TABLE>
F-9
<PAGE> 117
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
MARCH 31,
---------------------------
1994 1993
--------- -----------
<S> <C> <C>
(UNAUDITED)
RESULTS OF OPERATIONS
Net voyage revenues............................................ $ 236,690 $ 205,021
Income from vessel operations.................................. 59,128 33,303
Income before foreign currency exchange loss................... 25,745 28,370
Foreign currency exchange loss................................. 1,532 79,406
Net income (loss) from continuing operations................... 24,213 (51,036)
Net income from discontinued operations........................ 5,945 1,732
Net income (loss).............................................. 30,158 (49,304)
CASH FLOWS
Net cash flow from continuing operations....................... 117,387 76,232
Net cash flow from discontinued operations..................... 347 4,334
Net cash flow provided by (used for) financing activities...... (100,683) 24,069
Net cash flow used for investing activities.................... (27,207) (81,352)
</TABLE>
Investment
The Company's 50% interest in Viking Consolidated Shipping Corp. is carried
at the Company's original cost plus its proportionate share of the undistributed
net income.
Operating revenues and expenses
Voyage revenues and expenses are recognized on the percentage of completion
method of accounting. Estimated losses on voyages are provided for in full at
the time such losses become evident. The consolidated balance sheets reflect the
deferred portion of revenues and expenses applicable to subsequent periods.
Vessel expenses comprise all expenses relating to the operation of vessels,
including crewing, repairs and maintenance, insurance, stores and lubes, and
miscellaneous expenses including communications. Voyage expenses comprise all
expenses relating to particular voyages, including bunker fuel expenses, port
fees, canal tolls, and brokerage commissions.
Marketable securities
The Company adopted the Statement of Financial Accounting Standards Board
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("FAS 115") for the year ended March 31, 1995. In applying FAS 115,
investments in marketable securities have been classified by management as
available-for-sale securities and are carried at fair value. Net unrealized
gains or losses on available-for-sale securities are reported as a separate
component of stockholders' equity. The cumulative effect on opening retained
earnings from application of this Statement has been reflected separately as an
adjustment to net income for the year (see Note 5).
F-10
<PAGE> 118
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Vessels and equipment
All pre-delivery costs incurred during the construction of new buildings,
including interest costs, and supervision and technical costs are capitalized.
The acquisition cost and all costs incurred to restore used vessel purchases to
the standard required to properly service the Company's customers are
capitalized. Depreciation is calculated on a straight-line basis over a vessel's
useful life, estimated by the Company to be twenty years from the date a vessel
is initially placed in service.
Interest costs capitalized to vessels and equipment for the six-month
periods ended September 30, 1995 and 1994 aggregated $79,000 and $63,000,
respectively, and for the year ended March 31, 1995, the eleven-month period
ended March 31, 1994, and the year ended April 30, 1993 aggregated $151,000,
$1,653,000, and $5,276,000, respectively.
Expenditures incurred during drydocking are capitalized and amortized on a
straight-line basis over the period until the next anticipated drydocking. When
significant drydocking expenditures recur prior to the expiry of this period,
the remaining balance of the original drydocking is expensed in the month of the
subsequent drydocking. Drydocking amortization for the six-month periods ended
September 30, 1995 and 1994 aggregated $4,180,000 and $4,966,000, respectively,
and for the year ended March 31, 1995, the eleven month period ended March 31,
1994, and the year ended April 30, 1993 aggregated $10,281,000, $11,831,000 and
$16,808,000, respectively.
Vessels acquired pursuant to bareboat hire purchase agreements are
capitalized as capital leases and are amortized over the estimated useful life
of the acquired vessel.
Effective April 1, 1995, the Company revised its estimates of the residual
values of its vessels. The effect of this change in estimated residual values
was to reduce depreciation expense for the six-month period ended September 30,
1995 by $4.8 million (or $0.22 per common share).
Other assets
Loan costs, including fees, commissions and legal expenses, are capitalized
and amortized over the term of the relevant loan.
Interest rate swap agreements
The differential to be paid or received is accrued as interest rates change
and is recognized as an adjustment to interest expense.
Interest rate cap agreements
Premiums paid for interest rate cap agreements are recorded at cost and
amortized over the lives of the individual contracts.
Forward contracts
The Company enters into forward contracts as a hedge against changes in
foreign exchange rates. Market value gains and losses are recognized and the
resulting credit or debit offsets the effect of increases or decreases in
foreign exchange gains or losses.
F-11
<PAGE> 119
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Cash flows
Cash interest paid during the six-month periods ended September 30, 1995
and 1994 aggregated $31,895,000 and $32,421,000, respectively, and for the year
ended March 31, 1995, the eleven-month period ended March 31, 1994, and for the
year ended April 30, 1993 totalled $65,358,000, $49,456,000, and $50,893,000,
respectively.
The Company classifies all highly liquid investments with a maturity date
of three months or less when purchased to be included in cash.
Income taxes
The legal jurisdictions of the countries in which the Company and its
subsidiaries are incorporated do not impose income taxes upon shipping-related
activities.
Earnings (loss) per share
Earnings (loss) per share is based upon the weighted average number of
common shares outstanding during each period, after giving effect to the 1 for 2
reverse stock split (See Note 10 -- Capital Stock). Stock options have not been
included in the computation of earnings (loss) per share since their effect
thereon would not be material.
2. BUSINESS OPERATIONS
The Company is engaged in the ocean transportation of petroleum cargoes
worldwide through the ownership and operation of a fleet of tankers. All of the
Company's revenues are earned in international markets.
3. CONTRACTUAL RELATIONSHIPS
Prior to the acquisition of TSL (see Note 1--Basis of presentation), TSL
and its affiliated companies rendered administrative, operating and ship
management services to the Company in return for a monthly fee and commissions
at rates considered usual and customary to the industry. Amounts payable to TSL
and its affiliated companies related to these services at September 30, 1995 and
1994 amounted to $NIL and $1,825,000, respectively, and at March 31, 1995, March
31, 1994 amounted to $NIL and $1,604,000, respectively.
Fees incurred, included in general and administrative expenses, for the
six-month periods ended September 30, 1995 and 1994 aggregated $NIL and
$4,386,000, respectively, and for the year ended March 31, 1995, the
eleven-month period ended March 31, 1994, and the year ended April 30, 1993
aggregated $7,845,000, $8,074,000 and $9,174,000, respectively. Commissions
incurred, included in general and administrative expenses, for the six-month
periods ended September 30, 1995 and 1994 aggregated $NIL and $2,072,000,
respectively, and the year ended March 31, 1995, the eleven-month period ended
March 31, 1994, and the year ended April 30, 1993 aggregated $3,981,000,
$3,956,000 and $4,109,000, respectively. Commissions incurred, related to vessel
dispositions, for the six-month periods ended September 30, 1995 and 1994
aggregated $NIL and $43,500, respectively, and the year ended March 31, 1995,
the eleven-month period ended March 31, 1994, and the year ended April 30, 1993
aggregated $295,000, $579,000 and $NIL, respectively.
F-12
<PAGE> 120
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
4. DISCONTINUED OPERATIONS
In October 1992, the Company adopted a plan to divest its 50% investment in
Baltimar Overseas Limited ("Baltimar"), previously accounted for as a controlled
subsidiary, in order to focus its resources on the tanker shipping industry.
Baltimar operated a fleet of multipurpose dry cargo vessels through eighteen
single purpose shipping companies. On April 30, 1993, the Company entered into
an agreement to exchange its entire interest in Baltimar in return for the
shares of nine of Baltimar's single purpose shipping companies. No gain or loss
was recognized on this transaction. The vessels were sold in December 1993 for a
total sales price of $37.3 million resulting in a net gain of $5.7 million.
The amounts shown as discontinued operations in the accompanying
consolidated statements of income and retained earnings for 1993 represent the
results of operations prior to the plan of discontinuance.
Revenues from discontinued operations for the eleven-month period ended
March 31, 1994 and for the year ended April 30, 1993 amounted to $8,653,000, and
$27,195,000, respectively.
5. INVESTMENTS IN MARKETABLE SECURITIES
<TABLE>
<CAPTION>
APPROXIMATE
GROSS GROSS MARKET AND
UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES AMOUNT
-------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
September 30, 1995
Available-For-Sale Securities................ $ 48,945 $ 127 $ 270 $ 48,802
======== ======== ======== ==========
September 30, 1994
Available-For-Sale Securities................ $ 68,986 $ 322 $ 1,322 $ 67,986
======== ======== ======== ==========
March 31, 1995
Available-For-Sale Securities................ $ 69,721 $ 450 $ 932 $ 69,239
======== ======== ======== ==========
March 31, 1994
Available-For-Sale Securities................ $ 69,745 $ 20 $ 1,133 $ 68,632
======== ======== ======== ==========
</TABLE>
The cost and approximate market value of available-for-sale debt securities
by contractual maturity, as at September 30, 1995 and March 31, 1995 are shown
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------------ ------------------------
APPROXIMATE APPROXIMATE
MARKET AND MARKET AND
CARRYING CARRYING
COST AMOUNT COST AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Less than one year.......................... $ 34,167 $ 34,052 $ 44,767 $ 44,424
Due after one year through five years....... 12,820 12,792 24,954 24,815
Due after 5 years........................... 1,958 1,958
-------- ----------- -------- -----------
$ 48,945 $ 48,802 $ 69,721 $ 69,239
======== ========== ======== ==========
</TABLE>
F-13
<PAGE> 121
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
The unrealized loss on marketable securities included as a separate
component of stockholders' equity decreased by $339,000 for the six-month period
ended September 30, 1995, and increased by $482,000 for the year ended March 31,
1995.
6. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Voyage and vessel................................ $ 5,814 $ 10,091 $ 5,776 $ 7,683
Interest......................................... 4,841 5,321 5,415 6,332
Payroll and benefits............................. 1,887 944 1,863 1,016
Other............................................ 19
-------- -------- -------- --------
$ 12,542 $ 16,356 $ 13,054 $ 15,050
======== ======== ======== ========
</TABLE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------- -----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revolving Credit Facility.................... $ 88,000
First Preferred Ship Mortgage Notes (9 5/8%)
U.S. dollar debt due through 2004.......... 151,200 $ 175,000 $ 175,000 $ 175,000
Floating rate (LIBOR + 1% to 1 3/4%)
U.S. dollar debt due through 2006.......... 472,675 719,797 667,874 735,499
Floating rate (Japanese long-term prime +
0.7% to 1.2%)
Japanese Yen debt due through 2002......... 35,112
--------- --------- --------- ---------
711,875 894,797 842,874 945,611
Less current portion......................... 58,906 86,474 74,479 89,482
--------- --------- --------- ---------
$ 652,969 $ 808,323 $ 768,395 $ 856,129
========= ========= ========= =========
</TABLE>
In July 1994, the Company converted its remaining Japanese Yen long-term
debt of Yen 3.45 billion to U.S. denominated long-term debt of $33.5 million.
F-14
<PAGE> 122
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
The 9 5/8% First Preferred Ship Mortgage Notes due July 15, 2003 (the "1993
Notes") are collateralized by first preferred mortgages on six of the Company's
Aframax tankers, together with certain other related collateral, and are
guaranteed by the subsidiaries of Teekay that own the six mortgaged vessels. The
1993 Notes are also subject to a sinking fund, which will retire $25,000,000
principal amount of the 1993 Notes, on each July 15, commencing July 15, 1997.
The 1993 Notes are redeemable at the option of the Company, in whole or in part,
on or after July 15, 1998 at the following redemption prices expressed as a
percentage of principal.
<TABLE>
<CAPTION>
JULY 15 REDEMPTION PRICE
---------------------------------------------------- ----------------
<S> <C>
1998................................................ 104.813%
1999................................................ 102.406%
2000................................................ 100.000%
</TABLE>
In addition, the Company may, at any time prior to July 15, 1996, redeem up
to $61.25 million of the 1993 Notes at 109.625% of their principal amount from
the proceeds of a public equity offering.
Upon a Change of Control each Note holder has the right, unless the Company
elects to redeem the 1993 Notes, to require the Company to purchase the Notes at
101% of their principal amount plus accrued interest.
In May 1995, the Company negotiated a revolving credit facility (the
"Revolver") with three commercial banks providing for borrowings of up to $243
million in order to refinance certain of the existing debt obligations of the
Company and to finance vessel acquisitions. The Revolver is collateralized
initially by first priority mortgages granted on fourteen of the Company's
Aframax tankers, together with certain other related collateral, and a guarantee
from the Company for all amounts outstanding under the Revolver. The commitment
amount will be reduced by $9.5 million semi-annually commencing six months after
the initial drawdown date, together with a final balloon payment coincident with
the final semi-annual reduction. Interest payments are based on LIBOR plus a
margin ranging from 0.80% to 1.25% which is dependent on the financial leverage
of the Company. Principal repayments under the Revolver are required when the
Revolver borrowings exceed the commitment amount, which was $223 million as of
September 30, 1995.
In June, 1995, the Company made an initial drawdown under the Revolver in
the amount of $223 million and simultaneously prepaid approximately $204 million
in other floating rate debt.
In July, 1995, using part of the proceeds from the initial public offering
(see Note 10), the Company reduced the amount outstanding under the Revolver by
$135 million.
During the first quarter of fiscal 1996, the Company retired $23.8 million
of the 1993 Notes, utilizing approximately $18.5 million of funds available
under the Revolver.
All other floating rate loans are collateralized by first preferred
mortgages on the vessels to which the loans relate, together with certain other
collateral, and guarantees from the parent Company. In certain instances the
shares of the ship-owning subsidiary have been pledged as collateral or second
and third preferred mortgages have been recorded against specific vessels.
F-15
<PAGE> 123
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Amongst other matters, the long-term debt agreements generally provide for
such items as maintenance of various hull and fleet value to loan ratios,
prepayment privileges (in some cases with penalties), restrictions on the
payment of dividends and advances to shareholders by the individual subsidiaries
(at September 30, 1995, approximately $65,000 of subsidiary retained earnings
may not be distributed to Teekay without prior lender consent), and restrictions
against the incurrence of additional debt and new investments by the individual
subsidiaries without prior lender consent. Certain bank loans require retention
deposits. Retention deposits as at September 30, 1995 were $2,717,000,
(September 30, 1994--$3,838,000, March 31, 1995--$4,443,000, March 31,
1994--$3,098,000).
As at September 30, 1995, the Company was committed to a series of interest
rate swap agreements whereby $175 million of the Company's floating rate debt
was swapped with fixed rate obligations having an average remaining term of 4.5
months. The swap agreements expire between October 1995 and April 1996. These
arrangements effectively change the Company's interest rate exposure on $175
million of debt from a floating LIBOR rate to an average fixed rate of 5.68%.
Payments and receipts under the swap agreements are being reflected as
adjustments to interest expense since the agreements are designated as hedges in
connection with long-term debt obligations. The Company is exposed to credit
loss in the event of non-performance by the counter parties to the interest rate
swap agreements; however, the Company does not anticipate non-performance by any
of the counter parties.
As at September 30, 1995, the Company was a party to interest rate cap
contracts which effectively limit the interest rate exposure on $200 million of
the Company's floating rate debt to a maximum of 8%. $100 million of the
contracts became effective on February 24, 1995; the remaining $100 million of
contracts became effective in October 1995. All of the contracts expire on April
1, 1997. The premiums paid by the Company have been recorded at cost and are
being amortized over the lives of the individual contracts. Receipts, if any,
under the interest rate cap contracts will be reflected as adjustments to
interest expense since the agreements are designated as hedges in connection
with long-term debt obligations.
Scheduled long-term principal debt repayments reflect the new revolving
credit facility repayment provisions.
Long-term debt principal repayments required to be made in the fiscal years
subsequent to September 30, 1995 are as follows:
<TABLE>
<S> <C>
1996 (six months from October 1, 1995 to March 31,
1996)................................................. $ 29,268
1997.................................................... 59,276
1998.................................................... 60,476
1999.................................................... 84,276
2000.................................................... 84,276
Thereafter.............................................. 394,303
---------
$ 711,875
=========
</TABLE>
F-16
<PAGE> 124
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
8. LEASES
Charters-in
On August 7, 1995, the Company took delivery of a bareboat hire purchased
vessel which is accounted for as a capital lease.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------
<S> <C>
Floating rate (LIBOR + 1.25%)
U.S. dollar capital lease due through 2008...... $ 43,909
Less current portion of capital lease
obligation...................................... 2,709
--------
$ 41,200
========
</TABLE>
The Company's commitment with respect to the capital lease in the fiscal
years subsequent to September 30, 1995 is as follows:
<TABLE>
<S> <C>
1996 (six months from October 1, 1995 to March 31,
1996)................................................. $ 2,528
1997.................................................... 5,056
1998.................................................... 5,056
1999.................................................... 5,056
2000.................................................... 5,056
Thereafter.............................................. 37,082
---------
Minimum lease payments.................................. 59,834
Less amount representing interest....................... (15,925)
---------
Net minimum lease payments.............................. $ 43,909
=========
</TABLE>
The Company holds a purchase option on this vessel which is exercisable, at
the Company's discretion, on any monthly lease payment date at a price equal to
the unpaid principal balance of the capital lease obligation outstanding as at
the date the purchase option is exercised.
Charters-out
Time charters to third parties of the Company's vessels are accounted for
as operating leases. The minimum future revenues to be received on time charters
currently in place are as follows:
<TABLE>
<S> <C>
1996 (six months from October 1, 1995 to March 31,
1996).................................................. $ 14,135
1997..................................................... 12,367
1998..................................................... 855
--------
$ 27,357
========
</TABLE>
The minimum future revenues should not be construed to reflect total
charter hire revenues for any of the years.
F-17
<PAGE> 125
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash, restricted cash, and marketable securities--The carrying amounts
approximate fair value.
Long-term debt--The carrying amounts of floating rate debt approximate fair
value.
The fair values of the Company's other long-term debt are based on either
quoted market prices or estimated using discounted cash flow analyses, based on
rates currently available for debt with similar terms and remaining maturities.
Interest rate swap agreements--The fair value of interest rate swaps, used
for hedging purposes, is the estimated amount that the Company would receive or
pay to terminate the swap agreements at the reporting date, taking into account
current interest rates and the current credit worthiness of the swap counter
parties.
The fair value of interest rate cap agreements is the estimated amount that
the Company would receive from selling the contracts as at the reporting date.
The fair value of foreign currency contracts used for hedging purposes is
the estimated amount that the Company would receive or pay to terminate the
contract at the reporting date, taking into account current currency exchange
rates.
The estimated fair value of the Company's financial instruments is as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 MARCH 31, 1995 MARCH 31, 1994
------------------------ ------------------------ ------------------------
CARRYING CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash, restricted cash, and marketable
securities.............................. $ 112,890 $ 112,890 $ 93,373 $ 93,373 $ 113,584 $ 113,584
Long-term debt............................ 711,875 714,143 842,874 834,562 945,611 942,111
Interest rate swap agreements--net
receivable position..................... 90 3,047 1,679
Foreign currency contracts--net receivable
(payable) position...................... 2 (287 ) 78 144 3,270 3,270
Interest rate cap agreements.............. 856 59 975 820
</TABLE>
F-18
<PAGE> 126
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
10. CAPITAL STOCK
Authorized
25,000,000 Preferred Stock with a par value of $1 per share
125,000,000 Common Stock with no par value
<TABLE>
<CAPTION>
COMMON THOUSANDS PREFERRED THOUSANDS
STOCK OF SHARES STOCK OF SHARES
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Issued and outstanding
Balance April 30, 1992 and 1993................ $ 33,000 18,000 $ 1 600
February 22, 1994 2-for-1 Common Stock Split... 18,000
-------- -------- ------ ------
Balance March 31, 1994 and 1995................ $ 33,000 36,000 $ 1 600
May 15, 1995 1-for-2 Reverse Common Stock
Split........................................ (18,000)
July 19, 1995 Initial Public Offering 6,900,000
shares at $21.50 per share of Common Stock
(net of share issue costs)................... 137,613 6,900
July 19, 1995 Exchange of Redeemable Preferred
Stock for 2,790,698 shares of Common Stock... 60,000 2,791 (1) (600)
-------- -------- ------ ------
Balance September 30, 1995..................... $ 230,613 27,691 $ 0 0
======== ======== ====== ======
</TABLE>
On July 19, 1995, the Company completed its initial public offering of
6,900,000 shares of its Common Stock. The Company's Common Stock was initially
offered at a price of $21.50 per share, resulting in aggregate net proceeds to
the Company of approximately $137.6 million. $135 million of the net proceeds
from the offering was used to reduce the amounts outstanding under the Company's
revolving credit facility. In conjunction with the completion of the initial
public offering, the Company exchanged all of its outstanding Redeemable
Preferred Stock for 2,790,698 shares of Common Stock.
The Company has reserved 2,148,571 shares of Common Stock for issuance upon
exercise of options granted pursuant to the Company's 1995 Stock Option Plan, of
which options to purchase up to 796,750 shares of Common Stock, at an exercise
price of $21.50 per share, were granted concurrent with the consummation of the
offering.
11. COMMITMENTS AND CONTINGENCIES
As at September 30, 1995, the Company was committed to $175 million of
interest rate swap agreements and $200 million of interest rate cap contracts
(see Note 7).
As at September 30, 1995, the Company was committed to foreign exchange
contracts for the forward purchase of approximately Japanese Yen 1 billion and
Singapore dollars 472,000 for U.S. dollars, at an average rate of Japanese Yen
per 95.18 U.S. dollar and Singapore dollar 1.40 per U.S. dollar, respectively.
Of these, contracts for Japanese Yen 850 million are attributable to a hedge in
connection with the Company's 50% portion of a Japanese Yen-denominated
long-term debt obligation held in Viking Consolidated Shipping Corp., a joint
venture in which the Company has a 50% interest. Foreign exchange gains and
losses, if any, arising from these contracts are reflected as adjustments to the
Company's equity in the results of Viking Consolidated Shipping Corp. The
remaining foreign exchange contracts are for the purpose of hedging accounts
payable and accrued liabilities.
F-19
<PAGE> 127
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
The Company has guaranteed vessel loans of Viking Consolidated Shipping
Corp. At September 30, 1995, the guaranteed portions of these loans amounted to
$17.8 million.
A lawsuit has been commenced against the representative of the estate of
the Company's founder, the late Mr. Torben Karlshoej, by Mr. Karlshoej's first
wife, claiming an interest in certain assets, including the Company, at one time
directly or indirectly held by Mr. Karlshoej. The Company, based upon advice of
its legal counsel, believes that the suit is without merit and does not
anticipate that the outcome of the lawsuit will have a material adverse effect
upon it or its assets.
12. OTHER INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
--------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Gain on disposition of
assets..................... $ 3,728 $ 3,698 $ 18,245 $ 12,347 $ 37,213
Loss on marketable
securities................. (2,719) (1,553)
Loss on available-for-sale
securities................. (110) (4,303)
Minority interest............ 19 208
Equity in results of 50%
owned company.............. 704 (2,089) 983 441
Miscellaneous--net........... 42 (24)
-------- -------- -------- -------- --------
$ 4,364 $ 979 $ 11,848 $ 11,777 $ 37,862
======== ======== ======== ======== ========
</TABLE>
13. CHANGE IN NON-CASH WORKING CAPITAL ITEMS RELATED TO CONTINUING OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
--------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Accounts receivable.......... $ (3,614) $ 5,835 $ 3,585 $ 4,492 $ 316
Prepaid expenses and other
assets..................... (338) (3,303) (1,597) 6,054 (778)
Accounts payable............. (938) 2,432 (310) 22 1,427
Accrued liabilities.......... (512) 1,337 (2,941) 1,398 (4,050)
-------- -------- -------- -------- --------
$ (5,402) $ 6,301 $ (1,263) $ 11,966 $ (3,085)
======== ======== ======== ======== ========
</TABLE>
14. THE 1993 NOTES GUARANTOR SUBSIDIARIES
Six of the Company's subsidiaries, Diamond Spirit Inc., Sebarok Spirit
Inc., VSSI Bulkers Inc., VSSI Deepsea Inc., VSSI Star Inc., and VSSI Ulsan Inc.
(the "1993 Notes Guarantor Subsidiaries") have guaranteed the 9 5/8% First
Preferred Ship Mortgage Notes due July 2003 issued by Teekay Shipping
Corporation to a maximum of 95% of the fair value of their net assets. As of
September 30, 1995 the fair value of the net assets of the 1993 Notes Guarantor
Subsidiaries approximated $201 million.
F-20
<PAGE> 128
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
(FORMERLY VIKING STAR SHIPPING INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30,1995 AND 1994 AND FOR
THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Condensed financial information regarding the Company, the 1993 Notes
Guarantor Subsidiaries and non-1993 Notes guarantor subsidiaries of the Company
is set out on Schedule A of these financial statements.
15. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform with
the presentation adopted in the current period.
16. SUBSEQUENT EVENTS
Subsequent to September 30, 1995, the Company sold a vessel for $6.0
million resulting in a net gain of approximately $5.4 million.
Subsequent to September 30, 1995, the Company entered into an additional
$250 million in interest rate swap agreements with three commercial banks. These
swap agreements have an average life of 3 years, expiring between October 1998
and December 1998, and effectively change the Company's interest rate exposure
on $250 million of debt from a floating LIBOR rate to an average fixed rate of
5.85%.
Subsequent to September 30, 1995, the Company acquired a 1987-built Aframax
tanker, whereby the Company will time-charter the vessel for a period of one
year and then purchase the vessel for $26.5 million.
In December 1995, the Company commenced a preliminary offering of $225
million First Preferred Ship Mortgage Notes due 2008.
F-21
<PAGE> 129
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
(FORMERLY VIKING STAR SHIPPING INC.)
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1995
---------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
--------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues............................ $ $ 14,592 $ 223,457 $(120,557) $ 117,492
Operating expenses............................. 697 10,435 193,773 (121,641) 83,264
--------- --------- --------- --------- ---------
Income (loss) from vessel operations.......... (697) 4,157 29,684 1,084 34,228
Net interest income (expense).................. (7,314) (60) (20,674) (28,048)
Equity in net loss (gain) income of
subsidiaries.................................. 16,879 (16,175) 704
Other income................................... 1,163 147 2,350 3,660
--------- --------- --------- --------- ---------
Income (loss) before foreign currency exchange
loss (gain)................................... 10,031 4,244 11,360 (15,091) 10,544
Foreign currency exchange loss (gain).......... 513 513
--------- --------- --------- --------- ---------
Net income (loss).............................. 10,031 4,244 10,847 (15,091) 10,031
Retained earnings, beginning of the period..... 406,547 22,309 84,274 (106,583) 406,547
--------- --------- --------- --------- ---------
416,578 26,553 95,121 (121,674) 416,578
Exchange of redeemable preferred stock......... (60,000) (60,000)
Dividends paid................................. (7,200) (35,200) 42,400
--------- --------- --------- --------- ---------
Retained earnings, end of the period........... $ 356,578 $ 19,353 $ 59,921 $ (79,274) $ 356,578
========= ========= ========= ========= =========
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1994
---------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
--------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues............................ $ $ 16,223 $ 225,819 $(121,786) $ 120,256
Operating expenses............................. 801 12,442 203,494 (121,907) 94,830
--------- --------- --------- --------- ---------
Income (loss) from vessel operations.......... (801) 3,781 22,325 121 25,426
Net interest income (expense).................. (8,659) 285 (20,087) (28,461)
Equity in net loss (gain) income of
subsidiaries.................................. 7,443 (7,443)
Other income................................... 979 979
--------- --------- --------- --------- ---------
Income (loss) before foreign currency exchange
loss (gain)................................... (2,017) 4,066 3,217 (7,322) (2,056)
Foreign currency exchange loss (gain).......... (39) (39)
--------- --------- --------- --------- ---------
Net income (loss).............................. (2,017) 4,066 3,256 (7,322) (2,017)
Retained earnings, beginning of the period..... 400,179 46,735 80,946 (127,681) 400,179
--------- --------- --------- --------- ---------
398,162 50,801 84,202 (135,003) 398,162
Exchange of redeemable preferred stock.........
Dividends paid.................................
--------- --------- --------- --------- ---------
Retained earnings, end of the period........... $ 398,162 $ 50,801 $ 84,202 $(135,003) $ 398,162
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1995
---------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
--------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues.............................. $ $ 32,687 $ 448,437 $(246,115) $ 235,009
Operating expenses............................... 1,999 24,410 403,975 (246,208) 184,176
--------- --------- --------- --------- ---------
Income (loss) from vessel operations............ (1,999) 8,277 44,462 93 50,833
Net interest income (expense).................... (16,963) 491 (41,945) (58,417)
Equity in net income (loss) of subsidiaries...... 24,161 (26,250) (2,089)
Other income..................................... 56 1 13,880 13,937
--------- --------- --------- --------- ---------
Income before foreign currency exchange gain..... 5,255 8,769 16,397 (26,157) 4,264
Foreign currency exchange gain................... (991) (991)
--------- --------- --------- --------- ---------
Net income from continuing operations............ 5,255 8,769 17,388 (26,157) 5,255
Cumulative effect of change in accounting for
marketable securities........................... 1,113 1,113
--------- --------- --------- --------- ---------
Net income....................................... 6,368 8,769 17,388 (26,157) 6,368
Retained earnings, beginning of the period....... 400,179 46,735 80,946 (127,681) 400,179
--------- --------- --------- --------- ---------
406,547 55,504 98,334 (153,838) 406,547
Dividends paid................................... (25,266) (21,989) 47,255
--------- --------- --------- --------- ---------
Retained earnings, end of the period............. $ 406,547 $ 30,238 $ 76,345 $(106,583) $ 406,547
========= ========= ========= ========= =========
</TABLE>
- ------------
NOTE: THE 1993 NOTES GUARANTOR SUBSIDIARIES HAVE GUARANTEED THE 9 5/8% FIRST
PREFERRED SHIP MORTGAGE NOTES DUE JULY 2003.
(SEE NOTE 14)
F-22
<PAGE> 130
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
(FORMERLY VIKING STAR SHIPPING INC.)
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED MARCH 31, 1994
---------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
--------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues............................ $ $ 30,932 $ 447,155 $(241,397) $ 236,690
Operating expenses............................. 921 22,666 395,484 (241,509) 177,562
--------- --------- --------- --------- ---------
Income (loss) from vessel operations.......... (921) 8,266 51,671 112 59,128
Net interest income (expense).................. (11,794) (545) (32,821) (45,160)
Equity in net income (loss) of subsidiaries.... 42,873 (41,890) 983
Other income................................... 10,794 10,794
--------- --------- --------- --------- ---------
Income (loss) before foreign currency exchange
loss.......................................... 30,158 7,721 29,644 (41,778) 25,745
Foreign currency exchange loss................. 1,532 1,532
--------- --------- --------- --------- ---------
Net income (loss) from continuing operations... 30,158 7,721 28,112 (41,778) 24,213
Net income from discontinued operations........ 5,945 5,945
--------- --------- --------- --------- ---------
Net income (loss).............................. 30,158 7,721 34,057 (41,778) 30,158
Retained earnings, beginning of the period..... 370,021 39,014 70,673 (109,687) 370,021
--------- --------- --------- --------- ---------
400,179 46,735 104,730 (151,465) 400,179
Dividends paid................................. (23,784) 23,784
Contribution arising on continuity of interest
combination...................................
Net capital contribution (distribution)........
--------- --------- --------- --------- ---------
Retained earnings, end of the period........... $ 400,179 $ 46,735 $ 80,946 $(127,681) $ 400,179
========= ========= ========= ========= =========
<CAPTION>
YEAR ENDED APRIL 30, 1993
---------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
--------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues............................ $ $ 33,956 $ 474,253 $(280,020) $ 228,189
Operating expenses............................. 111 18,806 453,154 (280,797) 191,274
--------- --------- --------- --------- ---------
Income (loss) from vessel operations.......... (111) 15,150 21,099 777 36,915
Net interest income (expense).................. 1,225 (4,678) (42,765) (46,218)
Equity in net income (loss) of subsidiaries.... (48,582) 49,023 441
Other income................................... 37,214 207 37,421
--------- --------- --------- --------- ---------
Income (loss) before foreign currency exchange
loss.......................................... (47,468) 10,472 15,548 50,007 28,559
Foreign currency exchange loss................. 77,917 77,917
--------- --------- --------- --------- ---------
Net income (loss) from continuing operations... (47,468) 10,472 (62,369) 50,007 (49,358)
Net income from discontinued operations........ 1,890 1,890
--------- --------- --------- --------- ---------
Net income (loss).............................. (47,468) 10,472 (60,479) 50,007 (47,468)
Retained earnings, beginning of the period..... 409,989 28,542 126,452 (154,994) 409,989
--------- --------- --------- --------- ---------
362,521 39,014 65,973 (104,987) 362,521
Dividends paid................................. (2,800) 2,800
Contribution arising on continuity of interest
combination................................... 7,500 7,500
Net capital contribution (distribution)........ 7,500 (7,500)
--------- --------- --------- --------- ---------
Retained earnings, end of the period........... $ 370,021 $ 39,014 $ 70,673 $(109,687) $ 370,021
========= ========= ========= ========= =========
</TABLE>
- ------------
NOTE: THE 1993 NOTES GUARANTOR SUBSIDIARIES HAVE GUARANTEED THE 9 5/8% FIRST
PREFERRED SHIP MORTGAGE NOTES DUE JULY 2003.
(SEE NOTE 14)
F-23
<PAGE> 131
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
(FORMERLY VIKING STAR SHIPPING INC.)
CONDENSED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
-----------------------------------------------------------------------
TEEKAY
TEEKAY 1993 NOTES SHIPPING
SHIPPING GUARANTOR NON-GUARANTOR CORP. &
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash.......................... $ 131 $ 6,607 $ 53,727 $ 60,465
Restricted cash............... 3,623 3,623
Other current assets.......... 82 1,165 84,979 (90) 86,136
--------- --------- --------- --------- ---------
Total current assets......... 213 7,772 142,329 (90) 150,224
Vessels and equipment (net)... 144,439 1,057,545 1,201,984
Advances due from
subsidiaries................. 509,850 (509,850)
Other assets (principally
investments in
subsidiaries)................ 231,281 4,665 (222,238) 13,708
--------- --------- --------- --------- ---------
741,344 152,211 1,204,539 (732,178) 1,365,916
========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities........... 3,096 1,099 80,597 (93) 84,699
Long-term debt................ 151,200 501,769 652,969
Capital lease obligation...... 41,200 41,200
Due to parent................. 515,335 (515,335)
--------- --------- --------- --------- ---------
Total liabilities............ 154,296 1,099 1,138,901 (515,428) 778,868
--------- --------- --------- --------- ---------
Stockholders' Equity
Capital stock................. 230,613 6 5,723 (5,729) 230,613
Contributed capital........... 131,753 (131,753)
Retained earnings............. 356,578 19,353 59,921 (79,274) 356,578
Less net unrealized loss on
marketable securities........ 143 143
--------- --------- --------- --------- ---------
Total stockholders' equity... 587,048 151,112 65,644 (216,756) 587,048
--------- --------- --------- --------- ---------
$ 741,344 $ 152,211 $1,204,545 $ (732,184) $1,365,916
========= ========= ========= ========= =========
<CAPTION>
AT SEPTEMBER 30, 1994
-----------------------------------------------------------------------
TEEKAY
TEEKAY 1993 NOTES SHIPPING
SHIPPING GUARANTOR NON-GUARANTOR CORP. &
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash.......................... $ 22,421 $ 6,459 $ (787) $ 28,093
Restricted cash............... 6,828 6,828
Other current assets.......... 110 1,471 103,651 105,232
--------- --------- --------- --------- ---------
Total current assets......... 110 23,892 116,938 (787) 140,153
Vessels and equipment (net)... 166,781 1,029,280 1,196,061
Advances due from
subsidiaries................. 313,934 (313,934)
Other assets (principally
investments in
subsidiaries)................ 297,009 4,215 (281,384) 19,840
--------- --------- --------- --------- ---------
611,053 190,673 1,150,433 (596,105) 1,356,054
========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities...........
Long-term debt................ 4,890 1,326 111,139 (787) 116,568
Capital lease obligation...... 175,000 633,323 808,323
Due to parent................. 315,847 (315,847)
--------- --------- --------- --------- ---------
Total liabilities............ 179,890 1,326 1,060,309 (316,634) 924,891
--------- --------- --------- --------- ---------
Stockholders' Equity
Capital stock................. 33,001 11 5,922 (5,933) 33,001
Contributed capital........... 138,535 (138,535)
Retained earnings............. 398,162 50,801 84,202 (135,003) 398,162
Less net unrealized loss on
marketable securities........
--------- --------- --------- --------- ---------
Total stockholders' equity... 431,163 189,347 90,124 (279,471) 431,163
--------- --------- --------- --------- ---------
$ 611,053 $ 190,673 $1,150,433 $ (596,105) $1,356,054
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1995
-----------------------------------------------------------------------
TEEKAY
TEEKAY 1993 NOTES SHIPPING
SHIPPING GUARANTOR NON-GUARANTOR CORP. &
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash.......................... $ 97 $ 6,856 $ 9,547 $ $ 16,500
Restricted cash............... 7,634 7,634
Other current assets.......... 180 1,287 118,685 (211) 119,941
--------- --------- --------- --------- ---------
Total current assets......... 277 8,143 135,866 (211) 144,075
Vessels and equipment (net)... 162,812 985,226 1,148,038
Advances due from
subsidiaries................. 354,330 (354,330) 0
Other assets (principally
investments in
subsidiaries)................ 264,302 4,935 (254,876) 14,361
--------- --------- --------- --------- ---------
$ 618,909 $ 170,955 $1,126,027 $(609,417) $1,306,474
========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities........... $ 4,843 $ 2,214 $ 92,142 $ (186) $ 99,013
Long-term debt................ 175,000 593,395 768,395
Due to parent................. 358,223 (358,223)
--------- --------- --------- --------- ---------
Total liabilities............ 179,843 2,214 1,043,760 (358,409) 867,408
--------- --------- --------- --------- ---------
Stockholders' Equity
Capital stock................. 33,001 11 5,922 (5,933) 33,001
Contributed capital........... 138,492 (138,492) 0
Retained earnings............. 406,547 30,238 76,345 (106,583) 406,547
Less net unrealized loss on
marketable securities........ 482 482
--------- --------- --------- --------- ---------
Total stockholders' equity... 439,066 168,741 82,267 (251,008) 439,066
--------- --------- --------- --------- ---------
$ 618,909 $ 170,955 $1,126,027 $(609,417) $1,306,474
========= ========= ========= ========= =========
<CAPTION>
AT MARCH 31, 1994
-----------------------------------------------------------------------
TEEKAY
TEEKAY 1993 NOTES SHIPPING
SHIPPING GUARANTOR NON-GUARANTOR CORP. &
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash..........................$ $ 13,736 $ 25,120 $ (242) $ 38,614
Restricted cash............... 6,338 6,338
Other current assets.......... 67 813 107,502 (143) 108,239
--------- --------- --------- --------- ---------
Total current assets......... 67 14,549 138,960 (385) 153,191
Vessels and equipment (net)... 171,756 1,060,998 1,232,754
Advances due from
subsidiaries................. 323,362 (323,362)
Other assets (principally
investments in
subsidiaries)................ 288,914 4,243 (273,955) 19,202
--------- --------- --------- --------- ---------
$ 612,343 $ 186,305 $1,204,201 $(597,702) $1,405,147
========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities...........$ 4,163 $ 1,086 $ 110,837 $ (248) $ 115,838
Long-term debt................ 175,000 681,129 856,129
Due to parent................. 325,367 (325,367)
--------- --------- --------- --------- ---------
Total liabilities............ 179,163 1,086 1,117,333 (325,615) 971,967
--------- --------- --------- --------- ---------
Stockholders' Equity
Capital stock................. 33,001 11 5,922 (5,933) 33,001
Contributed capital........... 138,473 (138,473)
Retained earnings............. 400,179 46,735 80,946 (127,681) 400,179
Less net unrealized loss on
marketable securities........
--------- --------- --------- --------- ---------
Total stockholders' equity... 433,180 185,219 86,868 (272,087) 433,180
--------- --------- --------- --------- ---------
$ 612,343 $ 186,305 $1,204,201 $(597,702) $1,405,147
========= ========= ========= ========= =========
</TABLE>
- ------------
NOTE: THE 1993 NOTES GUARANTOR SUBSIDIARIES HAVE GUARANTEED THE 9 5/8% FIRST
PREFERRED SHIP MORTGAGE NOTES DUE JULY 2003.
(SEE NOTE 14)
F-24
<PAGE> 132
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
(FORMERLY VIKING STAR SHIPPING INC.)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1995
----------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
---------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
--------- --------- --------- --------- ---------
Net cash flow from operating activities...... $ (8,625) $ 7,658 $ 42,855 $ $ 41,888
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt.................. 223,000 223,000
Repayments of long-term debt.................. (22,580) (330,201) (352,781)
Repayments of capital lease obligations....... (640) (640)
Net proceeds from stock issuance.............. 137,613 137,613
Other......................................... (155,520) (7,200) 165,865 3,145
Financing activities of discontinued
operations...................................
--------- --------- --------- --------- ---------
Net cash flow from financing activities...... (40,487) (7,200) 58,024 10,337
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Expenditures for vessels and equipment........ (168) (51,552) (51,720)
Proceeds from disposition of assets........... 22,794 22,794
Other......................................... 49,146 431 (28,911) 20,666
Investing activities of discontinued
operations...................................
--------- --------- --------- --------- ---------
Net cash flow from financing activities...... 49,146 263 (57,669) (8,260)
--------- --------- --------- --------- ---------
Increase (decrease) in cash................... 34 721 43,210 43,965
Cash (deficiency), beginning of the period.... 97 5,886 16,500 16,500
--------- --------- --------- --------- ---------
Cash (deficiency), end of the period.......... $ 131 $ 6,607 $ 59,710 $ $ 60,465
========= ========= ========= ========= =========
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1994
---------------------------------------------------------------------------
TEEKAY 1993 NOTES NON- TEEKAY
SHIPPING GUARANTOR GUARANTOR SHIPPING CORP.
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS & SUBSIDIARIES
--------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
--------- --------- --------- --------- ---------
Net cash flow from operating activities...... $ (8,961) $ 9,095 $ 51,104 $ $ 51,238
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt..................
Repayments of long-term debt.................. (50,680) (50,680)
Repayments of capital lease obligations.......
Net proceeds from stock issuance..............
Other......................................... 8,878 (10,310) (1,432)
Financing activities of discontinued
operations...................................
--------- --------- --------- --------- ---------
Net cash flow from financing activities...... 8,878 0 (60,990) (52,112)
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Expenditures for vessels and equipment........ (472) (10,922) (11,394)
Proceeds from disposition of assets........... 4,220 4,220
Other......................................... (462) 62 (2,073) (2,473)
Investing activities of discontinued
operations...................................
--------- --------- --------- --------- ---------
Net cash flow from financing activities...... (462) (410) (8,775) (9,647)
--------- --------- --------- --------- ---------
Increase (decrease) in cash................... (545) 8,685 (18,661) (10,521)
Cash (deficiency), beginning of the period.... (242) 13,736 25,120 38,614
--------- --------- --------- --------- ---------
Cash (deficiency), end of the period.......... $ (787) $ 22,421 $ 6,459 $ $ 28,093
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1995
---------------------------------------------------------------
1993 NOTES
TEEKAY GUARANTOR NON-GUARANTOR
SHIPPING CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net cash flows from continuing operations...................... $ (40,919) $ 20,403 $108,021 $
Net cash flows from discontinued operations....................
--------- --------- --------- ---------
Net cash flows from operating activities...................... (40,919) 20,403 108,021
--------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt...................................
Repayments of long-term debts.................................. (102,603)
Payments on capital lease obligations..........................
Other.......................................................... (31,518) (25,263) 53,920
Financing activities of discontinued operations................
--------- --------- --------- ---------
Net cash flow from financing activities....................... (31,518) (25,263) (48,683)
--------- --------- --------- ---------
INVESTING ACTIVITIES
Expenditures for vessels and equipment......................... (2,039) (17,343)
Proceeds from disposition of assets............................ 16,817
Other.......................................................... 72,776 19 (74,385)
Investing activities of discontinued operations
--------- --------- --------- ---------
Net cash flow from investing activities....................... 72,776 (2,020) (74,911)
--------- --------- --------- ---------
Increase (decrease) in cash.................................... 339 (6,880) (15,573)
Cash (deficiency), beginning of the period..................... (242) 13,736 25,120
--------- --------- --------- ---------
Cash, end of the period........................................ $ 97 $ 6,856 $ 9,547 $
========= ========= ========= =========
<CAPTION>
TEEKAY
SHIPPING CORP.
& SUBSIDIARIES
--------------
<S> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net cash flows from continuing operations...................... $ 87,505
Net cash flows from discontinued operations....................
---------
Net cash flows from operating activities...................... 87,505
---------
FINANCING ACTIVITIES
Proceeds from long-term debt...................................
Repayments of long-term debts.................................. (102,603)
Payments on capital lease obligations..........................
Other.......................................................... (2,861)
Financing activities of discontinued operations................
---------
Net cash flow from financing activities....................... (105,464)
---------
INVESTING ACTIVITIES
Expenditures for vessels and equipment......................... (19,382)
Proceeds from disposition of assets............................ 16,817
Other.......................................................... (1,590)
Investing activities of discontinued operations
---------
Net cash flow from investing activities....................... (4,155)
---------
Increase (decrease) in cash.................................... (22,114)
Cash (deficiency), beginning of the period..................... 38,614
---------
Cash, end of the period........................................ $ 16,500
=========
</TABLE>
- ------------
NOTE: THE 1993 NOTES GUARANTOR SUBSIDIARIES HAVE GUARANTEED THE 9 5/8% FIRST
PREFERRED SHIP MORTGAGE NOTES DUE JULY 2003.
(SEE NOTE 14)
F-25
<PAGE> 133
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
(FORMERLY VIKING STAR SHIPPING INC.)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED MARCH 31, 1994
-----------------------------------------------------------------------
TEEKAY
TEEKAY 1993 NOTES SHIPPING
SHIPPING GUARANTOR NON-GUARANTOR CORP. &
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net cash flows from continuing
operations............................. $ (8,310) $ 16,849 $ 108,848 $ $ 117,387
Net cash flows from discontinued
operations............................. 347 347
--------- --------- --------- --------- ---------
Net cash flow from operating
activities........................... (8,310) 16,849 109,195 117,734
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt............ 175,000 45,000 220,000
Repayments of long-term debt............ (75,452) (94,031) (169,483)
Payments on capital lease obligations... (47,129) (82,182) (129,311)
Other................................... (51,652) (52,367) 102,207 (1,812)
Financing activities of discontinued
operations............................. (20,077) (20,077)
--------- --------- --------- --------- ---------
Net cash flow from financing
activities........................... 123,348 (174,948) (49,083) (100,683)
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Expenditures for vessels and
equipment.............................. (1,882) (77,147) (79,029)
Proceeds from disposition of assets..... 86,351 86,351
Other................................... (114,739) 138,473 (93,969) (70,235)
Investing activities of discontinued
operations............................. 35,706 35,706
--------- --------- --------- --------- ---------
Net cash flow from investing
activities........................... (114,739) 136,591 (49,059) (27,207)
--------- --------- --------- --------- ---------
Increase (decrease) in cash............. 299 (21,508) 11,053 (10,156)
Cash (deficiency), beginning of the
period................................. (541) 35,244 14,067 48,770
--------- --------- --------- --------- ---------
Cash (deficiency), end of the period.... $ (242) $ 13,736 $ 25,120 $ $ 38,614
========= ========= ========= ========= =========
<CAPTION>
YEAR ENDED APRIL 30, 1993
-----------------------------------------------------------------------
TEEKAY
TEEKAY 1993 NOTES SHIPPING
SHIPPING GUARANTOR NON-GUARANTOR CORP. &
CORP. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net cash flows from continuing
operations.............................$ 3,668 $ 19,149 $ 61,909 $ (692) $ 84,034
Net cash flows from discontinued
operations............................. 4,492 4,492
--------- --------- --------- --------- ---------
Net cash flow from operating
activities........................... 3,668 19,149 66,401 (692) 88,526
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt............ 147,782 147,782
Repayments of long-term debt............ (7,477) (105,373) (112,850)
Payments on capital lease obligations... (52,966) (52,966)
Other................................... 546 11,424 (3,882) 8,088
Financing activities of discontinued
operations............................. (10,586) 692 (9,894)
--------- --------- --------- --------- ---------
Net cash flow from financing
activities........................... 546 3,947 (25,025) 692 (19,840)
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Expenditures for vessels and
equipment.............................. (9,880) (196,597) (206,477)
Proceeds from disposition of assets..... 156,909 156,909
Other................................... (4,620) (9) 2,545 (2,084)
Investing activities of discontinued
operations............................. 5,497 5,497
--------- --------- --------- --------- ---------
Net cash flow from investing
activities........................... (4,620) (9,889) (31,646) (46,155)
--------- --------- --------- --------- ---------
Increase (decrease) in cash............. (406) 13,207 9,730 22,531
Cash (deficiency), beginning of the
period................................. (135) 22,037 4,337 26,239
--------- --------- --------- --------- ---------
Cash (deficiency), end of the period....$ (541) $ 35,244 $ 14,067 $ $ 48,770
========= ========= ========= ========= =========
</TABLE>
- ------------
NOTE: THE 1993 NOTES GUARANTOR SUBSIDIARIES HAVE GUARANTEED THE 9 5/8% FIRST
PREFERRED SHIP MORTGAGE NOTES DUE JULY 2003.
(SEE NOTE 14)
F-26
<PAGE> 134
AUDITORS' REPORT
To the Board of Directors
ANDROS SPIRIT INC., EXUMA SPIRIT INC.,
NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC.,
VSSI OCEANS INC. ("The Companies")
We have audited the accompanying balance sheets of the Companies as of
March 31, 1995 and 1994, and the related statements of income and retained
earnings and cash flows for the year ended March 31, 1995 and the eleven month
period ended March 31, 1994 and the year ended April 30, 1993. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Companies at March 31,
1995 and 1994, and the results of their operations and their cash flows for the
year ended March 31, 1995 and the eleven month period ended March 31, 1994 and
the year ended April 30, 1993, in conformity with accounting principles
generally accepted in the United States.
Nassau, Bahamas, ERNST & YOUNG
December 15, 1995 Chartered Accountants
F-27
<PAGE> 135
ANDROS SPIRIT INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES
Voyage revenues........................ 3,981 3,608 7,613 8,922 3,856
OPERATING EXPENSES
Vessel operating expenses.............. 811 769 1,499 1,419 533
Depreciation and amortization.......... 1,458 1,543 3,084 2,851 1,287
General and administrative
(note 3)............................. 109 95 205 193 86
-------- -------- ---------- ------------- ----------
2,378 2,407 4,788 4,463 1,906
-------- -------- ---------- ------------- ----------
Income from vessel operations.......... 1,603 1,201 2,825 4,459 1,950
-------- -------- ---------- ------------- ----------
Other items
Interest expense....................... (1,165) (995) (2,176) (2,050) (615)
Interest income........................ 3 10 32 12
-------- -------- ---------- ------------- ----------
(1,162) (985) (2,144) (2,038) (615)
-------- -------- ---------- ------------- ----------
Income before foreign exchange loss.... 441 216 681 2,421 1,335
Foreign exchange loss.................. (2) (3) (4,709)
-------- -------- ---------- ------------- ----------
Net Income (loss)...................... 441 214 678 2,421 (3,374)
Retained earnings (deficit), beginning
of the period........................ (275) (953) (953) (3,374)
-------- -------- ---------- ------------- ----------
Retained earnings (deficit),
end of the period.................... 166 (739) (275) (953) (3,374)
======= ======= ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE> 136
ANDROS SPIRIT INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents....................................... 131 537 845 629
Accounts receivable.................................... 12 28
Prepaid expenses....................................... 171 176 142 102
-------- -------- -------- --------
Total current assets............................. 302 725 1,015 731
-------- -------- -------- --------
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September 30,
1995--$8,654, 1994--$5,654; March 31, 1995--$7,196,
1994--$4,112)........................................ 53,045 56,034 54,494 57,547
-------- -------- -------- --------
53,347 56,759 55,509 58,278
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable....................................... 108 101 111 63
Accrued liabilities (note 4)........................... 53 29 69 48
Current portion of long-term debt (note 5)............. 3,509 3,510 3,509 3,509
-------- -------- -------- --------
Total current liabilities........................ 3,670 3,640 3,689 3,620
-------- -------- -------- --------
Long-term debt (note 5)................................ 25,034 31,876 30,122 33,631
Due to parent--without interest or stated terms of
repayment (note 10).................................. 21,977 21,968 21,975
-------- -------- -------- --------
Total liabilities................................ 28,704 57,493 55,779 59,226
-------- -------- -------- --------
STOCKHOLDER'S EQUITY
Capital stock (note 8)................................. 5 5 5 5
Contributed surplus (note 10).......................... 24,472
Retained earnings (deficit)............................ 166 (739) (275) (953)
-------- -------- -------- --------
Total stockholder's equity....................... 24,643 (734) (270) (948)
-------- -------- -------- --------
53,347 56,759 55,509 58,278
======= ======= ======= =======
</TABLE>
Contingencies (note 11)
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE> 137
ANDROS SPIRIT INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
--------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income (loss)............................. 441 214 678 2,421 (3,374)
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization............... 1,458 1,543 3,084 2,851 1,287
Foreign currency exchange loss.............. 4,636
Change in non-cash working capital items (note
9).......................................... (20) (67) 1 (505) 514
--------- --------- ---------- ------------- ----------
Net cash flow from operating activities..... 1,879 1,690 3,763 4,767 3,063
--------- --------- ---------- ------------- ----------
FINANCING ACTIVITIES
Scheduled repayments of long-term debt........ (1,755) (1,754) (3,509)
Prepayment of long-term debt.................. (3,333)
Scheduled repayments of capital lease
obligation.................................. (3,175)
Prepayments of capital lease obligation....... (11,612) (1,227)
Increase (decrease) in amount due to parent... (21,968) 2 (7) 10,549 5,469
Capital contribution from parent (note 10).... 24,472 5
--------- --------- ---------- ------------- ----------
Net cash flow from financing activities..... (2,584) (1,752) (3,516) (4,238) 4,247
--------- --------- ---------- ------------- ----------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (net of
capital lease financing of: April 30,
1993--$48,518).............................. (9) (30) (31) (7,186)
Increase (decrease) in other assets........... 1 (25)
--------- --------- ---------- ------------- ----------
Net cash flow from investing activities..... (9) (30) (31) 1 (7,211)
--------- --------- ---------- ------------- ----------
(Decrease) increase in cash equivalents....... (714) (92) 216 530 99
Cash equivalents, beginning of the period..... 845 629 629 99
--------- --------- ---------- ------------- ----------
Cash equivalents, end of the period........... 131 537 845 629 99
======== ======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE> 138
EXUMA SPIRIT INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
-------- -------- ---------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Voyage revenues..................... 4,010 3,642 7,676 8,933 6,094
OPERATING EXPENSES
Vessel operating expenses........... 819 769 1,563 1,433 844
Depreciation and amortization....... 1,455 1,541 3,082 2,850 2,055
General and administrative (note
3)................................ 110 114 223 200 132
------ ----- ------ ------ ------
2,384 2,424 4,868 4,483 3,031
------ ----- ------ ------ ------
Income from vessel operations....... 1,626 1,218 2,808 4,450 3,063
------ ----- ------ ------ ------
Other items
Interest expense.................... (1,158) (990) (2,165) (2,016) (1,269)
Interest income..................... 4 9 29 14 2
------ ----- ------ ------ ------
(1,154) (981) (2,136) (2,002) (1,267)
------ ----- ------ ------ ------
Income before foreign exchange
loss.............................. 472 237 672 2,448 1,796
Foreign exchange loss............... (2) (2) (1) (4,682)
------ ----- ------ ------ ------
Net Income (loss)................... 472 235 670 2,447 (2,886)
Retained earnings (deficit),
beginning of the period........... 231 (439) (439) (2,886)
------ ----- ------ ------ ------
Retained earnings (deficit), end of
the period........................ 703 (204) 231 (439) (2,886)
====== ===== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE> 139
EXUMA SPIRIT INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
------------------------ ------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents.................................. 153 532 755 596
Accounts receivable............................... 15
Prepaid expenses.................................. 183 182 176 111
--------- --------- --------- ---------
Total current assets........................ 336 714 946 707
--------- --------- --------- ---------
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September
30, 1995--$9,415, 1994--$6,418; March 31,
1995--$7,960, 1994--$4,877)..................... 52,245 55,217 53,679 56,731
--------- --------- --------- ---------
52,581 55,931 54,625 57,438
======== ======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable.................................. 67 110 147 50
Accrued liabilities (note 4)...................... 38 35 56 52
Current portion of long-term debt (note 5)........ 3,582 3,582 3,582 3,582
--------- --------- --------- ---------
Total current liabilities................... 3,687 3,727 3,785 3,684
--------- --------- --------- ---------
Long-term debt (note 5)........................... 24,729 31,644 29,853 33,436
Due to parent--without interest or stated terms of
repayment (note 10)............................. 20,759 20,751 20,752
--------- --------- --------- ---------
Total liabilities........................... 28,416 56,130 54,389 57,872
--------- --------- --------- ---------
STOCKHOLDER'S EQUITY
Capital stock (note 8)............................ 5 5 5 5
Contributed surplus (note 10)..................... 23,457
Retained earnings (deficit)....................... 703 (204) 231 (439)
--------- --------- --------- ---------
Total stockholder's equity.................. 24,165 (199) 236 (434)
--------- --------- --------- ---------
52,581 55,931 54,625 57,438
======== ======== ======== ========
</TABLE>
Contingencies (note 11)
The accompanying notes are an integral part of the financial statements.
F-32
<PAGE> 140
EXUMA SPIRIT INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
--------- --------- ---------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income (loss)............................. 472 235 670 2,447 (2,886)
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization............... 1,455 1,541 3,082 2,850 2,055
Foreign currency exchange loss.............. 4,583
Change in non-cash working capital items (note
9).......................................... (90) (28) 21 (591) 581
------- ------ ------ ------- ------
Net cash flow from operating activities..... 1,837 1,748 3,773 4,706 4,333
------- ------ ------ ------- ------
FINANCING ACTIVITIES
Scheduled repayments of long-term debt........ (1,791) (1,791) (3,583)
Prepayments of long-term debt................. (3,333)
Scheduled repayments of capital lease
obligation.................................. (3,187) (674)
Prepayments of capital lease obligation....... (10,859) (1,339)
Increase (decrease) in amount due to parent... (20,751) 7 (1) 9,926 (1,270)
Capital contribution from parent (note 10).... 23,457
------- ------ ------ ------- ------
Net cash flow from financing activities..... (2,418) (1,784) (3,584) (4,120) (3,283)
------- ------ ------ ------- ------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (net of
capital lease financing of: April 30,
1993--$48,493).............................. (21) (28) (30) (1,013)
Increase in other assets...................... (27)
------- ------ ------ ------- ------
Net cash flow from investing activities..... (21) (28) (30) (1,040)
------- ------ ------ ------- ------
(Decrease) increase in cash equivalents....... (602) (64) 159 586 10
Cash equivalents, beginning of the period..... 755 596 596 10
------- ------ ------ ------- ------
Cash equivalents, end of the period........... 153 532 755 596 10
======= ====== ====== ======= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE> 141
NASSAU SPIRIT INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES
Voyage revenues..................... 4,054 3,790 7,827 8,259 8,265
OPERATING EXPENSES
Vessel operating expenses........... 889 763 1,522 1,472 1,171
Depreciation and amortization....... 1,418 1,505 3,011 2,786 2,760
General and administrative (note
3)................................ 111 111 220 200 178
------ ------ ------ ------ ------
2,418 2,379 4,753 4,458 4,109
------ ------ ------ ------ ------
Income from vessel operations....... 1,636 1,411 3,074 3,801 4,156
------ ------ ------ ------ ------
Other items
Interest expense.................... (1,144) (989) (2,161) (1,963) (2,038)
Interest income..................... 2 6 13 14 10
------ ------ ------ ------ ------
(1,142) (983) (2,148) (1,949) (2,028)
------ ------ ------ ------ ------
Income before foreign exchange
loss.............................. 494 428 926 1,852 2,128
Foreign exchange loss............... (2) (3) (3) (5,400)
------ ------ ------ ------ ------
Net income (loss)................... 492 425 923 1,852 (3,272)
Retained earnings (deficit),
beginning of the period........... (497) (1,420) (1,420) (3,272)
------ ------ ------ ------ ------
Retained earnings (deficit), end of
the period........................ (5) (995) (497) (1,420) (3,272)
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE> 142
NASSAU SPIRIT INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents....................................... 80 102 252 71
Accounts receivable.................................... 1
Prepaid expenses....................................... 194 187 186 105
-------- -------- -------- --------
Total current assets............................. 274 289 438 177
-------- -------- -------- --------
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September 30,
1995--$9,949, 1994--$7,025; March 31, 1995--$8,531,
1994--$5,520)........................................ 50,281 53,186 51,684 54,691
-------- -------- -------- --------
50,555 53,475 52,122 54,868
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable....................................... 56 89 51 99
Accrued liabilities (note 4)........................... 47 28 56 10
Current portion of long-term debt (note 5)............. 3,355 3,355 3,355 3,355
-------- -------- -------- --------
Total current liabilities........................ 3,458 3,472 3,462 3,464
-------- -------- -------- --------
Long-term debt (note 5)................................ 24,731 31,725 29,895 33,556
Due to parent--without interest or stated terms of
repayment (note 10).................................. 19,268 19,257 19,263
-------- -------- -------- --------
Total liabilities................................ 28,189 54,465 52,614 56,283
-------- -------- -------- --------
STOCKHOLDER'S EQUITY
Capital stock (note 8)................................. 5 5 5 5
Contributed surplus (note 10).......................... 22,366
Retained earnings (deficit)............................ (5) (995) (497) (1,420)
-------- -------- -------- --------
Total stockholder's equity....................... 22,366 (990) (492) (1,415)
-------- -------- -------- --------
50,555 53,475 52,122 54,868
======= ======= ======= =======
</TABLE>
Contingencies (note 11)
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE> 143
NASSAU SPIRIT INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH, 31 APRIL 30,
1995 1994 1995 1994 1993
--------- --------- ---------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income (loss)............................. 492 425 923 1,852 (3,272)
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization............... 1,418 1,505 3,011 2,786 2,760
Foreign currency exchange loss.............. 5,322
Change in non-cash working capital items (note
9).......................................... (12) (73) (82) 136 (176)
------- ------ ------ ------- ------
Net cash flow from operating activities..... 1,898 1,857 3,852 4,774 4,634
------- ------ ------ ------- ------
FINANCING ACTIVITIES
Scheduled repayments of long-term debt........ (1,831) (1,831) (3,661)
Prepayments of long-term debt................. (3,333)
Scheduled repayments of capital lease
obligation.................................. (3,201) (1,325)
Prepayments of capital lease obligation....... (10,230) (1,339)
Increase (decrease) in amount due to parent... (19,257) 5 (6) 8,698 (6,115)
Capital contribution from parent (note 10).... 22,366 5
------- ------ ------ ------- ------
Net cash flow from financing activities..... (2,055) (1,826) (3,667) (4,733) (8,774)
------- ------ ------ ------- ------
INVESTING ACTIVITIES
Expenditures for vessels and equipment
(net of capital lease financing of:
April 30, 1993--$47,684).................... (15) (4) 4,196
Increase in other assets...................... (26)
------- ------ ------ ------- ------
Net cash flow from investing activities..... (15) (4) 4,170
------- ------ ------ ------- ------
(Decrease) increase in cash equivalents....... (172) 31 181 41 30
Cash equivalents, beginning of the period..... 252 71 71 30
------- ------ ------ ------- ------
Cash equivalents, end of the period........... 80 102 252 71 30
======= ====== ====== ======= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE> 144
SENANG SPIRIT INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED
---------------------- MARCH 31, MARCH, 31
1995 1994 1995 1994
-------- -------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Voyage revenues.................................. 4,178 3,678 7,678 2,166
OPERATING EXPENSES
Vessel operating expenses........................ 793 693 1,484 344
Depreciation and amortization.................... 1,635 1,714 3,429 865
General and administrative (note 3).............. 112 118 233 56
------ ------ ------ -----
2,540 2,525 5,146 1,265
------ ------ ------ -----
Income from vessel operations.................... 1,638 1,153 2,532 901
------ ------ ------ -----
Other items
Interest expense................................. (1,365) (1,093) (2,393) (499)
Interest income.................................. 11 1 6
------ ------ ------ -----
(1,354) (1,092) (2,387) (499)
------ ------ ------ -----
Income before foreign exchange loss.............. 284 61 145 402
Foreign exchange loss............................ (3) (2)
------ ------ ------ -----
Net Income....................................... 284 58 143 402
Retained earnings, beginning of the period....... 545 402 402
------ ------ ------ -----
Retained earnings, end of the period............. 829 460 545 402
====== ====== ====== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE> 145
SENANG SPIRIT INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents....................................... 479 9 217 44
Accounts receivable.................................... 2
Prepaid expenses....................................... 191 216 175 135
------ ------ ------ -----
Total current assets............................. 670 225 394 179
------ ------ ------ -----
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September 30,
1995--$5,920, 1994--$2,570; March 31, 1995--$4,286,
1994--$856).......................................... 62,661 66,004 64,291 67,603
------ ------ ------ -----
63,331 66,229 64,685 67,782
====== ====== ====== =====
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable....................................... 137 72 82 28
Accrued liabilities (note 4)........................... 61 58 91 128
Current portion of long-term debt (note 5)............. 3,333 3,333 3,333 3,333
------ ------ ------ -----
Total current liabilities........................ 3,531 3,463 3,506 3,489
------ ------ ------ -----
Long-term debt (note 5)................................ 30,833 34,166 32,499 35,833
Due to parent--without interest or stated terms of
repayment (note 10).................................. 28,135 28,130 28,053
------ ------ ------ -----
Total liabilities................................ 34,364 65,764 64,135 67,375
------ ------ ------ -----
STOCKHOLDER'S EQUITY
Capital stock (note 8)................................. 5 5 5 5
Contributed surplus (note 10).......................... 28,133
Retained earnings...................................... 829 460 545 402
------ ------ ------ -----
Total stockholder's equity....................... 28,967 465 550 407
------ ------ ------ -----
63,331 66,229 64,685 67,782
====== ====== ====== =====
</TABLE>
Contingencies (note 11)
The accompanying notes are an integral part of the financial statements.
F-38
<PAGE> 146
SENANG SPIRIT INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED
------------------------ MARCH 31, MARCH 31,
1995 1994 1995 1994
--------- --------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income..................................... 284 58 143 402
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization................ 1,635 1,714 3,429 865
Change in non-cash working capital items (note
9)........................................... 11 (107) (25 ) 21
--------- --------- ---------- -------------
Net cash flow from operating activities...... 1,930 1,665 3,547 1,288
--------- --------- ---------- -------------
FINANCING ACTIVITIES
Scheduled repayments of long-term debt......... (1,666) (1,667) (3,334 )
Scheduled repayments of capital lease
obligation................................... (981)
Prepayments of capital lease obligation........ (10,500)
Increase (decrease) in amount due to parent.... (28,130) 82 77 16,013
Capital contribution from parent (note 10)..... 28,133
--------- --------- ---------- -------------
Net cash flow from financing activities...... (1,663) (1,585) (3,257 ) 4,532
--------- --------- ---------- -------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment
(net of capital lease financing of:
March 31, 1994--$50,647)..................... (5) (115) (117 ) (5,776)
--------- --------- ---------- -------------
Net cash flow from investing activities...... (5) (115) (117 ) (5,776)
--------- --------- ---------- -------------
(Decrease) increase in cash equivalents........ 262 (35) 173 44
Cash equivalents, beginning of the period...... 217 44 44
--------- --------- ---------- -------------
Cash equivalents, end of the period............ 479 9 217 44
======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-39
<PAGE> 147
VSSI APPIAN INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
-------- -------- ---------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Voyage revenues..................... 4,677 4,346 8,967 8,704 9,057
OPERATING EXPENSES
Vessel operating expenses........... 827 880 1,633 1,410 1,414
Depreciation and amortization....... 1,322 1,408 2,819 2,619 2,802
General and administrative (note
3)................................ 115 121 234 200 207
-------- -------- ---------- ------------- ----------
2,264 2,409 4,686 4,229 4,423
-------- -------- ---------- ------------- ----------
Income from vessel operations....... 2,413 1,937 4,281 4,475 4,634
-------- -------- ---------- ------------- ----------
Other items
Interest expense.................... (1,398) (1,206) (2,595) (2,071) (2,665)
Interest income..................... 20 7 21 11
-------- -------- ---------- ------------- ----------
(1,378) (1,199) (2,574) (2,060) (2,665)
-------- -------- ---------- ------------- ----------
Income before foreign exchange
loss.............................. 1,035 738 1,707 2,415 1,969
Foreign exchange loss............... (3) (3) (1,715) (7,634)
-------- -------- ---------- ------------- ----------
Net Income (loss)................... 1,035 735 1,704 700 (5,665)
Retained earnings (deficit),
beginning of the period........... (971) (2,675) (2,675) (3,375) 2,290
-------- -------- ---------- ------------- ----------
Retained earnings (deficit), end of
the period........................ 64 (1,940) (971) (2,675) (3,375)
======= ======= ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE> 148
VSSI APPIAN INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents....................................... 811 372 571 303
Accounts receivable.................................... 12 12 156
Prepaid expenses....................................... 150 216 218 132
-------- -------- -------- --------
Total current assets............................. 961 600 801 591
-------- -------- -------- --------
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September 30,
1995--$9,910, 1994--$7,204; March 31, 1995--$8,601,
1994--$5,741)........................................ 45,927 48,594 47,234 49,961
-------- -------- -------- --------
Other assets........................................... 173 200 186 213
-------- -------- -------- --------
47,061 49,394 48,221 50,765
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable....................................... 69 122 122 101
Accrued liabilities (note 4)........................... 43 56 48 44
Current portion of long-term debt (note 5)............. 4,292 4,292 4,292 4,292
-------- -------- -------- --------
Total current liabilities........................ 4,404 4,470 4,462 4,437
-------- -------- -------- --------
Long-term debt (note 5)................................ 30,468 34,761 32,615 36,907
Due to parent--without interest or stated terms of
repayment (note 10).................................. 12,102 12,114 12,095
-------- -------- -------- --------
Total liabilities................................ 34,872 51,333 49,191 53,439
-------- -------- -------- --------
STOCKHOLDER'S EQUITY
Capital stock (note 8)................................. 1 1 1 1
Contributed surplus (note 10).......................... 12,124
Retained earnings (deficit)............................ 64 (1,940) (971) (2,675)
-------- -------- -------- --------
Total stockholder's equity....................... 12,189 (1,939) (970) (2,674)
-------- -------- -------- --------
47,061 49,394 48,221 50,765
======= ======= ======= =======
</TABLE>
Contingencies (note 11)
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE> 149
VSSI APPIAN INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
--------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income (loss)............................. 1,035 735 1,704 700 (5,665)
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization............... 1,322 1,408 2,819 2,619 2,802
Foreign currency exchange loss.............. 1,715 7,536
Change in non-cash working capital items (note
9).......................................... 22 93 83 (565) (239)
--------- --------- ---------- ------------- ----------
Net cash flow from operating activities..... 2,379 2,236 4,606 4,469 4,434
--------- --------- ---------- ------------- ----------
FINANCING ACTIVITIES
Scheduled repayments of long-term debt........ (2,147) (2,146) (4,292) (3,219) (1,479)
Prepayments of long-term debt................. (1,798) (1,219)
Increase (decrease) in amount due to parent... (12,114) 7 19 961 (1,459)
Capital contribution from parent (note 10).... 12,124
--------- --------- ---------- ------------- ----------
Net cash flow from financing activities..... (2,137) (2,139) (4,273) (4,056) (4,157)
--------- --------- ---------- ------------- ----------
INVESTING ACTIVITIES
Expenditures for vessels and equipment........ (2) (27) (65) 14 (110)
Increase in other assets...................... (1) (232) (59)
--------- --------- ---------- ------------- ----------
Net cash flow from investing activities..... (2) (28) (65) (218) (169)
--------- --------- ---------- ------------- ----------
Increase in cash equivalents.................. 240 69 268 195 108
Cash equivalents, beginning of the period..... 571 303 303 108
--------- --------- ---------- ------------- ----------
Cash equivalents, end of the period........... 811 372 571 303 108
======== ======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE> 150
VSSI ATLANTIC INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED
---------------------- MARCH 31, MARCH 31,
1995 1994 1995 1994
-------- -------- ---------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUES
Voyage revenues.................................... 4,262 3,740 7,832 2,019
OPERATING EXPENSES
Vessel operating expenses.......................... 773 830 1,545 235
Depreciation and amortization...................... 1,645 1,724 3,447 573
General and administrative (note 3)................ 224 265 460 75
-------- -------- ---------- -------------
2,642 2,819 5,452 883
-------- -------- ---------- -------------
Income from vessel operations...................... 1,620 921 2,380 1,136
-------- -------- ---------- -------------
Other items
Interest expense................................... (1,367) (1,085) (2,390) (328)
Interest income.................................... 14 32 43 11
-------- -------- ---------- -------------
(1,353) (1,053) (2,347) (317)
-------- -------- ---------- -------------
Income (loss) before foreign exchange loss......... 267 (132) 33 819
Foreign exchange loss.............................. (2) (2)
-------- -------- ---------- -------------
Net Income (loss).................................. 267 (134) 31 819
Retained earnings, beginning of the period......... 850 819 819
-------- -------- ---------- -------------
Retained earnings, end of the period............... 1,117 685 850 819
======= ======= ======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE> 151
VSSI ATLANTIC INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents....................................... 562 268 434 3,561
Accounts receivable.................................... 13 10
Prepaid expenses....................................... 155 186 167 179
-------- -------- -------- --------
Total current assets............................. 730 454 611 3,740
-------- -------- -------- --------
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September 30,
1995--$5,665, 1994--$2,297; March 31, 1995--$4,020,
1994--$572).......................................... 63,317 66,642 64,926 68,065
-------- -------- -------- --------
64,047 67,096 65,537 71,805
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable....................................... 113 115 97 43
Accrued liabilities (note 4)........................... 33 37 79 48
Current portion of long-term debt (note 5)............. 3,475 3,475 3,475 3,475
-------- -------- -------- --------
Total current liabilities........................ 3,621 3,627 3,651 3,566
-------- -------- -------- --------
Long-term debt (note 5)................................ 30,697 34,172 32,434 35,909
Due to parent--without interest or stated terms of
repayment (note 10).................................. 28,611 28,601 31,510
-------- -------- -------- --------
Total liabilities................................ 34,318 66,410 64,686 70,985
-------- -------- -------- --------
STOCKHOLDER'S EQUITY
Capital stock (note 8)................................. 1 1 1 1
Contributed surplus (note 10).......................... 28,611
Retained earnings...................................... 1,117 685 850 819
-------- -------- -------- --------
Total stockholder's equity....................... 29,729 686 851 820
-------- -------- -------- --------
64,047 67,096 65,537 71,805
======= ======= ======= =======
Contingencies (note 11)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE> 152
VSSI ATLANTIC INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
---------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
--------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income (loss)............................. 267 (134) 31 819
Add (deduct) charges to operations not
requiring a payment of cash:
Depreciation and amortization............... 1,645 1,724 3,447 573
Change in non-cash working capital items
(note 9).................................... (21) 54 87 (88)
--------- --------- ---------- ------------- ----------
Net cash flow from operating activities..... 1,891 1,644 3,565 1,304
--------- --------- ---------- ------------- ----------
FINANCING ACTIVITIES
Proceeds from long-term debt.................. 45,000
Scheduled repayments of long-term debt........ (1,737) (1,737) (3,475 ) (616)
Prepayments of long-term debt................. (5,000)
Increase (decrease) in amount due to parent... (28,601) (2,899) (2,909 ) 19,346 12,164
Capital contribution from parent (note 10).... 28,611 1
--------- --------- ---------- ------------- ----------
Net cash flow from financing activities..... (1,727) (4,636) (6,384 ) 58,731 12,164
--------- --------- ---------- ------------- ----------
INVESTING ACTIVITIES
Expenditures for vessels and equipment........ (36) (301) (308 ) (56,474) (12,164 )
--------- --------- ---------- ------------- ----------
Net cash flow from investing activities..... (36) (301) (308 ) (56,474) (12,164 )
--------- --------- ---------- ------------- ----------
(Decrease) increase in cash equivalents....... 128 (3,293) (3,127 ) 3,561
Cash equivalents, beginning of the period..... 434 3,561 3,561
--------- --------- ---------- ------------- ----------
Cash equivalents, end of the period........... 562 268 434 3,561
======== ======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-45
<PAGE> 153
VSSI OCEANS INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED
SEPTEMBER 30,
1995
----------------
<S> <C>
(UNAUDITED)
REVENUES
Voyage revenues.................................................................... 1,265
OPERATING EXPENSES
Vessel operating expenses.......................................................... 202
Depreciation and amortization...................................................... 385
General and administrative (note 3)................................................ 51
-------
638
-------
Income from vessel operations...................................................... 627
-------
Other items
Interest expense................................................................... (462)
Interest income.................................................................... 1
-------
(461)
-------
Net income......................................................................... 166
Retained earnings, beginning of the period.........................................
-------
Retained earnings, end of the period............................................... 166
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-46
<PAGE> 154
VSSI OCEANS INC.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------- AT MARCH 31,
1995 1994 1995
-------- -------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Cash equivalents............................................... 74 23 2
Accounts receivable............................................
Prepaid expenses............................................... 183
------ ------ ------
Total current assets..................................... 257 23 2
------ ------ ------
Vessel and equipment (note 5)
At cost, less accumulated depreciation (September 30,
1995--$399).................................................. 49,813
Advances on vessel............................................. 2,545 2,642
------ ------ ------
50,070 2,568 2,644
====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
Accounts payable............................................... 178 4
Accrued liabilities (note 4)................................... 179 5
Current portion of capital lease obligation (note 6)........... 2,709
------ ------ ------
Total current liabilities................................ 3,066 5 4
------ ------ ------
Capital lease obligation (note 6).............................. 41,200
Due to parent--without interest or stated terms of repayment
(note 10).................................................... 2,562 2,639
------ ------ ------
Total liabilities........................................ 44,266 2,567 2,643
------ ------ ------
STOCKHOLDER'S EQUITY
Capital stock (note 8)......................................... 1 1 1
Contributed surplus (note 10).................................. 5,637
Retained earnings.............................................. 166
------ ------ ------
Total stockholder's equity............................... 5,804 1 1
------ ------ ------
50,070 2,568 2,644
====== ====== ======
</TABLE>
Contingencies (note 11)
The accompanying notes are an integral part of the financial statements.
F-47
<PAGE> 155
VSSI OCEANS INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
---------------------- MARCH 31,
1995 1994 1995
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
Net Income (loss)............................................... 166
Add (deduct) charges to operations not requiring a payment of
cash:
Depreciation and amortization................................. 385
Change in non-cash working capital items (note 9)............... 170 5 4
-------- -------- ----------
Net cash flow from operating activities....................... 721 5 4
-------- -------- ----------
FINANCING ACTIVITIES
Scheduled repayments of capital lease obligation................ (641)
Increase (decrease) in amount due to parent..................... (2,639) 2,562 2,639
Capital contribution from parent (note 10)...................... 5,637 1 1
-------- -------- ----------
Net cash flow from financing activities....................... 2,357 2,563 2,640
-------- -------- ----------
INVESTING ACTIVITIES
Expenditures for vessels acquired under capital lease (net of
capital lease financing of: September 30, 1995--$44,550)...... (3,006) (2,545) (2,642)
-------- -------- ----------
Net cash flow from investing activities....................... (3,006) (2,545) (2,642)
-------- -------- ----------
Increase in cash equivalents.................................... 72 23 2
Cash equivalents, beginning of the period....................... 2
-------- -------- ----------
Cash equivalents, end of the period............................. 74 23 2
======= ======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-48
<PAGE> 156
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
In the opinion of management, the unaudited interim financial statements
contain all adjustments (consisting only of normal recurring accruals),
necessary to present fairly, in all material respects, the Companies' financial
position as at September 30, 1995 and 1994 and their related results of
operations and cash flows for the six-month periods ended September 30, 1995 and
1994. The results of operations for the six-month period ended September 30,
1995 are not necessarily indicative of those for a full fiscal year.
Reporting currency
The Companies' financial statements are stated in U.S. dollars because the
Companies operate in international shipping markets which utilize the U.S.
dollar as the functional currency.
Change in fiscal year end
The Companies changed their fiscal year ends, from April 30 to March 31,
effective March 31, 1994 and accordingly, the results of operations and cash
flows presented for fiscal 1994 are for the eleven months ended March 31, 1994.
Operating revenues and expenses
Voyage revenues and expenses are recognized on the percentage of completion
method of accounting. Estimated losses on voyages are provided for in full at
the time such losses become evident. The balance sheets reflect the deferred
portion of revenues and expenses applicable to subsequent periods.
Vessel expenses comprise all expenses relating to the operation of vessels,
including crewing, repairs and maintenance, insurance, stores and lubes, and
miscellaneous expenses including communications.
Vessels and equipment
All pre-delivery costs incurred during the construction of new buildings,
including interest costs, and supervision and technical costs are capitalized.
The acquisition cost and all costs incurred to restore used vessel purchases to
the standard required to properly service the Companies' customers are
capitalized. Depreciation is calculated on a straight-line basis over a vessel's
useful life, estimated by the Companies to be twenty years from the date a
vessel is initially placed in service.
F-49
<PAGE> 157
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Interest costs capitalized to vessels and equipment totalled approximately
the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
$ $ $ $ $
------- ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Andros Spirit Inc................ 403
Exuma Spirit Inc................. 317
Nassau Spirit Inc................ 181
Senang Spirit Inc................ 584 537
VSSI Appian Inc..................
VSSI Atlantic Inc................ 887
VSSI Oceans Inc.................. 79 63 151
</TABLE>
Expenditures incurred during drydocking are capitalized and amortized on a
straight-line basis over the period until the next anticipated drydocking. When
significant drydocking expenditures recur prior to the expiry of this period,
the remaining balance of the original drydocking is expensed in the month of the
subsequent drydocking.
Vessels acquired pursuant to bareboat hire purchase agreements are
capitalized as capital leases and are amortized over the estimated useful life
of the acquired vessel.
Effective April 1, 1995, the Companies revised their estimates of the
residual values of their vessels. The effect of this change in estimated
residual values was to reduce depreciation expense for the six-month period
ended September 30, 1995 for each of the Companies by approximately $85,000
(except for VSSI Oceans Inc.--$25,000).
Other assets
Loan costs, including fees, commissions and legal expenses, are capitalized
and amortized over the term of the relevant loan.
F-50
<PAGE> 158
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
Cash flows
Cash interest paid totalled approximately as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
$ $ $ $ $
------- ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Andros Spirit Inc. .............. 1,192 1,000 2,156 2,046 999
Exuma Spirit Inc. ............... 1,185 995 2,144 2,324 1,252
Nassau Spirit Inc. .............. 1,139 989 2,161 1,963 2,219
Senang Spirit Inc. .............. 1,392 1,176 2,448 974
VSSI Appian Inc. ................ 1,401 1,196 2,589 2,062 2,642
VSSI Atlantic Inc. .............. 1,394 1,074 2,351 313
VSSI Oceans Inc. ................ 350 151
</TABLE>
The Companies consider all highly liquid investments with a maturity date
of three months or less when purchased to be included in cash equivalents.
Income taxes
The legal jurisdictions of the countries in which the Companies are
incorporated do not impose income taxes upon shipping-related activities.
2. BUSINESS OPERATIONS
The Companies are engaged in the ocean transportation of petroleum cargoes
worldwide through the ownership and operation of a fleet of tankers. All of the
Companies' vessels operate in international markets.
F-51
<PAGE> 159
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
3. CONTRACTUAL RELATIONSHIPS
The Companies have entered into agreements with Teekay Shipping Limited
("TSL") an affiliated company, whereby TSL and its affiliated companies render
administrative, operating and ship management services in return for a monthly
fee and commissions at rates considered usual and customary to the industry. All
of the Companies' revenues are earned through long-term charter agreements with
Palm Shipping Inc. ("Palm"), an affiliated company, which markets the vessels on
the spot tanker market. Fees and commissions incurred, included in general and
administrative expenses, are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
$ $ $ $ $
------- ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Andros Spirit Inc................ 102 85 187 178 77
Exuma Spirit Inc................. 102 105 204 178
Nassau Spirit Inc................ 102 102 204 178 169
Senang Spirit Inc................ 102 102 204 51
VSSI Appian Inc.................. 102 102 204 178 185
VSSI Atlantic Inc................ 102 102 204 34
VSSI Oceans Inc.................. 34
</TABLE>
4. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- MARCH 31, MARCH 31,
1995 1994 1995 1994
$ $ $ $
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Vessel
Andros Spirit Inc............................. 9
Exuma Spirit Inc.............................. 7
Nassau Spirit Inc............................. 9
Senang Spirit Inc............................. 17
VSSI Appian Inc............................... 8 1 1
VSSI Atlantic Inc............................. 1
VSSI Oceans Inc............................... 5
Interest
Andros Spirit Inc............................. 22 24 49 29
Exuma Spirit Inc.............................. 22 23 49 28
Nassau Spirit Inc............................. 5
Senang Spirit Inc............................. 27 26 54 109
VSSI Appian Inc............................... 28 28 31 18
VSSI Atlantic Inc............................. 27 26 54 15
VSSI Oceans Inc............................... 191
</TABLE>
F-52
<PAGE> 160
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- MARCH 31, MARCH 31,
1995 1994 1995 1994
$ $ $ $
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Payroll and benefits
Andros Spirit Inc............................. 22 5 20 19
Exuma Spirit Inc.............................. 9 12 7 24
Nassau Spirit Inc............................. 33 28 56 10
Senang Spirit Inc............................. 17 32 37 19
VSSI Appian Inc............................... 7 27 16 26
VSSI Atlantic Inc............................. 6 11 24 33
VSSI Oceans Inc............................... (12)
Total accrued liabilities
Andros Spirit Inc............................. 53 29 69 48
Exuma Spirit Inc.............................. 38 35 56 52
Nassau Spirit Inc............................. 47 28 56 10
Senang Spirit Inc............................. 61 58 91 128
VSSI Appian Inc............................... 43 56 48 44
VSSI Atlantic Inc............................. 33 37 79 48
VSSI Oceans Inc............................... 179 5
</TABLE>
F-53
<PAGE> 161
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------- MARCH 31, MARCH 31,
1995 1994 1995 1994
$ $ $ $
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Floating rate (LIBOR + 1 to 1.5%) U.S.
dollar debt through 2006
Andros Spirit Inc......................... 28,543 35,386 33,631 37,140
Exuma Spirit Inc.......................... 28,311 35,226 33,435 37,018
Nassau Spirit Inc......................... 28,086 35,080 33,250 36,911
Senang Spirit Inc......................... 34,166 37,499 35,832 39,166
VSSI Appian Inc........................... 34,760 39,053 36,907 41,199
VSSI Atlantic Inc......................... 34,172 37,647 35,909 39,384
Current portion of long-term debt incurred
above:
Andros Spirit Inc......................... 3,509 3,510 3,509 3,509
Exuma Spirit Inc.......................... 3,582 3,582 3,582 3,582
Nassau Spirit Inc......................... 3,355 3,355 3,355 3,355
Senang Spirit Inc......................... 3,333 3,333 3,333 3,333
VSSI Appian Inc........................... 4,292 4,292 4,292 4,292
VSSI Atlantic Inc......................... 3,475 3,475 3,475 3,475
</TABLE>
Each loan is collateralized by a first preferred mortgage on the vessel to
which the loan relates together with assignments of earnings and insurance, as
well as guarantees from the parent company, Teekay Shipping Corporation
(formerly Viking Star Shipping Inc.) ("Teekay").
Amongst other matters, the long-term debt agreements generally provided for
such items as prepayment privileges (in some cases with penalties), and
restrictions against the incurrence of additional debt and new investments by
the individual subsidiaries without prior lender consent.
Teekay intends to refinance each of the Companies' long-term debt and
capital lease obligations with the net proceeds from the proposed offering of
$225,000,000 First Preferred Ship Mortgage Notes (the "Notes"). The Notes will
be subject to a sinking fund, which will retire $45 million principal amount of
the Notes each year commencing 2004. As a result, there will be no required
principal repayments on the Companies' existing long-term debt and capital lease
obligation subsequent to the completion of the Note Offering.
6. LEASES
Charters-in
During February and March 1994, Andros Spirit Inc., Exuma Spirit Inc.,
Nassau Spirit Inc. and Senang Spirit Inc. converted each of its remaining
capital lease obligations into long-term indebtedness.
F-54
<PAGE> 162
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
In August 1995, VSSI Oceans Inc. entered into a bareboat hire purchase
agreement which is accounted for as a capital lease. The capital lease bears an
interest rate of LIBOR + 1.25% and is due through 2008.
Charters-out
Time charters of the Companies' vessels to Palm are accounted for as
operating leases. The minimum future revenues to be received on time charters
currently in place are as follows:
ANDROS SPIRIT INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 3,881
1997............................................................................ 7,742
1998............................................................................ 7,742
1999............................................................................ 7,742
2000............................................................................ 7,763
--------
34,870
========
</TABLE>
EXUMA SPIRIT INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 3,911
1997............................................................................ 7,800
1998............................................................................ 7,800
1999............................................................................ 7,800
2000............................................................................ 7,821
--------
35,132
========
</TABLE>
NASSAU SPIRIT INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 3,956
1997............................................................................ 7,891
1998............................................................................ 7,891
1999............................................................................ 7,891
2000............................................................................ 7,913
--------
35,542
========
</TABLE>
F-55
<PAGE> 163
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
SENANG SPIRIT INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 4,180
1997............................................................................ 8,337
1998............................................................................ 8,337
1999............................................................................ 8,337
2000............................................................................ 8,359
--------
37,550
========
</TABLE>
VSSI APPIAN INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 4,659
1997............................................................................ 9,293
1998............................................................................ 9,293
1999............................................................................ 9,293
2000............................................................................ 9,318
--------
41,856
========
</TABLE>
VSSI ATLANTIC INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 4,268
1997............................................................................ 8,512
1998............................................................................ 8,512
1999............................................................................ 8,512
2000............................................................................ 8,535
--------
38,339
========
</TABLE>
VSSI OCEANS INC.
<TABLE>
<CAPTION>
$
--------
<S> <C>
1996 (Six months from October 1, 1995 to March 31, 1996)........................ 3,891
1997............................................................................ 7,760
1998............................................................................ 7,760
1999............................................................................ 7,760
2000............................................................................ 7,781
--------
34,952
========
</TABLE>
The minimum future revenues should not be construed to reflect total voyage
revenues for any of the periods.
F-56
<PAGE> 164
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Cash equivalents and restricted cash--The carrying amounts represent fair
value.
Long-term debt--The carrying amounts of floating rate debt approximate fair
value.
The fair values of the Companies' long-term debt and other financial
instruments approximate their carrying values at September 30, 1995, March 31,
1995, and March 31, 1994.
8. CAPITAL STOCK
Capital stock for each of the Companies is as follows:
AUTHORIZED
500 Common Stock with no par value--VSSI Appian Inc., VSSI
Atlantic Inc., and VSSI Oceans Inc..........................
5,000 Common Stock with a par value of $1 per share--Andros
Spirit Inc., Exuma Spirit Inc., Nassau Spirit Inc., and
Senang Spirit Inc.
<TABLE>
<CAPTION>
COMMON
STOCK
$ #
------ ------
<S> <C> <C>
ISSUED AND OUTSTANDING
VSSI Appian Inc., VSSI Atlantic Inc., and VSSI Oceans Inc.... 1 500
All other Companies.......................................... 5 5,000
</TABLE>
9. CHANGE IN NON-CASH WORKING CAPITAL ITEMS
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
--------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
$ $ $ $ $
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Accounts receivable
Andros Spirit Inc.............. 28 (12) (28)
Exuma Spirit Inc............... 15 (15)
Nassau Spirit Inc.............. 1 1 (1)
Senang Spirit Inc.............. 2 (2)
VSSI Appian Inc................ 12 144 144 (66) (90)
VSSI Atlantic Inc.............. (3) (10)
VSSI Oceans Inc................
</TABLE>
F-57
<PAGE> 165
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
--------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
$ $ $ $ $
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Prepaid expenses
Andros Spirit Inc.............. (29) (74) (40) 81 (183)
Exuma Spirit Inc............... (7) (71) (65) 66 (177)
Nassau Spirit Inc.............. (8) (82) (81) 79 (180)
Senang Spirit Inc.............. (16) (81) (40) (135)
VSSI Appian Inc................ 68 (84) (86) 22 (1)
VSSI Atlantic Inc.............. 12 (7) 12 (179)
VSSI Oceans Inc................ (183)
Accounts payable
Andros Spirit Inc.............. (3) 38 48 27 36
Exuma Spirit Inc............... (80) 60 97 (3) 52
Nassau Spirit Inc.............. 5 (10) (48) 82 (30)
Senang Spirit Inc.............. 55 44 54 28
VSSI Appian Inc................ (53) 21 21 101 (103)
VSSI Atlantic Inc.............. 16 72 54 43
VSSI Oceans Inc................ 174 4
Accrued liabilities
Andros Spirit Inc.............. (16) (19) 21 11 37
Exuma Spirit Inc............... (18) (17) 4 9 43
Nassau Spirit Inc.............. (9) 18 46 (23) 33
Senang Spirit Inc.............. (30) (70) (37) 128
VSSI Appian Inc................ (5) 12 4 (1) (22)
VSSI Atlantic Inc.............. (46) (11) 31 48
VSSI Oceans Inc................ 179 5
Deferred time charter revenue
Andros Spirit Inc.............. (624) 624
Exuma Spirit Inc............... (663) 663
Nassau Spirit Inc.............. (1) 1
Senang Spirit Inc..............
VSSI Appian Inc................ (621) (23)
VSSI Atlantic Inc..............
VSSI Oceans Inc................
</TABLE>
F-58
<PAGE> 166
ANDROS SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC., SENANG SPIRIT INC.,
VSSI APPIAN INC., VSSI ATLANTIC INC., VSSI OCEANS INC. (THE "COMPANIES")
NOTES TO THE FINANCIAL STATEMENTS -- (CONT'D)
(INFORMATION AS AT SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND FOR
THE SIX-MONTH PERIODS THEN ENDED, IS UNAUDITED)
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED ELEVEN MONTHS
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED
--------------------- MARCH 31, MARCH 31, APRIL 30,
1995 1994 1995 1994 1993
$ $ $ $ $
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Total change in non-cash
working capital items
Andros Spirit Inc.............. (20) (67) 1 (505) 514
Exuma Spirit Inc............... (90) (28) 21 (591) 581
Nassau Spirit Inc.............. (12) (73) (82) 136 (176)
Senang Spirit Inc.............. 11 (107) (25) 21
VSSI Appian Inc................ 22 93 83 (565) (239)
VSSI Atlantic Inc.............. (21) 54 87 (88)
VSSI Oceans Inc................ 170 5 4
</TABLE>
10. CONTRIBUTED SURPLUS
During the period ended September 30, 1995, the Companies' parent, Teekay
contributed approximately $144.8 million to the Companies by way of a capital
contribution consisting of forgiveness of inter-company debt.
11. CONTINGENCIES
Subsequent to September 30, 1995, all of the Companies will guarantee
certain of the indebtedness of their parent company, Teekay, in conjunction with
its proposed offering of $225 million First Preferred Ship Mortgage Notes due
2008.
F-59
<PAGE> 167
EXHIBIT A
DEFINITIONS OF SHIPPING TERMS
The following is a set of definitions for shipping terms that are used
throughout this Prospectus:
"AFRAMAX TANKER" An oil tanker of 75,000 - 115,000 dwt. Certain external
statistical compilations define an "Aframax Tanker" slightly differently, some
going as high as 125,000 dwt and others as low as 70,000 dwt. External data used
in this prospectus has been adjusted so that the definition of "Aframax Tanker"
is consistent throughout.
"ANNUAL SURVEY" An annual inspection of a vessel by a classification
society surveyor to ensure that the vessel meets the standards of that society.
"BALLAST" A vessel is in ballast when it is steaming without cargo, and is
instead loaded down with sea water for stability. Given that oil production is
concentrated in certain parts of the world, a vessel will generally spend a
significant amount of time "ballasting" as it returns from discharge port to
load port.
"BAREBOAT CHARTER" The leasing of an empty ship for a specified period of
time for a specific fee. In this arrangement, the shipowner virtually
relinquishes all rights and responsibilities in respect of the vessel and the
charterer becomes the de facto ("disponent") owner for this period. The
charterer is generally responsible for all operating expenses including crewing
and insurance
"BUNKER" Fuel oil used to operate a vessel's engines and generators.
"CHARTER" The hiring of a vessel for either 1) a specified period of time
or 2) a specific voyage or set of voyages.
"CHARTERER" The entity hiring the vessel from the shipowner.
"CHARTER-PARTY" The contract between the owner and the charterer,
stipulating in detail each party's responsibilities in the transaction.
"CLASSIFICATION" In order for a vessel to obtain both insurance and
employment with most oil majors, the vessel must belong to a classification
society, an independent body run under the direction of various shipping
professionals. In order to maintain classification, a vessel must meet the
standards of that society and be inspected on a regular basis.
"CRUDE CARRIER" A tanker vessel designed to carry crude oil or other dirty
products.
"DEMURRAGE" Compensation paid by the charterer to the ship owner when
loading and discharging time exceed the stipulated time in the voyage
charter-party. This rate of compensation is generally explicitly stated in the
charter-party.
"DOUBLE BOTTOM OR DOUBLE HULL" Hull construction technique by which a ship
has an inner and outer bottom or hull separated by void space, usually several
feet in width.
"DWT" Deadweight ton. A unit of a vessel's capacity, for cargo, fuel oil,
stores and crew, measured in metric tons of 1,000 kg. A vessel's dwt or total
deadweight is the total weight the vessel can carry when loaded to a particular
load line.
"HEAVY PETROLEUM PRODUCTS" Certain products derived from crude oil that
crude carriers are capable of carrying.
"IDLE-TIME" or "WAITING DAYS" Period during which a vessel is able to be
employed but is not earning revenue.
"IMO" International Maritime Organization, a United Nations agency that
issues international trade standards for shipping.
"INTERMEDIATE SURVEY" The inspection of a vessel by a classification
society surveyor which takes place approximately two and a half years before and
after each Special Survey. This survey is more
A-1
<PAGE> 168
rigorous than the "Annual Survey" and is meant to ensure that the vessel meets
the standards of the classification society.
"LADEN" A vessel is laden when it is carrying cargo.
"LAY-UP" Mooring a ship at a protected anchorage, shutting down
substantially all of its operating systems and taking measures to protect
against corrosion and other deterioration. Generally, a ship enters lay-up for a
period when its owner does not consider it profitable to continue trading that
vessel for that period.
"LIGHT PETROLEUM PRODUCTS" Products of crude oil that have passed through
an extensive refining process. It is generally not possible for crude carriers
to carry these products.
"M/T" Motor Tanker. A tanker propelled by diesel engines.
"NEWBUILDING" A new vessel under construction.
"OFF-HIRE" Period during which a vessel is temporarily incapable of
trading due to drydocking, maintenance, repair or breakdown.
"OIL/BULK/ORE CARRIER" An ocean-going vessel designed to carry either oil
or dry bulk cargoes.
"OPA 90" The United States Oil Pollution Act of 1990.
"PANAMAX TANKER" A vessel of approximately 50,000 to 75,000 dwt, of
maximum length and breadth and draught capable of passing through the Panama
Canal.
"PROTECTION AND INDEMNITY INSURANCE" Insurance obtained through a mutual
association formed by ship owners to provide protection from large financial
loss to one member by contribution towards that loss by all members.
"SCRAP" At the end of its life, a vessel is sold to a shipbreaker who
strips the ship and sells the steel. When charter rates are low, the scrap value
of the vessel may exceed the present trading value of that vessel, especially if
the vessel must incur significant costs to pass special surveys.
"SMALL TANKER" A tanker generally of less than 50,000 dwt.
"SPECIAL SURVEY" The inspection of a vessel by a classification society
surveyor which takes place every four to five years. A shipowner often must
incur a great deal of repair expense in order to pass his fourth and fifth
special survey and as a result may choose to simply scrap the vessel beforehand.
"SPOT MARKET" The market for chartering a vessel for single voyages.
"STORAGE" The use of a vessel for the storage rather than the
transportation of cargo. When spot market rates are low, a vessel can earn
comparable net cash flow from storage.
"SUEZMAX TANKER" A vessel of approximately 115,000 to 200,000dwt of
maximum length and breadth and draught capable of passing through the Suez
Canal.
"TCE" or "TIME CHARTER EQUIVALENT" A measure of revenue performance based
on a spot market rate, measured in $/ton, adjusted to equate to a time charter
rate, measured in dollars per ship per day. TCE is calculated as gross revenue
less the voyage specific expenses that the owner would not have incurred had the
vessel been time-chartered, divided by the number of voyage days. Consistent
with industry data, such as that produced by Clarkson, the TCE rates used in
this Prospectus do not account for brokerage commissions or off-hire and idle
time.
"TANKER" Ship designed for the carriage of liquid cargoes in bulk, her
cargo space consisting of many tanks. Tankers carry a variety of products
including crude oil, refined products, liquid chemicals, liquid gas and wine.
Tankers load their cargo by gravity from the shore or by shore pumps and
discharge using their own pumps.
A-2
<PAGE> 169
"TIME CHARTER" The hire of a ship for a specified period of time. The
owner provides the ship with crew, stores and provisions, ready in all aspects
to load cargo and proceed on a voyage. The charterer pays for bunkering and all
voyage related expenses including canal tolls and port charges.
"TON-MILES" A measure of tanker demand. Tons carried by a vessel
multiplied by the distance traveled.
"ULCC" Ultra Large Crude Carrier. An ocean-going tanker vessel of more
than 320,000 dwt, designed to carry crude oil cargoes.
"VLCC" Very Large Crude Carrier. An ocean-going tanker vessel of between
200,000 and 320,000 dwt, designed to carry crude oil cargoes.
"VOYAGE CHARTER" Contract of carriage in which the charterer pays for the
use of a ship's cargo capacity for one, or sometimes more than one, voyage.
Under this type of charter, the ship owner pays all the operating costs of the
ship (including bunkers, canal and port charges, pilotage, towage and ship's
agency) while payment for cargo handling charges are subject of agreement
between the parties. Freight is generally paid per unit of cargo, such as a ton,
based on an agreed quantity, or as a lump sum irrespective of the quantity
loaded.
Shipping terms supplied by Dictionary of Shipping Terms, published by
Lloyds of London Press Limited (1985), and other sources.
A-3
<PAGE> 170
[AFRAMAX FLEET]
[PHOTOS]
<PAGE> 171
[LEFT SIDE CAPACITY CHART]
<PAGE> 172
[RIGHT SIDE CAPACITY CHART]
<PAGE> 173
============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Available Information............................ 2
Incorporation of Documents By Reference.......... 3
Enforceability of Civil Liabilities Under the
Federal Securities Laws........................ 3
Prospectus Summary............................... 4
Risk Factors..................................... 14
Use of Proceeds.................................. 19
Capitalization................................... 20
The Company...................................... 21
Selected Consolidated Financial and Other Data... 23
Management's Discussion and Analysis of Results
of Operations and Financial Condition.......... 27
Business......................................... 34
Management....................................... 56
Ownership of Teekay.............................. 58
Description of Certain Indebtedness.............. 59
Certain Transactions With Related Parties........ 60
Description of the Notes......................... 61
The Subsidiary Guarantees........................ 93
The Mortgaged Vessels............................ 94
Tax Considerations............................... 99
Underwriting..................................... 102
Legal Matters.................................... 102
Experts.......................................... 102
Index to Financial Statements.................... F-1
Definitions of Shipping Terms.................... A-1
</TABLE>
$225,000,000
TEEKAY SHIPPING
CORPORATION
% FIRST PREFERRED SHIP MORTGAGE NOTES
DUE , 2008
[TEEKAY LOGO]
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
============================================================================
<PAGE> 174
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the securities
being registered, other than underwriting discounts and commissions, are
estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee................................................... $ 45,000
NASD Filing Fee........................................................ 22,600
Printing and Engraving Expenses........................................ 140,000
Legal Fees and Expenses................................................ 150,000
Accountants' Fees and Expenses......................................... 55,000
Blue Sky Expenses (including fees of counsel).......................... 25,000
Trustee Fees and Expenses.............................................. 15,000
Rating Agency Fees and Expenses........................................ 140,000
Miscellaneous Costs.................................................... 32,400
----------
Total................................................................ $ 625,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
LIBERIAN LAW
Teekay Shipping Corporation ("Teekay") and each of VSSI Oceans Inc., VSSI
Atlantic Inc. and VSSI Appian Inc. are Liberian corporations. Section 6.13 of
the Liberian Business Corporation Act ("LBCA") provides that a Liberian
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of no contest, or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful. A Liberian corporation
also has the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him or in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
II-1
<PAGE> 175
To the extent that a director or officer of a Liberian corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding paragraph, or in the defense of a claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid in advance of the final disposition of such action, suit
or proceeding as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in Section 6.13.
In addition, a Liberian corporation has the power to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a director
or officer against any liability asserted against him and incurred by him in
such capacity whether or not the corporation would have the power to indemnify
him against such liability under the provisions of Section 6.13.
Section J of Teekay's Articles of Incorporation, as amended, provides that
to the fullest extent permitted under the LBCA, a director of Teekay shall not
be liable to Teekay or its shareholders for monetary damages for breach of
fiduciary duty as a director. Section 10.00 of Teekay's Bylaws provides that any
person who is made party to a proceeding by virtue of being an officer or
director of Teekay or, being or having been such a director or officer or an
employee of Teekay, serving at the request of Teekay as a director, officer,
employee or agent of another corporation or other enterprise, shall be
indemnified and held harmless to the fullest extent permitted by the LBCA
against any and all expense, liability, loss (including attorneys' fees,
judgments, fines or penalties and amounts paid in settlement) actually incurred
or suffered by such person in connection with the proceeding.
In addition, Teekay has entered into separate Indemnification Agreements
with each of its officers and directors listed in the Registration Statement
which provide for indemnification of the director or officer against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative except to the extent that such person is otherwise indemnified,
such action, suit or proceeding arose out of such person's intentional
misconduct, knowing violation of law or out of a transaction in which such
director or officer is finally judicially determined to have derived an improper
personal benefit or if it shall be determined by a final judgment or other final
adjudication that such indemnification was not lawful.
BAHAMIAN LAW
Each of Senang Spirit Inc., Exuma Spirit Inc., Nassau Spirit Inc. and
Andros Spirit Inc. (collectively, the "Bahamian Guarantors") is a Bahamian
corporation. Section 56 of the International Business Companies Act, 1989 (the
"IBCA"), under which the Bahamian Guarantors were incorporated, provides that a
corporation may indemnify any person who (a) is or was a party or is threatened
to be made a party to any threatened, pending or completed proceedings, whether
civil, criminal, administrative or investigative, by reason of the fact that the
person is or was a director or officer of the corporation or (b) is or was, at
the request of the corporation, serving as a director or officer of another
company or a partnership, joint venture, trust or other enterprise, in each case
against all expenses, including legal fees, and against all judgments, fines and
amounts paid in settlement and reasonably incurred in connection with legal,
administrative or investigative proceedings (collectively, "Losses"), if such
person acted honestly and in good faith with a view to the best interests of the
corporation and, in the case of criminal proceedings, the person had no
reasonable cause to believe that his or her conduct was unlawful. In the absence
of fraud and unless a question of law is involved, a decision of the directors
of a corporation is sufficient regarding whether the person acted honestly and
in good faith, with a view to the best interests of the corporation and whether
the person had no reasonable cause to believe his or her conduct was unlawful.
The termination of any proceedings by any judgment, order, settlement,
conviction or upon a plea of no contest or its equivalent, shall not, of itself,
create a presumption that the person did not act honestly and in good faith,
with a view to the best interests of the corporation or that the person
II-2
<PAGE> 176
had reasonable cause to believe that his or her conduct was unlawful. If any
such person is successful in defense of any proceeding for which he or she may
be indemnified as discussed above, the person is entitled to indemnification for
all Losses.
Section 57 of the IBCA provides that a corporation may purchase and
maintain insurance in relation to any person who (a) is or was a party or is
threatened to be made a party to any threatened, pending or completed
proceedings, whether civil, criminal, administrative or investigative, by reason
of the fact that the person is or was a director or officer of the corporation
or (b) is or was, at the request of the corporation, serving as a director or
officer of another company or a partnership, joint venture, trust or other
enterprise, in each case against any liability asserted against such person and
incurred thereby in that capacity, whether or not the corporation has or would
have the power to indemnify the person against the liability under Section 56 of
the IBCA.
Section 9.01 of the Articles of Association of each Bahamian Guarantor
provides that such Bahamian Guarantor shall indemnify a director or officer, a
former director or officer, or a person who acts or acted at such Bahamian
Guarantors' request as a director or officer of a body corporate, a partnership,
joint venture, trust or other enterprise of which such Bahamian Guarantor is or
was a shareholder or creditor or in which it was a participant or held an
interest and such person's heirs and legal representatives, against all costs,
charges, fines, judgments and expenses, including any amount paid to settle an
action or satisfy a judgment, reasonably incurred by such person in respect of
any civil, criminal, or administrative action or proceeding to which such person
is party by reason of such person's having acted in any such capacity.
Section 9.02 of the Articles of Association of each Bahamian Guarantor
provides that such Bahamian Guarantor may purchase and maintain insurance for
the benefit of those persons described in Section 9.01 of the Articles of
Association, against any such liability incurred by such person, as the Board of
Directors may from time to time determine.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
*3.1 Articles of Incorporation of VSSI Oceans Inc.
*3.2 Bylaws of VSSI Oceans Inc.
3.3 Bylaws of VSSI Appian Inc.
*3.4 Memorandum of Association of Nassau Spirit Inc.
3.5 Memorandum of Association of Senang Spirit Inc.
*3.6 Articles of Association of Nassau Spirit Inc.
4.1 Form of Indenture among Teekay Shipping Corporation ("Teekay"), VSSI Oceans
Inc., VSSI Atlantic Inc., VSSI Appian Inc., Senang Spirit Inc., Exuma Spirit
Inc., Nassau Spirit Inc., Andros Spirit Inc. and United States Trust Company
of New York, as Trustee
4.2 Form of Teekay's First Preferred Ship Mortgage Notes Due 2008
4.3 Form of Bahamian Statutory Ship Mortgage
4.4 Form of Deed of Covenants
4.5 Form of First Preferred Ship Mortgage
4.6 Form of Assignment of Time Charter
4.7 Form of Assignment of Insurance
4.8 Form of Pledge Agreement and Irrevocable Proxy
4.9 Form of Guarantee
4.10 Form of Assignment of Freights and Hires
</TABLE>
II-3
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------------------------------------------------------------------------
<C> <S>
4.11 Form of Cash Collateral Account Agreement
4.12 Form of Investment Account Agreement
5.1 Opinion of Perkins Coie, special counsel to Teekay, regarding the legality of
the Notes and the Guarantees
8.1 Opinion of Perkins Coie, regarding U.S. tax matters (contained in opinion
filed as Exhibit 5.1)
8.2 Opinion of Haight, Gardner, Poor & Havens, special Liberian counsel to
Teekay, regarding Liberian tax matters
8.3 Opinion of Graham, Thompson & Co., Bahamian counsel to Teekay, regarding
Bahamian tax matters
10.1 Time Charter, as amended, dated July 3, 1995 between VSSI Oceans Inc. and
Palm Shipping Inc.
10.2 Time Charter, as amended, dated January 4, 1994 between VSSI Atlantic Inc.
and Palm Shipping Inc.
10.3 Time Charter, as amended, dated February 1, 1992 between VSSI Appian Inc. and
Palm Shipping Inc.
10.4 Time Charter, as amended, dated December 1, 1993 between Senang Spirit Inc.
and Palm Shipping Inc.
10.5 Time Charter, as amended, dated August 1, 1992 between Exuma Spirit Inc. and
Palm Shipping Inc.
10.6 Time Charter, as amended, dated May 1, 1992 between Nassau Spirit Inc. and
Palm Shipping Inc.
10.7 Time Charter, as amended, dated November 1, 1992 between Andros Spirit Inc.
and Palm Shipping Inc.
*10.8 Management Agreement, as amended, dated June 1, 1992 between Teekay Shipping
Limited and Nassau Spirit Inc.
15.1 Letter from Ernst & Young, as independent chartered accountants, regarding
unaudited interim financial information
23.1 Consent of Perkins Coie (contained in opinion filed as Exhibit 8.1)
23.2 Consent of Haight, Gardner, Poor & Havens (contained in opinion filed as
Exhibit 8.2)
23.3 Consent of Graham, Thompson & Co. (contained in opinion filed as Exhibit 8.3)
23.4 Consent of Ernst & Young, as independent chartered accountants
23.5 Consent of E.A. Gibson Shipbrokers Limited
23.6 Consent of Simpson, Spence & Young Shipbrokers Ltd.
24.1 Powers of Attorney for certain officers and directors of the Registrants
(contained on signature pages of the Registration Statement on Form F-3
(Registration No. 33-65139) filed with the Securities and Exchange Commission
on December 19, 1995)
+25.1 Statement of Eligibility and Qualification on Form T-1 of the Eligibility of
United States Trust Company of New York, as Trustee of the Notes
</TABLE>
- ------------------
* A Schedule attached to this exhibit identifies all other documents not
required to be filed as exhibits because such other documents are
substantially identical to this exhibit. The Schedule also sets forth
material details by which the omitted documents differ from this exhibit.
+ Previously filed.
II-4
<PAGE> 178
ITEM 17. UNDERTAKINGS.
A. Each of the undersigned Registrants hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
any Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the provisions described under "Item 14.
Indemnification of Directors and Officers," above, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by any of the Registrants of expenses
incurred or paid by a director, officer or controlling person of such Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the appropriate Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C. Each of the undersigned Registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE> 179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Teekay Shipping Corporation, certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form F-3
and has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Nassau, Commonwealth of The Bahamas, on January 18, 1996.
TEEKAY SHIPPING CORPORATION
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
Executive Vice President and
General Counsel
[/R]
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
CAPTAIN JAMES N. HOOD* President, Chief Executive Officer
- ---------------------------------------- (Principal Executive Officer) and Director
Captain James N. Hood
AXEL KARLSHOEJ* Chairman of the Board, Director and Authorized
- ---------------------------------------- Representative in the United States
Axel Karlshoej
ANTHONY GURNEE* Vice President and Chief Financial Officer
- ---------------------------------------- (Principal Financial and Accounting Officer)
Anthony Gurnee
/s/ ARTHUR F. COADY Director
- ----------------------------------------
Arthur F. Coady
MICHAEL D. DINGMAN* Director
- ----------------------------------------
Michael D. Dingman
MORRIS L. FEDER* Director
- ----------------------------------------
Morris L. Feder
STEVE G. K. HSU* Director
- ----------------------------------------
Steve G. K. Hsu
THOMAS KUO-YUEN HSU* Director
- ----------------------------------------
Thomas Kuo-Yuen Hsu
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, VSSI Oceans Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
VSSI OCEANS INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer
(Principal Executive Officer) and Director
- ----------------------------------------
Arthur F. Coady
</TABLE>
<TABLE>
<C> <S>
JAMES MCDONALD* Treasurer (Principal Financial and Accounting
- ---------------------------------------- Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the United States
- ----------------------------------------
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, VSSI Atlantic Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
VSSI ATLANTIC INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer
(Principal Executive Officer) and Director
- ----------------------------------------
Arthur F. Coady
</TABLE>
<TABLE>
<C> <S>
JAMES MCDONALD* Treasurer (Principal Financial and
- ---------------------------------------- Accounting Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the
- ---------------------------------------- United States
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 182
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Senang Spirit Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
SENANG SPIRIT INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer
(Principal Executive Officer) and
- ---------------------------------------- Director
Arthur F. Coady
</TABLE>
<TABLE>
<C> <S>
JAMES MCDONALD* Treasurer (Principal Financial and Accounting
- ---------------------------------------- Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the United States
- ----------------------------------------
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, VSSI Appian Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
VSSI APPIAN INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer
(Principal Executive Officer) and
- ---------------------------------------- Director
Arthur F. Coady
</TABLE>
<TABLE>
<C> <S>
JAMES MCDONALD* Treasurer (Principal Financial and Accounting
- ---------------------------------------- Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the United States
- ----------------------------------------
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-10
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Exuma Spirit Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
EXUMA SPIRIT INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer
(Principal Executive Officer) and
- ---------------------------------------- Director
Arthur F. Coady
</TABLE>
<TABLE>
<C> <S>
JAMES MCDONALD* Treasurer (Principal Financial and Accounting
- ---------------------------------------- Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the United States
- ----------------------------------------
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-11
<PAGE> 185
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Nassau Spirit Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
NASSAU SPIRIT INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer
(Principal Executive Officer) and
- ---------------------------------------- Director
Arthur F. Coady
JAMES MCDONALD* Treasurer (Principal Financial and Accounting
- ---------------------------------------- Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the United States
- ----------------------------------------
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-12
<PAGE> 186
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Andros Spirit Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Nassau,
Commonwealth of the Bahamas, on January 18, 1996.
ANDROS SPIRIT INC.
/s/ ARTHUR F. COADY
By:
Arthur F. Coady
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on the date
set forth above by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- -------------------------------------------------
<C> <S>
/s/ ARTHUR F. COADY President, Chief Executive Officer (Principal
Executive Officer) and Director
- ----------------------------------------
Arthur F. Coady
</TABLE>
<TABLE>
<C> <S>
JAMES MCDONALD* Treasurer (Principal Financial and Accounting
- ---------------------------------------- Officer) and Director
James McDonald
ESTHER E. GIBSON* Secretary and Director
- ----------------------------------------
Esther E. Gibson
AXEL KARLSHOEJ* Authorized Representative in the United States
- ----------------------------------------
Axel Karlshoej
/s/ ARTHUR F. COADY
*By:
Arthur F. Coady
Attorney-in-Fact
</TABLE>
II-13
<PAGE> 1
EXHIBIT 1.1
TEEKAY SHIPPING CORPORATION
_____ % FIRST PREFERRED SHIP MORTGAGE NOTES DUE 2008
------------------
FORM OF UNDERWRITING AGREEMENT
January , 1996
Goldman, Sachs & Co.,
As representatives of the several
Underwriters named in Schedule I
hereto
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Teekay Shipping Corporation, a Liberian corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") $225,000,000
aggregate principal amount of % First Preferred Ship Mortgage Notes due 2008
(the "Securities"). The Securities are to be issued pursuant to the provisions
of the Indenture to be dated as of , 1996 (the "Indenture"), among
the Company, VSSI Oceans Inc., a Liberian corporation ("VSSI Oceans"), VSSI
Atlantic Inc., a Liberian corporation ("VSSI Atlantic"), Senang Spirit Inc., a
Bahamian corporation ("Senang Spirit"), VSSI Appian Inc., a Liberian corporation
("VSSI Appian"), Exuma Spirit Inc., a Bahamian corporation ("Exuma Spirit"),
Nassau Spirit Inc., a Bahamian corporation ("Nassau Spirit") and Andros Spirit
Inc., a Bahamian corporation ("Andros Spirit" and, together with VSSI Oceans,
VSSI Atlantic, Senang Spirit, VSSI Appian, Exuma Spirit and Nassau Spirit, the
"Guarantors" and individually a "Guarantor") and United States Trust Company of
New York, as trustee (the "Trustee").
The Company's obligations under the Securities and the Indenture will be
irrevocably and unconditionally guaranteed by each of the Guarantors on a senior
secured basis, pursuant to a guarantee substantially in the form heretofore
delivered to you by each Guarantor in favor of the Trustee (each a "Subsidiary
Guarantee").
<PAGE> 2
To secure, among other things, the Securities and its respective Subsidiary
Guarantee, each Guarantor will pledge and assign to the Trustee all of its
right, title and interest in and to (i) the Aframax tanker (the "Mortgaged
Vessel") owned by it, pursuant to a First Preferred Ship Mortgage (as defined in
the Indenture) substantially in the form heretofore delivered to you to be
issued in favor of the Trustee, (ii) the time charter party (the "Charter")
between it and Palm Shipping Inc., a Liberian corporation ("Palm Shipping"),
relating to its Mortgaged Vessel, pursuant to an Assignment of Time Charter
substantially in the form heretofore delivered to you (an "Assignment of Time
Charter"), (iii) freights and hires relating to its Mortgaged Vessel, pursuant
to an Assignment of Freights and Hires substantially in the form heretofore
delivered to you (an "Assignment of Freights and Hires"), (iv) all of its
policies and contracts of insurance taken out from time to time in respect of
the Mortgaged Vessels, pursuant to an Assignment of Insurance substantially in
the form heretofore delivered to you (an "Assignment of Insurance") and (v) the
account maintained in the name of the Trustee into which charter hire under the
Charter will be paid following an Event of Default (as defined in the Indenture)
(the "Cash Collateral Account"), pursuant to the Indenture and a Cash Collateral
Account Agreement substantially in the form heretofore delivered to you (a "Cash
Collateral Account Agreement").
The Securities will also be secured by, among other things, a pledge by the
Company of (i) all of the issued and outstanding capital stock of each
Guarantor, pursuant to a pledge agreement in favor of the Trustee substantially
in the form heretofore delivered to you (the "Pledge Agreement") and (ii) the
investment account in the name of the Trustee maintained pursuant to the terms
of the investment account agreement between the Company and the Trustee (the
"Investment Account Agreement"). The Subsidiary Guarantees, Pledge Agreement,
Investment Account Agreement, First Preferred Ship Mortgages, Assignments of
Time Charter, Assignments of Freights and Hires, Assignments of Insurance and
Cash Collateral Account Agreements collectively will hereinafter be referred to
as the "Security Documents".
At the Time of Delivery (as defined below), approximately $
million of the proceeds from the offering of the Securities will be used to
repay certain indebtedness outstanding with respect to the Mortgaged Vessels,
and, upon such repayment, all outstanding Liens (as defined in the Indenture) on
the Mortgaged Vessels with respect to such indebtedness will be released.
1. Each of the Company and the Guarantors represents and warrants to, and
agrees with, each of the Underwriters that:
(a) A registration statement on Form F-3 (File No. 33-65139) (the
"Initial Registration Statement") in respect of the Securities has been
filed with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement, as amended prior to its effective date, and
any post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto but including all
2
<PAGE> 3
documents incorporated by reference in the prospectus contained
therein, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering
(the "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement or document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in such
registration statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act, is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto but excluding Form T-1 and including
(i) the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be
part of the registration statement at the time it was declared effective
and (ii) the documents incorporated by reference in the prospectus
contained in the Initial Registration Statement at the time such part of
the registration statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, each
as amended at the time such part of the registration statement became
effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus"; any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form F-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference to
any amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the date
of such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; and any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after
the effective date of the Initial Registration Statement that is
incorporated by reference in the Registration Statement;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
3
<PAGE> 4
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto
and as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however,that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
4
<PAGE> 5
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or long-term
debt (other than an immaterial change due to repayment or borrowing under
existing credit agreements) of the Company or any of its subsidiaries or
any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus;
(f) The Company has good and marketable title to all properties and
assets owned by it, free and clear of all liens, encumbrances and defects
except for Permitted Liens (as defined in the Indenture) and such as are
described or referenced in the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company. Each Guarantor has
good and marketable title, free and clear of all liens, encumbrances and
defects, to the Mortgaged Vessel listed opposite its name on Schedule III
attached hereto, except for Permitted Liens (as defined in the Indenture)
and such as are created pursuant to the credit agreements and security
documents listed on Schedule V attached hereto or are imposed pursuant to
the Indenture and any relevant Security Document;
(g) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the Republic of Liberia, has
the power and authority to own its property and to conduct its business as
currently conducted and as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(h) Each subsidiary of the Company (including, without limitation, the
Guarantors and Palm Shipping) has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, on any Guarantor or on Palm Shipping;
(i) All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
nonassessable. None of the
5
<PAGE> 6
outstanding shares of capital stock of the Company was issued in violation
of the preemptive rights of any stockholder of the Company. The Company had
at the date indicated a duly authorized and outstanding capitalization as
set forth in the Prospectus;
(j) All of the issued shares of capital stock of each Guarantor and
Palm Shipping have been duly and validly authorized and issued, are fully
paid and nonassessable and are owned by the Company free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, except, in the case of capital stock of the Guarantors, any
security interest to be created under the Indenture and the Security
Documents. All of the outstanding shares of capital stock of each
subsidiary of the Company other than the Guarantors and Palm Shipping have
been duly and validly authorized and issued, are fully paid and
nonassessable and, at the Time of Delivery, will be owned by the Company
free and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind, except as set forth in Schedule II
attached hereto. There are no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock of any subsidiary of the Company.
(k) This Agreement has been duly authorized, executed and delivered by
the Company and each Guarantor;
(l) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
Indenture; the Indenture has been duly authorized by the Company and each
Guarantor and duly qualified under the Trust Indenture Act and when
executed and delivered by the Company, the Guarantors and the Trustee will
constitute a valid and legally binding instrument, enforceable against the
Company and each Guarantor in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium and
other similar laws of general applicability from time to time in effect
relating to or affecting creditors' rights and to general equity principles
(regardless of whether considered in a proceeding in equity or at law); and
the Securities and the Indenture will conform to the descriptions thereof
in the Prospectus;
(m) Each of the Security Documents has been duly authorized by the
Company and the Guarantors, as the case may be (and Palm Shipping with
respect to the Investment Account Agreement), that are a party thereto,
and, when executed and delivered by the Company and the Guarantors, as the
case may be (and Palm Shipping with respect to the Investment Account
Agreement), party thereto, will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency (including, without limitation, all
laws relating
6
<PAGE> 7
to fraudulent transfers), reorganization, moratorium or other similar laws
of general applicability from time to time in effect relating to or
affecting creditors' rights and to general equity principles (regardless of
whether considered in a proceeding in equity or at law);
(n) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, this Agreement, the
Indenture and the Security Documents to which it is a party (i) will not
contravene any provision of applicable law or the articles of incorporation
or by-laws of the Company or any of its subsidiaries or any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
("Governmental Agency") having jurisdiction over the Company or any
subsidiary and (ii) will not result in or require the creation or
imposition of any lien, charge or other encumbrance upon or with respect to
any of the properties of the Company or any of its subsidiaries, except
pursuant to the terms of the Indenture and the Security Documents; and no
consent, approval, authorization or order of or qualification with
("Governmental Authorization") any governmental body or agency is required
for the issue and sale of the Securities or the performance by the Company
of its obligations under this Agreement, the Indenture or the Security
Documents to which it is a party, except the registration under the Act of
the Securities and the Subsidiary Guarantees, such as have been obtained
under the Trust Indenture Act and such as may be required by the securities
or Blue Sky laws of the various states in the United States, or other
applicable jurisdictions, in connection with the offer and sale of the
Securities;
(o) The compliance by each Guarantor with all of the provisions of
this Agreement, the Indenture and the Security Documents to which such
Guarantor is a party (i) will not contravene any provision of applicable
law, or the articles of incorporation or by-laws of such Guarantor or any
of its subsidiaries or any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument binding upon such
Guarantor or any of its subsidiaries that is material to such Guarantor and
its subsidiaries taken as a whole, or any judgment, order or decree of any
Governmental Agency having jurisdiction over such Guarantor or any of its
subsidiaries and (ii) will not result in or require the creation or
imposition of any lien, charge or other encumbrance upon or with respect to
any of the properties of such Guarantor or any of its subsidiaries, except
pursuant to the terms of the Indenture and the Security Documents; and no
Governmental Authorization of any governmental body or agency is required
for the performance by such Guarantor of its obligations under this
Agreement, the Indenture and the Security Documents to which such Guarantor
is a party, except the registration under the Act of the Securities and the
Subsidiary Guarantees, such as have been obtained under the Trust Indenture
Act and such as may be required by the securities or Blue Sky laws of the
7
<PAGE> 8
various states in the United States, or other applicable jurisdictions, in
connection with the offer and sale of the Securities;
(p) Neither the Company nor any of its subsidiaries is in violation of
its articles of incorporation or by-laws or in default in the performance
or observance of any material obligation, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;
(q) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(r) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(s) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all federal,
provincial, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to own,
lease, license and use its properties and assets and to conduct its
business in the manner described in the Prospectus, except to the extent
that the failure to obtain or file would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole, on any Guarantor or
on Palm Shipping, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to revocation or modification
of any such licenses, permits, certificates, consents, orders, approvals or
authorizations;
(t) No material labor dispute with the employees of the Company or any
of its subsidiaries exists, except as described in or contemplated by the
Prospectus, or, to the knowledge of the Company, is imminent;
(u) Each Charter with respect to each of the Mortgaged Vessels has
been duly authorized and constitutes a valid and binding obligation of Palm
Shipping and the Guarantor that is a party thereto enforceable against Palm
Shipping and such Guarantor in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or other
similar laws of general applicability from time to time in effect
8
<PAGE> 9
relating to or affecting creditors' rights and to general equity principles
(regardless of whether considered in a proceeding in equity or at law).
None of Palm Shipping or the Guarantors is, nor with giving of notice or
lapse of time or both would be, in violation of or in default under, nor
will the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby result in a violation of, or constitute a
default under, any Charter;
(v) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged;
(w) Except as otherwise described in the Prospectus, each of the
Company and its subsidiaries has filed all income or other tax returns that
are required to have been filed in its relevant jurisdictions, except
insofar as the failure to file such returns would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole, and
has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company and the Guarantors, except for such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided;
(x) There is no tax, levy, impost, deduction, charge or withholding
imposed by the Republic of Liberia or any political subdivision or taxing
authority thereof either (i) on or by virtue of the execution, delivery or
performances of this Agreement, the Indenture, any Security Document or any
other document to be furnished hereunder, or (ii) on any payment to be made
by the Company or any Guarantor pursuant to this Agreement, the Indenture,
the Securities or any Security Document, except for any tax, levy, impost,
deduction, charge or withholding imposed on payments made to holders of
Securities who reside in, maintain an office in or engage in business in
the Republic of Liberia;
(y) The representations and warranties made by the Company and the
Guarantors in the Security Documents to which they are a party will, when
such documents are executed and delivered, be true and correct;
(z) Each of the Company, the Guarantors and Palm Shipping is, and
immediately after the Time of Delivery will be, Solvent. As used herein,
the term "Solvent" means, with respect to each of the Company, the
Guarantors or Palm Shipping on a particular date (i) the fair market value
of the assets of the Company, such Guarantor, or Palm Shipping, as the case
may be, is greater than the total amount of liabilities (including
contingent liabilities) of the Company, such Guarantor or Palm Shipping, as
the case may be, (ii) the present fair saleable value of the assets of the
Company, such Guarantor, or Palm Shipping, as the case may be, is greater
than the amount that will be required to pay the probable liabilities of
the Company, such
9
<PAGE> 10
Guarantor, or Palm Shipping, as the case may be, on its debts as they
become absolute and matured, (iii) the Company, such Guarantor, or Palm
Shipping, as the case may be, is able to realize upon its assets and pay
its debts and other liabilities, including contingent obligations, as they
mature and (iv) the Company, such Guarantor, or Palm Shipping, as the case
may be, does not have an unreasonably small capital.
(aa) Except as otherwise described in the Prospectus, the Company and
its subsidiaries are (i) in compliance with any and all applicable foreign,
federal, provincial, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(bb) Except as otherwise described in the Prospectus, in the ordinary
course of its business, the Company conducts a periodic review of the
effect of Environmental Laws on the business, operations and properties of
the Company and its subsidiaries, in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(cc) The consolidated financial statements of the Company included in
the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act, and the
related published rules and regulations thereunder. The consolidated
financial statements included in the Prospectus present fairly the
consolidated financial position of the Company and its subsidiaries as of
the dates indicated and the consolidated results of operations and changes
in financial position of the Company and its subsidiaries for the periods
specified. Such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a
consistent basis throughout the periods involved. The selected financial
data included in the Prospectus present fairly the information shown
therein. Such selected financial data as at and for the fiscal years ended
April 30, 1991, 1992 and 1993, as at and for the 11-month period ended
March 31, 1994, and as at and
10
<PAGE> 11
for the fiscal year ended March 31, 1995 have been derived from the audited
consolidated financial statements of the Company, and such selected
financial data as at and for the six month periods ended September 30, 1994
and 1995 have been derived from the unaudited consolidated financial
statements of the Company. The pro forma financial information included in
the Prospectus presents fairly the information shown therein and has been
properly compiled on the pro forma bases described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein. Ernst and Young
are independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(dd) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida); and
(ee) The statements set forth in the Prospectus under the captions
"Description of the Notes", insofar as they purport to constitute a summary
of the terms of the Securities, and under the caption "Tax Considerations",
insofar as they purport to describe the provisions of the laws referred to
therein, are accurate, complete and fair;
2. Subject to the terms and conditions herein set forth, the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of % of the principal amount thereof, plus accrued interest, if any,
from January [29], 1996 to the Time of Delivery hereunder, the principal amount
of Securities set forth opposite the name of such Underwriter in Schedule I
hereto.
3. Upon the authorization by you of the release of the Securities, the
several Underwriters propose to offer the Securities for sale upon the terms and
conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., for the account of such Underwriter, against payment by or
on behalf of such Underwriter of the purchase price therefor by wire transfer to
or at the direction of the Company in immediately available funds. Except as set
forth in the next paragraph, the Securities to be purchased by each Underwriter
hereunder will be represented by one or more definitive global Securities in
book-entry form which will be deposited by or on behalf of the Company with The
Depository Trust Company ("DTC") or its designated custodian. The Company will
deliver the Securities to Goldman, Sachs & Co., for the account of each
Underwriter, against payment by or on behalf of such Underwriter of
11
<PAGE> 12
the purchase price therefor by wire transfer to or at the direction of the
Company in immediately available funds, by causing DTC to credit the Securities
to the account of Goldman, Sachs & Co., at DTC. The Company will cause the
certificates representing such Securities to be made available to Goldman, Sachs
& Co., for checking at least twenty-four hours prior to the Time of Delivery (as
defined below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be 9:30 a.m., New
York City time, on January [29], 1996 or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time and date are
herein called the "Time of Delivery".
Such Securities, if any, as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company (such request to include the
authorized denominations and the names in which such Securities are to be
registered), shall be delivered in definitive certificated form, by or on behalf
of the Company to Goldman, Sachs & Co. for the account of certain of the
Underwriters, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer to or at the direction of the Company
in immediately available funds. The Company will cause the certificates
representing such Securities to be made available for checking and packing at
least twenty-four hours prior to the Time of Delivery at the office of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004 (the "Designated
Office").
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(w) hereof, will be delivered at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022 (the "Closing
Location"), and the Securities will be delivered at the Designated Office, all
at the Time of Delivery. A meeting will be held at the Closing Location at 2:00
p.m., New York City time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the Time of Delivery which shall be disapproved by you
12
<PAGE> 13
promptly after reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to file promptly all reports required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c) or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required in connection with the offering
or sale of the Securities; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
to promptly use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Securities and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Act, the Exchange Act or the
Trust indenture Act, to notify you and upon your request to file such
document and to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
13
<PAGE> 14
Prospectus which will correct such statement or omission or effect such
compliance; and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Securities at any time nine months
or more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder any securities of the Company that are substantially similar to
the Securities;
(f) To furnish to its holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent
chartered accountants) and, as soon as practicable after the end of each of
the first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
securities exchange on which any class of securities of the Company is
listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to the
extent the accounts of the Company and its subsidiaries are consolidated in
reports furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
14
<PAGE> 15
(i) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act; and
(j) To use its best efforts to list, subject to notice of issuance,
the Securities on the New York Stock Exchange (the "Exchange").
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, the Indenture, the Blue Sky and Legal
Investment Memoranda, and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) the cost of preparing the Securities; (vii) the fees and
expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; (viii) all taxes arising as a result of the issuance, sale and
delivery of the Securities by the Underwriters to the initial purchasers thereof
in the manner contemplated by this Agreement, including, in any such case, any
Liberian income, capital gains, withholding, transfer or other tax asserted
against an Underwriter by reason of the purchase and sale of the Securities
pursuant to this Agreement and (ix) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
15
<PAGE> 16
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and of each Guarantor are, at and as of such Time of
Delivery, true and correct, the condition that the Company and each Guarantor
shall have performed all of its obligations hereunder and under the Security
Documents to which it is a party theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Shearman & Sterling, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated the Time of Delivery, in
form and substance satisfactory to you, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Haight, Gardner, Poor & Havens, counsel for the Company, VSSI
Oceans, VSSI Atlantic and VSSI Appian, shall have furnished to you their
written opinion substantially in the form attached as Annex I(a) hereto,
dated such Time of Delivery.
(d) Graham, Thompson & Company, special Bahamian counsel for the
Company, and for Senang Spirit, Exuma Spirit, Nassau Spirit, and Andros
Spirit (collectively, the "Bahamian" Guarantors, and each, individually, a
"Bahamian Guarantor"), shall have furnished to you their written opinion (a
draft of such opinion is attached as Annex I(b) hereto) dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) this Agreement has been duly authorized, executed and delivered
by each Bahamian Guarantor;
(ii) each of the subsidiaries of the Company listed on a schedule
thereto has been duly incorporated, is validly existing as a corporation
in good standing under the laws of The Bahamas and has the corporate
power and authority to own its property and to conduct its business as
described in the Prospectus;
16
<PAGE> 17
(iii) all of the issues shares of capital stock of each Bahamian
Guarantor have been duly authorized and validly issued and, assuming
issuance against payment therefor, are fully paid and nonassessable. To
such counsel's knowledge, all of the shares of capital stock of each
Bahamian Guarantor are owned by the Company free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, except for the security interest created under the Pledge
Agreement. To such counsel's knowledge, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock of any of the Bahamian
Guarantors.
(iv) the Indenture has been duly authorized, executed and delivered
by each Bahamian Guarantor;
(v) each of the Security Documents to which a Bahamian Guarantor is
a party has been duly authorized, executed and delivered by such
Bahamian Guarantor;
(vi) each Charter to which a Bahamian Guarantor is a party has been
duly authorized, executed and delivered by such Bahamian Guarantor;
(vii) there is no tax, levy, impost, deduction, charge or
withholding imposed by The Bahamas or any political subdivision or
taxing authority thereof or therein either (1) on or by virtue of the
execution, or delivery or performance or continued validity of any of
the Indenture or any Security Document or any other document referred to
therein or to be furnished thereunder (including without limitation the
Securities) or (2) on any payment to be made by the Company or any
Guarantor pursuant to any of the Indenture, the Securities or any
Security Document. All filing, registration and recording fees required
under the laws of The Bahamas in connection with the Indenture or any
Security Document or other fees necessary to assure the validity,
effectiveness and priority of any liens, charges and encumbrances
created thereby, have to our knowledge been paid;
(viii) insofar as any matter of Bahamian law is addressed therein,
the statements made in the Prospectus under "Enforceability of Civil
Liabilities under the Federal Securities Laws", "Risk Factors --
Enforcement of Mortgages", "Description of the Notes -- Fraudulent
Conveyance Statutes", "The Subsidiary Guarantees" and "The Mortgaged
Vessels -- The Mortgages", to the extent that they constitute matters of
law or legal conclusions, fairly present the information disclosed
therein in all material respects;
17
<PAGE> 18
(ix) no authorization, consent, license, permission, permit or
approval (including exchange control approval) of or action by, and no
notice to or filing with, any governmental authority or regulatory body
of The Bahamas is required for the execution, delivery and performance
of the Indenture or any of the Security Documents by the respective
Bahamian Guarantor party thereto and no such authorization, consent,
license, permission, permit, approval, action, notice or filing is
required for the exercise by the Trustee of the rights and remedies
granted to it under any of the Security Documents, except for the filing
and registration of the First Preferred Ship Mortgages in The Bahamas;
(x) VSSI Atlantic, VSSI Appian and each Bahamian Guarantor is the
registered owner of record of its respective Mortgaged Vessel, free and
clear of any Liens (as defined in the Indenture), except for the
respective liens of the First Preferred Ship Mortgages and Permitted
Liens (as defined in the Indenture);
(xi) each of the First Preferred Ship Mortgages over the Mortgaged
Vessels owned by the Bahamian Guarantors and VSSI Atlantic and VSSI
Appian was duly received for recording in The Bahamas Maritime
Authority's Office at The Bahamas High Commission in the City of London
and was duly recorded, as follows: the First Preferred Ship Mortgage
over the Torben Spirit in Book P.M. [ ] at Page [ ]; the First
Preferred Ship Mortgage over the Senang Spirit in Book P.M. [ ] at
Page [ ]; the First Preferred Ship Mortgage over the Mayon Spirit in
Book P.M. [ ] at Page [ ]; the First Preferred Ship Mortgage
over the Leyte Spirit in Book P.M. [ ] at Page [ ]; the First
Preferred Ship Mortgage over the Luzon Spirit in Book P.M. [ ] at
Page [ ]; and the First Preferred Ship Mortgage over the Samar
Spirit in Book P.M. [ ] at Page [ ]; all in accordance with the
laws of The Bahamas; and each creates the first preferred mortgage lien
covering the respective Mortgaged Vessel which it purports to create,
with each First Preferred Ship Mortgage being a first preferred mortgage
lien on the related Mortgaged Vessel;
(xii) the security interests created by each Security Document
(other than the First Preferred Ship Mortgages and the Cash Collateral
Account Agreements) do not require any action to be taken under or
pursuant to the laws of The Bahamas to create or perfect such security
interests or to permit the Trustee to enforce its rights under the
Security Document creating the same, other than the delivery by the
Company of the stock certificates of each of the Guarantors to the
Trustee at the Closing;
(xiii) the choice of New York law to govern this Agreement, the
Indenture and the Security Documents (other than the First Preferred
Ship Mortgages) constitutes a valid choice of law insofar as the law of
The Bahamas
18
<PAGE> 19
is concerned. The submission by the Bahamian Guarantors to the
non-exclusive jurisdiction of any federal or state court in the Borough
of Manhattan, The City of New York (a "New York court") is a valid
submission insofar as the law of The Bahamas is concerned, provided that
Lawco of Oregon, Inc. has accepted its appointment by each Bahamian
Guarantor as its agent to accept service of process in the United States
of America;
(xiv) in a suit on the merits brought before a Bahamian court, a
Bahamian court will respect and enforce the agreement of the parties as
to judgment currency;
(xv) a final and conclusive judgment in personam granted by a
foreign court against any Bahamian Guarantor may be enforced in The
Bahamas without a retrial on the merits of the matter;
(xvi) none of the Bahamian Guarantors nor any of their respective
property has any immunity from jurisdiction of any court or from any
legal process under the law of The Bahamas;
(xvii) the execution and delivery by each Bahamian Guarantor of,
and the performance by each Bahamian Guarantor of its obligations under,
this Agreement, the Indenture and the Security Documents to which it is
a party will not contravene the articles of incorporation or by-laws of
such Bahamian Guarantor;
(xviii) the First Preferred Ship Mortgages over the Mortgaged
Vessels owned by the Bahamian Guarantors and by VSSI Atlantic and VSSI
Appian conform in all material respects to the descriptions thereof in
the Prospectus;
(xix) each of the First Preferred Ship Mortgages over the Mortgaged
Vessels owned by the Bahamian Guarantors is a valid and binding
agreement of the Bahamian Guarantor party thereto, enforceable against
such Bahamian Guarantor in accordance with its terms, subject (1) as to
enforcement, to bankruptcy, moratorium and other laws of general
applicability from time to time in effect relating to or affecting
creditors' rights and (2) to general equitable principles (regardless of
whether considered in a proceeding in equity or law); and
(xx) the First Preferred Ship Mortgages over the Mortgaged Vessels
owned by the Bahamian Guarantors and by VSSI Atlantic and VSSI Appian
create valid security interests enforceable against the Guarantor party
thereto with
19
<PAGE> 20
respect to the collateral subject thereto as security for the
performance of the obligations secured thereby.
(e) Perkins Coie, counsel for the Company, shall have furnished to you
their written opinion (a draft of such opinion is attached as Annex I(c)
hereto) dated such Time of Delivery, in a form and substance satisfactory
to you, to the effect that:
(i) the Indenture has been fully qualified under the Trust
Indenture Act;
(ii) the Securities, the Indenture, the Pledge Agreement, the
Investment Account Agreement, the Subsidiary Guarantees and the Cash
Collateral Account Agreements (the Pledge Agreement, the Investment
Account Agreement, the Subsidiary Guarantees and the Cash Collateral
Account Agreements are collectively referred to herein as the
"Collateral Documents") conform in all material respects to the
descriptions thereof in the Prospectus;
(iii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Collateral Documents to which it is a party and the
Securities (i) will not contravene any provision of the laws of the
United States or New York or, to such counsel's knowledge, any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken
as a whole, or, to such counsel's knowledge, any judgment or decree of
any governmental body, agency or court of the United States or any state
thereof having jurisdiction over the Company or any subsidiary and (ii)
to such counsel's knowledge, will not result in or require the creation
or imposition of any lien, charge, or other encumbrance upon or with
respect to any of the properties of the Company or any of its
subsidiaries, except pursuant to the terms of the Indenture, the
Collateral Documents and the other Security Documents; and no consent,
approval, authorization or order of or qualification with any
governmental body or agency of the United States or New York is required
for the issue and sale of the Securities or the performance by the
Company of its obligations under this Agreement, the Indenture, the
Collateral Documents to which it is a party or the Securities, except
such as have been obtained under the Act and the Trust Indenture Act and
as may be required by the securities or Blue Sky laws of the various
states in the United States, or other applicable jurisdictions, in
connection with the offer and sale of the Securities by the
Underwriters;
(iv) the execution and delivery by each Guarantor of, and the
performance by each Guarantor of its obligations under, this Agreement,
the
20
<PAGE> 21
Indenture and the Collateral Documents to which it is a party (i) will
not contravene any provision of the laws of the United States or New
York or, to such counsel's knowledge, any indenture, mortgage, deed of
trust, loan agreement, lease, or other agreement or instrument binding
upon such Guarantor or any of its subsidiaries that is material to such
Guarantor and its subsidiaries, taken as a whole, or, to such counsel's
knowledge, any judgment, or decree of any governmental body, agency or
court of the United States or any state thereof having jurisdiction over
such Guarantor or any of its subsidiaries and (ii) to such counsel's
knowledge, will not result in or require the creation of imposition of
any lien, charge or other encumbrance upon or with respect to any of the
properties of such Guarantor or any of its subsidiaries, except pursuant
to the terms of the Indenture, the Collateral Documents and the other
Security Documents; and no consent, approval, authorization or order of
or qualification with any governmental body or agency of the United
States or New York is required for the performance by such Guarantor of
its obligations under this Agreement, the Indenture or the Collateral
Documents to which it is a party, except such as have been obtained
under the Act and the Trust Indenture Act and as may be required by the
securities or Blue Sky laws of the various states in the United States,
or other applicable jurisdictions, in connection with the offer and sale
of the Securities by the Underwriters;
(v) the statements in the Prospectus under the captions "Management
-Executive Compensation", "Description of Certain Indebtedness",
"Description of the Notes", "The Subsidiary Guarantees" and "Tax
Considerations -- United States Tax Considerations", in each case
insofar as such statements constitute summaries of legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings referred to therein, and fairly summarize the matters
referred to therein, in each case in all material respects;
(vi) insofar as any matter of United States federal law (other than
federal maritime law) or New York laws is addressed therein, the
statements made in the Prospectus under "Enforceability of Civil
Liabilities under the Federal Securities Laws", "Description of the
Notes -- Fraudulent Conveyance Statutes" and "The Subsidiary
Guarantees", to the extent that they constitute matters of law or legal
conclusions, fairly present the information disclosed therein in all
material respects;
(vii) to such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are required to
be described in the Registration
21
<PAGE> 22
Statement or the Prospectus and are not so described nor are there any
statutes, regulations, contracts or other documents that are required to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described
or filed as required;
(viii) the Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended;
(ix) to such counsel's knowledge, all of the shares of capital
stock of the Guarantors and of Palm Shipping are owned by the Company
free and clear of any pledge, lien, security interest, charge, claim or
encumbrance of any kind, except, in the case of the capital stock of the
Guarantors, for the security interest created under the Pledge
Agreement; to such counsel's knowledge, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock of any subsidiary of the
Company;
(x) assuming the due authorization, execution, issuance and
delivery of the Securities by the Company and the due authentication of
the Securities by the Trustee, the Securities constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture;
(xi) assuming the due authorization, execution and delivery of the
Indenture by each party thereto, the Indenture constitutes a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium and other laws of general applicability from
time to time in effect relating to or affecting creditors' rights and to
general equitable principles (regardless of whether considered in a
proceeding in equity or at law);
(xii) assuming the due authorization, execution and delivery of
each Collateral Document by each party thereto, each Collateral Document
is a valid and binding agreement of the Company or the Guarantor party
thereto, as the case may be, enforceable against the Company or such
Guarantor in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium and other laws of
general applicability from time to time in effect relating to or
affecting creditors' rights and to general equitable principles
(regardless of whether considered in a proceeding in equity or at law);
22
<PAGE> 23
(xiii) assuming the due authorization, execution and delivery by
each party thereto, the Collateral Documents create valid security
interests enforceable against the Company or the Guarantor party
thereto, as the case may be, with respect to the collateral subject
thereto as security for the performance of the obligations secured
thereby and the security interests created by each such Collateral
Document (other than the Cash Collateral Account Agreements and the
Investment Account Agreement) do not require any action to be taken
under or pursuant to the laws of the State of New York in order to
perfect such security interests, other than the delivery by the Company
of the stock certificates of each of the Guarantors to the Trustee at
the Closing;
(xiv) on the basis of information reviewed by such counsel in the
course of such counsel's performance of services in connection with the
registration of the Securities, including such counsel's participation
in conferences with officers and other representatives of the Company,
representatives of the Chartered Accountants for the Company,
representatives of the Underwriters and counsel for the Underwriters at
which the contents of the Prospectus were discussed (relying as to
materiality to the extent such counsel deems appropriate upon the
opinions of officers and other representatives of the Company), the
Registration Statement and Prospectus, including the documents
incorporated by reference in the Prospectus and any further amendment or
supplement thereto made by the Company prior to the Time of Delivery
(except for financial statements and schedules included therein as to
which such counsel need not express any opinion) comply as to form in
all material respects with the Act, the Exchange Act and the Trust
Indenture Act, as applicable, and the rules and regulations of the
Commission thereunder.
In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also include a statement to the effect that
although such counsel assumes no responsibility for the factual accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, on the basis of the procedures undertaken by
such counsel (and relying as to materiality to the extent such counsel
deems appropriate upon the opinions of officers and other representatives
of the Company), no facts have come to the attention of such counsel that
cause it to believe that the Registration Statement, at the time it became
effective and as of such Time of Delivery, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus, including the documents incorporated by reference and any
further amendment or supplement thereto, at the time it was mailed or
otherwise delivered to the commission for filing pursuant to Rule 424(b)
and as of such Time of Delivery, included an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that counsel need not express any opinion with
respect to the financial
23
<PAGE> 24
statements and supporting schedules and other financial data included in
the Registration Statement and the Prospectus. Counsel may indicate that it
has not undertaken any independent investigation to verify the
completeness, accuracy or fairness of the statements made in the
Registration Statement or the Prospectus.
With respect to subparagraph (xiv) of paragraph (e) above, Perkins
Coie and Shearman & Sterling may state that their opinion and belief are
based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and
review and discussion of the contents thereof, but are without independent
check or verification except as specified.
The opinion of Haight, Gardner, Poor & Havens described in paragraph
(c) above, the opinion of Graham, Thompson & Company described in paragraph
(d) above and the opinion of Perkins Coie described in paragraph (e) above
shall each be rendered to you at the request of the Company and shall so
state therein.
(f) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at the Time of Delivery, Ernst &
Young shall have furnished to you a letter or letters, dated the respective
dates of delivery thereof, in form and substance satisfactory to you, to
the effect set forth in Annex II hereto (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as Annex
II(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex II(b)
hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause (i)
or (ii), is in the judgment of Goldman, Sachs & Co. so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus;
24
<PAGE> 25
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 426(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on any exchange
or in any over-the-counter market; (iii) a general moratorium on commercial
banking activities declared by either Federal or New York State
authorities; (iv) a change or development involving a prospective change in
Liberian taxation affecting the Company, the Securities or the transfer
thereof or the imposition of exchange controls by the United States or
Liberia; or (v) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in this Clause
(v) in the judgment of Goldman, Sachs & Co. makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus or (vi) the occurrence of any
material adverse change in the existing financial, political or economic
conditions in the United States, the Republic of Liberia or elsewhere
which, in the judgment of Goldman, Sachs & Co. would materially and
adversely affect the financial markets or the market for the Securities and
other debt securities;
(j) The Company and the Guarantors shall have furnished to you and the
Trustee a copy of the Charters with respect to each Mortgaged Vessel
substantially in the form heretofore delivered to you certified by the
Company, Palm Shipping and the respective Guarantor to be true and correct;
(k) The Company and the Guarantors shall have furnished to you and the
Trustee a copy of the Management Agreement with respect to each Mortgaged
Vessel certified by the Company and the respective Guarantor to be true and
correct;
(l) Security Documents substantially in the form heretofore delivered
to you shall have been executed and delivered to the Trustee by each of the
Company and the Guarantors party thereto.
(m) The Company shall have delivered to the Trustee a Certificate of
Ownership and Encumbrances issued by the Office of the Deputy Commissioner
for Maritime Affairs of the Republic of Liberia at the Port of New York or
The Bahamas Maritime Authority's Office at The Bahamas High Commission in
the City of London,
25
<PAGE> 26
as the case may be, with respect to each Mortgaged Vessel showing that each
Guarantor is the sole owner of its Mortgaged Vessel free and clear of all
Liens, except Liens created pursuant to the Security Documents and
Permitted Liens (as defined in the Indenture);
(n) First Preferred Ship Mortgages with respect to each Mortgaged
Vessel shall have been duly received for recording in the Office of the
Deputy Commissioner for Maritime Affairs of the Republic of Liberia at the
Port of New York or The Bahamas Maritime Authority's Office at The Bahamas
High Commission in the City of London and duly recorded, all in accordance
with the laws of the Republic of Liberia or The Bahamas, as the case may
be.
(o) The Company shall have delivered to the Trustee the stock
certificates of each of the Guarantors pledged to the Trustee pursuant to
the Pledge Agreement, together with stock powers executed in blank;
(p) The Company shall have delivered to the Trustee its irrevocable
proxy pursuant to the Pledge Agreement;
(q) The Company shall have delivered to the Trustee the report of an
insurance broker required by Section 1.15(a)(iii) of each of the First
Preferred Ship Mortgages with respect to the insurance policies maintained
by each Guarantor in respect of its Mortgaged Vessel, which report shall
include loss payable clauses substantially in the form set in Schedule I
and Schedule II to each of the First Preferred Ship Mortgages;
(r) You shall have received from Simpson, Spence & Young Shipbrokers
Ltd. and E.A. Gibson Shipbrokers Ltd. letters, in form and substance
satisfactory to you, setting forth their determination of the Appraised
Value (as defined in the Indenture), as of December 13, 1995, of each of
the Mortgaged Vessels, which Appraised Values shall, for each Mortgaged
Vessel not be less than the value set forth below opposite such Mortgaged
Vessel:
<TABLE>
<CAPTION>
MINIMUM
MORTGAGED VESSEL APPRAISED VALUE
---------------- ---------------
<S> <C>
Poul Spirit .................................... $
Torben Spirit .................................. $
Senang Spirit .................................. $
Mayon Spirit ................................... $
Leyte Spirit ................................... $
Luzon Spirit ................................... $
Samar Spirit ................................... $
</TABLE>
26
<PAGE> 27
(s) With respect to each Mortgaged Vessel, you shall have received a
Classification Certificate, dated as of a date not more than 10 days prior
to the Time of Delivery, from the classification societies listed below
certifying that each Mortgaged Vessel is in the class listed below opposite
such vessel:
<TABLE>
<CAPTION>
MORTGAGED VESSEL CLASSIFICATION SOCIETY CLASS
---------------- ---------------------- ---------
<S> <C> <C>
Poul Spirit ......................................
Torben Spirit ....................................
Senang Spirit ....................................
Mayon Spirit .....................................
Leyte Spirit .....................................
Luzon Spirit .....................................
Samar Spirit .....................................
</TABLE>
(t) You and the Trustee shall have received evidence satisfactory to
you and the Trustee to the effect that all indebtedness outstanding at the
Time of Delivery with respect to the Mortgaged Vessels, as set forth on
Schedule IV attached hereto, has been repaid and that all security granted
by, or covering assets or property or capital stock of any Guarantor with
respect to such indebtedness, as set forth in Schedule V, shall have been
released;
(u) You and the Trustee shall have received a solvency certificate
from the Company and from each Guarantor;
(v) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(w) The Company and each Guarantor shall have furnished or caused to
be furnished to you at the Time of Delivery certificates of officers of the
Company and each Guarantor satisfactory to you as to the accuracy of the
representations and warranties of the Company and each Guarantor herein at
and as of such Time of Delivery, as to the performance by the Company and
each Guarantor of all of its obligations hereunder to be performed at or
prior to such Time of Delivery, as to the matters set forth in subsections
(a) and (g) of this Section and as to such other matters as you may
reasonably request; and
(x) You shall have received satisfactory evidence that the Securities
shall have been approved for listing on the Exchange, subject only to
notice of issuance.
8. (a) The Company and the Guarantors, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as
27
<PAGE> 28
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and the Guarantors shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Goldman, Sachs & Co. expressly for use
therein.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Guarantors against any losses, claims, damages or liabilities to which the
Company or the Guarantors may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and the Guarantors for any legal or other expenses
reasonably incurred by the Company or the Guarantors in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the
28
<PAGE> 29
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantors on the one hand and the Underwriters on the
other from the offering of the Securities. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and the Guarantors on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Guarantors on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Securities
purchased under this Agreement, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Guarantors on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Guarantors and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does
29
<PAGE> 30
not take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Guarantors under this Section 8
shall be in addition to any liability which the Company or the Guarantors may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and each
Guarantor and to each person, if any, who controls the Company within the
meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Securities.
30
<PAGE> 31
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the principal
amount of Securities which such Underwriter agreed to purchase hereunder and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the principal amount of Securities which such Underwriter agreed
to purchase hereunder) of the Securities of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Underwriters to purchase
Securities of a defaulting Underwriter or Underwriters, then this Agreement
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter, the Company or the Guarantors except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Guarantors and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company and the Guarantors shall not then be under any liability to any
Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other
reason, the Securities are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities, but the
Company and the Guarantors shall then be under no further liability to any
Underwriter except as provided in Sections 6 and 8 hereof, provided that if the
Underwriters are not required to perform their obligations under this Agreement
due to the occurrence of any event specified in Subsection 7(i) hereof, the
Company shall not be obligated to reimburse the Underwriters for such
out-of-pocket expenses.
31
<PAGE> 32
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives at 85 Broad Street, New
York, New York 10004, Attention: Registration Department; and if to the Company
or any Guarantor shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company and the Guarantors set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Guarantors and, to the extent provided
in Sections 8 and 10 hereof, the officers and directors of the Company and the
Guarantors and each person who controls the Company, the Guarantors or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Any legal suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby may be instituted in any
federal or state court in the Borough of Manhattan, The City of New York. Each
of the Company, the Guarantors and the Underwriters waives any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding, waives any immunity from jurisdiction or to service of process in
respect of any such legal suit, action or proceeding, irrevocably submits to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding and further submits to the jurisdiction of the courts of its
corporate domicile in any legal suit, action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
15. The Company and each Guarantor irrevocably designate and appoint Lawco
of Oregon, Inc. as its authorized agent upon which process may be served in any
legal suit, action or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby which may be instituted in any federal or
state court in the Borough of Manhattan, The City of New York, and agrees that
service of process upon such agent, and written notice of said service to the
Company or such Guarantor by the person serving the same, shall be deemed in
every respect effective service of process upon the Company and such Guarantor
in any such
32
<PAGE> 33
suit or proceeding. The Company and each Guarantor further agrees to take any
and all actions as may be necessary to maintain such designation and appointment
of such agent in full force and effect.
16. If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due hereunder into any currency other than United States
dollars, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be the rate at which in
accordance with normal banking procedures Goldman, Sachs & Co. could purchase
United States dollars with such other currency in The City of New York on the
business day proceeding that on which final judgment is given. The obligations
of the Company and each Guarantor in respect of any sum due from it to any
Underwriter shall, notwithstanding any judgment in a currency other than United
States dollars, not be discharged until the first business day, following
receipt by such Underwriter of any sum adjudged to be so due in such other
currency, on which (and only to the extent that) such Underwriter may in
accordance with normal banking procedures purchase United States dollars with
such other currency; if the United States dollars so purchased are less than the
sum originally due to such Underwriter hereunder, the Company and each Guarantor
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Underwriters against such loss. If the United States dollars so
purchased are greater than the sum originally due to such Underwriter hereunder,
such Underwriter agrees to pay to the Company and the Guarantors (but without
duplication) an amount equal to the excess of the dollars so purchased over the
sum originally due to such Underwriter hereunder.
17. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
18. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
19. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
33
<PAGE> 34
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company plus one for each counsel, counterparts hereof,
and upon the acceptance hereof by you, on behalf of each of the Underwriters,
this letter and such acceptance hereof shall constitute a binding agreement
between each of the Underwriters and the Company. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
TEEKAY SHIPPING CORPORATION
By:
-----------------------
Name:
Title:
VSSI OCEANS INC.
By:
-----------------------
Name:
Title:
VSSI ATLANTIC INC.
By:
-----------------------
Name:
Title:
SENANG SPIRIT INC.
By:
-----------------------
Name:
Title:
34
<PAGE> 35
VSSI APPIAN INC.
By:
-----------------------
Name:
Title:
EXUMA SPIRIT INC.
By:
-----------------------
Name:
Title:
NASSAU SPIRIT INC.
By:
-----------------------
Name:
Title:
ANDROS SPIRIT INC.
By:
-----------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
By:
---------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
35
<PAGE> 36
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF SECURITIES
UNDERWRITER TO BE PURCHASED
- ----------- ----------------
<S> <C>
Goldman, Sachs & Co. ....................................................... $
Smith Barney Inc. ..........................................................
Morgan Stanley & Co. Incorporated...........................................
------------
Total............................................................. $
============
</TABLE>
<PAGE> 37
SCHEDULE II
ENCUMBRANCES ON SUBSIDIARY CAPITAL STOCK
[TO BE PROVIDED]
3
<PAGE> 38
SCHEDULE III
The Mortgaged Vessels
Guarantor Vessel
- --------- ------
VSSI Oceans Inc, Poul Spirit, Official Number 10328, of
approximately 57,463 gross and 31,958 net tons,
having its home port at the Port of Monrovia,
Republic of Liberia, which vessel was built by
Onomichi Dockyard, Japan, in the year 1995, and is
documented under the laws and flag of the Republic
of Liberia.
VSSI Atlantic Inc. Torben Spirit, Official Number 723526, of
approximately 57,486 gross and 28,742 net tons,
having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built
by Onomichi Dockyard, Japan, in the year 1994, and
is documented under the laws and flag of the
Commonwealth of The Bahamas.
Senang Spirit Inc. Senang Spirit, Official Number 723521, of
approximately 52,508 gross and 28,208 net tons,
having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built
by Imabari Shipbuilding, Japan, in the year 1994,
and is documented under the laws and flag of the
Commonwealth of The Bahamas.
VSSI Appian Inc. Mayon Spirit, Official Number 720752, of
approximately 57,448 gross and 28,742 net tons,
having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built
by Onomichi Dockyard, Japan, in the year 1992, and
is documented under the laws and flag of the
Commonwealth of The Bahamas.
Exuma Spirit Inc. Leyte Spirit, Official Number 720796, of
approximatey 57,448 gross and 28,742 net tons,
having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built
by Onomichi Dockyard, Japan, in the year 1992, and
is documented under the laws and flag of the
Commonwealth of The Bahamas.
<PAGE> 39
Nassau Spirit Inc. Luzon Spirit, Official Number 720776, of
approximately 57,448 gross and 28,742 net tons,
having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built
by Onomichi Dockyard, Japan, in the year 1992, and
is documented under the laws and flag of the
Commonwealth of The Bahamas.
Andros Spirit Inc. Samar Spirit, Official Number 723134, of
approximately 57,448 gross and 28,742 net tons,
having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built
by Onomichi Dockyard, Japan, in the year 1992, and
is documented under the laws and flag of the
Commonwealth of The Bahamas.
<PAGE> 40
SCHEDULE IV
OUTSTANDING INDEBTEDNESS ON MORTGAGED VESSELS
[TO BE PROVIDED]
3
<PAGE> 41
SCHEDULE V
[TO BE PROVIDED]
4
<PAGE> 42
ANNEX 1(A)
[Form of Opinion of Haight, Gardner, Poor & Havens]
January , 1996
Teekay Shipping Corporation
Tradewinds Building
Sixth Floor
Bay Street
P.O. Box SS-6293
Nassau, The Bahamas
Goldman, Sachs & Co.
As representatives of the several Underwriters
named in Schedule I to the Underwriting
Agreement (as defined below)
85 Broad Street
New York, New York 10004
Re: Teekay Shipping Corporation
Ladies and Gentlemen:
We have acted as special Liberian counsel to Teekay Shipping
Corporation, a Liberian corporation (the "Company"), and to VSSI Oceans Inc.
("VSSI Oceans"), VSSI Atlantic Inc. ("VSSI Atlantic") and VSSI Appian Inc.
("VSSI Appian" and, together with VSSI Oceans and VSSI Atlantic, the "Liberian
Guarantors" and each, individually, a "Liberian Guarantor"), each a Liberian
corporation, in connection with the offering and sale by underwriters in the
United States and abroad of up to Two Hundred Twenty Five Million Dollars
($225,000,000) aggregate principal amount of % First Preferred Ship Mortgage
Notes due 2008 (the "Securities") pursuant to the Underwriting Agreement dated
January , 1996 (the "Underwriting Agreement") between the Company and
Goldman, Sachs & Co., as representative of the several underwriters named
therein (the "Underwriters"). The Securities are to be issued pursuant to the
provisions of the Indenture to be dated as of January , 1996 (the
"Indenture"), among the Company, the Liberian Guarantors, certain other
Guarantors named therein (the "Bahamian Guarantors" and, together with the
Liberian Guarantors, the "Guarantors"), and United States Trust Company of New
York, as Trustee (the "Trustee"). This opinion is rendered pursuant to Section
7(c) of the Underwriting Agreement.
<PAGE> 43
In connection with the opinions set forth herein, we have examined (i)
the Registration Statement on Form F-3 (No. 33- ), as amended (the
"Registration Statement"), filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, and the
rules and regulations thereunder, (ii) the Final Prospectus dated January ,
1996 (the "Prospectus") relating to the Registration Statement, (iii) the
Underwriting Agreement and (iv) all such originals and copies, certified or
otherwise identified to our satisfaction, of such other agreements,
certificates and other statements of government officials and corporate
officers and other representatives of the Company and other documents as we
have deemed necessary as the basis for the opinions set forth herein.
In such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals or copies, and
the conformity with the original documents of all documents submitted to us as
copies. As to any questions of fact material to our opinions, we have, when
relevant facts were not independently established, relied upon written or oral
statements of corporate officers and other representatives of the Company.
To the extent our opinion involves the valid existence and good
standing of the Company and the subsidiaries listed on Schedule A hereto under
Liberian law, we have relied upon information supplied to us by the
International Trust Company of Liberia.
We are not licensed to practice in the Republic of Liberia, and insofar
as the law of the Republic of Liberia is concerned, we have relied on opinions
received from Liberian counsel in analogous transactions and on Liberian legal
materials available to us to the extent such examination has enabled us to
confirm said opinions. We have assumed that the Liberian statutes as
previously in force, particularly the Associations Law, 1976 (Title 5 of the
Liberian Code of Laws, Revised) and the practices, frameworks and procedures
relating thereto have not been altered as a result of the current political
situation. We have further assumed that all Liberian officials and
representatives involved in this transaction are authorized to act on behalf of
the International Trust Company of Liberia and/or the Republic of Liberia.
Except with respect to the Company and the Liberian Guarantors, we have
assumed that each document or instrument mentioned herein has been duly
authorized by the other parties thereto, has been duly executed and delivered
by the other parties thereto and constitutes the legal, valid and binding
2
<PAGE> 44
obligation of the other parties thereto in accordance with its terms.
As some of the documents mentioned herein have been executed and/or governed
by laws of jurisdictions other than the Republic of Liberia, we have assumed
the correctness of all matters in connection therewith. As some of the
representations and warranties contained in the Underwriting Agreement and the
Registration Statement pertain to matters governed by the law of jurisdictions
other than the Republic of Liberia, we have assumed the correctness of all
matters in connection therewith.
The opinions expressed herein are further qualified in their entirety
as follows: (a) unless otherwise hereinafter expressly provided, no opinion is
expressed with respect to the laws other than those of the Republic of Liberia;
(b) to the extent that any such opinion relates to the enforceability of any
agreement or other document referred to herein, such opinion is subject to the
effect of applicable bankruptcy, insolvency, moratorium or other laws affecting
creditors' rights generally or laws respecting fraud on creditors and (c) no
opinion is expressed as to the availability of equitable remedies, including
specific performance, or the enforceability of any legal remedies insofar as
such remedies may be subject to overriding considerations of public policy or
to the exercise of the constitutional powers of the Republic of Liberia or
other governmental units which have jurisdiction in the premises.
We express no opinion as to the effect of any litigation or similar
proceedings referred to in the Registration Statement on the opinions
hereinafter expressed.
Based upon the foregoing and subject to the quali-fications set out
herein, we are of the opinion that insofar as present Liberian law is
concerned:
(i) the Underwriting Agreement has been authorized, executed and
delivered by the Company and by the Liberian Guarantors;
(ii) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus;
(iii) each of the subsidiaries of the Company listed on Schedule A
hereto has been duly incorporated, is validly existing as a corporation in
good standing under the laws of the Republic of Liberia and has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus;
3
<PAGE> 45
(iv) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(v) all of the issued shares of capital stock of the Company have
been duly authorized and validly issued and, assuming issuance against
payment therefor, are fully paid and nonassessable;
(vi) all of the issued shares of capital stock of each of the
Liberian Guarantors and of Palm Shipping Inc. ("Palm") have been duly
authorized and validly issued and, assuming issuance against payment
therefor, are fully paid and nonassessable;
(vii) the Securities have been duly authorized, executed and
delivered;
(viii) the Indenture has been duly authorized, executed and delivered
by the Company and the Liberian Guarantors;
(ix) each of the Security Documents (as defined in the Indenture) to
which the Company or a Liberian Guarantor is a party has been duly
authorized, executed and delivered by the Company or such Liberian
Guarantor; the First Preferred Mortgage of the POUL SPIRIT (the "Poul
Spirit Mortgage") and each of the Assignments of Insurance, Charter
Assignments and Assignments of Freights and Hires (as defined in the
Indenture; the foregoing are referred to herein as the "Assignments") is a
valid and binding agreement of the Guarantor party thereto, assuming the
due authorization, execution and delivery by each Bahamian Guarantors of
the Indenture and the Security Document to which it is party, enforceable
against such Guarantor in accordance with its terms under the laws of the
Republic of Liberia, in the case of the Poul Spirit Mortgage, and the laws
of the State of New York, in the case of the Assignments, except (i) as the
enforceability thereof may be limited by applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors' rights
generally, (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability (regardless of whether
considered in a proceeding in equity or at law), (iii) certain provisions
of the Security Documents and the consents contemplated thereby are or may
be unenforceable in whole or in part, but the inclusion of such provisions
does not affect the validity of such agreements and each such agreement
contains adequate provisions for enforcing performance of the obligations
4
<PAGE> 46
under such agreements and for the practical realization of the rights
and benefits afforded thereby, (iv) with respect to each of the
Assignments of Insurance, enforceability against underwriters and third
parties may depend upon due and timely notice thereof being given to
such persons and the consent of underwriters or such third parties where
the terms of insurance policies, other insurance documents or provisions
of applicable law so require and (v) with respect to each of the
Assignments of Freights and Hires, enforcement against charterers and
third parties may depend upon due and timely notice thereof being given
by such persons;
(x) VSSI Oceans has title of record to the Poul Spirit, free and
clear of any Liens (as defined in the Indenture) of record, except for the
lien of the First Preferred Ship Mortgage;
(xi) each Charter and the Investment Account Agreement has been duly
authorized, executed and delivered by Palm and the Charter relating to the
Poul Spirit has been duly authorized, executed and delivered by VSSI
Oceans;
(xii) there is no tax, levy, impost, deduction, charge or withholding
imposed by the Republic of Liberia or any political subdivision or taxing
authority thereof or therein either (1) on or by virtue of the execution,
or delivery or performance or continued validity of any of the Indenture or
any Security Document or any other document referred to therein or to be
furnished thereunder (including without limitation the Securities) or (2)
on any payment to be made by the Company or any Guarantor pursuant to any
of the Indenture, the Securities or any Security Document, assuming that
(1) the Company is an intends to maintain its status as a "non-resident
domestic corporation" under the Business Corporation act of Liberia; (2)
the Guarantors are not now engaged, and are not in the future expected to
engage in voyages exclusively within the territorial waters of the Republic
of Liberia; (3) the Securities and all related documentation will be
executed outside of the Republic of Liberia; and (4) the holders of the
Securities will neither reside in, maintain an office in nor engage in
business in the Republic of Liberia. All filing, registration and
recording fees required under the laws of the Republic of Liberia in
connection with the Indenture or any Security Document or other fees
necessary to assure the validity, effectiveness and priority of any liens,
charges and encumbrances created thereby, have to our knowledge been paid;
5
<PAGE> 47
(xiii) insofar as any matter of Liberian law or United States
maritime law is addressed therein, the statements made in the Prospectus
under "Enforceability of Civil Liabilities Under the Federal Securities
Laws", "Investment Considerations -- Enforcement of Mortgages",
"Description of Notes -- Fraudulent Conveyance Statutes", "The Subsidiary
Guarantees" and "The Mortgages", to the extent that they constitute matters
of law or legal conclusions, fairly present the information disclosed
therein in all material respects;
(xiv) no authorization, consent, license, permission, permit or
approval (including exchange control approval) of or action by, and no
notice to or filing with, any governmental authority or regulatory body of
the Republic of Liberia or, in the case of the Assignments, of the State of
New York, is required for the execution, delivery and performance of the
Indenture or any of the Security Documents by the respective parties
thereto and no such authorization, consent, license, permission, permit,
approval, action, notice or filing is required for the exercise by the
Trustee of the rights and remedies granted to it under any of the Security
Documents, except for the filing and registration of the First Preferred
Ship Mortgage over the Poul Spirit in the Republic of Liberia;
(xv) the First Preferred Ship Mortgage over the Poul Spirit was duly
received for recording in the Office of the Deputy Commissioner of Maritime
Affairs of the Republic of Liberia at the Port of New York and was duly
recorded in accordance with the laws of the Republic of Liberia, and
creates the first preferred mortgage lien covering the Poul Spirit which it
purports to create, with the First Preferred Ship Mortgage being a first
preferred mortgage lien on the Poul Spirit;
(xvi) the security interests created by each Security Document (other
than the First Preferred Ship Mortgages and the Cash Collateral Account
Agreements) do not require any action to be taken under or pursuant to the
laws of the Republic of Liberia or, in the case of the Assignments, of the
State of New York, in order to create or perfect such security interests or
to permit the Trustee to enforce its rights under the Security Document
creating the same, other than (i) the delivery by the Company of the stock
certificates of each of the Guarantors to the Trustee at the Closing, (ii)
due and timely notice of the Assignments of Freights and Hires to
charterers and third parties and (iii) due and timely notice of each of the
Assignments of Insurances to underwriters and third parties, as well as
6
<PAGE> 48
the consent of such underwriters or such third parties where the terms
of insurance policies, other insurance documents or provisions of
applicable law so require;
(xvii) the statements (1) in the Prospectus under the captions "Tax
Considerations -- Liberian Tax Considerations" and (2) in the Registration
Statement in Item 15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to such
legal matters, documents and proceedings and fairly summarize the matters
referred to therein;
(xviii) the choice of New York law to govern this Agreement, the
Indenture and the Security Documents (other than the First Preferred Ship
Mortgages) constitutes a valid choice of law insofar as the law of the
Republic of Liberia is concerned. The submission by the Company and the
Liberian Guarantors to the non-exclusive jurisdiction of any federal or
state court in the Borough of Manhattan, The City of New York (a "New York
court") is a valid submission insofar as the law of the Republic of Liberia
is concerned; in this regard we note that Haight, Gardner, Poor & Havens
has accepted its appointment by the Company and the Guarantors as their
agent to accept service of process in the United States of America under
the Underwriting Agreement, the Indenture and the Security Documents;
(xix) in a suit on the merits brought before a Liberian court, a
Liberian court will respect and enforce the agreement of the parties as to
judgment currency;
(xx) a judgment granted by a foreign court against the Company or a
Liberian Guarantor may be enforced in the Republic of Liberia without a
retrial on the merits of the matter provided that: (A) the judgment is for
a specific, ascertained sum of money and is final in the jurisdiction
granting the judgment; (B) the court granting the judgment had jurisdiction
under the laws of the place where the court is seated; (C) the judgment
does not offend the principles of the Republic of Liberia as to due
process, natural justice or public policy; (D) the judgment was not
obtained by fraud; (E) the defendant was actually present in person or by a
duly appointed representative; and (F) the judgment does not in effect
constitute a default judgment;
(xxi) neither the Company, Palm nor any Liberian Guarantor nor any of
their respective property has any immunity from jurisdiction of any court
or from any legal process under the laws of the Republic of Liberia; and
7
<PAGE> 49
(xxii) the execution and delivery by the Company of, and the
performance by the Company and the Liberian Guarantors of their respective
obligations under, the Indenture, each Security Document to which each
respective company is a party, and, in the case of the Company, the
Securities, will not contravene the articles of incorporation or by-laws of
the Company or any Liberian Guarantor.
The opinions expressed herein are based on our knowledge of the law and
facts as of the date hereof, and we hereby expressly disclaim any duty or other
obligation to communicate to you with respect to any matter subsequent to the
date hereof.
The opinions expressed herein are specific to the transaction and are
furnished to you for your use and are not otherwise to be quoted, reproduced or
published in any form without our prior written consent, except that you may
furnish copies to your independent auditors and to Shearman & Sterling in their
capacity as counsel to the Underwriters for this transaction. The opinions
expressed herein may not be quoted, used or relied upon by any other party other
than the addressees hereof or filed or furnished to any government agencies
(other than regulatory agencies as required by law) or other natural or legal
person, without our prior written consent.
This opinion should not be assumed to state general principles of law
applicable to transactions of this kind. This opinion and the analysis upon
which it is based in no way imply any approval or recommendation of an
investment in the Securities.
Very truly yours,
HAIGHT, GARDNER, POOR & HAVENS
By ----------------------------
8
<PAGE> 50
Schedule A to Opinion Letter of
Haight, Gardner, Poor & Havens
dated January , 1996
VSSI Appian Inc.
VSSI Apollo Inc.
VSSI Atlantic Inc.
VSSI Boxships Inc.
VSSI Bulkers Inc.
VSSI Carriers Inc.
VSSI Challenger Inc.
VSSI Condor Inc.
VSSI Containers Inc.
VSSI Deepsea Inc.
VSSI Drake Inc.
VSSI Gemini Inc.
VSSI Hong Kong Inc.
VSSI Magellan Inc.
VSSI Marine Inc.
VSSI Oceans Inc.
VSSI Overseas Inc.
VSSI Pacific Inc.
VSSI Singapore Inc.
VSSI Star Inc.
VSSI Sun Inc.
VSSI Tankers Inc.
VSSI Tokyo Inc.
VSSI Transport Inc.
VSSI Ulsan Inc.
Alliance Spirit Corp.
Diamond Spirit Inc.
Elcano Spirit Inc.
Jasmin Holdings Limited
Kobe Spirit Inc.
Kyushu Spirit Inc.
Mendana Spirit Inc.
Musashi Spirit Inc.
Nagasaki Spirit Inc.
Nakata Spirit Inc.
Onomichi Spirit Inc.
Schouten Spirit Inc.
Sentosa Spirit Inc.
Tasman Spirit Inc.
Tokyo Spirit Inc.
Van Dieman Spirit Inc.
Vancouver Spirit Inc.
Volar Spirit Inc.
Flying Clipper Inc.
Flying Cloud Inc.
Palmstar Rose Inc.
Palmstar Thistle Inc.
Palm Monarch Inc.
Bull Shipping Ltd.
Cloudesdale Shipping Corporation
<PAGE> 51
Cranberry Corporation
Dorio Shipping Ltd.
Hoi Wan Shipping Limited
Palm Shipping Inc.
Viking Consolidated Shipping Corp.
Pinewell Spirit Inc.
<PAGE> 52
ANNEX 1(B)
[TO BE PROVIDED]
ANNEX 1(C)
[TO BE PROVIDED]
2
<PAGE> 1
EXHIBIT 3.1
*********************************************************************
ARTICLES OF INCORPORATION
OF
VSSI OCEANS INC.
PURSUANT TO THE LIBERIAN BUSINESS CORPORATION ACT
*********************************************************************
<PAGE> 2
ARTICLES OF INCORPORATION
PURSUANT TO THE LIBERIAN BUSINESS CORPORATION ACT
The undersigned, for the purpose of forming a corporation pursuant to
the provisions of the Liberian Business Corporation Act, does hereby make,
subscribe, acknowledge and file in the Office of the Minister of Foreign
Affairs this instrument for that purpose, as follows:
A. The name of the Corporation shall be:
VSSI OCEANS INC.
B. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may now or hereafter be organized under the
Liberian Business Corporation Act.
C. The registered address of the Corporation in Liberia shall be
80 Broad Street, Monrovia, Liberia. The name of the Corporation's registered
agent at such address shall be The International Trust Company of America.
D. The aggregate number of shares of stock that the Corporation
is authorized to issue is Five Hundred (500) bearer and/or registered shares
without par value.
The Corporation shall mail notices and information to holders of bearer
shares to the address provided to the corporation by the shareholder for that
purpose.
The holder of a stock certificate issued to bearer may cause such
certificate to be exchanged for another certificate in his name for a like
number of shares, and the holder of shares issued in the name of the owner may
cause his certificate to be exchanged for another certificate to bearer for a
like number of shares.
E. The Corporation shall have every power which a Corporation now
or hereafter organized under the Liberian Business Corporation Act may have.
F. The name and mailing address of each incorporator of these
Articles of Incorporation and the number of shares of stock subscribed by each
incorporator is:
<TABLE>
<CAPTION>
No. of Shares of
Name Post Office Address Common Stock Subscribed
- ---- ------------------- -----------------------
<S> <C> <C>
S.B. Goweh 80 Broad Street One
Monrovia, Liberia
</TABLE>
2
<PAGE> 3
G. The number of directors constituting the initial Board of
Directors is three (3).
H. The Board of Directors as well as the Shareholders of the
Corporation shall have the authority to adopt, amend or repeal the by-laws of
the Corporation.
I. Corporate existence shall begin upon filing these Articles of
Incorporation with the Minister of Foreign Affairs as of the filing date stated
on these Articles.
IN WITNESS WHEREOF, I have made, subscribed and acknowledged this
instrument on this 7th day of September, 1987.
/s/ S.B. Goweh
--------------
3
<PAGE> 4
EXHIBIT 3.1
SCHEDULE TO EXHIBIT 3.1
Articles of Incorporation not required to be filed because each of them
is substantially identical to Exhibit 3.1, and the material details by which
such Articles of Incorporation differ from Exhibit 3.1 are as follows:
1. Articles of Incorporation, dated September 7, 1987, of VSSI
Atlantic, Inc.
a. Name of Corporation: VSSI Atlantic, Inc.
2. Articles of Incorporation, dated March 28, 1989, of VSSI
Appian, Inc.
a. Name of Corporation: VSSI Appian, Inc.
<PAGE> 1
EXHIBIT 3.2
============================================================
VSSI OCEANS INC.
BYLAWS ADOPTED SEPTEMBER 9, 1987
============================================================
1.00 OFFICES
The registered office of the Corporation shall be at 80 Broad Street,
Monrovia, Liberia. The Corporation may also have an office or offices at
such other places within or outside Liberia as the Board of Directors may
from time to time designate or the business of the Corporation may require.
2.00 STOCKHOLDERS
2.01 Annual Meeting. The annual meeting of stockholders shall be held
on the 10th day of January in every year at 10:00 a.m. or on such day and at
such time and place within or outside Liberia as the Directors may from time
to time determine for the purpose of electing Directors and transacting such
other business as may properly be brought before the meeting.
2.02 Special Meetings. Special meetings of the stockholders may be
held at such places within or outside Liberia as the Board of Directors may
determine upon call of the Board of Directors or the President or the
holders of shares entitled in the aggregate to more than a majority of the
number of votes which could at the time be cast by the holders of all shares
of the capital stock of the Corporation at the time outstanding and entitled
to vote, at such time as may be fixed by the Board of Directors or the
President or such stockholders, and as may be stated in the call and notice.
The purposes for which a special meeting of stockholders may be held shall
include the removal from office of any or all of the Directors, whether or
not any cause exists for such removal, and the election of Directors in
place of those removed.
2.03 Notice of Meetings. Notice of every meeting of stockholders,
other than any meeting and giving of notice of which is otherwise prescribed
by law, stating the date, time, place and purpose thereof, and in the case
of special meetings, the name of the person or persons at whose direction
the notice is being issued, shall be given personally or sent by mail,
telex, cable or facsimile at least ten but not more than sixty days before
such meeting, to each stockholder of record entitled to vote thereat. If
mailed, notice shall be deemed to have been given when deposited in the
mail, directed to the stockholder at his address as the same appears on the
record of stockholders of the Corporation or at such address as to which the
stockholder has given notice to the Secretary. Notice of a meeting need not
be given to any
<PAGE> 2
stockholder who submits a signed waiver of notice, whether before or
after the meeting, or who attends the meeting without protesting prior to
the conclusion thereof the lack of notice to him. If the Corporation shall
issue any class of bearer shares, notice of all meetings shall be given in
the manner provided in the Articles of Incorporation.
2.04 Quorum. No business shall be transacted at any meeting, except
the adjournment of the meeting, unless a quorum of stockholders is present
at the time when the meeting proceeds to business; and such quorum shall
consist of not less than the holders of at least a majority of the shares
issued and outstanding and entitled to vote, present in person or by proxy.
2.05 Voting. If a quorum is present, and except as expressly provided
by law, the affirmative vote of a majority of the shares of stock
represented at the meeting shall be the act of the stockholders. At any
meeting of the stockholders, each holder of outstanding shares of stock of
the Corporation entitled to vote thereat shall be entitled to one vote for
each such share, and may so vote either in person or by proxy appointed by
instrument in writing (including telex, cable, or facsimile). Any action
required or permitted to be taken at a meeting may be taken without a
meeting if a written consent, setting forth the action so taken, is signed
by all the stockholders entitled to vote with respect to the subject matter
thereof.
2.06 Right to Vote and Fixing of Record Date. The Board of Directors
may fix a time not more than sixty days nor less than ten days prior to the
date of any meeting of stockholders, or more than sixty days prior to the
last day on which the consent or dissent of stockholders may be expressed
for any purpose without a meeting, as the time as of which stockholders
entitled to notice of and to vote at such meeting or whose consent or
dissent is required or may be expressed for any purpose, as the case may be,
shall be determined, and all persons who were holders of record of voting
shares at such time shall be entitled to notice of and to vote at such
meeting or to express their consent or dissent, as the case may be. In
addition, all persons who were holders of voting shares in bearer form and
at such time had provided to the Corporation an address to which to forward
notices and information shall be entitled to notice of such meeting. The
Board of Directors may fix a time not exceeding sixty days preceding the
date fixed for the payment of any dividend, the making of any distribution,
the allotment of any rights or the taking of any other action, as a record
time for the determination of the stockholders entitled to receive any such
dividend, distribution or allotment or for the purpose of such other action.
With respect to holders of registered shared entitled to vote at the
meeting, such stockholders shall present thereat proof of identity
satisfactory to the Secretary of the meeting. With respect to holders of
bearer shares, the right to vote at the meeting shall be proven either by
presenting the certificate or certificates representing such shares to the
Secretary of the meeting for inspection or by presenting to the Secretary a
certificate
2
<PAGE> 3
of a bank establishing that said shares have been deposited in said
bank by said stockholder to be held there until after the date of the
meeting or by presenting such other evidence of ownership as may be
prescribed by the Board of Directors. If a holder of registered shares
desires to vote by proxy, such proxy nominee shall similarly present proof
of identity satisfactory to the Secretary of the meeting. If a holder of
bearer shares desires to vote by proxy, the proxy shall be accompanied by a
similar certificate of a bank establishing that the stockholder has
deposited the shares with said bank and that such shares will be held by
said bank until after the date of the meeting, or by such other evidence of
ownership as may be prescribed by the Board of Directors. No proxy shall be
valid after the expiration of eleven months from the date of its execution
unless the stockholder executing it shall have specified therein a longer
time during which it is to continue in force.
3.00 BOARD OF DIRECTORS
3.01 Number. The number of Directors of the Corporation shall be three
(3), who shall hold office for the term of one year or until successors are
elected and qualify. However, the number of Directors may be less than
three (3) when all outstanding shares are owned beneficially or of record by
less than three (3) stockholders, but the number of Directors shall not be
less than the number of stockholders. The number of Directors may be
increased or decreased by amendment to the Bylaws by the Board of Directors
or by the stockholders.
3.02 How Elected. Except as otherwise provided by law or by Section
3.06 of this Article, the Directors of the Corporation (other than the first
Board of Directors if named in the Articles of Incorporation or designated
by the incorporators) shall be elected at the annual meeting of
stockholders. Each Director shall be elected to serve until the next annual
meeting of stockholders and until his or her successor shall have been duly
elected and qualified, except in the event of his or her death, resignation,
removal or the earlier termination of his or her term of office.
3.03 Meetings of the Board. Meetings of the Board of Directors shall
be held at such place within or outside Liberia as may from time to time be
fixed by resolution of the Board, or as may be specified in the call of any
meeting. Regular meetings of the Board of Directors shall be held at such
times as may from time to time be fixed by resolution of the Board. Notice
need not be given of the regular meetings of the Board held at times fixed
by resolution of the Board. Special meetings of the Board may be held at any
time upon the call of the President or any Director by oral, telex,
facsimile or written notice, duly served on or sent or mailed to each
Director not less than one day before such meeting. Special meetings of the
Board of Directors may be held without notice if all the Directors are
present or if those not present waive notice in writing either before or
after the meeting.
3
<PAGE> 4
3.04 Annual Meeting of Directors. An annual meeting of the Board of
Directors shall be held in each year after the adjournment of the annual
stockholders' meeting and on the same day. If a quorum of the Directors be
not present on the day appointed for the annual meeting, the meeting shall
be adjourned to some convenient day. No notice need be given of the annual
meeting of the Board of Directors.
3.05 Quorum. No business shall be transacted at any Directors'
meeting, except the adjournment of the meeting, unless a quorum of Directors
is present at the time when the meeting proceeds to business; and such
quorum shall consist of not less than two Directors then in office, present
in person or by proxy, unless the number of Directors then in office is less
than two in accordance with Section 3.01 hereof.
3.06 Vacancies. Vacancies in the Board of Directors may be filled by a
vote of a majority of the Directors remaining in office even though less
than a quorum; provided that, in case of an increase in number of Directors,
the vacancy or vacancies so created shall be filled by the stockholders.
The Directors so chosen shall hold office, unless they are theretofore
removed from office by the stockholders, until the next annual election or
until their successors shall be duly elected and qualified.
3.07 Resignation and Removal. Any Director of the Corporation may
resign at any time by giving written notice to the President or to the
Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it effective.
Any and all of the Directors of the Corporation may be removed with or
without cause by action of the stockholders. Any Director may be removed
for cause by action of the Board of Directors.
3.08 Organization. At each meeting of the Board of Directors, the
President or, in the absence of the President, a chairman chosen by a
majority of the Directors present shall preside, and the Secretary of the
Corporation or, in the absence of the Secretary, a person appointed by the
chairman of the meeting shall act as secretary. The Board of Directors may
adopt such rules and regulations as they shall deem proper, not inconsistent
with law or with these Bylaws, for the conduct of their meetings and the
management of the affairs of the Corporation. At all meetings of the Board
of Directors, business shall be transacted in such order as the Board may
determine.
3.09 Powers. The Board of Directors shall have general power to manage
the business of the Corporation. The Board of Directors may authorize the
President or any other officer or officers of the Corporation to confer all
kinds of powers of attorney upon any person or entity (including power of
attorney in favor of lawyers, solicitors or judicial agents, in order to
enable them to carry on and perform the legal representation of the
Corporation in connection with any judicial process), with all the
4
<PAGE> 5
faculties and powers that he, she or they may deem convenient, and also
to revoke the same in whole or in part.
3.10 Compensation. In addition to reimbursement for his or her
reasonable expenses incurred in attending meetings or otherwise in
connection with his or her attention to the affairs of the Corporation, each
Director who is not a salaried officer of the Corporation shall be entitled
to receive such remuneration for serving as a Director and as a member of
any committees of the Board as may be fixed from time to time by the Board
of Directors. This Bylaw shall not be construed to preclude any Director
from serving the Corporation in any other capacity and receiving
compensation therefor.
4.00 COMMITTEES
4.01 Executive Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more of the
members of the Board to constitute an executive committee. The Executive
Committee shall have and may exercise, so far as may be permitted by law,
all of the powers of the Board in the management of the affairs and property
of the Corporation and the exercise of its corporate powers during the
intervals between meetings of the Board of Directors and shall have power to
authorize the seal of the Corporation, if any, to be affixed to all papers
which may require it; but the Executive Committee shall not have power to
fill vacancies in the Board, or to change the membership of, or to fill
vacancies in, the Executive Committee, or to make or amend Bylaws of the
Corporation. The Board shall have the power at any time to fill vacancies
in, to change the membership of, or to dissolve, the Executive Committee
with or without cause. The Executive Committee may hold meetings and make
rules for the conduct of its business and appoint such committees and
assistants as it shall from time to time deem necessary. A majority of the
members of the Executive Committee shall constitute a quorum. All action of
the Executive Committee shall be reported to the Board at its meeting next
succeeding such action.
4.02 Other Committees. The Board of Directors may, in its discretion,
by resolution, appoint other committees which shall have and may exercise
such powers as shall be conferred or authorized by the resolution appointing
them. A majority of any such committee, composed of more than two members,
may determine its action and fix the time and place of its meetings, unless
the Board of Directors shall otherwise provide. The Board shall have power
at any time to change the membership of any such committee, to fill
vacancies, and to discharge any such committee with or without cause.
5
<PAGE> 6
5.00 OFFICERS
5.01 Officers and Agents. The Board of Directors shall appoint a
President, a Secretary and a Treasurer for the Corporation. The Board of
Directors may also appoint from time to time one or more Vice-Presidents and
such Assistant Secretaries, Assistant Treasurers and other officers, agents,
and employees as may be deemed necessary. No officer except the President
need be a Director of the Corporation. The salaries of all officers shall
be fixed by the Board of Directors, and the fact that any officer is a
Director shall not preclude him or her from receiving a salary or from
voting upon the resolution providing the same. Any person may hold two or
more offices. Officers, agents, factors or employees of the Corporation may
be of any nationality and need not be residents of Liberia.
5.02 How Elected. The Officers shall be elected by the Board of
Directors at its first meeting and at its annual meetings thereafter. In
the event that the Board of Directors fails to so elect any officer, such
officer may be elected at any subsequent meeting, annual or otherwise, of
the Board of Directors.
5.03 Term of Office. The term of office of all officers shall be one
year or until their respective successors are chosen and qualify, but any
officer elected or appointed by the Board of Directors may be removed, with
or without cause, at any time by the affirmative vote of a majority of the
members of the Board then in office.
5.04 Powers and Duties. The officers, agents, and employees of the
Corporation shall each have such powers and duties in the management of the
property and affairs of the Corporation, subject to the control of the Board
of Directors, as generally pertain to their respective offices, as well as
such powers and duties as from time to time may be prescribed by the Board
of Directors. The Board of Directors may require to the extent permitted by
law any such officer, agent, or employee to give security for the faithful
performance of his or her duties.
6.00 CAPITAL STOCK
6.01 Certificate of Shares. The interest of each stockholder shall be
evidenced by a certificate or certificates for shares of stock of the
Corporation in such form as the Board of Directors may from time to time
prescribe. The certificates of stock shall be signed by the President or a
Vice-President, and the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, and sealed with the seal of the Corporation, if
any, and shall be countersigned or endorsed in such manner as the Board may
by resolution prescribe.
6.02 Transfers. The transfer of shares issued to the bearer shall be
by delivery of the certificate or certificates representing such shares.
6
<PAGE> 7
6.03 Stock Transfer. The Corporation shall maintain a stock register
to be kept on file in any office of the Corporation. In the case of shares
issued to bearer, such stock register shall state the number of shares so
issued, the date of issue and that such shares are fully paid and non-
assessable.
6.04 Lost or Destroyed Stock Certificates. No certificates for shares
of stock of the Corporation shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed, except upon production of
such evidence of the loss, theft or destruction and upon indemnification of
the Corporation and its agents to such extent and in such manner as the
Board of Directors may require.
7.00 CHECKS AND NOTES
All checks and drafts on the Corporation's bank accounts and all bills
of exchange and promissory notes and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be thereunto authorized from time to
time by the Board of Directors.
8.00 FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of May
in each year and shall end on the last day of April following.
9.00 CORPORATE SEAL
The corporate seal, if any, shall have inscribed thereon the name of
the Corporation and such other appropriate legend as the Board of Directors
may from time to time determine. In lieu of such corporate seal, when so
authorized by the Board of Directors or a duly empowered committee thereof,
a facsimile thereof may be impressed or affixed or reproduced.
10.00 AMENDMENTS
The Bylaws of the Corporation may be amended, added to, rescinded or
repealed at any meeting of the stockholders by the vote of the holders of
shares entitled in the aggregate to more than a majority of the number of
votes which could at the time be cast by the holders of all shares of the
capital stock of the Corporation then outstanding and entitled to vote if
all such holders were present or represented at the meeting, provided notice
of the proposed change is given in the notice of the meeting. If so
provided in the Articles of Incorporation of the Corporation, the Board of
Directors may from time to time amend, add to, rescind or repeal these
Bylaws at any regular or special meeting at which notice of the proposed
change is given,
7
<PAGE> 8
subject, however, to the power of the stockholders to alter, amend, or
repeal any Bylaws made by the Board of Directors.
- E N D -
8
<PAGE> 9
SCHEDULE TO EXHIBIT 3.2
Bylaws not required to be filed because each of them is substantially
identical to Exhibit 3.2, and the material details by which each such set of
Bylaws differs from Exhibit 3.2 are as follows:
1. Bylaws of VSSI Atlantic Inc.
a. Name of Corporation: VSSI Atlantic Inc.
<PAGE> 1
EXHIBIT 3.3
VSSI APPIAN INC.
BYLAWS ADOPTED MARCH 29, 1989
1.00 OFFICES . . . . . . . . . . . . . . . . . . . 2
2.00 SHAREHOLDERS . . . . . . . . . . . . . . . . . 2
2.01 Annual Meeting . . . . . . . . . . . . . . . . 2
2.02 Special Meetings . . . . . . . . . . . . . . . 2
2.03 Notice of Meetings . . . . . . . . . . . . . . 2
2.04 Quorum . . . . . . . . . . . . . . . . . . . . 2
2.05 Voting . . . . . . . . . . . . . . . . . . . . 2
2.06 Right to Vote and Fixing of Record Date . . . 3
3.00 BOARD OF DIRECTORS . . . . . . . . . . . . . . 3
3.01 Number . . . . . . . . . . . . . . . . . . . . 3
3.02 How Elected . . . . . . . . . . . . . . . . . 3
3.03 Resignation and Removal. . . . . . . . . . . . 3
3.04 Vacancies. . . . . . . . . . . . . . . . . . . 3
3.05 Organization . . . . . . . . . . . . . . . . . 3
3.06 Regular Meetings . . . . . . . . . . . . . . . 3
3.07 Special Meetings . . . . . . . . . . . . . . . 3
3.08 Notice of Special Meetings . . . . . . . . . . 4
3.09 Annual Meeting . . . . . . . . . . . . . . . . 4
3.11 Voting . . . . . . . . . . . . . . . . . . . . 4
3.12 Compensation . . . . . . . . . . . . . . . . . 4
4.00 COMMITTEES . . . . . . . . . . . . . . . . . . 4
4.01 Executive Committee. . . . . . . . . . . . . . 4
4.02 Other Committees . . . . . . . . . . . . . . . 4
5.00 OFFICERS . . . . . . . . . . . . . . . . . . . 4
5.01 Number and Designation . . . . . . . . . . . . 4
5.02 President. . . . . . . . . . . . . . . . . . . 5
5.03 Secretary . . . . . . . . . . . . . . . . . . 5
5.04 Treasurer . . . . . . . . . . . . . . . . . . 5
5.05 Other Officers . . . . . . . . . . . . . . . . 5
5.06 Bond . . . . . . . . . . . . . . . . . . . . . 5
6.00 CERTIFICATES FOR SHARES . . . . . . . . . . . 5
6.01 Form and Issuance . . . . . . . . . . . . . . 5
6.02 Transfers . . . . . . . . . . . . . . . . . . 5
6.03 Share Register . . . . . . . . . . . . . . . . 5
6.04 Lost or Destroyed Certificates . . . . . . . . 5
7.00 DIVIDENDS . . . . . . . . . . . . . . . . . . 6
8.00 MISCELLANEOUS PROVISIONS . . . . . . . . . . . 6
8.01 Fiscal Year . . . . . . . . . . . . . . . . . 6
8.02 Checks and Notes . . . . . . . . . . . . . . . 6
8.03 Corporate Seal . . . . . . . . . . . . . . . . 6
9.00 AMENDMENTS . . . . . . . . . . . . . . . . . . 6
9.01 By the Shareholders . . . . . . . . . . . . . 6
9.02 By the Directors . . . . . . . . . . . . . . . 6
<PAGE> 2
1.00 OFFICES
The registered office of the Corporation shall be at 80 Broad Street,
Monrovia, Liberia. The Corporation may also have an office or offices at such
other places within or outside Liberia as the Board of Directors may from time
to time designate or the business of the Corporation may require.
2.00 SHAREHOLDERS
2.01 Annual Meeting.
The annual meeting of shareholders shall be held on the second Friday
in January of every year or in such day, and at such time and place within or
outside Liberia as the Directors may from time to time determine, for the
purpose of electing Directors and transacting such other business as may
properly be brought before the meeting.
2.02 Special Meetings.
Special meetings of shareholders, unless otherwise prescribed by law,
may be called for any purpose at any time by order of the Board of Directors,
or by any officer of the Corporation whenever requested in writing to do so by
shareholders owning not less than twenty-five percent of all the outstanding
shares of the Corporation entitled to vote at such meeting. Such meetings
shall be held at such place, date and time as may be designated in the notice
thereof. The notice shall state the purpose of the proposed special meeting,
and the business transacted at any special meeting shall be limited
accordingly. The purpose for which a special meeting of shareholders may be
held shall include the removal from office of any or all of the Directors,
whether or not any cause exists for such removal, and the election of Directors
in place of those removed.
2.03 Notice of Meetings.
Notice of every meeting of shareholders (other than any meeting the
giving of notice of which is otherwise prescribed by law) stating the date,
time, place and purpose thereof, and in the case of special meetings, the name
of the person or persons at whose direction the notice is being issued, shall
be given personally or sent by courier service, mail, telex, cable or facsimile
at least fifteen but not more than sixty days before such meeting, to each
shareholder of record entitled to vote thereat and to each shareholder of
record who, by reason of any action proposed at such meeting would be entitled
to have his or her shares appraised if such action were taken, and the notice
shall include a statement of that purpose and to that effect. If mailed,
notice shall be deemed to have been given when deposited in the mail, directed
to the shareholder at his or her address as the same appears on the record of
shareholders of the Corporation or at such address as to which the shareholder
has given notice to the Secretary. Notice of a meeting need not be given to any
shareholder who submits a signed waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting prior to the conclusion
thereof the lack of notice to him or her. If the Corporation shall issue any
class of bearer shares, notice of all meetings shall be given in the manner
provided in the Articles of Incorporation.
2.04 Quorum.
At all meetings of shareholders, except as otherwise expressly provided
by law, there must be present either in person or by proxy shareholders of
record holding at least a majority of the shares issued and outstanding and
entitled to vote at such meetings in order to constitute a quorum, but if less
than a quorum is present, a majority of those shares present either in person
or by proxy shall have power to adjourn any meeting until a quorum shall be
present.
2.05 Voting.
If a quorum is present, and except as otherwise expressly provided by
law, the affirmative vote of a majority of the shares of stock represented at
the meeting shall be the act of the shareholders. At any meeting of
shareholders, each shareholder entitled to vote thereat shall be entitled to
one vote for each such share, and may so vote either in person or by proxy
appointed by instrument in writing (including telex, cable, or facsimile). Any
action required or permitted to be taken at a meeting may be taken without a
meeting if a written consent, setting forth the action so taken, is signed by
all the shareholders entitled to vote with respect to the subject matter
thereof.
2.06 Right to Vote and Fixing of Record Date.
The Board of Directors may fix a time not more than sixty days nor less
than fifteen days prior to the date of any meeting of shareholders, or more
than sixty days prior to the last day on which the consent or dissent of
shareholders may be expressed for any purpose without a meeting, as the time as
of which shareholders entitled to notice of and to vote at such meeting or
whose consent or dissent is required or may be expressed for any purpose, as
the case may be, shall be determined, and all persons who were holders of
record of voting shares at such time, and no others, shall be entitled to
notice of and to vote at such meeting or to express their consent or dissent,
as the case may be. All persons who were holders of voting shares in bearer
form and at such time had provided to the Corporation an address to which to
forward notices and information shall be entitled to notice of such meeting.
2
<PAGE> 3
The Board of Directors may fix a time not exceeding sixty days
preceding the date fixed for the payment of any dividend, the making of any
distribution, the allotment of any rights or the taking of any other action, as
a record time for the determination of the shareholders entitled to receive any
such dividend, distribution or allotment or for the purpose of such other
action.
With respect to holders of registered shares entitled to vote at the
meeting, such shareholders shall present thereat proof of identity satisfactory
to the secretary of the meeting. With respect to holders of bearer shares, the
right to vote at the meeting shall be proven by presenting the certificate or
certificates representing such shares to the secretary of the meeting for
inspection.
If a holder of registered shares desires to vote by proxy, such proxy
nominee shall present proof of identity satisfactory to the secretary of the
meeting. No proxy shall be valid after the expiration of eleven months from
the date of its execution unless the shareholder executing it shall have
specified therein a longer time during which it is to continue in force.
3.00 BOARD OF DIRECTORS
3.01 Number.
The affairs, business and property of the Corporation shall be managed
by a Board of Directors to consist of not less than three Directors unless the
shares of the Corporation are owned beneficially and of record by less than
three shareholders, in which case the number of Directors may equal the number
of shareholders. Within the limits fixed by these Bylaws the number of
Directors may be determined either by the vote of a majority of the entire
Board or by vote of the shareholders. The Directors need not be residents of
Liberia or shareholders of the Corporation. Corporations may, to the extent
permitted by law, be elected or appointed Directors.
3.02 How Elected.
Except as otherwise provided by law or by Section 3.04 of these Bylaws,
the Directors of the Corporation (other than the first Board of Directors)
shall be elected at the annual meeting of shareholders. Each Director shall be
elected to serve until the next annual meeting of shareholders and until his or
her successor shall have been duly elected and qualified, except in the event
of his or her death, resignation, removal or the earlier termination of his or
her term of office.
3.03 Resignation and Removal.
Any Director of the Corporation may resign at any time by giving
written notice to the President or to the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein the acceptance of such resignation shall not be
necessary to make it effective. Any or all of the Directors may be removed,
with or without cause, by a vote of the shareholders. Any Director may be
removed for cause by action of the Board of Directors.
3.04 Vacancies.
Vacancies in the Board of Directors occurring by death, resignation,
creation of new directorships, failure of the shareholders to elect the whole
Board at any annual election of Directors or for any other reason, including
removal of Directors for cause, may be filled either by the affirmative vote of
a majority of the remaining Directors then in office, even though less than a
quorum, at any special meeting called for that purpose, or at any regular
meeting of the Board, or by vote of the shareholders. Vacancies occurring by
removal of Directors without cause may be filled only by vote of the
shareholders.
3.05 Organization.
At each meeting of the Board of Directors, the President or, in the
absence of the President, a chairman chosen by a majority of the Directors
present shall preside, and the Secretary of the Corporation or, in the absence
of the Secretary, a person appointed by the chairman of the meeting shall act
as secretary. The Board of Directors may adopt such rules as they shall deem
proper, not inconsistent with law or with these Bylaws, for the conduct of
their meetings and the management of the affairs of the Corporation. At all
meetings of the Board of Directors, business shall be transacted in such order
as the Board may determine.
3.06 Regular Meetings.
Regular meetings of the Board of Directors may be held at such time and
place as may be determined by resolution of the Board of Directors and no
notice shall be required for any regular meeting. Except as otherwise provided
by law, any business may be transacted at any regular meeting.
3.07 Special Meetings.
Special meetings of the Board of Directors may, unless otherwise
prescribed by law, be called from time to time by the President, or any officer
of the Corporation who is also a Director. The President or the Secretary
shall call a special meeting of the Board upon written request directed to
either of them by any two Directors stating the time, place and purpose of such
special meeting. Special meetings of the Board shall be held on such date, and
at such time and place, as may be designated in the notice thereof by the
officer calling the meeting.
3
<PAGE> 4
3.08 Notice of Special Meetings.
Notice of the date, time and place of each special meeting of the Board
of Directors shall be given to each Director at least forty-eight hours prior
to such meeting, unless the notice is given orally or delivered in person, in
which case it shall be given at least twenty-four hours prior to such meeting.
For the purpose of this section, notice shall be deemed to be duly given to a
Director if given to him or her personally (including by telephone) or if such
notice be delivered to such Director by courier service, mail, telegraph,
cable, telex or facsimile, to his or her last known address. Notice of a
meeting need not be given to any Director who submits a signed waiver of
notice, whether before or after the meeting, or who attends the meeting without
protesting prior to the conclusion thereof, the lack of notice to him or her.
3.09 Annual Meeting.
An annual meeting of the Board of Directors shall be held in each year
after the adjournment of the annual shareholders meeting and on the same day.
If a quorum of the Directors is not present on the day appointed for the annual
meeting, the meeting shall be adjourned to some convenient day.
3.10 Quorum.
A majority of the Directors at the time in office, present in person or
by proxy or conference telephone, shall constitute a quorum for the transaction
of business.
3.11 Voting.
The vote of the majority of the Directors, present in person or by
proxy or conference telephone, at a meeting at which a quorum is present shall
be the act of the Directors. Any action required or permitted to be taken at a
meeting may be taken without a meeting if all members of the Board consent
thereto in writing.
3.12 Compensation.
The Board may from time to time, in its discretion, fix the amounts
which shall be payable to members of the Board of Directors for attendance at
the meetings of the Board or of any committee and for services rendered to the
Corporation.
4.00 COMMITTEES
4.01 Executive Committee.
The Board of Directors may, by resolution passed by a majority of the
entire Board, designate two or more of the members of the Board to constitute
an Executive Committee. The Executive Committee shall have and may exercise,
so far as may be permitted by law, and to the extent provided in said
resolution and these Bylaws, all of the powers of the Board in the management
of the affairs and property of the Corporation and the exercise of its
corporate powers, and shall have power to authorize the seal of the Corporation
to be affixed to all papers which may require it; but the Executive Committee
shall not have power to fill vacancies in the Board, or to change the
membership of, or to fill vacancies in, the Executive Committee, or to make or
amend Bylaws of the Corporation. The Board shall have the power at any time to
fill vacancies in, to change the membership of, or to dissolve, the Executive
Committee with or without cause. The Executive Committee may hold meetings and
make rules for the conduct of its business as it shall from time to time deem
necessary. A majority of the members of the Executive Committee shall
constitute a quorum. All action of the Executive Committee shall be reported
to the Board at its meeting next succeeding such action.
4.02 Other Committees.
The Board of Directors may, in its discretion, by resolution, appoint
other committees composed of two or more Directors which shall have and may
exercise such powers as shall be conferred or authorized by the resolution
appointing them. A majority of any such committee may determine its action and
fix the time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board shall have power at any time to change the
membership of any such committee, to fill vacancies, and to discharge any such
committee with or without cause. Each committee shall keep a record of its
proceedings and report the same to the Board when required.
5.00 OFFICERS
5.01 Number and Designation.
The Board of Directors shall elect a President, Secretary and Treasurer
and such other officers as it may deem necessary. Officers may be of any
nationality and need not be residents of Liberia. The officers shall be elected
annually by the Board of Directors at its first meeting following the annual
election of Directors, but in the event of the failure of the Board to so elect
any officer, such officer may be elected at any subsequent meeting of the Board
of Directors. The salaries of officers and any other compensation paid to them
shall be fixed from time to time by the Board of Directors. The Board of
Directors may elect additional officers at any meeting.
4
<PAGE> 5
Each officer shall hold office until the first meeting of the Board of
Directors following the next annual election of Directors and until his or her
successor shall have been duly elected and qualified, except in the event of
the earlier termination of his or her office, through death, resignation,
removal or otherwise.
Any officer may be removed by the Board at any time with or without
cause. Any vacancy in an office may be filled for the unexpired portion of the
term of such office by the Board of Directors at any regular or special
meeting.
5.02 President.
The President shall be the chief executive officer of the Corporation
and shall have the general management of the affairs of the Corporation
together with the powers and duties usually incident to the office of
President, except as specifically limited by appropriate resolution of the
Board of Directors, and shall have such other powers and perform such other
duties as may be assigned to him or her by the Board of Directors. The
President shall preside at all meetings of shareholders at which he or she is
present.
5.03 Secretary.
The Secretary shall act as Secretary of all meetings of the
shareholders and of the Board of Directors at which he or she is present, shall
have supervision over the giving and serving of notices of the Corporation,
shall be the custodian of the corporate records and the corporate seal of the
Corporation, shall be empowered (together with the other officers of the
Corporation) to affix the corporate seal to those documents, the execution of
which, on behalf of the Corporation under its seal, is duly authorized and when
so affixed may attest the same, and shall exercise the powers and perform such
other duties as may be assigned to him or her by the Board of Directors or the
President.
5.04 Treasurer.
The Treasurer shall have general supervision over the care and custody
of the funds, securities, and other valuable effects of the Corporation and
shall deposit the same or cause the same to be deposited in the name of the
Corporation in such depositories as the Board of Directors may designate, shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall have supervision over the accounts of all receipts and
disbursements of the Corporation, shall, whenever required by the Board, render
or cause to be rendered financial statements of the Corporation, shall have the
power and perform the duties usually incident to the office of Treasurer, and
shall have such powers and perform such other duties as may be assigned to him
or her by the Board of Directors or President.
5.05 Other Officers.
Officers other than those treated in Sections 5.02 through 5.04 of
these Bylaws shall exercise such powers and perform such duties as may be
assigned to them by the Board of Directors or the President.
5.06 Bond.
The Board of Directors shall have power to the extent permitted by law,
to require any officer, agent or employee of the Corporation to give bond for
the faithful discharge of his or her duties in such form and with such surety
or sureties as the Board of Directors may deem advisable.
6.00 CERTIFICATES FOR SHARES
6.01 Form and Issuance.
The shares of the Corporation shall be represented by certificates in
form meeting the requirements of law and approved by the Board of Directors.
Certificates shall be signed by (a) the President, and (b) by the Secretary or
the Treasurer.
6.02 Transfers.
The Board of Directors shall have power and authority to make such
rules and regulations as they may deem expedient concerning the issuance,
registration and transfer of certificates representing shares of the
Corporation's stock. The transfer of shares issued to bearer shall be by
delivery of the certificate or certificates representing such share.
6.03 Share Register.
The Corporation shall maintain a share register to be kept on file in
any office of the Corporation. In the case of shares issued to bearer, such
share register shall state the number of shares so issued, the date of issue
and that such shares are fully paid and non-assessable.
6.04 Lost or Destroyed Certificates.
No certificates for shares of stock of the Corporation shall be issued
in place of any certificate alleged to have been lost, stolen or destroyed,
except upon production of such evidence of the loss, theft or destruction and
upon indemnification of the Corporation and its agents to such extent and in
such manner as the Board of Directors may require.
5
<PAGE> 6
7.00 DIVIDENDS
Dividends may be declared in conformity with law by, and at the
discretion of, the Board of Directors at any regular or special meeting.
Dividends may be declared and paid in cash, stock or other property of the
Corporation.
8.00 MISCELLANEOUS PROVISIONS
8.01 Fiscal Year.
The fiscal year of the Corporation shall begin on May 1st of each year
and shall end on the last day of April following.
8.02 Checks and Notes.
All checks and drafts on the Corporation's bank accounts and all bills
of exchange and promissory notes and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be thereunto authorized from time to time
by the Board of Directors.
8.03 Corporate Seal.
The corporate seal shall have inscribed thereon the name of the
Corporation and such other information as the Board of Directors may from time
to time determine. In lieu of such corporate seal, when so authorized by the
Board of Directors or a duly empowered committee thereof, a facsimile thereof
may be impressed or affixed or reproduced.
9.00 AMENDMENTS
9.01 By the Shareholders.
These Bylaws may be amended, added to, altered or repealed, or new
Bylaws may be adopted, at any meeting of shareholders of the Corporation by the
affirmative vote of the holders of a majority of the stock present and voting
at such meeting, provided notice that an amendment is to be considered and
acted upon is inserted in the notice or waiver of notice of said meeting.
9.02 By the Directors.
These Bylaws may be amended, added to, altered or repealed, or new
Bylaws may be adopted, at any regular or special meeting of the Board of
Directors by the affirmative vote of a majority of the entire Board, subject,
however, to the power of the shareholders to alter, amend or repeal any Bylaw
so adopted.
- End -
6
<PAGE> 1
EXHIBIT 3.4
MEMORANDUM OF ASSOCIATION
OF
NASSAU SPIRIT INC.
THE INTERNATIONAL BUSINESS COMPANIES ACT, 1989
COMPANY LIMITED BY SHARES
1. NAME:
The name of the Company is NASSAU SPIRIT INC.
2. REGISTERED OFFICE:
The Registered Office of the Company will be situated in the First
Floor, Scotiabank Building, Rawson Square, Bay Street, in the City of Nassau,
in the Island of New Providence one of the Islands of the Commonwealth of the
Bahamas.
3. REGISTERED AGENT:
The Registered Agent of the Company will be Oceanic Bank and Trust Ltd.
which is situated in the First Floor, Scotiabank Building, Rawson Square, Bay
Street in the City of Nassau in the Island of New Providence one of the Islands
of the Commonwealth of the Bahamas.
4. OBJECTS/PURPOSES:
The object of purpose of the Company is to engage in any act or
activity that is not prohibited under any law for the time being in force in
The Bahamas.
5. CURRENCY:
The Currency in which shares in the company shall be issued is in the
currency of the United States of America.
6. AUTHORIZED CAPITAL:
The Capital of the Company is Five thousand dollars (US$5,000.00)
divided into Five thousand (5,000) registered and/or bearer shares of One
dollar (US$1.00) each.
7. SHARE CLASSES:
SEE 6 ABOVE.
8. SHARE RIGHTS AND RESTRICTIONS:
The rights and restrictions attaching to the registered and/or bearer
shares are as set out in Schedule "A".
9. REGISTERED/BEARER SHARES:
The Directors are authorized and empowered to issue shares as
registered shares or bearer shares at their discretion and as they may
determine by resolution of the Directors.
10. EXCHANGE OF REGISTERED/BEARER SHARES:
The holder of a stock certificate issued to bearer may cause such
certificate to be exchanged for another certificate in his name for a like
number of shares, and the holder of shares issued in the name of the owner may
cause his certificate to be exchanged for another certificate to bearer for a
like number of shares.
11. NOTICE TO SHAREHOLDERS:
The Company shall mail required notices and information to holders of
registered and/or bearer shares to the address provided to the company by the
shareholder for that purpose.
12. COMPANY FORMATION:
We, the several persons whose names and address are subscribed are
desirous of being formed into a company in pursuance of this Memorandum of
Association.
Incorporators Address Signatures
- ------------- ------- ----------
Arthur F. Coady Oceanic Bank and
Trust Ltd.
P. O. Box N 8220 /s/ Arthur F. Coady
Nassau, Bahamas -------------------
Esther E. Gibson Oceanic Bank and
Trust Ltd.
P. O. Box N 8220 /s/ Esther E. Gibson
Nassau, Bahamas --------------------
<PAGE> 2
SCHEDULE "A"
There shall be attached to the registered and/or bearer shares, the
following rights, privileges, restrictions and conditions, namely:
1. The holders of registered and/or bearer shares shall be entitled
to receive notice of, and to vote at every meeting of the shareholders of the
Corporation and shall have one vote thereat for each such registered and/or
bearer share so held.
2. Subject to the rights, privileges, restrictions and conditions
attached to any preferred shares of the Company, the holders of registered
and/or bearer shares shall be entitled to received such dividend as the
directors may from time to time, by resolution, declare.
3. Subject to the rights, privileges, restrictions and conditions
attached to any preferred shares of the Company, the holders of registered
and/or bearer shares shall be entitled to share equally in the assets of the
Corporation remaining upon liquidation of the Corporation after the creditors
of the Corporation have been satisfied.
Witness: /s/ M. Glinton
---------------
Monique Glinton
2
<PAGE> 3
SCHEDULE TO EXHIBIT 3.4
Memoranda of Association not required to be filed because each of them
is substantially identical to Exhibit 3.4, and the material details by which
each such Memorandum of Association differs from Exhibit 3.4 are as follows:
1. Memorandum of Association of Andros Spirit Inc.
a. Name of Company: Andros Spirit Inc.
2. Memorandum of Association of Exuma Spirit Inc.
a. Name of Company: Exuma Spirit Inc.
<PAGE> 1
EXHIBIT 3.5
MEMORANDUM OF ASSOCIATION
OF
SENANG SPIRIT INC.
THE INTERNATIONAL BUSINESS COMPANIES ACT, 1989
COMPANY LIMITED BY SHARES
1. NAME:
The name of the Company is SENANG SPIRIT INC.
2. REGISTERED OFFICE:
The Registered Office of the Company will be situated in the First
Floor, Scotiabank Building, Rawson Square, Bay Street, in the City of Nassau,
in the Island of New Providence one of the Islands of the Commonwealth of the
Bahamas.
3. REGISTERED AGENT:
The Registered Agent of the Company will be Oceanic Bank and Trust Ltd.
which is situated in the First Floor, Scotiabank Building, Rawson Square, Bay
Street in the City of Nassau in the Island of New Providence one of the Islands
of the Commonwealth of the Bahamas.
4. OBJECTS/PURPOSES:
The object of purpose of the Company is to engage in any act or
activity that is not prohibited under any law for the time being in force in
The Bahamas.
5. CURRENCY:
The Currency in which shares in the company shall be issued is in the
currency of the United States of America.
6. AUTHORIZED CAPITAL:
The Capital of the Company is Five thousand dollars (US$5,000.00)
divided into Five thousand (5,000) registered and/or bearer shares of One
dollar (US$1.00) each.
7. SHARE CLASSES:
SEE 6 ABOVE.
8. SHARE RIGHTS AND RESTRICTIONS:
The rights and restrictions attaching to the registered and/or bearer
shares are as set out in Schedule "A".
9. REGISTERED/BEARER SHARES:
The Directors are authorized and empowered to issue shares as
registered shares or bearer shares at their discretion and as they may
determine by resolution of the Directors.
10. EXCHANGE OF REGISTERED/BEARER SHARES:
The holder of a stock certificate issued to bearer may cause such
certificate to be exchanged for another certificate in his name for a like
number of shares, and the holder of shares issued in the name of the owner may
cause his certificate to be exchanged for another certificate to bearer for a
like number of the same class of shares.
11. NOTICE TO SHAREHOLDERS:
The Company shall mail required notices and information to holders of
registered and/or bearer shares to the address provided to the company by the
shareholder for that purpose.
12. COMPANY FORMATION:
We, the several persons whose names and address are subscribed are
desirous of being formed into a company in pursuance of this Memorandum of
Association.
Dated at Nassau, Bahamas this 18th day of September, 1991.
Incorporators Address Signatures
- ------------- ------- ----------
Arthur F. Coady Oceanic Bank and
Trust Ltd.
P. O. Box N 8220 /s/ Arthur F. Coady
Nassau, Bahamas --------------------
Esther E. Gibson Oceanic Bank and
Trust Ltd.
P. O. Box N 8220 /s/ Esther E. Gibson
Nassau, Bahamas ---------------------
<PAGE> 2
SCHEDULE "A"
TO MEMORANDUM OF ASSOCIATION
OF
SENANG SPIRIT INC.
There shall be attached to the registered and/or bearer shares, the
following rights, privileges, restrictions and conditions, namely:
1. The holders of all classes of registered and/or bearer shares
shall be entitled to receive notice of, and to vote at every meeting of the
shareholders of the Corporation and shall have one vote thereat for each such
registered and/or bearer share so held.
2. Subject to the rights, privileges, restrictions and conditions
attached to any preferred shares of the Company, the holders of registered
and/or bearer shares shall be entitled to received such dividend as the
directors may from time to time, by resolution, declare; provided however the
Directors may, from time to time, declare:
(a) a general dividend payable to the holders of all of the
classes of shares and/or;
(b) a limited dividend payable to the holders of a particular
class or classes of shares to the exclusion of the holders of the
remaining class or classes of shares.
For the purposes hereof, the holders of a particular class or classes
of shares to receive a limited dividend shall be determined from time to time
by the Board of Directors whose determination shall be conclusive and binding
upon the company and the holders of shares of every class.
3. Subject to the rights, privileges, restrictions and conditions
attached to any preferred shares of the Company, the holders of all classes of
registered and/or bearer shares shall be entitled to share equally in the
assets of the Corporation remaining upon liquidation of the Corporation after
the creditors of the Corporation have been satisfied.
Witness: /s/ Winifred Muncee
-------------------
Winifred Muncee
<PAGE> 1
EXHIBIT 3.6
INDEX
ARTICLES OF ASSOCIATION
OF
NASSAU SPIRIT INC.
1.00 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Definition . . . . . . . . . . . . . . . . . . . . . 1
2.00 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . 1
2.01 Corporate Seal . . . . . . . . . . . . . . . . . . . 1
2.02 Financial Year . . . . . . . . . . . . . . . . . . . 1
2.03 Registered Agent . . . . . . . . . . . . . . . . . . 1
2.04 Execution of Instruments . . . . . . . . . . . . . . 1
2.05 Bank Arrangements . . . . . . . . . . . . . . . . . 2
2.06 Voting Rights in Other Bodies Corporate . . . . . . 2
3.00 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.01 Number . . . . . . . . . . . . . . . . . . . . . . . 2
3.02 Vacancies . . . . . . . . . . . . . . . . . . . . . 2
3.03 Election . . . . . . . . . . . . . . . . . . . . . . 2
3.04 Organization . . . . . . . . . . . . . . . . . . . . 2
3.05 Quorum . . . . . . . . . . . . . . . . . . . . . . . 2
3.06 Calling of Meetings . . . . . . . . . . . . . . . . 2
3.07 Notice of Meeting . . . . . . . . . . . . . . . . . 2
3.08 Adjourned Meeting . . . . . . . . . . . . . . . . . 3
3.09 Casting Vote . . . . . . . . . . . . . . . . . . . . 3
3.10 Compensation . . . . . . . . . . . . . . . . . . . . 3
3.11 Office Vacated . . . . . . . . . . . . . . . . . . . 3
3.12 Alternate Directors . . . . . . . . . . . . . . . . 3
3.13 Director's Proxy . . . . . . . . . . . . . . . . . . 3
3.14 Sole Director . . . . . . . . . . . . . . . . . . . 3
3.15 Committee Proceedings . . . . . . . . . . . . . . . 4
3.16 Acts Valid . . . . . . . . . . . . . . . . . . . . . 4
3.17 Body Corporate Director . . . . . . . . . . . . . . 4
4.00 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.01 Appointment of Officers . . . . . . . . . . . . . . 4
4.02 Chairman of the Board . . . . . . . . . . . . . . . 4
4.03 Managing Director . . . . . . . . . . . . . . . . . 4
4.04 President . . . . . . . . . . . . . . . . . . . . . 4
4.05 Vice President . . . . . . . . . . . . . . . . . . . 4
4.06 Secretary . . . . . . . . . . . . . . . . . . . . . 4
4.07 Treasurer . . . . . . . . . . . . . . . . . . . . . 4
4.08 Other Officers . . . . . . . . . . . . . . . . . . . 5
4.09 Variation of Powers and Duties . . . . . . . . . . . 5
4.10 Term of Office . . . . . . . . . . . . . . . . . . . 5
4.11 Remuneration . . . . . . . . . . . . . . . . . . . . 5
4.12 Conflict of Interest . . . . . . . . . . . . . . . . 5
4.13 Agents and Attorneys . . . . . . . . . . . . . . . . 5
4.14 Bonds . . . . . . . . . . . . . . . . . . . . . . . 5
5.00 MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.01 Notice of Meetings . . . . . . . . . . . . . . . . . 5
5.02 Voting, Proxy and Record Date . . . . . . . . . . . 5
5.03 Chairman and Secretary . . . . . . . . . . . . . . . 5
5.04 Persons Entitled to Be Present . . . . . . . . . . . 6
5.05 Quorum . . . . . . . . . . . . . . . . . . . . . . . 6
5.06 Casting Vote . . . . . . . . . . . . . . . . . . . . 6
5.07 Show of Hands . . . . . . . . . . . . . . . . . . . 6
5.08 Ballots . . . . . . . . . . . . . . . . . . . . . . 6
5.09 Admission or Rejection of a Vote . . . . . . . . . . 6
5.10 One Shareholder . . . . . . . . . . . . . . . . . . 6
5.11 Merger or Consolidation . . . . . . . . . . . . . . 6
5.12 Notice on Transmission . . . . . . . . . . . . . . . 6
5.13 Committee . . . . . . . . . . . . . . . . . . . . . 7
6.00 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.01 Certificates . . . . . . . . . . . . . . . . . . . . 7
6.02 Allotment and Issue . . . . . . . . . . . . . . . . 7
6.03 Transfer and Transmission of Shares . . . . . . . . 7
6.04 Lien on Shares . . . . . . . . . . . . . . . . . . . 7
6.05 Lost or Destroyed Certificates . . . . . . . . . . . 8
7.00 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.01 Record Date . . . . . . . . . . . . . . . . . . . . 8
7.02 Unclaimed Dividends . . . . . . . . . . . . . . . . 8
7.03 Dividends on Transmission . . . . . . . . . . . . . 8
7.04 Dividend in Specie . . . . . . . . . . . . . . . . . 8
7.05 Payment . . . . . . . . . . . . . . . . . . . . . . 8
7.06 Joint Holders . . . . . . . . . . . . . . . . . . . 9
8.00 BORROWING AND SECURITIES . . . . . . . . . . . . . . . . . . 9
8.01 Borrowing Power . . . . . . . . . . . . . . . . . . 9
8.02 Delegation . . . . . . . . . . . . . . . . . . . . . 9
9.00 THE PROTECTION OF DIRECTORS, OFFICERS AND OTHERS . . . . . . 9
9.01 Indemnity . . . . . . . . . . . . . . . . . . . . . 9
9.02 Insurance . . . . . . . . . . . . . . . . . . . . . 9
10.00 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 9
10.01 Reserve . . . . . . . . . . . . . . . . . . . . . . 9
10.02 Authentication . . . . . . . . . . . . . . . . . . . 10
10.03 Corporate Seal . . . . . . . . . . . . . . . . . . . 10
10.04 Computation of Time . . . . . . . . . . . . . . . . 10
10.05 Amendments . . . . . . . . . . . . . . . . . . . . . 10
<PAGE> 2
ARTICLES OF ASSOCIATION
OF
NASSAU SPIRIT, INC.
THE INTERNATIONAL BUSINESS COMPANIES ACT
1.00 INTERPRETATION
1.01 DEFINITION
In these Articles and all Resolutions of the Board and Members, unless
the context otherwise requires:
A. "Act" means The International Business Companies Act, 1989 (no.
2 of 1990), and any statute that may be substituted therefore, as from time to
time amended and any regulations made thereunder;
B. "Appoint" includes "Elect" and vice versa;
C. "Articles" means these Articles of Association as originally
framed or as from time to time amended;
D. "Board" means the Board of Directors of the company or the
Directors, or alternate directors of the Company present at a meeting of
Directors at which a quorum is present;
E. "Director(s)" means the Members of the Board, including
alternate directors and where the context so requires, persons acting on behalf
of the Board by order of and with the authority of the Board;
F. "Memorandum of Association" means the original Memorandum of
Association of the Company and any amendments thereto;
G. The "Office" means the registered office for the time being;
H. "Person" includes an individual, a corporation, a trust, the
estate of a deceased individual, a partnership, or an unincorporated
association of persons;
I. "Secretary" shall include an assistant secretary and any person
appointed to perform the duties of Secretary temporarily;
J. "Signing Officer" means, in relation to any instrument, any
person authorized to sign the same on behalf of the company by virtue of Clause
2.04 or by a resolution passed pursuant thereto;
K. "Written" or any synonym thereof includes words typewritten,
printed, painted, engraved, lithographed, photographed or represented or
reproduced by any mode of reproducing words in a visible and permanent or
semi-permanent form, including telex, facsimile, telegram, cable or other form
of writing produced by electronic communication.
Save as aforesaid, words and expressions defined in the Act have the
same meanings when used herein; and words importing the singular number include
the plural and vice versa; words importing gender include the masculine,
feminine and neuter genders.
2.00 ADMINISTRATION
2.01 CORPORATE SEAL
The corporate seal of the company shall be in the form as determined by
the Board from time to time.
2.02 FINANCIAL YEAR
The financial year of the company shall be determined by the Board from
time to time.
2.03 REGISTERED AGENT
The Board may change the registered agent from time to time which
change will be notified to the Registrar.
2.04 EXECUTION OF INSTRUMENTS
a. Any officer or any Director may sign certificates and
similar instruments (other than share certificates) on the company's behalf
with respect to any factual matters relating to the company's business and
affairs, including certificates certifying copies of the Memorandum of
Association, the Articles, resolutions and minutes of meetings of the Members
and the Board.
b. Deeds, transfers, assignments, contracts, obligations,
and other instruments of any nature may be signed on behalf of the company
by one person who is either a Director and/or Officer of the company.
1
<PAGE> 3
c. Security certificates (including share certificates)
shall be signed by at least one Director or Officer of the company or
by or on behalf of a registrar, transfer agent or branch transfer agent of the
company or by a trustee who certifies it in accordance with a trust indenture.
Any signature required on a security certificate (including share certificates)
may be printed or otherwise mechanically reproduced on it.
In addition, the Board may from time to time direct the person or
persons by whom any particular instruments or class of instruments may or shall
be signed. Any Signing Officer or Director may have affixed the company seal
to any instrument requiring the same.
2.05 BANK ARRANGEMENTS
The banking business of the company including, without limitation, the
borrowing of money and the giving of security therefore, shall be transacted
with such banks, trust companies or other body corporate or organization as may
from time to time be designated by or under the authority of the Board. Such
banking business or any part thereof shall be transacted under such agreements,
instructions and delegations of power as the Board may from time to time
prescribe or authorize.
2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE
The Signing Officers of the company may execute and deliver proxies and
arrange for the issuance of voting certificates or other evidence of the right
to exercise the voting rights attaching to any securities held by the company.
Such instruments, certificate or other evidence shall be in favor of such
person or persons as may be determined by the Officer or Officers executing
such proxies or arranging for the issuance of voting certificates or such other
evidence of the rights to exercise such voting rights. In addition, the Board,
or failing the Board, the Signing Officers of the company, may from time to
time direct the manner in which and the person or persons by whom any
particular voting rights or class of voting rights may or shall be exercised.
3.00 DIRECTORS
3.01 NUMBER
The Board shall consist of not less than three Directors unless the
shares of the company are owned by less than three shareholders, in which case
the number of Directors may equal the number of shareholders.
3.02 VACANCIES
Vacancies in the Board may be filled either by the remaining Directors
then in office, even though less than a quorum, or by the members.
3.03 ELECTION
In addition to election as provided under the Act, Directors are also
hereby empowered to elect other Directors for such term as such Directors may
determine.
3.04 ORGANIZATION
At each meeting of the Board, the Chairman of the Board, or, in the
absence of the Chairman of the Board, the President, or in the absence of both,
a Chairman chosen by the Directors present shall preside, and the Secretary, of
the company, or, in the absence of the Secretary, a person appointed by the
Chairman of the meeting shall act as Secretary. The Board may adopt such rules
as they shall deem proper, not inconsistent with the Act or these Articles, for
the conduct of their meetings and the management of the affairs of the company.
At all meetings of the Board, business shall be transacted in such order as the
Board may determine.
3.05 QUORUM
The quorum shall be the quorum as set by the Act. If a quorum is
present at the opening of any meeting of Directors, the Directors present may
proceed with the business of the meeting notwithstanding that a quorum is not
present throughout the meeting.
3.06 CALLING OF MEETINGS
Meetings of the Board shall be held from time to time at such time and
at such place as the Board, the Chairman of the Board, the Managing Director,
the President or any two Directors may determine. Provided always that should
more than one of the above named call a meeting at or for substantially the
same time there shall be held only one meeting and such meeting shall occur at
the time and place determined by, in order of priority, the Board, the
Chairman, the President or the Managing Director.
3.07 NOTICE OF MEETING
A notice of a meeting of the Board need not specify the purpose of or
the business to be transacted at the meeting, except where the Act requires
such purpose or business to be specified.
2
<PAGE> 4
3.08 ADJOURNED MEETING
Notice of an adjourned meeting of the Board is not required if the time
and place of the adjourned meeting is announced at the original meeting.
3.09 CASTING VOTE
At all meetings of the Board each Director, including the Chairman,
shall be entitled to vote on every question, except as restricted by the Act,
and in case of an equality of votes the Chairman of the meeting shall be
entitled to a second or casting vote.
3.10 COMPENSATION
The Board from time to time, in its discretion, fix the amount, if any,
which shall be payable to members of the Board for attendance at meetings of
the Board or of any committee and for services rendered to the company. The
Directors shall be entitled to be reimbursed for traveling and other expenses
properly incurred by them in attending meetings of the Board or of any
committee thereof.
3.11 OFFICE VACATED
The office of a Director shall be vacated and shall be deemed to be
vacated in any of the following events, namely:
a) if he becomes prohibited by law from acting as a Director;
b) if he resigns by writing left at the office;
c) if he becomes of unsound mind or be judged incapable of
managing his own affairs; or
d) if he be requested in writing by members holding a majority in
value of the issued share capital of the company to resign.
3.12 ALTERNATE DIRECTORS
a) Any Director may at any time by writing and deposited at the
Office appoint any person approved by the Board to be his alternate Director
either for any particular meeting or for such period of time (not exceeding his
own period of office) as such writing shall stipulate and may in like manner at
any time terminate such appointment.
b) The appointment of an alternate Director shall ipso facto
determine on the happening of any event which if he were a Director would render
him legally disqualified from acting as a Director. His appointment shall also
determine ipso facto if his appointor cease for any reason to be a Director.
c) An alternate Director shall (subject to his giving to the
Company an address at which notices may be served upon him) be entitled to
receive notices of meetings of the Board and to attend and vote as a Director at
any such meeting at which the Director appointing him is not personally present
and generally at such meeting to perform all functions generally of his
appointor as a Director and in the event of his having express authority in
writing from his appointor he shall be entitled to sign any resolution. An
alternate Director shall not (save as aforesaid) have power to act as a Director
nor shall he be deemed to be a Director for the purposes of this presents.
d) An alternate Director may be repaid by the Company such
expenses as might properly be repaid to him if he were a Director and he shall
be entitled to receive from the Company such proportion, if any, of the
remuneration otherwise payable to his appointor has such appointor may by notice
in writing to the Company from time to time direct, but save as aforesaid he
shall not in respect of such appointment be entitled to receive any remuneration
from the Company.
3.13 DIRECTOR'S PROXY
A Director who is unable to attend any meeting of the Board and has not
appointed an alternate Director may authorize any other Director to vote for
him at that meeting, and in that event the Director so authorized shall have a
vote for each Director by whom he is so authorized in addition to his own vote.
Any such authority must be in writing and produced at the meeting at which the
same is to be used, and be left with the Secretary for filing.
3.14 SOLE DIRECTOR
If the Company shall have only one Director the provisions herein
contained for meetings of the Board shall not apply but such sole Director
shall have full power to represent and act for the Company in all matters as
are not by the Act or the Memorandum or these Articles required to be exercised
by the members of the Company and in lieu of minutes of the meeting shall
record in writing and sign a note or memorandum of all matters requiring a
resolution of Directors. Such a note or memorandum shall constitute sufficient
evidence of such resolution for all purposes.
3
<PAGE> 5
3.15 COMMITTEE PROCEEDINGS
The meetings and proceedings of any committee consisting of two or more
Directors shall be governed by the provisions of these presents regulating the
meetings and proceedings of the Board so far as the same are applicable and are
not superseded by any regulations made by the Board.
3.16 ACTS VALID
All acts done by any meeting of the Board, or of a committee of the
Board, or by any person acting as a Director, shall as regards all persons
dealing in good faith with the Company, notwithstanding that there was some
defect in the appointment or continuance in office of any such Director, or
person acting as aforesaid, or that they or any of them were disqualified or
had vacated office, or were not entitled to vote, be as valid as if every such
person had been duly appointed and was qualified and had continued to be a
Director and had been entitled to vote.
3.17 BODY CORPORATE DIRECTOR
Any Director which is a body corporate may appoint any person its duly
authorized representative for the purpose of representing it at meetings of the
Board or with respect to written consents.
4.00 OFFICERS
4.01 APPOINTMENT OF OFFICERS
The Board may from time to time appoint a chairman of the Board, a
Managing Director, a President, one or more Vice Presidents, a Secretary, a
Treasurer and such other officers as the Board may determine, including one or
more assistants to any of the Officers so appointed. The Board may specify the
duties of, and delegate to such Officers power to manage the business and
affairs of the Company. Except for a Managing Director and a Chairman of the
Board, an Officer may need not be a Director and one person may hold more than
one office.
4.02 CHAIRMAN OF THE BOARD
The Board may from time to time a Chairman of the Board who shall be a
Director. If appointed, the Board may assign to him any of the powers and
duties that are by any provision of these Articles assigned to the Managing
Director or to the President; and he shall, subject to the provisions of the
Act, have such other powers and duties as the Board may specify. He shall
preside at all meetings of shareholders and Directors at which he is present.
During the absence or disability of the Chairman of the Board, his duties shall
be performed and his powers exercised by the Managing Director, if any, or by
the President if there is no Managing Director.
4.03 MANAGING DIRECTOR
The Board may from time to time appoint a Managing Director. If
appointed, he shall have, subject to the authority of the Board, general
supervision of the business and affairs of the company; and he shall, subject
to the provisions of the Act, have such other powers and duties as the Board
may specify. During the absence or disability of the President or if no
President has been appointed, the Managing Director shall also have the powers
and duties of that office.
4.04 PRESIDENT
If appointed, the President shall subject to the discretion of the
Board, be the chief executive officer, and he shall have such powers and duties
as the Board may specify. During the absence or disability of the Managing
Director, or if no Managing Director has been appointed, the President shall
also have the powers and duties of that office.
4.05 VICE PRESIDENT
A Vice President, if appointed, shall have such powers and duties as
the Board or the chief executive officer may specify.
4.06 SECRETARY
The Secretary, if appointed, shall attend and be the Secretary of all
meetings of the Board, shareholders and committees of the Board and shall enter
or cause to be entered in records kept for the purpose, minutes of all
proceedings thereat; he shall give or cause to be given, as and when
instructed, all notices to shareholders, Directors, officers, auditors and
members of committees of the Board; he shall be the custodian of the stamp or
mechanical device generally used for affixing the company seal and of all
books, paper, records, documents and instruments belonging to the company
except when some other officer or agent has been appointed for that purpose;
and he shall have such other powers and duties as the Board or the chief
executive officer may specify.
4.07 TREASURER
The Treasurer, if appointed, shall keep proper accounting records in
compliance with the Act and shall be responsible for the deposit of money, the
safe keeping of securities and the disbursement of funds of the company; he
shall render to the Board, whenever required, an account of all his
transactions as treasurer and of the financial position of the company; and he
shall have such other powers and duties as the Board or the chief executive
officer may specify.
4
<PAGE> 6
4.08 OTHER OFFICERS
The power and duties of all other officers shall be such as the terms
of their engagement call for or as the Board or the chief executive officer may
specify. Any of the powers and duties of an officer to whom an assistant has
been appointed by be exercised and performed by such assistant, unless the
Board or the chief executive officer otherwise directs.
4.09 VARIATION OF POWERS AND DUTIES
The Board may from time to time and subject to the provisions of the
Act, vary, add to or limit the powers and duties of any officer.
4.10 TERM OF OFFICE
The Board, in its discretion, may remove any officer of the company,
without prejudice to such officer's right under any employment contract.
Otherwise each officer appointed by the Board shall hold office until his
successor is appointed.
4.11 REMUNERATION
Terms of employment and the remuneration of officers appointed by the
Board shall be settled by it from time to time. The fact that any officer is a
director or shareholder of the company shall not disqualify him from receiving
such remuneration as an officer as may be determined.
4.12 CONFLICT OF INTEREST
An officer shall disclose his interest in any material contract or
proposed material contract with the company in accordance with the terms of the
Act.
4.13 AGENTS AND ATTORNEYS
The Board shall have the power from time to time to appoint agents or
attorneys in fact for the company with such powers (including the power of
substitution) as the Board shall deem appropriate.
4.14 BONDS
The Board shall have the power to the extent permitted by law, to
require any officer, employee, agent or attorney in fact of the company to give
bond for the faithful discharge of his duties in such form and with such surety
or sureties as the Board may deem advisable.
5.00 MEMBERS
5.01 NOTICE OF MEETINGS
Notice of every meeting of members shall be given personally or sent by
courier service, mail, telex, cable or facsimile. If the company shall issue
any class of bearer shares, notice of all meetings shall be given in the manner
provided in the Memorandum of Association.
5.02 VOTING, PROXY AND RECORD DATE
At any meeting of members, each member entitled to vote thereat may so
vote either in person or by proxy appointed by instrument in writing (including
telex, cable, or facsimile). The proxy nominee shall present proof of identity
satisfactory to the Secretary of the meeting.
With respect to holders of registered shares entitled to vote at the
meeting, such shareholders shall present thereat proof of identity satisfactory
to the Secretary of the meeting. With respect to holders of bearer shares, the
right to vote at the meeting shall be proven by presenting the certificate or
certificates representing such shares to the Secretary of the meeting for
inspection unless such requirement is waived by the Chairman of the meeting.
If the board shall fail to fix a record date then the record date for
the determination of the members entitled to receive notice of the meeting
shall be at the close of business on the date immediately preceding the day on
which the notice was sent or, if no notice is sent, shall be the day on which
the meeting is held.
5.03 CHAIRMAN AND SECRETARY
The Chairman of any meeting of members shall be the Chairman or, in his
absence, the President or, in his absence, the Managing Director or, in his
absence, a Vice President. If no such officer is present within 15 minutes
from the time fixed for holding the meeting, the persons present and entitled
to vote shall choose one of their number to be Chairman. If the Secretary of
the corporation is absent, the Chairman shall appoint some person who need not
be a shareholder, to act as Secretary of the meeting.
5
<PAGE> 7
5.04 PERSONS ENTITLED TO BE PRESENT
The only persons entitled to be present at a meeting of members shall
be those entitled to vote thereat and the Directors of the company and others
who, although not entitled to vote, are entitled or required under any
provision of the Act to be present at the meeting. Any other person may be
admitted only on the invitation of the Chairman of the meeting or with the
consent of the members.
5.05 QUORUM
A quorum for the transaction of business at any meeting of members
shall be that stipulated by the Act. If a quorum is present at the opening at
any meeting of members, the members present or represented may proceed with the
business of the meeting notwithstanding that a quorum is not present throughout
the meeting.
5.06 CASTING VOTE
In any case of an equality of votes either upon a show of hands or upon
a poll, the Chairman of the meeting shall be entitled to a second or casting
vote.
5.07 SHOW OF HANDS
Subject to the provisions of the Act, any question at a meeting of
members shall be decided by a show of hands, unless a ballot thereon is
required or demanded as hereinafter provided. Upon a show of hands every
person who is present and entitled to vote shall have one vote. Whenever a
vote by show of hands shall have been taken upon a question, unless a ballot
thereon is so required or demanded, a declaration by the chairman of the
meeting that the vote upon the question has been carried or carried by a
particular majority or not carried, an entry to that effect in the minutes of
the meeting shall be prima facie evidence of the fact without proof of the
number or proportion of the vote recorded in favor or against any resolution or
other proceeding in respect of the said questions, and the result of the vote
so taken shall be the decision of the members upon the said question.
5.08 BALLOTS
On any question proposed for consideration at the meeting of members,
any member or proxy holder entitled to vote at the meeting may require or
demand a ballot either before or on the declaration of the result of any vote
by show of hands. A ballot so required or demanded shall be taken in such
manner as the Chairman shall direct. A requirement or demand for a ballot may
be withdrawn at any time prior to the taking of the ballot. If a ballot is
taken, each person present shall be entitled in respect of the shares which he
is entitled to vote at the meeting upon the question, to that number of votes
as provided by the Act or the Memorandum of Association, and the result of the
ballot so taken shall be the decision of the members on the said question. The
demand of a ballot shall not prevent the continuance of a meeting for the
transaction of any business other than the question on which the ballot has
been demanded and questions affected thereby.
5.09 ADMISSION OR REJECTION OF A VOTE
In case of any dispute concerning the admission or rejection of a vote,
the Chairman shall determine the same and such determination made in good faith
shall be final and conclusive. No such objection shall be raised except at the
meeting or adjourned meeting at which the vote objected to is or may be given
or tendered.
5.10 ONE SHAREHOLDER
Where the company has only one member or only one holder of any class
or series of shares, the member present in person or by proxy constitutes a
meeting.
5.11 MERGER OR CONSOLIDATION
When considering a plan of merger or consolidation, members holding
outstanding shares of a class or series of shares shall be entitled to vote on
the merger or consolidation as a class or series.
5.12 NOTICE ON TRANSMISSION
A person entitled to a share in consequence of the death or bankruptcy
of a member, upon supplying to the Company such evidence as the Board may
reasonably require to show his title to the share, and upon supplying also an
address for the service of notices, shall be entitled to have served upon him
at such address any notice or document to which the member but for his death or
bankruptcy would be entitled, and such service shall for all purposes be deemed
a sufficient service of such notice or document on all persons interested
(whether jointly with or as claiming through or under him) in the share. Save
as aforesaid any notice or document delivered or sent by post to or left at the
registered address of any member in pursuance of these presents shall
notwithstanding that such member be then dead or bankrupt, and whether or not
the Company had notice of his death or bankruptcy, be deemed to have been duly
served in respect of any share registered in the name of such member as sole or
joint holder.
6
<PAGE> 8
5.13 COMMITTEE
A member of unsound mind, or in respect of whom an order has been made
by any court having jurisdiction, may vote, whether on a show of hands or on a
poll by his committee, curator bonis or other person in the nature of a
committee or curatory bonis appointed by such court, provided that such
evidence as the Board may require of the authority of the person claiming to
vote shall have been deposited at the Office not less than forty eight hours
before the time appointed for holding the meeting or adjourned meeting or for
the taking of the poll at which it is desired to vote.
6.00 SHARES
6.01 CERTIFICATES
The company shall issue certificates in respect of its shares and every
holder of one or more shares of the company shall be entitled, at his option,
to a share certificate, or to a non-transferable written acknowledgment of his
right to obtain a share certificate. The certificate representing such shares
shall be in such form and content as approved by the Board.
The signatures of the signing officers to the share certificates may be
printed or mechanically produced in facsimile upon such share certificate and
every such facsimile signature shall for all purposes by deemed to be the
signature of the officer whose signature it reproduces and shall be binding
upon the company.
6.02 ALLOTMENT AND ISSUE
The shares shall be under the control of the Board which may, from time
to time, allot and issue or grant options to purchase the whole or any part of
the authorized and the unissued shares the company at such time and to such
persons and for such consideration as the Board shall determine.
No holder of any class of shares of the capital of the company shall be
entitled as of right to subscribe for, purchase or receive any part of any new
or additional issue of shares of any class, whether now or hereafter authorized
or any bonds, debentures or other securities convertible into shares of any
class.
6.03 TRANSFER AND TRANSMISSION OF SHARES
a) The instrument of transfer of any shares in the
company shall be executed by the transferor and the transferor shall be deemed
to remain the holder of such shares until the name of the transferee is entered
in the share register in respect thereof.
b) Subject to the provisions of the Act, and the
provisions of these Articles, no transfer of any share shall be recorded nor
shall the same be valid or permitted to be entered in the share registered
unless or until the share certificate has been surrendered and canceled by one
of the officers of the company.
c) Shares in the company may be transferred in any form
the directors may think fit to register.
d) The Board may decline to register a transfer of any
shares on which the company has a lien and they may also in their absolute
discretion decline to register a transfer to any person of whom they do not
approve. The Board may also decline to register any transfer of shares without
assigning any reason therefore. However, a personal representative of a
deceased shareholder shall be entitled to be registered as a shareholder.
e) In case of the death of a shareholder the survivors or
survivor where the deceased was a joint holder, and the executor or
administrators of the deceased where he was sole or only surviving holder,
shall be the only person recognized by the Company as having any title to his
interest in the shares.
f) Any person becoming entitled to a share in consequence
of the death or bankruptcy of a member may, subject as hereinafter provided,
either by registered himself as holder of the share upon giving to the Company
notice in writing of his desire, or transfer such share to some other person.
All the limitations, restrictions and provisions of these presents relating to
the right to transfer and the registration of transfer of shares shall be
applicable to any such notice or transfer as aforesaid as if the death or
bankruptcy of the member had not occurred and the notice or transfer were a
transfer executed by such member.
Every instrument of transfer shall be left at the Office for the
appropriate registration, accompanied by the certificate for the shares to be
transferred and such other evidence as the Board may require to prove the title
of the transferor or his right to transfer the shares.
6.04 LIEN ON SHARES
a) The company shall have a first and paramount lien upon
all the shares owned by a member for his debts, liabilities and engagements
solely or jointly with any other person to or with the company whether the
period for the payment, fulfillment or discharge thereof shall have actually
arrived or not. Such lien shall extend to all dividends from time to time
declared in respect of such shares.
7
<PAGE> 9
b) For the purpose of enforcing such lien the Board may
sell the shares subject thereto in such manner as they shall think fit; but no
sale shall be made until notice in writing of the intention to sell shall have
been served on such member or his legal representatives, and default shall have
been made by him or them, in payment, fulfillment or discharge of such debts,
liability or engagements within seven days after such notice.
c) The net proceeds of any such sale shall be applied in
or towards satisfaction of such debts, liabilities or engagements and the
balance (if any) paid to such member or his legal representative.
d) Upon any sale for enforcing a lien in purported
exercise of the power herein before given, the Board may cause the purchaser's
name to be entered into the register in respect of the shares sold and the
purchaser shall not be bound to see to the regularity of the proceedings or to
the application of the purchase money and after his name has been entered in
the register in respect of such shares, the validity of the sale shall not be
impeached by any person and the remedy of any person aggrieved by the sale
shall be in damage only against the company exclusively.
6.05 LOST OR DESTROYED CERTIFICATES
No certificates for shares or stock of the company shall be issued in
place of any certificate alleged to have been lost, or stolen or destroyed,
except upon production of such evidence of the loss, theft or destruction and
upon indemnification of the company and its agents to such extent and in such
manner as the Board may require.
7.00 DIVIDENDS
7.01 RECORD DATE
The Board may fix in advance a date as a record date for the
determination of the persons entitled to receive payment of a dividend or the
issue of any warrant or any evidence of a right to subscribe for a security of
the company. Where no record date is fixed in advance as aforesaid, the record
date for the determination of the persons entitled to receive payment of any
dividend or to receive the right to subscribe for securities of the company
shall be at the close of business on the day on which the resolution relating
to such dividend or right to subscribe is passed by the Board.
7.02 UNCLAIMED DIVIDENDS
Any dividends unclaimed after the period of six years from the date on
which the same has been declared to be payable shall be forfeited and shall
revert to the company.
7.03 DIVIDENDS ON TRANSMISSION
The Directors may retain the dividends payable upon shares in respect
of which any person is by virtue of transmission of shares entitled to become a
member, or which any person is, by way of transmission, entitled to transfer
until such person shall become a member in respect of such shares or shall
transfer the same.
7.04 DIVIDEND IN SPECIE
The Company may, upon the recommendation of the Board, by resolution
direct payment of a dividend in whole or in part by the distribution of
specific assets, and in particular of paid up shares or debentures of any other
company or in any one or more such ways; and the Board shall give effect to
such resolution, and where any difficulty arises in regard to such
distribution, the Board may settle the same as they think expedient and in
particular may issue factional certificates and fix the value for distribution
of such specific assets or any part thereof and may determine that cash payment
shall be made to any member upon the footing of the value so fixed in order to
adjust the rights of all parties and may vest such specific assets in trustees
as may seem expedient to the Board.
7.05 PAYMENT
Any dividend or other moneys payable in cash on or in respect of a
share may be paid by check or warrant sent through the post to the registered
address of the members or person entitled thereto, or, if two or more persons
are registered as joint holders of the share or are entitled thereto in
consequence of the death or bankruptcy of the holder, to any one of such
persons or to such person and such address as such person or persons may be
writing direct. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent or to such person as the holder or joint
holders or person or persons entitled to the share in consequence of the death
or bankruptcy of the holder may direct and payment of the cheque if purporting
to be paid by the bank on which it is drawn shall be a good discharge to the
Company. Every such cheque or warrant shall be sent at the risk of the person
entitled to the money represented thereby.
8
<PAGE> 10
7.06 JOINT HOLDERS
If two or more persons are registered as joint holders of any share, or
are entitled jointly to a share in consequence of the death or bankruptcy of
the holder, any one of them may give effectual receipts for any dividend or
other moneys payable on or in respect of the share.
8.00 BORROWING AND SECURITIES
8.01 BORROWING POWER
Without limiting the borrowing power or borrowing powers of the company
as set forth in the Act, the Board may from time to time on behalf of the
company, without authorization of the members:
a) Borrow money upon the credit of the company in such
amounts and on such terms as may be deemed expedient by obtaining loans or
advances or by way of overdraft or otherwise;
b) Issue, reissue, sell or pledge bonds, debentures,
mortgages, notes or other evidence of indebtedness or guarantee of the company,
whether secured or unsecured for such sums and at such prices as may be deemed
expedient;
c) to the extent permitted by the Act, give a guarantee
on behalf of the company to secure the performance of any present or future
indebtedness, liability or obligation of any person;
d) to charge, mortgage, hypothecate, pledge or otherwise
create a security interest in all or any present and future property, real and
personal, immovable and movable, of the company, including its undertaking and
rights, to secure any bonds, debentures, mortgages, notes or other evidence of
indebtedness or guarantee or any other indebtedness, liability or obligation of
the company, present or future;
Nothing in this section limits or restricts the borrowing of money by
the company on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the company.
8.02 DELEGATION
The Board may from time to time delegate to one or more of the
directors and officers of the company or such other person or persons as may be
designated by the Board all or any of the powers conferred on the Board by
article will determine at the time of each such delegation.
9.00 THE PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
9.01 INDEMNITY
Subject to the limitations contained in the Act, the company shall
indemnify a director or officer, a former director or officer, or a person who
acts or acted at the company's request as a director or officer or in any other
capacity of a body corporate, a partnership, joint venture, trust or other
enterprise of which the company is or was a shareholder or creditor or in which
it was a participant or held an interest (or a person who undertakes or has
undertaken any liability on behalf of the company or any such body corporate,
partnership, joint venture, trust or other enterprise) and his heirs and legal
representatives, against all costs, charges, fines, judgments and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal, or administrative action or
proceeding to which he is a party by reason of his having acted in a capacity
as hereinbefore described.
9.02 INSURANCE
Subject to the limitations contained in the Act, the company may
purchase and maintain insurance for the benefit of those persons described in
clause 9.01 above, against any such liability incurred by him, as the Board may
from time to time determine.
10.00 MISCELLANEOUS PROVISIONS
10.01 RESERVE
The Board may from time to time set aside out of the profits of the
Company and carry to reserve such sums as they think proper which, at the
discretion of the Board, shall be applicable for any purpose to which the
profits of the company may properly be applied, and pending such application
may either be employed in the business of the Company or be invested. The
Board may divide the reserve into such special funds as they think fit, and may
consolidate into one fund any special funds or parts of any special funds into
which the reserve may have been divided. The Board may also without placing
the same to reserve carry forward any profits.
9
<PAGE> 11
10.02 AUTHENTICATION
A document purporting to be a copy of a resolution of the Board or any
extract from the minutes of a meeting of the Board which is certified as such
in accordance with the Act shall be conclusive evidence in favor of all persons
dealing with the company upon the faith thereof that such resolution has been
duly passed or, as the case may be, that such extract is a true and accurate
record of a duly constituted meeting of the Board.
10.03 CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the company
and such other information as the Board may from time to time determine. In
lieu of such corporate seal, when so authorized by the Board, a facsimile
thereof may be impressed or affixed or reproduced.
10.04 COMPUTATION OF TIME
In computing the date when notice must be given under any provision
requiring a specific number of days notice of any meeting or other event, the
date of giving the notice shall be included and the date of meeting or other
event shall be excluded.
10.05 AMENDMENTS
These Articles and/or Memorandum of Association may be amended by a
resolution of the Board.
IN WITNESS WHEREOF, we have hereunto subscribed our names this ___ day
of February, 1990.
Subscribers Address Signatures
- ----------- ------- ----------
Arthur F. Coady c/o Oceanic Bank and Trust Ltd. /s/ Arthur F. Coady
PO Box N-8220 Nassau, Bahamas --------------------
Esther E. Gibson c/o Oceanic Bank and Trust Ltd. /s/ Esther E. Gibson
PO Box N-8220 Nassau, Bahamas ---------------------
Signed by the subscribers to the Articles of Association in the
presence of:
Witness /s/ M. Glinton
---------------
Monique Glinton
10
<PAGE> 12
SCHEDULE
TO
EXHIBIT 3.6
Articles of Association not required to be filed because each of them
is substantially identical to Exhibit 3.6 and the material details by which
such Articles of Association differ from Exhibit 3.6 are as follows:
1. Articles of Association, dated February, 1990, of Andros Spirit
Inc.
a. Name of Company: Andros Spirit Inc.
2. Articles of Association, dated February, 1990, of Exuma Spirit
Inc.
a. Name of Company: Exuma Spirit Inc.
b. Signatories: James McDonald, Esther E. Gibson
3. Articles of Association, dated September 18, 1991, of Senang
Spirit Inc.
a. Name of Company: Senang Spirit Inc.
b. Name of Witness: Monique Glinton
11
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEEKAY SHIPPING CORPORATION,
AS ISSUER
VSSI OCEANS INC.,
VSSI ATLANTIC INC.,
VSSI APPIAN INC.,
SENANG SPIRIT INC.,
EXUMA SPIRIT INC.,
NASSAU SPIRIT INC. AND
ANDROS SPIRIT INC.,
as Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
----------------------------------------
FORM OF INDENTURE
Dated as of January [29], 1996
----------------------------------------
____ % FIRST PREFERRED SHIP MORTGAGE NOTES DUE 2008
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS 1
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS OF THE COMPANY AND THE GUARANTORS.......................... 1
ARTICLE ONE
Definitions and Incorporation by Reference
SECTION 1.01. Definitions......................................................... 6
SECTION 1.02. Incorporation by Reference of Trust Indenture Act................... 33
SECTION 1.03. Rules of Construction............................................... 33
ARTICLE TWO
The Securities
SECTION 2.01. Form and Dating..................................................... 34
SECTION 2.02. Execution, Authentication and Denominations......................... 34
SECTION 2.03. Registrar and Paying Agent.......................................... 35
SECTION 2.04. Paying Agent to Hold Money in Trust................................. 36
SECTION 2.05. Transfer and Exchange............................................... 37
SECTION 2.06. Replacement Securities.............................................. 37
SECTION 2.07. Outstanding Securities.............................................. 38
SECTION 2.08. Temporary Securities................................................ 39
SECTION 2.09. Cancellation........................................................ 39
SECTION 2.10. CUSIP Numbers....................................................... 39
SECTION 2.11. Defaulted Interest.................................................. 39
ARTICLE THREE
Redemption
SECTION 3.01. Mandatory Sinking Fund Payments..................................... 40
SECTION 3.02. Satisfaction of Sinking Fund Payments with Securities............... 40
</TABLE>
- ---------------
1 Note: The Table of Contents shall not for any purposes be deemed to be
part of the Indenture.
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 3.03. Mandatory Redemption upon the Loss of a Mortgaged Vessel............ 41
SECTION 3.04. Mandatory Redemption upon the Sale of a Mortgaged Vessel............ 43
SECTION 3.05. Selection of Securities to Be Redeemed.............................. 45
SECTION 3.06. Notice of Redemption................................................ 45
SECTION 3.07. Effect of Notice of Redemption...................................... 46
SECTION 3.08. Deposit of Redemption Price......................................... 46
SECTION 3.09. Payment of Securities Called for Redemption......................... 47
SECTION 3.10. Securities Redeemed in Part......................................... 47
ARTICLE FOUR
Certain Covenants
SECTION 4.01. Payment of Securities............................................... 47
SECTION 4.02. Maintenance of Office or Agency..................................... 48
SECTION 4.03. Limitation on Indebtedness.......................................... 48
SECTION 4.04. Limitation on Restricted Payments................................... 51
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries........................................... 53
SECTION 4.06. Limitation on Issuance of Capital Stock of Restricted
Subsidiaries...................................................... 55
SECTION 4.07. Limitation on Transactions with Shareholders and Affiliates......... 56
SECTION 4.08. Limitation on Liens................................................. 57
SECTION 4.09. Limitation on Asset Sales........................................... 58
SECTION 4.10. Excess Proceeds Offers.............................................. 60
SECTION 4.11. Existence........................................................... 62
SECTION 4.12. Payment of Taxes and Other Claims................................... 62
SECTION 4.13. Maintenance of Properties........................................... 62
SECTION 4.14. Insurance........................................................... 63
SECTION 4.15. Performance of Agreements........................................... 63
SECTION 4.16. Modification of Material Contracts.................................. 63
SECTION 4.17. Limitation on Investments........................................... 64
SECTION 4.18. Notice of Defaults.................................................. 64
SECTION 4.19. Compliance Certificates............................................. 64
SECTION 4.20. Commission Reports and Reports to Holders........................... 65
SECTION 4.21. Waiver of Stay, Extension or Usury Laws............................. 65
SECTION 4.22. Management of Mortgaged Vessels..................................... 65
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 4.23. Repurchase of Securities upon a Change of Control Triggering
Event............................................................. 66
SECTION 4.24. Taxes............................................................... 67
SECTION 4.25. Opinion of Counsel with Respect to Trust Estate..................... 68
ARTICLE FIVE
Covenants After Termination and Release
SECTION 5.01. Termination and Release............................................. 69
SECTION 5.02. Limitation on Liens................................................. 69
SECTION 5.03. Limitation on Indebtedness of Restricted Subsidiaries............... 70
SECTION 5.04. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries........................................... 72
SECTION 5.05. Limitation on Issuance of Capital Stock of Restricted
Subsidiaries...................................................... 74
SECTION 5.06. Limitation on Sales and Leasebacks.................................. 75
ARTICLE SIX
Consolidation, Merger and Sale of Assets
SECTION 6.01. When Company May Merge, Etc......................................... 75
SECTION 6.02. Successor Substituted............................................... 76
ARTICLE SEVEN
Default and Remedies
SECTION 7.01. Events of Default................................................... 77
SECTION 7.02. Acceleration........................................................ 79
SECTION 7.03. Other Remedies...................................................... 80
SECTION 7.04. Waiver of Past Defaults............................................. 80
SECTION 7.05. Control by Majority................................................. 80
SECTION 7.06. Limitation on Suits................................................. 81
SECTION 7.07. Rights of Holders to Receive Payment................................ 82
SECTION 7.08. Collection Suit by Trustee.......................................... 82
SECTION 7.09. Trustee May File Proofs of Claim.................................... 82
SECTION 7.10. Undertaking for Costs............................................... 83
SECTION 7.11. Restoration of Rights and Remedies.................................. 83
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 7.12. Rights and Remedies Cumulative...................................... 84
SECTION 7.13. Delay or Omission Not Waiver........................................ 84
ARTICLE EIGHT
Trustee
SECTION 8.01. General............................................................. 84
SECTION 8.02. Certain Rights of Trustee........................................... 85
SECTION 8.03. Individual Rights of Trustee........................................ 85
SECTION 8.04. Trustee's Disclaimer................................................ 86
SECTION 8.05. Notice of Default................................................... 86
SECTION 8.06. Reports by Trustee to Holders....................................... 86
SECTION 8.07. Compensation and Indemnity.......................................... 86
SECTION 8.08. Replacement of Trustee.............................................. 87
SECTION 8.09. Successor Trustee by Merger, Etc.................................... 88
SECTION 8.10. Eligibility......................................................... 88
SECTION 8.11. Money Held in Trust................................................. 88
SECTION 8.12. Withholding Taxes................................................... 89
ARTICLE NINE
Release of Collateral
SECTION 9.01. Possession, Etc., by Company;
Dispositions Without Release...................................... 89
SECTION 9.02. Releases............................................................ 90
SECTION 9.03. Sale or Disposition of Mortgaged Vessel Asset or Loss of a
Mortgaged Vessel.................................................. 92
SECTION 9.04. Release upon Redemption or Retirement of Securities................. 94
SECTION 9.05. Powers Exercisable Notwithstanding Default.......................... 95
SECTION 9.06. Purchaser Protected................................................. 95
SECTION 9.07. Change of Flag...................................................... 95
SECTION 9.08. Tender of a Qualified Substitute Vessel............................. 101
ARTICLE TEN
Application of Trust Moneys
SECTION 10.01. "Trust Moneys" Defined.............................................. 103
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 10.02. Application of Funds Pursuant to Assignments of Time Charters....... 104
SECTION 10.03. Application of Funds Held in the Investment Account................. 105
SECTION 10.04. Application of Sale or Event of Loss Proceeds....................... 105
SECTION 10.05. Payment During Continuance of an Event of Default Prior to
Acceleration...................................................... 106
SECTION 10.06. Payment Following Acceleration...................................... 106
SECTION 10.07. Withdrawal of Insurance Proceeds.................................... 107
SECTION 10.08. Application as Directed by Other Agreements......................... 108
SECTION 10.09. Application in Absence of Direction................................. 109
SECTION 10.10. Trustee's Right to Perform.......................................... 109
SECTION 10.11. Distribution of Certain Funds....................................... 110
SECTION 10.12. Priority of Applications with Respect to Principal, Premium and
Interest.......................................................... 111
ARTICLE ELEVEN
Discharge of Indenture
SECTION 11.01. Termination of Company's Obligations................................ 111
SECTION 11.02. Defeasance and Discharge of Indenture............................... 112
SECTION 11.03. Defeasance of Certain Obligations................................... 114
SECTION 11.04. Application of Trust Money.......................................... 116
SECTION 11.05. Repayment to Company................................................ 117
SECTION 11.06. Reinstatement....................................................... 117
ARTICLE TWELVE
Amendments, Supplements and Waivers
SECTION 12.01. Without Consent of Holders.......................................... 118
SECTION 12.02. With Consent of Holders............................................. 119
SECTION 12.03. Revocation and Effect of Consent.................................... 120
SECTION 12.04. Notation on or Exchange of Securities............................... 121
SECTION 12.05. Trustee to Sign Amendments, Etc..................................... 121
SECTION 12.06. Conformity with Trust Indenture Act................................. 121
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE THIRTEEN
Miscellaneous
SECTION 13.01. Trust Indenture Act of 1939......................................... 122
SECTION 13.02. Notices............................................................. 122
SECTION 13.03. Certificate and Opinion as to Conditions Precedent.................. 123
SECTION 13.04. Statements Required in Certificate or Opinion....................... 123
SECTION 13.05. Rules by Trustee, Paying Agent or Registrar......................... 124
SECTION 13.06. Payment Date Other Than a Business Day.............................. 124
SECTION 13.07. Governing Law....................................................... 124
SECTION 13.08. No Adverse Interpretation of Other Agreements....................... 124
SECTION 13.09. No Recourse Against Others.......................................... 125
SECTION 13.10. Successors.......................................................... 125
SECTION 13.11. Duplicate Originals................................................. 125
SECTION 13.12. Separability........................................................ 125
SECTION 13.13. Table of Contents, Headings, Etc.................................... 125
SECTION 13.14. Consent to Jurisdiction............................................. 126
SIGNATURES .................................................................... 127
EXHIBIT A Form of Note........................................................ A-1
EXHIBIT B Form of Liberian First Preferred Ship Mortgage...................... B-1
EXHIBIT C Form of Bahamian Statutory Ship Mortgage............................ C-1
EXHIBIT D Form of Bahamian Deed of Covenants.................................. D-1
EXHIBIT E Form of Subsidiary Guarantee........................................ E-1
EXHIBIT F Form of Pledge Agreement............................................ F-1
EXHIBIT G Form of Assignment of Time Charter.................................. G-1
EXHIBIT H Form of Assignment of Insurance..................................... H-1
EXHIBIT I Form of Assignment of Freights and Hires............................ I-1
EXHIBIT J Form of Cash Collateral Account Agreement........................... J-1
EXHIBIT K Form of Qualified Substitute Vessel Charter......................... K-1
EXHIBIT L Form of Assumption Agreement........................................ L-1
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
Page
<S> <C> <C>
EXHIBIT M Contents of Officer's Certificate with Respect to a Tendered
Vessel............................................................ M-1
EXHIBIT N Contents of Opinions of Counsel to Tendered Vessel Owner............ N-1
EXHIBIT O Form of Solvency Certificate........................................ O-1
EXHIBIT P Form of Investment Account Agreement................................ P-1
</TABLE>
vii
<PAGE> 9
INDENTURE, dated as of January [29], 1996, among TEEKAY SHIPPING
CORPORATION, a Liberian corporation, as issuer (the "Company"), and VSSI OCEANS
INC., a Liberian corporation, VSSI ATLANTIC INC., a Liberian corporation, VSSI
APPIAN INC., a Liberian corporation, SENANG SPIRIT INC., a Bahamian corporation,
EXUMA SPIRIT, INC., a Bahamian corporation, NASSAU SPIRIT INC., a Bahamian
corporation, and ANDROS SPIRIT INC., a Bahamian corporation (each a wholly owned
subsidiary of the Company and each, individually, a "Guarantor" and,
collectively, the "Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, a
bank and trust company organized under the New York Banking Law, as Trustee (the
"Trustee").
RECITALS OF THE COMPANY AND THE GUARANTORS
The Company has duly authorized the creation and issuance of up to
$225,000,000 aggregate principal amount of ____ % First Preferred Ship Mortgage
Notes due 2008 (the "Securities"), and to provide therefor and to secure the
Securities the Company and each Guarantor have duly authorized the execution and
delivery of this Indenture. All things necessary to make this Indenture a valid
agreement of the Company and each of the Guarantors, in accordance with its
terms, have been done, and the Company and each of the Guarantors have done all
things necessary to make the Securities, when executed by the Company and
authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company and each of the Guarantors as
hereinafter provided.
The Company and the Guarantors desire by this Indenture, among other
things, (A) to provide for the authentication and delivery of the Securities by
the Trustee to the Holders (as hereinafter defined) against payment therefor,
and (B) unless and until the Termination and Release (as hereinafter defined)
shall have occurred, to provide for the guarantee of the Securities by the
Guarantors and for the deposit, mortgage and pledge by the Company and by the
Guarantors with the Trustee, as part of the Trust Estate (as hereinafter
defined), among other things, of all the right, title and interest of the
Company in and to all of the issued and outstanding shares of capital stock of
the Guarantors and all right, title and interest of each Guarantor in and to its
Mortgaged Vessel (as hereinafter defined) (pursuant to a First Preferred Ship
Mortgage (as hereinafter defined)), its respective Charters (as hereinafter
defined) and all insurance and proceeds thereof relating to its Mortgaged
Vessel, and all payments and other amounts received hereunder or thereunder
(except as otherwise set forth herein) in accordance with the terms hereof, in
trust, as security for the obligations of the Company and the Guarantors to the
Holders of the Securities, for the benefit and security thereof.
This Indenture incorporates and shall be governed by the provisions of the
Trust Indenture Act of 1939, as amended, that are required to be a part of and
to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
<PAGE> 10
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
It is hereby covenanted and agreed by and between the parties hereto as
follows: To secure, prior to the occurrence of the Termination and Release, the
prompt payment of the principal of (and premium, if any) and interest on, and
all other amounts due with respect to, all the Securities from time to time
outstanding hereunder and the performance and observance by the Company and each
of the Guarantors of all the agreements, covenants and provisions contained
herein (including, without limitation, the Trustee's rights to indemnification
hereunder), in the Securities and in the Security Documents (as hereinafter
defined), and for the uses and purposes and subject to the terms and provisions
hereof, and in consideration of the premises and of the covenants herein
contained and of the acceptance of the Securities by the Holders thereof, each
of the Company and the Guarantors has, or has caused to be, granted, conveyed,
mortgaged, sold, assigned, transferred, pledged, deposited and confirmed, and
does hereby grant, convey, mortgage, sell, assign, transfer, pledge, deposit and
confirm, unto the Trustee, its successors and assigns, for the security and
benefit of the Holders from time to time of the Securities, a security interest
in and mortgage lien on all estate, right and interest of the Company and each
of the Guarantors in, to and under the following described property, rights,
interests and privileges (which collectively, including all property hereafter
specifically subjected to the lien of this Indenture by any instrument
supplemental hereto, are herein called the "Trust Estate"), to wit:
GRANTING CLAUSE FIRST
All right, title and interest in and to each Guarantor's Charter,
including any guarantee or security therefor, when entered into from time to
time hereafter, including, without limitation, the right to receive all moneys
due and to become due under each such Charter, all claims for damages arising
out of the breach thereof, the Guarantor's lien as owner under such Charter on
cargoes and freights and subfreights and the right of each Guarantor to
terminate each such Charter, to perform thereunder and to compel performance of
the terms thereof, and all moneys and claims for moneys due and to become due to
each Guarantor.
It is expressly agreed that (i) each Guarantor shall remain liable under
each such Charter to perform all of the obligations assumed by it thereunder,
(ii) the obligations of each Guarantor under each such Charter may be performed
by the Trustee or its nominee or other assignee from the Trustee without
releasing such Guarantor therefrom and (iii) the Trustee shall have no
obligation or liability under any of such Charters by reason of, or arising out
of, the Assignments of Time Charters (as hereinafter defined) and shall not be
obligated to perform any of the obligations of any Guarantor under any Charter,
or to make any payment or to make any inquiry of the sufficiency of any payment
received by it, or to present or file any claim or to take any other action to
collect or enforce any payment assigned thereunder.
2
<PAGE> 11
GRANTING CLAUSE SECOND
All right, title and interest of each Guarantor in and to its Mortgaged
Vessel, together with all of the boilers, engines, machinery, masts, spars,
sails, boats, anchors, cables, chains, rigging, tackle, apparel, furniture,
fittings, equipment and all other appurtenances thereunto appertaining or
belonging, and also any and all additions, improvements and replacements
hereafter made in or to such Mortgaged Vessel, or any part thereof, or in or to
her equipment and appurtenances aforesaid, except and excluding such equipment
placed on the Mortgaged Vessel which under the terms of any contract relating
thereto does not become the property of the Mortgaged Vessel [and any "property
other than a vessel" as that term is used in paragraph (2) of Section 106 of
Chapter 3 of Title 22 of the Liberian Code of Laws of 1956, as amended]
[comparable section under Bahamian law], pursuant to each First Preferred Ship
Mortgage and all claims for damages and all insurance and other proceeds in
respect of the actual or constructive loss of, or the requisition (whether of
title or use), condemnation, sequestration, seizure, forfeiture or other taking
of, its Mortgaged Vessel, pursuant to each First Preferred Ship Mortgage.
GRANTING CLAUSE THIRD
All right, title and interest of the Company in and to the shares of
capital stock held by it in each Guarantor, including the certificates
representing the shares, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the shares; and all additional shares of stock of
any Guarantor which may from time to time be acquired by the Company in any
manner, and the certificates representing such additional shares, and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such additional shares pledged to the Trustee pursuant to the Pledge
Agreement.
GRANTING CLAUSE FOURTH
All right, title and interest of each Guarantor in and to all policies and
contracts of insurance (including all entries in a protection and indemnity or
war risks association, but only to the extent permitted by the rules of such
association) which are from time to time taken out in respect of its Mortgaged
Vessel, its freights, disbursements, profits or otherwise and all the benefits
and proceeds thereof, including all claims and returns of premiums, pursuant to
the Assignments of Insurance.
3
<PAGE> 12
GRANTING CLAUSE FIFTH
The Subsidiary Guarantee (as defined herein) by each Guarantor of the
payment of the principal of (and premium, if any) and interest on the Securities
and the payment of all sums of money from time to time payable by the Company
under this Indenture and the performance and observance of all agreements,
covenants and provisions contained in its Guarantor Security Documents and this
Indenture.
GRANTING CLAUSE SIXTH
All right, title and interest of the Company and each Guarantor in and to
(i) all funds and investments, if any, held from time to time in each Cash
Collateral Account and the Investment Account and (ii) all checks, notes,
deposits, certificates of deposit, securities, commercial paper or other debt
instruments from time to time hereafter delivered to or otherwise possessed by
the Trustee in connection with either the Cash Collateral Accounts or the
Investment Account, and all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect or in exchange thereof.
GRANTING CLAUSE SEVENTH
All right, title and interest in and to each Guarantor's interest in the
freights and hires and other moneys earned with respect to the use, operation or
chartering of its Mortgaged Vessel, including any guarantee or security
therefor, whether now in effect or entered into from time to time hereafter,
including, without limitation, the right to receive all moneys due and to become
due under any and all present and future charter parties and other contracts for
the carriage of cargo, all claims for damages arising out of the breach thereof
or out of the loss or requisition of its Mortgaged Vessel, and all moneys and
claims for moneys due and to become due thereunder.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Trustee, its successors and assigns, in trust for the benefit and security of
the Holders from time to time of the Securities, without any priority of any one
Security over any other, except as herein otherwise expressly provided, and for
the uses and purposes and subject to the terms and provisions set forth in this
Indenture.
The guarantees, mortgages, liens and security interests created by the
foregoing Granting Clauses shall attach upon the delivery hereof and upon
delivery of the Pledge Agreement and the Guarantor Security Documents of each
Guarantor or as soon thereafter as permitted by law, but in any event each such
guarantee, mortgage, lien and security interest shall
4
<PAGE> 13
attach no later than the Closing Date, except with respect to the Vessels
tendered to the Trust Estate on later dates in accordance with the terms of this
Indenture, in which case such guarantee, mortgage, lien and security interest
shall attach no later than the respective Vessel Tender Date (as hereinafter
defined), as the case may be.
The Company and each Guarantor do hereby constitute the Trustee the true
and lawful attorney of the Company and each Guarantor, irrevocably, with full
power (which power shall be deemed coupled with an interest) (in the name of the
Company or each Guarantor or otherwise) to ask, require, demand, receive,
settle, compromise, compound and give acquittance for any and all moneys and
claims for moneys due and to become due under or arising out of the Trust
Estate, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Trustee may deem to be necessary or advisable in the premises.
The Company and each Guarantor agree that at any time and from time to
time, upon the written request of the Trustee, it shall promptly and duly
execute and deliver or cause to be duly executed and delivered any and all such
further instruments and documents as the Trustee may reasonably deem desirable
in obtaining the full benefits of the foregoing Granting Clauses and of the
rights and powers herein granted.
The Company and each Guarantor do hereby declare that the right, title and
interest of the Company and each Guarantor in and to the Trust Estate, whether
now or hereafter acquired, is subject, to the extent provided in this Indenture,
to the rights, mortgage and security interests created by this Indenture and,
when entered into on the Closing Date or a Vessel Tender Date, as the case may
be, the First Preferred Ship Mortgages and the other Security Documents, in
favor of the Trustee and the Holders.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.
5
<PAGE> 14
ARTICLE ONE
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acceleration Notice" has the meaning provided in Section 7.02.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person became a Subsidiary and not Incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary.
"Adjusted Consolidated Net Income" means, with respect to any Person for
any period, the aggregate net income (or loss) of such Person and its
consolidated Subsidiaries for such period determined in conformity with GAAP;
provided that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income (or loss) of
such Person (other than net income (or loss) attributable to a Subsidiary of
such Person) in which any other Person (other than such Person or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or any of its
Subsidiaries by such other Person during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (B) of the first paragraph of Section 4.04 (and in such case,
except to the extent includable pursuant to clause (i) above), the net income
(or loss) of any Person accrued prior to the date it becomes a Subsidiary of any
other Person or is merged into or consolidated with such other Person or any of
its Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by such other Person or any of its Subsidiaries; (iii) the
effects of foreign currency exchange adjustments under GAAP; (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales or to prepayment of
Indebtedness; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (B) of the first paragraph of
Section 4.04, any amount paid or accrued as dividends on Preferred Stock of such
Person or Preferred Stock of any Subsidiary of such Person owned by Persons
other than such Person and any of its Subsidiaries; and (vi) all extraordinary
gains and extraordinary losses; provided that, solely for the purposes of
calculating the Interest Coverage Ratio (and in such case, except to the extent
includable pursuant to clause (i) above), "Adjusted Consolidated Net Income" of
the Company shall include the amount of all cash dividends received by the
Company or any Restricted Subsidiary of the Company from an Unrestricted
Subsidiary.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the
6
<PAGE> 15
terms "controlling," "controlled by" and "under common control with"), as
applied to any Person, is defined to mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent or
co-registrar
"Application" means an application for the release of property or the
withdrawal of cash under any provision of the Indenture and shall consist of,
and shall not be deemed complete until there shall have been delivered to the
Trustee, such cash, Securities and documents as are required by such provision
to establish the right of the Company or any Guarantor, as the case may be, to
the action applied for. The date of a particular Application shall be deemed to
be the date of completion of all such deliveries to the Trustee and not the date
on any particular document so delivered.
"Appraised Value" means the fair market sale value as of a specified date
of a specified asset that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy, as determined by an
Appraiser mutually acceptable to the Trustee and the Company. The Appraised
Value of any Vessel shall be determined free of any Charters with respect to
such Vessel. If the Trustee and the Company shall not agree on an Appraiser
within 20 days of the first giving of notice by the Company to the Trustee
requesting a determination of an Appraised Value (the "Appraisal Request Date"),
such Appraised Value shall be determined by a panel of three Appraisers, one of
whom shall be selected by the Company, another of whom shall be selected by the
Trustee and the third of whom shall be selected by such other two Appraisers or,
if such Appraisers shall be unable to agree upon a third Appraiser within 10
days of the selection date of the second of such two Appraisers, by the American
Arbitration Association; provided, that if either party shall not select its
Appraiser within 35 days after the Appraisal Request Date, such Appraised Value
shall be determined solely by the Appraiser selected by the other party. The
Appraiser or Appraisers appointed pursuant to the foregoing procedure shall be
instructed to determine such Appraised Value within 45 days after the final
appointment of any Appraiser pursuant hereto (but in no event may such
determination be made more than 75 days following the Appraisal Request Date),
and such determination shall be final and binding upon the parties. If three
Appraisers shall be appointed, (a) if the median of the determinations of the
Appraisers shall equal the average of such determinations, such average shall
constitute the determination of the Appraisers, otherwise (b) the determination
of the Appraiser that shall differ most from the other two Appraisers shall be
excluded, the remaining two determinations shall be averaged and such average
shall constitute the determination of the Appraisers. Fees and expenses relating
to the determination of an Appraised Value shall be payable by the Company. If
any provision of this Indenture requires
7
<PAGE> 16
a determination of Appraised Value by an Independent Appraiser, then all
Appraisers shall be Independent.
"Appraiser" means a Person engaged in the business of appraising
ocean-going vessels, including tankers, including Simpson, Spence & Young
Shipbrokers Ltd., H. Clarkson & Company Limited, E.A. Gibson Shipbrokers Ltd. or
P.F. Bassoe, who, except as otherwise required by this Indenture, need not be
independent and may be employed by or affiliated with the Company.
"Asset Acquisition" means (i) an Investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of the Company or shall be merged into,
consolidated with, or liquidated into, the Company or any of its Restricted
Subsidiaries or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of any Vessel, or of the assets of any Person other than the
Company or any of its Restricted Subsidiaries that constitute substantially all
of the assets of, or all of a division or line of business of, such acquiring
Person.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary of the Company) of (i) all or substantially all of the
Capital Stock of any Restricted Subsidiary of the Company, (ii) any Vessel or
(iii) all or substantially all of the assets of, or all or substantially all of
the assets that constitute a division or line of business of, the Company or any
of its Restricted Subsidiaries.
"Asset Sale" means with respect to any Person, any sale, transfer or other
disposition (including by way of merger, consolidation or sale-leaseback
transactions) in one transaction or a series of related transactions by such
Person or any of its Subsidiaries to any Person other than the Company or any of
its Restricted Subsidiaries of (A) all or any of the Capital Stock of any
Subsidiary of such Person, (B) any Vessel, or all or substantially all of the
property and assets of an operating unit or business of such Person or any of
its Subsidiaries or (C) any other property and assets of such Person or any of
its Subsidiaries outside the ordinary course of business of such Person or such
Subsidiary and, in each case, that is not governed by Article Six; provided that
sales or other dispositions of inventory, receivables and other current assets
shall not be included within the meaning of "Asset Sale".
"Assignment of Freights and Hires" means each assignment dated the Closing
Date or a Vessel Tender Date, as the case may be, as amended from time to time
in accordance with the terms of this Indenture, substantially in the form of
Exhibit I, from each Guarantor to the Trustee pursuant to which such Guarantor
assigns to the Trustee its right, title and interest in, to and under the
freights and hires with respect to its Mortgaged Vessel.
8
<PAGE> 17
"Assignment of Insurance" means each assignment dated the Closing Date or a
Vessel Tender Date, as the case may be, as amended from time to time in
accordance with the terms of this Indenture, substantially in the Form of
Exhibit H, together with the executed agreement and consent to assignment
attached thereto, from each Guarantor to the Trustee pursuant to which such
Guarantor assigns its right, title and interest in, to and under all policies
and contracts of insurance in respect of its Mortgaged Vessel.
"Assignment of Time Charter" means each assignment, dated the Closing Date
or a Vessel Tender Date, as the case may be, as amended from time to time in
accordance with the terms of this Indenture, substantially in the form of
Exhibit G, together with the executed agreement and consent to assignment
attached thereto, from each Guarantor to the Trustee pursuant to which such
Guarantor assigns to the Trustee its right, title and interest in, to and under
the Charter with respect to its Mortgaged Vessel and any assignment of
Subsequent Charters.
"Assumption Agreement" means each assumption agreement, dated a Vessel
Tender Date, as amended from time to time in accordance with the terms of the
Indenture, substantially in the form of Exhibit L pursuant to which a Tendered
Vessel Owner assumes all of the obligations of a Guarantor under this Indenture.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the product of (A)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (B) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution, certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital stock, whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
Common Stock and Preferred Stock.
9
<PAGE> 18
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligation" is defined to mean the rental obligations, as aforesaid, under
such lease.
"Cash Collateral Account" means each account so designated and maintained
with the Trustee by each Guarantor pursuant to a Cash Collateral Account
Agreement.
"Cash Collateral Account Agreement" means each Cash Collateral Account
Agreement, dated the Closing Date or a Vessel Tender Date, as the case may be,
substantially in the form of Exhibit J, between a Guarantor and the Trustee.
"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the
Trusts or any holding company, more than 50% of the total voting power of the
Voting Stock of which is "beneficially owned" by the Trusts, becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act and
including by reason of any change in the ultimate "beneficial ownership" of the
Capital Stock of the Company) of more than 50% of the total voting power of the
Voting Stock of the Company (calculated on a fully diluted basis) or (ii)
individuals who at the beginning of any period of two consecutive calendar years
constituted the board of directors of the Company (together with any new
directors whose election by such board of directors or whose nomination for
election was approved by a vote of at least two-thirds of the members of such
board of directors then still in office who either were members of such board of
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute at least
50% of the members of such board of directors then in office.
"Change of Control Offer" has the meaning provided in Section 4.23(a).
"Change of Control Payment" has the meaning provided in Section 4.23(a).
"Change of Control Payment Date" has the meaning provided in Section
4.23(b).
"Change of Control Triggering Event" means the occurrence of a Change of
Control and a Rating Decline.
"Change of Flag Documents" has the meaning provided in Section 9.07(d).
"Charters" means each time charter party between a Guarantor and Palm
Shipping with respect to such Guarantor's Mortgaged Vessel, as amended through
the date of this
10
<PAGE> 19
Indenture or a Vessel Tender Date, as the case may be, and as the same may be
further amended from time to time hereafter in accordance with the terms of this
Indenture, or as the same may be extended or renewed in accordance with the
terms of this Indenture.
"Closing Date" means the date on which the Securities are originally issued
under this Indenture.
"Collateral" means, in each case as pledged and assigned to the Trustee
pursuant to the Security Documents, (1) all of the issued and outstanding
capital stock of each Guarantor, pledged in favor of the Trustee pursuant to the
Pledge Agreement; (2) the Company's interest in the Investment Account to secure
the Obligations, pledged in favor of the Trustee pursuant to the Investment
Account Agreement; and (3) all of each Guarantor's right, title and interest in
and to (i) its respective Mortgaged Vessel, pursuant to a First Preferred Ship
Mortgage issued by such Guarantor in favor of the Trustee, which First Preferred
Ship Mortgage contains covenants pursuant to which such Guarantor, among other
things, shall be prohibited from selling, mortgaging or transferring any of its
interest in such vessel (other than as permitted under the Indenture); (ii) the
Charter with Palm Shipping relating to its Mortgaged Vessel, including the right
to receive all monies due and to become due under such Charter or in respect of
such Mortgaged Vessel and all claims for damages arising under such Charter or
relating to such Mortgaged Vessel; (iii) the freights and hires relating to its
Mortgaged Vessel; (iv) all of its policies and contracts of insurance taken out
from time to time in respect of its Mortgaged Vessel; and (v) each Guarantor's
Cash Collateral Account.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of the Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a successor
replaces it pursuant to Article Six of this Indenture and thereafter means such
successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
11
<PAGE> 20
"Comparable Treasury Issue" means the United States Treasury security
elected by an Independent Investment Banker as having a maturity comparable to
the weighted average maturity of the remaining term of the Securities
outstanding that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to such weighted average maturity of such
Securities.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m., Quotations for U.S
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum of the amounts for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes (other than income taxes
(either positive or negative) attributable to extraordinary and non-recurring
gains or losses or sales of assets), (iv) depreciation expense, (v) amortization
expense and (vi) all other non-cash items reducing Adjusted Consolidated Net
Income (including last-in-first-out adjustment for inventory), less all non-cash
items increasing Adjusted Consolidated Net Income (including last-in-first-out
adjustment for inventory), all as determined on a consolidated basis for such
Person and its Subsidiaries in conformity with GAAP; provided that, if a Person
has any Subsidiary that is not a Wholly Owned Subsidiary of such Person,
Consolidated EBITDA of such Person shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the Adjusted
Consolidated Net Income of such Subsidiary multiplied by (B) the quotient of (1)
the number of shares of outstanding Common Stock of such Subsidiary not owned on
the last day of such period by such Person or any Subsidiary of such Person
divided by (2) the total number of shares of outstanding Common Stock of such
Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate amount of interest in respect of Indebtedness (including
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed by such Person) and all but the principal
component of rentals in respect of
12
<PAGE> 21
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by such Person and its consolidated Subsidiaries during such period, all
as determined on a consolidated basis in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination, shareholders'
equity as set forth on the most recently available consolidated balance sheet of
the Company and its Restricted Subsidiaries (which shall be as of a date not
more than 60 days prior to the date of such computation), less any amounts
attributable to Redeemable Stock or any equity security convertible into or
exchangeable for Indebtedness, the cost of treasury stock and the principal
amount of any promissory notes receivable from the sale of the Capital Stock of
the Company or any Restricted Subsidiary of the Company, each item to be
determined in accordance with GAAP (excluding the effects of foreign currency
exchange adjustments under GAAP).
"Consolidated Tangible Assets" of any Person means the sum of the Tangible
Assets of such Person after eliminating inter-company items, determined on a
consolidated basis in accordance with generally accepted accounting principles,
including appropriate deductions for any minority interest in Tangible Assets of
such Person's Restricted Subsidiaries, provided, however, that, with respect to
the Company, adjustments following the date of the Indenture to the accounting
books and records of the Company in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto), or otherwise resulting
from the acquisition of control of the Company by another Person shall not be
given effect.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 114 West 47th Street, New York, New York 10036-1532, Attention: Trust
Administration.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
under which the Company or any of its Subsidiaries is a party or a beneficiary
on the date of this Indenture or becomes a party or a beneficiary thereafter.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning provided in Section 7.01.
"Event of Loss" means any of the following events: (a) the actual or
constructive total loss of a Vessel or the agreed or compromised total loss of a
Vessel, (b) the destruction of a Vessel, (c) damage to a Vessel to an extent,
determined in good faith by the Company within
13
<PAGE> 22
90 days after the occurrence of such damage (and evidenced by an Officers'
Certificate to such effect delivered to the Trustee, within such 90-day period),
as shall make repair thereof uneconomical or shall render such Vessel
permanently unfit for normal use (other than obsolescence) or (d) the
condemnation, confiscation, requisition, seizure, forfeiture other taking of
title to or use of a Vessel that shall not be revoked within six months. An
Event of Loss shall be deemed to have occurred: (i) in the event of the
destruction or other actual total loss of a Vessel, on the date of such loss;
(ii) in the event of a constructive, agreed or compromised total loss of a
Vessel, on the date of determination of such total loss pursuant to the relevant
insurance policy; (iii) in the case of any event referred to in clause (c)
above, upon the delivery of the Company's Officers' Certificate to the Trustee;
or (iv) in the case of any event referred in clause (d) above, on the date six
months after the occurrence of such event.
"Event of Loss Proceeds" means all compensation, damages and other payments
(including insurance proceeds, other than proceeds under any protection and
indemnity or other liability insurance payable to the Trustee as an assured to
indemnify the Trustee or reimburse it for any loss, damage or expense incurred
by it) received by the Company, any Guarantor or the Trustee, jointly or
severally, from any Person, including any governmental authority, with respect
to or in connection with an Event of Loss.
"Excess Proceeds Offer" has the meaning provided in Section 4.10(b).
"Excess Proceeds Payment" has the meaning provided in Section 4.10(b).
"Excess Proceeds Payment Date" has the meaning provided in Section 4.10(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fall-away Event" has the meaning provided in Section 5.01.
"First Preferred Ship Mortgages" means the Liberian first preferred ship
mortgages, substantially in the forms of Exhibit B, or the Bahamian statutory
ship mortgages and deeds of covenants, substantially in the form of Exhibits C
and D, respectively, on each of the Mortgaged Vessels granted by each of the
Guarantors to the Trustee and dated the Closing Date or a Vessel Tender Date, as
the case may be, as amended from time to time in accordance with the terms of
this Indenture and such ship mortgages or deeds of covenants.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of this Indenture, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant
14
<PAGE> 23
segment of the accounting profession. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP, except
that calculations made for purposes of determining compliance with the terms of
the covenants and with other provisions of this Indenture shall be made without
giving effect to (i) except as otherwise provided, the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and
17 and (ii) any non-recurring charges associated with the adoption, after the
Closing Date, of Financial Accounting Standard Nos. 106 and 109.
"Gradation" means a gradation within a Rating Category or a change to
another Rating Category, which shall include: (i) "+" and "-" in the case of
S&P's current Rating Categories (e.g., a decline from BB+ to BB would constitute
a decrease of one gradation), (ii) 1 and 2 in the case of Moody's current Rating
Categories (e.g., a decline from B1 to B2 would constitute a decrease of one
gradation), or (iii) the equivalent in respect of successor Rating Categories of
S&P or Moody's or Rating Categories used by Rating Agencies other than S&P and
Moody's.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guarantor Security Documents" means the Subsidiary Guarantee, the First
Preferred Ship Mortgage, the Assignment of Time Charter, the Assignment of
Freights and Hires, the Assignment of Insurance and the Cash Collateral Account
Agreement, in each case as executed and delivered by each of the Guarantors to
the Trustee on the Closing Date or a Vessel Tender Date, as the case may be,
with respect to its Mortgaged Vessel and to secure the Securities and such
Guarantor's obligations under this Indenture and such documents.
"Guarantors" means the following Wholly Owned Subsidiaries of the Company:
VSSI Oceans Inc., VSSI Atlantic Inc. and VSSI Appian Inc. (each of which is a
Liberian corporation) and Exuma Spirit Inc., Nassau Spirit Inc., Senang Spirit
Inc. and Andros Spirit Inc. (each of which is a Bahamian corporation), each the
owner of a Mortgaged Vessel, and their respective successors and assigns. If all
of the Capital Stock or The Mortgaged Vessel of one of
15
<PAGE> 24
such Wholly Owned Subsidiaries shall be sold as permitted by the Indenture, such
Subsidiary shall cease to be a Guarantor upon compliance with the requirements
of this Indenture relating to the release of its Mortgaged Vessel in connection
with such sale. Owners of Qualified Substitute Vessels that are tendered to
become part of the Trust Estate pursuant to, and in accordance with, the terms
of this Indenture shall become Guarantors upon such tender in accordance with
the terms of Section 9.08 of this Indenture and such owner's applicable
Assumption Agreement.
"Holder" or "Securityholder" means the registered holder of any Security as
reflected in the Security Register.
"Incidental Asset" means any equipment, outfit, furniture, furnishings,
appliances, spare or replacement parts or stores owned by the Company or a
Guarantor that have become obsolete or unfit for use or no longer useful,
necessary or profitable in the conduct of the business of the Company or such
Guarantor, as the case may be. In no event shall the term "Incidental Asset"
include a Vessel or a Mortgaged Vessel.
"Incidental Asset Sale" means any conveyance, transfer, sale or other
disposition, whether or not for value, by the Company or any Guarantor of any
Incidental Asset.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an incurrence of Acquired Indebtedness by reason of the acquisition of
more than 50% of the Capital Stock of any Person; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as lessee
under Capitalized Leases, (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such
Person, and (viii) to the extent not otherwise included in this definition,
obligations under
16
<PAGE> 25
Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation, provided that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP; and provided further that Indebtedness shall not include any liability for
federal, state, local or other taxes.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
"Independent" when used with respect to any specified Person means such a
Person who (1) is in fact independent, (2) does not have any direct financial
interest or any material indirect financial interest in the Company or any
Subsidiary, the Trustee or in any Affiliate of any of them and (3) is not
connected with the Company or any Subsidiary, the Trustee or any such Affiliate
as an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions. Whenever it is provided that any
Independent Person's opinion or certificate shall be furnished to the Trustee,
such Person shall be appointed by the Company and approved by the Trustee in the
exercise of reasonable care and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the
meaning thereof.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Company.
"Interest Coverage Ratio" means, with respect to any Person on any
Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA
of such Person for the four fiscal quarters for which financial information in
respect thereof is available immediately prior to such Transaction Date to (ii)
the aggregate Consolidated Interest Expense of such Person during such four
fiscal quarters. In making the foregoing calculation, (A) pro forma effect shall
be given to (1) any Indebtedness Incurred subsequent to the end of the
four-fiscal-quarter period referred to in clause (i) and prior to the
Transaction Date (other than Indebtedness Incurred under a revolving credit or
similar arrangement to the extent of the commitment thereunder (or under any
predecessor revolving credit or similar arrangement) in effect on the last day
of such period), (2) any Indebtedness Incurred during such period to the extent
such Indebtedness is outstanding at the Transaction Date and (3) any
Indebtedness to be Incurred on the Transaction Date, in each case as if such
Indebtedness had been Incurred on the first day of such four-fiscal-quarter
period and after giving pro forma effect to the application of the proceeds
thereof as if such application had occurred on such first day; (B) Consolidated
Interest Expense
17
<PAGE> 26
attributable to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on the date of computation (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months) had been
the applicable rate for the entire period; (C) there shall be excluded from
Consolidated Interest Expense any Consolidated Interest Expense related to any
amount of Indebtedness that was outstanding during such four-fiscal-quarter
period or thereafter but that is not outstanding or is to be repaid on the
Transaction Date, except for Consolidated Interest Expense accrued (as adjusted
pursuant to clause (B)) during such four-fiscal-quarter period under a revolving
credit or similar arrangement to the extent of the commitment thereunder (or
under any successor revolving credit or similar arrangement) in effect on the
Transaction Date; (D) pro forma effect shall be given to Asset Dispositions and
Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during such four-fiscal-quarter
period or thereafter and prior to the Transaction Date as if they had occurred
and such proceeds had been applied on the first day of such four-fiscal-quarter
period; and (E) pro forma effect shall be given to asset dispositions and asset
acquisitions (including giving pro forma effect to the application of proceeds
of any asset disposition) that have been made by any Person that has become a
Restricted Subsidiary or has been merged with or into the Company or any
Restricted Subsidiary during the four-fiscal-quarter period referred to above or
subsequent to such period and prior to the Transaction Date and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such period; provided that to the extent that
clause (D) or (E) of this sentence requires that pro forma effect be given to an
asset acquisition or asset disposition, such pro forma calculation shall be
based upon the four full fiscal quarters immediately preceding the Transaction
Date of the Person, or division or line of business of the Person, that is
acquired or disposed for which financial information is available; and provided
further that for purposes of determining the Interest Coverage Ratio with
respect to the acquisition of a Vessel or the financing thereof, the Company may
apply Consolidated EBITDA for such Vessel based upon historical earnings of such
Vessel or, if none, of its most comparable Vessel (in the good faith
determination of the Board of Directors) during the applicable
four-fiscal-quarter period, or if, in the good faith determination of the Board
of Directors, the Company does not have a comparable Vessel, based upon industry
average earnings for comparable vessels (as determined in good faith by the
Board of Directors).
"Interest Payment Date" means each semiannual interest payment date on
________ and __________ of each year, commencing ____________, 1996.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar
18
<PAGE> 27
agreement or arrangement designed to protect the Company or any of its
Restricted Subsidiaries against fluctuations in interest rates to or under which
the Company or any of its Restricted Subsidiaries is a party or a beneficiary on
the date hereof or becomes a party or a beneficiary hereafter.
"Investment" means any direct or indirect advance, loan or other extension
of credit (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of any Person or
its Subsidiaries) or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by any other
Person; provided, however, that if an Event of Default shall not have occurred
and be continuing the term "Investment" shall not include the routine use of the
Company's current cash management system for the receipt of revenues and the
payment of obligations on behalf of the Company and its subsidiaries. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair
market value of the assets (net of liabilities) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined by the Board of Directors in good faith.
"Investment Account" means the account in the name of the Trustee managed
and maintained by the Trustee pursuant to the Investment Account Agreement.
"Investment Account Agreement" means the agreement, substantially in the
form of Exhibit P, dated the Closing Date between the Company and the Trustee,
as amended from time to time in accordance with the terms of this Indenture.
"Investment Grade" means (i) BBB -- or above in the case of S&P (or its
equivalent under any successor Rating Categories of S&P), (ii) Baa3 or above, in
the case of Moody's (or its equivalent under any successor Rating Categories of
Moody's), and (iii) the equivalent in respect of the Rating Categories of any
Rating Agencies substituted for S&P or Moody's.
"Investment Grade Status" means the existence as of a date and thereafter
if at such date the Securities are rated Investment Grade by both Rating
Agencies.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention
19
<PAGE> 28
agreement or lease in the nature thereof, any sale with recourse against the
seller or any Affiliate of the seller, or any agreement to give any security
interest).
"Loan To Value Ratio" means, at any time, the ratio of the aggregate
principal amount of the Securities Outstanding at such time to the aggregate
Appraised Value of all Mortgaged Vessels at such time. If the Loan To Value
Ratio is required to be calculated or adjusted at a time when cash is on deposit
with the Trustee in the Investment Account as part of the Trust Estate in
connection with the sale of a Mortgaged Vessel or the occurrence of an Event of
Loss with respect to a Mortgaged Vessel, the amount of such cash on deposit
shall be deemed to be the Appraised Value of the Vessel giving rise to such cash
on deposit and such Vessel shall be deemed to be a Mortgaged Vessel for purposes
of such computation or adjustment of Loan To Value Ratio.
"Loss Date" has the meaning provided in Section 3.03.
"Loss Excess Proceeds" means the total of (i) amounts treated as Loss
Excess Proceeds under Section 3.03 and (ii) the amount by which the Net Event of
Loss Proceeds received by the Company or any of its Restricted Subsidiaries from
one or more Events of Loss with respect to Vessels other than Mortgaged Vessels
occurring on or after the Closing Date in the most recent period of 12
consecutive months exceed $10 million, less (in the case of this clause (ii))
the amount of such excess Net Event of Loss Proceeds (A) used to repay
unsubordinated Indebtedness of the Company or a Guarantor or Indebtedness of any
Restricted Subsidiary, in each case owing to a Person other than the Company or
any of its Subsidiaries or (B) invested in property or assets of a nature or
type of which shall be used in a business (or in a company having property or
assets of a nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, the Company
and its Restricted Subsidiaries existing on the date of such investment or
allocated to working capital for general corporate purposes (in each case, as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board resolution).
"Loss Excess Proceeds Offer" has the meaning provided in Section 4.10(b).
"Loss Excess Proceeds Payment" has the meaning provided in Section 4.10(b).
"Loss Redemption Amount" has the meaning provided in Section 3.03.
"Lost Mortgaged Vessel" has the meaning provided in Section 3.03.
"Maximum Loan To Value Ratio" means, during any period, 0.75 to 1.
"Moody's" means Moody's Investors Service, Inc. and its successors.
20
<PAGE> 29
"Mortgaged Vessel Asset" has the meaning specified in Section 4.09(a).
"Mortgaged Vessels" means the Aframax tankers owned by the Guarantors and
being, on the Closing Date (i) the Poul Spirit, Official Number 10328, of
approximately 57,463 gross and 31,958 net tons, having its home port at the Port
of Monrovia, Republic of Liberia, which vessel was built by Onomichi Dockyard,
Japan, in the year 1995, and is documented under the laws and flag of the
Republic of Liberia and is owned by VSSI Oceans Inc., (ii) the Torben Spirit,
Official Number 723526, of approximately 57,486 gross and 28,742 net tons,
having its home port at the Port of Nassau, Commonwealth of The Bahamas, which
vessel was built by Onomichi Dockyard, Japan, in the year 1994, and is
documented under the laws and flag of The Bahamas and is owned by VSSI Atlantic
Inc., (iii) the Senang Spirit, Official Number 723521, of approximately 52,508
gross and 28,208 net tons, having its home port at the Port of Nassau,
Commonwealth of The Bahamas, which vessel was built by Imabari Shipbuilding,
Japan, in the year 1994, and is documented under the laws and flag of the
Commonwealth of The Bahamas and is owned by Senang Spirit, Inc., (iv) the Mayon
Spirit, Official Number 720752, of approximately 57,448 gross and 28,742 net
tons, having its home port at the Port of Nassau, Commonwealth of The Bahamas,
which vessel was built by Onomichi Dockyard, Japan, in the year 1991, and is
documented under the laws and flag of the Commonwealth of The Bahamas and is
owned by VSSI Appian Inc., (v) the Leyte Spirit, Official Number 720790, of
approximately 57,448 gross and 28,742 net tons, having its home port at the Port
of Nassau, Commonwealth of The Bahamas, which vessel was built by Onomichi
Dockyard, Japan, in the year 1992, and is documented under the laws and flag of
the Commonwealth of The Bahamas and is owned by Exuma Spirit Inc., (vi) the
Luzon Spirit, Official Number 720776, of approximately 57,448 gross and 28,742
net tons, having its home port at the Port of Nassau, Commonwealth of The
Bahamas, which vessel was built by Onomichi Dockyard, Japan, in the year 1992,
and is documented under the laws and flag of the Commonwealth of The Bahamas and
is owned by Nassau Spirit Inc., (vii) the Samar Spirit, Official Number 723134,
of approximately 57,448 gross and 28,742 net tons, having its home port at the
Port of Nassau, Commonwealth of The Bahamas, which vessel was built by Onomichi
Dockyard, Japan, in the year 1992, and is documented under the laws and flag of
the Commonwealth of The Bahamas and is owned by Andros Spirit Inc. If an Event
of Loss occurs with respect to one of such Vessels, such Vessel shall cease to
be a Mortgaged Vessel from and after the Loss Date (but shall remain part of the
Trust Estate until released as provided in Section 9.03). If one of such Vessels
shall be sold pursuant to Section 4.09(c), such Vessel shall cease to be a
Mortgaged Vessel from and after the consummation of such sale in accordance with
Section 4.09(c). In accordance with Section 3.03 and Section 3.04, a Qualified
Substitute Vessel may be substituted for a Mortgaged Vessel in certain
circumstances and such substituted Vessel shall become a Mortgaged Vessel upon
substitution in accordance with the terms of this Indenture.
21
<PAGE> 30
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
such Asset Sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes (whether or not such taxes shall actually be paid or are payable) as a
result of such Asset Sale without regard to the consolidated results of
operations of the Company and its Restricted Subsidiaries, taken as a whole,
(iii) payments made to repay Indebtedness or any other obligation outstanding at
the time of such Asset Sale that either (A) is secured by a Lien on the property
or assets sold or (B) is required to be paid as a result of such sale and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
as a reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP.
"Net Event of Loss Proceeds" means, with respect to any Event of Loss, the
Event of Loss Proceeds from such Event of Loss net of related fees and expenses
and payments made to repay Indebtedness or any other obligation outstanding at
the time of such Event of Loss, provided that such Indebtedness or other
obligation is either (A) secured by a Lien on the property or assets that
suffered the Event of Loss or (B) required to be paid as a result of such Event
of Loss.
"Officer" means, with respect to the Company or any Successor Corporation,
the Chairman of the Board, the President, any Vice President, the Chief
Financial Officer, the Treasurer or any Assistant Treasurer, or the Secretary or
any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers. Each
Officers' Certificate (other than certificates provided pursuant to TIA Section
314(a)(4)) shall include the statements provided for in TIA Section 314(e).
"Opinion of Counsel" means a written opinion signed by legal counsel who is
acceptable to the Trustee. Such counsel may be an employee of or counsel to the
Company or the Trustee. Each such Opinion of Counsel shall include the
statements provided for in TIA Section 314(e).
"Outstanding" or "outstanding" when used with respect to Securities means,
as of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
22
<PAGE> 31
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and Securities, except to the extent provided in
Sections 11.02, 11.03 and 11.04, with respect to which the Company has
effected defeasance or covenant defeasance as provided in Article Ten; and
(c) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands the Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
direction, consent or waiver hereunder, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, direction, consent or waiver, only Securities which the Trustee
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Palm Shipping" means Palm Shipping, Inc., a Liberian corporation and a
Wholly Owned subsidiary of the Company, and its successors and assigns.
"Paying Agent" has the meaning provided in Section 2.03, except that, for
the purposes of Article Eleven, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permitted Investment" is defined to mean (i) readily marketable securities
issued by states or municipalities within the United States of America or of
agencies of subdivisions thereof rated "A" (or such similar equivalent rating)
or better by Moody's or by S&P and
23
<PAGE> 32
maturing in less than one year from the date of purchase; (ii) direct
obligations of, or obligations unconditionally guaranteed by, the United States
of America, the United Kingdom, the Federal Republic of Germany, France, Japan,
Canada or Switzerland or any agency of any thereof maturing in less than one
year from the date of purchase; (iii) commercial paper rated in the highest or
next highest category by Moody's or by S&P and maturing in less than one year
from the date of purchase; (iv) corporate bonds or debentures, rated "A" (or
similar equivalent rating) or better by Moody's or by S&P and maturing in less
than one year from the date of purchase; and (v) certificates of deposit and
other time deposits which mature in less than one year from the date of purchase
and are issued by or made in any commercial bank which has a combined capital
and surplus of at least $100,000,000 (or the equivalent thereof in any other
currency) and whose debt is rated "A" (or such similar equivalent rating) or
higher by Moody's or by S&P.
"Permitted Liens" means with respect to the Company and Restricted
Subsidiaries (i) Liens for taxes, assessments, governmental charges or claims
that are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made; (ii) statutory Liens or Liens otherwise arising by operation of law of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (iii) Liens for crews' wages and
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (v) charters of Vessels, leases or subleases granted to others
in the ordinary course of business that are subject to the relevant First
Preferred Ship Mortgage and that do not materially interfere with the ordinary
course of business of the Company and its Restricted Subsidiaries, taken as a
whole; (vi) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (vii) Liens on property of, or on shares
of stock or Indebtedness of, any corporation (other than a Guarantor, if prior
to the occurrence of the Termination and Release, or Palm Shipping) existing at
the time such corporation becomes, or becomes a part of, any Restricted
Subsidiary; (viii) except in the case of a Guarantor, if prior to the occurrence
of the Termination and Release, or Palm Shipping, Liens in favor of the Company
or any Restricted Subsidiary; (ix) except in the case of a Guarantor, if prior
to the occurrence of the Termination and Release, or Palm Shipping, Liens
arising from the rendering of a final judgment or order against the Company or
any Restricted Subsidiary that does not give rise to an Event of Default; (x)
except in the case of a Guarantor, if prior to the occurrence of the Termination
and Release,
24
<PAGE> 33
or Palm Shipping, Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xi) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; and (xii) Liens for
salvage.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Pledge Agreement" means each Pledge Agreement and Irrevocable Proxy, dated
the Closing Date or a Vessel Tender Date, as the case may be, and as amended
from time to time in accordance with the terms of this Indenture, substantially
in the form of Exhibit F, made by the Company in favor of the Trustee pursuant
to which the Capital Stock of a Guarantor or the Guarantors is pledged to the
Trustee.
"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of the Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"principal" of a debt security, including the Securities, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Qualified Substitute Vessel" means, as of any date, a tanker or
ore/bulk/oil carrier of at least 80,000 dwt, which (i) was completed no earlier
than 1991 and is no older than one year older than the Vessel for which it is
being substituted, (ii) is not a Mortgaged Vessel as of such date, (iii) is
wholly owned by a Wholly Owned Subsidiary of the Company, (iv) is registered
under the laws of the Republic of Liberia or the Commonwealth of the Bahamas and
(v) has an Appraised Value at the Vessel Tender Date at least equal to (and
being in as good operating condition as) the Mortgaged Vessel for which it is
being substituted, assuming compliance by the applicable Guarantor with all the
terms of the applicable First Preferred Ship Mortgage.
"Rating Agencies" is defined to mean (i) S&P and Moody's or (ii) if S&P or
Moody's or both of them are not making ratings of the Securities publicly
available, a nationally recognized U.S. rating agency or agencies, as the case
may be, selected by the Company, which shall be substituted for S&P or Moody's
or both, as the case may be.
25
<PAGE> 34
"Rating Categories" is defined to mean (i) with respect to S&P, any of the
following categories (any of which may include a "+" or "-"): AAA, AA, A, BBB,
BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect
to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C
and D (or equivalent successor categories); and (iii) the equivalent of any such
categories of S&P or Moody's used by another Rating Agency, if applicable.
"Rating Decline" is defined to mean that at any time within 90 days (which
period shall be extended as long as the rating of the Securities is under
publicly announced consideration for possible downgrade by any Rating Agency)
after the date of public notice of a Change of Control or of the intention of
the Company or of any Person to effect a Change of Control, the rating of the
Securities decreased by both Rating Agencies by one or more Gradations and the
rating by such Rating Agencies on the Securities following such downgrade is
below Investment Grade.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or otherwise is (i) required to be redeemed prior to
the final Stated Maturity of the Securities, (ii) redeemable at the option of
the holder of such class or series of Capital Stock at any time prior to the
final Stated Maturity of the Securities or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or clause (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of the
Securities; provided that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Stated Maturity of
the Securities shall not constitute Redeemable Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained in
Section 4.09 and Section 4.23 and such Capital Stock specifically provides that
such Person shall not repurchase or redeem any such stock pursuant to such
provisions prior to such Person's repurchase of such Securities as are required
to be repurchased pursuant to Section 4.09 and Section 4.23.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which such Security is to be redeemed pursuant to this
Indenture.
"Reference Treasury Dealer" means each of Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated and Smith Barney Inc. and their respective
successors; provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities
26
<PAGE> 35
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Treasury Reference Dealer at 5:00 p.m. (New York
City time) on the third business day preceding such Redemption Date.
"Registrar" has the meaning provided in Section 2.03.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the __________ or ___________ (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Replacement Property" has the meaning provided in Section 9.02(c).
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means all Subsidiaries of the Company, including
each Guarantor and Palm Shipping, other than Unrestricted Subsidiaries.
"Sale Date" has the meaning provided in Section 3.04.
"Sale Excess Proceeds" means all amounts treated as Sale Excess Proceeds
under Sections 3.04, 4.09(b) and 4.09(c).
"Sale Excess Proceeds Offer" has the meaning provided in Section 4.10(a).
"Sale Excess Proceeds Payment" has the meaning provided in Section 4.10(a).
27
<PAGE> 36
"Sale Redemption Amount" has the meaning provided in Section 3.04.
"Securities" means any of the securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture.
"Security Documents" means the Pledge Agreement, the Investment Account
Agreement or the Guarantor Security Documents of each Guarantor and all
Assumption Agreements.
"Security Register" has the meaning provided in Section 2.03.
"Sinking Fund" has the meaning specified in Section 3.01.
"Sold Mortgaged Vessel" has the meaning provided in Section 3.04.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill
Inc., a New York corporation and its successors.
"Stated Maturity" means (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsequent Charter" means any time charter party entered into by the
Company or any Guarantor with respect to any of the Mortgaged Vessels following
the termination of the Charter thereof or cessation of charter hire payments
thereunder.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is owned, directly or indirectly, by such Person and one or more
other Subsidiaries of such Person; provided that, except as the term
"Subsidiary" is used in the definition of "Unrestricted Subsidiary" set forth
below, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the
Company for purposes of this Indenture.
"Subsidiary Guarantees" means the Guarantees dated the Closing Date or a
Vessel Tender Date, as the case may be, as amended from time to time in
accordance with the terms of this Indenture, substantially in the form of
Exhibit E, by each Guarantor in favor of the Trustee pursuant to which each
Guarantor Guarantees the Securities.
28
<PAGE> 37
"Successor Corporation" means any corporation which, as a result of the
Company converting into, or merging, consolidating or amalgamating with or into,
or selling, transferring or conveying all or substantially all of its assets to,
or being liquidated into, such corporation, succeeds to the interests of the
Company.
"Tangible Assets" of any Person means, at any date, the gross book value as
shown by the accounting books and records of such Person of all its property
both real and personal, less (i) the net book value of all its licenses,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
non-compete agreements or organizational expenses and other like intangibles,
(ii) unamortized indebtedness discount and expenses, (iii) all reserves for
depreciation, obsolescence, depletion and amortization of its properties and
(iv) all other proper reserves which in accordance with generally accepted
accounting principles should be provided in connection with the business
conducted by such Person, provided, however, that with respect to the Company
and its Restricted Subsidiaries, adjustments following the date of this
Indenture to the accounting books and records of the Company and its Restricted
Subsidiaries in accordance with Accounting Principles Board Opinions Nos. 16 and
17 (or successor opinions there), or otherwise resulting from the acquisition of
control of the Company by another Person shall not be given effect.
"Tendered Vessel Owner" has the meaning provided in Section 9.08.
"Termination and Release" has the meaning provided in Section 5.01.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended (15 U.S. Code 77aaa-77bbb), as in effect from time to time until this
Indenture is qualified under the Trust Indenture Act and, after such
qualification, shall mean such Act as in effect on the date of such
qualification, except as provided in Section 12.06.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services by such Person.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Treasury Rate" means with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.
29
<PAGE> 38
"Trust Estate" has the meaning provided in the recitals to this Agreement.
"Trust Moneys" has the meaning provided in Section 10.01.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Eight of this Indenture and thereafter means such successor.
"Trusts" means, collectively, the Cirrus Trust, a trust organized under the
laws of the Turks and Caicos Islands, and the JTK Trust, a trust organized
under the laws of the Bahamas, which as of December 31, 1995 owned
approximately 65.1% and 10.4% of the outstanding Common Stock of the Company,
respectively.
"United States Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time hereafter (11 U.S.C. Sec. 101
et seq.), or any successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company (other
than a Guarantor, if prior to the occurrence of the Termination and Release, and
Palm Shipping) that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
may designate any Restricted Subsidiary (including any newly acquired or newly
formed Subsidiary (other than a Guarantor, if prior to the occurrence of the
Termination and Release, and Palm Shipping)) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided
that immediately after giving effect to such designation (x) the Company could
Incur $1.00 of additional Indebtedness under the first paragraph of Section
4.03(a) or, if after the occurrence of the Termination and Release, Section
5.03(a) and (y) no Default or Event of Default shall have occurred and be
continuing or shall result as a consequence thereof. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality
30
<PAGE> 39
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof at any time prior to the Stated Maturity of the Securities,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligation or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of the
U.S. Government Obligation evidenced by such depository receipt.
"Vessel" means a tanker or oil/bulk/ore carrier owned or leased by the
Company or any Subsidiary of the Company.
"Vessel Percentage" means as of and after the Closing Date and prior to any
subsequent adjustment as provided below, for each of the initial seven Mortgaged
Vessels, the percentage set forth below opposite such Mortgaged Vessel:
<TABLE>
<CAPTION>
MORTGAGED VESSEL PERCENTAGE
- ------------------------------------- ----------
<S> <C>
Poul Spirit.......................... 15.5%
Torben Spirit........................ 15.1%
Senang Spirit........................ 15.0%
Mayon Spirit......................... 13.6%
Leyte Spirit......................... 13.6%
Luzon Spirit......................... 13.6%
Samar Spirit......................... 13.6%
----------
100.0%
=========
</TABLE>
provided, however, that each Vessel Percentage shall be adjusted in each case
upon the occurrence of, and after giving effect to, the delivery of any
Qualified Substitute Vessel as part of the Trust Estate pursuant to Section
8.08, an Event of Loss with respect to any Mortgaged Vessel, the sale of any
Mortgaged Vessel Asset or the release of any Mortgaged Vessel from the Lien of
this Indenture and the Security Documents, in each case effected in accordance
with the terms of this Indenture, to be, for each Mortgaged Vessel remaining
after such an occurrence, the percentage that the Appraised Value of such
Mortgaged Vessel at the time of and after giving effect to such occurrence bears
to the aggregate Appraised Value of the remaining Mortgaged Vessels at the time
of and after giving effect to such occurrence. Notwithstanding the foregoing, if
any Vessel Percentage is required to be calculated or adjusted at a time when
cash is on deposit with the Trustee in the Investment Account as part of the
Trust
31
<PAGE> 40
Estate as a result of the sale of a Mortgaged Vessel or the occurrence of an
Event of Loss with respect to a Mortgaged Vessel, the amount of such cash on
deposit shall be deemed to be the Appraised Value of such Vessel previously sold
or lost giving rise to such cash on deposit and such Vessel shall be deemed to
remain a Mortgaged Vessel for purposes of such computation or adjustment of
Vessel Percentage.
"Vessel Tender Date" has the meaning provided in Section 9.08.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, such
Subsidiary of such Person if all of the outstanding Common Stock or other
similar equity ownership interests (but not including Preferred Stock) in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned directly or indirectly by
such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company, each Guarantor or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
32
<PAGE> 41
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it in this Indenture;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the plural
include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth above; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
The Securities
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form annexed hereto as Exhibit A. The Securities may have
notations, legends or endorsements required by law, stock exchange agreements to
which the Company is subject or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on the Securities. Each
Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the
33
<PAGE> 42
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
The definitive Securities shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 2.02. Execution, Authentication and Denominations.
Two Officers shall execute the Securities for the Company by facsimile or
manual signature in the name and on behalf of the Company. The seal of the
Company, if any, shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee or authenticating agent authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee or an authenticating agent shall authenticate for original
issue Securities in the aggregate principal amount of $225,000,000; provided
that the Trustee shall be entitled to receive an Officers' Certificate and an
Opinion of Counsel of the Company that it may reasonably request in connection
with such authentication of Securities. Such order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated, which with respect to the issue of additional
Securities shall be the Interest Payment Date as to which the Company has
elected not to make interest payments in cash. The aggregate principal amount of
Securities outstanding at any time may not exceed the amount set forth above
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
2.05, 2.06, 2.07 or 2.08.
The Trustee may appoint an authenticating agent to authenticate Securities.
An authenticating agent may authenticate Securities whenever the Trustee may do
so. Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
34
<PAGE> 43
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 in principal amount and any integral
multiple of $1,000 in excess thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Securities may be presented for payment (the "Paying
Agent") and an office or agency where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served, which shall be in
the Borough of Manhattan, The City of New York. The Company shall cause the
Registrar to keep a register of the Securities and of their transfer and
exchange (the "Security Register"). The Company may have one or more
co-Registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent. If the Company fails to maintain a Registrar,
Paying Agent and/or agent for service of notices and demands, the Trustee shall
act as such Registrar, Paying Agent and/or agent for service of notices and
demands. The Company may remove any Agent upon written notice to such Agent and
the Trustee; provided that no such removal shall become effective until (i) the
acceptance of an appointment by a successor Agent to such Agent as evidenced by
an appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. If, at any
time, the Trustee is not the Registrar, the Registrar shall make available to
the Trustee on or before each Interest Payment Date and at such other times as
the Trustee may reasonably request, the names and addresses of the Holders as
they appear in the Security Register.
SECTION 2.04. Paying Agent to Hold Money in Trust.
Not later than each due date of the principal, premium, if any, and
interest on any Securities, the Company shall deposit with the Paying Agent
money in immediately available funds sufficient to pay such principal, premium,
if any, and interest so becoming due. The
35
<PAGE> 44
Company shall require each Paying Agent other than the Trustee to agree in
writing that such Paying Agent shall hold in trust for the benefit of the
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, and interest on the Securities (whether such
money has been paid to it by the Company or any other obligor on the
Securities), and such Paying Agent shall promptly notify the Trustee of any
default by the Company (or any other obligor on the Securities) in making any
such payment. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing so,
the Paying Agent shall have no further liability for the money so paid over to
the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of
any of them acts as Paying Agent, it shall, on or before each due date of any
principal of, premium, if any, or interest on the Securities, segregate and hold
in a separate trust fund for the benefit of the Holders a sum of money
sufficient to pay such principal, premium, if any, or interest so becoming due
until such sum of money shall be paid to such Holders or otherwise disposed of
as provided in this Indenture, and shall promptly notify the Trustee of its
action or failure to act.
SECTION 2.05. Transfer and Exchange.
The Securities are issuable only in registered form. A Holder may transfer
a Security only by written application to the Registrar stating the name of the
proposed transferee and otherwise complying with the terms of this Indenture. No
such transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Registrar in the Security Register. Prior to the registration of any
transfer by a Holder as provided herein, the Company, the Trustee, and any agent
of the Company shall treat the person in whose name the Security is registered
as the owner thereof for all purposes whether or not the Security shall be
overdue, and neither the Company, the Trustee, nor any such agent shall be
affected by notice to the contrary. When Securities are presented to the
Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange or redemption
of the Securities, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other similar governmental
charge payable upon exchanges pursuant to Section 2.08, 3.01 or 12.04).
The Registrar shall not be required (i) to issue, register the transfer of
or exchange any Security during a period beginning at the opening of business 15
days before the
36
<PAGE> 45
day of the mailing of a notice of redemption of Securities selected for
redemption under Section 3.05 and ending at the close of business on the day of
such mailing or during a period beginning at the opening of business 15 days
before the due date of any payment of principal on the Securities and ending at
the close of business on the day of such payment due date, or (ii) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
SECTION 2.06. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
claims that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Security of
like tenor and principal amount; provided that the requirements of the second
paragraph of Section 2.07 are met. If required by the Trustee or the Company, an
indemnity bond must be furnished that is sufficient in the judgment of both the
Trustee and the Company to protect the Company, the Trustee or any Agent from
any loss that any of them may suffer if a Security is replaced. The Company may
charge such Holder for its expenses and the expenses of the Trustee in replacing
a Security. In case any such mutilated, lost, destroyed or wrongfully taken
Security has become or is about to become due and payable, the Company in its
discretion may pay such Security instead of issuing a new Security in
replacement thereof.
Every replacement Security is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
SECTION 2.07. Outstanding Securities.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.07 as not
outstanding.
If a Security is replaced pursuant to Section 2.06, it ceases to be
outstanding unless and until the Trustee receives proof satisfactory to it that
the replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the Company)
holds on a maturity date money sufficient to pay Securities payable on that
date, then on and after that date such Securities cease to be outstanding and
interest on them shall cease to accrue.
A Security does not cease to be outstanding because the Company or one of
its Affiliates holds such Security, provided, however, that, in determining
whether the Holders of the requisite principal amount of the outstanding
Securities have given any request, demand,
37
<PAGE> 46
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
SECTION 2.08. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may have
insertions, substitutions, omissions and other variations determined to be
appropriate by the Officers executing the temporary Securities, as evidenced by
their execution of such temporary Securities. If temporary Securities are
issued, the Company shall cause definitive Securities to be prepared without
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 4.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall be entitled to
the same benefits under this Indenture as definitive Securities.
SECTION 2.09. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee shall cancel all Securities surrendered for transfer, exchange, payment
or cancellation and shall destroy them in accordance with its normal procedure.
The Company may not issue new Securities to replace Securities it has paid in
full or delivered to the Trustee for cancellation.
SECTION 2.10. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Trustee shall use CUSIP numbers in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Securities
38
<PAGE> 47
or as contained in any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Securities.
SECTION 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay, or shall deposit with the Paying Agent money in immediately available
funds sufficient to pay the defaulted interest, plus (to the extent lawful) any
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date. A special record date, as used in this Section
2.11 with respect to the payment of any defaulted interest, shall mean the 15th
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to the
Trustee a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest to be paid.
ARTICLE THREE
Redemption
SECTION 3.01. Mandatory Sinking Fund Payments.
As a mandatory sinking fund (the "Sinking Fund") for the retirement of the
Securities, the Company shall, until all the Securities shall have been paid, or
payment thereof duly provided for, pay to the Trustee, prior to 11:15 a.m. (New
York time) on , 2004, and prior to 11:15 a.m. (New York time) on
in each year thereafter to and including , 2008, an amount
in same day funds, subject to adjustment as provided below, sufficient to redeem
$45 million principal amount of Securities at a Redemption Price (expressed as a
percentage of principal amount) of 100%, plus accrued interest to the Redemption
Date. Upon any redemption of Securities in connection with a reduction in the
number of Mortgaged Vessels securing the Securities, whether as a result of the
sale of a Mortgaged Vessel, or an Event of Loss with respect to a Mortgaged
Vessel, each sinking fund payment payable after the occurrence of such event
shall be proportionately reduced by an amount equal to the product of (x) the
sinking fund payment otherwise due pursuant to this Section 3.01 multiplied by
(y) the Vessel Percentage of the Mortgaged Vessel so lost or sold). The cash
amount of any Sinking Fund payment is also subject to reduction as provided in
Section 3.02. Each Sinking Fund payment shall be applied to the redemption of
Securities on each such as herein provided.
39
<PAGE> 48
SECTION 3.02. Satisfaction of Sinking Fund Payments with Securities.
(a) The Company may deliver Outstanding Securities (other than any
previously called for redemption) theretofore purchased or otherwise acquired by
the Company in satisfaction of all or any part of any Sinking Fund payment
required to be made pursuant to Section 3.01; provided that such Securities have
not been previously so delivered. Each such Security shall be received and
credited for such purpose by the Trustee in an amount equal to the principal
amount thereof and the amount of such Sinking Fund payment shall be reduced
accordingly.
(b) The Company may also apply to the redemption of Securities in
satisfaction of all or any part of any Sinking Fund payment required to be made
pursuant to Section 3.01 cash deposited pursuant to Section 4.09(b) and held by
the Trustee in the Investment Account.
(c) At least 45 days prior to the Redemption Date for each Sinking Fund
payment, the Company shall deliver to the Trustee an Officers' Certificate
specifying (i) the portion thereof, if any, which is to be satisfied by payment
of cash, (ii) the portion thereof, if any, which is to be satisfied with cash
deposited pursuant to Section 4.09(b) and held by the Trustee in the Investment
Account and (iii) the portion thereof, if any, which is to be satisfied by
delivering or crediting Securities pursuant to Section 3.02(a) and shall also
deliver, if not previously delivered, to the Trustee any Securities to be so
delivered. Such Officers' Certificate shall also state that the Securities
forming the basis of any credit do not include any Securities which have been
redeemed through the operation of the Sinking Fund in the minimum amount
required under Section 3.01 or previously credited against such Sinking Fund
payment. Such certificate shall be irrevocable and upon its delivery the Company
shall be obligated to make the cash payment or payments therein referred to, if
any, on or before the next succeeding Sinking Fund Redemption Date. In the case
of the failure of the Company to deliver such certificate, the Sinking Fund
payment due on the next succeeding Sinking Fund Redemption Date shall be paid
entirely in cash. The Trustee shall, upon the receipt of such Officers'
Certificate, select the Securities to be redeemed upon such Sinking Fund
Redemption Date, in the manner specified in Section 3.05 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 3.06. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 3.09 and 3.10.
SECTION 3.03. Mandatory Redemption upon the Loss of a Mortgaged Vessel.
Unless and until the Termination and Release shall have occurred, and if an
Event of Loss occurs at any time with respect to a Mortgaged Vessel (the
Mortgaged Vessel suffering such Event of Loss being the "Lost Mortgaged
Vessel"), the Company shall deposit funds with
40
<PAGE> 49
the Trustee in an amount equal to the Vessel Percentage applicable to the Lost
Mortgaged Vessel multiplied by the principal amount of Securities Outstanding on
the date (the "Loss Date") such Event of Loss was deemed to have occurred (the
"Loss Redemption Amount") (provided, that if an Event of Default shall have
occurred and be continuing at the time of receipt of Event of Loss Proceeds,
such funds must be in an amount equal to the greater of (x) the Loss Redemption
Amount and (y) the Event of Loss Proceeds) upon the earlier to occur of (A) the
receipt of Event of Loss Proceeds with respect to such Event of Loss and (B) 90
days after the Loss Date, to be held in the Investment Account until applied in
accordance with subsections (a) or (b) below, and:
(a) (i) redeem Securities, in whole or in part (rounded to the nearest
$1,000 in principal amount), at a Redemption Price equal to 100% of their
principal amount, plus accrued interest to the Redemption Date, in an
aggregate principal amount equal to the Loss Redemption Amount and (ii)
treat the amount equal to the excess of the Net Event of Loss Proceeds from
such Event of Loss over the Loss Redemption Amount, if any, as Loss Excess
Proceeds; or
(b) if no Event of Default shall have occurred and be continuing (i)
notify the Trustee within 30 days of the Loss Date of its intention to
substitute a Qualified Substitute Vessel for the Lost Mortgaged Vessel,
(ii) substitute a Qualified Substitute Vessel for the Lost Mortgaged Vessel
within 180 days of the Loss Date and (iii) within 12 months after the
Vessel Tender Date, (A)(1) apply an amount equal to the Net Event of Loss
Proceeds from such Event of Loss to repay unsubordinated Indebtedness of
the Company or a Guarantor or Indebtedness of any Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its
Subsidiaries, or (2) invest an equal amount, or the amount not so applied
pursuant to clause (1) (or enter into a definitive agreement committing to
so invest within 12 months after the date of such agreement), in property
or assets of a nature or type of which shall be used in a business (or in a
company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and
assets of, or the business of, the Company and its Restricted Subsidiaries
existing on the date of such investment, or allocate such amount to working
capital for general corporate purposes (in each case, as determined in good
faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) and (B) treat any remaining Net Event
of Loss Proceeds, to the extent not applied pursuant to clause (A), as Loss
Excess Proceeds.
The Redemption Date for a mandatory redemption pursuant to this Section
3.03 shall be not later than the earlier of (x) 60 days after the date of
receipt by the Trustee of Event of Loss Proceeds with respect to such Event of
Loss and (y) 90 days after the Loss Date; provided, however, that in the event
that the Company has not deposited the Loss Redemption
41
<PAGE> 50
Amount with the Trustee as required above or the Company has notified the
Trustee of its election to substitute a Qualified Substitute Vessel, but the
Company's obligation to redeem Securities has been reinstated as described above
due to the failure to comply with the conditions set forth in the proviso of
subparagraph (b) above, the Redemption Date shall be not later than the 60th day
following the earliest of (x) the Company's failure to deposit the Loss
Redemption Amount with the Trustee as required above, (y) the Company's
notification to the Trustee that it no longer elects to, or is unable to,
substitute a Qualified Substitute Vessel and (z) the end of the 180-day period
provided for such substitution in clause (b)(ii) of this Section 3.03.
SECTION 3.04. Mandatory Redemption upon the Sale of a Mortgaged Vessel.
Unless and until the Termination and Release shall have occurred, if a
Mortgaged Vessel or the Capital Stock of a Guarantor is sold in accordance with
the terms of the Indenture (the Mortgaged Vessel so sold or owned by the
Guarantor whose Capital Stock is so sold being the "Sold Mortgaged Vessel"), the
Company shall deposit with the Trustee funds in an amount (the "Sale Redemption
Amount") equal to the Vessel Percentage applicable to the Sold Mortgaged Vessel
multiplied by the principal amount of Securities outstanding on the date of such
sale (the "Sale Date") upon the earlier to occur of (A) the receipt of Net Cash
Proceeds with respect to such sale and (B) 30 days after the Sale Date, to be
held in the Investment Account until applied in accordance with subsections (a)
or (b) below, and:
(a) (i) redeem Securities, in whole or in part, in an aggregate
principal amount equal to the Sale Redemption Amount at a Redemption Price
equal to the greater of (A) 100% of the principal amount of such Securities
and (B) the sum of the present values of the remaining scheduled payments
of principal and interest thereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 50 basis points, plus accrued interest
thereon to the Redemption Date and (ii) treat the amount equal to the
excess of the Net Cash Proceeds from such sale over the aggregate principal
amount of the Securities redeemed pursuant to clause (a)(i) above, if any,
as Sale Excess Proceeds; or
(b) (i) notify the Trustee within 30 days of the Sale Date of its
intention to substitute a Qualified Substitute Vessel for the Sold
Mortgaged Vessel, (ii) substitute a Qualified Substitute Vessel for the
Sold Mortgaged Vessel within 180 days of the Sale Date and (iii) within 12
months after the Vessel Tender Date, (A) (1) apply an amount equal to the
Net Cash Proceeds from such sale to repay unsubordinated Indebtedness of
the Company or a Guarantor or Indebtedness of any Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its
Subsidiaries, or (2) invest an equal amount, or the amount not so applied
pursuant to clause (1) (or enter into a definitive agreement committing to
so invest within 12 months after the date of such
42
<PAGE> 51
agreement), in property or assets of a nature or type of which shall be
used in a business (or in a company having property and assets of a nature
or type, or engaged in a business) similar or related to the nature or type
of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment, or
allocate such amount to working capital for general corporate purposes (in
each case, as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and
(B) treat any remaining Net Cash Proceeds, to the extent not applied
pursuant to clause (A), as Sale Excess Proceeds; provided, however, that
the Company shall not be permitted to substitute a Qualified Substitute
Vessel for the Sold Mortgaged Vessel, and shall be obligated to redeem
Securities as set forth in subparagraph (a) above, if (A) an Event of
Default shall have occurred and be continuing at the Vessel Tender Date,
(B) the Company does not deposit the Sale Redemption Amount with the
Trustee as required above, (C) the Appraised Value of the Qualified
Substitute Vessel at the Vessel Tender Date is less than the product of the
Vessel Percentage applicable to the Sold Mortgaged Vessel multiplied by the
principal amount of the Securities outstanding at the Vessel Tender Date or
(D) other requirements for the tender of the Qualified Substitute Vessel to
the Trust Estate specified in Section 9.08 are not satisfied at the Vessel
Tender Date for any reason.
The Redemption Date for a mandatory redemption pursuant to this Section
3.04 shall be not later than the earlier of 60 days after the Sale Date;
provided, however, that in the event that the Company has not deposited the Sale
Redemption Amount with the Trustee as required above or the Company has notified
the Trustee of its election to substitute a Qualified Substitute Vessel, but the
Company's obligation to redeem Securities has been reinstated as described above
due to the failure to comply with the conditions set forth in the proviso of
subparagraph (b) above, the Redemption Date shall be not later than the 60th day
following the earliest of (x) the Company's failure to deposit the Sale
Redemption Amount with the Trustee pursuant to the first paragraph of this
Section 3.04, (y) the Company's notification to the Trustee that it no longer
elects to, or is unable to, substitute a Qualified Substitute Vessel and (z) the
end of the 180-day period provided for such substitution in clause (b)(ii) of
this Section 3.04.
SECTION 3.05. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed at any time, the
Trustee shall select the Securities to be redeemed on a pro rata basis among all
of the Holders; provided that no Securities of $1,000 in original principal
amount or less shall be redeemed in part.
In any proration pursuant to this Section, the Trustee shall make such
adjustments, relocations and eliminations as it shall deem proper to the end
that the principal amount of Securities so prorated shall be $1,000 or a
multiple thereof, by increasing or decreasing or
43
<PAGE> 52
eliminating the amount which would be allocable to any Holder on the basis of
exact proportion by an amount not exceeding $1,000. The Trustee in its
discretion may determine the particular Securities (if there are more than one)
registered in the name of any Holder which are to be redeemed, in whole or in
part.
Provisions of this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption. The Trustee shall
notify the Company and the Registrar promptly in writing of the Securities or
portions of Securities to be called for redemption.
SECTION 3.06. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail a notice of redemption by first class mail to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Securities to the Paying Agent;
(vi) that, if any Security is being redeemed in part, the portion of
the principal amount (equal to $1,000 in original principal amount or any
integral multiple thereof) of such Security to be redeemed and that, on and
after the Redemption Date, upon surrender of such Security, a new Security
or Securities in principal amount equal to the unredeemed portion thereof
shall be reissued; and
(vii) that, if any Security contains a CUSIP number as provided in
Section 2.10, no representation is being made as to the correctness of the
CUSIP number either as
44
<PAGE> 53
printed on the Securities or as contained in the notice of redemption and
that reliance may be placed only on the other identification numbers
printed on the Securities.
At the Company's request (which request may be revoked by the Company at
any time prior to the time at which the Trustee shall have given such notice to
the Holders), made in writing to the Trustee at least 60 days (or such shorter
period as shall be satisfactory to the Trustee) before a Redemption Date, the
Trustee shall give the notice of redemption in the name and at the expense of
the Company. Concurrently with the giving of such notice by the Company to the
Holders, the Company shall deliver to the Trustee an Officers' Certificate
stating that such notice has been given.
SECTION 3.07. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price. Upon
surrender of any Securities to the Paying Agent, such Securities shall be paid
at the Redemption Price, plus accrued interest to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives the notice. In any event, failure to give such notice,
or any defect therein, shall not affect the validity of the proceedings for the
redemption of Securities held by Holders to whom such notice was properly given.
SECTION 3.08. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Paying Agent (or, if the Company is acting as its own Paying Agent, shall
segregate and hold in trust as provided in Section 2.04) money sufficient to pay
the Redemption Price of and accrued interest on all Securities to be redeemed on
that date other than Securities or portions thereof called for redemption on
that date that have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.09. Payment of Securities Called for Redemption.
If notice of redemption has been given in the manner provided above, the
Securities or portion of Securities specified in such notice to be redeemed
shall become due and payable on the Redemption Date at the Redemption Price
stated therein, together with accrued interest to such Redemption Date, and on
and after such date (unless the Company shall default in the payment of such
Securities at the Redemption Price and accrued interest to the Redemption Date,
in which case the principal, until paid, shall bear interest from the Redemption
Date at the rate prescribed in the Securities), such Securities shall cease to
accrue
45
<PAGE> 54
interest. Upon surrender of any Security for redemption in accordance with a
notice of redemption, such Security shall be paid and redeemed by the Company at
the Redemption Price, together with accrued interest to the Redemption Date;
provided that installments of interest whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders registered as such at the
close of business on the relevant Regular Record Date.
SECTION 3.10. Securities Redeemed in Part.
Upon surrender of any Security that is redeemed in part, the Trustee shall
authenticate for the Holder a new Security equal in principal amount to the
unredeemed portion of such surrendered Security.
ARTICLE FOUR
Covenants
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of, premium, if any, and interest on
the Securities on the dates and in the manner provided in the Securities and
this Indenture. An installment of principal, premium, if any, or interest shall
be considered paid on the date due if the Trustee or Paying Agent (other than
the Company, a Subsidiary of the Company, or any Affiliate of any of them) holds
on that date money designated for and sufficient to pay the installment. If the
Company or any Subsidiary of the Company or any Affiliate of any of them, acts
as Paying Agent, an installment of principal, premium, if any, or interest shall
be considered paid on the due date if the entity acting as Paying Agent complies
with the last sentence of Section 2.04. As provided in Section 7.09, upon any
bankruptcy or reorganization procedure relative to the Company, the Trustee
shall serve as the Paying Agent and conversion agent, if any, for the
Securities.
The Company shall pay interest on overdue principal, premium, if any, and
interest on overdue installments of interest, to the extent lawful, at the rate
per annum specified in the Securities.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York an office or agency where Securities may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company shall give prompt
46
<PAGE> 55
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided that
no such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, the City
of New York for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby initially designates the office of the Trustee, located
in the Borough of Manhattan, the City of New York as such office of the Company
in accordance with Section 2.03.
SECTION 4.03. Limitation on Indebtedness.
(a) Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any Restricted Subsidiary to, Incur any
Indebtedness (not including the Securities (including any agreement pursuant to
which the Securities are issued) and Indebtedness existing (or for which a
written commitment has been made and a copy of which has been delivered to the
Trustee on or prior to the Closing Date) on the Closing Date); provided that the
Company or any Restricted Subsidiary (other than a Guarantor and Palm Shipping)
may Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Interest Coverage Ratio of the Company would be greater than 2:1.
Notwithstanding the foregoing, the Company or any Restricted Subsidiary
(other than a Guarantor or Palm Shipping, except as provided in clause (vii)
below) also may Incur each and all of the following:
(i) Indebtedness in an aggregate principal amount such that the
aggregate principal amount of the Indebtedness of the Company and its
Restricted Subsidiaries outstanding immediately after such Incurrence does
not exceed the aggregate principal amount of Indebtedness existing (or for
which a written commitment has been made and a copy of which has been
delivered to the Trustee on or prior to the Closing Date) on the Closing
Date, after giving effect to the issuance of the Securities and the
application of the proceeds therefrom, plus $50 million;
47
<PAGE> 56
(ii) Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary, or of a Restricted Subsidiary to the Company or another Wholly
Owned Restricted Subsidiary;
(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, outstanding Indebtedness of the
Company or any Restricted Subsidiary, other than Indebtedness Incurred
under clause (i), (v) or (vi) of this paragraph and any refinancings
thereof, in an amount not to exceed the principal amount so exchanged,
refinanced or refunded (plus premiums, accrued and unpaid interest, fees
and expenses thereon); providedthat Indebtedness the proceeds of which are
used to refinance or refund the Securities or other Indebtedness of the
Company that is pari passu with, or subordinated in right of payment to,
the Securities shall only be permitted under this clause (iii) if (A) in
case the Securities are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Securities, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such
new Indebtedness is issued or remains outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining
Securities, (B) in case the Indebtedness to be refinanced is subordinated
in right of payment to the Securities, such new Indebtedness, by its terms
or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Securities, at least to the extent
that the Indebtedness to be refinanced is subordinated to the Securities
and (C) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness so exchanged, refinanced or refunded and the Average Life of
such new Indebtedness is at least equal to the remaining Average Life of
the Indebtedness so exchanged, refinanced or refunded;
(iv) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under Currency
Agreements and Interest Rate Agreements; provided that, in the case of
Currency Agreements that relate to other Indebtedness, such Currency
Agreements do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation payable
thereunder, and (C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant
to such agreements, in any case Incurred in connection with the disposition
of any business, assets or Restricted Subsidiary of the Company or of any
of its Restricted Subsidiaries and not exceeding the gross proceeds
therefrom, other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets
48
<PAGE> 57
or Restricted Subsidiary of the Company or any of its Restricted
Subsidiaries for the purpose of financing such acquisition;
(v) Indebtedness under Guarantees in respect of obligations of
Unrestricted Subsidiaries, in an amount not to exceed $5 million at any one
time outstanding;
(vi) Acquired Indebtedness; provided that, with respect to this clause
(vi), after giving effect to the Incurrence thereof, the Company could
Incur at least $1.00 of Indebtedness pursuant to the first paragraph of
this subsection (a); and
(vii) Indebtedness of Palm Shipping (A) Incurred in the ordinary
course of business in connection with the operation of any Vessel in an
aggregate principal amount not to exceed $25 million outstanding at any one
time or (B) to the Company resulting from advances to Palm Shipping by the
Company.
(b) For purposes of determining any particular amount of Indebtedness under
this Section 4.03, Guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with this Section 4.03, (i) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described above in this
Section, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses and (ii) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with GAAP.
Notwithstanding any other provision of this Section 4.03, the maximum amount of
Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to
this Section 4.03 shall not be deemed to be exceeded due solely to fluctuations
in the exchange rates of currencies.
(c) Unless and until the Termination and Release shall have occurred, the
Company shall not Incur any Indebtedness that is expressly subordinated to any
other Indebtedness of the Company unless such Indebtedness, by its terms or the
terms of any agreement or instrument pursuant to which such Indebtedness is
issued or remains outstanding, is also expressly made subordinate to the
Securities at least to the extent that it is subordinated to such other
Indebtedness.
(d) Unless and until the Termination and Release shall have occurred, no
Guarantor may Incur any Indebtedness other than pursuant to its Subsidiary
Guarantee, First Preferred Ship Mortgage, Assignment of Insurance, Assignment of
Freights and Hires, Assignment of Time Charter, Cash Collateral Account
Agreement and other related Security Documents.
49
<PAGE> 58
SECTION 4.04. Limitation on Restricted Payments.
Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, (i) declare or pay any dividend or make any distribution on its
Capital Stock (other than dividends or distributions payable solely in shares of
its or such Restricted Subsidiary's Capital Stock (other than Redeemable Stock
or Capital Stock of a Guarantor or Palm Shipping) of the same class held by such
holders or in options, warrants or other rights to acquire such shares of
Capital Stock) held by Persons other than the Company or any of its Wholly Owned
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of the Company or any of its Subsidiaries
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by Persons other than the Company or any of its Wholly Owned
Restricted Subsidiaries, (iii) make any voluntary or optional principal payment,
or voluntary or optional redemption, repurchase, defeasance, or other voluntary
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Securities, or (iv) make any Investment
in any Affiliate of the Company (other than a Restricted Subsidiary) or any
Unrestricted Subsidiary (such payments or any other actions described in clauses
(i) through (iv) being collectively "Restricted Payments") if, at the time of,
and after giving effect to, the proposed Restricted Payment: (A) a Default or
Event of Default shall have occurred and be continuing or (B) the aggregate
amount expended for all Restricted Payments (the amount so expended, if other
than in cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) after the
date of this Indenture shall exceed the sum of (1) 50% of the aggregate amount
of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of such amount) of the Company (determined by
excluding income resulting from transfers of assets received by the Company or a
Restricted Subsidiary from an Unrestricted Subsidiary) accrued on a cumulative
basis during the period (taken as one accounting period) beginning on the first
day of the month immediately following the Closing Date and ending on the last
day of the last fiscal quarter preceding the Transaction Date plus (2) the
aggregate net proceeds (including the fair market value of non-cash proceeds as
determined in good faith by the Board of Directors) received by the Company
(including the amount of dividends reinvested in the Capital Stock of the
Company) from the issuance and sale permitted by the Indenture of the Capital
Stock of the Company (other than Redeemable Stock) to a Person who is not a
Restricted Subsidiary or an Unrestricted Subsidiary, including an issuance or
sale permitted by this Indenture for cash or other property upon the conversion
of any Indebtedness of the Company subsequent to the Closing Date, or from the
issuance of any options, warrants or other rights to acquire Capital Stock of
the Company (in each case, exclusive of any Redeemable Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the Securities) plus
(3) an amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each
50
<PAGE> 59
case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries,
or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not to
exceed, in the case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company and any Restricted Subsidiary in such
Unrestricted Subsidiary plus (4) $50 million.
The foregoing provision shall not take into account, and shall not be
violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would
comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value (other than by a Guarantor) of Indebtedness of the
Company that is subordinated in right of payment to the Securities,
including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause (iii)
of the second paragraph of Section 4.03(a);
(iii) the repurchase, redemption or other acquisition by the Company
of Capital Stock of the Company in exchange for, or out of the proceeds of
a substantially concurrent offering of, shares of Capital Stock of the
Company (other than Redeemable Stock);
(iv) the acquisition by the Company of Indebtedness of the Company
that is subordinated in right of payment to the Securities in exchange for,
or out of the proceeds of, a substantially concurrent offering of, shares
of the Capital Stock of the Company (other than Redeemable Stock);
(v) payments or distributions pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with Article Six;
or
(vi) the purchase, redemption, acquisition, cancellation or other
retirement for a nominal value per right (as determined in good faith by
the Board of the Directors) of any rights granted to all of the holders of
Common Stock of the Company pursuant to any shareholders' rights plan
adopted for the purpose (determined in good faith by the Board of
Directors) of protecting shareholders from unfair takeover tactics;
provided that any such purchase, redemption, acquisition, cancellation or
other retirement of such rights shall not be for the purpose of evading the
limitations of this Section 4.04 (all as determined in good faith by the
Board of Directors);
51
<PAGE> 60
provided that, in the case of clauses (i) and (ii) above, no Default or Event of
Default shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
Notwithstanding the foregoing, in the event of an issuance of Capital Stock
of the Company and (1) the repurchase, redemption or other acquisition of
Capital Stock out of the proceeds of such issuance or (2) the acquisition of
Securities or Indebtedness that is subordinated in right of payment to the
Securities out of the proceeds of such issuance, as permitted by clauses (iii)
and (iv) above, then, in calculating whether the conditions of clause (B) of
this Section 4.04 have been met with respect to any subsequent Restricted
Payments, both the proceeds of such issuance and the application of such
proceeds shall be included under such clause (B).
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to
the Company or any other Restricted Subsidiary, (iii) make loans or advances to
the Company or any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Company or any other Restricted Subsidiary.
The foregoing provision shall not restrict or prohibit any encumbrances or
restrictions:
(i) existing pursuant to: (A) this Indenture, the Securities, the
Security Documents or any agreements in effect on the Closing Date or in
any Indebtedness containing any such encumbrance or restriction that is
permitted pursuant to clause (iv) below or in any extensions, refinancings,
renewals or replacements of any of the foregoing; provided that the
encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to
the Holders than those encumbrances or restrictions that are then in effect
and that are being extended, refinanced, renewed or replaced or (B) any
agreement which imposes such encumbrances or restrictions on Persons other
than a Guarantor, Palm Shipping or any Subsidiary of a Guarantor or Palm
Shipping;
52
<PAGE> 61
(ii) existing under any other agreement providing for the Incurrence
of Indebtedness of any Restricted Subsidiary (other than a Guarantor or
Palm Shipping) that is permitted to be Incurred by Section 4.03; provided
that the encumbrances and restrictions in any such agreement are no less
favorable in any material respect to the Holders than those encumbrances
and restrictions existing as of the Closing Date and permitted pursuant to
clause (i) above;
(iii) existing under and by reason of applicable law;
(iv) existing with respect to any Person or the property or assets of
such Person (other than a Guarantor or Palm Shipping) acquired by the
Company or any Restricted Subsidiary and existing at the time of such
acquisition, which encumbrances or restrictions are not applicable to any
Person or the property or assets of any Person other than such Person or
the property or assets of such Person so acquired;
(v) in the case of clause (iv) of the first paragraph of this Section
4.05, (A) that restrict in a customary manner the subletting, assignment or
transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by the Indenture or (C) arising or agreed to in
the ordinary course of business, not relating to any Indebtedness, and that
do not, individually or in the aggregate, detract from the value of
property or assets of the Company or any Restricted Subsidiary in any
manner material to the Company and its Restricted Subsidiaries; or
(vi) with respect to a Restricted Subsidiary (other than a Guarantor
or Palm Shipping), imposed pursuant to an agreement that has been entered
into for the sale or disposition of all or substantially all of the Capital
Stock of, or all, or substantially all, of the property and assets of, such
Restricted Subsidiary.
Nothing contained in this Section 4.05 shall prevent the Company or any
Restricted Subsidiary from (1) entering into any agreement permitting or
providing for the incurrence of Liens otherwise permitted in Section 4.08, (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness (other than the
Securities and the Subsidiary Guarantees) of the Company or any of its
Restricted Subsidiaries or (3) amending, modifying or supplementing any charter
or similar arrangement between Palm Shipping and a vessel-owning Subsidiary of
the Company (other than the Charters) solely (A) to lower the rates paid by Palm
Shipping to such vessel-owning Subsidiary under such charter or similar
arrangement or (B) to increase the rates paid by Palm Shipping to such
vessel-owning Subsidiary under such charter or similar arrangement to the extent
required to
53
<PAGE> 62
service (x) Indebtedness for money borrowed, Incurred in good faith (as
determined by the Board of Directors) and not with the purpose of evading the
requirements of this covenant, in connection with the financing or the
refinancing of Indebtedness of such Subsidiary and (y) expenses incurred by such
Subsidiary in the ordinary course of business.
SECTION 4.06. Limitation on Issuance of Capital Stock of Restricted
Subsidiaries.
Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly issue or sell any shares of the Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares of
such Capital Stock) except (i) to the Company or, except shares of Capital Stock
of a Guarantor or Palm Shipping, to another Wholly Owned Restricted Subsidiary,
(ii) other than with respect to shares of Capital Stock of a Guarantor or Palm
Shipping, to management employees of the Company or a Restricted Subsidiary
pursuant to the exercise of stock options or stock appreciation rights, (iii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary for purposes of
this Indenture or (iv) other than with respect to shares of Capital Stock of a
Guarantor or Palm Shipping, to Persons who are entering into joint ventures or
other similar business relationships with the Company or any Subsidiary other
than a Guarantor or Palm Shipping, provided that transactions pursuant to this
clause (iv) are approved in the manner set forth in clause (i) of the second
paragraph of Section 4.07.
SECTION 4.07. Limitation on Transactions with Shareholders and Affiliates.
Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or the
rendering of any service) or series of related transactions with any holder (or
any Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company, except upon fair and reasonable
terms no less favorable to the Company or such Restricted Subsidiary than could
be obtained, at the time of such transaction or series of related transactions
or at the time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not such a holder or
Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions or series of related transactions (A) approved by a
majority of the disinterested members of the Board of Directors as fair to
the Company or such
54
<PAGE> 63
Restricted Subsidiary or (B) for which the Company delivers to the Trustee
a written opinion of a nationally recognized investment banking firm
stating that the transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view;
(ii) any transaction or series of related transactions among the
Company and any Wholly Owned Restricted Subsidiaries (other than a
Guarantor or Palm Shipping) or among Wholly Owned Restricted Subsidiaries
(other than a Guarantor or Palm Shipping);
(iii) the payment of reasonable and customary regular fees to
directors of the Company or any Restricted Subsidiary who are not employees
of the Company or any Restricted Subsidiary; or
(iv) any Restricted Payments not prohibited by Section 4.04.
Notwithstanding the foregoing, any transaction or series of related transactions
of the type that are permitted under clause (iii) or (iv) of this paragraph, the
aggregate amount of which exceeds $5 million in value, must be approved or
determined to be fair in the manner provided for in clause (i) of the second
paragraph of this Section 4.07.
Nothing contained in this Section 4.07 shall prevent the Company or any
Restricted Subsidiary from amending, modifying or supplementing any charter or
similar arrangement between Palm Shipping and a vessel-owning Subsidiary of the
Company (other than the Charters) solely (A) to lower the rates paid by Palm
Shipping to such vessel-owning Subsidiary under such charter or similar
arrangement or (B) to increase the rates paid by Palm Shipping to such
vessel-owning Subsidiary under such charter or similar arrangement to the extent
required to service (x) Indebtedness for money borrowed, Incurred in good faith
(as determined by the Board of Directors) and not with the purpose of evading
the requirements of this covenant, in connection with the financing or
refinancing of Indebtedness of such Subsidiary and (y) expenses incurred by such
Subsidiary in the ordinary course of business.
SECTION 4.08. Limitation on Liens.
Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any Restricted Subsidiary to, create,
incur, assume or suffer to exist any Lien on any of its assets or properties, or
any shares of Capital Stock or Indebtedness of any Restricted Subsidiary,
without making effective provision for all of the Securities and all other
amounts due under the Indenture to be directly secured equally and ratably with
(or prior to) the obligation or liability secured by such Lien for so long as
such Lien affects such assets or properties, shares of Capital Stock or
Indebtedness. The foregoing limitation does not limit, and shall not apply to:
55
<PAGE> 64
(i) Liens securing obligations under this Indenture, the Securities
and the Security Documents;
(ii) other Liens existing or securing Indebtedness existing (or for
which a written commitment has been made, a copy of which has been
delivered to the Trustee and the Placement Agent on or prior to the Closing
Date) on the Closing Date;
(iii) Liens granted after the Closing Date on any assets or properties
or Capital Stock of the Company or its Subsidiaries created in favor of the
Holders;
(iv) Liens on assets or properties or Capital Stock of the Company or
a Restricted Subsidiary (other than a Guarantor and Palm Shipping) securing
Indebtedness permitted to be Incurred pursuant to Section 4.03;
(v) Liens with respect to Acquired Indebtedness, provided that such
Liens do not extend to or cover any assets or properties of the Company or
any Subsidiary of the Company other than the assets or properties acquired;
(vi) Liens with respect to the assets of a Restricted Subsidiary
(other than a Guarantor and Palm Shipping) granted by such Restricted
Subsidiary to the Company to secure Indebtedness owing to the Company by
such Restricted Subsidiary;
(vii) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness and which is permitted to be Incurred pursuant to
Section 4.03, provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than
the property or assets securing the Indebtedness being refinanced;
(viii) Liens on any accounts receivable accrued in the ordinary course
of business; and
(ix) Permitted Liens.
Notwithstanding the foregoing, unless and until the Termination and Release
shall have occurred, (x) the Company shall not, and shall not permit a Guarantor
or Palm Shipping to, create, incur, assume or suffer to exist any Lien upon
Capital Stock pledged pursuant to the Pledge Agreements and (y) no Guarantor
shall, and the Company shall not permit a Guarantor or Palm Shipping to, create,
incur, assume or suffer to exist any Lien upon any of its assets or properties,
except for Liens securing obligations under this Indenture, the Securities and
the Security Documents and Permitted Liens.
56
<PAGE> 65
SECTION 4.09. Limitation on Asset Sales.
(a) Unless and until the Termination and Release shall have occurred,
neither the Company nor any Guarantor may sell, assign, convey, transfer or
otherwise dispose of (collectively, as used in this Section 4.09, to "sell" or a
"sale") a Mortgaged Vessel or any other portion of the Trust Estate (other than
an Incidental Asset); provided that a Guarantor may sell a Mortgaged Vessel
(together with the applicable Charters, freights and hires and other related
agreements) or the Company may sell all of the Capital Stock of a Guarantor (any
such asset proposed to be sold is referred to herein as a "Mortgaged Vessel
Asset") if such sale of a Mortgaged Vessel Asset shall be made in compliance
with each of the following conditions:
(i) no Event of Default shall have occurred and be continuing;
(ii) the sale shall be effected in a commercially reasonable manner;
(iii) the entire consideration for such sale shall be cash and the Net
Cash Proceeds from such sale shall be not less than the Appraised Value of
the relevant Mortgaged Vessel Asset as of the date of such sale;
(iv) the sale shall be to a Person who is not an Affiliate of the
Company, and the Board of Directors of the Company shall have determined
that the sale was effected in a commercially reasonable fashion, which
determination shall be evidenced by a Board Resolution filed with the
Trustee;
(v) funds in an amount equal to the Sale Redemption Amount shall be
paid in full directly to the Trustee to be held in the Investment Account
and shall be received by the Trustee free of any Lien (other than the Lien
of this Indenture); and
(vi) the Company shall have complied with the provisions of Article
Nine in connection with such sale.
(b) Unless and until the Termination and Release shall have occurred, the
Company shall apply the amount received pursuant to clause (a)(v) above in
accordance with Section 3.04.
(c) Unless and until the Termination and Release shall have occurred, the
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
engage in any Asset Sales other than pursuant to Section 4.09(a) unless (x) (A)
such Asset Sale is by the Company or by a Restricted Subsidiary that is not a
Guarantor or (B) such Asset Sale is an Incidental Asset Sale and (y) in the
event and to the extent that the Net Cash Proceeds received by the Company or
any of its Restricted Subsidiaries from one or more of such Asset Sales
57
<PAGE> 66
occurring on or after the Closing Date in any period of 12 consecutive months
exceed $10 million, then the Company shall or shall cause a Restricted
Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received
exceed $10 million in any period of 12 consecutive months (A) apply an amount
equal to such excess Net Cash Proceeds to repay unsubordinated Indebtedness of
the Company or a Guarantor or Indebtedness of any Restricted Subsidiary, in each
case owing to a Person other than the Company or any of its Subsidiaries or (B)
invest an equal amount, or the amount not so applied pursuant to clause (A) (or
enter into a definitive agreement committing to so invest within 12 months after
the date of such agreement), in property or assets of a nature or type or which
shall be used in a business (or in a company having property and assets of a
nature or type, or engaged in a business) similar or related to the nature or
type of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment, or allocate
such amount to working capital for general corporate purposes (in each case, as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) and (ii) treat (no later than
the end of such 12-month period referred to in clause (i) of this subsection
(c)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause
(i) of this subsection (c)) as Sale Excess Proceeds.
SECTION 4.10. Excess Proceeds Offers.
(a) If, as of the first day of any calendar month, the aggregate amount of
Sale Excess Proceeds not theretofore subject to a Sale Excess Proceeds Offer (as
defined below) totals at least $10 million, the Company must, not later than the
fifteenth Business Day of such month, make an offer (a "Sale Excess Proceeds
Offer") to purchase from the holders on a pro rata basis an aggregate principal
amount of Securities equal to the Sale Excess Proceeds on such date, at a
purchase price at least equal to 101% of their principal amount, plus, in each
case, accrued interest (if any) to the date of purchase (the "Sale Excess
Proceeds Payment").
(b) Unless and until the Termination and Release shall have occurred, if,
as of the first day of any calendar month, the aggregate amount of Loss Excess
Proceeds not theretofore subject to a Loss Excess Proceeds Offer (as defined
below) totals at least $10 million, the Company must, not later than the
fifteenth Business Day of such month, make an offer (a "Loss Excess Proceeds
Offer," and together with a Sale Excess Proceeds Offer, an "Excess Proceeds
Offer") to purchase from the holders on a pro rata basis an aggregate principal
amount of Securities equal to the Loss Excess Proceeds on such date, at a
purchase price at least equal to 100% of their principal amount, plus, in each
case, accrued interest (if any) to the date of purchase (the "Loss Excess
Proceeds Payment," and together with a Sale Excess Proceeds Payment, an "Excess
Proceeds Payment").
(c) The Company shall commence an Excess Proceeds Offer by mailing a notice
to the Trustee and each Holder stating:
58
<PAGE> 67
(i) that the Excess Proceeds Offer is being made pursuant to this
Section 4.10 and that all Securities validly tendered shall be accepted for
payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Excess Proceeds Payment Date");
(iii) that any Security not tendered shall continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the Excess
Proceeds Payment, any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Excess
Proceeds Payment Date;
(v) that Holders electing to have a Security purchased pursuant to the
Excess Proceeds Offer shall be required to surrender the Security, together
with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
immediately preceding the Excess Proceeds Payment Date;
(vi) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Securities delivered for purchase and
a statement that such Holder is withdrawing his election to have such
Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
On the Excess Proceeds Payment Date, the Company shall: (i) accept for
payment on a pro rata basis Securities or portions thereof tendered pursuant to
the Excess Proceeds Offer; (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Securities or
portions thereof so accepted together with an Officers' Certificate specifying
the Securities or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Security equal in principal amount
to any unpurchased portion of the Security surrendered; provided that each
Security purchased and each new Security issued shall be in an original
59
<PAGE> 68
principal amount of $1,000 or integral multiples thereof. The Company shall
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the Excess Proceeds Payment Date. For purposes of this Section
4.10, the Trustee shall act as the Paying Agent.
(d) The Company shall comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that such Excess Proceeds are received
by the Company under this Section 4.10.
SECTION 4.11. Existence.
Subject to Article Four and Article Six of this Indenture, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its existence and the existence of each of its Subsidiaries in
accordance with the respective organizational documents of the Company and each
such Subsidiary and the rights (whether pursuant to charter, partnership
certificate, agreement, statute or otherwise), material licenses and franchises
of the Company and each such Subsidiary; provided that the Company shall not be
required to preserve any such right, license or franchise, or the existence of
any such Subsidiary (other than the Guarantors, if prior to the occurrence of
the Termination and Release, and Palm Shipping), if the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries taken as a whole.
SECTION 4.12. Payment of Taxes and Other Claims.
The Company shall pay or discharge and shall cause each of its Subsidiaries
to pay or discharge, or cause to be paid or discharged, before the same shall
become delinquent (i) all material taxes, assessments and governmental charges
levied or imposed upon (a) the Company or any such Subsidiary, (b) the income or
profits of any such Subsidiary which is a corporation or (c) the property of the
Company or any such Subsidiary and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a Lien upon the
property of the Company or any such Subsidiary; provided that the Company shall
not be required to pay or discharge, or cause to be paid or discharged, any such
tax, assessment, charge or claim the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves, if any, in conformity with GAAP, have been established.
SECTION 4.13. Maintenance of Properties.
Unless and until the Termination and Release shall have occurred, the
Company shall: (i) at all times and without cost or expense to the Trustee
maintain and preserve, or cause to be maintained and preserved, the Mortgaged
Vessels in accordance with the provisions of the
60
<PAGE> 69
First Preferred Ship Mortgagesl; (ii) at all times and without cost or expense
to the Trustee cause all other properties used or useful in the conduct of its
business or the business of any of its Subsidiaries, to be maintained and kept
in good condition, repair and working order and supplied with and; (iii) cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary.
SECTION 4.14. Insurance.
(a) Unless and until the Termination and Release shall have occurred, the
Company and each Guarantor shall at all times maintain all insurance relating to
the Mortgaged Vessels in accordance with the provisions of the First Preferred
Ship Mortgages.
(b) Each of the Company and its Restricted Subsidiaries shall at all times
keep all of its assets and properties (other than, if prior to the occurrence of
the Termination and Release, the Mortgaged Vessels) which are of an insurable
nature insured with insurers, believed by the Company and each Restricted
Subsidiary to be responsible, against loss or damage to the extent that property
of similar character is usually so insured by corporations similarly situated
and owning like properties.
SECTION 4.15. Performance of Agreements.
Unless and until the Termination and Release shall have occurred, the
Company and each of the Guarantors shall, and the Company shall cause Palm
Shipping to, perform in accordance with their terms their respective obligations
under the Charters, the Security Documents, and the insurance policies assigned
to the Trustee from time to time pursuant to the Assignments of Insurance and
any other agreements assigned to the Trustee to secure obligations under this
Indenture, the Securities and the Security Documents.
SECTION 4.16. Modification of Material Contracts.
(a) Unless and until the Termination and Release shall have occurred,
subject to Section 4.16(b), neither the Company nor any of the Guarantors may
amend or otherwise modify, agree to any variation of, waive any breach of,
release any other party from any obligations under or consent to any act or
omission by any other party which would constitute a breach under the material
provisions of any Charter, freights and hires or other agreement assigned as
security for the Securities, in each case in a manner adverse to the Holders
unless the Holders of a majority of the aggregate principal amount of Securities
Outstanding consent to such amendment, modification, variation, waiver, release
or consent.
(b) Unless and until the Termination and Release shall have occurred, the
Company and each Guarantor do hereby ratify and confirm the Charters and do
hereby agree
61
<PAGE> 70
that they shall not, and the Company shall cause Palm Shipping not to, except as
permitted in this Indenture, take or omit to take any action, the taking or
omission of which might result in an impairment of the Charters, this Indenture
or the Security Documents.
SECTION 4.17. Limitation on Investments.
Unless and until the Termination and Release shall have occurred, the
Company shall not permit any Guarantor to purchase or otherwise acquire any
Capital Stock or other securities or make any Investments, other than Permitted
Investments.
SECTION 4.18. Notice of Defaults.
In the event that the Company or, if prior to the occurrence of the
Termination and Release, any Guarantor becomes aware of any Default or Event of
Default the Company or a Guarantor, as the case may be, promptly after it
becomes aware thereof, shall give written notice thereof to the Trustee.
SECTION 4.19. Compliance Certificates.
(a) The Company and, unless and until the Termination and Release shall
have occurred, each Guarantor shall deliver to the Trustee, within 60 days after
the end of each fiscal quarter of the Company or such Guarantor, as the case may
be (120 days after the end of the last fiscal quarter of each year), an
Officers' Certificate stating whether or not the signers know of any Default or
Event of Default that occurred during such fiscal quarter. In the case of the
Officers' Certificate delivered within 120 days of the end of the Company's or
such Guarantor's, as the case may be, fiscal year, such certificate shall
contain a certification from the principal executive officer, principal
financial officer or principal accounting officer as to his or her knowledge of
the Company's or such Guarantor's, as the case may be, compliance with all
conditions and covenants under this Indenture. For purposes of this Section
4.19, such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture. If they do know of such
a Default or Event of Default, the certificate shall describe any such Default
or Event of Default and its status. The first certificate to be delivered
pursuant to this Section 4.19(a) shall be for the first fiscal quarter beginning
after the execution of this Indenture.
(b) The Company and, unless and until the Termination and Release shall
have occurred, each Guarantor shall deliver to the Trustee, within 120 days
after the end of the Company's or such Guarantor's, as the case may be, fiscal
year, a certificate signed by the Company's or such Guarantor's, as the case may
be, independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
most recent
62
<PAGE> 71
Officers' Certificate of the Company or such Guarantor, as the case may be,
delivered to the Trustee pursuant to paragraph (a) of this Section 4.19 and
(iii) whether, in connection with their audit examination, anything came to
their attention that caused them to believe that the Company or such Guarantor
was not in compliance with any of the terms, covenants, provisions or conditions
of Article Four and Section 6.01 of this Indenture as they pertain to accounting
matters and, if any Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided that such
independent certified public accountants shall not be liable in respect of such
statement by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
SECTION 4.20. Commission Reports and Reports to Holders.
At all times from and after the date of this Indenture, whether or not the
Company is then required to file reports with the Commission, the Company shall
file with the Commission all such reports and other information as would be
required to be filed with the Commission by the Exchange Act. The Company shall
supply to the Trustee and to each Holder, or shall supply to the Trustee for
forwarding to each Holder, without cost to such Holder, copies of such reports
or other information. The Company also shall comply with the other provisions of
TIA Section 314(a).
SECTION 4.21. Waiver of Stay, Extension or Usury Laws.
The Company and, unless and until the Termination and Release shall have
occurred, each Guarantor covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of, premium, if any, or interest on the
Securities as contemplated herein or any payments required under any Security
Documents, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company and each Guarantor hereby expressly
waives all benefit or advantage of any such law and covenants that it shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
63
<PAGE> 72
SECTION 4.22. Management of Mortgaged Vessels.
Unless and until the Termination and Release shall have occurred, at all
times while any Securities are outstanding, the Mortgaged Vessels shall be
managed and operated by the Company or an operator acceptable to the Trustee
pursuant to management agreements on fair and reasonable terms no less favorable
to the Company or the Guarantors than could be obtained in a comparable
arm's-length transaction with a Person that is not an Affiliate of the Company
or a Guarantor.
SECTION 4.23. Repurchase of Securities upon a Change of Control Triggering
Event.
(a) Upon the occurrence of a Change of Control Triggering Event, each
Holder shall have the right to require the repurchase of its Securities by the
Company in cash pursuant to the offer described below (the "Change of Control
Offer") at a purchase price equal to 101% of the principal amount thereof, plus
accrued interest (if any) to the date of purchase (the "Change of Control
Payment"). Prior to the mailing of the notice to Holders provided for in
subsection (b) of this Section, but in any event within 30 days following any
Change of Control Triggering Event, the Company shall (i) (A) repay in full all
unsubordinated Indebtedness of the Company that does not permit the Company to
repurchase the Securities pursuant to subsection (b) of this Section 4.23 or (B)
offer to repay in full all such unsubordinated Indebtedness of the Company and
repay such unsubordinated Indebtedness of each holder of such unsubordinated
Indebtedness who has accepted such offer or (ii) obtain the requisite consents,
if any, under the instruments governing any such unsubordinated Indebtedness of
the Company that is not repaid pursuant to clause (i) to permit the repurchase
of the Securities as provided for in subsection (b) of this Section. The Company
shall first comply with the covenant in the preceding sentence before it shall
be required to repurchase Securities pursuant to this Section 4.23.
(b) Within 30 days of a Change of Control Triggering Event, the Company
shall mail a notice to the Trustee and each Holder stating:
(i) that a Change of Control Triggering Event has occurred, that the
Change of Control Offer is being made pursuant to this Section 4.23 and
that all Securities validly tendered shall be accepted for payment;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Change of Control Payment Date");
(iii) that any Security not tendered shall continue to accrue
interest;
64
<PAGE> 73
(iv) that, unless the Company defaults in the payment of the Change of
Control Payment, any Security accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest on and after the Change of
Control Payment Date;
(v) that Holders electing to have any Security or portion thereof
purchased pursuant to the Change of Control Offer shall be required to
surrender such Security, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of such Security completed,
to the Paying Agent at the address specified in the notice prior to the
close of business on the Business Day immediately preceding the Change of
Control Payment Date;
(vi) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Securities delivered for purchase and
a statement that such Holder is withdrawing his election to have such
Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
(c) On the Change of Control Payment Date, the Company shall: (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee, all Securities or portions
thereof so accepted together with an Officers' Certificate specifying the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail, to the Holders of Securities so accepted, payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Security equal in principal amount
to any unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 4.23, the Trustee shall act as Paying Agent.
(d) The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Change of Control
Triggering Event occurs under this Section 4.23 and the Company is required
to repurchase Securities as set forth above.
65
<PAGE> 74
SECTION 4.24. Taxes.
In the event that the Company is required by any applicable law to make,
with respect to any payment to be made on a Security, any deduction or
withholding for or on account of any taxes, assessments or other governmental
charges imposed on such payment by any governmental or taxing authority (other
than the United States of America or any political subdivision or taxing
authority thereof or therein, including the Commonwealth of Puerto Rico, any
territory or possession of the United States of America or other area subject to
its jurisdiction), the Company shall pay such additional amount as may be
necessary in order that the net amount received by the Holder of such Security
in respect of such payment shall be not less than the amount of the payment such
Holder would have received had no deduction or withholding been required;
provided, however, that the Company shall not be required to pay any additional
amount on account of a tax, assessment or other governmental charge imposed by
reason of any present or former connection between a Holder of Securities (or
between a fiduciary, settlor, beneficiary, member or shareholder of, or
possessor of a power over, such Holder, if such Holder is an estate, trust,
partnership or corporation) and the governmental or taxing authority, including
without limitation such Holder (or a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, such Holder) having been a citizen
or resident thereof or treated as a resident thereof or being or having been
engaged in a trade or business therein or having or having had a permanent
establishment therein.
SECTION 4.25. Opinion of Counsel with Respect to Trust Estate.
Unless and until the Termination and Release shall have occurred, the
Company shall furnish to the Trustee:
(a) promptly after the execution and delivery of this Indenture, the
Security Documents, each supplemental indenture, each amendment or supplement to
a Security Document or other instrument of further assurance, an Opinion of
Counsel stating that, in the opinion of such Counsel, this Indenture, the
Security Documents, any such supplemental indentures, any such amendment or
supplement to a Security Document and other instruments of further assurance
have been properly recorded, endorsed, registered and filed, or have been
received for record, filing or registration, to the extent necessary to make
effective and perfect the Liens intended to be created by this Indenture and the
Security Documents and reciting the details of such action or referring to prior
Opinions of Counsel in which such details are given, and stating that all
financing statements and continuation statements have been executed and filed
that are necessary fully to perfect, preserve and protect the rights of the
Holders and the Trustee hereunder and thereunder, or stating that, in the
Opinion of such Counsel, no such action is necessary to make such Liens
effective; and
66
<PAGE> 75
(b) within 30 days after December 31 in each year beginning with the year
1996, an Opinion of Counsel, dated as of such date, either stating that, in the
opinion of such Counsel, such action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and re-filing of
this Indenture, the Security Documents, of all supplemental indentures, of all
amendments or supplements to Security Documents, financing statements,
continuation statements or other instruments of further assurances as is
necessary to maintain the Lien of this Indenture and the Security Documents
(including the Lien on any property acquired by the Company or any Guarantor
since the end of the preceding calendar year) and reciting the details of such
action or referring to prior Opinions of Counsel in which such details are
given, and stating that all financing statements and continuation statements
have been executed and filed that are necessary fully to perfect, preserve and
protect the rights of the Holders and the Trustee hereunder, or stating that, in
the Opinion of Counsel, no such action is necessary to maintain such Lien.
ARTICLE FIVE
Covenants After Termination and Release
SECTION 5.01. Termination and Release.
In the event that (i) the Securities achieve Investment Grade Status on a
pro formabasis after giving effect to the termination of the Security Documents
and the release of the Collateral from the Liens of this Indenture and the
Security Documents, (ii) no Event of Default shall have occurred and be
continuing and (iii) on a pro forma basis, after giving effect to the
termination of the Security Documents and the release of the Collateral from the
Liens of this Indenture and the Security Documents, the aggregate amount of all
Indebtedness of the Company that is secured by a Lien plus(without duplication)
all Indebtedness of Restricted Subsidiaries is not greater than 15% of the
Company's Consolidated Tangible Assets (the occurrence of the events described
in the foregoing clauses (i), (ii) and (iii) being collectively referred to as
the "Fall-away Event"):
(A) each of the Subsidiary Guarantees shall be terminated pursuant to
Section 11 of the relevant Subsidiary Guarantee;
(B) the pledge of the issued and outstanding Capital Stock of each
Guarantor made pursuant to the Pledge Agreement shall be terminated
pursuant to Section 15 of the Pledge Agreement;
67
<PAGE> 76
(C) each First Preferred Ship Mortgage granted by the Guarantors to
the Trustee shall be released pursuant to the granting clause of the
relevant First Preferred Ship Mortgage;
(D) the assignment of the Charter and all moneys and claims assigned
to the Trustee pursuant to each Assignment of Time Charter shall be
terminated in accordance with the relevant Assignment of Time Charter;
(E) the assignment of the insurances, claims, returns of premium and
other moneys and rights assigned to the Trustee pursuant to each Assignment
of Insurance shall be terminated pursuant to Section 9 of the relevant
Assignment of Insurance;
(F) the assignment of the freights, hire and other moneys and claims
assigned to the Trustee pursuant to each Assignment of Freights and Hire
shall be terminated pursuant to Section 10 of the relevant Assignment of
Freights and Hire;
(G) the security interests granted to the Trustee pursuant to each
Cash Collateral Account Agreement shall terminate pursuant to Section 17 of
the relevant Cash Collateral Account Agreement, the security interest
granted to the Trustee pursuant to the Investment Account Agreement shall
terminate pursuant to Section 17 of the Investment Account Agreement, and
all right, title and interest in and to the Investment Account and each
Cash Collateral Account shall revert to the Company or the relevant
Guarantor, as the case may be;
(H) the mandatory redemption requirements set forth in Sections 3.03
and 3.04 shall no longer be applicable to the Company; and
(I) except as otherwise set forth herein, (i) the covenants set forth
in Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10(b), 4.11 (to the
extent of the specific reference to the Guarantors in the proviso), 4.13,
4.14(a), 4.15, 4.16, 4.17, 4.18 (to the extent applicable to the
Guarantors), 4.19 (to the extent applicable to the Guarantors), 4.21 (to
the extent applicable to the Guarantors) and 4.22, the provisions of
Article Nine, and clauses (4) and (5) of Section 6.01 shall no longer be
applicable to the Company, the Guarantors and the Restricted Subsidiaries
and (ii) the covenants set forth in this Article Five shall be applicable
to the Company and the Restricted Subsidiaries;
provided that (x) the Company and the Guarantors deliver to the Trustee a
written request that the Termination and Release shall occur and (y) the Company
delivers to the Trustee (i) an Officer's Certificate certifying that the
Fall-away Event shall have occurred, (ii) an Opinion of Counsel pursuant to
Section 13.03 stating, among other things, that no Event of Default shall have
occurred and be continuing and (iii) a letter from each of the Rating Agencies
certifying that the Securities are
68
<PAGE> 77
rated Investment Grade and shall be rated Investment Grade on a pro forma basis
after giving effect to termination of the Security Documents and the release of
the Collateral from the Liens of this Indenture and the Security Documents and
with the changes described in clauses (H) and (I) above. Each of such Officer's
Certificate, Opinion of Counsel and letters from the Rating Agencies shall be
dated not more than one day prior to the date on which the Company and the
Guarantors request that the Termination and Release occur.
The occurrence of the Fall-away Event and the satisfaction of the
requirements described in clauses (x) and (y) of this Section 5.01 are
collectively referred to herein as the "Termination and Release".
As soon as practicable after the occurrence of the Termination and Release,
the Trustee will, at the Company's expense, (i) return to the Company or the
relevant Guarantor, as the case may be, all Collateral as shall not have been
sold or otherwise applied pursuant to the terms of the relevant Security
Document and (ii) promptly execute and deliver all further instruments and
documents, and take all further actions, that may be necessary or desirable, or
that the Company may reasonably request, in order to evidence the Termination
and Release.
SECTION 5.02. Limitation on Liens.
Following the occurrence of the Termination and Release, the Company shall
not, and shall not permit any Restricted Subsidiary to, incur any Lien on any of
its assets or properties without making effective provision for all of the
Securities and all other amounts due under this Indenture to be directly secured
equally and ratably with (or prior to) the obligation or liability secured by
such Lien for so long as such Lien affects such assets or properties unless, at
the time of the incurrence of such Lien, the aggregate amount of all
Indebtedness of the Restricted Subsidiaries plus the aggregate amount of all
Indebtedness of the Company secured by a Lien on the Company's assets shall not
be greater than 15% of the Company's Consolidated Tangible Assets. The foregoing
limitation does not apply to:
(i) Liens on assets or properties or Capital Stock of the Company or a
Restricted Subsidiary (other than Palm Shipping) securing Indebtedness
permitted to be incurred pursuant to Section 5.03;
(ii) Liens on certain assets and properties securing Indebtedness
which are incurred to refinance Indebtedness secured by Liens on the same
assets or properties;
(iii) Liens with respect to Acquired Indebtedness, provided that such
Liens do not extend to or cover any assets or properties of the Company or
any Subsidiary of the Company other than the assets or properties acquired;
69
<PAGE> 78
(iv) Liens with respect to the assets of a Restricted Subsidiary
(other than Palm Shipping) granted by such Restricted Subsidiary to the
Company to secure Indebtedness owing to the Company by such Restricted
Subsidiary;
(v) Liens on any accounts receivable accrued in the ordinary course of
business; and
(vi) Permitted Liens.
Notwithstanding the foregoing, following the occurrence of the Termination
and Release, the Company shall not, and shall not permit Palm Shipping to,
create, incur, assume or suffer to exist any Lien upon any of Palm Shipping's
assets or properties, except for Permitted Liens.
SECTION 5.03. Limitation on Indebtedness of Restricted Subsidiaries.
(a) Following the occurrence of the Termination and Release, the Company
shall not permit any Restricted Subsidiary to Incur any Indebtedness unless,
after giving effect to the Incurrence of such Indebtedness and the application
of the net proceeds therefrom, the aggregate amount of Indebtedness of all
Restricted Subsidiaries plus the aggregate amount of all Indebtedness of the
Company secured by a Lien on the Company's assets is not greater than 15% of the
Company's Consolidated Tangible Assets.
Notwithstanding the foregoing, any Restricted Subsidiary (other than Palm
Shipping, except as provided in clause (v) below) also may Incur each and all of
the following:
(i) Indebtedness of a Restricted Subsidiary to the Company or to any
other Wholly Owned Restricted Subsidiary;
(ii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, outstanding Indebtedness of any Restricted
Subsidiary, other than Indebtedness Incurred under clause (i) or (v) of
this paragraph (a) and any refinancings thereof, in an amount not to exceed
the principal amount so exchanged, refinanced or refunded (plus premiums,
accrued and unpaid interest, fees and expenses thereon); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Securities or other Indebtedness of the Company that is pari passu with, or
subordinated in right of payment to, the Securities shall only be permitted
under this clause (iii) if (A) in case the Securities are refinanced in
part or the Indebtedness to be refinanced is pari passu with the
Securities, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is issued
or
70
<PAGE> 79
remains outstanding, is expressly made pari passu with, or subordinate in
right of payment to, the remaining Securities, (B) in case the Indebtedness
to be refinanced is subordinated in right of payment to the Securities,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the
Securities, at least to the extent that the Indebtedness to be refinanced
is subordinated to the Securities and (C) such new Indebtedness, determined
as of the date of Incurrence of such new Indebtedness, does not mature
prior to the Stated Maturity of the Indebtedness so exchanged, refinanced
or refunded and the Average Life of such new Indebtedness is at least equal
to the remaining Average Life of the Indebtedness so exchanged, refinanced
or refunded;
(iii) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under Currency
Agreements and Interest Rate Agreements; provided that, in the case of
Currency Agreements that relate to other Indebtedness, such Currency
Agreements do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation payable
thereunder, and (C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of any Restricted Subsidiaries pursuant to such agreements, in
any case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary of the Company or of any of its Restricted
Subsidiaries and not exceeding the gross proceeds therefrom, other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary of the Company or
any of its Restricted Subsidiaries for the purpose of financing such
acquisition;
(iv) Acquired Indebtedness; provided that, with respect to this clause
(iv), after giving effect to the Incurrence thereof, the Restricted
Subsidiaries could Incur at least $1.00 of Indebtedness pursuant to the
first paragraph of this subsection (a); and
(v) Indebtedness of Palm Shipping (A) Incurred in the ordinary course
of business in connection with the operation of any Vessel in an aggregate
principal amount not to exceed $25 million outstanding at any one time or
(B) to the Company resulting from advances to Palm Shipping by the Company.
(b) For purposes of determining any particular amount of Indebtedness under
this Section 5.03, Guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with this Section 5.03, (i) in the event that
71
<PAGE> 80
an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described above in this Section, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses and (ii)
the amount of Indebtedness issued at a price that is less than the principal
amount thereof shall be equal to the amount of the liability in respect thereof
determined in conformity with GAAP. Notwithstanding any other provision of this
Section 5.03, the maximum amount of Indebtedness that any Restricted Subsidiary
may Incur pursuant to this Section 5.03 shall not be deemed to be exceeded due
solely to fluctuations in the exchange rates of currencies.
(c) Following the occurrence of the Termination and Release, the Company
may not incur any Indebtedness that is expressly subordinated to any other
Indebtedness of the Company unless such Indebtedness, by its terms or the terms
of any agreement or instrument pursuant to which such Indebtedness is issued or
remains outstanding, is also expressly made subordinate to the Securities at
least to the extent that it is subordinated to such other Indebtedness.
SECTION 5.04. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
Following the occurrence of the Termination and Release, the Company shall
not, and shall not permit any Restricted Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Company or any other Restricted Subsidiary.
The foregoing provision shall not restrict or prohibit any encumbrances or
restrictions:
(i) existing pursuant to: (A) this Indenture, the Securities or any
other agreements in effect on the date of the Termination and Release or in
any Indebtedness containing any such encumbrance or restriction that is
permitted pursuant to clause (iv) below or in any extensions, refinancings,
renewals or replacements of any of the foregoing; provided that the
encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to
the Holders than those encumbrances or restrictions that are then in effect
and that are being extended, refinanced, renewed or replaced or (B) any
agreement which imposes such encumbrances or restrictions on Persons other
than Palm Shipping or any Subsidiary of Palm Shipping;
72
<PAGE> 81
(ii) existing under any other agreement providing for the Incurrence
of Indebtedness of any Restricted Subsidiary (other than Palm Shipping)
that is permitted to be Incurred by Section 5.03; provided that the
encumbrances and restrictions in any such agreement or in any extensions,
refinancings, renewals or replacements of such agreement are no less
favorable in any material respect to the Holders than those encumbrances
and restrictions existing as of the date of the Termination and Release and
permitted pursuant to clause (i) of this paragraph;
(iii) existing under and by reason of applicable law;
(iv) existing with respect to any Person or the property or assets of
such Person (other than Palm Shipping) acquired by the Company or any
Restricted Subsidiary and existing at the time of such acquisition, which
encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired or any extensions, refinancings, renewals
or replacements of the foregoing; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and are being
extended, refinanced, renewed or replaced;
(v) in the case of clause (iv) of the first paragraph of this Section
5.04, (A) that restrict in a customary manner the subletting, assignment or
transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by this Indenture or (C) arising or agreed to in
the ordinary course of business, not relating to any Indebtedness, and that
do not, individually or in the aggregate, detract from the value of
property or assets of the Company or any Restricted Subsidiary in any
manner material to the Company and its Restricted Subsidiaries; or
(vi) with respect to a Restricted Subsidiary (other than Palm
Shipping), imposed pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock
of, or all, or substantially all, of the property and assets of, such
Restricted Subsidiary.
Nothing contained in this Section 5.04 shall prevent the Company or any
Restricted Subsidiary from (1) entering into any agreement permitting or
providing for the incurrence of Liens otherwise permitted in Section 5.02, (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness (other than the
Securities) of the Company or any of its Restricted Subsidiaries or (3)
amending, modifying
73
<PAGE> 82
or supplementing any charter or similar arrangement between Palm Shipping and a
vessel-owning Subsidiary of the Company (other than the Charters) solely (A) to
lower the rates paid by Palm Shipping to such vessel-owning Subsidiary under
such charter or similar arrangement or (B) to increase the rates paid by Palm
Shipping to such vessel-owning Subsidiary under such charter or similar
arrangement to the extent required to service (x) Indebtedness for money
borrowed, Incurred in good faith (as determined by the Board of Directors) and
not with the purpose of evading the requirements of this covenant, in connection
with the financing or the refinancing of Indebtedness of such Subsidiary and (y)
expenses incurred by such Subsidiary in the ordinary course of business.
SECTION 5.05. Limitation on Issuance of Capital Stock of Restricted
Subsidiaries.
Following the occurrence of the Termination and Release, the Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
issue or sell any shares of the Capital Stock of a Restricted Subsidiary
(including options, warrants or other rights to purchase shares of such Capital
Stock) except (i) to the Company or, except shares of Capital Stock of Palm
Shipping, to another Wholly Owned Restricted Subsidiary, (ii) other than with
respect to shares of Capital Stock of Palm Shipping, to management employees of
the Company or a Restricted Subsidiary pursuant to the exercise of stock options
or stock appreciation rights, (iii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary for purposes of this Indenture or (iv) other than with
respect to shares of Capital Stock of Palm Shipping, to Persons who are entering
into joint ventures or other similar business relationships with the Company or
any Subsidiary other than Palm Shipping, provided that transactions pursuant to
this clause (iv) are approved in the manner set forth in clause (i) of the
second paragraph of Section 4.07.
SECTION 5.06. Limitation on Sales and Leasebacks.
Following the occurrence of the Termination and Release, neither the
Company nor any Restricted Subsidiary may enter into any sale and leaseback
transaction involving any property or assets owned or leased by the Company or
any Restricted Subsidiary, the acquisition of which, or completion of
construction and commencement of full operation of which, has occurred more than
120 days prior to such sale and leaseback transaction, unless the Company or
such Restricted Subsidiary, within 360 days after the sale or transfer of such
property, (1) applies the Net Cash Proceeds from such sale, first, to the
purchase, acquisition or construction of property or assets to be used in the
business of the Company and its Restricted Subsidiaries (which includes the
entering into, within such 360 day period, of any agreement for such purchases,
acquisition or construction of property or assets) and, second, to the repayment
or reduction of certain unsubordinated Indebtedness or as working capital for
general corporate
74
<PAGE> 83
purposes and (2) treats (no later than the end of such 12-month period referred
to in clause (1) above) such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (1) above) as Sale Excess Proceeds.
ARTICLE SIX
Consolidation, Merger and Sale of Assets
SECTION 6.01. When Company May Merge, Etc.
The Company shall not, in a single transaction or a series of related
transactions, (i) consolidate with or merge with or into any other Person or
permit any other Person to consolidate with or merge with or into the Company,
or (ii) directly or indirectly, transfer, sell, lease or otherwise dispose of
all or substantially all of its assets, unless:
(1) in a transaction in which the Company does not survive or in which
the Company sells, leases or otherwise disposes of all or substantially all
of its assets, the successor entity to the Company is organized under (a)
the laws of the United States or any State thereof or the District of
Columbia, (b) the laws of the Republic of Liberia, (c) the laws of the
Commonwealth of the Bahamas or (d) the laws of any other country recognized
by the United States of America and which, in the case of any of (a), (b),
(c) or (d), shall expressly assume, by a supplemental indenture executed
and delivered to the Trustee in the form satisfactory to the Trustee, all
of the Company's obligations under this Indenture and, if applicable, the
Security Documents;
(2) immediately before and after giving effect to such transaction and
treating any Indebtedness which becomes an obligation of the Company or a
Restricted Subsidiary as a result of such transaction as having been
incurred by the Company or such Restricted Subsidiary at the time of the
transaction, no Default or Event of Default shall have occurred and be
continuing;
(3) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Company (or other successor entity to the
Company) and its Restricted Subsidiaries is equal to or greater than that
of the Company and its Restricted Subsidiaries immediately prior to the
transaction;
(4) immediately after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of the Company or a Restricted
Subsidiary as a result of such transaction as having been incurred by the
Company or such Restricted Subsidiary at the time of the transaction, (A)
unless and until the Termination and
75
<PAGE> 84
Release shall have occurred, the Company (including any successor entity to
the Company) could incur at least $1.00 of additional indebtedness pursuant
to the provisions of Section 4.03 and (B) following the occurrence of the
Termination and Release, the Restricted Subsidiary could incur at least
$1.00 of additional indebtedness pursuant to Section 5.03.
(5) if, as a result of any such transaction, property or assets of the
Company would become subject to a Lien prohibited by the provisions of (x)
Section 4.08 prior to the occurrence of the Termination and Release or (y)
Section 5.02 following the occurrence of the Termination and Release, the
Company or the successor entity to the Company shall have secured the
Securities as required by Section 4.08 or Section 5.02, as the case may be;
and
(6) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clause (3) and clause (4) above) and an Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such supplemental
indenture comply with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied with.
SECTION 6.02. Successor Substituted.
Upon any consolidation or merger, or any transfer, sale, lease or other
disposition of all or substantially all of the property and assets of the
Company in accordance with Section 6.01(a) of this Indenture, the successor
Person formed by such consolidation or into which the Company is merged or to
which such transfer, sale, lease or other disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein.
ARTICLE SEVEN
Default and Remedies
SECTION 7.01. Events of Default.
An "Event of Default" shall occur with respect to the Securities if:
76
<PAGE> 85
(a) the Company defaults in the payment of the principal of (or
premium, if any, on) any Securities when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any Securities
when the same becomes due and payable and such default continues for a
period of 30 days;
(c) the Company defaults in the deposit of any Sinking Fund or other
mandatory redemption payment, when and as due by the terms of this
Indenture;
(d) the Company or, if prior to the occurrence of the Termination and
Release, any Guarantor defaults in the performance of or breaches any other
covenant or agreement of the Company or such Guarantor in this Indenture or
under the Securities or in the Security Documents, if applicable, and such
default or breach continues for a period of 30 consecutive days after the
date on which written notice of such default or breach, requiring the
Company or a Guarantor to remedy the same, shall have been given to the
Company or such Guarantor by the Trustee, or to the Company, such Guarantor
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Securities at the time Outstanding;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any of its Restricted Subsidiaries having an outstanding
aggregate principal amount of $10 million or more individually or $20
million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, an
event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not
been rescinded or annulled (by cure, waiver or otherwise) within 30 days of
such acceleration; provided, however, that any secured Indebtedness in
excess of the limits set forth above shall be deemed to have been declared
due and payable if the lender in respect thereof takes any action to
enforce a security interest against, or an assignment of, or to collect on,
seize, dispose of or apply any assets of the Company or its Subsidiaries
(including lock-box and other similar arrangements) securing such
Indebtedness, or to set off against any bank account of the Company or its
Subsidiaries (in excess of $10 million);
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million individually or $20 million in
the aggregate for all such final judgments or orders against all such
Persons (treating any deductibles, self-insurance or retention as not so
covered) shall be rendered against the Company or any Restricted Subsidiary
and shall not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order in excess
77
<PAGE> 86
of $10 million individually or that causes the aggregate amount for all
such final judgments or orders outstanding and not paid or discharged
against all such Persons to exceed $20 million during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect;
(g) the Company or any Restricted Subsidiary shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Company or any Restricted Subsidiary seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days, or
any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of
a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Company or any
Subsidiary shall take any corporate action to authorize any of the actions
set forth above in this subsection (g);
(h) the Company and/or one or more of its Restricted Subsidiaries
fails to make (i) at the final (but not any interim) fixed maturity of any
issue of Indebtedness a principal payment of $10 million or more or (ii) at
the final (but not any interim) fixed maturity of more than one issue of
such Indebtedness principal payments aggregating $20 million or more and,
in the case of clause (i), such defaulted payment shall not have been made,
waived or extended within 30 days of the payment default and, in the case
of clause (ii), all such defaulted payments shall not have been made,
waived or extended within 30 days of the payment default that causes the
amount described in clause (ii) to exceed $20 million;
(i) if, prior to the occurrence of the Termination and Release, any
Security Document ceases to be in full force and effect for a period of 30
days; or
(j) if, prior to the occurrence of the Termination and Release, any
Charter ceases to be in full force and effect or is repudiated prior to the
expiration of the term of such Charter.
78
<PAGE> 87
SECTION 7.02. Acceleration.
If an Event of Default (other than an Event of Default specified in clause
(g) of Section 7.01 of this Indenture) occurs and is continuing, the Trustee or
the Holders of at least 25% of the aggregate principal amount of the Securities
then outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders (the "Acceleration Notice")), may, and the
Trustee at the request of such Holders shall, declare the entire unpaid
principal of, premium, if any, and accrued interest on the Securities to be
immediately due and payable, as specified below. Upon a declaration of
acceleration, such principal, premium, if any, and accrued interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (d) or (h) of Section 7.01 has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event triggering such Event of
Default pursuant to clause (d) or (h) of Section 7.01 shall be remedied or cured
by the Company and/or the relevant Restricted Subsidiaries or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause
(g) of Section 7.01 of this Indenture occurs, all unpaid principal of, premium,
if any, and accrued interest on the Securities then outstanding shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration, but before a judgment
or decree for the payment of the money due has been obtained by the Trustee, the
Holders of at least a majority in principal amount of the outstanding Securities
by written notice to the Company and to the Trustee may waive all past Defaults
and rescind and annul such declaration of acceleration and its consequences if
(a) the Company has paid or deposited with the Trustee a sum sufficient to pay
(i) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Securities, (iii) the principal of
and premium, if any, on any Securities that have become due otherwise than by
such declaration or occurrence of acceleration and interest thereon at the rate
prescribed therefor by such Securities, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest at the rate prescribed
therefor by such Securities, (b) all existing Events of Default, other than the
non-payment of the principal of the Securities that have become due solely by
such declaration of acceleration, have been cured or waived and (c) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 7.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Securities or to enforce the
performance of any provision of
79
<PAGE> 88
the Securities, this Indenture or, unless and until the Termination and Release
shall have occurred, the Security Documents.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding.
SECTION 7.04. Waiver of Past Defaults.
Subject to Sections 7.02, 7.07 and 12.02, the Holders of at least a
majority in principal amount of the Outstanding Securities, by notice to the
Trustee, may waive an existing Default or Event of Default and its consequences,
except a Default in the payment of principal of, premium, if any, or interest on
any Security as specified in subsection (a) or subsection (b) of Section 7.01 or
in respect of a covenant or provision of this Indenture which cannot be modified
or amended without the consent of the holder of each Outstanding Security
affected. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 7.05. Control by Majority.
The Holders of at least a majority in aggregate principal amount of the
Outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or that shall expose the
Trustee to personal liability; and provided further that the Trustee may take
any other action it deems proper that is not inconsistent with any directions
received from Holders of Securities pursuant to this Section 7.05.
SECTION 7.06. Limitation on Suits.
A Holder may not institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(i) such Holder has previously given to the Trustee written notice of
a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
80
<PAGE> 89
(iii) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liabilities or
expenses to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the Outstanding Securities have not given the Trustee a
direction that is inconsistent with such written request.
For purposes of Section 7.05 and this Section 7.06, the Trustee shall
comply with TIA Section 316(a) in making any determination of whether the
Holders of the required aggregate principal amount of outstanding Securities
have concurred in any request or direction of the Trustee to pursue any remedy
available to the Trustee or the Holders with respect to this Indenture or the
Securities or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 7.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, premium, if any, or
interest on such Security on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 7.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in subsection (a), subsection (b) or subsection (c) of Section 7.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or, prior to the occurrence
of the Termination and Release, the Guarantors, or any other obligor of the
Securities for the whole amount of principal, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal, premium,
if any, and, to the extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the rate specified in the
Securities, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
81
<PAGE> 90
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or, prior to the
occurrence of the Termination and Release, in any Security Document, Charter or
policy or contract of insurance assigned to the Trustee pursuant to any
Assignment of Insurance, or in aid of the exercise of any power granted herein
or therein, or to enforce any other proper remedy, subject however to Section
7.05. The Trustee may, while an Event of Default has occurred and is continuing,
direct that payments for any loss, damage or expense covered by insurance
assigned to the Trustee pursuant to any Assignment of Insurance and any other
amounts assigned to the Trustee thereunder be made directly to the Trustee.
SECTION 7.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 8.07) and the Holders allowed in any judicial
proceedings relative to the Company or, prior to the occurrence of the
Termination and Release, any Guarantor, or any other obligor of the Securities,
its creditors or its property and shall be entitled and empowered to collect and
receive any monies, securities or other property payable or deliverable upon
conversion or exchange of the Securities or upon any such claims and to
distribute the same, and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 8.07. Nothing
herein contained shall be deemed to empower the Trustee to authorize or consent
to, or accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 7.10. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
82
<PAGE> 91
faith of the claims or defenses made by the party litigant. This Section 7.10
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
7.07, or a suit by Holders of more than 10% in principal amount of the
outstanding Securities.
SECTION 7.11. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then, and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Company, Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 7.12. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or wrongfully taken Securities in Section 2.06 of
this Indenture, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 7.13. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to exercise any right
or remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article Seven or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
83
<PAGE> 92
ARTICLE EIGHT
Trustee
SECTION 8.01. General.
The duties and responsibilities of the Trustee shall be as provided by the
TIA and as specifically set forth herein, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Article Eight.
SECTION 8.02. Certain Rights of Trustee.
Subject to TIA Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document;
(ii) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 11.04 of this Indenture. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care;
(iv) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the
Trustee security or indemnity reasonably satisfactory to the Trustee
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
84
<PAGE> 93
(v) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers; provided that the Trustee's conduct does not constitute
negligence or bad faith; and
(vi) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Holders of at least a majority in aggregate principal amount of the
Securities at the time Outstanding relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
involving the exercise of any right, duty, trust or power conferred upon
the Trustee under the TIA or this Indenture.
SECTION 8.03. Individual Rights of Trustee.
The Trustee, in its individual or any other capacity, may become the owner
or pledgee of Securities and may make loans to, accept deposits from, perform
services for, and otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to TIA Sections 310(b) and
311.
SECTION 8.04. Trustee's Disclaimer.
The Trustee (i) makes no representation as to the validity or adequacy of
this Indenture or the Securities, (ii) shall not be accountable for the
Company's use of the proceeds from the Securities and (iii) shall not be
responsible for any statement in the Securities other than its certificate of
authentication.
SECTION 8.05. Notice of Default.
If any Default or any Event of Default occurs and is continuing and if such
Default or Event of Default is known to the Trustee, the Trustee shall mail to
each Holder in the manner and to the extent provided in TIA Section 313(c)
notice of the Default or Event of Default within 45 days after it occurs, unless
such Default or Event of Default has been cured; provided, however, that, except
in the case of a default in the payment of the principal of, premium, if any, or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
Holders.
85
<PAGE> 94
SECTION 8.06. Reports by Trustee to Holders.
Within 60 days after each January 1, beginning with January 1, 1997, the
Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief
report dated as of such January 1, if required by TIA Section 313(a).
SECTION 8.07. Compensation and Indemnity.
The Company shall pay to the Trustee such compensation as shall be agreed
upon in writing for its services. The compensation of the Trustee shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable out-of-pocket
expenses and advances incurred or made by it. Such expenses shall include the
reasonable compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless against,
any loss or liability or expense incurred by it without negligence or bad faith
on its part in connection with the acceptance or administration of this
Indenture and its duties under this Indenture, the Securities, the Investment
Account Agreement and the Cash Collateral Account Agreements, including the
costs and expenses of defending itself against any claim or liability and of
complying with any process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties under this
Indenture, the Securities, the Investment Account Agreement and the Cash
Collateral Account Agreements.
To secure the Company's payment obligations in this Section 8.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of, premium, if any, and interest on
particular Securities.
If the Trustee incurs expenses or renders services after the occurrence of
an Event of Default specified in subsection (f) or subsection (g) of Section
7.01, the expenses and the compensation for the services shall be intended to
constitute expenses of administration under the United States Bankruptcy Code or
any applicable federal or state law for the relief of debtors.
SECTION 8.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 8.08.
86
<PAGE> 95
The Trustee may resign by so notifying the Company in writing at least 30
days prior to the date of the proposed resignation. The Holders of a majority in
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 8.10 of this Indenture;
(ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not take office within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after the delivery of
such written acceptance, subject to the lien provided in Section 8.07, (i) the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, (ii) the resignation or removal of the retiring Trustee shall
become effective and (iii) the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
If the Trustee fails to comply with Section 8.10, any Holder who satisfies
the requirements of TIA Section 310(b) may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 8.08,
the Company's obligation under Section 8.07 shall continue for the benefit of
the retiring Trustee.
87
<PAGE> 96
SECTION 8.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee corporation
or national banking association without any further act shall be the successor
Trustee with the same effect as if the successor Trustee had been named as the
Trustee herein.
SECTION 8.10. Eligibility.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus
of at least $25,000,000 as set forth in its most recent published annual report
of condition.
SECTION 8.11. Money Held in Trust.
The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree with the Company. Money held in trust by the
Trustee need not be segregated from other funds except to the extent required by
law and except for money held in trust under Article Eleven.
SECTION 8.12. Withholding Taxes.
The Trustee, as agent for the Company, shall exclude and withhold from each
payment of principal and interest and other amounts due hereunder or under the
Securities any and all withholding taxes applicable thereto as required by law.
The Trustee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future taxes or similar charges are required
to be withheld with respect to any amounts payable in respect of the Securities,
to withhold such amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the holders of the Securities, that it shall file
any necessary withholding tax returns or statements when due, and that, as
promptly as possible after the payment thereof, it shall deliver to each holder
of a Security appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such holders may reasonably request
from time to time.
88
<PAGE> 97
ARTICLE NINE
Release of Collateral
The provisions of this Article Nine shall continue in effect until the
occurrence of the Termination and Release, at which time they shall terminate
and have no further force or effect.
SECTION 9.01. Possession, Etc., by Company; Dispositions Without Release.
In the absence of an Event of Default, subject to the Granting Clauses and
the provisions of this Article Nine and the Security Documents, the Company
shall be suffered and permitted to possess, charter, lease, use, manage, operate
and enjoy the Trust Estate (other than any cash constituting part of the Trust
Estate and deposited or required to be deposited with the Trustee in the
Investment Account or for any payment on or redemption of any Securities) and to
the extent specifically permitted by this Indenture, to collect, receive, use,
invest and dispose of the rents, hires, issues, tolls, profits, revenues and
other income from the Trust Estate (other than from any cash constituting part
of the Trust Estate and deposited or required to be deposited with the Trustee
in the Investment Account or for payment on or redemption of any Securities) and
to deal with, exercise any and all rights under, receive and enforce performance
under, and adjust and settle all matters relating to current performance of,
choses in action, leases, charters and contracts. In addition to and
notwithstanding the foregoing, the Company shall be suffered and permitted,
freely and without hindrance on the part of the Trustee or of the Holders, to
maintain, improve, alter, repair and modify (and to permit any maintenance,
improvement, alteration, repair or modification of) the Mortgaged Vessels or any
part thereof and to replace (or permit the replacement of) any part of the
Mortgaged Vessels, provided that, unless and until the Termination and Release
shall have occurred, such maintenance, improvement, alterations, repairs,
modifications or replacements are in accordance with any applicable provision of
the Security Documents, Charters or any Subsequent Charters pertaining thereto
and do not materially and adversely affect the value, performance,
characteristics or efficiency of the Mortgaged Vessel or the ability of the
relevant Guarantor to perform the corresponding Charter.
The Company shall have the right, from time to time, without any release
from or consent by or notice to the Trustee,
(a) to sell or otherwise dispose of and to permit any sale or other
disposition of, free from the Lien of this Indenture and the First
Preferred Ship Mortgages, any Incidental Asset and any investment, security
or instrument (other than Capital Stock of a Guarantor) pursuant to Section
4.09(c). In the event that other property or assets shall
89
<PAGE> 98
be substituted for an Incidental Asset that is sold or disposed of, such
substituted property shall forthwith become, without further action,
subject to the Lien of this Indenture and the applicable First Preferred
Ship Mortgage; and no purchaser of any such property shall be bound to
inquire into any question with respect to the right of the Company to sell
or otherwise dispose of the same free from the Lien of this Indenture and
the First Preferred Ship Mortgages; and
(b) so long as no Event of Default has occurred and is continuing, to
receive, funds, if any, deposited in any Cash Collateral Account from time
to time.
SECTION 9.02. Releases.
Subject to and in compliance with Section 4.09(c), any Guarantor may remove
and replace parts of its Mortgaged Vessel, the sale or other disposition of
which is not expressly provided for elsewhere in this Indenture free from the
Lien of this Indenture and such Guarantor's First Preferred Ship Mortgage upon
receipt by the Trustee of the following documents (each dated no more than 5
days prior to the date of any proposed sale or other disposition):
(a) An Officers' Certificate as to the following:
(1) The removal and replacement of the parts in question shall: (i)
be carried out in accordance with good operating and maintenance
practice, consistent with the terms of the Indenture, any applicable
Security Document and the corresponding Charter or Subsequent Charter
and (ii) not adversely affect the ability of the Company and the
Guarantor in question to satisfy their respective maintenance and
operating covenants under the Indenture or any Security Document;
(2) No Event of Default has occurred and is continuing;
(3) In the opinion of the signers, the proposed release shall not
impair the security under this Indenture or any applicable Security
Document or contravene the provisions hereof or thereof; and
(4) The satisfaction of the other matters set forth in Section
9.02.
(b) The certificate or opinion of an Appraiser as to the Appraised
Value of any property to be released from the Lien of the Indenture, which
certificate or opinion shall state that in the opinion of the person making
the same the proposed release shall not impair the security under the
Indenture in contravention of the provisions thereof;
90
<PAGE> 99
provided that such a certificate or opinion of an Appraiser shall not be
required if the Appraised Value thereof as set forth in the certificate or
opinion required by this Subsection (b) is less than $25,000 or less than
1% of the aggregate principal amount of the Securities at the time
Outstanding and provided further that such a certificate or opinion of an
Appraiser shall be a certificate or opinion of an Independent Appraiser if
the Appraised Value thereof as set forth in the certificate or opinion
required by this Subsection (b) is greater than $1,000,000.
(c) Either:
(1) Cash equal to the fair value set forth in the certificate or
opinion delivered pursuant to clause (b) above to be held in the
Investment Account; or
(2) (i) an Officer's Certificate certifying that the property being
released has been or promptly shall be replaced with property (the
"Replacement Property") with an Appraised Value to the Company or the
appropriate Guarantor at least equal to the Appraised Value of the
property being released; and (ii) a certificate or opinion of an
Appraiser as to the Appraised Value to the Company or such Guarantor of
the Replacement Property.
(d) An Opinion of Counsel as to the following:
(1) all conditions precedent in this Indenture to such release have
been complied with;
(2) the certificates, opinions and other instruments and/or cash
that have been or are being delivered to, or deposited and pledged with,
the Trustee conform to the requirements of this Indenture and the
property for which release is being sought may be lawfully released from
the Lien of this Indenture and all applicable Security Documents; and
(3) The satisfaction of the other matters set forth in this Section
9.02.
Notwithstanding the foregoing, any Guarantor may remove and replace parts
of its Mortgaged Vessel free from the Lien of the Indenture and such Guarantor's
First Preferred Ship Mortgage without complying with the foregoing documentation
requirements (i) to the extent expressly permitted pursuant to Section 1.11(e)
of such Guarantor's First Preferred Ship Mortgage or (ii) if the Termination and
Release shall have occurred.
91
<PAGE> 100
SECTION 9.03. Sale or Disposition of Mortgaged Vessel Asset or Loss of a
Mortgaged Vessel.
(a) Subject to and in compliance with Sections 4.09(a) and 4.09(b), the
Company and the Guarantors may sell a Mortgaged Vessel Asset upon proper
Application to the Trustee. In connection with any such sale, the Trustee shall
release such Mortgaged Vessel Asset from the Trust Estate, from the Liens of
this Indenture and the applicable Security Documents upon receipt from or on
behalf of the Company or the applicable Guarantor by the Trustee of the
following:
(i) An Officers' Certificate of the Company and such Guarantor, dated
not less than 30 days prior to the proposed sale or disposition of such
Mortgaged Vessel Asset, setting forth in substance as follows:
(A) a description of the terms of the proposed transfer and a
statement that the sale is to a Person who is not an Affiliate of the
Company and that, in the opinion of the signers, such sale shall be
effected in a commercially reasonable manner and attaching thereto a
Board Resolution to such effect and final forms of documents evidencing
such transfer;
(B) that no Event of Default has occurred and is continuing;
(C) a statement that the sale of the Mortgaged Vessel Asset
complies with the provisions of Sections 4.09(a) and 4.09(b);
(D) instructing the Trustee to apply the proceeds of such sale to
the redemption of Securities pursuant to Section 3.04(a) or notifying
the Trustee of the Company's election to substitute, in accordance with
Section 3.04(b), a Qualified Substitute Vessel for the Mortgaged Vessel
Asset to be sold; and
(E) that, in the opinion of the signers, the proposed release shall
not impair the security under this Indenture or any of the Security
Documents (other than those to be released in connection with such sale)
in contravention of the provisions hereof or thereof and that all
conditions precedent herein and therein provided for relating to such
release have been complied with.
(ii) A certificate of an Independent Appraiser, dated not more than 40
days prior to the date of the Application for such release, stating the
Appraised Value, in the Appraisers' opinion, at the date of the proposed
release, of the Mortgaged Vessel Asset to be released and the Mortgaged
Vessels remaining after giving effect to such release.
92
<PAGE> 101
(iii) An Opinion of Counsel dated not more than 5 days prior to the
date of the Application setting forth in substance as follows:
(A) that all conditions precedent herein provided for relating to
such release have been complied with; and
(B) that the certificates, opinions and other instruments and cash
that have been or are therewith delivered to, or deposited with, the
Trustee conform to the requirements of this Indenture, and that, upon
the basis of the Application, the property for which release is being
sought may be lawfully released from the Lien of this Indenture and the
Security Documents.
(iv) For deposit in the Investment Account pending application as
provided in Section 3.04, funds in the amount required pursuant to Section
4.09(a)(v); provided, however, that notwithstanding Section 4.09(a)(v), if
such receipt of funds occurs during the continuation of an Event of
Default, such amount shall be equal to the greater of (i) the Net Cash
Proceeds from the sale of such Mortgaged Vessel Asset, as certified
pursuant to this Section 9.03 and (ii) the Sale Redemption Amount.
For purposes of clarification, this Section 9.03(a) shall not apply after the
Termination and Release shall have occurred.
(b) In connection with any Event of Loss with respect to a Mortgaged
Vessel, the Trustee shall release the Lost Mortgaged Vessel from the Trust
Estate, from the Liens of this Indenture and the applicable Security Documents
upon receipt from or on behalf of the Company of funds, for deposit in the
Investment Account pending application as provided in Section 3.03, in an amount
equal to the Loss Redemption Amount; provided, however, that if such receipt of
funds occurs during the continuation of an Event of Default, such amount shall
be equal to the greater of (i) the Event of Loss Proceeds with respect to such
Event of Loss and (ii) the Loss Redemption Amount. For purposes of
clarification, upon the occurrence of the Termination and Release, the Trustee
shall release the Lost Mortgaged Vessel from the Trust Estate, from the Liens of
this Indenture and the applicable Security Documents without such receipt of
funds.
SECTION 9.04. Release upon Redemption or Retirement of Securities.
Prior to the occurrence of the Termination and Release, in the event that
the Company redeems Securities or the Company acquires and delivers to the
Trustee for cancellation Securities, in each case in an aggregate principal
amount not theretofore applied pursuant to this provision in excess of $10
million, the Company may request the Trustee to release a Mortgaged Vessel Asset
from the Trust Estate and from the Liens of this Indenture and the Security
Documents: (a) provided that (i) the Appraised Value of such Mortgaged Vessel
93
<PAGE> 102
at the time of such release does not exceed 133% of the aggregate principal
amount of the Securities so redeemed, acquired or retired and (ii) the Loan To
Value Ratio after giving effect to such release does not exceed the applicable
Maximum Loan To Value Ratio in effect at the time of such release, using the
Appraised Value of the remaining Mortgaged Vessels at the time of and after
giving effect to such release to calculate such Loan to Value Ratio; and (b)
upon receipt from or on behalf of the Company by the Trustee of the following:
(i) An Officers' Certificate of the Company, dated not less than 30
days prior to the date of the Application for such release of the Mortgaged
Vessel, setting forth in substance as follows:
(1) that no Event of Default has occurred and is continuing;
(2) a statement that all conditions precedent relating to such
release have been complied with.
(ii) A certificate of an Independent Appraiser, dated not more than 40
days prior to the date of the Application for such release, stating the
Appraised Value, in the Independent Appraisers' opinion, at the date of the
proposed release, of the Mortgaged Vessel to be released and the Mortgaged
Vessels remaining after giving effect to such release.
(iii) An Opinion of Counsel dated not more than 5 days prior to the
date of the Application setting forth in substance as follows:
(1) that all conditions precedent herein provided for relating to
such release have been complied with; and
(2) that the certificates, opinions and other instruments and cash
that have been or are therewith delivered to, or deposited with, the
Trustee conform to the requirements of this Indenture, and that, upon
the basis of the Application, the property for which release is being
sought may be lawfully released from the Lien of this Indenture and the
Security Documents.
SECTION 9.05. Powers Exercisable Notwithstanding Default.
While in possession of the Trust Estate (other than any cash constituting
part of the Trust Estate and deposited or required to be deposited with the
Trustee in the Investment Account or any Cash Collateral Account or for payment
on or redemption of any Securities), the Company may exercise the powers
conferred upon it in the Sections of this Article Nine even though it is
prohibited from doing so while an Event of Default exists as provided therein,
if the
94
<PAGE> 103
Trustee in its discretion, or the Holders of a majority in aggregate principal
amount of the Securities Outstanding, shall consent to such action, in which
event none of the instruments required to be furnished to the Trustee under any
of such Sections as a condition to the exercise of such powers needs state that
no Event of Default has occurred and is continuing as provided therein.
SECTION 9.06. Purchaser Protected.
No purchaser in good faith of property purporting to be released herefrom
shall be bound to ascertain the authority of the Trustee to execute the release
or to inquire as to the existence of any conditions herein prescribed for the
exercise of such authority; nor shall any purchaser or grantee of any property
or rights permitted by this Article to be sold or otherwise disposed of by the
Company be under any obligation to ascertain or inquire into the authority of
the Company to make any such sale or other disposition. Any release executed by
the Trustee under this Article shall be sufficient for the purpose of this
Indenture and shall constitute a good and valid release of the property therein
described from the Lien hereof and the Liens of the Security Documents.
SECTION 9.07. Change of Flag.
Prior to the occurrence of the Termination and Release, so long as no Event
of Default shall have occurred and be continuing, the Company or any Guarantor,
at any time and from time to time, may cause record ownership and other
documentation with respect to one or more Mortgaged Vessels to be transferred
from Liberia to the Bahamas, or from the Bahamas to Liberia. The Trustee shall
release such Mortgaged Vessel from the First Preferred Ship Mortgage covering
such Vessel upon receipt by the Trustee of the following:
(a) a First Preferred Ship Mortgage under the laws of the new
jurisdiction covering such Mortgaged Vessel and, to the extent necessary,
Security Documents amended to reflect such new First Preferred Ship
Mortgage;
(b) evidence from the shipping registry in the new jurisdiction that
such Mortgaged Vessel has been duly registered under the laws of such
jurisdiction and that a First Preferred Ship Mortgage under the laws of
such jurisdiction was duly received for recording and was recorded in the
ship registry office of the new jurisdiction in accordance with the laws of
such jurisdiction and creating a first preferred mortgage lien on such
Mortgaged Vessel;
(c) a report of an insurance broker as required by Section
1.15(a)(iii) of the First Preferred Ship Mortgage with respect to the
insurance policies maintained by the owner of such Vessel in respect of
such Vessel, which report shall include loss payable
95
<PAGE> 104
clauses substantially in the form set forth in Schedule I and Schedule II
to the First Preferred Ship Mortgages;
(d) an Officer's Certificate of the Company and such Guarantor dated
as of the date of the transfer of registry of such vessel setting forth in
substance as follows:
(i) that no Event of Default has occurred and is continuing;
(ii) that each of the First Preferred Ship Mortgage and other
agreements executed and delivered by the Company or such Guarantor
pursuant to this Section 9.07 or in connection with the transfer of
registry to the new jurisdiction (the "Change of Flag Documents") have
been duly authorized, executed and delivered by, and is a valid and
binding agreement of, the relevant Guarantor, enforceable against such
Guarantor in accordance with its terms;
(iii) that the execution and delivery by such Guarantor of, and the
performance by such Guarantor of its obligations under the Change of
Flag Documents, and the consummation of the transactions contemplated
thereby, (A) shall not contravene (1) any provision of applicable law,
(2) the certificate or articles of incorporation or by-laws of such
Guarantor or any of its subsidiaries, (3) any agreement or other
instrument binding upon such Guarantor or any of its subsidiaries that
is material to such Guarantor and its subsidiaries taken as a whole, or
(4) any judgment, order or decree of any governmental body, agency or
court having jurisdiction over such Guarantor or any of its
subsidiaries, (B) shall not result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of
such Guarantor or any of its subsidiaries, except pursuant to the terms
of the Indenture and the relevant Security Documents, or constitute a
default under any agreement, contract, ordinance, license or permit, and
(C) no consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the performance by
such Guarantor of its obligations under the charge of Flag Documents;
(iv) that neither such Guarantor nor any of its subsidiaries is (A)
in violation of its certificate or articles of incorporation or by-laws,
(B) in violation of any law, administrative regulation, ordinance,
order, judgment or decree of any court or governmental agency,
arbitration panel or authority applicable to such Guarantor or any of
its subsidiaries or any of its respective properties or assets, which
violation would have a material adverse effect upon such Guarantor and
its subsidiaries, taken as a whole, or (C) in violation of or default
under any obligation, agreement, covenant or condition contained in any
contract, indenture,
96
<PAGE> 105
time charter, agreement for freight or hire, lease, loan agreement,
bond, debenture, mortgage, deed of trust, note or any other evidence of
indebtedness to which such Guarantor or any of its subsidiaries is a
party or by which such Guarantor or any of its subsidiaries is bound or
to which any of their respective properties or assets are bound or
subject, which violation or default would have a material adverse effect
upon the Company and its subsidiaries, taken as a whole, or on such
Guarantor, and no condition or event has occurred which, with notice or
lapse of time or both would constitute a default under any such document
or instrument or result in the imposition of any penalty or acceleration
of any indebtedness which default, penalty or acceleration would have a
material adverse effect on such Guarantor;
(v) that such Guarantor has good and marketable title, free and clear
of all Liens, to the relevant Mortgaged Vessel except such Liens as are
imposed pursuant to the Indenture and any relevant Security Document and
Permitted Liens;
(vi) the representations and warranties made by such Guarantor in the
Change of Flag Documents with respect to such Mortgaged Vessel are true and
correct;
(vii) that such Guarantor is Solvent (as used herein, the term
"Solvent" means that (A) the fair market value of the assets of such
Guarantor is greater than the total amount of liabilities (including
contingent liabilities) of such Guarantor, (B) the present fair saleable
value of the assets of such Guarantor is greater than the amount that shall
be required to pay the probable liabilities of such Guarantor on its debts
as they become absolute and matured, (C) such Guarantor is able to realize
upon its assets and pay its debts and other liabilities, including
contingent obligations, as they mature and (D) such Guarantor does not have
an unreasonably small capital); and
(viii) that simultaneously with such change in registration a valid
first priority security interest in such Mortgaged Vessel shall have been
created and perfected under the laws of the new jurisdiction; and
(e) an Opinion of Counsel setting forth in substance as follows:
(i) that all conditions precedent herein relating to such release
have been complied with;
97
<PAGE> 106
(ii) that the certificates, opinions and other instruments that
have been delivered to the Trustee conform to the requirements of the
Indenture and the Security Documents;
(iii) that such Guarantor has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority
to own, lease and operate the properties used in its business and to
conduct its business as currently conducted and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a material adverse
effect on such Guarantor and its subsidiaries, taken as a whole;
(iv) that each of the Change of Flag Documents delivered pursuant
to Section 9.07 has been duly authorized, executed and delivered by, and
is a valid and binding agreement of such Guarantor enforceable against
such Guarantor, in accordance with its terms, except as (A) the
enforceability thereof may be limited by applicable bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally, (B) the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether considered in a proceeding in equity or at law)
and (C) certain provisions of the Change of Flag Documents delivered
pursuant to Section 9.07 are or may be unenforceable in whole or in
part, but the inclusion of such provisions does not affect the validity
of such agreements and each such agreement contains adequate provisions
for enforcing performance of the obligations under such agreements and
for the practical realization of the rights and benefits afforded
thereby;
(v) that the execution and delivery by such Guarantor of, and the
performance by such Guarantor of its obligations under, the Change of
Flag Documents delivered pursuant to Section 9.07 to which it is a
party, and the consummation of the transactions contemplated thereby,
(A) shall not contravene (1) any provision of applicable law, (2) the
certificate or articles of incorporation or by-laws of such Guarantor or
any of its subsidiaries, (3) any agreement or other instrument binding
upon such Guarantor or any of its subsidiaries that is material to such
Guarantor and its subsidiaries, taken as a whole, or (4) to the best of
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or Court having jurisdiction over such
Guarantor or any subsidiary, (B) shall not result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of such Guarantor or any of
98
<PAGE> 107
its subsidiaries, except pursuant to the terms of the Indenture and the
Security Documents, or constitute a default under any agreement,
contract, ordinance, license or permit, and (C) no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required for the performance by such Guarantor of its
obligations under the Change of Flag Documents delivered pursuant to
Section 9.07 to which it is a party;
(vi) such Guarantor has title of record to such Mortgaged Vessel,
free and clear of all Liens, except for such Liens as are imposed
pursuant to the Indenture and any relevant Security Document;
(vii) the First Preferred Ship Mortgage delivered pursuant to
Section 9.07 was duly received for recording in the ship registry office
of the new jurisdiction in accordance with the laws of the ship registry
office of the new jurisdiction and creates the first preferred mortgage
lien covering such Mortgaged Vessel which it purports to create, with
the First Preferred Ship Mortgage being a first preferred mortgage lien
on such Mortgaged Vessel;
(viii) neither such Guarantor nor any of its property has any
immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws
of the new jurisdiction;
(ix) under the laws of the new jurisdiction, such Guarantor may
validly and effectively agree that the validity, construction and
performance of each of the Indenture and the Security Documents (other
than the First Preferred Ship Mortgage) and all rights of the Trustee
thereunder shall be governed by and construed in accordance with the
laws of the State of New York. Such choice of law is a valid choice of
law respecting the Indenture and the Security Documents (other than the
First Preferred Ship Mortgage) and the submission by such Guarantor to
the jurisdiction of any New York State or Federal court sitting in New
York City and any appellate court from any thereof, in connection with
all transactions arising out of the Indenture and the Security Documents
is a valid submission to the jurisdiction of such courts. In the event a
judgment of such courts against such Guarantor was obtained after
service of process in the manner specified in the Indenture or any
Security Document, the same would be enforced by the courts of the new
jurisdiction without a further review on the merits unless: (A) the
judgment was obtained by fraud; (B) the judgment was given in a manner
contrary to natural justice, or the judgment was given in a manner
contrary to the public policy of the new jurisdiction; (C) the judgment
was in a case in which the defendant did not appear or in which an
authorized person did
99
<PAGE> 108
not appear in such defendant's behalf; (D) the judgment was not for a
specific, ascertained sum of money; or (E) the judgment was not final
and conclusive in accordance with the laws of the jurisdiction in which
the judgment was obtained; and
(x) that the Change of Flag Documents create valid security
interests enforceable against the Guarantor party thereto with respect
to the collateral subject thereto as security for the performance of the
obligations secured thereby.
After an Event of Default shall have occurred and be continuing, the
Trustee may direct the Company to cause, and, if so directed, the Company shall
cause, one or more Mortgaged Vessels to be transferred from Liberian flag to
Bahamian flag or from Bahamian flag to Liberian flag in accordance with this
Section 9.07. The Company and each Guarantor hereby appoint the Trustee the true
and lawful attorney of the Company and each Guarantor, irrevocably, with full
power (which power shall be deemed coupled with an interest) (in the name of the
Company or each Guarantor or otherwise) to take all actions necessary to effect
such transfer of flag in accordance with this Section 9.07.
For purposes of clarification, this Section 9.07 shall not apply after the
Termination and Release shall have occurred.
SECTION 9.08. Tender of a Qualified Substitute Vessel.
(a) Prior to the occurrence of the Termination and Release, on the date on
which a Qualified Substitute Vessel shall be tendered for delivery to the Trust
Estate (a "Vessel Tender Date"), the Company shall deliver to the Trustee, or
shall cause the owner of such vessel, which shall be a Wholly Owned Subsidiary
of the Company (the "Tendered Vessel Owner"), to deliver to the Trustee, as the
case may be, the following documents:
(i) a Subsidiary Guarantee of the Tendered Vessel Owner dated the
Vessel Tender Date;
(ii) a First Preferred Ship Mortgage with respect to such Vessel dated
the Vessel Tender Date and (x) in the case of a Liberian Vessel, such First
Preferred Ship Mortgage shall have been duly received for recording in the
office of the Deputy Commissioner for Maritime Affairs of the Republic of
Liberia at the Port of New York and duly recorded, all in accordance with
the laws of the Republic of Liberia, or (y) in the case of a Bahamian
Vessel, such Preferred Ship Mortgage shall have been duly received for
recording in the office of The Registrar of Bahamian Shipping, all in
accordance with the laws of the Commonwealth of the Bahamas;
100
<PAGE> 109
(iii) a Charter with respect to such Vessel, and certified by the
Company to be true and correct, the term of which shall not expire prior to
, 2008;
(iv) an Assignment of Time Charter with respect to such Vessel dated
the Vessel Tender Date and acknowledgments and consents to such assignment;
(v) an Assignment of Freights and Hires with respect to such Vessel
dated the Vessel Tender Date;
(vi) an Assignment of Insurance with respect to such Vessel dated the
Vessel Tender Date;
(vii) a Cash Collateral Account Agreement dated the Vessel Tender
Date;
(viii) an Assumption Agreement, dated the Vessel Tender Date pursuant
to which the Tendered Vessel Owner assumes all of the obligations of a
Guarantor under this Indenture;
(ix) a Pledge Agreement, dated the Vessel Tender Date pursuant to
which the Company pledges all of the Capital Stock of the Tendered Vessel
Owner to the Trustee;
(x) the stock certificates representing all of the Capital Stock of
the Tendered Vessel Owner, together with stock powers executed in blank;
(xi) the irrevocable proxy of the Company required pursuant to the
Pledge Agreement delivered to the Trustee pursuant to paragraph (ix) above;
(xii) a Certificate of an Independent Appraiser dated not more than 30
days prior to the Vessel Tender Date stating that such Vessel is either a
tanker or oil/bulk/ore carrier having at least 80,000 dwt, completed no
earlier than 1991 and no earlier than one year prior to the date of
completion of the Vessel for which it is being substituted; and having an
Appraised Value at least equal to (and being in as good operating condition
as) such Mortgaged Vessel assuming compliance by the owner of such
Mortgaged Vessel with all the terms of the applicable First Preferred Ship
Mortgage;
(xiii) a Certificate of an Independent Appraiser dated not more than
30 days prior to the Vessel Tender Date setting forth its determination of
the Appraised Value of all of the Mortgaged Vessels as of its date and a
Certificate of an Officer of the Company setting forth his determination of
the Vessel Percentage for each of the Mortgaged Vessels calculated in
accordance with the definition of Vessel Percentage and using such
Appraised Values and after giving effect to the mortgage of such Vessel;
101
<PAGE> 110
(xiv) the documents required by Section 1.15(a)(iii) of the First
Preferred Ship Mortgages with respect to the insurance policies maintained
by the owner of such Vessel in respect of such Vessel, which report shall
include loss payable clauses substantially in the form set forth in
Schedule I and Schedule II to the First Preferred Ship Mortgages;
(xv) a classification certificate for such Vessel from such Vessel's
classification society, dated as of a date not more than 10 days prior to
the Vessel Tender Date and indicating that such Vessel is "in-class";
(xvi) a certificate of ownership and encumbrances from the official
registry of such Vessel reflecting ownership by only the Tendered Vessel
Owner and reflecting the First Preferred Ship Mortgage as the only Lien of
record;
(xvii) evidence satisfactory to the Trustee to the effect that all
Indebtedness outstanding with respect to such Vessel has been repaid and
that all security granted by, or covering assets or property of, the
Company or any Guarantor with respect to such Indebtedness shall have been
released;
(xviii) a solvency certificate substantially in the form of Exhibit O
hereto;
(xix) a Certificate of an Officer the Company as to the matters set
forth in Exhibit M hereto;
(xx) an Opinion of Counsel as to the matters set forth in Exhibit N
hereto; and
(xxi) such other documents and certificates as are reasonably
requested by the Trustee or its counsel.
(b) In the case of a tender for delivery of a Qualified Substitute Vessel
to the Trust Estate pursuant to this Section 9.08, the application of funds with
the Trustee and held in the Investment Account shall be as provided in Article
Ten.
ARTICLE TEN
102
<PAGE> 111
Application of Trust Moneys
SECTION 10.01. "Trust Moneys" Defined.
All moneys received by the Trustee
(a) unless and until the Termination and Release shall have occurred,
pursuant to the Charters, any Subsequent Charters, the Assignments of Time
Charter and the Assignments of Freights and Hires, or
(b) unless and until the Termination and Release shall have occurred,
as compensation for, or proceeds of sale of, any part of the Trust Estate,
upon a sale, Event of Loss, or other disposition thereof, including,
without limitation, a taking by eminent domain, or
(c) unless and until the Termination and Release shall have occurred,
as proceeds from insurance contracts and policies pursuant to the
Assignments of Insurance, other than proceeds under any protection and
indemnity or other liability insurance payable to the Trustee as an assured
to indemnify the Trustee or reimburse it for any loss, damage or expense
incurred by it, or
(d) as a deposit for application to redemption of Securities pursuant
to Article Three, or
(e) as proceeds from any sale or other disposition of the Trust Estate
by the Trustee upon occurrence of an Event of Default, or
(f) as proceeds from the investment of Trust Moneys, or
(g) unless and until the Termination and Release shall have occurred,
from the Guarantors pursuant to Subsidiary Guarantees or other Security
Documents, or
(h) unless and until the Termination and Release shall have occurred,
maintained in the Cash Collateral Accounts or the Investment Account
(including investment income thereon),
(i) as a deposit pursuant to Article Eleven, or
(j) for application under this Article Ten as elsewhere herein
provided, or whose disposition is not elsewhere herein otherwise
specifically provided for (all such moneys being herein sometimes called
"Trust Moneys") shall be held by the Trustee,
103
<PAGE> 112
except as otherwise provided in this Article, as a part of the Trust Estate
and all or any part of the Trust Moneys may be withdrawn, and shall be paid
or applied by the Trustee from time to time, as provided in this Article
Ten, inclusive.
Upon the occurrence of the Termination and Release, all Trust Moneys shall
be paid to or upon the direction of the Company.
SECTION 10.02. Application of Funds Pursuant to Assignments of Time
Charters.
For so long as no Event of Default has occurred and is continuing, any
amount paid pursuant to the Charters, Subsequent Charters, Assignments of Time
Charters and Assignments of Freights and Hires and received by the Trustee in
any Cash Collateral Account, shall be paid to or upon the direction of the
Company. Following the occurrence of the Termination and Release, no Trust
Moneys shall be required to be paid to the Trustee pursuant to the Charters,
Subsequent Charters, the Assignment of Time Charter and the Assignment of
Freights and Hires.
SECTION 10.03. Application of Funds Held in the Investment Account.
Prior to the occurrence of the Termination and Release, for so long as no
Event or Default has occurred and is continuing, any amount received by the
Trustee in the Investment Account shall be invested pursuant to and in
compliance with the Company's Investment Account Agreement and applied pursuant
to the terms of this Indenture. For purposes of clarification, (i) upon the
occurrence of the Termination and Release, all moneys received by the Trustee in
the Investment Account shall be paid to or upon the direction of the Company and
(ii) following the occurrence of the Termination and Release, no moneys shall be
deposited into the Investment Account. For so long as no Event of Default has
occurred and is continuing, any Trust Moneys deposited with the Trustee for any
payment on or redemption of any Securities shall be applied by the Trustee to
such payment or redemption as provided in this Indenture upon delivery to the
Trustee of an Officer's Certificate pursuant to Section 13.04.
SECTION 10.04. Application of Sale or Event of Loss Proceeds.
Prior to the occurrence of the Termination and Release, for so long as no
Event of Default has occurred and is continuing, sale proceeds from the sale of
any portion of the Trust Estate, and insurance or other payments constituting
Event of Loss Proceeds received by the Trustee pursuant to this Indenture, a
First Preferred Ship Mortgage or the Security Documents upon or in connection
with the occurrence of an Event of Loss with respect to a Mortgaged Vessel or
any Assignment of Insurance, shall in each case be held in the Investment
104
<PAGE> 113
Account for application pursuant to Section 3.03, 3.04 or 4.09(b) and shall be
applied in the following order of priority:
first, to the Trustee for amounts due under Section 8.07;
second, in the event of a redemption of Outstanding Securities
pursuant to Section 3.03 or Section 3.04, to redeem Outstanding Securities
pursuant thereto; and
third, the balance, if any, of such payment remaining thereafter shall
be distributed to the Company or as directed by Company Request upon
receipt of an Officer's Certificate of the Company setting forth in
substance as follows: (i) that no Event of Default has occurred and is
continuing; and (ii) that Section 3.03 or Section 3.04, as the case may be,
has been complied with and that the proposed use of such funds complies
with the provisions of Section 3.03 or Section 3.04, as the case may be.
For purposes of clarification, no moneys shall be held in the Investment
Account following the occurrence of the Termination and Release.
SECTION 10.05. Payment During Continuance of an Event of Default Prior to
Acceleration.
For so long as an Event of Default (other than an Event of Default
specified in Section 7.01(g)) shall have occurred and be continuing and no
declaration of acceleration shall have been made pursuant to Section 7.02, Trust
Moneys shall be applied by the Trustee in the following order of priority:
first, to the Trustee for amounts due under Section 8.07;
second, to pay in full the aggregate unpaid principal amount of all
Outstanding Securities then due, plus the accrued but unpaid interest
thereon to the date of payment, to the Holders of such Securities, ratably,
without priority of one over the other;
third, to continue to hold an amount equal to the principal amount of
all Outstanding Securities plus the amount necessary to pay all scheduled
interest payments on the Outstanding Securities through , 2008
and any income or earnings from the investment thereof until the Indenture
shall be discharged; and
fourth, the balance, if any, shall be distributed to the Company or as
directed in a Company Request.
105
<PAGE> 114
For purposes of clarification, no Trust Moneys shall be held by the Trustee
following the occurrence of the Termination and Release.
SECTION 10.06. Payment Following Acceleration.
If the Trustee collects or holds any money pursuant to Article Seven or
otherwise following a declaration of acceleration pursuant to Section 7.02 or
the occurrence of an Event of Default specified in Section 7.01(g), it shall pay
out the money in the following order of priority:
first: to the Trustee for amounts due under Section 8.07;
second: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest on the Securities in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium, if any, and interest,
respectively; and
third: to the Company or any other obligors under the Securities, this
Indenture or any Security Documents, as their interests may appear, or as a
court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 10.06.
SECTION 10.07. Withdrawal of Insurance Proceeds.
So long as no Event of Default has occurred and is continuing, to the
extent that any Trust Moneys consist of proceeds of insurance on any part of the
Trust Estate and to the extent that the disposition thereof is not governed by
Sections 10.04 or 3.03, such amounts shall be paid by the insurers directly to
the Company (or a Guarantor) or to the Trustee in accordance with the provisions
of the related First Preferred Ship Mortgage.
Proceeds of insurance constituting Trust Moneys required to be paid
directly to the Trustee pursuant to the terms of any First Preferred Ship
Mortgage shall, to the extent that the disposition thereof is not governed by
Sections 10.04 or 3.03, be paid by the Trustee in accordance with the following
procedures:
(a) At least 20 days prior to the first date requested in a Company
Request for withdrawal of such insurance proceeds, the Company shall
deliver to the Trustee the following:
106
<PAGE> 115
(1) a Company Request: (A) stating that the Company or a specified
Guarantor has made or intends to make certain repairs and/or
replacements which shall be briefly described, (B) setting forth the
amount and nature of any expenditures made or required to make such
repairs and/or replacements (which amount, repairs and/or replacements
shall be in accordance with that set forth in the Appraiser's
Certificate described in (3) below) and an estimated schedule of
necessary withdrawals of insurance proceeds and (C) certifying that upon
completion of such repairs and/or replacements the relevant Mortgaged
Vessel shall be in the operating condition and repair required to be
maintained by this Indenture and the Security Documents;
(2) an Officers' Certificate pursuant to Section 13.04;
(3) an Appraiser's Certificate, stating, in the opinion of the
signer, the repairs and/or replacements reasonably required to place the
relevant Mortgaged Vessel in the operating condition and repair required
to be maintained by this Indenture and the Security Documents and their
cost; and
(4) the certificate of the chief financial officer of the Company
stating that such insurance proceeds together with other funds described
in the Company Request as being available to the Company or the
specified Guarantor for the repairs and/or replacements set forth in the
Company Request shall be sufficient to complete such repairs and/or
replacement within the period of time contemplated by the Company
Request.
(b) At least five Business Days prior to each scheduled withdrawal of
insurance proceeds (including the first withdrawal), the Company shall
deliver to the Trustee a Company Request requesting a payment on the
specified withdrawal date and setting forth a detailed list of all
expenditures incurred or to be incurred in connection with the repair
and/or replacement in question prior to the next scheduled withdrawal and
the portion thereof to be covered by the requested withdrawal and by other
funds available to the Company or such Guarantor (specifying the source of
such funds).
Upon compliance with the foregoing provisions of this section, the Trustee
shall, on the specified withdrawal date (which shall be a Business Day), pay an
amount of Trust Moneys out of the insurance proceeds for the relevant occurrence
equal to the amount of the expenditures or costs stated in each Company Request
delivered pursuant to Subsection 10.07(a)(1) above.
For purposes of clarification, no Trust Moneys shall be paid to or held by
the Trustee following the occurrence of the Termination and Release.
107
<PAGE> 116
SECTION 10.08. Application as Directed by Other Agreements.
Except as otherwise provided in this Article Ten, any payments received by
the Trustee, provision for the application of which is made in any Security
Document, shall be applied to the purpose for which such payment was made in
accordance with the terms of such Security Document. For purposes of
clarification, no moneys shall be paid to or held by the Trustee pursuant to any
Security Document following the occurrence of the Termination and Release.
SECTION 10.09. Application in Absence of Direction.
Except as otherwise provided in this Article Ten,
A. any payments received by the Trustee for which no provision as to
the application thereof is made herein or in the Charters or any other
Security Document, and
B. any payments received by the Trustee under any Security Document,
or otherwise, with respect to the Mortgaged Vessels after payment and
performance in full of the Securities, as well as any amounts or moneys
then held or thereafter received by the Trustee,
shall be applied by the Trustee in the following order of priority:
first, to the Trustee for amounts due under Section 8.07; and
second, the balance, if any, shall be distributed to the Company or as
directed in a Company Request.
For purposes of clarification, following the occurrence of the Termination
and Release, no moneys shall be paid to or held by the Trustee pursuant to the
Charters or any other Security Document or with respect to the Mortgaged
Vessels.
SECTION 10.10. Trustee's Right to Perform.
Except as otherwise provided in Section 10.05, in the event that the
Trustee shall incur any expense in performing any obligation of the Company or
the Guarantor pursuant to Article Four which the Company or such Guarantor shall
not have duly performed, the Trustee shall have a first priority claim against
the Trust Estate and any funds distributable in respect thereof pursuant to this
Article Ten to the extent that the Trustee shall have made written demand to the
Company for the reimbursement of such expense and the Trustee shall not have
108
<PAGE> 117
been paid therefor by or on behalf of the Company within 30 days thereafter. The
Trustee is hereby authorized by the Company and each Guarantor to take such
action as it shall deem necessary to protect and preserve the Lien of the
Indenture and the Security Documents upon the Trust Estate and not suffer to be
created any Lien or charge upon the Trust Estate or any part thereof or upon the
income therefrom, other than as permitted by this Indenture, the Security
Documents and the Charters. The Trustee is hereby authorized (but is not
required) by the Company and each Guarantor from time to time, upon at least 15
days' prior written notice to the Company, to pay or cause to be paid as they
become due and payable all taxes, assessments and governmental charges lawfully
levied or assessed or imposed upon the Mortgaged Vessels or the Trust Estate or
any part thereof, and also all taxes and assessments and governmental charges
lawfully levied or assessed upon the Lien or interest of the Trustee in the
Trust Estate, so that the Lien of this Indenture and the Security Documents
shall at all times be wholly preserved; provided, however, that the Company
shall have the right to contest, or to cause to be contested, in good faith, by
appropriate proceedings any such tax, assessment or governmental charge and,
pending such contest, may cause the Trustee to defer the payment thereof so long
as such deferred payment shall not, as stated in a written Opinion of Counsel
satisfactory to the Trustee, subject the Mortgaged Vessels or the Trust Estate
or any part thereof to forfeiture or loss or the First Preferred Ship Mortgages
to loss of status as a preferred mortgage under Liberian maritime law, and the
Company shall have undertaken in writing to pay any and all costs or expenses in
connection therewith. The Trustee shall have a first priority claim against the
Trust Estate and, subject to Section 10.05, any funds distributable in respect
thereof pursuant to this Article Ten for the reimbursement of any costs or
expenses incurred by the Trustee in carrying out the provisions of the foregoing
sentence.
SECTION 10.11. Distribution of Certain Funds.
All amounts that are to be distributed by the Trustee to the Company or as
provided in a Company Request pursuant to this Article Ten shall, unless
otherwise directed by the Company Request, be so distributed at the office of
the Trustee at 114 West 47th Street, New York, New York 10036-1532, Attention:
Trust Administration, in funds of the type furnished to the Trustee.
Notwithstanding the foregoing or any other provision in this Indenture to the
contrary, the Trustee shall pay, if so requested by the Company by written
notice to the Trustee, all amounts payable to the Company or a nominee thereof
(including all amounts distributed pursuant to this Article Ten) either (a) by
crediting the amount to be distributed to the Company to the account maintained
by the Company with the Trustee or by transferring by wire such amount to such
other banks as shall have been specified in a Company Request, to the extent
such funds are so available for immediate credit to the account of the Company
maintained at such bank, or (b) by mailing a check payable in funds which are
clearing house funds to the Company at such address as the Company shall have
specified in such Company Request. Distributions by the Trustee pursuant to this
Section 10.11 shall be made on the date that payment is received therefor to the
extent such funds are available to do so by the Trustee,
109
<PAGE> 118
provided that if any such payment is received by the Trustee after 1:00 P.M.
local time, the Trustee shall be permitted to distribute such payment on the
next succeeding Business Day.
SECTION 10.12. Priority of Applications with Respect to Principal, Premium
and Interest.
All payments in respect of principal (premium, if any) and interest on the
Securities shall be applied first to the payment of interest and then the
remainder, if any, to the payment of principal and any premium on such
Securities.
ARTICLE ELEVEN
Discharge of Indenture
SECTION 11.01. Termination of Company's Obligations.
Except as otherwise provided in this Section 11.01, the Company may
terminate its obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered (other than
destroyed, lost or stolen
Securities that have been replaced or Securities that are paid pursuant to
Section 4.01 or Securities for whose payment money or securities have
theretofore been held in trust and thereafter repaid to the Company, as
provided in Section 11.05) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of them are to
be called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (B) the Company
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of the
Holders for that purpose, money or U.S. Government Obligations sufficient
(in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if, any, and interest on the Securities
to their Stated Maturity or redemption, as the case may be, and to pay all
other sums payable by it hereunder, (C) no Default or Event of Default with
respect to the Securities shall have occurred and be continuing on the date
of such deposit, (D) such deposit shall not result in a breach or violation
of, or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by
110
<PAGE> 119
which it is bound and (E) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating that
all conditions precedent provided for herein relating to the satisfaction
and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations under
Section 8.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 8.07, 8.08, 11.04, 11.05 and 11.06 shall survive until the Securities are
no longer outstanding. Thereafter, only the Company's obligations in Sections
8.07, 11.05 and 11.06 shall survive. After any such irrevocable deposit, the
Trustee upon request shall acknowledge in writing the discharge of the Company's
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
SECTION 11.02. Defeasance and Discharge of Indenture.
The Company shall be deemed to have paid and shall be discharged from any
and all obligations in respect of the Securities on the 123rd day after the date
of the deposit referred to in clause (A) of this Section 11.02, and the
provisions of this Indenture shall no longer be in effect with respect to the
Securities, and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same, except as to (i) rights of registration of
transfer and exchange, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of Holders to receive
payments of principal thereof and interest thereon, (iv) the Company's
obligations under Section 4.02, (v) the rights, obligations and immunities of
the Trustee hereunder and (vi) if applicable, the rights of the Holders as
beneficiaries of this Indenture with respect to the property so deposited with
the Trustee payable to all or any of them, and the assets and property held in
the Trust Estate shall be released, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same; provided that
the following conditions shall have been satisfied:
(A) with reference to this Section 11.02, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 8.10 of this
Indenture) and conveyed all right, title and interest for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in and to
(1) money in an amount, (2) U.S. Government Obligations that, through the
payment of interest, premium, if any, and principal in respect thereof in
accordance with their terms, shall provide, not later than one day before
the due date of any payment referred to in this clause (A), money in an
111
<PAGE> 120
amount or (3) a combination thereof in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Securities at the Stated
Maturity of such principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal, premium,
if any, and interest with respect to the Securities;
(B) such deposit shall not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd day
after such date of deposit;
(D) the Company shall have delivered to the Trustee (1) either (x) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the Holders shall not recognize income, gains or loss
for federal income tax purposes as a result of the Company's exercise of
its option under this Section 11.02 and shall be subject to federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised or (y) an
Opinion of Counsel to the same effect as the ruling described in clause (x)
above which opinion must be based upon (and accompanied by a copy of) a
ruling to that effect published by the Internal Revenue Service, unless
there has been a change in the applicable federal income tax law since the
date of this Indenture such that a ruling from the Internal Revenue Service
is no longer required and (2) an Opinion of Counsel to the effect that (x)
the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and (y) after the passage of 123 days following the
deposit (except, with respect to any trust funds for the account of any
Holder who may be deemed to be an "insider" for purposes of the United
States Bankruptcy Code, after one year following the deposit), the trust
funds shall not be subject to the effect of Section 547 of the United
States Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law in a case commenced by or against the Company under either such
statute, and either (I) the trust funds shall no longer remain the property
of the Company (and therefore shall not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (II) if a court were to rule under any such
law in any case or proceeding that the trust funds remained property of the
Company, (a) assuming such trust funds remained in the possession of
112
<PAGE> 121
the Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee shall hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise (except for the effect of Section 552(b) of the
United States Bankruptcy Code on interest on the trust funds accruing after
the commencement of a case under such statute) and (b) the Holders shall be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case or proceeding;
(E) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge shall not
cause the Securities to be delisted; and
(F) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 11.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (D)(2)(y) above, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day (or one year) period with respect to this Section 11.02, the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 8.07, 8.08, 11.05 and 11.06 shall survive until the Securities are no
longer outstanding. Thereafter, only the Company's obligations in Sections 8.07,
11.05 and 11.06 shall survive. If and when a ruling from the Internal Revenue
Service or an Opinion of Counsel referred to in clause (D)(1) above is able to
be provided specifically without regard to, and not in reliance upon, the
continuance of the Company's obligations under Section 4.01, then the Company's
obligations under such Section 4.01 shall cease upon delivery to the Trustee of
such ruling or Opinion of Counsel and compliance with the other conditions
precedent provided for herein relating to the defeasance contemplated by this
Section 11.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 11.03. Defeasance of Certain Obligations.
The Company may omit to comply with any term, provision or condition set
forth in clause (iii) and clause (iv) of Section 6.01(a), Sections 4.03 through
4.18, Section 4.21, Sections 5.02 through 5.06, and subsection (d) of Section
7.01 with respect to clause (iii) and clause (iv) of Section 6.01, Sections 4.03
through 4.17, Sections 4.22, 4.23, Sections 5.02 through 5.06, and subsections
(e), (f), (h), (i) and (j) of Section 7.01 shall be deemed not to be Events of
Default with respect to the outstanding Securities, and the assets and property
held in
113
<PAGE> 122
the Trust Estate shall be released, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same if:
(i) with reference to this Section 11.03, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 8.10) and conveyed
all right, title and interest to the Trustee for the benefit of the
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in and to
(A) money in an amount, (B) U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with
their terms, shall provide, not later than one day before the due date of
any payment referred to in this clause (i), money in an amount or (C) a
combination thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Securities on the Stated
Maturity of such principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal, premium,
if any, and interest with respect to the Securities;
(ii) such deposit shall not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit and after giving effect to such
deposit;
(iv) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (A) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, (B) the Holders have a valid
first-priority security interest in the trust funds, (C) the Holders shall
not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain obligations and shall be
subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and
defeasance had not occurred and (D) after the passage of 123 days following
the deposit (except, with respect to any trust funds for the account of any
Holder who may be deemed to be an "insider" for purposes of the United
States Bankruptcy Code, after one year following the deposit),
114
<PAGE> 123
the trust funds shall not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (1) the trust funds shall no longer remain the
property of the Company (and therefore shall not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (2) if a court were to rule under
any such law in any case or proceeding that the trust funds remained
property of the Company, (x) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to the Holders, the Trustee shall hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise (except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute), (y) the
Holders shall be entitled to receive adequate protection of their interests
in such trust funds if such trust funds are used in such case or proceeding
and (z) no property, rights in property or other interests granted to the
Trustee or the Holders in exchange for, or with respect to, such trust
funds shall be subject to any prior rights of holders of other Indebtedness
of the Company or any of its Subsidiaries;
(v) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge shall not
cause the Securities to be delisted; and
(vi) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 11.03 have been complied with.
SECTION 11.04. Application of Trust Money.
Subject to Section 11.06, the Trustee or Paying Agent shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to Section
11.01, 11.02 or 11.03, as the case may be, and shall apply the deposited money
and the money from U.S. Government Obligations in accordance with the Securities
and this Indenture to the payment of principal of, premium, if any, and interest
on the Securities; provided that such money need not be segregated from other
funds except to the extent required by law.
SECTION 11.05. Repayment to Company.
Subject to Sections 8.07, 11.01, 11.02 and 11.03, the Trustee and the
Paying Agent shall promptly pay to the Company upon request set forth in an
Officers' Certificate any excess money held by them at any time and thereupon
shall be relieved from all liability with
115
<PAGE> 124
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years; providedthat the Trustee
or such Paying Agent before being required to make any payment may cause to be
published at the expense of the Company once in a newspaper of general
circulation in the City of New York or mail to each Holder entitled to such
money at such Holder's address (as set forth in the Security Register) notice
that such money remains unclaimed and that after a date specified therein (which
shall be at least 30 days from the date of such publication or mailing) any
unclaimed balance of such money then remaining shall be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 11.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 11.01, 11.02 or 11.03, as the
case may be, by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 11.01, 11.02 or 11.03, as the case may
be, until such time as the Trustee or Paying Agent is permitted to apply all
such money or U.S. Government Obligations in accordance with Section 11.01,
11.02 or 11.03, as the case may be; provided that, if the Company has made any
payment of principal of, premium, if any, or interest on any Securities because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE TWELVE
Amendments, Supplements and Waivers
SECTION 12.01. Without Consent of Holders.
The Company, when authorized by a resolution of its Board of Directors, and
the Trustee may amend or supplement this Indenture, the Securities or the
Security Documents without notice to or the consent of any Holder:
116
<PAGE> 125
(1) to cure any ambiguity, defect or inconsistency in the Indenture or
any Security Document; provided that such amendments or supplements shall
not adversely affect the interests of the Holders in any material respect;
(2) to comply with Article Six;
(3) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(5) to establish or maintain the First Preferred Ship Mortgages as
first preferred ship mortgages on the Mortgaged Vessels under the maritime
laws of the Republic of Liberia or the Commonwealth of the Bahamas, or to
correct or amplify the description of any property at any time subject to
the Lien of this Indenture or the First Preferred Ship Mortgages, or to
subject additional property to the Lien of this Indenture or the First
Preferred Ship Mortgages;
(6) to correct or amplify the description of any assets subject to any
Security Document or to subject additional assets to any Security Document;
(7) to add Tendered Vessel Owners as Guarantors hereunder, or to
secure further the obligations of the Company and the Guarantors under the
Indenture, the Securities or the Security Documents;
(8) to make any change that does not materially and adversely affect
the rights of any Holder; or
(9) to amend or supplement any Security Document to reflect an
increase in the interest rate on the Securities as provided in Exhibit A to
this Indenture.
SECTION 12.02. With Consent of Holders.
Subject to Sections 7.04 and 7.07 and without prior notice to the Holders,
the Company, when authorized by its Board of Directors (as evidenced by a Board
Resolution), and the Trustee may amend this Indenture, the Securities or the
Security Documents with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Securities then Outstanding, and
the Holders of at least a majority in principal amount of the Securities then
Outstanding by written notice to the Trustee may waive future compliance by the
Company with any provision of this Indenture or the Securities.
117
<PAGE> 126
Notwithstanding the provisions of this Section 12.02, without the consent
of each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 7.04, may not:
(i) change the Stated Maturity of the principal of, or any installment
of interest on, any Security;
(ii) reduce the principal amount of or the rate of interest thereon or
any premium payable upon the redemption of any Security;
(iii) adversely affect any right of repayment at the option of any
Holder of any Security;
(iv) change any place of payment where, or the currency in which, any
Security or any premium or the interest thereon is payable;
(v) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity thereof (or, in the case of a
redemption, on or after the Redemption Date) of any Security;
(vi) reduce the percentage in principal amount of outstanding
Securities the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain
provisions of this Indenture or certain Defaults and their consequences
provided for in this Indenture;
(vii) waive a Default in the payment of principal of, premium, if any,
or interest on, any Security;
(viii) modify any of the provisions of this Section 12.02 or Section
7.04, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Security affected thereby; or
(ix) prior to the occurrence of the Termination and Release, except
as permitted by this Indenture, permit the creation of any Lien ranking
prior to or on a parity with the Lien of this Indenture or any Security
Document, or terminate the Lien of the Indenture or any Security Document
on any property at any time subject hereto or thereto or deprive the
Holders of the security afforded by the Lien of this Indenture or the
Security Document.
118
<PAGE> 127
It shall not be necessary for the consent of the Holders under this Section
12.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 12.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company shall mail
copies of supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
SECTION 12.03. Revocation and Effect of Consent.
Until an amendment or waiver becomes effective, a consent to it by a Holder
is a continuing consent by the Holder and every subsequent Holder of a Security
or portion of a Security that evidences the same debt as the Security of the
consenting Holder, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be effective only if
the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver shall
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Securities.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder unless it is of the type described in any of clauses (i) through
(ix) of Section 12.02. In case of an amendment or waiver of the type described
in clauses (i) through (ix) of Section 12.02, the amendment or waiver shall bind
each Holder who has consented to it and every subsequent Holder of a Security
that evidences the same indebtedness as the Security of the consenting Holder.
119
<PAGE> 128
SECTION 12.04. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Security about the changed terms and return
it to the Holder and the Trustee may place an appropriate notation on any
Security thereafter authenticated. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 12.05. Trustee to Sign Amendments, Etc.
The Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Twelve is authorized or
permitted by this Indenture. Subject to the preceding sentence, the Trustee
shall sign such amendment, supplement or waiver if the same does not adversely
affect the rights of the Trustee. The Trustee may, but shall not be obligated
to, execute any such amendment, supplement or waiver that affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise.
SECTION 12.06. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article Twelve shall
conform to the requirements of the TIA as then in effect.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act of 1939.
This Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable,
incorporate and be governed by such provisions.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in writing and
delivered in person or mailed by first class mail addressed as follows:
120
<PAGE> 129
if to the Company or any Guarantor:
Teekay Shipping Corporation
Tradewinds Building
Sixth Floor
Bay Street
P.O. Box SS-6293
Nassau, Commonwealth of the Bahamas
Attention: Managing Director
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Trust Administration
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to him at
his address as it appears on the Security Register by first class mail and shall
be sufficiently given to him if so mailed within the time prescribed. Copies of
any such communication or notice to a Holder shall also be mailed to the Trustee
and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
121
<PAGE> 130
SECTION 13.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 13.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in the Indenture shall include:
(i) a statement that the person making such certificate or opinion has
read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(iv) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with, and such other opinions as
the Trustee may reasonably request; provided, however, that, with respect to
matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 13.05. Rules by Trustee, Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
122
<PAGE> 131
SECTION 13.06. Payment Date Other Than a Business Day.
If an Interest Payment Date, Redemption Date, Change in Control Purchase
Date, Excess Proceeds Payment Date, Stated Maturity or date of maturity of any
Security shall not be a Business Day at any place of payment, then payment of
principal of, premium, if any, or interest on such Security, as the case may be,
need not be made on such date, but may be made on the next succeeding Business
Day at such place of payment with the same force and effect as if made on the
Interest Payment Date, Change in Control Purchase Date, Excess Proceeds Payment
Date, or Redemption Date, or at the Stated Maturity or date of maturity of such
Security; provided that no interest shall accrue for the period from and after
such Interest Payment Date, Change in Control Purchase Date, Excess Proceeds
Payment Date, Redemption Date, Stated Maturity or date of maturity, as the case
may be.
SECTION 13.07. Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE
SECURITIES.
SECTION 13.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.09. No Recourse Against Others.
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Securities, or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company contained in this Indenture, or in any of the
Securities, or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator or against any past, present or future
incorporator, shareholder, officer, director, employee or controlling person, as
such, of the Company or of any successor Person, either directly or through the
Company or any successor Person, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Securities.
123
<PAGE> 132
SECTION 13.10. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 13.11. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.12. Separability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.13. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms and provisions hereof.
SECTION 13.14. Consent to Jurisdiction.
The Company and each Guarantor hereby irrevocably submits to the
non-exclusive jurisdiction of any New York State or Federal court sitting in New
York City and any appellate court from any thereof for the purposes of (and
solely for the purposes of) any suit, action or other proceeding arising out of
or relating to this Indenture or any of the transactions contemplated hereby,
and the Company and each Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court or in such Federal court. The Company and each Guarantor hereby
(to the fullest extent they may effectively do so) irrevocably waive and agree
not to assert, by way of motion, as a defense, or otherwise in any such suit,
action or proceeding, any claim that they are not personally subject to the
jurisdiction of the above-named courts for any reason whatsoever, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper, or that this Indenture or the
subject matter hereof may not be enforced in such courts. The Company and each
Guarantor hereby irrevocably appoint [Haight, Gardner, Poor & Havens] (the
"Process Agent"), with an office on the date hereof at [195 Broadway, New York,
New York 10007], United States, as their agent to receive on behalf of the
Company and each Guarantor and their property service of copies of the summons
and
124
<PAGE> 133
complaint and any other process which may be served in any such suit, action or
proceeding and in any suit, action or proceeding arising out of or relating to
the Indenture to which the Company or any Guarantor is a party. Such service may
be made by mailing or delivering a copy of such process to the Company and each
Guarantor in care of the Process Agent at the Process Agent's above address, and
the Company and each Guarantor hereby irrevocably authorize and direct the
Process Agent to accept such service on their behalf. As an alternative method
of service, the Company and each Guarantor also irrevocably consent to the
service of any and all process in any such suit, action or proceeding by the
mailing of copies of such process to the Company and each Guarantor at its
address specified in Section 13.02. The Company and each Guarantor agree that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Section 11.14 shall affect the right of
the Trustee to serve legal process in any other manner permitted by law or
affect the right of the Trustee to bring any action or proceeding against the
Company and each Guarantor or their property in the courts of any other
jurisdictions.
125
<PAGE> 134
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
TEEKAY SHIPPING CORPORATION,
as Issuer
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
VSSI OCEANS INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
----------------------
Name:
Title:
126
<PAGE> 135
VSSI ATLANTIC INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
VSSI APPIAN INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
SENANG SPIRIT INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
127
<PAGE> 136
EXUMA SPIRIT INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
NASSAU SPIRIT INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
ANDROS SPIRIT INC.,
as Guarantor
By:
----------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
128
<PAGE> 137
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
----------------------------
Name:
Title:
Attest:
----------------------------
Name:
Title:
129
<PAGE> 138
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Treasurer of TEEKAY SHIPPING CORPORATION, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 139
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of VSSI OCEANS INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 140
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of VSSI ATLANTIC INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 141
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of VSSI APPIAN INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 142
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of SENANG SPIRIT INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 143
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of EXUMA SPIRIT INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 144
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of NASSAU SPIRIT INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 145
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came Arthur F.
Coady, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of ANDROS SPIRIT INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 146
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the day of January, 1996, before me personally came , to
me known, who, being by me duly sworn, did depose and say that he is [Vice
President] of UNITED STATES TRUST COMPANY OF NEW YORK, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------
<PAGE> 1
EXHIBIT 4.2
[FACE OF NOTE]
TEEKAY SHIPPING CORPORATION
% First Preferred Ship Mortgage Note Due 2008
CUSIP
No. $
TEEKAY SHIPPING CORPORATION, a Liberian corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to), for
value received, promises to pay to , or its registered assigns, the
principal sum of ($ ), on , 2008.
Initial Interest Rate: % per annum.
Interest Payment Dates: and , commencing ,
1996.
Regular Record Dates: and .
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Date: January , 1996
TEEKAY SHIPPING CORPORATION
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the % First Preferred Ship Mortgage Notes Due 2008 (the
"Notes") described in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
--------------------------------
Authorized Signatory
<PAGE> 2
[REVERSE SIDE OF NOTE]
TEEKAY SHIPPING CORPORATION
% FIRST PREFERRED SHIP MORTGAGE NOTE DUE 2008
1. Principal and Interest.
The Company will pay the principal of this Note on , 2008.
The Company promises to pay interest on the principal amount of this Note
on each Interest Payment Date, as set forth below, at the rate of % per
annum.
Interest will be payable semiannually (to the Holders of record of the
Notes at the close of business on the or immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
, 1996.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January , 1996;
provided that, if there is no existing default in the payment of interest and if
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is equal to the rate otherwise payable.
2. Method of Payment.
The Company will pay interest (except defaulted interest and subject to the
provisions of the third paragraph of Section 1 hereof) on the principal amount
of the Notes on each and to the persons who are Holders (as
reflected in the Security Register at the close of business on such and
immediately preceding the Interest Payment Date), in each case, even if the Note
is cancelled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after , 2008.
The Company will pay principal, premium, if any, and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal, premium, if
any, and interest by its check payable in such money. The Company may
3
<PAGE> 3
mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Business Day and no interest shall accrue for the intervening
period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice to the Holders. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent (other than for purposes of
Article 11 of the Indenture), Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of January ,
1996 (the "Indenture"), among the Company, VSSI Oceans Inc., a Liberian
corporation, VSSI Atlantic Inc., a Liberian corporation, VSSI Appian Inc., a
Liberian corporation, Senang Spirit Inc., a Bahamian corporation, Exuma Spirit,
a Bahamian corporation, Nassau Spirit Inc., a Bahamian corporation, and Andros
Spirit Inc., a Bahamian corporation, as guarantors of the Notes (each,
individually a "Guarantor" and, collectively, the "Guarantors"), and United
States Trust Company of New York, as trustee (the "Trustee"). Capitalized terms
herein are used as defined in the Indenture unless otherwise indicated. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are subject to
all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Indenture limits the original aggregate principal amount of the Notes
to $225 million.
5. Security.
Unless and until the Termination and Release shall have occurred, the Notes
and the obligations of the Company and the Guarantors under the Indenture shall
be secured by (a) a pledge by the Company to the Trustee of all of the capital
stock of the Guarantors, and (b) guarantees by each of the Guarantors in favor
of the Trustee. In addition, unless and until the Termination and Release shall
have occurred, the Notes and such obligations shall be secured by (a) first
preferred mortgages by each Guarantor on the Mortgaged Vessel owned by such
Guarantor, (b) assignments by each Guarantor of such Guarantor's interest in the
time charter with
4
<PAGE> 4
respect to its Mortgaged Vessel, (c) general assignments by each Guarantor of
such Guarantor's interest in freights and hires with respect to its Mortgaged
Vessel and (d) assignments by each Guarantor of such Guarantor's interest in
certain insurance policies with respect to its Mortgaged Vessel.
The Indenture and the related security documents prescribe certain terms
and conditions, applicable until the Termination and Release shall have
occurred, for the ownership, operation and maintenance of the Mortgaged Vessels
and the performance of the related charters, freights and hires and insurance
policies. Upon terms and conditions prescribed in the Indenture, a Guarantor may
sell a Mortgaged Vessel or request that a Mortgaged Vessel be released from the
Lien of the Indenture and the related security documents.
6. Fall-away Event
In the event that (i) the Notes achieve Investment Grade Status on a pro
forma basis after giving effect to the termination of the Security Documents and
the release of the Collateral from the Liens of the Indenture and the Security
Documents, (ii) no Event of Default shall have occurred and be continuing and
(iii) on a pro forma basis, after giving effect to the termination of the
Security Documents and the release of the Collateral from the Liens of the
Indenture and the Security Documents, the aggregate amount of all Indebtedness
of the Company that is secured by a Lien plus all Indebtedness of Restricted
Subsidiaries is not greater than 15% of the Company's Consolidated Tangible
Assets, upon the request of the Company and the Guarantors and subject to the
delivery of appropriate documentation to the Trustee, the Subsidiary Guarantees
will be terminated, the Collateral securing the Obligations of the Company and
the Guarantors under the Indenture and the Security Documents will be released
and certain covenants under the Indenture will no longer be applicable to the
Company and the Restricted Subsidiaries. See Sections 5 and 15. In addition,
Teekay's mandatory redemption obligations upon a loss or sale of a Mortgaged
Vessel shall no longer be applicable. See Section 9.
7. Repurchase upon a Change in Control Triggering Event.
Upon the occurrence of a Change in Control Triggering Event, each Holder
shall have the right to require the repurchase of its Notes by the Company in
cash pursuant to the offer described in the Indenture at a purchase price equal
to 101% of the principal amount thereof, plus accrued interest, if any, to the
date of purchase (the "Change of Control Payment").
A notice of such Change in Control Triggering Event will be mailed within
30 days after any Change in Control Triggering Event occurs to each Holder at
such Holder's last address as it appears in the Security Register. Notes in
original denominations larger than $1,000 may be sold to the Company in part. On
and after the Change in Control Payment Date, interest ceases to accrue on Notes
or portions of Notes surrendered for purchase by the Company, unless the Company
defaults in the payment of the Change in Control Payment.
8. Sinking Fund.
The Notes are subject to redemption of $45 million aggregate principal
amount thereof (subject to adjustment as provided below) on in each
year commencing in 2004 through the operation of a sinking fund, at a Redemption
Price equal to 100% of principal amount, together with accrued interest to
the Redemption Date, all as provided in the Indenture. Upon any redemption of
Notes in connection with a reduction in the number of Mortgaged Vessels securing
the Notes, whether as a result of the sale of a Mortgaged Vessel, or an Event of
Loss with respect to a Mortgaged Vessel, each remaining sinking fund payment
will be proportionately reduced by an amount equal to the product of the sinking
fund payment otherwise due multiplied by the Vessel Percentage of the Mortgaged
Vessel
5
<PAGE> 5
so lost or sold. Notes acquired by the Company and delivered to the Trustee
may, at the Company's option, be credited against subsequent sinking fund
requirements.
9. Mandatory Redemption.
Unless and until the Termination and Release shall have occurred, under
certain circumstances the Notes will be subject to mandatory redemption, in
whole or in part, at a Redemption Price equal to (a) 100% of their principal
amount, together with accrued interest to the Redemption Date, in the event of a
loss, condemnation, requisition or other Event of Loss (as defined in the
Indenture) affecting any of the Mortgaged Vessels, or (b) the greater of (i)
100% of their principal amount, together with accrued interest to the Redemption
Date, and (ii) the sum of the present values of the remaining scheduled payments
of principal and interest thereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 50 basis points, together with accrued interest to the
Redemption Date, in the event of a permitted sale of a Mortgaged Vessel by a
Guarantor.
10. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and multiples of $1,000 in excess thereof. A Holder may register the
transfer or exchange of Notes in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not register the transfer or
exchange of any Notes (a) selected for redemption (except the unredeemed portion
of any Notes being redeemed in part) or (b) for a period of 15 business days
after a notice of selection of Notes to be redeemed is mailed to Holders or 15
business days before the due date of any payment of principal on the Notes.
11. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all purposes.
12. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee and the Paying Agent will pay the money
back to the Company at its request. After that, Holders entitled to the money
must look to the Company for payment as general creditors, unless an applicable
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
6
<PAGE> 6
13. Discharge Prior to Redemption or Maturity.
If the Company complies with certain conditions set forth in the
Indenture, including the deposit with the Trustee of certain amounts of money or
U.S. Government Obligations, the Company will be discharged from the Indenture
and the Notes, except in certain circumstances for certain sections thereof, or
from certain covenants set forth in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented, and any existing default or compliance with any provision may be
waived with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding. Without notice to or the consent of any
Holder, the Company and the Trustee may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency and
make any change therein that does not materially and adversely affect the rights
of any Holder.
15. Restrictive Covenants.
Unless and until the Termination and Release shall have occurred, the
Indenture imposes certain limitations on the ability of the Company and its
Restricted Subsidiaries, among other things, to Incur additional Indebtedness,
incur or create liens, make Restricted Payments, use the proceeds from Asset
Sales, engage in transactions with Affiliates or merge or consolidate with, or
transfer substantially all of its assets to, another entity. Following the
occurrence of the Termination and Release, the Indenture imposes certain
limitations on the ability of (a) the Company and its Restricted Subsidiaries,
among other things, to incur or create Liens or enter into certain sale and
leaseback transactions, and (b) the Restricted Subsidiaries to Incur additional
Indebtedness. Within 60 days after the end of each fiscal quarter (120 days
after the end of the last fiscal quarter of each fiscal year), the Company must
report to the Trustee regarding compliance with such limitations.
16. Defaults and Remedies.
The following events constitute "Events of Default" under the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and
7
<PAGE> 7
payable at maturity, upon acceleration, redemption or otherwise; (b) default in
the payment of interest on any Note when the same becomes due and payable, and
such default continues for a period of 30 days; (c) default in the deposit of
any Sinking Fund or other mandatory redemption payment, when and as due by the
terms of the Indenture; (d) the Company or, if prior to the occurrence of the
Termination and Release, any Guarantor defaults in the performance of or
breaches any other covenant or agreement of the Company or any Guarantor in the
Indenture or under the Notes or in the Security Documents, if applicable, and
such default or breach continues for a period of 30 consecutive days after the
date on which written notice of such default or breach, requiring the Company or
a Guarantor to remedy the same, shall have been given to the Company or such
Guarantor by the Trustee, or to the Company, such Guarantor and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Notes at the
time Outstanding; (e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any of its Restricted Subsidiaries having an
outstanding aggregate principal amount of $10 million or more individually or
$20 million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, an event of
default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled (by
cure, waiver or otherwise) within 30 days of such acceleration; provided,
however, that any secured Indebtedness in excess of the limits set forth above
shall be deemed to have been declared due and payable if the lender in respect
thereof takes any action to enforce a security interest against, or an
assignment of, or to collect on, seize, dispose of or apply any assets of the
Company or its Subsidiaries (including lock-box and other similar arrangements)
securing such Indebtedness, or to set off against any bank account of the
Company or its Subsidiaries (in excess of $10 million); (f) any final judgment
or order (not covered by insurance) for the payment of money in excess of $10
million individually or $20 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Restricted Subsidiary and shall not be paid or discharged, and
there shall be any period of 30 consecutive days following entry of the final
judgment or order in excess of $10 million individually or that causes the
aggregate amount for all such final judgments or orders outstanding and not paid
or discharged against all such Persons to exceed $20 million during which a stay
of enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (g) certain events of bankruptcy or
insolvency in respect of the Company or any Restricted Subsidiary; (h) the
Company and/or one or more of its Restricted Subsidiaries fails to make (x) at
the final (but not any interim) fixed maturity of any issue of Indebtedness a
principal payment of $10 million or more or (y) at the final (but not any
interim) fixed maturity of more than one issue of such Indebtedness principal
payments aggregating $20 million or more and, in the case of clause (x), such
defaulted payment shall not have been made, waived or extended within 30 days of
the payment default and, in the case of clause (y), all such defaulted payments
shall not have been made, waived or extended within 30 days of the payment
default that causes
8
<PAGE> 8
the amount described in clause (y) to exceed $20 million; (i) if prior to the
occurrence of the Termination and Release, any Security Document ceases to be in
full force and effect for a period of 30 days; or (j) if prior to the occurrence
of the Termination and Release, any Charter ceases to be in full force and
effect or is repudiated prior to the expiration of the term of such Charter.
If an Event of Default (as defined in the Indenture) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding may declare all the Notes to be due and
payable. If a bankruptcy or insolvency default with respect to the Company or
any Restricted Subsidiary occurs and is continuing, the Notes automatically
become due and payable. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
reasonably satisfactory to it before it enforces the Indenture or the Notes.
Subject to certain limitations, Holders of at least a majority in aggregate
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power.
17. Trustee Dealings with Company.
Subject to applicable provisions of the Trust Indenture Act, the Trustee
under the Indenture, in its individual or any other capacity, may make loans to,
accept deposits from, perform services for, and otherwise deal with the Company
or its Affiliates and may otherwise deal with the Company or its Affiliates as
if it were not the Trustee.
18. No Recourse Against Others.
No incorporator or any past, present or future partner, shareholder, other
equity holder, officer, director, employee or controlling person, as such, of
the Company or of any successor Person shall have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
19. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
20. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
9
<PAGE> 9
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Teekay Shipping
Corporation, Tradewinds Building, Sixth Floor, Bay Street, P.O. Box SS-6293,
Nassau, Commonwealth of the Bahamas, Attention: Secretary.
10
<PAGE> 10
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
Please print or typewrite name and address including zip code of assignee
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
Date:
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or
any change whatsoever.
11
<PAGE> 11
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.10 or Section 4.23 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.23 of the Indenture, state the amount (in
original principal amount of $1,000 or integral multiples thereof, unless less
than $1,000 principal amount is outstanding):
$ .
Date:
Your Signature:
---------------------------------
Name:
---------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
---------------------------------
Name:
---------------------------------
12
<PAGE> 1
COMMONWEALTH OF THE BAHAMAS EXHIBIT 4.3
FORM. NO. (J) -- 1 MORTGAGE (TO SECURE ACCOUNT CURRENT, & C.) (BODY CORPORATE)
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
No., Year and Whether a Sailing, Horse Power
Official No. Name of Ship Port of Registry Steam or Motor Ship of Engine, if any
</TABLE>
<TABLE>
<CAPTION>
Feet Tenths
<S> <C> <C> <C>
Length from forepart of stern, to the aft side of the
head of the stern post............................... Gross...............................
Main breadth to outside of plating..................... Number of Tons
Depth in hold from tonnage deck to ceiling amidships... Register............................
</TABLE>
and as described in more detail in the Certificate of the Surveyor and the
Register Book.
Whereas (a) there is an account, current between (1) , a Liberian
Corporation (the "Shipowner") and (2) United States Trust Company of New York, a
New York corporation (together with its successors and assigns, the "Mortgages")
regulated by (i) a Deed of Covenants (as the same may from time to time be
amended, the "Deed of Covenants") bearing even date herewith and made between
the undersigned and the Mortgages, and (ii) an Indenture dated as of January ,
1996 (as the same may from time to time be amended, the "Indenture", terms used
herein and not otherwise defined shall be used herein as defined in the
Indenture) among the Company, the Guarantors and the Mortgages.*
Now we the (b) said in consideration of the premises for ourselves and our
successors, covenant with the said (c) United States Trust Company of New York
and (d) its assigns, to pay to him or them or it the sums for the time being due
on this security, whether by way of principal or interest,at the times and
manner aforesaid. And for the purpose of better securing to the said (c) United
States Trust Company of New York the payment of such sums as last aforesaid, we
do hereby mortgage to the said (c) United States Trust Company of NY sixty-four
sixty-fourths, 64/64ths shares, of which we are the Owners in the Ship above
particularly described, and in her boats, guns, ammunition, shell arms, and
appurtenances.
Lastly, we for ourselves and our successors, covenant with the said (c)
United States Trust Company of New York and (d) its assigns that we have power
to mortgage in manner aforesaid the above-mentioned shares, and that the same
are free from incumbrances (e) , .
In witness whereof we have hereunto affixed our common seal this day
of One thousand nine hundred and .
The Common Seal of the )
was affixed hereunto in the presence of: )
)
)
(a) Here state by way of recital that there is an account current between
the Mortgagor (describing the Company and giving as address), and the Mortgagee
(giving address and description -- if the Mortgagee is a Body Corporate the full
title and address must be given, and if Joint Mortgagees are concerned they must
be so described), and describe the nature of the transaction so as to show how
the amount of principal and interest due at any given time is to be ascertained
and the manner and time of payment, (b) Name of the Company, (c) Full name of
Mortgagee, (d) "his," "their" or "its," (e) if any prior incumbrance add, "save
as appears by the Registry of the said Ship", : Signatures and description of
witnesses, i.e., Directors, Secretary, etc. (as the case may be).
NOTE:--The prompt registration of a Mortgage Deed at the Port of
Registry of the Ship is essential to the security of Mortgagee, as a
Mortgage takes its priority from the date of production for registry, not
from the date of the instrument.
NOTE:--Registered Owners or Mortgagees are reminded of the importance of
keeping the Registrar of Bahamian Ships informed of any change of residence
on their part.
* as Trustee, pursuant to which Indenture the Notes will be issued in the
aggregate principal amount of up to $225,000,000. Pursuant to the Indenture, the
Shipowner has agreed to execute this Mortgage for the purpose of securing
payment to the Mortgagee of all sums of money (whether for principal, premium,
if any, interest, fees expenses or otherwise) from time to time payable by the
Shipowner under its Guarantee, the payment of the principal of (and premium, if
any) and interest on the Securities, the payment of all other sums of money
payable by the Company under the Indenture, the payment of all other sums of
money payable by the Shipowner under the Deed of Covenants and this Mortgage and
the other Guarantor Security Documents to which it is a party, and the payment
of all sums payable by the other Guarantors under their respective Subsidiary
Guarantees and Guarantor Security Documents (collectively, the "Obligations"),
and to secure as well the performance and observance of all agreements,
covenants and provisions contained in the Deed of Covenants and this Mortgage,
and of the Company and the Guarantors in the Indenture and the Security
Documents. The amount of principal (and premium, if any), interest, costs,
charges, expenses or otherwise due at any given time can be ascertained by
reference to the Indenture and the Deed of Covenants.
<PAGE> 1
EXHIBIT 4.4
[FORM OF BAHAMIAN DEED OF COVENANTS]
DEED OF COVENANTS
TO ACCOMPANY FIRST PRIORITY
STATUTORY MORTGAGE OF A SHIP
BY
**A**
TO
UNITED STATES TRUST COMPANY OF NEW YORK
AS
TRUSTEE
DATED ,
M/T **B**
<PAGE> 2
This Deed made the day of , by **A**, a corporation
organized and existing under the laws of [the Republic of Liberia] [the
Commonwealth of the Bahamas] (the "Shipowner"), to United States Trust Company
of New York (the "Mortgagee"), a New York corporation, as Trustee (the
"Trustee"), pursuant to, and for the benefit of the Holders of the Securities
(as hereinafter defined) issued under, that certain Indenture (the "Indenture";
terms used herein and not otherwise defined are used as defined in the
Indenture) (a copy of which, including exhibits thereto, is annexed hereto as
Exhibit A and made a part hereof) dated as of January , 1996, among Teekay
Shipping Corporation, a corporation organized and existing under the laws of the
Republic of Liberia (the "Company"), certain subsidiaries of the Company (each a
"Guarantor" and, collectively, the "Guarantors") and the Trustee.
WHEREAS:
1. The Company, the Guarantors and the Trustee have entered into the
Indenture to secure, among other things, payment of the principal of (and
premium, if any) and interest on all the Securities issued and to be issued
under the Indenture; and 2. Securities, in an aggregate principal amount of
$225,000,000 have been authorized under the Indenture and designated the %
First Preferred Ship Mortgage Notes due 2008, the form of which is included in
the Indenture, which Securities were originally executed, authenticated and
delivered on the date hereof; and
3. The Shipowner, a Guarantor, has unconditionally guaranteed the
Securities and the Company's obligations under the Indenture pursuant to a
Guarantee dated the date hereof (its "Guarantee") (a copy of which Guarantee is
annexed hereto as Exhibit B); and
4. The Shipowner is the absolute and unencumbered owner of 64/64th shares
of and in the Bahamian flag vessel **B**, registered in the name of the
Shipowner with its home port being Nassau, Bahamas under Official No. **C**, of
**D** gross and **E** net tons, built in **G** in by **F** and bearing Hull
Number ; and
5. Contemporaneously with the execution of this Deed there has been
executed and registered by the Shipowner in favor of the Mortgagee a First
Priority Statutory Bahamian Mortgage (to secure an account current) (the
"Statutory Mortgage") constituting a first preferred mortgage of 64/64th shares
in the said Vessel (as hereinafter defined), and the Shipowner has agreed to
execute this Deed collateral thereto and to the security thereby created; and
6. The Shipowner, in order to secure the payment of all sums of money
(whether for principal, premium, if any,
<PAGE> 3
interest, fees, expenses or otherwise) from time to time payable by the
Shipowner under its Guarantee, the payment of the principal of (and premium, if
any) and interest on the Securities, the payment of all other sums of money
payable by the Company under the Indenture, the payment of all other sums of
money payable by the Shipowner under this Deed and Statutory Mortgage and the
other Guarantor Security Documents to which it is a party, and the payment of
all sums payable by the other Guarantors under their respective Subsidiary
Guarantees and the Guarantor Security Documents (collectively, the
"Obligations"), and to secure as well the performance and observance of all
agreements, covenants and provisions contained in this Deed and Statutory
Mortgage, and of the Company and the Guarantors in the Indenture and the
Security Documents, the Shipowner has duly authorized the execution and delivery
of this Deed and the Statutory Mortgage. The liability of the Shipowner under
this Deed shall be limited by the provisions of Section 2 of the Guarantee.
NOW, THEREFORE, to secure the prompt payment of the Obligations and the
performance and observance of all agreements, covenants and provisions contained
in this Deed and the Statutory Mortgage and of the Company and the Guarantors in
the Indenture and the Security Documents, the Shipowner has granted, conveyed,
mortgaged, pledged, confirmed, assigned, transferred and set over, and by these
presents does grant, convey, mortgage, pledge, confirm, assign, transfer and set
over unto the Mortgagee the whole of the vessel described in Recital 4 above,
together with all of the boilers, engines, machinery, masts, spars, sails,
boats, anchors, cables, chains, rigging, tackle, apparel, furniture, fittings,
equipment and all other appurtenances thereunto appertaining or belonging, and
also any and all additions, improvements and replacements hereafter made in or
to such vessel, or any part thereof, or in or to her equipment and appurtenances
aforesaid, except and excluding such equipment placed on the vessel which under
the terms of any contract relating thereto does not become the property of the
Shipowner (the "Vessel");
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and its
successors' and assigns' own use, benefit and behoof forever;
PROVIDED, HOWEVER, and these presents are upon the condition that, if (a)
the Shipowner or its successors or assigns shall pay or cause to be paid or
there shall otherwise be paid in full, the Obligations in accordance with the
terms hereof and of its Guarantee and the Indenture and shall perform and
observe or cause to be performed and observed all of the agreements,
2
<PAGE> 4
covenants and provisions contained in this Deed, the Statutory Mortgage, its
Guarantee and the Indenture, or (b) the Termination and Release shall have
occurred under the Indenture, this Deed, the Statutory Mortgage and the estate
and rights thereby granted shall cease to be binding and be void, otherwise to
remain in full force and effect.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property above
described is to be held subject to the further covenants, conditions,
provisions, terms and uses hereinafter set forth.
ARTICLE I
COVENANTS OF THE SHIPOWNER
The Shipowner covenants and agrees with the Mortgagee as follows:
SECTION 1.1. The Shipowner will make payment when due of all Obligations
from time to time payable by the Shipowner to the Trustee under its Guarantee
and will observe, perform and comply with the covenants, terms and conditions
herein and in its Guarantee, express or implied, on its part to be observed,
performed or complied with.
SECTION 1.2. The Shipowner was duly organized and is now duly existing as
a corporation under the laws of [the Republic of Liberia] [the Commonwealth of
the Bahamas]; it is duly authorized to mortgage the Vessel; all corporate action
necessary and required by law for the execution and delivery of this Deed and
the Statutory Mortgage has been duly and effectively taken; its Guarantee is and
will be a valid and enforceable obligation of the Shipowner in accordance with
its terms; and the Shipowner shall at all times maintain its corporate existence
and right to carry on its business.
SECTION 1.3. The Shipowner lawfully owns 64/64th shares in and is lawfully
possessed of the Vessel free from any lien, charge or encumbrance whatsoever
(except for (i) the lien of this Deed, (ii) the Statutory Mortgage, (iii) liens
for current crew's wages, if any and (iv) the Time Charter Party dated
, with Palm Shipping Inc., as amended (including any further
amendments, extensions or renewals thereof permitted by the Indenture, the "Time
Charter Party")) and will warrant and defend the title and possession thereto
and to every part thereof for the benefit of the Mortgagee against the claims
and demands of all persons whomsoever.
SECTION 1.4. The Shipowner will cause the Statutory Mortgage to be duly
recorded or filed in a central office or at
3
<PAGE> 5
the home port of the Vessel and in accordance with the applicable provisions of
the law of the Bahamas and will otherwise comply with and satisfy all of the
provisions of applicable law of the Bahamas in order to establish and maintain
(a) the Statutory Mortgage as a first priority statutory mortgage thereunder
upon the Vessel and upon all renewals, replacements and improvements made in or
to the same and (b) this Deed as a first priority assignment of, charge over,
and security interest in the Vessel or other property assigned thereunder.
SECTION 1.5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to law and the Shipowner will not engage in any
unlawful trade or violate any law or carry any cargo that will expose the Vessel
to penalty, forfeiture or capture, and will not do, or suffer or permit to be
done, anything which can or may injuriously affect the registration or
enrollment of the Vessel under the laws and regulations of the Bahamas and will
at all times keep the Vessel duly documented thereunder except as provided in
Section 1.13.
SECTION 1.6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom unless the
Shipowner is contesting the amount, applicability or validity thereof in good
faith and by appropriate proceedings.
SECTION 1.7. Neither the Shipowner, any charterer, the Master of the
Vessel nor any other person has or shall have any right, power or authority to
create, incur or permit to be placed or imposed or continued upon the Vessel any
lien whatsoever other than for crew's wages and salvage.
SECTION 1.8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Deed and a properly certified copy of
the Statutory Mortgage on board the Vessel with her papers and will cause such
certified copy and the Vessel's marine document to be exhibited to any and all
persons having business therewith which might give rise to any lien thereon
other than liens for crew's wages and salvage and to any representative of the
Mortgagee; and will place and keep prominently displayed in the chart room and
in the Master's cabin of the Vessel a framed printed notice in plain type
reading as follows:
4
<PAGE> 6
"NOTICE OF MORTGAGE
This Vessel is owned by **A**, and is subject to a First Priority Statutory
Mortgage and Deed of Covenants collateral thereto in favor of United States
Trust Company of New York, acting solely as Trustee and not in its
individual capacity according to an Indenture dated as of January ,
1996. Under the terms of said Deed, neither the Shipowner, any charterer,
the Master of the Vessel, nor any other person has any right, power or
authority to create, incur or permit to be placed or imposed upon the
Vessel, its freights, profits or hire any other lien whatsoever other than
for crew's wages and salvage."
SECTION 1.9. Except for the Time Charter Party, the lien of this Deed and
the Statutory Mortgage, the Shipowner will not suffer to be continued any lien,
encumbrance or charge on the Vessel for longer than 30 days and in due course
and in any event within 30 days after the same becomes due and payable the
Shipowner will pay or cause to be discharged or make adequate provision for the
satisfaction or discharge of all claims or demands (except to the extent that
the same shall concurrently be contested by the Shipowner in good faith by
appropriate proceedings and shall not affect the continued release of the
Vessel), or will cause the Vessel to be released or discharged from any lien,
encumbrance or charge therefor.
SECTION 1.10. (a) If a libel or complaint be filed against the Vessel or
the Vessel be otherwise attached, arrested, levied upon or taken into custody
under process or color of legal authority for any cause whatsoever, the
Shipowner will promptly notify the Mortgagee by telex or cable, confirmed by
letter, addressed to it at 114 West 47th Street, New York, New York 10036-1532,
Attention: Trust Administration, and within 30 days will cause the Vessel to be
released and all liens thereon other than this Deed, the Statutory Mortgage and
the Time Charter Party to be discharged (except to the extent that the claim
giving rise to such lien shall concurrently be contested by the Shipowner in
good faith by appropriate proceedings and shall not affect the release of the
Vessel) and will promptly notify the Mortgagee thereof in the manner aforesaid.
(b) If the Shipowner shall fail or neglect to furnish proper security or
otherwise to release the Vessel from libel, arrest, levy, seizure or attachment,
the Mortgagee or any person acting on behalf of the Mortgagee may furnish
security to release the Vessel and by so doing shall not be deemed to cure the
default of the Shipowner.
5
<PAGE> 7
SECTION 1.11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee maintain and preserve, or cause to be maintained and
preserved, the Vessel (i) in good running order and repair, so that the Vessel
shall be, insofar as due diligence can make her so, tight, staunch, strong and
well and sufficiently tackled, apparelled, furnished, equipped and in every
respect seaworthy and (ii) in at least as good condition as when originally
delivered by her builder, ordinary wear and tear excepted; and will keep the
Vessel, or cause her to be kept, in such condition as will entitle her to the
highest classification rating for vessels of the same type, size, age and flag
in the classification society, currently [+1A1 Tanker] (or its equivalent with
Lloyd's Registry of Shipping, currently [+100A1 "0.1 Tanker" + LMC UMS and
IGS]).
(b) The Mortgagee shall have the right at any time, on reasonable notice,
to inspect or survey the Vessel to ascertain its condition and to satisfy itself
that the Vessel is being properly repaired and maintained, and the Shipowner
shall cause to be made all such repairs, without expense to the Mortgagee, as
such inspection or survey may show to be required. The Shipowner shall also
permit the Mortgagee to inspect the Vessel's logs, whenever requested, on
reasonable notice, and shall promptly furnish the Mortgagee with full
information regarding any casualties or other accidents or damage to the Vessel
involving an amount in excess of $1,000,000.
(c) The Vessel shall, and the Shipowner covenants that it will, at all
times comply with all applicable laws, rules and regulations issued thereunder,
and the Vessel shall have on board as and when required thereby certificates
showing compliance therewith.
(d) The Shipowner will not make, or permit to be made, any substantial
change in the structure, type or speed of the Vessel or change in her rig, if
any such change would or could reasonably be expected to have a material adverse
effect on the rights or interest of the Mortgagee to any of the terms in any of
the instruments of insurance referred to in Section 1.15 or materially diminish
the value of the Vessel.
(e) The Shipowner may, in the ordinary course of maintenance, repair or
overhaul of the Vessel, remove any item of property constituting a part of the
Vessel, provided such item of property is replaced as promptly as possible by an
item of property which, immediately prior to the time of replacement, is free
and clear of all security interests, liens, encumbrances and rights of others,
is in as good operating condition, leaves the Vessel as seaworthy and has a
value and utility at least equal to the item of property being replaced,
assuming compliance by the
6
<PAGE> 8
Shipowner with all of the terms of this Deed and the Statutory Mortgage. Any
such replacement item of property, shall, without necessity of further act,
become part of the Vessel and subject to this Deed and the Statutory Mortgage.
SECTION 1.12. The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and her cargo and papers and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of all contracts and documents relating to the Vessel, whether on board or not.
SECTION 1.13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel except as permitted by the terms of the
Indenture.
SECTION 1.14. Except as permitted by the terms of the Indenture, the
Shipowner will not sell, mortgage, demise charter or transfer the Vessel.
SECTION 1.15. (a) (i) The Shipowner will at all times and at its own cost
and expense cause to be carried and maintained in respect of the Vessel
insurance payable in United States Dollars in amounts, against risks (including,
without limitation, marine hull and machinery (including excess value)
insurance, marine protection and indemnity insurance, war risks insurance and
liability arising out of pollution and the spillage or leakage of cargo and
cargo liability insurance) and in a form which are substantially equivalent to
the coverage carried by other responsible and experienced companies engaged in
the operation of vessels similar to the Vessel and with insurance companies,
underwriters, funds, mutual insurance associations or clubs of recognized
standing. No such insurance shall provide for a deductible amount in excess of
$1,000,000 per occurrence.
(ii) In the case of all marine and war risk hull and machinery policies,
the Shipowner will cause the Mortgagee to be named an additional insured and
will use its best efforts (and cause its insurance broker to use its best
efforts) to cause the insurers under such policies to waive any liability of the
Mortgagee for premiums or calls payable under such policies. In the case of all
protection and indemnity insurance (including insurance against liability for
pollution or the spillage or leakage of cargo), the Shipowner will cause the
Mortgagee to be named as an additional insured unless it cannot be provided that
the Mortgagee shall not be liable under such policies for payment of any
premium, club call, assessment or advance. The Shipowner will cause its
insurance brokers to agree to advise the Mortgagee as soon as is reasonably
practicable by telex addressed to it at
7
<PAGE> 9
114 West 47th Street, New York, New York 10036-1532, Attention: Trust
Administration, of any lapse of any such insurance by expiration, termination,
failure to renew or otherwise and of any default in payment of any premium in
respect of any insurance on the Vessel. The Mortgagee shall not be deemed to
have knowledge of any such lapse of insurance in the absence of receipt of
notice from such brokers. The Shipowner will also cause such brokers to agree to
mark their records and to advise the Mortgagee, by telex, addressed as provided
above in this subsection, at least seven business days prior to the expiration
date of any insurance carried pursuant to this Deed, whether such insurance has
been renewed or replaced with new insurance which complies with the provisions
of this Section 1.15. In addition, the Shipowner will cause each insurance
company, underwriter, club or fund (or an authorized agent thereof) with respect
to all insurance required hereby to agree in writing for the benefit of the
Mortgagee that each policy or contract issued by such insurance company,
underwriter, club or fund shall not lapse, expire, terminate or be cancelled for
any reason whatsoever without at least seven business days' prior telex or cable
notice to the Mortgagee addressed as provided above in this subsection.
(iii) The Shipowner, at its own expense, shall furnish to the Mortgagee
simultaneously with the execution and delivery hereof, and thereafter at
intervals of not more than 12 calendar months, a detailed report (which shall
set forth, without limitation, with respect to each type of insurance coverage,
each policy or certificate of entry, its form, its number, its amount, each
direct or indirect or participating insurer or underwriter, the type of risk
covered and the expiration date), signed by either a firm of independent
insurance brokers or the company or companies which have issued such coverage,
with respect to the insurance carried and maintained in respect of the Vessel,
together with the opinion of such brokers or of Bankscope Marine Insurance
Consultants Limited ("Bankscope") (or other insurance consultant of similar
recognized standing) substantially to the effect that (A) such insurance is in
such amounts and for such limits against such risks, in such form and with such
insurance companies, underwriters or underwriting associations as are necessary
and reasonable for the protection of the Shipowner's and the Mortgagee's
respective interests, and (B) are arranged in the broadest form generally
available in the United States, British, Japanese or Scandinavian insurance
markets, and (C) as to the compliance of such insurance with the provisions of
this Section 1.15; provided, however, that the opinion of Bankscope delivered
simultaneously with this Mortgage shall not be required to include the opinion
called for by subsection (B) of this paragraph.
8
<PAGE> 10
(b) (i) For the purposes of insurance against total loss, the Vessel, its
equipment, appurtenances, etc., shall be insured for and valued at an amount at
least equal to the fair value thereof (it being agreed that as at the date
hereof such fair value is $ ) but, in any event, an amount which,
when added to the amounts of such insurance on other vessels mortgaged to the
Mortgagee as security for the Obligations, shall be not less than the unpaid
principal amount of the Securities from time to time outstanding plus premium,
if any, and accrued interest thereon.
(ii) Protection and indemnity insurance and insurance against liability for
pollution or the spillage or leakage of cargo shall be in an amount from time to
time obtainable for vessels of the same type, size, age and flag as the Vessel
and carried by other responsible and experienced companies engaged in the
operation of vessels similar to the Vessel, but in any event shall be in an
amount for each occurrence of not less than the declared value of the Vessel
under its hull and machinery insurance.
(c) Although the insurance may be payable to the Mortgagee as named
assured:
(i) any payment under any insurance on the Vessel with respect to
protection and indemnity risks and liability arising out of pollution and
the spillage or leakage of cargo (other than a payment to indemnify or
reimburse the Mortgagee from or for any loss, damage or expense incurred by
it) may be paid directly to the Shipowner (unless the Mortgagee shall have
otherwise required by notice to the insurers as permitted by the Indenture)
to reimburse it for any loss, damage or expense incurred by it and covered
by such insurance or directly to the person to whom any liability covered
by such insurance has been incurred; and
(ii) in the case of any loss (other than a loss covered by clause (i)
of this subsection or by subsection (d) of this Section 1.15) under any
insurance with respect to the Vessel involving any damage to the Vessel
(unless the Mortgagee shall have otherwise required by notice to the
insurers as permitted by the Indenture), the insurers may pay directly for
the repair, salvage or other charges involved or, if the Shipowner shall
have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Shipowner as reimbursement therefor; provided that if
such damage involves a loss in excess of $1,000,000, the insurers shall
make such payment to or as directed by Mortgagee and any adjustment or
compromise of
9
<PAGE> 11
such loss by the Shipowner shall be at the highest amount reasonably
obtainable.
Any loss covered by this subsection which is paid to the Mortgagee but which
might have been paid, in accordance with the provisions of this subsection,
directly to the Shipowner or others, shall be paid by the Mortgagee to or as
directed by the Shipowner, and all other payments to the Mortgagee of losses
covered by this subsection shall be applied by the Mortgagee in accordance with
the provisions of Sections 10.04, 10.05 or 10.06 of the Indenture, as
applicable.
(d) In the event of an actual, constructive or compromised total loss of
the Vessel, any adjustment or compromise of such loss by the Shipowner shall be
at the highest amount reasonably obtainable, and all insurance or other payments
for such shall be paid to the Mortgagee and applied by the Mortgagee, first, to
any costs or expenses of the Mortgagee in connection with collecting such
payment, and second, in accordance with the provisions of Sections 10.04, 10.05
and 10.06 of the Indenture.
(e) (i) The Shipowner will cause all policies and certificates of entry
with respect to insurance required hereby to contain a loss payable clause which
shall be on substantially the terms set forth in Schedule I hereto, in the case
of all marine and war risk hull and machinery (including excess values)
policies, and the terms set forth in Schedule II hereto (or, if such terms are
not obtainable, then such terms as shall, in the opinion of the broker referred
to in Section 1.15(a)(iii) above, be the best otherwise attainable), in the case
of all protection and indemnity and liability and oil pollution liability
insurance, and which shall: (A) in the case of protection and indemnity
insurance, provide for payment to the Shipowner or its order unless the payment
is to indemnify the Mortgagee from or reimburse the Mortgagee for any loss,
damage or expense incurred by it or unless and until the insurers or
associations receive notice from the Mortgagee that the Shipowner is in default
hereunder or that an Event of Default has occurred and is continuing under the
Indenture, in which event all payments shall be made to the Mortgagee, provided
that the insurer may in all events make payments directly to third parties to
whom liability has been established in discharge of guaranties issued by the
insurer or claims against the Shipowner or insurer, and (B) in the case of all
other insurance, shall provide for payment in accordance with the terms of
subsections (c) and (d) of this Section 1.15.
(ii) In addition, the Shipowner will, at its cost and expense, assign to
the Mortgagee, by an Assignment of
10
<PAGE> 12
Insurances, all of the Shipowner's right, title and interest in and to each
policy and contract of insurance (including all entries in protection and
indemnity or war risk associations) with respect to the insurance required
hereby and furnish, or cause its brokers to furnish, written notice of such
assignment to all insurers, underwriters, clubs and associations with respect to
such insurance.
(f) In the event that any claim or lien is asserted against the Vessel for
loss, damage or expense which is covered by insurance required hereunder (other
than in the event of an actual, constructive or compromised total loss of the
Vessel), and it is necessary for the Shipowner to obtain a bond or supply other
security to prevent arrest of the Vessel or to release the Vessel from arrest on
account of such claim or lien, the Mortgagee, on request of the Shipowner or its
agent, shall, so long as no Event of Default shall have occurred and be
continuing, assign to any person, firm or corporation executing a surety or
guarantee bond or other agreement to save or release the Vessel from such
arrest, all right, title and interest of the Mortgagee in and to said insurance
(excluding any protection and indemnity insurance under which the Mortgagee is a
named insured) covering said loss, damage or expense, as collateral security to
indemnify against liability under said bond or other agreement.
(g) The Shipowner will deliver to the Mortgagee copies or, if requested by
the Mortgagee at any time and from time to time, the originals of all cover
notes, binders, policies and certificates of entry in protection and indemnity
associations, and all endorsements and riders amendatory thereof, in respect of
insurance maintained in connection with the Vessel.
(h) The Shipowner agrees that it will not do or permit or willingly allow
to be done any act by which any insurance required by the terms of this Deed may
be suspended, impaired or cancelled, and that it will not permit or allow the
Vessel to undertake any voyage or run any risk or transport any cargo which may
not be permitted by the policies in force, without having previously insured the
Vessel by additional coverage to extend to such voyages, risks or cargoes.
SECTION 1.16. The Shipowner will reimburse the Mortgagee promptly, with
interest at a rate equal to 1% per annum above the rate applicable to the
Securities, for any and all expenditures which the Mortgagee may from time to
time reasonably make, lay out or expend in providing such protection in respect
of insurance, discharge or purchase of liens, taxes, dues, assessments,
governmental charges, fines and penalties lawfully imposed, repairs, attorneys'
fees and other matters as the Shipowner is obligated herein to provide, but
fails to provide.
11
<PAGE> 13
Such obligation of the Shipowner to reimburse the Mortgagee shall be an
additional indebtedness due from the Shipowner, secured by this Deed and the
Statutory Mortgage, and shall be payable by the Shipowner on demand. The
Mortgagee, though privileged so to do, shall be under no obligation to the
Shipowner to make any such expenditures, nor shall the making thereof relieve
the Shipowner of any default in that respect.
SECTION 1.17. The Shipowner will fully perform the Time Charter Party and
any and all other charter parties which are or may be entered into with respect
to the Vessel.
SECTION 1.18. In the event that at any time and from time to time this
Deed, the Statutory Mortgage, the Shipowner's Guarantee or the Indenture or any
provisions hereof or thereof shall be deemed invalidated in whole or in part by
reason of any present or future law or any decision of any authoritative court,
or if the documents at any time held by the Mortgagee shall be deemed by the
Mortgagee for any reason insufficient to carry out the true intent and spirit of
this Deed and the Statutory Mortgage, then the Shipowner, forthwith upon the
request of the Mortgagee, will execute, on its own behalf, such other and
further assurances and documents as requested by the Mortgagee to more
effectually subject the Vessel to the payment of the principal sum of the
Obligations, as in this Deed provided, and the performance of the terms and
provisions of this Deed and the Statutory Mortgage.
SECTION 1.19. In the event of the requisition (whether of title or use),
condemnation, sequestration, seizure or forfeiture of the Vessel by any
governmental or purported authority or by anyone else, any payments in respect
thereof shall be paid, and the Shipowner shall cause any such payment to be
paid, to the Mortgagee and applied in accordance with the terms of the
Indenture.
SECTION 1.20. The Shipowner will fully perform any and all covenants and
undertakings in the Indenture which are applicable to it.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
SECTION 2.1. An Event of Default under the Indenture shall constitute an
Event of Default under this Deed and, in case any one or more Events of Default
shall have occurred and be continuing, then, in each and every such case the
Mortgagee shall have the right to:
12
<PAGE> 14
(1) declare immediately due and payable all of the Obligations (in
which case all of the same shall be immediately due), and bring suit at
law, in equity or in admiralty, as it may be advised, to recover judgment
for the Obligations and collect the same out of any and all property of the
Shipowner whether covered by this Deed and the Statutory Mortgage or
otherwise;
(2) exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable law,
including but not limited to, the provisions of the laws of the
Commonwealth of the Bahamas;
(3) take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to the
Mortgagee possession of the Vessel and the Mortgagee may, without being
responsible for loss or damage, hold, lay up, lease, charter, operate or
otherwise use such Vessel for such time and upon such terms as it may deem
to be for its best advantage, and demand, collect and retain all hire,
freights, earnings, issues, revenues, income, profits, return premiums,
salvage awards or recoveries, recoveries in general average, and all other
sums due or to become due in respect of such Vessel or in respect of any
insurance thereon from any person whomsoever, accounting only for the net
profits, if any, arising from such use of the Vessel and charging upon all
receipts from the use of the Vessel or from the sale thereof by court
proceedings or pursuant to subsection (4) next following, all costs,
expenses, charges, damages or losses by reason of such use; and if at any
time the Mortgagee shall avail itself of the right herein given it to take
the Vessel, the Mortgagee shall have the right to dock the Vessel, for a
reasonable time at any dock, pier or other premises of the Shipowner
without charge, or to dock her at any other place at the cost and expense
of the Shipowner; and/or
(4) take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems desirable
to the Mortgagee and without being responsible for loss or damage, sell
such Vessel, at any place and at such time as the Mortgagee may specify and
in such manner and such place (whether by public or private sale) as the
Mortgagee may deem advisable (without necessity of bringing the Vessel to
the place designated for such sale), free from any claim by the Shipowner
in admiralty, in equity, at law or by statute, after first giving notice of
the time and place of any public sale with a general description of the
property in the following manner:
13
<PAGE> 15
(i) by publishing such notice for 10 consecutive days in a daily
newspaper of general circulation published in New York City;
(ii) if the place of sale should not be New York City, then also by
publication of a similar notice in a daily newspaper, if any, published
at the place of sale; and
(iii) by mailing a similar notice to the Shipowner at its last
known address on the day of first publication;
and notice of the time and place of any private sale by mailing such notice to
the Shipowner at its last known address.
SECTION 2.2. Any sale of the Vessel made in pursuance of this Deed,
whether under the power of sale hereby granted or any judicial proceedings,
shall operate to divest all right, title and interest of any nature whatsoever
of the Shipowner therein and thereto and shall bar any claim from the Shipowner,
its successors and assigns, and all persons claiming by, through or under them.
No purchaser shall be bound to inquire whether notice has been given, or whether
any default has occurred, or as to the propriety of the sale, or as to the
application of the proceeds thereof. In the case of any such sale, the Mortgagee
shall be entitled, for the purpose of making settlement or payment for the
property purchased, to use and apply the Obligations in order that there may be
credited against the amount remaining due and unpaid thereon the sums payable
out of the net proceeds of such sale with respect to the Obligations after
allowing for the costs and expense of sale and other charges; and thereupon such
purchaser shall be credited, on account of such purchase price, with the net
proceeds that shall have been so credited with respect to the Obligations. At
any such sale, the Mortgagee may bid for and purchase such property and upon
compliance with the terms of sale may hold, retain and dispose of such property
without further accountability therefor.
SECTION 2.3. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner to execute and deliver to any purchaser aforesaid, and is hereby
vested with full power and authority to make, in the name and on behalf of the
Shipowner, a good conveyance of the title to the Vessel so sold. In the event of
any sale of the Vessel, under any power herein contained, the Shipowner will, if
and when required by the Mortgagee, execute such form of conveyance of the
Vessel and other related documents, as the Mortgagee may direct or approve.
SECTION 2.4. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner in the name of the Shipowner to demand, collect, receive, compromise
and sue for, so far as may
14
<PAGE> 16
be permitted by law, all freights, hire, earnings, issues, revenues, income and
profits of the Vessel and all amounts due from underwriters under any insurance
thereon as payments of losses or as return premiums or otherwise, salvage awards
and recoveries, recoveries in general average or otherwise, and all other sums,
due or to become due at the time of the occurrence of any Event of Default, or
in respect of any insurance thereon, from any person whomsoever, and to make,
give and execute in the name of the Shipowner acquittances, receipts, releases
or other discharges for the same, whether under seal or otherwise, and to
endorse and accept in the name of the Shipowner all checks, notes, drafts,
warrants, agreements and other instruments in writing with respect to the
foregoing.
SECTION 2.5. Whenever any right to enter and take possession of the Vessel
accrues to the Mortgagee, it may require the Shipowner to deliver, and the
Shipowner shall on demand, at its own cost and expense, deliver to the Mortgagee
the Vessel as demanded. If any legal proceedings shall be taken to enforce any
right under this Deed, the Mortgagee shall be entitled as a matter of right to
the appointment of a receiver of the Vessel and of the freights, hire, earnings,
issues, revenues, income and profits due or to become due and arising from the
operation thereof.
SECTION 2.6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and assigns, in any court of any country or nation of the world where a suit is
pending against the Vessel because of or on account of an alleged lien against
the Vessel from which the Vessel has not been released and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee, and shall be secured by the lien of this Deed and the
Statutory Mortgage in like manner and extent as if the amount and description
thereof were written therein.
SECTION 2.7. The Shipowner covenants that at any time that any Obligations
shall be due and payable (whether by acceleration or otherwise), the Mortgagee
may demand the payment thereof; and in case the Shipowner shall fail to pay the
same forthwith upon such demand, the Mortgagee shall be entitled to recover
judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the
Mortgagee's agents, attorneys and counsel and any necessary advances, expenses
and liabilities made or incurred by it hereunder. All moneys collected by the
15
<PAGE> 17
Mortgagee under this Section 2.7 shall be applied by the Mortgagee in accordance
with the provisions of Article 10 of the Indenture.
SECTION 2.8. Each and every power and remedy given to the Mortgagee as
Trustee under the Indenture and herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein given
or now or hereafter existing at law, in equity, in admiralty or by statute, and
each and every power and remedy whether herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgagee, and the exercise or the beginning of the exercise of
any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other power or remedy. No delay or
omission by the Mortgagee in the exercise of any right or power or in the
pursuance of any remedy accruing upon any Event of Default shall impair any such
right, power or remedy or be construed to be a waiver of any such Event of
Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Obligations
after any Event of Default or of any payment on account of any past Event of
Default be construed to be a waiver of any right to take advantage of any future
Event of Default or of any past Event of Default not completely cured thereby.
SECTION 2.9. If at any time after an Event of Default and prior to the
actual sale of the Vessel by the Mortgagee or prior to any foreclosure
proceedings, the Shipowner offers completely to cure all Events of Default and
to pay all expenses, advances and damages to the Mortgagee consequent on such
Events of Default, with interest at the rate provided in Section 1.16 of Article
I hereof, then the Mortgagee may, but shall be under no obligation to, accept
such offer, cure and payment and restore the Shipowner to its former position,
but such action shall not affect any subsequent Event of Default or impair any
rights consequent thereon.
SECTION 2.10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Deed and the Statutory Mortgage by
foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Mortgagee, then and in every such case the Shipowner and the Mortgagee
shall be restored to their former positions and rights hereunder with respect to
the property subject or intended to be subject to this Deed and the Statutory
Mortgage, and all rights, remedies and powers of the Mortgagee shall continue as
if no such proceedings had been taken.
16
<PAGE> 18
SECTION 2.11. The proceeds of any sale of the Vessel and the net earnings
of any charter operation or other use of the Vessel by the Mortgagee under any
of the powers herein specified in this Article II, as well as any and all other
moneys received by the Mortgagee pursuant to or under any of the provisions of
Article I hereof or this Article II or in any proceedings pursuant to this
Article II, shall be held and applied by the Mortgagee from time to time as
provided in Article 10 of the Indenture. In the event that the proceeds and
amounts referred to above received by the Mortgagee are insufficient to pay in
full the Obligations, the Mortgagee shall be entitled to collect the balance
from the Shipowner or from any other person or entity liable therefor.
SECTION 2.12. Unless and until one or more Events of Default shall occur
and be continuing, the Shipowner (a) shall be suffered and permitted to retain
actual possession and use of the Vessel and (b) shall have the right, from time
to time, in its discretion, and without application to the Mortgagee, and
without obtaining a release thereof by the Mortgagee, to dispose of, free from
the lien hereof, any boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment
or any other appurtenances of the Vessel that are no longer useful, necessary,
profitable or advantageous in the operation of the Vessel, first or
simultaneously replacing the same by new boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, cables, chains, tackle, apparel,
furniture, fittings, equipment or other appurtenances of substantially equal
value to the Shipowner, which shall forthwith become subject to the lien of the
Statutory Mortgage as a first preferred mortgage thereon.
ARTICLE III
SUNDRY PROVISIONS
SECTION 3.1. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Deed contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
successors and assigns. In the event of any assignment of this Deed, the term
"Mortgagee" as used in this Deed shall be deemed to mean any such assignee.
SECTION 3.2. Wherever and whenever herein any right, power or authority is
granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
17
<PAGE> 19
SECTION 3.3. (a) In the event that any provision of this Deed or the
Statutory Mortgage shall be deemed invalid or unenforceable by reason of any
present or future law or any decision of any court of competent jurisdiction,
the validity and enforceability of any other provision hereof shall not be
affected thereby. Any such invalidity or unenforceability of any provision of
this Deed or the Statutory Mortgage in any jurisdiction or nation shall not
render such provision invalid or unenforceable under the laws of any other
jurisdiction or nation.
(b) In the event that this Deed, the Statutory Mortgage or any of the
documents or instruments which may from time to time be delivered hereunder or
any provision hereof shall be deemed invalidated by present or future law of any
nation or by decision of any court, this shall not affect the validity and/or
enforceability of all or any other parts of this Deed, the Statutory Mortgage,
or such documents or instruments and, in any such case, the Shipowner covenants
and agrees that, on demand, it will execute and deliver such other and further
agreements and/or documents and/or instruments and do such things as the
Mortgagee in its sole discretion may deem to be necessary to carry out the true
intent of this Deed and the Statutory Mortgage.
(c) Anything herein to the contrary notwithstanding, it is intended that
nothing herein shall waive the preferred status of the Statutory Mortgage and
that, if any provision of the Statutory Mortgage or portion thereof shall be
construed to waive the preferred status of the Statutory Mortgage, then such
provision to such extent shall be void and of no effect and shall cease to be a
part of the Statutory Mortgage, without affecting the remaining provisions,
which shall remain in full force and effect.
SECTION 3.4. The Shipowner irrevocably submits itself to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York City and
any appellate court from any thereof, for the purposes (and solely for the
purposes of) of any suit, action or other proceeding arising out of, or relating
to, this Deed, the Statutory Mortgage or any of the transactions contemplated
hereby, hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard in such New York State or Federal court and hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
whatsoever, that such suit, action or proceeding is brought in an inconvenient
forum, or that the venue of such suit, action or proceeding is improper, or that
this Deed, the Statutory Mortgage or the subject matter thereof may not be
enforced in or by such courts. The Shipowner hereby
18
<PAGE> 20
irrevocably appoints Haight, Gardner, Poor & Havens (the "Process Agent"), with
an office on the date hereof at 195 Broadway, New York, New York 10007, United
States, as its agent to receive on behalf of the Shipowner and its property
service of copies of the summons and complaint and any other process which may
be served in any such suit, action or proceeding and in any suit, action or
proceeding arising out of or relating to any other Security Document to which
the Shipowner is a party. Such service may be made by mailing or delivering a
copy of such process to the Shipowner in care of the Process Agent at the
Process Agent's above address, and the Shipowner hereby irrevocably authorizes
and directs the Process Agent to accept such service on its behalf. As an
alternative method of service, the Shipowner also irrevocably consents to the
service of any and all process in any such suit, action or proceeding by the
mailing of copies of such process to the Shipowner care of Teekay Shipping
Corporation, Tradewinds Building, Sixth Floor, Bay Street, P.O. Box SS-6293,
Nassau, Commonwealth of the Bahamas, Attention: Managing Director. The Shipowner
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Section 3.4 shall affect
the right of the Mortgagee to serve legal process in any other manner permitted
by law or affect the right of the Mortgagee to bring any action or proceeding
against the Shipowner or its property in the courts of any other jurisdiction.
SECTION 3.5. This Deed may be executed in any number of counterparts, each
of which shall be an original; but such counterparts shall together constitute
but one and the same instrument.
SECTION 3.6. The term "Dollars" or the symbol "$" as used herein shall
mean Dollars in any coin or currency of the United States of America which at
the time of payment shall be legal tender for public and private debts.
SECTION 3.7. THIS DEED SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, BAHAMIAN LAW.
SECTION 3.8. Upon the termination of this Deed pursuant to the proviso to
the Habendum Clause hereof, the Mortgagee, forthwith upon the request of the
Shipowner, will execute, on its own behalf, such other and further assurances
and documents as requested by the Shipowner to effect such termination and to
remove the lien of record of the Statutory Mortgage and this Deed, all at the
cost and expense of the Shipowner.
[The rest of this page has been left intentionally blank.]
19
<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Deed to be duly executed
the day and year first above written.
SIGNED, SEALED AND DELIVERED )
by )
the duly authorized )
of )
**A**
in the presence of:- )
SIGNED, SEALED AND DELIVERED )
by )
the duly authorized )
of )
United States Trust Company
of New York, not )
in its individual capacity )
but solely as Trustee )
in the presence of:- )
20
<PAGE> 22
<TABLE>
<S> <C>
STATE OF [ ])
) ss.:
)
</TABLE>
I, of
**A**, a corporation organized and existing under the laws of [the
Republic of Liberia][the Commonwealth of the Bahamas] (the "Company"), make oath
and say that I was present and saw the Common Seal of the Company affixed to the
annexed Deed of Covenants dated the day of , by
, the of the Company and
that I saw the said sign, execute and deliver the
said Deed of Covenants as and for the act and deed of the Company and for the
purposes therein mentioned and that I subscribed my name as the witness to the
due execution thereof. And further that the Seal affixed and impressed at the
foot or end of the said Deed of Covenants is the Common Seal of the Company and
was affixed and impressed thereto by the said by
the order and with the authority of the Board of Directors of the Company and in
conformity with the [ ] of the Company.
<TABLE>
<S> <C>
SWORN to this
------------------------------ )
day of
-----------------------------, ) ------------------------------
------------- )
</TABLE>
Before me,
NOTARY PUBLIC
<PAGE> 23
<TABLE>
<S> <C>
STATE OF [ ])
) ss.:
)
</TABLE>
I, of UNITED
STATES TRUST COMPANY OF NEW YORK, a New York corporation (hereinafter called
"the Company"), make oath and say that I was present and saw the Common Seal of
the Company affixed to the annexed Deed of Covenants dated the day of
, by , the of
the Company and that I saw the said sign, execute
and deliver the said Deed of Covenants as and for the act and deed of the
Company and for the purposes therein mentioned and that I subscribed my name as
the witness to the due execution thereof. And further that the Seal affixed and
impressed at the foot or end of the said Deed of Covenants is the Common Seal of
the Company and was affixed and impressed thereto by the said
by the order and with the authority of the Board
of Directors of the Company and in conformity with the
[ ] of the Company.
<TABLE>
<S> <C>
SWORN to this
------------------------------- )
day of
------------------------------, ) -------------------------------
----------------- )
</TABLE>
Before me,
NOTARY PUBLIC
<PAGE> 24
SCHEDULE I
TO
DEED OF COVENANTS
DATED ,
Loss, if any, payable to UNITED STATES TRUST COMPANY OF NEW YORK (the
"Mortgagee"), a NEW YORK CORPORATION, in its capacity as Trustee pursuant to,
and for the benefit of the Holders of the Securities (as defined in the
Indenture hereinafter defined) issued under, that certain Indenture dated as of
January , 1996, among Teekay Shipping Corporation (the "Company"), certain
subsidiaries of the Company and the Trustee (the "Indenture"), for distribution
by it to the Mortgagee and then to **A** (the "Owner") as their respective
interests may appear, or order, except that, unless Underwriters have been
otherwise instructed by notice in writing from the Mortgagee in the case of any
loss involving any damage to the Vessel or liability of the Vessel, the
Underwriters may pay directly for the repair, salvage, liability or other
charges involved or, if the Owner shall have first fully repaired the damage and
paid the cost thereof, or discharged the liability or paid all of the salvage or
other charges, then the Underwriters may pay the Owner as reimbursement
therefor, provided, however, that if such damage involves a loss in excess of
U.S.$1,000,000 or its equivalent the Underwriters shall not make such payment
without first obtaining the written consent thereto of the Mortgagee.
In the event of an actual or constructive total loss or a compromised or
arranged total loss or requisition of title, all insurance payments therefor
shall be paid to the Mortgagee, for distribution by it in accordance with the
terms of the Mortgage.
<PAGE> 25
SCHEDULE II
TO
DEED OF COVENANTS
LOSS PAYABLE CLAUSE
By assignment dated January , 1996, **A** (the "Owner"), the owner of the
**B** (the "Vessel"), assigned to United States Trust Company of New York, as
Trustee (the "Mortgagee") all of the Owner's right, title and interest in and to
this entry and all benefits thereof including all claims of whatsoever nature
thereunder.
Payment of any recovery the Owner is entitled to receive from the funds of
the Association in respect of any liability, costs or expenses incurred by the
Owner shall be made to the Owner or to its order unless and until the
Association receives notice from United States Trust Company of New York, 114
West 47th Street, New York, NY 10036-1532, USA (hereinafter called the
Mortgagee) that the Owner is in default under the Mortgage, in which event all
such recoveries shall thereafter be paid to the Mortgagee or to its order.
The Association undertakes:
(a) to inform the Mortgagee if notice is given to the Owner of the above
ship under Rule 9(2)(i) or 9(3) that its insurance in the Association
in respect of such ship is to cease; and
(b) to give the Mortgagee 14 days' notice of the Association's intention
to cancel the insurance of the Owner by reason of its failure to pay
when due and demanded any sum due from it to the Association.
<PAGE> 26
EXHIBIT A
TO
DEED OF COVENANTS
[COPY OF THE INDENTURE]
<PAGE> 27
EXHIBIT B
TO
DEED OF COVENANTS
[COPY OF THE GUARANTEE]
<PAGE> 1
EXHIBIT 4.5
[FORM OF LIBERIAN FIRST PREFERRED SHIP MORTGAGE]
FIRST PREFERRED SHIP MORTGAGE
BY
**A**
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
AS
TRUSTEE
DATED ,
M/T **B**
<PAGE> 2
FIRST PREFERRED SHIP MORTGAGE made the day of , ,
by **A* -- , a corporation organized and existing under the laws of [the
Republic of Liberia] [the Commonwealth of the Bahamas] (the "Shipowner"), to
United States Trust Company of New York (the "Mortgagee"), a New York
corporation, as Trustee (the "Trustee"), pursuant to, and for the benefit of the
Holders of the Securities (as hereinafter defined) issued under, that certain
Indenture (the "Indenture"; terms used herein and not otherwise defined are used
herein as defined in the Indenture) (a copy of which, including exhibits
thereto, is annexed hereto as Exhibit A and made a part hereof) dated as of the
date hereof, among Teekay Shipping Corporation, a corporation organized and
existing under the laws of the Republic of Liberia (the "Company"), certain
subsidiaries of the Company (each a "Guarantor" and, collectively, the
"Guarantors") and the Trustee.
WHEREAS:
1. The Company, the Guarantors and the Trustee have entered into the
Indenture to secure, among other things, payment of the principal of (and
premium, if any) and interest on all the Securities issued and to be issued
under the Indenture; and 2. Securities, in an aggregate principal amount of
$225,000,000 have been authorized under the Indenture and designated the %
First Preferred Ship Mortgage Notes due 2008, the form of which is included in
the Indenture, which Securities were originally executed, authenticated and
delivered on the date hereof; and
3. The Shipowner, a Guarantor, has unconditionally guaranteed the
Securities and the Company's obligations under the Indenture pursuant to a
Guarantee dated the date hereof (its "Guarantee") (a copy of which Guarantee is
annexed hereto as Exhibit B); and
4. The Shipowner is the sole owner of the vessel m/t **B**, Official Number
**C**, of approximately **D** gross and **E** net tons, having its home port at
the Port of Monrovia, Republic of Liberia, which vessel was built at **F** in
the year **G**, and is documented under the laws and flag of the Republic of
Liberia; and
5. The Shipowner, in order to secure the payment of all sums of money
(whether for principal, premium, if any, interest, fees, expenses or otherwise)
from time to time payable by the Shipowner under its Guarantee, the payment of
the principal of (and premium, if any) and interest on the Securities, the
payment of all other sums of money payable by the Company under the Indenture,
the payment of all other sums of money payable by the Shipowner under this
Mortgage and the other Guarantor Security Documents to which it is a party, and
the payment of all sums payable by the other Guarantors under their
<PAGE> 3
respective Subsidiary Guarantees and Guarantor Security Documents (collectively,
the "Obligations"), and to secure as well the performance and observance of all
agreements, covenants and provisions contained in this Mortgage, and of the
Company and the Guarantors in the Indenture and the Security Documents, the
Shipowner has duly authorized the execution and delivery of this First Preferred
Ship Mortgage. The liability of the Shipowner under this Mortgage shall be
limited by the provisions of Section 2 of the Guarantee.
NOW, THEREFORE, to secure the prompt payment of the Obligations and the
performance and observance of all agreements, covenants and provisions contained
in this Mortgage and of the Company and the Guarantors in the Indenture and the
Security Documents, the Shipowner has granted, conveyed, mortgaged, pledged,
confirmed, assigned, transferred and set over, and by these presents does grant,
convey, mortgage, pledge, confirm, assign, transfer and set over unto the
Mortgagee the whole of the vessel described in Recital 4 above, together with
all of the boilers, engines, machinery, masts, spars, sails, boats, anchors,
cables, chains, rigging, tackle, apparel, furniture, fittings, equipment and all
other appurtenances thereunto appertaining or belonging, and also any and all
additions, improvements and replacements hereafter made in or to such vessel, or
any part thereof, or in or to her equipment and appurtenances aforesaid, except
and excluding such equipment placed on the vessel which under the terms of any
contract relating thereto does not become the property of the Shipowner and any
"property other than a vessel" as that term is used in paragraph (2) of Section
106 of Chapter 3 of Title 22 of the Liberian Code of Laws of 1956, as amended
(the "Vessel");
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and its
successors' and assigns' own use, benefit and behoof forever;
PROVIDED, HOWEVER, and these presents are upon the condition that, if (a)
the Shipowner or its successors or assigns shall pay or cause to be paid or
there shall otherwise be paid in full, the Obligations in accordance with the
terms hereof and of its Guarantee and the Indenture and shall perform and
observe or cause to be performed and observed all of the agreements, covenants
and provisions contained in this Mortgage, its Guarantee and the Indenture, or
(b) the Termination and Release shall have occurred under the Indenture, this
Mortgage and the estate and rights hereby granted shall cease to be binding and
be void, otherwise to remain in full force and effect.
2
<PAGE> 4
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property above
described is to be held subject to the further covenants, conditions,
provisions, terms and uses hereinafter set forth.
ARTICLE I
COVENANTS OF THE SHIPOWNER
The Shipowner covenants and agrees with the Mortgagee as follows:
SECTION 1.1. The Shipowner will make payment when due of all Obligations
from time to time payable by the Shipowner to the Trustee under its Guarantee
and will observe, perform and comply with the covenants, terms and conditions
herein and in its Guarantee, express or implied, on its part to be observed,
performed or complied with.
SECTION 1.2. The Shipowner was duly organized and is now duly existing as
a corporation under the laws of [the Republic of Liberia][the Commonwealth of
the Bahamas]; it is duly authorized to mortgage the Vessel; all corporate action
necessary and required by law for the execution and delivery of this Mortgage
has been duly and effectively taken; its Guarantee is and will be a valid and
enforceable obligation of the Shipowner in accordance with its terms; and the
Shipowner shall at all times maintain its corporate existence and right to carry
on its business.
SECTION 1.3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien, charge or encumbrance whatsoever (except for (i) the
lien of this Mortgage, (ii) liens for current crew's wages, if any and (iii) the
Time Charter Party dated , with Palm Shipping Inc., as amended
(including any further amendments, extensions or renewals thereof permitted by
the Indenture, the "Time Charter Party")) and will warrant and defend the title
and possession thereto and to every part thereof for the benefit of the
Mortgagee against the claims and demands of all persons whomsoever.
SECTION 1.4. The Shipowner has caused this Mortgage to be duly recorded
and will comply with and satisfy all the provisions and requirements of Chapter
3 of Title 22 of the Liberian Code of Laws of 1956, as amended, in order to
establish and maintain this Mortgage as a first preferred mortgage lien
thereunder upon the Vessel and upon all renewals, replacements and improvements
made in or to the same for the amount of the Obligations.
3
<PAGE> 5
SECTION 1.5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to law and the Shipowner will not engage in any
unlawful trade or violate any law or carry any cargo that will expose the Vessel
to penalty, forfeiture or capture, and will not do, or suffer or permit to be
done, anything which can or may injuriously affect the registration or
enrollment of the Vessel under the laws and regulations of the Republic of
Liberia and will at all times keep the Vessel duly documented thereunder except
as provided in Section 1.13.
SECTION 1.6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom unless the
Shipowner is contesting the amount, applicability or validity thereof in good
faith and by appropriate proceedings.
SECTION 1.7. Neither the Shipowner, any charterer, the Master of the
Vessel nor any other person has or shall have any right, power or authority to
create, incur or permit to be placed or imposed or continued upon the Vessel any
lien whatsoever other than for crew's wages and salvage.
SECTION 1.8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause such certified copy and the Vessel's marine document to be
exhibited to any and all persons having business therewith which might give rise
to any lien thereon other than liens for crew's wages and salvage and to any
representative of the Mortgagee; and will place and keep prominently displayed
in the chart room and in the Master's cabin of the Vessel a framed printed
notice in plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is covered by a First Preferred Ship Mortgage to United States
Trust Company of New York under authority of Title 22 of the Code of Laws
of 1956 of the Republic of Liberia, as amended. Under the terms of said
Mortgage, neither the Owner, any charterer, the Master of this Vessel nor
any other person has any right, power or authority to create, incur or
permit to be imposed upon this Vessel any lien whatsoever other than for
crew's wages and salvage."
SECTION 1.9. Except for the Time Charter Party and the lien of this
Mortgage, the Shipowner will not suffer to be continued any lien, encumbrance or
charge on the Vessel for longer than 30 days and in due course and in any event
within 30
4
<PAGE> 6
days after the same becomes due and payable the Shipowner will pay or cause to
be discharged or make adequate provision for the satisfaction or discharge of
all claims or demands (except to the extent that the same shall concurrently be
contested by the Shipowner in good faith by appropriate proceedings and shall
not affect the continued release of the Vessel), or will cause the Vessel to be
released or discharged from any lien, encumbrance or charge therefor.
SECTION 1.10. (a) If a libel or complaint be filed against the Vessel or
the Vessel be otherwise attached, arrested, levied upon or taken into custody
under process or color of legal authority for any cause whatsoever, the
Shipowner will promptly notify the Mortgagee by telex or cable, confirmed by
letter, addressed to it at 114 West 47th Street, New York, New York 10036-1532,
Attention: Trust Administration, and within 30 days will cause the Vessel to be
released and all liens thereon other than this Mortgage and the Time Charter
Party to be discharged (except to the extent that the claim giving rise to such
lien shall concurrently be contested by the Shipowner in good faith by
appropriate proceedings and shall not affect the release of the Vessel) and will
promptly notify the Mortgagee thereof in the manner aforesaid.
(b) If the Shipowner shall fail or neglect to furnish proper
security or otherwise to release the Vessel from libel, arrest, levy,
seizure or attachment, the Mortgagee or any person acting on behalf of the
Mortgagee may furnish security to release the Vessel and by so doing
shall not be deemed to cure the default of the Shipowner.
SECTION 1.11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee maintain and preserve, or cause to be maintained and
preserved, the Vessel (i) in good running order and repair, so that the Vessel
shall be, insofar as due diligence can make her so, tight, staunch, strong and
well and sufficiently tackled, apparelled, furnished, equipped and in every
respect seaworthy and (ii) in at least as good condition as when originally
delivered by her builder, ordinary wear and tear excepted; and will keep the
Vessel, or cause her to be kept, in such condition as will entitle her to the
highest classification rating for vessels of the same type, size, age and flag
in the classification society, currently [+1A1 Tanker] (or its equivalent with
Lloyd's Registry of Shipping, currently [+ 100A1 "Oil Tanker" + LMC UMS and
IGS]).
(b) The Mortgagee shall have the right at any time, on reasonable notice,
to inspect or survey the Vessel to ascertain its condition and to satisfy itself
that the Vessel is being properly repaired and maintained, and the Shipowner
shall cause
5
<PAGE> 7
to be made all such repairs, without expense to the Mortgagee, as such
inspection or survey may show to be required. The Shipowner shall also permit
the Mortgagee to inspect the Vessel's logs, whenever requested, on reasonable
notice, and shall promptly furnish the Mortgagee with full information regarding
any casualties or other accidents or damage to the Vessel involving an amount in
excess of $1,000,000.
(c) The Vessel shall, and the Shipowner covenants that it will, at all
times comply with all applicable laws, rules and regulations issued thereunder,
and the Vessel shall have on board as and when required thereby certificates
showing compliance therewith.
(d) The Shipowner will not make, or permit to be made, any substantial
change in the structure, type or speed of the Vessel or change in her rig, if
any such change would or could reasonably be expected to have a material adverse
effect on the rights or interest of the Mortgagee to any of the terms in any of
the instruments of insurance referred to in Section 1.15 or materially diminish
the value of the Vessel.
(e) The Shipowner may, in the ordinary course of maintenance, repair or
overhaul of the Vessel, remove any item of property constituting a part of the
Vessel, provided such item of property is replaced as promptly as possible by an
item of property which, immediately prior to the time of replacement, is free
and clear of all security interests, liens, encumbrances and rights of others,
is in as good operating condition, leaves the Vessel as seaworthy and has a
value and utility at least equal to the item of property being replaced,
assuming compliance by the Shipowner with all the terms of this Mortgage. Any
such replacement item of property, shall, without necessity of further act,
become part of the Vessel and subject to this Mortgage.
SECTION 1.12. The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and her cargo and papers and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of all contracts and documents relating to the Vessel, whether on board or not.
SECTION 1.13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel except as permitted by the terms of the
Indenture.
SECTION 1.14. Except as permitted by the terms of the Indenture, the
Shipowner will not sell, mortgage, demise charter or transfer the Vessel.
6
<PAGE> 8
SECTION 1.15. (a) (i) The Shipowner will at all times and at its own cost
and expense cause to be carried and maintained in respect of the Vessel
insurance payable in United States Dollars in amounts, against risks (including,
without limitation, marine hull and machinery (including excess value)
insurance, marine protection and indemnity insurance, war risks insurance and
liability arising out of pollution and the spillage or leakage of cargo and
cargo liability insurance) and in a form which are substantially equivalent to
the coverage carried by other responsible and experienced companies engaged in
the operation of vessels similar to the Vessel and with insurance companies,
underwriters, funds, mutual insurance associations or clubs of recognized
standing. No such insurance shall provide for a deductible amount in excess of
$1,000,000 per occurrence.
(ii) In the case of all marine and war risk hull and machinery policies,
the Shipowner will cause the Mortgagee to be named an additional insured and
will use its best efforts (and cause its insurance broker to use its best
efforts) to cause the insurers under such policies to waive any liability of the
Mortgagee for premiums or calls payable under such policies. In the case of all
protection and indemnity insurance (including insurance against liability for
pollution or the spillage or leakage of cargo), the Shipowner will cause the
Mortgagee to be named as an additional insured unless it cannot be provided that
the Mortgagee shall not be liable under such policies for payment of any
premium, club call, assessment or advance. The Shipowner will cause its
insurance brokers to agree to advise the Mortgagee as soon as is reasonably
practicable by telex addressed to it at 114 West 47th Street, New York, New York
10036-1532, Attention: Trust Administration, of any lapse of any such insurance
by expiration, termination, failure to renew or otherwise and of any default in
payment of any premium in respect of any insurance on the Vessel. The Mortgagee
shall not be deemed to have knowledge of any such lapse of insurance in the
absence of receipt of notice from such brokers. The Shipowner will also cause
such brokers to agree to mark their records and to advise the Mortgagee, by
telex, addressed as provided above in this subsection, at least seven business
days prior to the expiration date of any insurance carried pursuant to this
Mortgage, whether such insurance has been renewed or replaced with new insurance
which complies with the provisions of this Section 1.15. In addition, the
Shipowner will cause each insurance company, underwriter, club or fund (or an
authorized agent thereof) with respect to all insurance required hereby to agree
in writing for the benefit of the Mortgagee that each policy or contract issued
by such insurance company, underwriter, club or fund shall not lapse, expire,
terminate or be cancelled for any reason whatsoever without at least seven
business days' prior telex or
7
<PAGE> 9
cable notice to the Mortgagee addressed as provided above in this subsection.
(iii) The Shipowner, at its own expense, shall furnish to the Mortgagee
simultaneously with the execution and delivery hereof, and thereafter at
intervals of not more than 12 calendar months, a detailed report (which shall
set forth, without limitation, with respect to each type of insurance coverage,
each policy or certificate of entry, its form, its number, its amount, each
direct or indirect or participating insurer or underwriter, the type of risk
covered and the expiration date), signed by either a firm of independent
insurance brokers or the company or companies which have issued such coverage,
with respect to the insurance carried and maintained in respect of the Vessel,
together with the opinion of such brokers or of Bankscope Marine Insurance
Consultants Limited ("Bankscope") (or other insurance consultant of similar
recognized standing) substantially to the effect that (A) such insurance is in
such amounts and for such limits against such risks, in such form and with such
insurance companies, underwriters or underwriting associations as are necessary
and reasonable for the protection of the Shipowner's and the Mortgagee's
respective interests, and (B) are arranged in the broadest form generally
available in the United States, British, Japanese or Scandinavian insurance
markets, and (C) as to the compliance of such insurance with the provisions of
this Section 1.15; provided, however, that the opinion of Bankscope delivered
simultaneously with this Mortgage shall not be required to include the opinion
called for by subsection (B) of this paragraph.
(b) (i) For the purposes of insurance against total loss, the Vessel, its
equipment, appurtenances, etc., shall be insured for and valued at an amount at
least equal to the fair value thereof (it being agreed that as at the date
hereof such fair value is $ ) but, in any event, an amount which, when
added to the amounts of such insurance on other vessels mortgaged to the
Mortgagee as security for the Obligations, shall be not less than the unpaid
principal amount of the Securities from time to time outstanding plus premium,
if any, and accrued interest thereon.
(ii) Protection and indemnity insurance and insurance against liability for
pollution or the spillage or leakage of cargo shall be in an amount from time to
time obtainable for vessels of the same type, size, age and flag as the Vessel
and carried by other responsible and experienced companies engaged in the
operation of vessels similar to the Vessel, but in any event shall be in an
amount for each occurrence of not less than the declared value of the Vessel
under its hull and machinery insurance.
8
<PAGE> 10
(c) Although the insurance may be payable to the Mortgagee as named
assured:
(i) any payment under any insurance on the Vessel with respect to
protection and indemnity risks and liability arising out of pollution and
the spillage or leakage of cargo (other than a payment to indemnify or
reimburse the Mortgagee from or for any loss, damage or expense incurred by
it) may be paid directly to the Shipowner (unless the Mortgagee shall have
otherwise required by notice to the insurers as permitted by the Indenture)
to reimburse it for any loss, damage or expense incurred by it and covered
by such insurance or directly to the person to whom any liability covered
by such insurance has been incurred; and
(ii) in the case of any loss (other than a loss covered by clause (i)
of this subsection or by subsection (d) of this Section 1.15) under any
insurance with respect to the Vessel involving any damage to the Vessel
(unless the Mortgagee shall have otherwise required by notice to the
insurers as permitted by the Indenture), the insurers may pay directly for
the repair, salvage or other charges involved or, if the Shipowner shall
have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Shipowner as reimbursement therefor; provided that if
such damage involves a loss in excess of $1,000,000, the insurers shall
make such payment to or as directed by Mortgagee and any adjustment or
compromise of such loss by the Shipowner shall be at the highest amount
reasonably obtainable.
Any loss covered by this subsection which is paid to the Mortgagee but which
might have been paid, in accordance with the provisions of this subsection,
directly to the Shipowner or others, shall be paid by the Mortgagee to or as
directed by the Shipowner, and all other payments to the Mortgagee of losses
covered by this subsection shall be applied by the Mortgagee in accordance with
the provisions of Sections 10.04, 10.05 or 10.06 of the Indenture, as
applicable.
(d) In the event of an actual, constructive or compromised total loss of
the Vessel, any adjustment or compromise of such loss by the Shipowner shall be
at the highest amount reasonably obtainable, and all insurance or other payments
for such shall be paid to the Mortgagee and applied by the Mortgagee, first, to
any costs or expenses of the Mortgagee in connection with collecting such
payment, and second, in accordance with the provisions of Sections 10.04, 10.05
and 10.06 of the Indenture.
9
<PAGE> 11
(e) (i) The Shipowner will cause all policies and certificates of entry
with respect to insurance required hereby to contain a loss payable clause which
shall be on substantially the terms set forth in Schedule I hereto, in the case
of all marine and war risk hull and machinery (including excess values)
policies, and the terms set forth in Schedule II hereto (or, if such terms are
not obtainable, then such terms as shall, in the opinion of the broker referred
to in Section 1.15(a)(iii) above, be the best otherwise attainable), in the case
of all protection and indemnity and liability and oil pollution liability
insurance, and which shall: (A) in the case of protection and indemnity
insurance, provide for payment to the Shipowner or its order unless the payment
is to indemnify the Mortgagee from or reimburse the Mortgagee for any loss,
damage or expense incurred by it or unless and until the insurers or
associations receive notice from the Mortgagee that the Shipowner is in default
hereunder or that an Event of Default has occurred and is continuing under the
Indenture, in which event all payments shall be made to the Mortgagee, provided
that the insurer may in all events make payments directly to third parties to
whom liability has been established in discharge of guaranties issued by the
insurer or claims against the Shipowner or insurer, and (B) in the case of all
other insurance, shall provide for payment in accordance with the terms of
subsections (c) and (d) of this Section 1.15.
(ii) In addition, the Shipowner will, at its cost and expense, assign to
the Mortgagee, by an Assignment of Insurances, all of the Shipowner's right,
title and interest in and to each policy and contract of insurance (including
all entries in protection and indemnity or war risk associations) with respect
to the insurance required hereby and furnish, or cause its brokers to furnish,
written notice of such assignment to all insurers, underwriters, clubs and
associations with respect to such insurance.
(f) In the event that any claim or lien is asserted against the Vessel for
loss, damage or expense which is covered by insurance required hereunder (other
than in the event of an actual, constructive or compromised total loss of the
Vessel), and it is necessary for the Shipowner to obtain a bond or supply other
security to prevent arrest of the Vessel or to release the Vessel from arrest on
account of such claim or lien, the Mortgagee, on request of the Shipowner or its
agent, shall, so long as no Event of Default shall have occurred and be
continuing, assign to any person, firm or corporation executing a surety or
guarantee bond or other agreement to save or release the Vessel from such
arrest, all right, title and interest of the Mortgagee in and to said insurance
(excluding any protection and indemnity insurance under which the Mortgagee is a
named insured)
10
<PAGE> 12
covering said loss, damage or expense, as collateral security to indemnify
against liability under said bond or other agreement.
(g) The Shipowner will deliver to the Mortgagee copies or, if requested by
the Mortgagee at any time and from time to time, the originals of all cover
notes, binders, policies and certificates of entry in protection and indemnity
associations, and all endorsements and riders amendatory thereof, in respect of
insurance maintained in connection with the Vessel.
(h) The Shipowner agrees that it will not do or permit or willingly allow
to be done any act by which any insurance required by the terms of this Mortgage
may be suspended, impaired or cancelled, and that it will not permit or allow
the Vessel to undertake any voyage or run any risk or transport any cargo which
may not be permitted by the policies in force, without having previously insured
the Vessel by additional coverage to extend to such voyages, risks or cargoes.
SECTION 1.16. The Shipowner will reimburse the Mortgagee promptly, with
interest at a rate equal to 1% per annum above the rate applicable to the
Securities, for any and all expenditures which the Mortgagee may from time to
time reasonably make, lay out or expend in providing such protection in respect
of insurance, discharge or purchase of liens, taxes, dues, assessments,
governmental charges, fines and penalties lawfully imposed, repairs, attorneys'
fees and other matters as the Shipowner is obligated herein to provide, but
fails to provide. Such obligation of the Shipowner to reimburse the Mortgagee
shall be an additional indebtedness due from the Shipowner, secured by this
Mortgage, and shall be payable by the Shipowner on demand. The Mortgagee, though
privileged so to do, shall be under no obligation to the Shipowner to make any
such expenditures, nor shall the making thereof relieve the Shipowner of any
default in that respect.
SECTION 1.17. The Shipowner will fully perform the Time Charter Party and
any and all other charter parties which are or may be entered into with respect
to the Vessel.
SECTION 1.18. In the event that at any time and from time to time this
Mortgage, the Shipowner's Guarantee or the Indenture or any provisions hereof or
thereof shall be deemed invalidated in whole or in part by reason of any present
or future law or any decision of any authoritative court, or if the documents at
any time held by the Mortgagee shall be deemed by the Mortgagee for any reason
insufficient to carry out the true intent and spirit of this Mortgage, then the
Shipowner, forthwith upon the request of the Mortgagee, will execute, on its own
behalf, such other and further assurances and documents as
11
<PAGE> 13
requested by the Mortgagee to more effectually subject the Vessel to the payment
of the principal sum of the Obligations, as in this Mortgage provided, and the
performance of the terms and provisions of this Mortgage.
SECTION 1.19. In the event of the requisition (whether of title or use),
condemnation, sequestration, seizure or forfeiture of the Vessel by any
governmental or purported authority or by anyone else, any payments in respect
thereof shall be paid, and the Shipowner shall cause any such payment to be
paid, to the Mortgagee and applied in accordance with the terms of the
Indenture.
SECTION 1.20. The Shipowner will fully perform any and all covenants and
undertakings in the Indenture which are applicable to it.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
SECTION 2.1. An Event of Default under the Indenture shall constitute an
Event of Default under this Mortgage and, in case any one or more Events of
Default shall have occurred and be continuing, then, in each and every such case
the Mortgagee shall have the right to:
(1) declare immediately due and payable all of the Obligations (in
which case all of the same shall be immediately due), and bring suit at
law, in equity or in admiralty, as it may be advised, to recover judgment
for the Obligations and collect the same out of any and all property of the
Shipowner whether covered by this Mortgage or otherwise;
(2) exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable law,
including but not limited to, the provisions of Chapter 3 of Title 22 of
the Liberian Code of Laws of 1956, as amended;
(3) take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to the
Mortgagee possession of the Vessel and the Mortgagee may, without being
responsible for loss or damage, hold, lay up, lease, charter, operate or
otherwise use such Vessel for such time and upon such terms as it may deem
to be for its best advantage, and demand, collect and retain all hire,
freights, earnings, issues, revenues, income, profits, return premiums,
salvage awards or recoveries, recoveries in
12
<PAGE> 14
general average, and all other sums due or to become due in respect of such
Vessel or in respect of any insurance thereon from any person whomsoever,
accounting only for the net profits, if any, arising from such use of the
Vessel and charging upon all receipts from the use of the Vessel or from
the sale thereof by court proceedings or pursuant to subsection (4) next
following, all costs, expenses, charges, damages or losses by reason of
such use; and if at any time the Mortgagee shall avail itself of the right
herein given it to take the Vessel, the Mortgagee shall have the right to
dock the Vessel, for a reasonable time at any dock, pier or other premises
of the Shipowner without charge, or to dock her at any other place at the
cost and expense of the Shipowner; and/or
(4) take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems desirable
to the Mortgagee and without being responsible for loss or damage, sell
such Vessel, at any place and at such time as the Mortgagee may specify and
in such manner and such place (whether by public or private sale) as the
Mortgagee may deem advisable (without necessity of bringing the Vessel to
the place designated for such sale), free from any claim by the Shipowner
in admiralty, in equity, at law or by statute, after first giving notice of
the time and place of any public sale with a general description of the
property in the following manner:
(i) by publishing such notice for 10 consecutive days in a daily
newspaper of general circulation published in New York City;
(ii) if the place of sale should not be New York City, then also by
publication of a similar notice in a daily newspaper, if any, published
at the place of sale; and
(iii) by mailing a similar notice to the Shipowner at its last
known address on the day of first publication;
and notice of the time and place of any private sale by mailing such notice to
the Shipowner at its last known address.
SECTION 2.2. Any sale of the Vessel made in pursuance of this Mortgage,
whether under the power of sale hereby granted or any judicial proceedings,
shall operate to divest all right, title and interest of any nature whatsoever
of the Shipowner therein and thereto and shall bar any claim from the Shipowner,
its successors and assigns, and all persons claiming by, through or under them.
No purchaser shall be bound to inquire whether notice has been given, or whether
any default has occurred, or as to the propriety of the sale, or as to the
application of the proceeds thereof. In the case of any such sale, the Mortgagee
13
<PAGE> 15
shall be entitled, for the purpose of making settlement or payment for the
property purchased, to use and apply the Obligations in order that there may be
credited against the amount remaining due and unpaid thereon the sums payable
out of the net proceeds of such sale with respect to the Obligations after
allowing for the costs and expense of sale and other charges; and thereupon such
purchaser shall be credited, on account of such purchase price, with the net
proceeds that shall have been so credited with respect to the Obligations. At
any such sale, the Mortgagee may bid for and purchase such property and upon
compliance with the terms of sale may hold, retain and dispose of such property
without further accountability therefor.
SECTION 2.3. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner to execute and deliver to any purchaser aforesaid, and is hereby
vested with full power and authority to make, in the name and on behalf of the
Shipowner, a good conveyance of the title to the Vessel so sold. In the event of
any sale of the Vessel, under any power herein contained, the Shipowner will, if
and when required by the Mortgagee, execute such form of conveyance of the
Vessel and other related documents, as the Mortgagee may direct or approve.
SECTION 2.4. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner in the name of the Shipowner to demand, collect, receive, compromise
and sue for, so far as may be permitted by law, all freights, hire, earnings,
issues, revenues, income and profits of the Vessel and all amounts due from
underwriters under any insurance thereon as payments of losses or as return
premiums or otherwise, salvage awards and recoveries, recoveries in general
average or otherwise, and all other sums, due or to become due at the time of
the occurrence of any Event of Default, or in respect of any insurance thereon,
from any person whomsoever, and to make, give and execute in the name of the
Shipowner acquittances, receipts, releases or other discharges for the same,
whether under seal or otherwise, and to endorse and accept in the name of the
Shipowner all checks, notes, drafts, warrants, agreements and other instruments
in writing with respect to the foregoing.
SECTION 2.5. Whenever any right to enter and take possession of the Vessel
accrues to the Mortgagee, it may require the Shipowner to deliver, and the
Shipowner shall on demand, at its own cost and expense, deliver to the Mortgagee
the Vessel as demanded. If any legal proceedings shall be taken to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
14
<PAGE> 16
SECTION 2.6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and assigns, in any court of any country or nation of the world where a suit is
pending against the Vessel because of or on account of an alleged lien against
the Vessel from which the Vessel has not been released and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee, and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
SECTION 2.7. The Shipowner covenants that at any time that any Obligations
shall be due and payable (whether by acceleration or otherwise), the Mortgagee
may demand the payment thereof; and in case the Shipowner shall fail to pay the
same forthwith upon such demand, the Mortgagee shall be entitled to recover
judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the
Mortgagee's agents, attorneys and counsel and any necessary advances, expenses
and liabilities made or incurred by it hereunder. All moneys collected by the
Mortgagee under this Section 2.7 shall be applied by the Mortgagee in accordance
with the provisions of Article 10 of the Indenture.
SECTION 2.8. Each and every power and remedy given to the Mortgagee as
Trustee under the Indenture and herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein given
or now or hereafter existing at law, in equity, in admiralty or by statute, and
each and every power and remedy whether herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgagee, and the exercise or the beginning of the exercise of
any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other power or remedy. No delay or
omission by the Mortgagee in the exercise of any right or power or in the
pursuance of any remedy accruing upon any Event of Default shall impair any such
right, power or remedy or be construed to be a waiver of any such Event of
Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Obligations
after any Event of Default or of any payment on account of any past Event of
Default be construed to be a waiver of any right to take advantage of any future
Event of Default or of any past Event of Default not completely cured thereby.
15
<PAGE> 17
SECTION 2.9. If at any time after an Event of Default and prior to the
actual sale of the Vessel by the Mortgagee or prior to any foreclosure
proceedings, the Shipowner offers completely to cure all Events of Default and
to pay all expenses, advances and damages to the Mortgagee consequent on such
Events of Default, with interest at the rate provided in Section 1.16 of Article
I hereof, then the Mortgagee may, but shall be under no obligation to, accept
such offer, cure and payment and restore the Shipowner to its former position,
but such action shall not affect any subsequent Event of Default or impair any
rights consequent thereon.
SECTION 2.10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall be restored to their former positions
and rights hereunder with respect to the property subject or intended to be
subject to this Mortgage, and all rights, remedies and powers of the Mortgagee
shall continue as if no such proceedings had been taken.
SECTION 2.11. The proceeds of any sale of the Vessel and the net earnings
of any charter operation or other use of the Vessel by the Mortgagee under any
of the powers herein specified in this Article II, as well as any and all other
moneys received by the Mortgagee pursuant to or under any of the provisions of
Article I hereof or this Article II or in any proceedings pursuant to this
Article II, shall be held and applied by the Mortgagee from time to time as
provided in Article 10 of the Indenture. In the event that the proceeds and
amounts referred to above received by the Mortgagee are insufficient to pay in
full the Obligations, the Mortgagee shall be entitled to collect the balance
from the Shipowner or from any other person or entity liable therefor.
SECTION 2.12. Unless and until one or more Events of Default shall occur
and be continuing, the Shipowner (a) shall be suffered and permitted to retain
actual possession and use of the Vessel and (b) shall have the right, from time
to time, in its discretion, and without application to the Mortgagee, and
without obtaining a release thereof by the Mortgagee, to dispose of, free from
the lien hereof, any boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment
or any other appurtenances of the Vessel that are no longer useful, necessary,
profitable or advantageous in the operation of the Vessel, first or
simultaneously replacing the same by new boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, cables,
16
<PAGE> 18
chains, tackle, apparel, furniture, fittings, equipment or other appurtenances
of substantially equal value to the Shipowner, which shall forthwith become
subject to the lien of this Mortgage as a first preferred mortgage thereon.
ARTICLE III
SUNDRY PROVISIONS
SECTION 3.1. The maximum principal amount that may be outstanding under
this Mortgage at any time is Two Hundred Twenty-Five Million United States
Dollars (US$225,000,000), and for purposes of this Mortgage recording as
required by the Liberian Maritime Law, the total amount of this Mortgage is Two
Hundred Twenty-Five Million United States Dollars (US$225,000,000), premium (if
any) and interest and performance of mortgage covenants. The maturity date is on
demand and there is no separate discharge amount.
SECTION 3.2. All of the covenants, promises, stipulations and agreements of
the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
successors and assigns. In the event of any assignment of this Mortgage, the
term "Mortgagee" as used in this Mortgage shall be deemed to mean any such
assignee.
SECTION 3.3. Wherever and whenever herein any right, power or authority is
granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
SECTION 3.4. (a) In the event that any provision of this Mortgage shall be
deemed invalid or unenforceable by reason of any present or future law or any
decision of any court of competent jurisdiction, the validity and enforceability
of any other provision hereof shall not be affected thereby. Any such invalidity
or unenforceability of any provision of this Mortgage in any jurisdiction or
nation shall not render such provision invalid or unenforceable under the laws
of any other jurisdiction or nation.
(b) In the event that this Mortgage or any of the documents or instruments
which may from time to time be delivered hereunder or any provision hereof shall
be deemed invalidated by present or future law of any nation or by decision of
any court, this shall not affect the validity and/or enforceability of all or
any other parts of this Mortgage, or such documents or
17
<PAGE> 19
instruments and, in any such case, the Shipowner covenants and agrees that, on
demand, it will execute and deliver such other and further agreements and/or
documents and/or instruments and do such things as the Mortgagee in its sole
discretion may deem to be necessary to carry out the true intent of this
Mortgage.
(c) Anything herein to the contrary notwithstanding, it is intended that
nothing herein shall waive the preferred status of this Mortgage and that, if
any provision of this Mortgage or portion thereof shall be construed to waive
the preferred status of this Mortgage, then such provision to such extent shall
be void and of no effect and shall cease to be a part of this Mortgage, without
affecting the remaining provisions, which shall remain in full force and effect.
SECTION 3.5. The Shipowner irrevocably submits itself to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York City and
any appellate court from any thereof, for the purposes (and solely for the
purposes of) of any suit, action or other proceeding arising out of, or relating
to, this Mortgage or any of the transactions contemplated hereby, hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard in such New York State or Federal court and hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defense, or otherwise, in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of the above-named courts for any reason whatsoever, that such
suit, action or proceeding is brought in an inconvenient forum, or that the
venue of such suit, action or proceeding is improper, or that this Mortgage or
the subject matter hereof may not be enforced in or by such courts. The
Shipowner hereby irrevocably appoints Haight, Gardner, Poor & Havens (the
"Process Agent"), with an office on the date hereof at 195 Broadway, New York,
New York 10007, United States, as its agent to receive on behalf of the
Shipowner and its property service of copies of the summons and complaint and
any other process which may be served in any such suit, action or proceeding and
in any suit, action or proceeding arising out of or relating to any other
Security Document to which the Shipowner is a party. Such service may be made by
mailing or delivering a copy of such process to the Shipowner in care of the
Process Agent at the Process Agent's above address, and the Shipowner hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, the Shipowner also irrevocably
consents to the service of any and all process in any such suit, action or
proceeding by the mailing of copies of such process to the Shipowner care of
Teekay Shipping Corporation, Tradewinds Building, Sixth Floor, Bay Street, P.O.
Box SS-6293, Nassau, Commonwealth of the Bahamas, Attention: Managing Director.
The
18
<PAGE> 20
Shipowner agrees that a final judgment in any such action, suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Section 3.5
shall affect the right of the Mortgagee to serve legal process in any other
manner permitted by law or affect the right of the Mortgagee to bring any action
or proceeding against the Shipowner or its property in the courts of any other
jurisdiction.
SECTION 3.6. This Mortgage may be executed in any number of counterparts,
each of which shall be an original; but such counterparts shall together
constitute but one and the same instrument.
SECTION 3.7. The term "Dollars" or the symbol "$" as used herein shall
mean Dollars in any coin or currency of the United States of America which at
the time of payment shall be legal tender for public and private debts.
SECTION 3.8. Upon the termination of this Mortgage pursuant to the proviso
to the Habendum Clause hereof, the Mortgagee, forthwith upon the request of the
Shipowner, will execute, on its own behalf, such other and further assurances
and documents as requested by the Shipowner to effect such termination and to
remove the lien of record of this Mortgage, all at the cost and expense of the
Shipowner.
[The rest of this page has been left intentionally blank.]
19
<PAGE> 21
IN WITNESS WHEREOF, the Shipowner has executed this Mortgage on the day and
year first above written.
**A**
By
-----------------------
Name:
Title:
20
<PAGE> 22
STATE OF )
) ss. :
COUNTY OF )
On this day of , , before me personally appeared
, to me known, who being by me duly sworn, did depose and say that
he resides at ; that he is an authorized
individual of **A**, the Corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said Corporation and that said instrument is the act
and deed said Corporation.
--------------------------------------
Notary Public
[For use in the Republic of Liberia.]
<PAGE> 23
SCHEDULE I
to
First Preferred Ship Mortgage
dated ,
Loss, if any, payable to UNITED STATES TRUST COMPANY OF NEW YORK (the
"Mortgagee"), a NEW YORK CORPORATION, in its capacity as Trustee pursuant to,
and for the benefit of the Holders of the Securities (as defined in the
Indenture hereinafter defined) issued under, that certain Indenture dated as of
January , 1996, among Teekay Shipping Corporation (the "Company"), certain
subsidiaries of the Company and the Trustee (the "Indenture"), for distribution
by it to the Mortgagee and then to **A** (the "Owner") as their respective
interests may appear, or order, except that, unless Underwriters have been
otherwise instructed by notice in writing from the Mortgagee in the case of any
loss involving any damage to the Vessel or liability of the Vessel, the
Underwriters may pay directly for the repair, salvage, liability or other
charges involved or, if the Owner shall have first fully repaired the damage and
paid the cost thereof, or discharged the liability or paid all of the salvage or
other charges, then the Underwriters may pay the Owner as reimbursement
therefor, provided, however, that if such damage involves a loss in excess of
U.S.$1,000,000 or its equivalent the Underwriters shall not make such payment
without first obtaining the written consent thereto of the Mortgagee.
In the event of an actual or constructive total loss or a compromised or
arranged total loss or requisition of title, all insurance payments therefor
shall be paid to the Mortgagee, for distribution by it in accordance with the
terms of the Mortgage.
<PAGE> 24
SCHEDULE II
TO
FIRST PREFERRED SHIP MORTGAGE
LOSS PAYABLE CLAUSE
By assignment dated January , 1996, **A** (the "Owner"), the owner of the
**B** (the "Vessel"), assigned to United States Trust Company of New York, as
Trustee (the "Mortgagee") all of the Owner's right, title and interest in and to
this entry and all benefits thereof including all claims of whatsoever nature
thereunder.
Payment of any recovery the Owner is entitled to receive from the funds of
the Association in respect of any liability, costs or expenses incurred by the
Owner shall be made to the Owner or to its order unless and until the
Association receives notice from United States Trust Company of New York, 114
West 47th Street, New York, NY 10036-1532, USA (hereinafter called the
Mortgagee) that the Owner is in default under the Mortgage, in which event all
such recoveries shall thereafter be paid to the Mortgagee or to its order.
The Association undertakes:
(a) to inform the Mortgagee if notice is given to the Owner of the
above ship under Rule 9(2)(i) or 9(3) that its insurance in the
Association in respect of such ship is to cease; and
(b) to give the Mortgagee 14 days' notice of the Association's
intention to cancel the insurance of the Owner by reason of its
failure to pay when due and demanded any sum due from it to the
Association.
<PAGE> 25
EXHIBIT A
TO
FIRST PREFERRED MORTGAGE
[COPY OF THE INDENTURE]
<PAGE> 26
EXHIBIT B
TO
FIRST PREFERRED MORTGAGE
[COPY OF THE GUARANTEE]
<PAGE> 1
EXHIBIT 4.6
[FORM OF ASSIGNMENT OF TIME CHARTER]
**A**
**B**
ASSIGNMENT OF TIME CHARTER
**A**, a corporation organized and existing under the laws of [the Republic
of Liberia] [the Commonwealth of the Bahamas] (the "Assignor"), in consideration
of one dollar ($1.00) lawful money of the United States of America and other
good and valuable consideration, the receipt of which is hereby acknowledged,
has sold, assigned, transferred and set over, and does hereby sell, assign,
transfer and set over unto UNITED STATES TRUST COMPANY OF NEW YORK (the
"Assignee"), a New York corporation, as Trustee pursuant to, and for the benefit
of the Holders of the Securities (as defined in the Indenture hereinafter
defined) issued under, that certain Indenture dated as of the date hereof among
Teekay Shipping Corporation (the "Company"), certain subsidiaries of the Company
and the Trustee (the "Indenture"; terms used herein and not otherwise defined
herein being used herein as defined in the Indenture), its successors and
assigns, to its and its successors' and assigns' own proper use and benefit as
security for all of the obligations of the Assignor under its Guarantee dated
the date hereof (the "Guarantee"), the payment of the principal of (and premium,
if any) and interest on the Securities, the payment of all other sums of money
payable by the Company under the Indenture, the payment of all other sums of
money payable by the Shipowner under this Assignment and the other Guarantor
Security Documents to which it is a party, and the payment of all sums payable
by the other Guarantors under their respective Subsidiary Guarantees and
Guarantor Security Documents (collectively, the "Obligations"), and to secure as
well the performance and observance of all agreements, covenants and provisions
contained in this Assignment, and of the Company and the Guarantors in the
Indenture and the Security Documents, all the right, title and interest of the
Assignor in and to: (i) that certain Time Charter Party dated ,
between the Assignor and Palm Shipping Inc. (the "Charterer"), a Liberian
company, as charterer, with respect to the Assignor's [Liberian] [Bahamian] flag
vessel **B** (said vessel or any vessel hereafter
<PAGE> 2
substituted therefor under said Time Charter Party being herein called the
"Vessel"), as said Time Charter Party may heretofore or hereafter be amended
from time to time or extended or renewed (said Time Charter Party as heretofore
or hereafter amended or extended or renewed being hereinafter called the
"Charter"), including, without limitation, within such assignment the right to
receive all moneys due and to become due under the Charter and all rights
arising out of the owner's lien on cargoes and subfreights thereunder, all
claims for damages arising out of the breach thereof and the right of the
Assignor to terminate the Charter, to perform thereunder and to compel
performance of the terms thereof; and (ii) all moneys and claims for moneys due
and to become due to the Assignor, and all claims for damages and all insurance
and other proceeds in respect of, the actual or constructive loss of, or the
requisition (whether of title or use), condemnation, sequestration, seizure,
forfeiture or other taking of, the Vessel. The liability of the Assignor under
this Assignment shall be limited by the provisions of Section 2 of the
Guarantee.
It is expressly agreed that anything herein contained to the contrary
notwithstanding, (i) the Assignor shall remain liable under the Charter to
perform all the obligations assumed by it thereunder, (ii) the obligations of
the Assignor under the Charter may be performed by the Assignee or its nominee
or other assignee from the Assignee without releasing the Assignor therefrom and
(iii) the Assignee shall have no obligation or liability under the Charter by
reason of, or arising out of, this Assignment and shall not be obligated to
perform any of the obligations of the Assignor under the Charter, or to make any
payment or to make any inquiry of the sufficiency of any payment received by it,
or to present or file any claim or to take any other action to collect or
enforce any payment assigned hereunder.
The Assignor does hereby constitute the Assignee, its successors and
assigns, the Assignor's true and lawful attorney, irrevocably, with full power
(in the name of the Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for money due
and to become due under, or arising out of, the Charter or otherwise assigned
hereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith all as and to the extent permitted in the Indenture.
Notwithstanding anything to the contrary, so long as no Event of Default
shall have occurred and be continuing, the Assignor shall be entitled to receive
and retain any and all moneys otherwise assigned hereunder. If an Event of
Default
2
<PAGE> 3
shall have occurred and be continuing and the Assignee shall have given the
Assignor written notice thereof, the Assignor shall specifically authorize and
direct the Charterer or other obligor to make payment of all of the moneys
hereby assigned directly to the Cash Collateral Account in accordance with the
Cash Collateral Account Agreement, and shall deliver to the Assignee the written
acknowledgment of the Charterer or obligor of such instructions.
The Assignor agrees that at any time and from time to time, upon the
written request of the Assignee, the Assignor will promptly and duly execute and
deliver any and all such further instruments and documents as the Assignee may
reasonably request or as shall be necessary for the Assignee to obtain the full
benefits of this Assignment and of the rights and powers herein granted,
including, without limitation, the execution and delivery of such Uniform
Commercial Code financing and continuation statements and the filing thereof in
such jurisdictions as shall be appropriate. To the extent permitted by
applicable law, the Assignor hereby authorizes the Assignee to execute and file
any such financing or continuation statements without necessity of the signature
of the Assignor.
The Assignor does hereby represent and warrant that the Charter is in full
force and effect and is enforceable in accordance with the terms thereof, that
the Charterer has no claims against the Assignor thereunder and the Assignor is
not in default thereunder. The Assignor does hereby further represent and
warrant that there is not now in effect any assignment or pledge of, and hereby
covenants that Assignor will not assign, pledge, or suffer to exist any lien,
charge, security interest, or encumbrance, or any other type of preferential
arrangement, upon or with respect to, so long as this instrument of Assignment
shall remain in effect, the whole or any part of the rights hereby assigned, to
anyone other than the Assignee, its successors or assigns. The Assignor
represents and warrants that it does not maintain an office or place of business
in the United States of America or in Canada and covenants that it will give the
Assignee immediate notice if at any time it establishes such an office or place
of business.
Upon (a) payment in full of all of the Obligations and the performance and
observance of all agreements, covenants and provisions contained in its Guaranty
and First Preferred Ship Mortgage and of the Company and the Assignor in the
Indenture, and when neither the Assignor nor the Company is under any further
actual or contingent liability in respect of any thereof, (b) the occurrence of
the Termination and Release or (c) the substitution of a Qualified Substitute
Vessel for the Vessel under the Indenture, the Assignee will at the request and
cost of
3
<PAGE> 4
the Assignor reassign the Charter and its interest in all other rights assigned
to the Assignee hereunder to the Assignor or as the Assignor shall direct,
without any representation, warranty or recourse by or to the Assignee.
This Assignment and the Agreement and Consent to Assignment annexed hereto
may be executed by the Assignor and the Charterer under the Charter on separate
counterparts without in any way adversely affecting the validity of said
Agreement and Consent to Assignment. The Assignor agrees that it will forthwith
procure that the Charterer delivers to the Assignee such Agreement and Consent
to Assignment duly executed by the Charterer.
This Assignment shall be governed by and construed in accordance with the
laws of the State of New York. The Assignor hereby irrevocably submits itself to
the non-exclusive jurisdiction of any New York State or Federal court sitting in
New York City and any appellate court from any thereof, for the purposes of (and
solely for the purposes of) any suit, action or other proceeding arising out of,
or relating to, this Assignment or any of the transactions contemplated hereby,
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard in such New York State or Federal court and hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
whatsoever, that such suit, action or proceeding is brought in an inconvenient
forum, or that the venue of such suit, action or proceeding is improper, or that
this Assignment or the subject matter hereof may not be enforced in or by such
courts. The Assignor hereby irrevocably appoints Haight, Gardner, Poor & Havens
(the "Process Agent"), with an office on the date hereof at 195 Broadway, New
York, New York 10007, United States, as its agent to receive on behalf of the
Assignor and its property service of copies of the summons and complaint and any
other process which may be served in any such suit, action or proceeding and in
any suit, action or proceeding arising out of or relating to any other Security
Document to which the Assignor is a party. Such service may be made by mailing
or delivering a copy of such process to the Assignor in care of the Process
Agent at the Process Agent's above address, and the Assignor hereby irrevocably
authorizes and directs the Process Agent to accept such service on its behalf.
As an alternative method of service, the Assignor also irrevocably consents to
the service of any and all process in any such suit, action or proceeding by the
mailing of copies of such process to the Assignor at its address specified in
the Indenture. The Assignor agrees that a final judgment in any such action,
suit or proceeding shall be
4
<PAGE> 5
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this paragraph shall affect the
right of the Assignee to serve legal process in any other manner permitted by
law or affect the right of the Assignee to bring any action or proceeding
against the Assignor or its property in the courts of any other jurisdiction.
[The remainder of this page is left intentionally blank.]
5
<PAGE> 6
IN WITNESS WHEREOF, the Assignor has caused this instrument of Assignment
to be duly executed as of the day of , .
**A**
By
----------------------------------
Name:
Title:
6
<PAGE> 7
ASSIGNMENT OF TIME CHARTER
AGREEMENT AND CONSENT TO ASSIGNMENT
TO: PALM SHIPPING INC.
**B**
We refer to the time charter party dated , as
amended, made between us, **A*, and you, Palm Shipping Inc., by which we agreed
to let and you agreed to take on time charter for the period and on the terms
and conditions set out in the Charter of the **B** of about **D** net tons and
**E** gross tons registered in our name under the [Liberian][Bahamian] flag.
We hereby give you notice of the following, and you by your execution and
delivery of this Agreement and Consent to Assignment hereby agree to the
following:
1. By an assignment (the "Assignment", the defined terms therein being
used herein as therein defined) dated the date hereof (a copy of which
is attached hereto) made between us and the Trustee referred to therein,
we have sold, assigned, transferred and set over unto the Trustee all
our right, title and interest in and to the Charter (as such term is
defined in the attached Assignment) and in and to certain moneys and
claims for moneys due and to become due to us (all as more fully
described in the Assignment).
2. You are hereby irrevocably authorized and instructed to pay, and agree
that you will make payment of, all such moneys payable by you under the
Charter to such place as the Trustee may from time to time direct.
3. We shall remain liable to perform all our obligations under the Charter
and the Trustee shall not be under any obligation under the Charter, but
should the Trustee exercise its right to perform, or cause performance
by its designee of, our obligations under the Charter, you agree,
without thereby releasing us from our obligations under the Charter, to
accept such performance.
4. By your acknowledgement below, you agree that your obligation to make
payment of all moneys payable by you under the Charter to the Trustee
pursuant to paragraph 2 above is absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, (i)
any set-off, counterclaim, recoupment, defense or other right against
us, the Company, the Trustee or any Holder (as defined in the Indenture
referred to in the Assignment) or anyone else for any reason whatsoever
(whether in connection with the Vessel or otherwise), including, without
<PAGE> 8
limitation, any defect in the title, condition, design, operation, or
fitness for use of, or any damage to or loss or destruction of, or any
lien, security interest or other charge or encumbrance upon, the Vessel
or any part thereof or any interruption or cessation in the use or
possession thereof by us or you or any subcharterer thereof for any
reason, (ii) any insolvency, bankruptcy, reorganization or similar
proceeding by or against the Company, us, the Trustee or any Holder or
anyone else, (iii) any liability, obligation, claim, damage, penalty,
cost or expense (including, without limitation, fees and expenses of
attorneys, consultants, engineers and appraisers and any claim arising
under any law, rule, regulation, charter, lease, permit, license or
other requirement relating to pollution or to the protection of health
or the environment) which may be imposed upon or incurred by or asserted
against you or us or the Company, the Trustee, any Holder or anyone else
for any reason or (iv) any other circumstance, happening or event
whatsoever, whether foreseen or unforeseen and whether or not similar to
any of the foregoing. If for any reason whatsoever, the Charter shall be
terminated as to any vessel subject thereto by operation of law or
otherwise, you nonetheless agree to pay to the Trustee all amounts
payable under such Charter at the time such payments would have become
due and payable in accordance with the terms of the Charter had such
Charter not been so terminated. You hereby waive, to the extent
permitted by applicable law, any and all rights which you may now have
or which at any time hereafter may be conferred upon you, by statute or
otherwise, to terminate, cancel, quit or surrender any Charter unless
(a) the Securities shall have been paid in full and all sums payable to
the Trustee under the Indenture shall have been paid in full or (b) the
Termination and Release shall have occurred.
5. You agree that the Trustee shall be entitled to exercise any and all
rights and remedies of the Assignor under the Charter in accordance with
the terms of the Assignment and the Indenture, and you shall comply in
all respects with such exercise. You agree that the Charter, including,
without limitation, all of your liens thereunder, shall be subordinated
in all respects to the lien of the First Preferred Ship Mortgage in
favor of the Trustee on the Vessel, and, at the option of the Trustee,
foreclosure under such First Preferred Ship Mortgage shall terminate
such Charter and such liens and divest you and your subcharterers of all
right, title and interest in and to the Vessel. You agree that each
subcharter of the Vessel shall be subordinate in all respects to the
lien of such First Preferred Ship Mortgage.
2
<PAGE> 9
6. You and we are each subsidiaries of the Company. Each present and
future Guarantor (as defined in the Indenture) will assign its rights
under a Charter (as defined in the Indenture and including but not
limited to the Charter referred to in the Assignment) to the Trustee as
security for, among other obligations, the Company's obligations under
the Indenture and the Securities (as defined in the Indenture).
7. Your obligations to pay hire under the Charter referred to in the
Assignment include, without limitation, the obligation to pay hire
thereunder so that each installment of hire thereunder shall be, under
any circumstances and in any event, in an amount and paid on such date
as shall be sufficient, when combined with all payments made on or
before such date by you to the Trustee under all of the Charters (as
defined in the Indenture) assigned to the Trustee, so that the Trustee
shall have been paid in full as of its due date each payment of
principal of and interest (and premium, if any) on the Securities (as
defined in the Indenture) required to be paid by the Company pursuant to
the Indenture on such due date.
8. You hereby agree that, so long as any Securities (as defined in the
Indenture) shall be outstanding and the Termination and Release shall
not have occurred:
(a) If an Event of Default (as defined in the Indenture) has occurred
and is continuing and the Trustee has given you written notice
thereof and requested that you issue instructions to the charterers
and other obligors directly (and without derogation of any other
rights of the Trustee), you shall specifically authorize and direct
each charterer or other obligor to make payment of all the freights,
hire and other moneys assigned pursuant to the Assignment of
Freights and Hires (as defined in the Indenture) directly to our
Cash Collateral Account (as defined in the Indenture) in accordance
with our Cash Collateral Account Agreement (as defined in the
Indenture), and shall obtain and deliver to the Trustee the written
acknowledgment of each such charterer or other obligor of such
instructions.
(b) Upon the request of the Trustee from time to time, you shall
provide to the Trustee such information as the Trustee may
reasonably request regarding the Vessel and its use, including but
not limited to the terms of each subcharter thereof, the subcharter
party, the routes
3
<PAGE> 10
plied and to be plied by such Vessel and its scheduled arrival and
departure from each port on such route.
(c) You covenant and agree with the Trustee that you will (i) duly
perform and observe all of the terms and provisions of any charter
or contract of affreightment on your part to be performed or
observed; and (ii) clearly record on your books and records
notations of the Assignment and the Assignment of Freights and Hires
(as defined in the Indenture).
(d) At any time and from time to time, upon the written request of the
Trustee, you shall promptly and duly execute and deliver any and all
such further instruments and documents as the Trustee may reasonably
request in order to obtain the full benefits of the Assignment and
of the rights and powers herein granted.
(e) Whenever requested by the Trustee, you shall deliver letters to
each of your agents and representatives into whose hands or
control may come any earnings, moneys and property assigned by the
Assignment or assigned pursuant to the Assignment of Freights and
Hires, informing each such addressee of such assignments and, if
any Event of Default has occurred, instructing such addressee to
remit or deliver promptly to the Trustee all earnings, moneys and p
property hereby assigned which may come into the addressee's hands
or control and to continue to make such remittances or delivery
until such time as the addressee may receive written notice or
instructions to the contrary direct from the Trustee. Each such
addressee shall acknowledge directly to the Trustee receipt of
your letter of notification and instructions.
9. Your acknowledgement and consent hereunder, and your agreements herein
contained, are for the benefit of the Trustee and the Holders and shall
be enforceable by the Trustee for its benefit and the benefit of the
Holders.
10. This Agreement and Consent to Assignment shall terminate, and be of
no further force and effect, upon (i) the payment in full of all of
the Obligations and the performance and observance of all agreements,
covenants and provisions contained in the Guarantee and the First
Preferred Ship Mortgage and of the Company and us in the ndenture,
and the absence of any further actual or contingent liability in
respect of any thereof, (ii) the occurrence of the Termination and
Release or (iii) the substitution of a
4
<PAGE> 11
Qualified Substitute Vessel for the Vessel under the Indenture.
The authorizations and instructions by us in this Agreement and Consent to
Assignment cannot be revoked or varied by us without the Trustee's prior written
consent.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
5
<PAGE> 12
For and on behalf of
**A**
By:-------------------------------
Name:
Title:
Dated:
To: **A**
In consideration of the extension of the term of the Time Charter, and for other
good and valuable consideration, the receipt of which is hereby acknowledged, we
hereby agree to the terms set out above and consent to, and agree to be bound
by, the Assignment.
For and on behalf of
PALM SHIPPING INC.
By:----------------------------------
Name:
Title:
Dated:
6
<PAGE> 1
EXHIBIT 4.7
[FORM OF ASSIGNMENT OF INSURANCE]
**A**
**B**
ASSIGNMENT OF INSURANCE
**A**, a corporation organized and existing under the laws of [the Republic
of Liberia] [the Commonwealth of the Bahamas] (the "Assignor"), the owner of the
[Liberian] [Bahamian] documented vessel **B**, Official No. **C** (the
"Vessel"), in consideration of One Dollar ($1) lawful money of the United States
of America and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, has sold, assigned, transferred
and set over, and by this instrument does sell, assign, transfer and set over
unto UNITED STATES TRUST COMPANY OF NEW YORK (the "Assignee"), a New York
corporation, as Trustee pursuant to, and for the benefit of the Holders of the
Securities (as defined in the Indenture hereinafter defined) issued under, that
certain Indenture dated as of the date hereof, among Teekay Shipping Corporation
(the "Company"), certain subsidiaries of the Company and the Trustee (the
"Indenture"), and as mortgagee of the Vessel under the First Preferred Ship
Mortgage (as defined in the Indenture) (the "Mortgage") granted by Assignor in
favor of the Assignee, and unto the Assignee's successors and assigns, to its
and its successors' and assigns' own proper use and benefit, and, as collateral
security for the Assignor's obligations under its Guarantee dated the date
hereof (the "Guarantee"), the payment of the principal of (and premium, if any)
and interest on the Securities, the payment of all other sums of money payable
by the Company under the Indenture, the payment of all other sums of money
payable by the Shipowner under this Assignment and the other Guarantor Security
Documents to which it is a party, and the payment of all sums payable by the
other Guarantors under their respective Subsidiary Guarantees and Guarantor
Security Documents (collectively, the "Obligations"), and to secure as well the
performance and observance of all agreements, covenants and provisions contained
in this Assignment, and of the Company and the Guarantors in the Indenture and
the Security Documents, all right, title and interest of the Assignor under, in
and to (i) all insurances in respect of the Vessel, whether heretofore, now or
hereafter effected, and all renewals of or replacements for the same (the
"Insurances"), (ii) all claims, returns of premium and other
<PAGE> 2
moneys and claims for moneys due and to become due under or in respect of said
insurances, (iii) all other rights of the Assignor under or in respect of said
insurances and (iv) any proceeds of any of the foregoing. The liability of the
Assignor under this Assignment shall be limited by the provisions of Section 2
of the Guarantee.
SECTION 1. Representations, Warranties and Covenants. The Assignor hereby
warrants and represents that each of the Insurances is in full force and effect
and is enforceable in accordance with its terms, and that the Assignor is not in
default thereunder. The Assignor hereby further warrants and represents that it
has not assigned, pledged or in any way created or suffered to be created any
security interest in the whole or any part of the right, title and interest
hereby assigned, except for the assignment to the Assignee. The Assignor hereby
covenants that, without the prior written consent thereto of the Assignee, so
long as this Assignment shall remain in effect, it will not assign or pledge the
whole or any part of the right, title and interest hereby assigned to anyone
other than the Assignee, its successors or assigns, and it will not take or omit
to take any action, the taking or omission of which might result in an
alteration or impairment of said insurances in any material respect, or this
Assignment or of any of the rights created by said insurances or this
Assignment.
The Assignor hereby further covenants and agrees to procure that notice of
this Assignment shall be duly given to all underwriters and that where the
consent of any underwriter is required pursuant to any of the insurances
assigned hereby it shall be obtained and evidence thereof shall be given to the
Assignee, or, in the alternative, that in the case of protection and indemnity
coverage the Assignor shall obtain, with the Assignee's approval, a letter of
undertaking by the underwriters or clubs, and that there shall be duly endorsed
upon all slips, cover notes, policies, certificates of entry or other
instruments issued or to be issued in connection with the insurances assigned
hereby such clauses as to named assured or loss payees as the Assignee may
require or approve. In all cases (except in the case of protection and indemnity
coverage), unless otherwise agreed in writing by the Assignee, such slips, cover
notes, notices, certificates of entry or other instruments shall show the
Assignee as named assured and shall provide that there will be no recourse
against the Assignee for payment of premiums, calls or assessments.
The Assignor agrees that at any time and from time to time, upon the
written request of the Assignee, its successors and assigns, the Assignor will
promptly and duly execute and deliver any and all such further instruments and
documents as the
2
<PAGE> 3
Assignee, its successors and assigns may reasonably request in order to obtain
the full benefits of this Assignment and of the rights and powers herein
granted.
Any payments made pursuant to the terms hereof shall be made to such
account as may, from time to time, be designated by the Assignee.
Section 2. Freedom of Assignee from Obligations. It is hereby expressly
agreed that anything herein contained to the contrary notwithstanding, the
Assignor shall remain liable under said insurances to perform all of the
obligations assumed by it thereunder and the Assignee shall have no obligation
or liability (including, without limitation, any obligation or liability with
respect to the payment of premiums, calls or assessments) under said insurances
by reason of or arising out of this Assignment, nor shall the Assignee be
required or obligated in any manner to perform or fulfill any obligations of the
Assignor under or pursuant to said insurances or to make any payment or to make
any inquiry as to the nature or sufficiency of any payment received by the
Assignee or to present or file any claim, or to take any other action to collect
or enforce the payment of any amounts which may have been assigned to it or to
which it may be entitled hereunder at any time or times.
Section 3. Power of Attorney; Financing Statements. The Assignee, its
successors and assigns, are hereby constituted lawful attorneys, irrevocably,
with full power (in the name of the Assignor or otherwise) to ask, require,
demand, receive, compound and give acquittance for any and all moneys and
claims for moneys due and to become due under or arising out of said
insurances, to endorse any check or other instruments or orders in connection
therewith and to file any claims or take any action or institute any
proceedings which the Assignee may deem to be necessary or advisable in
the premises. Any action or proceeding brought by the Assignee pursuant to
any of the provisions hereof or of said insurances or otherwise, and any
claim made by the Assignee hereunder or under said insurances, may be
compromised, withdrawn or otherwise dealt with by the Assignee without any
notice to, or approval of the Assignor. The Assignor hereby irrevocably
authorizes the Assignee, at the Assignor's expense, to file, at any time and
from time to time, such financing and continuation statements or
papers of similar purpose or effect relating to this Assignment, without the
Assignor's signature, as the Assignee at its option may deem appropriate and
appoints the Assignee as the Assignor's attorney-in-fact to execute any such
statements in the Assignor's name and to perform all other acts which the
Assignee may deem appropriate to perfect and continue the security interests
conferred hereby.
3
<PAGE> 4
SECTION 4. Irrevocable Assignment. The powers and authority granted to
the Assignee herein have been given for a valuable consideration and are hereby
declared to be irrevocable and may not be amended or waived except by an
instrument in writing signed by the party against whom enforcement is sought.
SECTION 5. Conditions of Assignment. Unless and until an Event of
Default shall have occurred and be continuing under the Indenture, the
Assignor shall be entitled to exercise all its rights under said insurances
(subject to the provisions of this Assignment) in all respects as if this
Assignment had not been made.
SECTION 6. Governing Law. This Assignment shall be construed in
accordance with and governed by the laws of the State of New York, United States
of America. The Assignor hereby irrevocably submits itself to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York City and
any appellate court from any thereof, for the purposes of (and solely for the
purposes of) any suit, action or other proceeding arising out of, or relating
to, this Assignment or any of the transactions contemplated hereby, hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard in such New York State or Federal court and hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defense, or otherwise, in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of the above-named courts for any reason whatsoever, that such
suit, action or proceeding is brought in an inconvenient forum, or that the
venue of such suit, action or proceeding is improper, or that this Assignment or
the subject matter hereof may not be enforced in or by such courts. The Assignor
hereby irrevocably appoints Haight, Gardner, Poor & Havens (the "Process
Agent"), with an office on the date hereof at 195 Broadway, New York, New York
10007, United States, as its agent to receive on behalf of the Assignor and its
property service of copies of the summons and complaint and any other process
which may be served in any such suit, action or proceeding and in any suit,
action or proceeding arising out of or relating to any other Security Document
to which the Assignor is a party. Such service may be made by mailing or
delivering a copy of such process to the Assignor in care of the Process Agent
at the Process Agent's above address, and the Assignor hereby irrevocably
authorizes and directs the Process Agent to accept such service on its behalf.
As an alternative method of service, the Assignor also irrevocably consents to
the service of any and all process in any such suit, action or proceeding by the
mailing of copies of such process to the Assignor at its address specified in
the Indenture. The Assignor agrees that a final judgment in any such action,
suit or proceeding shall be conclusive and may be enforced in other
4
<PAGE> 5
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this paragraph shall affect the right of the Assignee to serve legal
process in any other manner permitted by law or affect the right of the Assignee
to bring any action or proceeding against the Assignor or its property in the
courts of any other jurisdiction.
SECTION 7. Notices. All notices or other communications required or
permitted to be made or given hereunder shall be made in writing, in English,
and personally delivered to an officer or other responsible employee of the
addressee, or sent, by registered air mail, return receipt requested, postage
prepaid, telex, facsimile transmission, or other direct written electronic means
to the applicable address set opposite such party's name below, or to such other
address as any party hereto may from time to time designate to the others in
such manner:
If to the Assignee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Trust Administration
Telex: 620439
ANSWER BACK US TRUST
Facsimile: (212) 852-1625
If to the Assignor:
**A**
c/o Teekay Shipping Corporation
Tradewinds Building
Sixth Floor
Bay Street
P.O. Box SS-6293
Nassau, Commonwealth of the Bahamas
Attention: Managing Director
Telex: 382-20375
ANSWER BACK AB: OCEAN
Facsimile: (809) 328-7330
Any communication personally delivered shall be deemed to have been validly
and effectively given or delivered on the date of such delivery. Any
communication transmitted by facsimile, telex or other direct written electronic
means, or by registered air mail, shall be deemed to have been validly and
effectively given or delivered on the day when received.
5
<PAGE> 6
SECTION 8. Headings. The division of this Assignment into sections and
the insertion of headings are for convenience of reference only and shall not
affect the interpretation or construction of this Assignment.
SECTION 9. Termination. This Assignment shall terminate, and be of no
further force and effect, upon (i) the payment in full of all of the Obligations
and the performance and observance of all agreements, covenants and provisions
contained in the Guarantee and the Mortgage, and of the Company and the Assignor
under the Indenture, and the absence of any further actual or contingent
liability in respect of any thereof, (ii) the occurrence of the Termination and
Release or (iii) the substitution of a Qualified Substitute Vessel for the
Vessel under the Indenture.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
6
<PAGE> 7
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed this day of , .
**A**
By:
---------------------------------
Name:
Title:
The terms and conditions of
this Assignment are hereby
ACCEPTED BY:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
---------------------------------
Name:
Title:
7
<PAGE> 8
NOTICE OF ASSIGNMENT
The Nippon Fire & Marine Insurance Co., Ltd.
The Britannia Steam Ship Insurance Association Limited
Miller Marine Limited
**A** (the "Owner"), owner of the [Liberian] [Bahamian] documented vessel
**B**, Official No. **C** (the "Vessel"), HEREBY GIVES NOTICE that by an
Assignment dated January , 1996 and made by the Owner to UNITED STATES TRUST
COMPANY OF NEW YORK (the "Assignee"), a New York corporation, as Trustee
pursuant to, and for the benefit of the Holders of the Securities (as defined in
the Indenture hereinafter defined) issued under, that certain Indenture dated as
of January , 1996, among Teekay Shipping Corporation (the "Company"), certain
subsidiaries of the Company and the Trustee (the "Indenture"), the Owner
assigned to the Assignee all of the Owner's right, title and interest in and to
all insurances and the benefit of all insurances, heretofore, now or hereafter
taken out in respect of the Vessel. This Notice and the attached Loss Payable
Clauses are to be endorsed on all policies and certificates of entry evidencing
such insurances.
**A**
By:
---------------------------------
Name:
Title:
<PAGE> 9
LOSS PAYABLE CLAUSES
HULL AND WAR RISKS
Loss, if any, payable to UNITED STATES TRUST COMPANY OF NEW YORK (the
"Mortgagee"), a NEW YORK CORPORATION, in its capacity as Trustee pursuant to,
and for the benefit of the Holders of the Securities (as defined in the
Indenture hereinafter defined) issued under, that certain Indenture dated as of
January , 1996, among Teekay Shipping Corporation (the "Company"), certain
subsidiaries of the Company and the Trustee (the "Indenture"), for distribution
by it to the Mortgagee and then to **A** (the "Owner) as their respective
interests may appear, or order, except that, unless Underwriters have been
otherwise instructed by notice in writing from the Mortgagee in the case of any
loss involving any damage to the Vessel or liability of the Vessel, the
Underwriters may pay directly for the repair, salvage, liability or other
charges involved or, if the Owner shall have first fully repaired the damage and
paid the cost thereof, or discharged the liability or paid all of the salvage or
other charges, then the Underwriters may pay the Owner as reimbursement
therefor, provided, however, that if such damage involves a loss in excess of
U.S. $1,000,000 or its equivalent the Underwriters shall not make such payment
without first obtaining the written consent thereto of the Mortgagee.
In the event of an actual or constructive total loss or a compromised or
arranged total loss or requisition of title, all insurance payments therefor
shall be paid to the Mortgagee, for distribution by it in accordance with the
terms of the Mortgage.
<PAGE> 10
PROTECTION AND INDEMNITY
Payment of any recovery the Owner is entitled to receive from the funds of
the Association in respect of any liability, costs or expenses incurred by him
shall be made to the Owner or to his order unless and until the Association
receives notice from United States Trust Company of New York, 114 West 47th
Street, New York, NY 10036-1532, USA (hereinafter called the Mortgagee) that the
Owner is in default under the Mortgage, in which event all such recoveries shall
thereafter be paid to the Mortgagee or to its order.
The Association undertakes:
(a) to inform the Mortgagee if notice is given to the Owner of the
above ship under Rule 9(2)(i) or 9(3) that its insurance in the Association
in respect of such ship is to cease; and
(b) to give the Mortgagee 14 days' notice of the Association's
intention to cancel the insurance of the Owner by reason of its failure to
pay when due and demanded any sum due from it to the Association.
<PAGE> 1
EXHIBIT 4.8
[FORM OF PLEDGE AGREEMENT]
PLEDGE AGREEMENT AND IRREVOCABLE PROXY, dated January , 1996, made by
Teekay Shipping Corporation, a Liberian corporation (the "Pledgor"), and United
States Trust Company of New York (the "Pledgee"), a New York corporation, in its
capacity as Trustee (the "Trustee") pursuant to, and for the benefit of the
Holders of the Securities (as defined in the Indenture hereinafter defined)
issued under, that certain Indenture dated as of the date hereof, among the
Pledgor, certain subsidiaries of the Pledgor and the Trustee (the "Indenture";
terms used herein and not otherwise defined herein being used herein as defined
in the Indenture).
PRELIMINARY STATEMENTS:
(1) The Pledgor is the owner of all of the shares (the "Pledged Shares") of
stock described on Schedule I hereto and issued by the respective issuers named
on such Schedule I.
(2) The Pledgor and the Trustee have entered into the Indenture to secure,
among other things, payment of the principal of (and premium, if any) and
interest on all the Securities issued and to be issued under the Indenture.
(3) Securities, in an aggregate principal amount of $225,000,000, have been
authorized under the Indenture and designated the % First Preferred Ship
Mortgage Notes due 2008, the form of which is included in the Indenture, which
Securities were originally executed, authenticated and delivered on the date
hereof.
(4) The Pledgor, in order to secure the payment of the principal of (and
premium, if any) and interest on the Securities and the payment of all sums of
money from time to time payable by it under the Indenture, whether for
principal, premium (if any), interest, fees, expenses or otherwise, the payment
of all sums of money payable by the Guarantors under the Guarantor Security
Documents (collectively, the "Obligations") and to secure as well the
performance and observance of all agreements, covenants and provisions by the
Company and the Guarantors contained in this Agreement, the Indenture and the
Security Documents, has duly authorized the execution and delivery of this
Agreement.
NOW, THEREFORE, to secure the prompt payment of the Obligations and the
performance and observance of all agreements, covenants and provisions contained
in this Agreement and the Indenture, the Pledgor hereby agrees as follows:
<PAGE> 2
SECTION 1. Pledge. The Pledgor hereby pledges to the Pledgee, and grants
to the Pledgee a security interest in, the following (the "Pledged Collateral"):
(i) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; and
(ii) all additional shares of stock of any of the issuers of the
Pledged Shares named on Schedule I hereto, which may from time to time be
acquired by the Pledgor in any manner, and the certificates representing
such additional shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such additional shares.
Promptly upon receipt of any additional shares referred to in paragraph (ii)
above, the Pledgor will deliver such shares to the Pledgee in pledge hereunder.
SECTION 2. Security for Obligations. This Agreement secures the payment
of all the Obligations and the performance and observance of all agreements,
covenants and provisions contained in this Agreement and the Indenture.
SECTION 3. Delivery of Pledged Collateral. The Pledgor herewith delivers
to the Pledgee the Pledged Shares, together with fully completed stock powers
signed by the Pledgor duly evidencing the transfer of the Pledged Shares to, and
in the name of, the Pledgee or of a nominee for, and chosen by, the Pledgee. The
Pledgor agrees to take the same action with respect to any further stock
constituting Pledged Collateral forthwith upon the receipt thereof by the
Pledgor.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is a corporation duly incorporated, validly existing
and in good standing under the laws of the Republic of Liberia. The
execution, delivery and performance by the Pledgor of this Agreement (i)
are within the Pledgor's corporate powers and have been duly authorized by
all necessary corporate action, (ii) do not contravene the Pledgor's
charter or by-laws or any law of any country or any contractual restriction
binding on or affecting the Pledgor, (iii) do not require any authorization
or approval (including exchange control approval) or other action by, or
2
<PAGE> 3
any notice to or filing with, any governmental authority in any country and
(iv) except for the Liens created by the Security Documents, do not result
in or require the creation or imposition of any Lien upon or with respect
to any of the properties of the Pledgor or any Guarantor. This Agreement is
the legal, valid and biding obligation of the Pledgor enforceable against
the Pledgor in accordance with its terms, except as (i) the enforceability
thereof may be limited by applicable bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws affecting creditors'
rights generally and (ii) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited to equitable principles
of general applicability (regardless of whether in a proceeding in equity
or at law).
(b) There is no tax, levy, impost, deduction, charge or withholding
imposed by the Republic of Liberia or any political subdivision or taxing
authority thereof either (i) on or by virtue of the execution, delivery or
performance of this Agreement or any other document to be furnished
hereunder or (ii) on any payment to be made by the Pledgor pursuant to this
Agreement.
(c) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable; the Pledgor is the legal and
beneficial owner of the Pledged Collateral free and clear of any lien,
security interest, option or other charge or encumbrance or preferential
arrangement except for the security interest created by this Agreement; the
Pledged Shares have been duly registered on the books of the respective
issuers thereof named on Schedule I hereto in the name of a nominee of the
Pledgee, and the pledge of the Pledged Shares pursuant to this Agreement
creates a valid and duly perfected first priority security interest in the
Pledged Collateral, securing the payment of the Obligations and performance
and observance of all agreements, covenants and provisions contained in
this Agreement and the Indenture.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Pledgee may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Pledgee to exercise and enforce its rights
(including, without limitation, the registration of the Pledged Collateral in
the
3
<PAGE> 4
name of the Pledgee or its nominee) and remedies hereunder with respect to any
Pledged Collateral.
SECTION 6. Voting Rights; Dividends; Etc.
(a) Irrevocable Proxy. The Pledgor hereby agrees to grant and does
hereby grant, to the Pledgee for the benefit of the Pledgee, as such grant
shall be evidenced by Schedule II hereto, an irrevocable proxy to (i) vote
or cause to be voted any and all of the Pledged Shares and (ii) give or
cause to be given consents, waivers and ratifications in respect thereof.
This proxy shall be valid so long as the Termination and Release has not
occurred under the Indenture and any amounts are due and payable under the
Indenture or any Security Document. The Pledgee hereby agrees that until
and unless an Event of Default (as defined in the Indenture) shall have
occurred and be continuing the Pledgee shall not exercise this proxy and
the Pledgor shall be entitled to (i) vote or cause to be voted any and all
the Pledged Shares and (ii) give, or cause to be given, consents, waiver
and ratifications in respect thereof, provided, however, that no vote shall
be cast or consent, waiver or ratification given or taken, which would be
inconsistent with any provisions of the Indenture or any Security Document
or which would have a material adverse effect on the value of the Pledged
Collateral or any part thereof. All such rights of the Pledgor to vote, or
cause to be voted and to give, or cause to be given, consent, waivers and
ratifications shall cease automatically in case an Event of Default shall
occur and so long as it is continuing. The Pledgor further agrees to
execute the irrevocable proxy attached hereto in Schedule II.
(b) So long, but only so long, as no Event of Default (as defined in
the Indenture) shall have occurred and be continuing, the Pledgee shall
deliver, or permit to be delivered, to the Pledgor any and all dividends
paid in respect of the Pledged Collateral, provided, however, that any and
all
(A) dividends paid or payable other than in cash in respect of, and
instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in-surplus, and
4
<PAGE> 5
(C) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Pledged Collateral,
shall be, and shall be forthwith delivered to the Pledgee to hold as,
Pledged Collateral and shall, if received by the Pledgor, be received in
trust for the benefit of the Pledgee, be segregated from the other property
or funds of the Pledgor, and be forthwith delivered to the Pledgee as
Pledged Collateral in the same form as so received (with any necessary
indorsement), to be applied as provided in and pursuant to this Agreement
and the Indenture. All dividends which are received by the Pledgor contrary
to the provisions of this Section 6(b) shall be received in trust for the
benefit of the Pledgee, shall be segregated from other funds of the Pledgor
and shall be forthwith paid over to the Pledgee as Pledged Collateral in
the same form as so received (with any necessary indorsement).
SECTION 7. Transfers and Other Liens; Additional Shares.
(a) The Pledgor agrees that it will not (i) sell or otherwise dispose
of, or grant any option with respect to, any of the Pledged Collateral or
(ii) create or permit to exist any lien, security interest, or other charge
or encumbrance or preferential arrangement upon or with respect to any of
the Pledged Collateral, except for the security interests under this
Agreement and except as otherwise permitted by the Indenture.
(b) The Pledgor agrees that it will cause each of the issuers of
Pledged Shares named on Schedule I hereto not to issue any stock or other
securities in addition to or in substitution for the Pledged Shares issued
by it without the Pledgee's prior written consent.
SECTION 8. Pledgee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Pledgee may itself perform, or cause performance
of, such agreement, and the expenses of the Pledgee incurred in connection
therewith shall be payable by the Pledgor under Section 11.
SECTION 9. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Pledgee
5
<PAGE> 6
has or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
SECTION 10. Remedies upon Default If any Event of Default shall have
occurred and be continuing:
(a) The Pledgee may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein, in the Indenture
or otherwise available to it, all the rights and remedies of a secured
party on default under the Uniform Commercial Code (the "Code") in effect
in the Sate of New York, U.S.A., at that time, and the Pledgee may also,
without notice except as specified below, sell the Pledged Collateral or
any part thereof in one or more parcels at public or private sale, at any
exchange, broker's board or at any of the Pledgee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as
the Pledgee may deem commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten days'
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash held by the Pledgee as Pledged Collateral and all cash
proceeds received by the Pledgee in respect of any sale of, collection
from, or other realization upon all or any part of the Pledged Collateral
may, in the discretion of the Pledgee, be held by the Pledgee as collateral
for, and/or then or at any time thereafter applied (after payment of any
amounts payable to the Pledgee pursuant to Section 11) in whole or in part
by the Pledgee against, all or any part of the Obligations in such order as
the Pledgee shall elect and as provided in the Indenture. Any surplus of
such cash or cash proceeds held by the Pledgee and remaining after payment
in full of all the Obligations and performance and observance of all
agreements, covenants and provisions contained in this Agreement and the
Indenture shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 11. Expenses. The Pledgor will upon demand pay to the Pledgee the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of
6
<PAGE> 7
any experts and agents, which the Pledgee may reasonably incur in connection
with (i) the administration of this Agreement, (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Pledgee hereunder or (iv) the failure by the Pledgor to perform or observe
any of the provisions hereof.
SECTION 12. Security Interest Absolute. All rights of the Pledgee and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Indenture or any Security or any other agreement or
instrument delivered pursuant or relating thereto, (ii) any amendment or waiver
of or any consent to any departure from the Indenture or any Security or any
other agreement or instrument delivered pursuant or relating thereto, or (iii)
any other circumstance which might otherwise constitute a defense available to,
or a discharge of, the Pledgor in respect of the Obligations or this Agreement.
SECTION 13. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the
Pledgee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 14. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telexed or telephonic
telecopier communication) and, if to the Pledgor, mailed, telexed or
telephonically telecopied or delivered to it, addressed to it at its address
specified in the Indenture, if to the Pledgee, mailed, telexed, telephonically
telecopied or delivered to it, addressed to it at its address specified in the
Indenture, or as to either party at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices and other communications pursuant to
this Agreement shall be effective (i) if sent by telex, cable or telephonic
telecopier, upon transmission to the intended addressee, whether or not receipt
is acknowledged, and (ii) if delivered by hand (including by independent courier
service) upon delivery to the addressee and (iii) if sent by first-class mail,
postage prepaid, on the fifth (5th) calendar day after the date of mailing.
SECTION 15. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect
7
<PAGE> 8
until either (1) the occurrence of the Termination and Release under the
Indenture or (2) payment in full of the Obligations and performance and
observance of all agreements, covenants and provisions contained in this
Agreement and the Indenture, (ii) be binding upon the Pledgor, its successors
and assigns, and (iii) inure to the benefit of the Pledgee and its successors,
transferees and assigns. Upon (i) the payment in full of the Obligations and
performance and observance of all agreements, covenants and provisions contained
in this Agreement and the Indenture or (ii) the occurrence of the Termination
and Release thereunder, the Pledgor shall be entitled to the return, upon its
request and at its expense, of such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
SECTION 16. Governing Law and Jurisdiction; Terms.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, United States of America, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by
the laws of a jurisdiction other than the Sate of New York.
(b) The Pledgor irrevocably submits itself to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York
City and any appellate court from any thereof, for the purposes of (and
solely for the purposes of) any suit, action or other proceeding arising
out of, or relating to, this Agreement or any of the transactions
contemplated hereby, hereby irrevocably agrees that all claims in respect
of such suit, action or proceeding may be heard in such New York State or
Federal court and hereby (to the fullest extent it may effectively do so)
irrevocably waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of the above-named
courts for any reason whatsoever, that such suit, action or proceeding is
brought in an inconvenient forum, or that the venue of such suit, action or
proceeding is improper, or that this Agreement or the subject matter hereof
may not be enforced in or by such courts. The Pledgor hereby irrevocably
appoints Haight, Gardner, Poor & Havens (the "Process Agent"), with an
office on the date hereof at 195 Broadway, New York, New York 10007, United
States, as its agent to receive on behalf of the Pledgor and its property
service of copies of the summons and complaint and any other process which
may be served in any such suit, action or proceeding and in any suit,
action or proceeding arising out of or
8
<PAGE> 9
relating to any other Security Document to which the Pledgor is a party.
Such service may be made by mailing or delivering a copy of such process to
the Pledgor in care of the Process Agent at the Process Agent's above
address, and the Pledgor hereby irrevocably authorizes and directs the
Process Agent to accept such service on its behalf. As an alternative
method of service, the Pledgor also irrevocably consents to the service of
any and all process in any such suit, action or proceeding by the mailing
of copies of such process to the Pledgor at its address specified in the
Indenture. The Pledgor agrees that a final judgment in any such action,
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Section 16 shall affect the right of the Pledgee to
serve legal process in any other manner permitted by law or affect the
right of the Pledgee to bring any action or proceeding against the Pledgor
or its property in the courts of any other jurisdiction.
(c) Unless otherwise defined herein or in the Indenture, terms defined
in Article 9 of the Code in the State of New York are used herein as
therein defined.
[The remainder of this page has been left intentionally blank.]
9
<PAGE> 10
IN WITNESS WHEREOF each of the parties hereto has caused this Agreement to
be duly executed and delivered by its officer or attorney-in-fact thereunto duly
authorized as of the date first above written.
TEEKAY SHIPPING CORPORATION
By
----------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK,
as Trustee
By
----------------------------------
Name:
Title:
10
<PAGE> 11
SCHEDULE I
ATTACHED TO AND FORMING A PART OF THAT CERTAIN
PLEDGE AGREEMENT AND IRREVOCABLE PROXY, DATED JANUARY , 1996,
BY TEEKAY SHIPPING CORPORATION,
AS PLEDGOR, TO UNITED STATES TRUST COMPANY OF NEW YORK
AS TRUSTEE, AS PLEDGEE
<TABLE>
<CAPTION>
STOCK
JURISD. OF CLASS OF CERTIFICATE NUMBER OF
STOCK ISSUER INCORP. STOCK NO(S). PAR VALUE SHARES
- ----- ------------ ---------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Andros................ Spirit Inc. Bahamas Common 4 U.S.$1.00 5,000
Exuma................. Spirit Inc. Bahamas Common 4 U.S.$1.00 5,000
Nassau................ Spirit Inc. Bahamas Common 4 U.S.$1.00 5,000
Senang................ Spirit Inc. Bahamas Common 4 U.S.$1.00 5,000
VSSI.................. Appian Inc. Liberia Common 2 None 500
VSSI.................. Atlantic Inc. Liberia Common 2 None 500
VSSI.................. Oceans Inc. Liberia Common 2 None 500
</TABLE>
<PAGE> 12
SCHEDULE II
IRREVOCABLE PROXY
The Undersigned hereby constitutes and appoints United States Trust Company
of New York, in its capacity as Pledgee under the Pledge Agreement hereinafter
referred to, its attorney and proxy to appear, vote and otherwise act, all in
the name, place and stead of the Undersigned in the same manner that the
Undersigned might do and with the same powers, with respect to all of the shares
of stock in each of Andros Spirit Inc., Exuma Spirit Inc., Nassau Spirit Inc.,
Senang Spirit Inc., VSSI Appian Inc., VSSI Atlantic Inc. and VSSI Oceans Inc.
(each of them being a "Company"), owned or hereafter acquired by the
Undersigned, at any and all meetings of shareholders of any Company, on any and
all matters, questions and resolutions that may come before such meetings,
including, but not limited to, the election of directors, or at any adjournment
or adjournments thereof, or to consent on behalf of the undersigned in the
absence of a meeting to anything that might have been voted on at such a
meeting.
This power of attorney is coupled with an interest, is given in connection
with a pledge pursuant to a Pledge Agreement dated January , 1996, and is
irrevocable. It shall continue in effect so long as the debt for which the
pledge is granted as security remains unpaid and the Termination and Release (as
defined in the Indenture referred to in the Pledge Agreement) has not occurred.
The attorney and proxy named herein is hereby given full power of
substitution and revocation and may act through such agents, nominees or
substitute attorneys as it may from time to time appoint.
The powers of such attorney and proxy shall include (without limiting its
general powers hereunder) the power to receive and waive any notice of any
meeting on behalf of the Undersigned.
TEEKAY SHIPPING CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.9
[NAME OF SUBSIDIARY GUARANTOR]
GUARANTEE
GUARANTEE, dated as of January 1996, made by [NAME OF SUBSIDIARY
GUARANTOR], a [Liberian] [Bahamian] corporation (the "Guarantor"), in favor of
United States Trust Company of New York, a bank and trust company organized
under the New York Banking Law (the "Trustee"), as Trustee pursuant to, and for
the benefit of the Holders of the Securities (as defined in the Indenture
hereinafter defined) issued under, that certain Indenture, dated as of the date
hereof, among Teekay Shipping Corporation, a Liberian Corporation (the
"Company"), certain of the Company's subsidiaries named therein (the
"Guarantors") and the Trustee (the "Indenture"; terms used herein and not
otherwise defined herein being used herein as defined in the Indenture).
The Company, the Guarantors and the Trustee have entered into the Indenture
to secure, among other things, payment of the principal of (and premium, if any)
and interest on all the Securities issued and to be issued under the Indenture.
Securities, in an aggregate principal amount of $225,000,000, have been
authorized under the Indenture and designated the % First Preferred Ship
Mortgage Notes, the form of which is included in the Indenture, which Securities
are originally being executed, authenticated and delivered on the date hereof.
The Guarantor, a wholly owned subsidiary of the Company, in order to guarantee
the payment of the principal of (and premium, if any) and interest on the
Securities, and the payment of all fees, expenses and other sums of money from
time to time payable by the Company under the Indenture, and the payment of all
sums of money payable by the other Guarantors under their respective Subsidiary
Guarantees and Guarantor Security Documents (collectively, the "Obligations"),
and to guarantee as well the performance and observance of all agreements,
covenants and provisions contained in this Guarantee and of the Company and the
Guarantors in the Indenture and the Security Documents, has duly authorized the
execution and delivery of this Guarantee.
In order to induce the Trustee to enter into the Indenture and the
transactions contemplated thereby and the Holders to accept the Securities, the
Guarantor hereby agrees as follows:
SECTION 1. Guarantee. The Guarantor hereby unconditionally guarantees the
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of the Obligations and performance and observance of all agreements,
covenants and provisions contained in this Guarantee and the Indenture, and
agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Trustee in enforcing any rights under this Guarantee
or the Indenture. Without limiting the generality of the
<PAGE> 2
foregoing, the Guarantor's liability shall extend to all amounts which
constitute part of the Obligations and would be owed by the Company under the
Indenture but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company.
SECTION 2. Guarantee Absolute. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with their respective terms,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Trustee with
respect thereto. The obligations of the Guarantor under this Guarantee are
independent of the Obligations, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Guarantee, irrespective of
whether any action is brought against the Company or whether the Company is
joined in any such action or actions. The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any Obligation or any
other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Indenture or any Security or
any other agreement or instrument delivered pursuant or relating thereto,
including, without limitation, any increase in the Obligations resulting
from the extension of additional credit to the Company or any of its
subsidiaries or otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the Obligations;
(iv) any manner of application of collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other disposition
of any collateral for all or any of the Obligations or any other assets of
the Company or any of its subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of the Company or any of its subsidiaries; or
(vi) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Company or a Guarantor;
provided, however that, notwithstanding the foregoing, the liability of the
Guarantor under this Guarantee shall not exceed the greatest of (a) 95% of the
Adjusted Net Assets of the
2
<PAGE> 3
Guarantor on the date of delivery hereof, (b) 95% of the Adjusted Net Assets of
the Guarantor on the date of any payment hereunder and (c) the total amount of
the proceeds received by the Guarantor from the Company from the sale of the
Securities. "Adjusted Net Assets" of the Guarantor at any date means the lesser
of (i) the amount by which the fair value of the property of the Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities, but excluding liabilities under this Guarantee, of the
Guarantor at such date and (ii) the amount by which the present fair saleable
value of the assets of the Guarantor at such date exceeds the amount that will
be required to pay the probable liability of the Guarantor on its debts,
excluding debt in respect of this Guarantee, as they become absolute and
matured.
This Guarantee shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Obligations is rescinded or
must otherwise be returned upon the insolvency, bankruptcy or reorganization of
the Company or otherwise, all as though such payment had not been made.
SECTION 3. Waiver. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
and this Guarantee and any requirement that the Trustee protect, secure, perfect
or insure any security interest or lien or any property subject thereto or
exhaust any right or take any action against the Company or any other person or
entity or any collateral.
SECTION 4. Subrogation. The Guarantor hereby irrevocably waives any claim
or other rights that it may now or hereafter acquire against the Company that
arise from the existence, payment, performance or enforcement of the Guarantor's
Obligations under this Guarantee or the Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the
Trustee against the Company, any other Guarantor, or a Vessel, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Company or any other Guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right. If any amount shall be paid to the Guarantor in
violation of the preceding sentence at any time prior to the later of the
payment in full of the Obligations and all other amounts payable under this
Guarantee and the Stated Maturity, such amount shall be held in trust for the
benefit of the Trustee and shall forthwith be paid to the Trustee to be credited
and applied to the Obligations and other amounts payable under this Guarantee,
whether matured or unmatured, in accordance with the terms of the Indenture, or
to be held as collateral for any Obligations or other amounts payable under this
Guarantee thereafter arising. The Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by the
Indenture and that the waiver set forth in this subsection is knowingly made in
contemplation of such benefits.
3
<PAGE> 4
SECTION 5. Taxes. In the event that the Guarantor is required by any
applicable law to make, with respect to any payment to be made pursuant to this
Guarantee, any deduction or withholding for or on account of any taxes,
assessments or other governmental charges imposed on such payment by any
governmental or taxing authority (other than the United States of America or any
political subdivision or taxing authority thereof or therein, including the
Commonwealth of Puerto Rico, any territory or possession of the United States of
America or other area subject to its jurisdiction), the Guarantor shall pay such
additional amount as may be necessary in order that the net amount received by
the Trustee in respect of such payment will be not less than the amount of the
payment the Trustee would have received had no deduction or withholding been
required; provided, however, that the Guarantor shall not be required to pay any
additional amount on account of a tax, assessment or other governmental charge
imposed by reason of any present or former connection between a Holder of
Securities (or between a fiduciary, settlor, beneficiary, member or shareholder
of, or possessor of a power over, such Holder, if such Holder is an estate,
trust, partnership or corporation) and the governmental or taxing authority,
including without limitation such Holder (or a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such Holder) having been
a citizen or resident thereof or treated as a resident thereof or being or
having been engaged in a trade or business therein or having or having had a
permanent establishment therein.
SECTION 6. Consent to Jurisdiction. (a) The Guarantor hereby irrevocably
submits to the non-exclusive jurisdiction of any New York State or Federal court
sitting in New York City and any appellate court from any thereof, for the
purposes of (and solely for the purposes of) any suit, action or other
proceeding arising out of or relating to this Guarantee or any of the
transactions contemplated hereby, and the Guarantor hereby irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in such New York State court or in such Federal court. The Guarantor
hereby (to the fullest extent it may effectively do so) irrevocably waives and
agrees not to assert, by way of motion, as a defense, or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason whatsoever, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper, or that this Guarantee or the
subject matter hereof may not be enforced in such courts. The Guarantor hereby
irrevocably appoints Haight Gardner, Poor & Havens (the "Process Agent"), with
an office on the date hereof at 195 Broadway, New York, New York 10007, United
States, as its agent to receive on behalf of the Guarantor and its property
service of copies of the summons and complaint and any other process which may
be served in any such suit, action or proceeding and in any suit, action or
proceeding arising out of or relating to any other Security Document to which
the Guarantor is a party. Such service may be made by mailing or delivering a
copy of such process to the Guarantor in care of the Process Agent at the
Process Agent's above address, and the Guarantor hereby irrevocably authorizes
and directs the Process Agent to accept such service on its behalf. As an
alternative method of service, the Guarantor also irrevocably
4
<PAGE> 5
consents to the service of any and all process in any such suit, action or
proceeding by the mailing of copies of such process to the Guarantor at its
address specified in Section 9. The Guarantor agrees that a final judgment in
any such suit, action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(b) Nothing in this Section shall affect the right of the Trustee to serve
legal process in any other manner permitted by law or affect the right of the
Trustee to bring any action or proceeding against the Guarantor or its property
in the courts of any other jurisdiction.
SECTION 7. Representations and Warranties. The Guarantor hereby
represents and warrants that (a) the execution, delivery and performance of this
Guarantee are within its corporate powers, have been duly authorized by all
necessary action, including, without limitation, authorization by its sole
shareholder, and do not contravene any law of any country or any contractual
restriction binding on or affecting the Guarantor; (b) no authorization or
approval (including exchange control approval) or other action by, and no notice
to or filing with, any governmental authority or regulatory body in any country
is required for the due execution, delivery and performance by the Guarantor of
this Guarantee; (c) this Guarantee is a legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its terms;
(d) there is no pending or threatened action or proceeding affecting the
Guarantor or any of its subsidiaries before any court, governmental agency or
arbitrator in any country, which may materially adversely affect the financial
condition or operations of the Guarantor or any such subsidiary; and (e) there
is no tax, levy, impost, deduction, charge or withholding imposed by the
[Republic of Liberia] [Commonwealth of the Bahamas] or any political subdivision
or taxing authority thereof either (i) on or by virtue of the execution or
delivery of this Guarantee or (ii) on any payment which may be made by the
Guarantor hereunder.
SECTION 8. Amendments, Etc. No amendment or waiver of any provision of
this Guarantee, and no consent to any departure by the Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 9. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telephonic telecopier,
telex or cable communication) and mailed, telephonically telecopied, telexed,
cabled or delivered to it, if to the Guarantor, at its address specified in the
Indenture, and if to the Trustee, at its address specified in the Indenture, or,
as to either party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and other
5
<PAGE> 6
communications pursuant to this Guarantee shall be effective (i) if sent by
telex, cable or telephonic telecopier, upon transmission to the intended
addressee, whether or not receipt is acknowledged, and (ii) if delivered by hand
(including by independent courier service) upon delivery to the addresses and
(iii) if sent by first-class mail, postage prepaid, on the fifth (5th) calendar
day after the date of mailing.
SECTION 10. No Waiver; Remedies. No failure on the part of the Trustee to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 11. Continuing Guarantee; Assignments. This Guarantee is a
continuing guarantee and shall (i) remain in full force and effect until (x) the
payment in full of the Obligations and all other amounts payable under this
Guarantee or (y) the Termination and Release shall have occurred, (ii) be
binding upon the Guarantor, it successors and assigns, and (iii) inure to the
benefit of, and be enforceable by, the Trustee and its successors, transferees
and assigns.
SECTION 12. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA.
[The remainder of this page has been left intentionally blank.]
6
<PAGE> 7
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[NAME OF SUBSIDIARY GUARANTOR]
By:
---------------------------------
Name:
Title:
7
<PAGE> 1
EXHIBIT 4.10
[FORM OF ASSIGNMENT OF FREIGHTS AND HIRES]
**A**
**B**
ASSIGNMENT OF FREIGHTS AND HIRES
The undersigned, **A**, a corporation organized and existing under the
laws of [the Republic of Liberia] [the Commonwealth of the Bahamas] (the
"Assignor"), in consideration of One Dollar ($1) lawful money of the United
States of America, and other good and valuable consideration, the receipt of
which is hereby acknowledged, has sold, assigned, transferred and set over and
by this instrument does sell, assign, transfer and set over unto UNITED STATES
TRUST COMPANY OF NEW YORK (the "Assignee"), a New York corporation, as Trustee
pursuant to, and for the benefit of the Holders of the Securities (as defined
in the Indenture hereinafter defined) issued under, that certain Indenture
dated as of the date hereof among Teekay Shipping Corporation (the "Company"),
certain subsidiaries of the Company and the Trustee (the "Indenture"; terms
used herein and not otherwise defined shall be used herein as defined in the
Indenture), and unto the Assignee's successors and assigns, to its and its
successors' and assigns' own proper use and benefit and does hereby grant to
the Assignee a security interest in all the right, title, interest, claim and
demand of the Assignor in and to (i) all freights, hire and other moneys earned
and to be earned, due or to become due, or paid or payable to, or for the
account of, the Assignor, of whatsoever nature, arising out of or as a result
of the use, operation or chartering by the Assignor or its agents of the
[Liberian] [Bahamian] documented vessel **B**, Official No. **C** (the
"Vessel"), including, without limitation, all rights arising out of the owner's
lien on cargoes and subfreights thereunder, (ii) all moneys and claims for
moneys due and to become due to the Assignor, and all claims for damages,
arising out of the breach of any and all present and future charter parties,
bills of lading, contracts and other engagements of affreightment or for the
carriage or transportation of cargo, and operations of every kind whatsoever of
the Vessel and in and to any and all claims and causes of action for money,
loss or damages that may accrue or belong to the Assignor, its successors or
assigns, arising out of or in any way connected with the present or future use,
operation or chartering of the Vessel or arising out of or in any way
<PAGE> 2
connected with any and all present and future requisitions, charter parties,
bills of lading, contracts and other engagements of affreightment or for the
carriage or transportation of cargo, and other operations of the Vessel, (iii)
all moneys and claims due and to become due to the Assignor, and all claims for
damages and all insurances and other proceeds, in respect of the actual or
constructive total loss of or requisition of use of or title to the Vessel, and
(iv) any proceeds of any of the foregoing and all interest and earnings from
the investment of any of the foregoing and the proceeds thereof. The liability
of the Assignor under this Assignment shall be limited by the provisions of
Section 2 of the Guarantee.
Section 1. Recital. This Assignment is given as security for all of the
obligations of the Assignor under its Guarantee dated the date hereof (the
"Guarantee"), the payment of the principal of (and premium, if any) and interest
on the Securities, the payment of all other sums of money payable by the Company
under the Indenture, the payment of all other sums of money payable by the
Shipowner under this Assignment and the other Guarantor Security Documents to
which it is a party, and the payment of all sums payable by the other Guarantors
under their respective Subsidiary Guarantees and Guarantor Security Documents
(collectively, the "Obligations"), and to secure as well the performance and
observance of all agreements, covenants and provisions contained in this
Assignment, and of the Company and the Guarantors in the Indenture and the
Security Documents.
Section 2. Representations and Warranties. The Assignor hereby represents
and warrants to the Assignee, as an inducement to the Assignee to accept this
Assignment, that neither the whole nor any part of the right, title and interest
hereby assigned is the subject of any present assignment, security interest or
pledge other than any assignments for the benefit of the Assignee.
Section 3. Covenants. The Assignor hereby covenants to the Assignee that:
(a) If an Event of Default has occurred and is continuing and the
Assignee has given the Assignor written notice thereof, and without
derogation of the rights of the Assignee under Section 5 hereof to issue
instructions to the charterers and other obligors directly, the Assignor
shall specifically authorize and direct each charterer or other obligor to
make payment of all of the freights, hire and other moneys hereby assigned
directly to the Cash Collateral Account in accordance with the Cash
Collateral Account Agreement, and shall deliver to the Assignee the written
acknowledgment of such charterer or other obligor of such instructions.
Notwithstanding anything to
2
<PAGE> 3
the contrary, the Assignor and the Assignee hereby agree that so long
as no Event of Default shall have occurred and be continuing, the
Assignor shall be entitled to receive and retain any and all moneys
otherwise assigned hereunder.
(b) The Assignor shall notify the Assignee promptly of any and all
time charter parties or series of successive voyage charter parties or
contract of affreightment entered into by the Assignor respecting the
Vessel having an indicated duration of at least six (6) months and, upon
the Assignee's request, any other charter party. The Assignor shall also
provide the Assignee with a true and complete copy of the agreements
specified in this paragraph (b) upon the Assignee's request. The Assignor
shall execute any further assignments of its rights, titles and interests
pursuant to any and all such agreements, as the Assignee may, at its sole
discretion, require.
(c) So long as this Assignment is in effect, the Assignor shall
not assign, grant a security interest in or pledge the whole or any part of
the right, title and interest hereby assigned to anyone other than the
Assignee, its successors, endorsees and/or assigns without the prior
written consent of the Assignee and it shall not take or omit to take any
action, the taking or omission of which might result in any material
alteration or impairment of this Assignment or any of the rights created by
this Assignment.
(d) The Assignor covenants and agrees with the Assignee that the
Assignor will (i) duly perform and observe all of the terms and provisions
of any charter or contract of affreightment on the part of the Assignor to
be performed or observed; and (ii) clearly record on the books and records
of the Assignor notations of this Assignment.
(e) At any time and from time to time, upon the written request of
the Assignee, the Assignor shall promptly and duly execute and deliver any
and all such further instruments and documents as the Assignee may
reasonably request in order to obtain the full benefits of this Assignment
and of the rights and powers herein granted.
(f) Whenever requested by the Assignee, the Assignor shall deliver
letters to each of its agents and representatives into whose hands or
control may come any earnings, moneys and property hereby assigned,
informing each such addressee of this Assignment and instructing such
addressee to remit or deliver promptly to the Assignee all earnings, moneys
and property hereby assigned which may come into the addressee's hands or
control and to continue to make such remittances or delivery until such
time as the addressee may receive written notice or instructions to
3
<PAGE> 4
the contrary direct from the Assignee. Each such addressee shall acknowledge
directly to the Assignee receipt of the Assignor's letter of notification and
instructions.
Section 4. Freedom of Assignee from Obligations. It is hereby
expressly agreed that anything herein contained to the contrary
notwithstanding, the Assignee shall have no obligation or liability under any
charter or contract of affreightment by reason of or arising out of this
Assignment, nor shall the Assignee be required or obligated in any manner to
perform or to fulfill any obligations of the Assignor under or pursuant to any
charter or contract of affreightment nor to make any payment, nor to make any
inquiry as to the nature or sufficiency of any payment received by the Assignee
or to present or file any claim, or to take any other action to collect or
enforce the payment of any amounts which may have been assigned to it or which
it may be entitled to hereunder at any time or times.
Section 5. Payment Directions to Charterers; Power of Attorney;
Financing Statements. Upon the occurrence and continuance of an Event of
Default and issuance of notice thereof to the Assignor, the Assignee shall be
entitled to direct the charterers and other obligors to pay all moneys assigned
hereunder to such bank account in New York City or elsewhere as the Assignee
may from time to time designate. Upon request of the Assignor, the Assignee
shall furnish the Assignor with information from time to time as to the
accounts into which moneys assigned hereunder are paid, the amounts and sources
of such payments and the amounts and application of moneys withdrawn therefrom.
The Assignee, its successors and assigns, are hereby constituted lawful
attorneys of the Assignor, irrevocably, with full power (in the name of the
Assignor or otherwise), to ask, require, demand, receive, compound and give
acquittance for any and all moneys, claims, property and rights hereby
assigned, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any
proceedings which the Assignee may deem to be necessary or advisable in the
premises. Any action or proceeding brought by the Assignee pursuant to any of
the provisions hereof or of any charter or contract of affreightment or
otherwise, and any claim made by the Assignee hereunder or under any charter or
contract of affreightment, may be compromised, withdrawn or otherwise dealt
with by the Assignee without any notice to, or approval of, the Assignor. The
Assignor hereby irrevocably authorizes the Assignee to file, at any time and
from time to time, at the Assignor's expense, such financing and continuation
statements or papers of similar purpose or effect relating to this Assignment,
without the Assignor's signature, as the Assignee at its option may deem
appropriate and appoints the Assignee as the Assignor's attorney-in-fact to
execute any such statements in the Assignor's
4
<PAGE> 5
name and to perform all other acts which the Assignee may deem appropriate to
perfect and continue the security interest conferred hereby.
Section 6. Irrevocable Assignment. The powers and authority granted
to the Assignee herein have been given for a valuable consideration and are
hereby declared to be irrevocable and may not be amended or waived except by an
instrument in writing signed by the party against whom enforcement is sought.
Section 7. Governing Law. This Assignment shall be construed in
accordance with and governed by the laws of the State of New York, United
States of America. The Assignor hereby irrevocably submits itself to the non-
exclusive jurisdiction of any New York State or Federal court sitting in New
York City and any appellate court from any thereof, for the purposes of (and
solely for the purposes of) any suit, action or other proceeding arising out
of, or relating to, this Assignment or any of the transactions contemplated
hereby, hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard in such New York State or Federal court and hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
or otherwise, in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
whatsoever, that such suit, action or proceeding is brought in an inconvenient
forum, or that the venue of such suit, action or proceeding is improper, or
that this Assignment or the subject matter hereof may not be enforced in or by
such courts. The Assignor hereby irrevocably appoints Haight, Gardner, Poor &
Havens (the "Process Agent"), with an office on the date hereof at 195
Broadway, New York, New York 10007, United States, as its agent to receive on
behalf of the Assignor and its property service of copies of the summons and
complaint and any other process which may be served in any such suit, action or
proceeding and in any suit, action or proceeding arising out of or relating to
any other Security Document to which the Assignor is a party. Such service may
be made by mailing or delivering a copy of such process to the Assignor in care
of the Process Agent at the Process Agent's above address, and the Assignor
hereby irrevocably authorizes and directs the Process Agent to accept such
service on its behalf. As an alternative method of service, the Assignor also
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by the mailing of copies of such process to the Assignor
at its address specified in the Indenture. The Assignor agrees that a final
judgment in any such action, suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this paragraph shall affect the right of the
Assignee to serve legal process in any other manner
5
<PAGE> 6
permitted by law or affect the right of the Assignee to bring any action or
proceeding against the Assignor or its property in the courts of any other
jurisdiction.
Section 8. Notices. All notices or other communications required or
permitted to be made or given hereunder shall be made in writing, in English,
and personally delivered to an officer or other responsible employee of the
addressee, or sent, by registered air mail, return receipt requested, postage
prepaid, telex, facsimile transmission, or other direct written electronic
means to the applicable address set opposite such party's name below, or to
such other address as any party hereto may from time to time designate to the
others in such manner:
If to the Assignee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Trust Administration
Facsimile: (212) 852-1625
If to the Assignor:
**A**
c/o Teekay Shipping Corp.
Tradewinds Building
Sixth Floor
Bay Street
P.O. Box SS-6293
Nassau, Commonwealth of the Bahamas
Attention: Managing Director
Facsimile: (809) 328-7330
Any communication personally delivered shall be deemed to have been
validly and effectively given or delivered on the date of such delivery. Any
communication transmitted by facsimile, telex or other direct written
electronic means, or by registered air mail, shall be deemed to have been
validly and effectively given or delivered on the day when received.
Section 9. Headings. The division of this Assignment into sections
and the insertion of headings are for convenience of reference only and shall
not affect the interpretation or construction of this Assignment.
6
<PAGE> 7
Section 10. Termination. This Assignment shall terminate, and be of no
further force and effect, upon (i) the payment in full of all of the
Obligations and the performance and observance of all agreements, covenants and
provisions contained in the Guarantee and the Mortgage, and of the Company and
the Assignor under the Indenture, and the absence of any further actual or
contingent liability in respect of any thereof, (ii) the occurrence of the
Termination and Release or (iii) the substitution of a Qualified Substitute
Vessel for the Vessel under the Indenture.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
7
<PAGE> 8
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed this day of , .
**A**
By:
------------------------
Name:
Title:
The terms and conditions of
this Assignment are hereby
ACCEPTED BY:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
------------------------
Name:
Title:
8
<PAGE> 1
EXHIBIT 4.11
CASH COLLATERAL ACCOUNT AGREEMENT
CASH COLLATERAL ACCOUNT AGREEMENT, dated January , 1996 (this
"Agreement"), made by [NAME OF SUBSIDIARY GUARANTOR], a [Liberian] [Bahamian]
corporation (the "Pledgor") and UNITED STATES TRUST COMPANY OF NEW YORK, a bank
and trust company organized under the New York Banking Law (the "Trustee"), for
the Holders under the Indenture referred to below.
PRELIMINARY STATEMENTS:
(1) The Pledgor has opened a special non-interest bearing cash collateral
account with the Trustee at its office at 114 West 47th Street, New York, New
York 10036, Account No. (the "Cash Collateral Account") in the name of
the Pledgor but under the sole control and dominion of the Trustee and subject
to the terms of this Agreement.
(2) The Pledgor has entered into an Indenture dated as of January , 1996
(as it may hereafter be amended or otherwise modified from time to time, the
"Indenture"), among Teekay Shipping Corporation (the "Company"), the Pledgor,
certain of the Company's other subsidiaries, and the Trustee, pursuant to which,
among other things, the Company has provided for the authentication and delivery
of the Securities, and the Trustee has agreed to act for the benefit of the
Holders. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Indenture.
(3) The Cash Collateral Account constitutes a portion of the Trust Estate
under the Indenture, and it is a condition precedent to the issuance of the
Securities under the Indenture that the Pledgor shall have made the pledge and
assignment contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises, the Pledgor hereby agrees
with the Trustee for its benefit and the ratable benefit of the Holders as
follows:
SECTION 1. Pledge and Assignment. The Pledgor hereby pledges and assigns
to the Trustee for its benefit and the ratable benefit of the Holders, and
grants to the Trustee for its benefit and the ratable benefit of the Holders a
security interest in, the following collateral (the "Collateral"):
(i) the Cash Collateral Account, all funds held therein and all
certificates and instruments, if any, from time to time representing or
evidencing the Cash Collateral Account;
(ii) all notes, certificates of deposit, deposit accounts, checks and
other
<PAGE> 2
instruments from time to time hereafter delivered to or otherwise possessed
by the Trustee for or on behalf of the Pledgor in substitution for or in
addition to any or all of the then existing Collateral;
(iii) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the then existing Collateral; and
(iv) all proceeds of any and all of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures the payment
of the principal of (and premium, if any) and interest on the Securities, the
payment of all sums of money (whether for principal, premium, if any, interest,
fees, expenses or otherwise) from time to time payable by the Company under the
Indenture, or by the Pledgor and the other Guarantors under the Guarantor
Security Documents (collectively, the "Obligations"), and to secure as well the
performance and observance of all agreements, covenants and provisions contained
in the Indenture and the Security Documents. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts which
constitute part of the Obligations and would be owed by the Pledgor, the Company
or the other Guarantors to the Trustee or the Holders under the Indenture, the
Securities or any Security Document, but for the fact that they are
unenforceable or not allowable due to of the existence of a bankruptcy,
reorganization or similar proceeding involving the Pledgor, the Company or any
other Guarantor.
SECTION 3. Delivery of Collateral. All certificates or instruments, if
any, representing or evidencing the Collateral shall be delivered to and held by
or on behalf of the Trustee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Trustee. The Trustee shall have the right, at any time in its discretion, to
transfer to or to register in the name of the Trustee or any of its nominees any
or all of the Collateral. The Trustee shall provide notice to the Company of any
such transfer or registration. In addition, the Trustee shall have the right at
any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. Maintaining the Account. So long as any security shall remain
outstanding:
(a) The Pledgor will maintain the Cash Collateral Account with the
Trustee.
(b) It shall be a term and condition of the Cash Collateral Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to
2
<PAGE> 3
the Cash Collateral Account, and except as otherwise provided by the
provisions of Section 12 hereof, that no amount (including interest on the
Cash Collateral Account) shall be paid or released to or for the account
of, or withdrawn by or for the account of, the Pledgor or any other person
or entity from the Cash Collateral Account.
The Cash Collateral Account shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other appropriate banking or governmental authority, as may now or
hereafter be in effect.
SECTION 5. Payment and Investment of Amounts in the Account.
(a) Upon the occurrence and during the continuation of an Event of
Default, at the request of the Trustee, the Pledgor will cause all amounts
assigned under both the Assignment of Time Charter and the Assignment of
Freights and Hires to be paid directly into the Cash Collateral Account.
(b) If requested by the Pledgor, the Trustee will, subject to the
provisions of Sections 5(c) and 11 hereof, from time to time (i) invest
amounts on deposit in the Cash Collateral Account in Permitted Investments
as the Pledgor may select by written instructions to the Trustee and (ii)
invest interest paid on the Permitted Investments referred to in clause (i)
above, and reinvest other proceeds of any such Permitted Investments which
may mature or be sold, in each case in such Permitted Investments as the
Pledgor may select by written instructions to the Trustee (the Permitted
Investments referred to in clauses (i) and (ii) above being collectively
"Investments"). Interest and proceeds that are not invested or reinvested
in Investments as provided above shall be deposited and held in the Cash
Collateral Account. If the Pledgor shall make no such request, the Trustee
may, but shall be under no obligation to, invest amounts on deposit in the
Cash Collateral Account in such Permitted Investments (except for direct
obligations of, or obligations unconditionally guaranteed by, countries
other than the United States of America) as it in its sole discretion may
select.
(c) Except to the extent set forth in Section 12 hereof, the
Trustee will apply amounts in the Cash Collateral Account in accordance
with the applicable provisions of the Indenture.
SECTION 6. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the [Republic of Liberia]
[Commonwealth of the Bahamas], has the corporate power and authority to
own, lease and operate the properties used in its business and to conduct
its business as currently conducted and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Pledgor
and its subsidiaries, taken as a
3
<PAGE> 4
whole.
(b) This Agreement has been duly authorized, executed and delivered
by, and, when executed and delivered by the Pledgor on the Closing Date,
will be a valid and binding agreement of, the Pledgor, enforceable against
the Pledgor in accordance with its terms, except as (i) the enforceability
thereof may be limited by applicable bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws affecting creditors'
rights generally and (ii) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability (regardless of whether in a proceeding in equity
or at law).
(c) The Pledgor is the legal and beneficial owner of the Collateral
free and clear of any lien, security interest, option or other charge or
encumbrance except for the security interest created by this Agreement.
(d) The pledge and assignment of the Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in
the Collateral, securing the payment of the Obligations.
(e) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the pledge
and assignment by the Pledgor of the Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the
Pledgor, (ii) for the perfection or maintenance of the security interest
created hereby (including the first priority nature of such security
interest) or (iii) for the exercise by the Trustee of its rights and
remedies hereunder.
(f) The execution and delivery by the Pledgor of, and the performance
by the Pledgor of its obligations under, this Agreement, and the
consummation of the transactions contemplated thereby, (i) will not
contravene (A) any provision of applicable law, (B) the certificate or
articles of incorporation or by-laws of the Pledgor, (C) any agreement or
other instrument binding upon the Pledgor that is material to the Pledgor,
or (D) any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Pledgor, (ii) will not result in or
require the creation or imposition of any Lien upon or with respect to any
of the properties of the Pledgor, except for the security interest created
by this Agreement, or constitute a default under any agreement, contract,
ordinance, license or permit.
(g) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
4
<PAGE> 5
SECTION 7. Further Assurances. The Pledgor agrees that at any time and
from time to time, at its expense, the Pledgor will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Trustee may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Trustee to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.
SECTION 8. Transfers and Other Liens. The Pledgor agrees that it will not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement.
SECTION 9. Trustee Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Trustee as attorney-in-fact (which power shall be deemed coupled
with an interest), with full authority in the place and stead of the Pledgor,
and in the name of the Pledgor or otherwise, from time to time in the Trustee's
discretion to take any action and to execute any instrument which the Trustee
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any interest payment, dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
SECTION 10. Trustee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Trustee may itself perform, or cause performance
of, such agreement, but the Trustee shall not be obligated to do so, and the
expenses of the Trustee incurred in connection therewith shall be payable by the
Pledgor under Section 13.
SECTION 11. The Trustee's Duties. The terms and provisions of Sections
8.01 through 8.04, inclusive, and 8.07 through 8.12, inclusive, of the Indenture
are incorporated herein by reference, and shall be applicable to this Agreement
and the duties and responsibilities of the Trustee hereunder. The powers
conferred on the Trustee hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Trustee shall have
no duty as to any Collateral, as to ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Collateral, whether or not the Trustee has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral. The
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which United States Trust Company of New
York accords its own property. The Trustee shall not be liable to the Company or
to anyone else for any loss which may be incurred by reason of any investment of
5
<PAGE> 6
the Collateral pursuant to the terms of this Agreement. To the extent that the
Trustee becomes liable for the payment of taxes, including withholding taxes, in
respect of income derived from the investment of the Collateral hereunder or any
payment made hereunder, the Trustee may pay such taxes. The Trustee may withhold
from any payment or release of monies from time to time comprising the Cash
Collateral Account such amount as the Trustee estimates to be sufficient to
provide for the payment of such taxes not yet paid, and may use the sum withheld
for that purpose. The Company shall indemnify the Trustee for, and hold it
harmless against, any liability for taxes and for any penalties or interest in
respect of taxes on such investment income, payments or release of monies.
SECTION 12. Remedies upon Default. If any Event of Default under the
Indenture shall have occurred and be continuing:
(a) The Trustee may, without notice to the Pledgor except as required
by law, and at any time or from time to time, charge, set off and otherwise
apply all or any part of the Cash Collateral Account against the
Obligations or any part thereof.
(b) The Trustee may also exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the State of New York at
that time (the "NYUCC") (whether or not the NYUCC applies to the affected
Collateral), and may also, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Trustee may
deem commercially reasonable. The Pledgor agrees that, to that extent
notice of sale shall be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.
The Trustee shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Trustee may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(c) Any cash held by the Trustee as Collateral and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the
discretion of the Trustee, be held by the Trustee as collateral for, and/or
then or at any time thereafter be applied (after payment of any amounts
payable to the Trustee pursuant to Section 13) in whole or in part by the
Trustee for the ratable benefit of the Holders against, all or any part of
the Obligations in such order as the Trustee shall elect and as provided in
the Indenture. Any surplus of such cash or cash proceeds held by the
Trustee and remaining after payment in full of all the Obligations shall be
paid over to the Pledgor or to whomsoever may be lawfully entitled
6
<PAGE> 7
to receive such surplus.
SECTION 13. Expenses. The Pledgor will upon demand pay to the Trustee the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Trustee may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Trustee or the Holders hereunder or (iv) the failure by
the Pledgor to perform or observe any of the provisions hereof.
SECTION 14. Security Interest Absolute. The obligations of the Pledgor
under this Agreement are independent of the Obligations, and a separate action
or actions may be brought and prosecuted against the Pledgor to enforce this
Agreement, irrespective of whether any action is brought against the Company or
any other Guarantor or whether the Company or any other Guarantor is joined in
any such action or actions. All rights of the Trustee and security interests
hereunder, and all obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of the Indenture, the
Securities, any Security Document or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place or payment or, or in any
other term or, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture or the
Securities or any Security Document;
(iii) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Obligations;
(iv) any manner of application of collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other disposition
of any collateral for all or any of the Obligations or any other assets of
the Pledgor, the Company or any other Guarantor or the Charterer or any of
their respective subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of the Pledgor, the Company or any other Guarantor
or any of their respective subsidiaries; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Pledgor or a third party
pledgor.
SECTION 15. Amendments, Etc. No amendment or waiver of any provision
7
<PAGE> 8
of this Agreement, and no consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to it, to the Pledgor or to the Trustee, at their respective
addresses specified in the Indenture, or, as to any party, at such other address
as shall be designated by such party in a written notice to the other party. All
such notices and other communications shall be effective (i) if sent by telex,
cable or telephonic telecopier, upon transmission, (ii) if delivered by hand
(including by independent courier service), upon delivery to the addressee and
(iii) if sent by first-class mail, postage prepaid, on the fifth (5th) calendar
day after mailing.
SECTION 17. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until (x) the payment in full of the Obligations and all other
amounts payable under this Agreement or (y) the Termination and Release shall
have occurred, (ii) be binding upon the Pledgor, its successors and assigns, and
(iii) inure to the benefit of, and be enforceable by, the Trustee, the Holders
and their respective successors, transferees and assigns. Upon (x) the payment
in full of the Obligations and all other amounts payable under this Agreement or
(y) the occurrence of the Termination and Release, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Pledgor. Upon any such termination, the Trustee will, at the Pledgor's expense,
return to the Pledgor such of the Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 18. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 19. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the Pledgor have caused this Agreement to be duly
executed and delivered by its officers thereunto duly authorized as of the date
first above written.
[NAME OF SUBSIDIARY GUARANTOR]
By:
---------------------------------
Name:
Title:
ACCEPTED AND AGREED:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
---------------------------------
Name:
Title:
9
<PAGE> 1
EXHIBIT 4.12
INVESTMENT ACCOUNT AGREEMENT
INVESTMENT ACCOUNT AGREEMENT, dated January , 1996 (this "Agreement"),
made by TEEKAY SHIPPING CORPORATION, a Liberian corporation (the "Pledgor"), and
UNITED STATES TRUST COMPANY OF NEW YORK, a bank and trust company organized
under the New York Banking Law (the "Trustee"), for the Holders under the
Indenture referred to below.
PRELIMINARY STATEMENTS:
(1) The Pledgor has opened a special non-interest bearing account with the
Trustee at its office at 114 West 47th Street, New York, New York 10036, Account
No. (the "Investment Account") in the name of the Pledgor but under
the sole control and dominion of the Trustee and subject to the terms of this
Agreement.
(2) The Pledgor has entered into an Indenture dated as of January , 1996
(as it may hereafter be amended or otherwise modified from time to time, the
"Indenture"), among the Pledgor, certain of the Pledgor's subsidiaries named
therein, and the Trustee, pursuant to which, among other things, the Pledgor has
provided for the authentication and delivery of the Securities, and the Trustee
has agreed to act for the benefit of the Holders. Capitalized terms used but not
otherwise defined herein shall have the meaning ascribed to such terms in the
Indenture.
(3) The Investment Account constitutes a portion of the Trust Estate under
the Indenture, and it is a condition precedent to the issuance of the Securities
under the Indenture that the Pledgor shall have made the pledge and assignment
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises, the Pledgor hereby agrees
with the Trustee for its benefit and the ratable benefit of the Holders as
follows:
SECTION 1. Pledge and Assignment. The Pledgor hereby pledges and assigns
to the Trustee for its benefit and the ratable benefit of the Holders, and
grants to the Trustee for its benefit and the ratable benefit of the Holders a
security interest in, the following collateral (the "Collateral"):
(i) the Investment Account, all funds held therein and all
certificates and instruments, if any, from time to time representing or
evidencing the Investment Account;
(ii) all Investments (as defined in Section 5), from time to time, and
all certificates and instruments, if any, from time to time representing or
evidencing the Investments;
<PAGE> 2
(iii) all notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time hereafter delivered to or otherwise
possessed by the Trustee for or on behalf of the Pledgor in substitution
for or in addition to any or all of the then existing Collateral;
(iv) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the then existing Collateral; and
(v) all proceeds of any and all of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures the payment
of the principal of (and premium, if any) and interest on the Securities, the
payment of all sums of money (whether for principal, premium, if any, interest,
fees, expenses or otherwise) from time to time payable by the Pledgor under the
Indenture and the Pledge Agreement, or by the Guarantors under the Guarantor
Security Documents (collectively, the "Obligations"), and to secure as well the
performance and observance of all agreements, covenants and provisions contained
in the Indenture and the Security Documents. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts which
constitute part of the Obligations and would be owed by the Pledgor or the
Guarantors to the Trustee or the Holders under the Indenture, the Securities or
any Security Document, but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Pledgor or any Guarantor.
SECTION 3. Delivery of Collateral. All certificates or instruments, if
any, representing or evidencing the Collateral shall be delivered to and held by
or on behalf of the Trustee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Trustee. The Trustee shall have the right, at any time in its discretion and
without notice to the Pledgor, to transfer to or to register in the name of the
Trustee or any of its nominees any or all of the Collateral. In addition, the
Trustee shall have the right at any time to exchange certificates or instruments
representing or evidencing Collateral for certificates or instruments of smaller
or larger denominations.
SECTION 4. Maintaining the Accounts. So long as any Security shall remain
outstanding:
(a) The Pledgor will maintain the Investment Account with the Trustee.
(b) It shall be a term and condition of the Investment Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to the Investment Account, and except as otherwise
provided by the provisions of Section 6 and Section
2
<PAGE> 3
13 hereof, that no amount (including interest on the Investment Account)
shall be paid or released to or for the account of, or withdrawn by or for
the account of, the Pledgor or any other person or entity from the
Investment Account.
The Investment Account shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other appropriate banking or governmental authority, as may now or
hereafter be in effect.
SECTION 5. Investing of Amounts in the Accounts. If requested by the
Pledgor, the Trustee will, subject to the provisions of Section 6 and Section 12
hereof, from time to time (i) invest amounts on deposit in the Investment
Account in Permitted Investments as the Pledgor may select by written
instructions to the Trustee and (ii) invest interest paid on the Permitted
Investments referred to in clause (i) above, and reinvest other proceeds of any
such Permitted Investments which may mature or be sold, in each case in such
Permitted Investments as the Pledgor may select by written instructions to the
Trustee (the Permitted Investments referred to in clauses (i) and (ii) above
being collectively "Investments"). Interest and proceeds that are not invested
or reinvested in Investments as provided above shall be deposited and held in
the Investment Account. If the Pledgor shall make no such request, the Trustee
may, but shall be under no obligation to, invest amounts on deposit in the
Investment Account in such Permitted Investments (except for direct obligations
of, or obligations unconditionally guaranteed by, countries other than the
United States of America) as it in its sole discretion may select.
SECTION 6. Application of Amounts. Except to the extent set forth in
Section 13 of this Agreement, the Trustee will apply amounts in the Investment
Account in accordance with the applicable provisions of the Indenture.
SECTION 7. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the Republic of Liberia, has
the corporate power and authority to own, lease and operate the properties
used in its business and to conduct its business as currently conducted and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Pledgor and its subsidiaries, taken as a
whole.
(b) This Agreement has been duly authorized, executed and delivered
by, and, when executed and delivered by the Pledgor on the Closing Date,
will be a valid and binding agreement of, the Pledgor, enforceable against
the Pledgor in accordance with its terms, except as (i) the enforceability
thereof may be limited by applicable
3
<PAGE> 4
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
affecting creditors' rights generally and (ii) rights of acceleration, if
applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability (regardless of whether in a
proceeding in equity or at law).
(c) The Pledgor is the legal and beneficial owner of the Collateral
free and clear of any lien, security interest, option or other charge or
encumbrance except for the security interest created by this Agreement.
(d) The pledge and assignment of the Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in
the Collateral, securing the payment of the Obligations.
(e) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the pledge
and assignment by the Pledgor of the Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the
Pledgor, (ii) for the perfection or maintenance of the security interest
created hereby (including the first priority nature of such security
interest) or (iii) for the exercise by the Trustee of its rights and
remedies hereunder.
(f) The execution and delivery by the Pledgor of, and the performance
by the Pledgor of its obligations under, this Agreement, and the
consummation of the transactions contemplated thereby, (i) will not
contravene (A) any provision of applicable law, (B) the certificate or
articles of incorporation or by-laws of the Pledgor, (C) any agreement or
other instrument binding upon the Pledgor that is material to the Pledgor
or any of its subsidiaries, taken as a whole, or (D) any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Pledgor, (ii) will not result in or require the creation or imposition
of any Lien upon or with respect of any of the properties of the Pledgor,
except for the security interest created by this Agreement, or constitute a
default under any agreement, contract, ordinance, license or permit.
(g) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
SECTION 8. Further Assurances. The Pledgor agrees that at any time and
from time to time, at its expense, the Pledgor will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Trustee may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Trustee to exercise and enforce its rights and
4
<PAGE> 5
remedies hereunder with respect to any Collateral.
SECTION 9. Transfers and Other Liens. The Pledgor agrees that it will not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement.
SECTION 10. Trustee Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Trustee as attorney-in-fact (which power shall be deemed coupled
with an interest), with full authority in the place and stead of the Pledgor,
and in the name of the Pledgor or otherwise, from time to time in the Trustee's
discretion to take any action and to execute any instrument which the Trustee
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any interest payment, dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
SECTION 11. Trustee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Trustee may itself perform, or cause performance
of, such agreement, but the Trustee shall not be obligated to do so, and the
expenses of the Trustee incurred in connection therewith shall be payable by the
Pledgor under Section 14.
SECTION 12. The Trustee's Duties. The terms and provisions of Sections
8.01 through 8.04, inclusive, and 8.07 through 8.12, inclusive, of the Indenture
are incorporated herein by reference, and shall be applicable to this Agreement
and the duties and responsibilities of the Trustee hereunder. The powers
conferred on the Trustee hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Trustee shall have
no duty as to any Collateral, as to ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Collateral, whether or not the Trustee has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral. The
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which United States Trust Company of New
York accords its own property. The Trustee shall not be liable to the Company or
to anyone else for any loss which may be incurred by reason of any investment of
the Collateral pursuant to the terms of this Agreement. To the extent that the
Trustee becomes liable for the payment of taxes, including withholding taxes, in
respect of income derived from the investment of the Collateral hereunder or any
payment made hereunder, the Trustee may pay such taxes. The Trustee may withhold
from any payment or release of monies from time to time comprising the
Investment Account such amount as the Trustee estimates to be sufficient to
5
<PAGE> 6
provide for the payment of such taxes not yet paid, and may use the sum withheld
for that purpose. The Company shall indemnify the Trustee for, and hold it
harmless against, any liability for taxes and for any penalties and for any
penalties or interest in respect of taxes on such investment income, payments or
release of monies.
SECTION 13. Remedies upon Default. If any Event of Default under the
Indenture shall have occurred and be continuing:
(a) The Trustee may, without notice to the Pledgor except as required
by law, and at any time or from time to time, charge, set-off and otherwise
apply all or any part of the Investment Account against the Obligations or
any part thereof.
(b) The Trustee may also exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the right and remedies of a secured party on default
under the Uniform Commercial Code in effect in the State of New York at
that time (the "NYUCC") (whether or not the NYUCC applies to the affected
Collateral), and may also, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public of
private sale, at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Trustee may
deem commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Trustee shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(c) Any cash held by the Trustee as Collateral and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the
discretion of the Trustee, be held by the Trustee as collateral for, and/or
then or at any time thereafter be applied (after payment of any amounts
payable to the Trustee pursuant to Section 14) in whole or in part by the
Trustee for the ratable benefit of the Holders against, all or any part of
the Obligations in such order as the Trustee shall elect and as provided in
the Indenture. Any surplus of such cash or cash proceeds held by the
Trustee and remaining after payment in full of all the Obligations shall be
paid over to the Pledgor or to whomsoever may be lawful entitled to receive
such surplus.
SECTION 14. Expenses. The Pledgor will upon demand pay to the Trustee the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Trustee may
incur in connection with (i) the
6
<PAGE> 7
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Trustee or the
Holders hereunder or (iv) the failure by the Pledgor to perform or observe any
of the provisions hereof.
SECTION 15. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Pledgor herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to it, to either the Pledgor or to the Trustee, at their
respective addresses specified in the Indenture, or, as to any party, at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and other communications shall be effective (i) if
sent by telex, cable or telephonic telecopier, upon transmission, (ii) if
delivered by hand (including by independent courier service), upon delivery to
the addressee and (iii) if sent by first-class mail, postage prepaid, on the
fifth (5th) calendar day after mailing.
SECTION 17. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until (x) the payment in full of the Obligations and all other
amounts payable under this Agreement or (y) the Termination and Release shall
have occurred, (ii) be binding upon the Pledgor and its successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the Trustee, the
Holders and their respective successors, transferees and assigns. Upon (x) the
payment in full of the Obligations and all other amounts payable under this
Agreement or (y) the occurrence of the Termination and Release, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Pledgor. Upon any such termination, the Trustee will, at the
Pledgor's expense, return to the Pledgor such of the Collateral as shall not
have been sold or otherwise applied pursuant to the terms hereof and execute and
deliver to the Pledgor such documents as the Pledgor shall reasonably request to
evidence such termination.
SECTION 18. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 19. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this
7
<PAGE> 8
Agreement.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its officers thereunto duly authorized as of the date
first above written.
TEEKAY SHIPPING CORPORATION
By:
---------------------------------
Name:
Title:
ACCEPTED AND AGREED:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
---------------------------------
Name:
Title:
8
<PAGE> 1
EXHIBIT 5.1
PERKINS COIE
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
1211 SOUTHWEST FIFTH AVENUE, SUITE 1500 - PORTLAND, OREGON 97204-1002
TELEPHONE: (503) 727-2000 - FACSIMILE: (503) 727-2222
January 18, 1996
Teekay Shipping Corporation
Tradewinds Building, Sixth Floor
Bay Street, P.O. Box SS-6293
Nassau, The Bahamas
RE: REGISTRATION STATEMENT ON FORM F-3 (NO. 33-65139)
Dear Sirs:
We have acted as special counsel to Teekay Shipping Corporation, a
Liberian corporation (the "Company"), in connection with the proposed public
offering of up to $225 million in aggregate principal amount of First Preferred
Ship Mortgage Notes Due 2008 (the "Notes"), as described in the Registration
Statement on Form F-3 (No. 33-65139), as amended (the "Registration
Statement"), filed by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations promulgated thereunder (the "Rules"). The Notes will be
(a) issued pursuant to an Indenture (the "Indenture") to be entered into among
the Company, the Subsidiary Guarantors (as defined below) and United States
Trust Company of New York, as Trustee (the "Trustee"), and (b) unconditionally
guaranteed on a senior secured basis by VSSI Oceans Inc., VSSI Atlantic Inc.,
VSSI Appian Inc., Senang Spirit Inc., Exuma Spirit Inc., Nassau Spirit Inc. and
Andros Spirit Inc. (collectively, the "Subsidiary Guarantors") pursuant to
certain Guarantees (collectively, the "Guarantees") to be entered into by each
Subsidiary Guarantor in favor of the Trustee. You have asked us to render our
opinion as to the matters hereinafter set forth. Capitalized terms used but
not defined herein shall have the same meaning as in the Registration
Statement.
In this connection, we have examined such certificates, agreements,
records, and other documents as we have deemed relevant and necessary as a
basis for the opinions expressed herein. We have assumed, with your permission
and without independent investigation, (i) the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as photostatic or
facsimile copies, and the authenticity of the originals of such copies, (ii)
the accuracy of the factual representations made to us by officers and other
representatives of the Company, whether evidenced by certificates or otherwise,
(iii) that the Indenture and the Underwriting Agreement to be entered into
between the Company and Goldman, Sachs & Co., as the representative of the
Underwriters (the "Underwriting Agreement"), in each case as executed, will be
in substantially the respective forms as filed as exhibits to the Registration
Statement, (iv) that the Company, each Subsidiary Guarantor and the Trustee
each has all necessary power and authority to enter into and perform its duties
under the Indenture and, with respect to only the Subsidiary Guarantors, the
Guarantees, and (v) that all actions contemplated by the Registration Statement
have been and will be carried out only in the manner described therein.
<PAGE> 2
Teekay Shipping Corporation
January 18, 1996
Page 2
Based upon and subject to the foregoing, we are of the following
opinion:
1. That, when the Indenture and the Guarantees have been duly
authorized, executed and delivered by all parties thereto, and when the Notes
have been duly authorized, executed, authenticated and issued in accordance
with the terms of the Indenture and delivered against payment therefor in
accordance with the terms of the Underwriting Agreement, (a) the Notes will
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, and (b) the Guarantees will
constitute the legal, valid and binding obligations of the Subsidiary
Guarantors, enforceable against the Subsidiary Guarantors in accordance with
their terms, in each case subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
from time to time in effect relating to or affecting creditors' rights and to
general equitable principles (regardless of whether considered in a proceeding
in equity or at law).
2. The summary set forth under the heading "Tax Considerations --
United States Federal Income Tax Considerations" in the Prospectus forming a
part of the Registration Statement is accurate and describes the material
United States federal income tax consequences expected to be relevant to
prospective initial purchasers of the Notes who have acquired the Notes as a
capital asset, are United States persons and are not among particular
categories of investors subject to special treatment under certain United
States federal income tax laws. This opinion is based on provisions of the
United States Internal Revenue Code of 1986, as amended, applicable United
States Treasury Department Regulations, published administrative positions and
judicial decisions, all existing as of the date hereof.
In giving the opinions expressed herein, we express no opinion as to
the laws of any jurisdiction other than the State of New York and federal
income tax laws of the United States.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the Prospectus made
part of the Registration Statement under the captions "Risk Factors -- Possible
Taxation of the Company's United States Source Income," "Business -- Taxation
of the Company -- United States Taxation," "Tax Considerations -- United States
Federal Income Tax Considerations," and "Legal Matters." In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act or related Rules.
This Consent may be incorporated by reference in any registration statement
filed in connection with the offering of the Notes pursuant to Rule 462(b) of
Regulation C under the Securities Act.
Very truly yours,
/s/ Perkins Coie
PERKINS COIE
DSM:pjd
<PAGE> 1
Exhibit 8.2
HAIGHT, GARDNER, POOR & HAVENS
195 Broadway * New York, NY 10007-3189 * (212) 341-7000
January 18, 1996
Teekay Shipping Corporation
Tradewinds Building
Sixth Floor
Bay Street
P.O. Box SS-6293
Nassau, Bahamas
Re: Registration Statement on Form F-3
Ladies and Gentlemen:
We have acted as special Liberian counsel to Teekay Shipping
Corporation, a Liberian corporation (the "Company"), in connection with the
Registration Statement on Form F-3 (No. 33-65139) (as amended as of the date
hereof, the "Registration Statement") filed by the Company with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations thereunder (the "Rules") in connection
with the proposed offering and sale by underwriters of the First Preferred Ship
Mortgage Notes Due 2008 (the "Notes"). You have asked us to render our opinion
as to the matters hereinafter set forth.
In connection with the opinions set forth herein, we have examined the
Registration Statement and all such originals and copies, certified or
otherwise identified to our satisfaction, of such other agreements,
certificates and other statements of government officials and corporate
officers and other representatives of the Company and other documents as we
have deemed necessary as the basis for the opinions set forth herein.
In such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals or copies, and
the conformity with the original documents of all documents submitted to us as
copies. As to any questions of fact material to our opinions, we have, when
relevant facts were not independently established, relied upon written or oral
statements of corporate officers and other representatives of the Company.
<PAGE> 2
HAIGHT, GARDNER, POOR & HAVENS
Page 2
Teekay Shipping Corporation
January 18, 1996
We have further assumed that (i) the Company is and intends to maintain
its status as a "nonresident Liberian entity" under the Liberian Internal
Revenue Code, (ii) the Company is not now carrying on, and in the future does
not expect to carry on, any operations within the Republic of Liberia, and
(iii) all documentation related to the proposed offering will be executed
outside the Republic of Liberia.
To the extent our opinion involves the valid existence and good
standing of the Company under Liberian law, we have relied upon information
supplied to us by the International Trust Company of Liberia.
We are not licensed to practice in the Republic of Liberia, and insofar
as the law of the Republic of Liberia is concerned, we have relied (i) on
opinions received from Liberian counsel as to certain matters under Liberian
law and in analogous transactions and (ii) on Liberian legal materials
available to us to the extent such examination has enabled us to confirm said
opinions. We have assumed that the Liberian statutes as previously in force,
particularly the Associations Law, 1976 (Title 5 of the Liberian Code of Laws,
Revised) and the practices, frameworks and procedures relating thereto have not
been altered as a result of the current political situation. We have further
assumed that all Liberian officials and representatives involved in this
transaction are authorized to act on behalf of the International Trust Company
of Liberia and/or the Republic of Liberia. The opinions expressed herein are
further qualified in their entirety in that, unless otherwise hereinafter
expressly provided, no opinion is expressed with respect to the laws other than
those of the Republic of Liberia.
Based upon the foregoing and subject to the qualifications set out
herein, we are of the opinion that insofar as present Liberian law is
concerned, the summary set forth under the heading "Tax
Considerations--Liberian Taxation" in the Prospectus forming a part of the
Registration Statement (the "Prospectus") is accurate and describes the
Liberian tax consequences expected to be relevant to prospective holders of the
Notes offered to the public pursuant to the Prospectus.
The opinions expressed herein are based on our knowledge of the law and
facts as of the date hereof, and we hereby expressly disclaim any duty or other
obligation to communicate to you with respect to any matter subsequent to the
date hereof.
<PAGE> 3
HAIGHT, GARDNER, POOR & HAVENS
Page 3
Teekay Shipping Corporation
January 18, 1996
We hereby consent to the use of our name in the Registration Statement
and in the Prospectus as the same appears under the captions "Risk
Factors--Enforcement of Mortgages", "Description of the Notes--Fraudulent
Conveyance Statutes", "Business -- Taxation of the Company -- Liberian
Taxation", "Tax Considerations -- Liberian Taxation" and "Legal Matters" and to
the use of this opinion as an exhibit to the Registration Statement. This
consent may be incorporated by reference in any registration statement filed
pursuant to Rule 462(b) of Regulation C under the Act in connection with the
offering of the Notes. In giving this consent, we do not thereby admit that we
come within the category of persons whose consent is required by the Act or the
Rules.
Very truly yours,
HAIGHT, GARDNER, POOR & HAVENS
By /s/ Jovi Tenev
---------------------------------------
<PAGE> 1
EXHIBIT 8.3
GRAHAM, THOMPSON & CO.
Counsel and Attorneys-at-Law
Notaries Public
Sassoon House
P.O. Box N 272
Nassau, The Bahamas
Telephone: 809-322-4130/4
809-323-7276
Fax: 809-328-1069 Group 3
January __, 1996
Teekay Shipping Corporation
Tradewinds Building
Sixth Floor
P. O. Box SS-6293
Nassau, Bahamas
RE: REGISTRATION STATEMENT ON FORM F-3 (NO. 33-65139)
Dear Sirs:
In connection with the above-captioned Registration Statement on Form
F-3, as amended (the "Registration Statement"), filed by Teekay Shipping
Corporation, a Liberian corporation ("Teekay"), with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations thereunder (the "Rules"), we have been
requested to render our opinion as to the matters hereinafter set forth.
In this regard, we have examined a copy, certified or otherwise
identified to our satisfaction, of the Registration Statement and the related
Prospectus and in our examination of same, we have assumed, without independent
investigation, the authenticity of all such documents submitted to us as
originals, the conformity to the original documents of all such documents
submitted to us as certified, photostatic, reproduced, conformed or otherwise
in our possession as copies and the authenticity of all such documents, the
power, authority and legal right of all parties thereto to enter into and
perform their respective obligations under the said documents and the due
authorization, execution and delivery of the said documents by all of the
parties to those documents to which they are a party. We have also assumed the
accuracy and completeness of all factual representations made in the documents.
Based upon and subject to the foregoing we are of the opinion that the
summary set forth under the heading "Tax Considerations -- Bahamian Taxation"
in the Prospectus forming a part of the Registration Statement is accurate and
describes the Bahamian tax consequences expected to be relevant to prospective
initial purchasers of the First Preferred Ship Mortgage Notes Due 2008 (the
"Notes") offered to the public pursuant to the Prospectus.
We hereby consent to the use of our name in the Registration Statement
and in the related Prospectus as the same appears under the captions "Risk
Factors--Enforcement of Mortgages," "Business--Taxation of the
Company--Bahamian Taxation," "Description of the Notes--Fraudulent Conveyance
Statutes," and "Legal Matters," and to the use of this opinion as an exhibit to
the Registration Statement. This Consent may be incorporated by reference in
any registration statement of Teekay filed pursuant to Rule 462(b) of
Regulation C under the Act in connection with the offering of the Notes. In
giving this consent, we do not hereby admit that we come within the category of
persons whose consent is required by the Act or the Rules.
Our opinion expressed above is limited to the laws of the Commonwealth
of The Bahamas as in effect on the date hereof. Insofar as the Registration
Statement and the related Prospectus are expressed to be governed by any other
system of law, we have assumed with your approval the validity and
enforceability of same under the applicable system of law.
This opinion is solely for the benefit of and may be relied upon by
Teekay. This opinion may not be relied upon by any other person or entity
without the prior written approval of the undersigned.
Yours faithfully,
GRAHAM, THOMPSON & CO.
/s/ Gregory I. H. Cottis
Gregory I. H. Cottis
<PAGE> 1
EXHIBIT 10.1
TIME CHARTER, AS AMENDED, DATED JULY 3, 1995
BETWEEN VSSI OCEANS INC. AND PALM SHIPPING INC.
IT IS THIS 3rd DAY OF July 1995 mutually
agreed between VSSI Oceans Inc. a Liberian
corporation, maintaining an office and place of
business at 80 Broad Street, Monrovia as Owner
(herein called "Owner") of the Liberian flag
motor/tank/vessel to be built by Onomichi Dockyard
for delivery to Owner on or about 5-10 Aug 1995 ,
named Poul Spirit (herein called "Vessel") and Palm
Shipping Inc., a Liberian corporation, maintaining
an office and place of business at c/o Teekay
Shipping., P.O. Box SS6293, Scotiabank Building, 1st
Floor, Rawson Square, Bay Street, Nassau, Bahamas
(herein called "Charterer"), that the Owner lets and
the Charterer hires the use and service of the Vessel
for a period and on the terms and conditions
hereinafter set forth.
TERM 1. (a) The term of this Charter shall be for a
period of about 10 years 6 months (10.5)
consecutive years (herein called "Original Period")
plus any extensions thereof as provided in paragraph
(b) below. The Original Period shall commence when
the Vessel is placed at the Charterer's disposal, as
provided in Clause 3. The word "about" as used above
shall mean "thirty (30) days more or less" at
Charterer's option and shall apply to the term of
this Charter consisting of the Original Period plus
any extensions as hereinafter provided.
(b) The term of this Charter may be extended
by Charterer for a period equal to all or any part of
the time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least Three (3) months before the
expiration of the Original Period, or Extended Period
if Charterer has exercised the option under Clause
2(b). Any Off-Hire incurred after the above notice
shall have been given, whether said Off-Hire occurs
within the Original Period, Extended Period and/or
Off-Hire Extension, shall without any further written
notice, be a further Off-Hire Extension. Off-Hire, for
the purposes of this Clause 2 (c) shall include
incidents of Off-Hire specified in Clause 7 as well as
any other period(s) for which cesser or suspension of
the payment(s) of hire is (are) allowed hereunder
during the Original Period, Extended Period, and, or
Off-Hire Extension.
OWNER'S WARRANTIES 2. (a) Owner undertakes and warrants that, on
the date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of
the particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 754,983 Bbls.*
98% full 739,883 Bbls *
(ii) Weight of stores, etc., permanently
deducted from cargo carrying
capacity 318 L.T.*
(iii) a. Fresh water consumption per day
Boilers 1 L.T.*
Potable 12 L.T.*
b. Capacity of evaporators per day
Boilers 20 L.T.*
Potable L.T.*
c. Normal quantity of fresh water
deductible from cargo carrying
capacity 100 L.T.*
(iv) Estimated loss of cargo carrying capacity
due to "sag" when fully loaded with light,
medium, heavy cargo
Light ( S.G.) API 35 1,300 M.T.
Medium ( S.G.) API 30 900 M.T.
Heavy ( S.G.) API 25 500 M.T.
(v) The Vessel can carry 97,042 L.T.*** (of
2,240 lbs.) total deadweight (as certified
by Classification Society) of cargo,
bunkers, water, and stores on an assigned
summer freeboard of 20 ft.4 in * in salt
water equalling 47 ft. 04 in.** summer
mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks for propulsion
(98% full) 50 Days at sea*
(ii) Total capacity of fresh water tanks
(100% full)
Boilers 17 M3*
Potable 32 M3*
(iii) Total capacity of permanent segregated
clean ballast tanks (100% full) 38,578 M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo Pumps
a. Number 3
b. Make Shinko
c. Type Steam Turbine
d. Design rated capacity of each pump in
cubic meters per hour 2700 M3/Hr.
and corresponding discharge head
in meters 150 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Steam
d. Design rated capacity of each pump in
cubic meters per hour 200 M3/Hr.
and corresponding total discharge head
in meters 150 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 2
b. Make Shinko
c. Type Electric
d. Design capacity each pump 1700 M3/Hr.
<PAGE> 2
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any
direction equivalent to the safe working load of
the cargo hose lifting equipment and will meet
OCIMF recommendations.
(i) a. Number of manifold
connections 3 Per Side
b. Diameter of manifold
connections inches 16 in.
c. Distance between centers
of manifold connections 8 ft. - in.
d. Distance from manifold
connections to
ship's side 15 ft. - in.
e. Distance center of manifold
connections to deck 6 ft. - in.
f. Distance bow/center of
manifold 401 ft. 8 in.
(ii) Cargo Manifold Reducing Pieces
Vessel is equipped with a sufficient
number of cargo manifold reducing pieces
of steel or equivalent material to permit
presenting of flanges of
12 in. at - ASA
10 in. at - ASA
8 in. at - ASA
(5) HEATING COILS
(i) Type of coils Steam Pipes
Material of which manufactured AL.BR
(ii) Ratio heating surface/volume
a. Slop Tanks 0.06 M2/M3
b. Bunker Tanks Aft 0.0083 M2/M3
Fore - M2/M3
c. Cargo Tanks Fore - M2/M3
Wings - M2/M3
Center 0.0091 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous
cargo at maximum rate of 11800 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 800 ft. 02 in. *
(ii) Fully loaded summer draft in salt water of
a density of 1.025
maximum 47 ft. 04 in.**
on an assigned
freeboard of 20 ft. - in.*
(iii) Fresh Water allowance - ft. - in.*
(iv) Light ship draft Forward 9 ft. 04 in.*
Aft 14 ft 08 in.*
Mean 11 ft 09 in.*
(v) Moulded Depth 70 ft 09 in.*
(vi) Light ship freeboard 59 ft 08 in.*
(vii) TPI on light ship draft L.T.*
(viii) TPI on summer draft 220 L.T.*
(ix) Extreme beam 135 ft.*
(x) Gross Reg. Tons 57,463 Tons**
(xi) Net Reg. Tons 28,828 Tons**
(xii) Suez Canal tonnage 54,726 Tons**
Panama Canal tonnage - Tons**
(xiii) Flag of Registry Liberian
(xiv) Call letters ELSG5
(xv) Classification Society NKK
(xvi) Type Engines Motor
(xvii) Mooring winches
Number 8
Type Hydraulic
Capacity Tons pull 9-15 at M/Min
Placement
(xviii) Trial Speed fully loaded 14 Knots ***
(xix) Fuel Rate at maximum
power on trial 57 **
(xx) Guaranteed speed in all weather
Loaded: 14.0 KT
Ballast: 14.0 KT
(xxi) Guaranteed fuel consumption in all weather
Amount: 43MT Laden/ 41.5 MT Ballast
Type:
380 CST HVF
Sec. Redwood #1 at 100 degree F
0.5 MT Diesel Oil
(xxii) Tank cleaning system:
Fixed Portable
Type: HY-OTC MARK II KAPPA MU 302
No: 29 4
Capacity: 80 M3/HR 34 M3/HR
(xxiii) Hose handling booms 1
SWL 15 Tons
<PAGE> 3
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to communicate
with land stations. In this respect,
Vessel is equipped as follows:
HF Transmitter 400 W Output
MF Transmitter 400 W Output
SSB Transmitter 400 W Output
VHF Transreceivers Channel Nos 57
(ii) Vessel is constructed and equipped upon
delivery under this Charter in accordance
with regulations now existing as to enable
Vessel to transit Suez Canal/ Panama Canal
in accordance with respective latest
navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in
good operating condition. Owner warrants
that this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of SOLAS
as amended.
(v) Vessel's slop retention system has a
capacity of 6,700 tons and is designed to
meet International Pollution Convention
standards as amended in 1969 or thereafter
revised. Oily water separator has a
capacity of - tons/ hour with discharge
concentration in accordance with 1969
convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at - M3/H.
(vii) Vessel is equipped with the following
cargo pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 500 MM Diameter
Direct Filling Lines 500 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is
fitted with expansion bends or of - type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit
( ) port loading and ( ) port
discharging and to permit of
Vessel's deadweight in clean/ballast to be
discharged overboard from cargo/ballast
tanks simultaneously with loading of
cargo.
(xi) Vessel is equipped with float type cargo
tank measuring devices.
(b) Owner will, on Charterer's request,
supply Charterer with copies of Vessel's plans
provided that in the case of a new-building said plans
and said copies shall be supplied to Charterer when
they are made available to Owner by the New Building
Yard.
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall be
deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during the
Term of this Charter, place any additional mortgage,
lien or encumbrance on the Vessel, without the prior
written consent of Charterer, other than liens in
favor of the crew or routine suppliers to the Vessel.
<PAGE> 4
(d) Owner warrants that the Vessel will during
the Original and Extended Periods as well as any
Off-Hire Extension of this Charter be manned by
Officers and Crew of EUROP/INDN/PI and PI
nationality respectively.
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT during the period of service under this Charter, so
OF HIRE that all the representations and warranties set forth
TRADE AND USE in Clause 2 shall, at all times, be true and accurate.
Owner further represents, undertakes warrants that, on
the date Vessel is placed at Charterer's disposal,
Vessel will then be ready with holds and cargo tanks
clear and clean and in every way fitted for the
service and carriage of Crude Oil and/or Dirty
Petroleum Products in bulk maximum three (3) grades
within Vessel's natural segregation and such other
dirty petroleum products and lawful merchandise as may
be suitable for a Vessel of her description and shall
then be tight, staunch and strong, with pipelines,
pumps and heating coils in cargo, slop and bunker
tanks in good working condition, and with a full
complement of properly certified Master, Officers and
Crew for a Vessel of her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 30 May 95 /and simultaneously with its
delivery to Owner from the New Building Yard and shall
in no event perform any voyage on behalf of the Owner
or any other person prior to its being so placed at
Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have received
from the Master written notice that Vessel is in all
respects ready for sea and is at Charterer's disposal
at Onomichi, Japan in or at such readily accessible
dock, wharf or place where she can always safely lie a
float, as Charter or its Agents may direct. However,
hire shall not, in any event, commence before 01 Aug
95 unless with Charterer's written consent and
Charterer shall have the option to cancel this Charter
should Vessel not be ready and placed at Charterer's
disposal in accordance with the provisions hereof,
before 30 Aug 95. Said option to cancel shall be
declared by Charterer not later than the date on which
Vessel is placed at Charterer's disposal delivered to
Owner by New Building Yard, and shall be without
prejudice to any claim for damages Charterer may have
for late tender of Vessel's services.
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading is
prohibited by vessels flag, unless Owner gives written
consent, trading between safe ports in such lawful
trades as Charterer or its Agents may direct, subject
to Institute Warranties and Clauses, attached hereto
as Attachment A; but including ports on the East Coast
of Canada, St. Lawrence River, North American Lakes,
Greenland and Baltic Sea upon payment by Charterer of
any additional insurance premiums required by Vessel's
underwriters for such latter trading. Charterer shall
be entitled to send Vessel through the Straits of
Magellan at any time of the year. In the event that
the Vessel shall, for any reason whatsoever, be unable
to be employed or trade in any port of the World
(subject to the limitations specifically set forth
herein) Charterer, at its option, may immediately
terminate this Charter and release the Vessel to the
Owner's use pursuant to the provisions of Clause 14.
Charterer shall be permitted to breach IWL reimbursing
Owner for all additional premiums incurred.
<PAGE> 5
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers, Crew,
tackle, apparel, furniture, fuel, provisions and
stores. Charterer shall have the option of shipping
any lawful dry cargo in bulk for which the Vessel or
her tanks are suitable and lawful merchandise in cases
and/or cans and/or other packages in Vessel's
available, suitable space subject, however, to
Master's approval as to kind and character, amount and
stowage. All charges for dunnage, loading, stowing and
discharging so incurred shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged, or
lightened, at any port, place, berth, dock, anchorage,
or submarine line or alongside lighters or vessels
whether in a port or not as Charterer may direct.
Notwithstanding anything contained in this Clause or
any other provisions of this Charter, Charterer shall
not be deemed to warrant the safety of any port,
berth, dock, anchorage, submarine line and/ or lighter
or lightening Vessel and shall not be liable for any
loss, damage, injury, or delay resulting from
conditions at or on such ports, place, berths, docks,
anchorages, submarine lines and/or lighter or
lightening Vessel whether in a port or not, not caused
by Charterer's fault or neglect or which could have
been avoided by the exercise of reasonable care on the
part of the Master or Owner.
(g) Charterer, at its risk and responsibility,
may send passengers and/ or super-cargo in available
accommodations in Vessel upon any voyage made under
this Charter, with Owner to provide provisions and all
requisites, except liquors, and Charterer to pay at
the rate of THREE UNITED STATES DOLLARS (U.S. $3.00)
per diem for each person during the time of such
travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of <See clause 53>. Payments
OF HIRE of said hire shall be made monthly in advance in
United States Dollars, without any discount,
adjustment or deduction, except as specifically set
forth in this clause or otherwise in this Charter, at
to owners designated bank. Hire shall commence from
the hour (GMT) and day that the Vessel is placed at
Charterer's disposal, as provided for in Clause 3, and
shall continue until the hour (GMT) and date that the
Vessel is released to the Owner by the Charterer in
accordance with the provisions of this Charter unless
the Vessel is an actual or constructive total loss or
is Off-Hire in accordance with the terms of this
Charter. Any hire paid in advance and not earned
shall be refundable and payable to Charterer by Owner
and or by any party to whom Owner may have assigned
the hire; Owner at all times remaining ultimately
responsible therefor.
(b) Charterer shall be entitled to deduct from
the payments of hire due under paragraph (a) of this
Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's agents in
excess of the said revolving fund; (ii) lay-up savings
in accordance with Clause 12; (iii) any previous
overpayments of hire, including payments made with
respect to periods of Off-Hire and including any
overpayments of hire concerning which a bona fide
dispute may exist; (iv) Off-Hire anticipated to occur
during month for which payment of Hire is to be made;
(v) any sums due or estimated to be due under Clause 6
and (vi) any other sums to which Charterer is entitled
under this Charter.
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also less
the amount estimated by Charterer to become payable by
Owner for fuel and water on release of the Vessel to
Owner as provided in Clause 14. Upon release of the
Vessel any difference between the estimated and actual
amounts shall be refunded to or paid by the Charterer
as and to the extent that the case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of her
loss, or if such time is unknown, at the time when the
Vessel was last heard of. If the Vessel should become
a constructive total loss, hire shall cease at the
time of the casualty resulting in such loss. In either
or any case, hire paid in advance and not earned, plus
any other monies then owing to Charterer under the
provisions of this Charter, shall be immediately
returned to the Charterer. If the Vessel should be
Off-Hire or missing when a payment of hire would
otherwise be due, such payment shall be postponed
until the Off-Hire ceases or the safety of the Vessel
is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights the
Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days of
receipt of said notification from the Owner, failing
which the Owner may have the right to withdraw the
Vessel from the service of the Charterer without
prejudice to any other claim the Owner may have
against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from any
such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire applicable
to said increase in deadweight and until an Addendum
to this Charter embodying such agreement is executed
by Owner and Charterer the said increase in deadweight
shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account not
compensated for by the revolving fund provided for
herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for Owner's account,
(iv) all amounts due under other provisions of this
Charter, and (v) any damages sustained by Charterer as
a result of a breach of any provision of this Charter
by the Owner.
<PAGE> 6
OWNER'S 6. (a) In addition to the warranties set forth
GUARANTEES AND in this Charter, Owner stipulates, agrees and
ADJUSTMENTS guarantees, that Vessel will, throughout the term of
OF HIRE this Charter, maintain on all sea passages, from sea
buoy to sea buoy, a guaranteed average speed of no
less than 14.0 knots loaded and 14.0 knots in ballast
(which speed will be determined by taking the total
mileage of the actual course which Vessel has
travelled divided by the total hours at sea is shown
in the log books, excluding stops at sea which are
considered as periods of Off-Hire under the terms of
this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 43 MT Laden/
41.5 Ballast 380 CST .
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty-four
(24) hours against a head pressure of one hundred
and twenty-five pounds per square inch at the ship's
manifold, and that Vessel is fitted with sufficient
block valves for complete segregation to enable
simultaneous loading and discharge from a centralized
manifold amidships of three (3) grades of cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each subsequent
period of six (6) calendar months; provided, however,
that if there should be a period of less than six (6)
calendar months remaining prior to release of the
Vessel to Owner, then not later than the commencement
of the final month of this Charter. If, in respect of
any such period or prior period it is found that
Vessel has failed to maintain the speed and/or fuel
consumption and/or pumping performance guaranteed
pursuant to this Clause 6, Charterer shall be
compensated, including retroactive compensation, in
respect of each failing as follows: (i) SPEED---For
each knot, or pro rata for each part of a knot, below
the guaranteed speeds, a reduction in hire per
calendar month of USD 0.375 per each DWT of Vessel's
capacity reflected in Clause 2; (ii) FUEL
CONSUMPTION--Owner to pay Charterer for each Metric
ton, or pro rata for each part of a Metric ton,
consumed in excess of the guaranteed daily consumption
for main engines and auxiliaries, at Charterer's
Actual average price for the particular grade of
bunkers at during the particular period, or prior
period, under review; (iii) PUMPING---Vessel to be
considered Off-Hire for each hour, or part of an hour,
in excess of the maximum number of hours guaranteed
herein for completing pumping of a full cargo or
pro-rata for a part thereof against a head pressure at
Vessel's manifold of one hundred and twenty-five
pounds per square inch. Charterer shall determine
whether any delay in pumping is the result of unique
characteristics of the cargo being pumped or of the
receiving terminal, and, if so, shall consider this
factor in assessing the pumping performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive hours, whether at sea or in port
including but not limited to drydocking pursuant to
Clause 8 or for an accumulation of more than twelve
(12) hours during any voyage (a voyage to be
considered as a round voyage beginning at the time
Vessel tenders for loading at the first port under
the voyage in question until such time as it
completes the voyage and tenders for loading on the
subsequent voyage) or, (ii) for any number of hours
(including any part of an hour) due to deficiency of
personnel or stores, strike, boycotts (including
boycotts by persons or organizations other than
officers and/or members of the crew), refusal to
sail, breach of orders, or failure to have on board
Certificate required pursuant to Clause 21 or neglect
of duty on the part of the Master, Officers, or Crew,
or in order to render salvage services, obtain
medical aid or treatment, or for landing any sick or
injured person or the body of a deceased person
(other than a passenger carried under Clause 3 (g)
hereof), or due to any other deviation (including the
putting back or into any port other than that to
which Vessel is bound), then hire shall cease for all
time so lost until Vessel is again in an efficient
state to resume her service and has regained a point
of progress equivalent to that when hire ceased
hereunder.
(b) Cost of fuel, at Current Market Price,
and water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all
port charges, pilotage, towage and other expenses
incurred during such period and/or consequent upon
putting into any port or place other than to which
Vessel is bound, shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention
by authorities, unless due to Charterer's fault,
shall be for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by
any governmental authority, or by any legal action
against Vessel or Owner, or by any strike or boycott
including a boycott by other than the Vessel's
officers or crew, whereby Vessel is rendered
unavailable for Charterer's service for a period of
thirty (30) days or more, unless brought about by act
or neglect of Charterer, Charterer may, by written
notice given before Vessel is free and ready to
resume service, elect to terminate this Charter, or
to suspend same until the service can again be
resumed, without prejudice to any other rights
Charterer may have under this Charter or to any claim
it may have for damages. Hire shall cease during the
entire time Vessel is out of Charterer's service due
to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all overhaul
and other necessary repairs, at approximately twelve
(12)/ twenty-four (24) month intervals, for which
purpose Charterer shall allow Vessel to proceed to an
appropriate port. Owner shall be solely responsible
therefor, and also for gasfreeing the Vessel, upon
each such occasion. All towage, pilotage, fuel, at
Current Market Price, water, if a steamer, and other
expenses incurred while proceeding to and from, and
while in, drydock, shall also be for Owner's account.
<PAGE> 7
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or
discharge under Charterer's orders, hire shall be
suspended from the time Vessel receives free pratique
on arrival, if in ballast, or upon completion of
discharge of cargo, if loaded, until Vessel is again
ready for service. In case of drydocking at a port
other than where Vessel loads, discharges or bunkers,
payment of hire shall cease from the time of
deviation until Vessel is again in the same or
equivalent position as though no deviation had
occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging, twelve
(12) months after Vessel is placed at Charterer's
disposal and thereafter at least once within every
twelve (12)/ twenty-four (24 ) months, shall be at
Charterer's option.
OWNER OR 9. (a) Owner will provide and/or pay for (i)
CHARTERER TO provisions, supplies, deck and engine stores, galley
PROVIDE and cabin stores, all fresh water if a motor vessel,
all P.&I., Hull and other insurance on Vessel or with
respect to Vessel's liabilities, wages of Master,
Officers and Crew, consular fees pertaining to the
Master, Officers-and Crew, (ii) galley and crew fuel
at the monthly rate payable to Charterer of
, and (iii) the cost of all fuel oil,
and/or diesel oil and water, if a steamer, on board
when Vessel is released to Owner hereunder, not to
exceed tons fuel and tons
water, respectively (costs for fuel and/ or diesel oil
to be determined at the current Market Prices at the
port and date of Vessel's release to Owner; or, if not
available there, at current Market Prices at the
nearest port where bunkers are available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of ; (iii)
all overtime of Officers and Crew worked at Charter's
request, at the monthly rate of ,
and (iv) cost of fuel oil and/ or diesel oil and
water, if a steamer, on board when Vessel is placed at
Charterer's disposal, not to exceed tons
fuel and tons water, respectively
(costs for fuel and/or diesel oil to be determined at
the current Market Prices at the port and date the
Vessel is placed at Charterer's disposal where Hire
begins; or, if not available there, at current Market
Prices at the nearest port where bunkers are
available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel
oil and water, if a steamer, expended or consumed in
a General Average situation and also during a
consequent related drydocking or repair of the Vessel
and said reimbursement shall not thereafter be deemed
to be a General Average expenditure.
DUTIES OF 10. (a) Master shall prosecute his voyages with
MASTER utmost dispatch and render all reasonable assistance
with Vessel's crew and equipment, including hoisting,
connecting and disconnecting hoses at ports or sea
berths where requested or where such assistance is a
normal practice. Master and Chief Engineer shall be
required to be fluent in written and oral English.
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate
it and if necessary make a change in the
appointments.
(d) Master shall be furnished by Charterer,
from time to time, with all requisite instructions
and sailing orders, and both he and the Engineers
shall keep full and correct logs of the voyages,
which shall at all times be available to Charterer
and its Agents, and abstracts thereof, or such other
forms or reports as Charterer may require, shall be
sent to Charterer from each port of call. Failure of
the Master to promptly forward the Vessel's abstract
and other forms and reports in compliance with the
above shall be adequate grounds for Charterer's
invoking the provisions of Clause 10 (c).
ADDITIONAL 11. Charterer, subject to Owner's approval,
EQUIPMENT which shall not be unreasonably withheld, shall be at
liberty to fit, at Charterer's expense if any,
additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/ or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying
up the Vessel for all or any portion of the term of
this Charter, in which case hire hereunder shall
continue to be paid, but there shall be credited
against such hire the whole amount which Owner shall
save (or reasonably should save) during such period of
lay-up. Should Charterer, having exercised the option
granted hereunder, desire the Vessel again to be put
into service, Owner will, upon receipt of written
notice from Charterer to such effect, immediately take
steps to restore Vessel to service as promptly as
possible. The option granted to Charterer hereunder
may be exercised one or more times during the currency
of this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any
person or government under circumstances which are
equivalent to requisition of title), this Charter
shall automatically terminate as of the effective
date of such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of
thirty (30) days, the Charterer shall have the option
to terminate this Charter upon written notice to the
Owner. Any periods of Off-Hire under this Clause
shall be subject to the Charterer's option for
Off-Hire extension set forth in Clause 1 hereof.
<PAGE> 8
RELEASE OF 14. Unless the employment of the Vessel under
VESSEL TO OWNER this Charter shall previously have been terminated by
loss of the Vessel or otherwise, the Charterer shall
redeliver the Vessel to Owner (herein called "release
of the Vessel to the Owner's use"), free of cargo, at
the expiration of the term of this Charter stated in
Clause 1 (including any extension thereof provided in
said Clause or elsewhere in this Charter), at a port
World-Wide at Charterer's option (herein called "Port
of Release"). At the Charterer's option, the Vessel
may be released to the Owner with tanks in a clean or
dirty condition; and in no event shall Charterer be
required to so release the Vessel gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other terms
set forth or specified in the subparagraphs to this
paragraph (b) and such terms shall be incorporated
verbatim or be deemed incorporated by reference in any
such Bill of Lading. In the subparagraphs to this
paragraph (b) and in any Act referred to therein, the
word "Carrier" shall include the Owner of the Vessel.
(1) Clause Paramount. This Bill of Lading shall
have effect subject to the provisions of the Carriage
of Goods by Sea Act of the United States, approved
April 16, 1936, except that if this Bill of Lading is
issued at a place where any other Act, ordinance, or
legislation gives statutory effect to the
International Convention for the Unification of
Certain Rules relating to Bills of Lading at Brussels,
August 1924, then this Bill of Lading shall have
effect subject to the provisions of such Act,
ordinance, or legislation. The applicable Act,
ordinance, or legislation (hereinafter called "Act")
shall be deemed to be incorporated herein and nothing
herein contained shall be deemed a surrender by the
Owner or Carrier of any of its rights or immunities or
an increase of any of its responsibilities or
liabilities under the Act. If any term of this Bill of
Lading be repugnant to the Act to any extent, such
term shall be void to that extent but no further.
(2) New Jason Clause. In the event of accident,
danger, damage, or disaster before or after the
commencement of the voyage, resulting from any cause
whatsoever, whether due to negligence or not, for
which, or for the consequences of which, the Carrier
is not responsible, by statute, contract or otherwise,
the cargo, shippers, consignees, or owners of the
cargo shall contribute with the Carrier in General
Average to the payment of any sacrifices, losses, or
expenses of a General Average nature that may be made
or incurred and shall pay salvage and special charges
incurred in respect of the cargo. If a salving ship is
owned or operated by the Carrier, salvage shall be
paid for as fully as if the said salving ship or ships
belonged to strangers. Such deposit as the Carrier or
its Agents may deem sufficient to cover the estimated
contribution of the cargo and any salvage and special
charges thereon shall, if required, be made by the
cargo, shippers, consignees or owners of the cargo to
the Carrier before delivery.
(3) General Average. General Average shall be
adjusted, stated, and settled according to
York/Antwerp Rules 1974, as amended, but subject to
the provisions of Clause 9 (c) of this Charter and, as
to matters not provided for by those rules, according
to the laws and usages at the Port of New York (except
that any payment made by Carrier to Charterer under
Clause 20(b) or to a Government or others to "remove"
oil, as defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil Pollution
(TOVALOP), as well as any other payments, with respect
to the Vessel or Owner's Liability for Oil Pollution
damages, shall not be deemed to be General Average
sacrifices or expenditures). If a General Average
statement is required, it shall be prepared at such
port by an Adjuster at the Port of New York appointed
by the Charterer of the Vessel and approved by the
Carrier. Such Adjuster shall attend to the settlement
and the collection of the General Average, subject to
customary charges. General Average Agreements and/ or
security shall be furnished by Carrier and/or
Charterer of the Vessel, and/or Carrier and/or
Consignee of cargo, if requested. Any cash deposit
being made as security to pay General Average and/or
salvage shall be remitted to the Average Adjuster and
shall be held by him at his risk in a special account
in a duly authorized and licensed bank at the place
where the General Average statement is prepared.
(4) Both to Blame. If the Vessel comes into
collision with another ship as a result of the
negligence of the other ship and any act, neglect or
default of the Master, mariner, pilot, or the servants
of the Carrier in the navigation or in the management
of the Vessel, the owners of the cargo carried
hereunder shall indemnify the Carrier against all loss
or liability to the other or noncarrying ship or her
owners insofar as such loss or liability represents
loss of, or damage to, or any claim whatsoever of the
owners of said cargo, paid or payable by the other or
non-carrying ship or her owners to the Owner of said
cargo and set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of their
claim against the carrying ship or Carrier. The
foregoing provisions shall also apply where the
owners, operators, or those in charge of any ships or
objects other than, or in addition to, the colliding
ships or object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any provision of this
Charter to the contrary notwithstanding, the Carrier
shall have the benefit of all limitations of, and
exemptions from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or rule of
law for the time being.
(6) Deviation Clause. The Vessel shall have liberty
to sail with or without pilots, to tow or be towed, to
go to the assistance of Vessels in distress, to
deviate for the purpose of saving life or property or
of landing any ill or injured person on board, and to
call for fuel at any port or ports in or out of the
regular course of the voyage, subject to the
provisions of this Clause.
WAR CLAUSES 16. (a) No contraband of war shall be shipped,
AND RISKS but petroleum and/or its products shall not be deemed
contraband of war for the purposes of this Clause.
Vessel shall not, be required, without the consent of
Owner, which shall not be unreasonably withheld, to
enter any port of zone which is involved in a state of
war, warlike operations or hostilities, whether there
be a declaration of war or not, where it might
reasonably be expected to be subject to capture,
seizure or arrest, or to a hostile act by a
belligerent power (the term "power" meaning any de
jure or de facto authority or any other purported
governmental organization maintaining naval, military
or air forces).
<PAGE> 9
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or under
a Government program in respect of such voyage, route
or port of loading or discharge. If such consent is
given by Owner, Charterer will pay the provable
additional cost of insuring Vessel against all war
risks in an amount equal to (i) the value under her
ordinary marine policy but (ii) in no event exceeding
USD Fifty-six Million (US$56,000,000). If such
insurance is not obtainable commercially or through a
Government program, Vessel shall not be required to
enter or remain at any such port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer shall,
in respect of voyages to any such port or zone, assume
the provable additional cost of wages and insurance
properly incurred in connection with Master, Officers
and Crew as a consequence of such war, warlike
operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her properly
manned, equipped and supplied; or from any other cause
of whatsoever kind arising without the actual fault or
privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War; act
of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout, stoppage or restraint of
labor, picketing, boycott, or other labor disturbances
or interruptions, from whatever cause, either partial
or general; or riot or civil commotion.
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's option
to cancel this Charter, as provided in this Charter.
DAMAGES TO, OR 18. Owner guarantees and warrants that Vessel is
CLAIMS ON CARGO constructed and equipped to carry, without admixture,
at least three (3) qualities or descriptions of oil
but, subject to this, neither Owner nor Vessel shall
be responsible for any on Cargo admixture if more than
three (3) qualities of oil are shipped, nor for
leakage, contamination or deterioration in quality of
the cargo, unless the admixture, leakage,
contamination or deterioration results from (i)
unseaworthiness existing at the time of loading or at
the inception of the voyage which was discoverable by
the exercise of due diligence, or (ii) error or fault
of the servants of Owner in the loading, care or
discharge of the cargo or (iii) because of any breach
of warranty set forth in this Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/ or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from and
limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when no
tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the provisions
of Clause 11 except that such equipment shall be at
Owner's expense, if required by applicable law or to
otherwise meet the provisions of this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred, sold
or assigned by the Owner to any person or persons or
to a company related or affiliated to the Owner
without receipt of Charterer's prior written consent.
However, if Charterer shall assign the Charter to any
company related or affiliated to it, it shall assign
the obligations assumed hereunder, without any prior
written consent of the Owner, provided that Charterer
shall, until termination of the Charter, also remain
primarily liable for the obligations it has assumed
under this Clause.
WATER QUALITY 21. (a) Owner warrants that the Vessel
performing under this Charter shall carry onboard a
Certificate of Financial Responsibility meeting the
requirements of the U.S. Federal Maritime Commission
promulgated pursuant to the U.S. "Water Quality
Improvement Act of 1970."
<PAGE> 10
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7 (a).
SALVAGE 22. (a) All salvage moneys earned by Vessel
shall be divided equally between Owner and Charterer
after deducting Master's, Officers' and Crew's share,
legal expenses, hire of Vessel during time lost, value
of fuel consumed, repairs of damage, if any, and any
other extraordinary loss or expense sustained as a
result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit as
Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage or
special charges thereon, as may ultimately be required
to be paid by the Shippers, Consignees or Owners of
the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and
CLAUSES paint Vessel's funnel with its own colors or affix
thereto Charterer's stack insignia, if desired, at the
Charterer's expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES OF 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the
event Vessel is so sold without Charterer's consent,
in addition to its other rights and Sub-letting
Charterer may at its absolute discretion, terminate
the Charter whereupon Owner shall immediately
reimburse Charterer for any and hire paid in advance
and not earned, the cost of bunkers, and any other
sums to which Charterer is entitled under this
Sub-letting Charter as well as damages which Charterer
may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required
to give Owner hereunder shall be addressed (i) to
Owner at its place of business first designated in
this Charter or (ii) to Owner's Agent c/o Teekay
Shipping Ltd., PO Box SS6293 at Scotiabank Building,
1st Floor, Rawson Square, Bay Street, Nassau, Bahamas.
Any notice which Owner is required to give to
Charterer hereunder shall be addressed to Charterer at
c/o Teekay Shipping Ltd., PO Box SS6293, Scotiabank
Building, 1st Floor, Rawson Square, Bay Street,
Nassau. Any notices given by letter by either party
shall, irrespective of any provision of law otherwise
applicable, be deemed to have been given when such
notice, addressed to the other party, or to Owner's or
Charterer's Agent, at its place of business designated
in the Charter, is posted.
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to
ARBITRATION be regarded as essential parts of the Charter, which
is conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
(b) The interpretation of this Charter and the
rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses set forth
herein are for convenience of reference only and shall
not affect the interpretation of this Charter. No
modification, waiver or discharge of any term in this
Charter shall be valid unless it is reduced to writing
and executed by the party to be charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall be
put to arbitration in New York pursuant to the laws
related to arbitration there in force, before a Board
of three persons, consisting of one (1) arbitrator to
be appointed by Owner, one (1) by Charterer, and one
(1) by the two so chosen. In the event that either
Owner or Charterer shall state a dispute and designate
an arbitrator, in writing, the other party shall have
twenty (20) days, excluding Saturdays, Sundays and
legal holidays to designate his arbitrator failing
which the single arbitrator can render an award
hereunder. The decision of any two (2) of the three
(3) on any point or points shall be final. Until such
time as the arbitrators finally close the Hearings,
either party shall have the right by written notice
served on the arbitrators and on the other party to
specify further disputes or differences under this
Charter for hearing and determination. The arbitrators
may grant any relief, and render an award, which they
or a majority of them, deem just and equitable and
within the scope of the agreement of the parties,
including but not limited to, specific performance.
Awards pursuant to this Clause may include costs,
including a reasonable allowance for attorneys' fees,
and judgments may be entered upon any award made
herein in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through 54
as attached are hereby incorporated into this Charter
Party.
WITNESS OWNER VSSI OCEANS INC
By
-------------------- --------------------------
WITNESS CHARTERER PALM SHIPPING INC
By
-------------------- --------------------------
<PAGE> 11
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations promulgated thereunder (hereinafter
called "U.S. Regulations"); the International Convention for the
Prevention of Pollution from Ships (MARPOL 1973) and the 1978 Protocol
thereto as applicable; and the International Convention for Safety of
Lives at Sea (SOLAS 1974) and the 1978 Protocol thereto as applicable
(the foregoing conventions and protocols hereinafter in this clause
called "IMCO Regulations"). Owner warrants that the Vessel shall carry
on board certifications of compliance with U.S. Regulations and IMCO
Regulations and any other records or documentations as may be required
by the U.S. Government authorities, Flay State authorities or port and
government authorities for any port within the trading areas described
in Clause 3 (d). Any delays, losses, expenses or damages arising as a
result of failure to comply with this clause shall be for Owner's
account and in no case shall Charterer be liable for hire or other
expenses during any time lost as a result of Vessel's failure to
comply with the foregoing U.S. Regulations and IMCO Regulations and/or
carry On board the necessary certification of compliance.
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
<PAGE> 12
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred or
expected to be incurred by Charterer for Owner's account less any
amounts that Charterer otherwise may be permitted to withhold or
deduct under the terms of this Charter, and less the estimated value
of bunker fuel remaining at the termination of the voyage; and when
the Vessel is redelivered, any overpayment shall be refunded by Owner
or underpayment paid by Charterer. Notwithstanding the provisions of
Clause 1 hereof, should the Vessel be upon a voyage at expiry of the
period of this Charter, Charterer shall have the use of the Vessel at
the same rate and conditions for such extended time as may be
necessary for the completion of the round voyage on which she is
engaged until her return to a port of redelivery as provided in this
Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and
any extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each
occasion when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel's mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank cleaning and
surveyor's fees, hotel expense, cost of travelling, etc., and the
Vessel shall remain on-hire while changing mode.
<PAGE> 13
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance of the
Notes outstanding during the 365 day period subsequent to the
Determination Date.
y = the principal repayment requirements during the 365 day
period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel (excluding
depreciation and amortization) for the 365 day period
subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the vessel, divided
by the number of years (and fractions thereof) between the
completion of the most recent drydocking of the vessel and the
commencement of that next drydocking.
The Determination Dates shall occur on January 10, 1994 and annually
thereafter. In addition, there shall be a Determination Date upon the
occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock budgets
as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent (1-1/4%)
on all hires to Teekay Shipping Limited in the Bahamas which
commission shall be deductible from hire as and when paid.
<PAGE> 1
EXHIBIT 10.2
TIME CHARTER, AS AMENDED, DATED JANUARY 4, 1994
BETWEEN VSSI ATLANTIC INC. AND PALM SHIPPING INC.
IT IS THIS 4th DAY OF January, 1994 mutually agreed
between VSSI ATLANTIC INC. a Liberian corporation,
maintaining an office and place of business at 80
Broad Street, Monrovia, Liberia as Owner (herein
called "Owner") of the Bahamian flag motor/tank/vessel
to be built by Onomichi Dockyard Co. Ltd. for delivery
to Owner on or about 28 January, 1994 , named TORBEN
SPIRIT (herein called "Vessel") and PALM SHIPPING
INC., a Liberian corporation, maintaining an office
and place of business at c/o TEEKAY SHIPPING LTD, PO
Box SS-6293, Scotiabank Building 1st Floor, Rawson
Square, Bay Street, Nassau, Bahamas (herein called
"Charterer"), that the Owner lets and the Charterer
hires the use and service of the Vessel for a period
and on the terms and conditions hereinafter set forth.
TERM 1. (a) The term of this Charter shall be for a
period of about ten (10) consecutive years
(herein called "Original Period") plus any extensions
thereof as provided in paragraph (b) below. The
Original Period shall commence when the Vessel is
placed at the Charterer's disposal, as provided in
Clause 3. The word "about" as used above shall mean
"thirty (30) days more or less" at Charterer's option
and shall apply to the term of this Charter
consisting of the Original Period plus any extensions
as hereinafter provided.
(b) The term of this Charter may be extended by
Charterer for a period equal to all or any part of
the time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least three (3) months before
the expiration of the Original Period, or Extended
Period if Charterer has exercised the option under
Clause 2(b). Any Off-Hire incurred after the above
notice shall have been given, whether said Off-Hire
occurs within the Original Period, Extended Period
and/or Off-Hire Extension, shall without any further
written notice, be a further Off-Hire Extension.
Off-Hire, for the purposes of this Clause 2 (c) shall
include incidents of Off-Hire specified in Clause 7
as well as any other period(s) for which cesser or
suspension of the payment(s) of hire is (are) allowed
hereunder during the Original Period, Extended
Period, and, or Off-Hire Extension.
OWNER'S WARRANTIES 2. (a) Owner undertakes and warrants that, on
the date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of
the particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 755,044 Bbls.*
98% full 739,943 Bbls*
(ii) Weight of stores, etc., permanently deducted
from cargo carrying capacity L.T.*
(iii) a. Fresh water consumption per day
Boilers 5 L.T.*
Potable 20 L.T.*
b. Capacity of evaporators per day
Boilers 40 L.T.*
Potable L.T.*
c. Normal quantity of fresh water
deductible from cargo carrying
capacity 250 L.T.*
(iv) Estimated loss of cargo carrying capacity
due to "sag" when fully loaded with light,
medium, heavy cargo
Light ( S.G.) N/A L.T.
Medium ( S.G.) N/A L.T.*
Heavy ( S.G.) N/A L.T.*
(v) The Vessel can carry ABT 97,000 L.T.*** (of
2,240 lbs.) total deadweight (as certified
by Classification Society) of cargo,
bunkers, water, and stores on an assigned
summer freeboard of ft. in * in salt water
equalling 47 ft. 04 in.** summer mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks for propulsion
(98% full) Approx 65 Days at sea*
(ii) Total capacity of fresh water tanks (100%
full)
Boilers 315M3*
Potable 97M3*
(iii) Total capacity of permanent segregated clean
ballast tanks (100% full) 39,418M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo Pumps
a. Number 3
b. Make Shinko
c. Type Steam Turbine Centrifugal
d. Design rated capacity of each pump in
cubic meters per hour 2,700 M3/Hr.
and corresponding discharge head in
meters 150 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Motor Driven Reciprocating
d. Design rated capacity of each pump in
cubic meters per hour 200 M3/Hr.
and corresponding total discharge
head in meters 150 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 2
b. Make Shinko
c. Type Motor Driven Centrifugal
d. Design capacity each
pump 1,700 M3/Hr.
<PAGE> 2
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any direction
equivalent to the safe working load of the cargo
hose lifting equipment and will meet OCIMF
recommendations.
(i) a. Number of manifold connections 3
b. Diameter of manifold connections
inches 16 in.
c. Distance between centers of manifold
connections 8 ft. 02in.
d. Distance from manifold connections
to ship's side 14 ft. 04 in.
e. Distance center of manifold
connections to deck 6 ft. 02 in.
f. Distance bow/center of
manifold 408 ft. 07in.
(ii) Cargo Manifold Reducing Pieces
Vessel is equipped with a sufficient number
of cargo manifold reducing pieces of steel or
equivalent material to permit presenting of
flanges of
12 in. at 150 ASA
10 in. at 150 ASA
8 in. at 150 ASA
(5) HEATING COILS
(i) Type of coils Strait
Material of which manufactured Copper Alloy
(ii) Ratio heating surface/volume
a. Slop Tanks 0.060 M2/M3
b. Bunker Tanks Aft 0.060 M2/M3
Fore 0.060 M2/M3
c. Cargo Tanks Fore 0.0095 M2/M3
Wings 0.0166 M2/M3
Center 0.0083 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous cargo at
maximum rate of 12,000 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 803 ft. 02 in.*
(ii) Fully loaded summer draft in salt water
of a density of 1.025 maximum
47 ft. 03 in.**
on an assigned freeboard of 20 ft. 05 in.*
(iii) Fresh Water allowance ft. 12.8 in.*
(iv) Light ship draft Forward 2 ft. 00 in.*
Aft 15 ft 03 in.*
Mean 8 ft 00 in.*
(v) Moulded Depth 70 ft 10 in.*
(vi) Light ship freeboard ft in.*
(vii) TPI on light ship draft L.T.*
(viii) TPI on summer draft 220 L.T.*
(ix) Extreme beam 135' 02" *
(x) Gross Reg. Tons 57,486 Tons**
(xi) Net Reg. Tons 28,742 Tons**
(xii) Suez Canal tonnage 54,649 Tons**
Panama Canal tonnage - Tons**
(xiii) Flag of Registry Bahamian
(xiv) Call letters C6MF7
(xv) Classification Society NK
(xvi) Type Engines Diesel
(xvii) Mooring winches
Number 6 Sets
Type Hydraulic
Capacity Tons pull 15T x 15 at M/Min
Placement 2 Sets FOCSLE
2 Sets Midship
2 Sets AFT
(xviii) Trial Speed fully loaded ***
(xix) Fuel Rate at maximum power on trial **
(xx) Guaranteed speed in all weather
Loaded: 14 KT
Ballast: 14 KT
(xxi) Guaranteed fuel consumption in all weather
Amount: 43 MT Laden/41.5 MT Ballast
Type: HVF 380 CST
Sec. Redwood #1 at 100 degrees F
0.5 MT Diesel Oil
(xxii) Tank cleaning system: Fixed Portable
Type:
No:
Capacity:
(xxiii) Hose handling crane 1
SWL 15 Tons
<PAGE> 3
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to communicate
with land stations. In this respect, Vessel
is equipped as follows:
HF Transmitter 36 DBW Output
MF Transmitter 800 W Output
SSB Transmitter Output
VHF Transreceivers Channel Nos Multi
(ii) Vessel is constructed and equipped upon
delivery under this Charter in accordance
with regulations now existing as to enable
Vessel to transit Suez Canal/Panama Canal
in accordance with respective latest
navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in good
operating condition. Owner warrants that
this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of SOLAS
as amended.
(v) Vessel's slop retention system has a
capacity of 26,644 MT and is
designed to meet International Pollution
Convention standards as amended in 1969 or
thereafter revised. Oily water separator
has a capacity of
tons/hour with discharge concentration in
accordance with 1969 convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at 10,000 M3/H.
(vii) Vessel is equipped with the following cargo
pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 550 MM Diameter
Direct Filling Lines 550 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is fitted
with expansion bends or of dresser type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit three (3)
port loading and three (3) port discharging
and to permit 39% of Vessel's deadweight in
clean/ballast to be discharged overboard
from cargo/ballast tanks simultaneously
with loading of cargo.
(xi) Vessel is equipped with float type cargo
tank measuring devices. Maximum rates at
which vessel's lines will receive Bunkers:
Fuel M3/Hour
Diesel 100 M3/Hour
(b) Owner will, on Charterer's request,
supply Charterer with copies of Vessel's plans
provided that in the case of a new-building said
plans and said copies shall be supplied to Charterer
when they are made available to Owner by the New
Building Yard.
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall
be deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during
the Term of this Charter, place any additional
mortgage, lien or encumbrance on the Vessel, without
the prior written consent of Charterer, other than
liens in favor of the crew or routine suppliers to
the Vessel.
(d) Owner warrants that the Vessel will during
the Original and Extended Periods as well as any
Off-Hire Extension of this Charter be manned by
Officers and Crew of European/Indian/Filipino and
Filipino nationality respectively.
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT OF during the period of service under this Charter, so
HIRE, TRADE AND USE that all the representations and warranties set forth
in Clause 2 shall, at all times, be
true and accurate. Owner further represents,
undertakes warrants that, on the date Vessel is placed
at Charterer's disposal, Vessel will then be ready
with holds and cargo tanks clear and clean and in
every way fitted for the service and carriage of Crude
Oil and/or Dirty Petroleum Products including crude
condensates, dirty naphtha and carbon black feedstock
in bulk maximum three (3) grades within Vessel's
natural segregation and such other dirty petroleum
products and lawful merchandise as may be suitable for
a Vessel of her description and shall then be tight,
staunch and strong, with pipelines, pumps and heating
coils in cargo, slop and bunker tanks in good working
condition, and with a full complement of properly
certified Master, Officers and Crew for a Vessel of
her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 31 JAN 94/and simultaneously with its
delivery to Owner from the New Building Yard and
shall in no event perform any voyage on behalf of the
Owner or any other person prior to its being so
placed at Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have received
from the Master written notice that Vessel is in all
respects ready for sea and is at Charterer's disposal
at Onomichi in or at such readily accessible dock,
wharf or place where she can always safely lie a
float, as Charter or its Agents may direct. However,
hire shall not, in any event, commence before 15 JAN
94 unless with Charterer's written consent and
Charterer shall have the option to cancel this Charter
should Vessel not be ready and placed at Charterer's
disposal in accordance with the provisions hereof,
before 15 FEB 94. Said option to cancel shall be
declared by Charterer not later than the date on which
Vessel is placed at Charterer's disposal delivered to
Owner by New Building Yard, and shall be without
prejudice to any claim for damages Charterer may have
for late tender of Vessel's services.
<PAGE> 4
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading is
prohibited by vessel's flag, unless Owner gives
written consent, trading between safe ports in such
lawful trades as Charterer or its Agents may direct,
subject to Institute Warranties and Clauses, attached
hereto as Attachment A; but including ports on the
East Coast of Canada, St. Lawrence River, North
American Lakes, Greenland and Baltic Sea upon payment
by Charterer of any additional insurance premiums
required by Vessel's underwriters for such latter
trading. Charterer shall be entitled to send Vessel
through the Straits of Magellan at any time of the
year. In the event that the Vessel shall, for any
reason whatsoever, be unable to be employed or trade
in any port of the World (subject to the limitations
specifically set forth herein) Charterer, at its
option, may immediately terminate this Charter and
release the Vessel to the Owner's use pursuant to the
provisions of Clause 14. Charterer shall be permitted
to breach IWL reimbursing Owner for all additional
premiums incurred.
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers,
Crew, tackle, apparel, furniture, fuel, provisions
and stores. Charterer shall have the option of
shipping any lawful dry cargo in bulk for which the
Vessel or her tanks are suitable and lawful
merchandise in cases and/or cans and/or other
packages in Vessel's available, suitable space
subject, however, to Master's approval as to kind and
character, amount and stowage. All charges for
dunnage, loading, stowing and discharging so incurred
shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged,
or lightened, at any port, place, berth, dock,
anchorage, or submarine line or alongside lighters or
vessels whether in a port or not as Charterer may
direct. Notwithstanding anything contained in this
Clause or any other provisions of this Charter,
Charterer shall not be deemed to warrant the safety
of any port, berth, dock, anchorage, submarine line
and/ or lighter or lightening Vessel and shall not be
liable for any loss, damage, injury, or delay
resulting from conditions at or on such ports, place,
berths, docks, anchorages, submarine lines and/or
lighter or lightening Vessel whether in a port or
not, not caused by Charterer's fault or neglect or
which could have been avoided by the exercise of
reasonable care on the part of the Master or Owner.
(g) Charterer, at its risk and
responsibility, may send passengers and/ or
super-cargo in available accommodations in Vessel
upon any voyage made under this Charter, with Owner
to provide provisions and all requisites, except
liquors, and Charterer to pay at the rate of THREE
UNITED STATES DOLLARS (U.S. $3.00) per diem for each
person during the time of such travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of <See Clause 53>. Payments
OF HIRE of said hire shall be made monthly in advance in
United States Dollars, without any discount,
adjustment or deduction, except as specifically set
forth in this clause or otherwise in this Charter, at
Chase Manhattan Bank, New York, New York, Account of
Willow Limited 910-576825. Hire shall commence from
the hour (GMT) and day that the Vessel is placed at
Charterer's disposal, as provided for in Clause 3, and
shall continue until the hour (GMT) and date that the
Vessel is released to the Owner by the Charterer in
accordance with the provisions of this Charter unless
the Vessel is an actual or constructive total loss or
is Off-Hire in accordance with the terms of this
Charter. Any hire paid in advance and not earned
shall be refundable and payable to Charterer by Owner
and or by any party to whom Owner may have assigned
the hire; Owner at all times remaining ultimately
responsible therefor.
(b) Charterer shall be entitled to deduct
from the payments of hire due under paragraph (a) of
this Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's agents in
excess of the said revolving fund; (ii) lay-up
savings in accordance with Clause 12; (iii) any
previous overpayments of hire, including payments
made with respect to periods of Off-Hire and
including any overpayments of hire concerning which a
bona fide dispute may exist; (iv) Off-Hire
anticipated to occur during month for which payment
of Hire is to be made; (v) any sums due or estimated
to be due under Clause 6 and (vi) any other sums to
which Charterer is entitled under this Charter.
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also
less the amount estimated by Charterer to become
payable by Owner for fuel and water on release of the
Vessel to Owner as provided in Clause 14. Upon
release of the Vessel any difference between the
estimated and actual amounts shall be refunded to or
paid by the Charterer as and to the extent that the
case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of
her loss, or if such time is unknown, at the time
when the Vessel was last heard of. If the Vessel
should become a constructive total loss, hire shall
cease at the time of the casualty resulting in such
loss. In either or any case, hire paid in advance and
not earned, plus any other monies then owing to
Charterer under the provisions of this Charter, shall
be immediately returned to the Charterer. If the
Vessel should be Off-Hire or missing when a payment
of hire would otherwise be due, such payment shall be
postponed until the Off-Hire ceases or the safety of
the Vessel is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights
the Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days
of receipt of said notification from the Owner,
failing which the Owner may have the right to
withdraw the Vessel from the service of the Charterer
without prejudice to any other claim the Owner may
have against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from
any such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire
applicable to said increase in deadweight and until
an Addendum to this Charter embodying such agreement
is executed by Owner and Charterer the said increase
in deadweight shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account
not compensated for by the revolving fund provided
for herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for Owner's
account, (iv) all amounts due under other provisions
of this Charter, and (v) any damages sustained by
Charterer as a result of a breach of any provision of
this Charter by the Owner.
<PAGE> 5
OWNER'S 6. (a) In addition to the warranties set forth
GUARANTEES AND in this Charter, Owner stipulates, agrees and
ADJUSTMENTS guarantees, that Vessel will, throughout the term of
OF HIRE this Charter, maintain on all sea passages, from sea
buoy to sea buoy, a guaranteed average speed of no
less than 14.0 knots loaded and 14.0 knots in ballast
(which speed will be determined by taking the total
mileage of the actual course which Vessel has
travelled divided by the total hours at sea is shown
in the log books, excluding stops at sea which are
considered as periods of Off-Hire under the terms of
this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 43 MT
Laden/41.5 MT Ballast 380 CST tons.
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty-four (24)
hours against a head pressure of one hundred and
twenty-five pounds per square inch at the ship's
manifold, and that Vessel is fitted with sufficient
block valves for complete segregation to enable
simultaneous loading and discharge from a centralized
manifold amidships of three (3) grades of cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each subsequent
period of six (6) calendar months; provided, however,
that if there should be a period of less than six (6)
calendar months remaining prior to release of the
Vessel to Owner, then not later than the commencement
of the final month of this Charter. If, in respect of
any such period or prior period it is found that
Vessel has failed to maintain the speed and/or fuel
consumption and/or pumping performance guaranteed
pursuant to this Clause 6, Charterer shall be
compensated, including retroactive compensation, in
respect of each failing as follows: (i) SPEED--For
each knot, or pro rata for each part of a knot, below
the guaranteed speeds, a reduction in hire per
calendar month of
per each DWT of Vessel's capacity reflected in
Clause 2; (ii) FUEL CONSUMPTION--Owner to pay
Charterer for each Metric ton, or pro rata for each
part of a Metric ton, consumed in excess of the
guaranteed daily consumption for main engines and
auxiliaries, at Charterer's Actual average price for
the particular grade of bunkers at Ras Tanura during
the particular period, or prior period, under review;
(iii) PUMPING--Vessel to be considered Off-Hire for
each hour, or part of an hour, in excess of the
maximum number of hours guaranteed herein for
completing pumping of a full cargo or pro-rata for a
part thereof against a head pressure at Vessel's
manifold of one hundred and twenty-five pounds per
square inch. Charterer shall determine whether any
delay in pumping is the result of unique
characteristics of the cargo being pumped or of the
receiving terminal, and, if so, shall consider this
factor in assessing the pumping performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive
<PAGE> 6
hours, whether at sea or in port including but not
limited to drydocking pursuant to Clause 8 or for an
accumulation of more than twelve (12) hours during
any voyage (a voyage to be considered as a round
voyage beginning at the time Vessel tenders for
loading at the first port under the voyage in
question until such time as it completes the voyage
and tenders for loading on the subsequent voyage) or,
(ii) for any number of hours (including any part of
an hour) due to deficiency of personnel or stores,
strike, boycotts (including boycotts by persons or
organizations other than officers and/or members of
the crew), refusal to sail, breach of orders, or
failure to have on board Certificate required
pursuant to Clause 21 or neglect of duty on the part
of the Master, Officers, or Crew, or in order to
render salvage services, obtain medical aid or
treatment, or for landing any sick or injured person
or the body of a deceased person (other than a
passenger carried under Clause 3 (g) hereof), or due
to any other deviation (including the putting back or
into any port other than that to which Vessel is
bound), then hire shall cease for all time so lost
until Vessel is again in an efficient state to resume
her service and has regained a point of progress
equivalent to that when hire ceased hereunder.
(b) Cost of fuel, at Current Market Price,
and water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all
port charges, pilotage, towage and other expenses
incurred during such period and/or consequent upon
putting into any port or place other than to which
Vessel is bound, shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention
by authorities, unless due to Charterer's fault,
shall be for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by
any governmental authority, or by any legal action
against Vessel or Owner, or by any strike or boycott
including a boycott by other than the Vessel's
officers or crew, whereby Vessel is rendered
unavailable for Charterer's service for a period of
thirty (30) days or more, unless brought about by act
or neglect of Charterer, Charterer may, by written
notice given before Vessel is free and ready to
resume service, elect to terminate this Charter, or
to suspend same until the service can again be
resumed, without prejudice to any other rights
Charterer may have under this Charter or to any claim
it may have for damages. Hire shall cease during the
entire time Vessel is out of Charterer's service due
to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all
overhaul and other necessary repairs, at
approximately sixty (60)/
( ) month intervals, for which purpose Charterer
shall allow Vessel to proceed to an appropriate port.
Owner shall be solely responsible therefor, and also
for gasfreeing the Vessel, upon each such occasion.
All towage, pilotage, fuel, at Current Market Price,
water, if a steamer, and other expenses incurred
while proceeding to and from, and while in, drydock,
shall also be for Owner's account.
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or
discharge under Charterer's orders, hire shall be
suspended from the time Vessel receives free pratique
on arrival, if in ballast, or upon completion of
discharge of cargo, if loaded, until Vessel is again
ready for service. In case of drydocking at a port
other than where Vessel loads, discharges or bunkers,
payment of hire shall cease from the time of
deviation until Vessel is again in the same or
equivalent position as though no deviation had
occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging, sixty (60)
months after Vessel is placed at Charterer's disposal
and thereafter at least once within every sixty
(60) months, shall be at Charterer's option.
OWNER OR 9. (a) Owner will provide and/or pay for (i)
CHARTERER TO provisions, supplies, deck and engine stores, galley
PROVIDE and cabin stores, all fresh water if a motor vessel,
all P.&I., Hull and other insurance on Vessel or with
respect to Vessel's liabilities, wages of Master,
Officers and Crew, consular fees pertaining to the
Master, Officers-and Crew, (ii) galley and crew fuel
at the monthly rate payable to Charterer of
, and
(iii) the cost of all fuel oil, and/or diesel oil and
water, if a steamer, on board when Vessel is released
to Owner hereunder, not to exceed
tons fuel and
tons water, respectively (costs for fuel and/or diesel
oil to be determined at the current Market Prices at
the port and date of Vessel's release to Owner; or, if
not available there, at current Market Prices at the
nearest port where bunkers are available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of
; (iii) all overtime of Officers and Crew
worked at Charter's request, at the monthly rate of
, and (iv) cost
of fuel oil and/ or diesel oil and water, if a
steamer, on board when Vessel is placed at Charterer's
disposal, not to exceed
tons fuel and
tons water, respectively (costs for fuel and/or diesel
oil to be determined at the current Market Prices at
the port and date the Vessel is placed at Charterer's
disposal where Hire begins; or, if not available
there, at current Market Prices at the nearest port
where bunkers are available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel
oil and water, if a steamer, expended or consumed in
a General Average situation and also during a
consequent related drydocking or repair of the Vessel
and said reimbursement shall not thereafter be deemed
to be a General Average expenditure.
DUTIES OF 10. (a) Master shall prosecute his voyages with
MASTER utmost dispatch and render all reasonable assistance
with Vessel's crew and equipment, including hoisting,
connecting and disconnecting hoses ports or sea berths
where requested or where such assistance is normal
practice. Master and Chief Engineer shall be required
to be fluent in written and oral English.
<PAGE> 7
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate
it and if necessary make a change in the
appointments.
(d) Master shall be furnished by Charterer,
from time to time, with all requisite instructions
and sailing orders, and both he and the Engineers
shall keep full and correct logs of the voyages,
which shall at all times be available to Charterer
and its Agents, and abstracts thereof, or such other
forms or reports as Charterer may require, shall be
sent to Charterer from each port of call. Failure of
the Master to promptly forward the Vessel's abstract
and other forms and reports in compliance with the
above shall be adequate grounds for Charterer's
invoking the provisions of Clause 10 (c).
ADDITIONAL 11. Charterer, subject to Owner's approval, which
EQUIPMENT shall not be unreasonably withheld, shall be at
liberty to fit, at Charterer's expense if any,
additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/ or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying up
the Vessel for all or any portion of the term of this
Charter, in which case hire hereunder shall continue
to be paid, but there shall be credited against such
hire the whole amount which Owner shall save (or
reasonably should save) during such period of lay-up.
Should Charterer, having exercised the option granted
hereunder, desire the Vessel again to be put into
service, Owner will, upon receipt of written notice
from Charterer to such effect, immediately take steps
to restore Vessel to service as promptly as possible.
The option granted to Charterer hereunder may be
exercised one or more times during the currency of
this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any
person or government under circumstances which are
equivalent to requisition of title), this Charter
shall automatically terminate as of the effective
date of such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of
thirty (30) days, the Charterer shall have the option
to terminate this Charter upon written notice to the
Owner. Any periods of Off-Hire under this Clause
shall be subject to the Charterer's option for
Off-Hire extension set forth in Clause 1 hereof.
RELEASE OF VESSEL 14. Unless the employment of the Vessel under
TO OWNER this Charter shall previously have been terminated by
loss of the Vessel or otherwise, the Charterer shall
redeliver the Vessel to Owner (herein called "release
of the Vessel to the Owner's use"), free of cargo, at
the expiration of the term of this Charter stated in
Clause 1 (including any extension thereof provided in
said Clause or elsewhere in this Charter), at a port
World-Wide at Charterer's option (herein called "Port
of Release"). At the Charterer's option, the Vessel
may be released to the Owner with tanks in a clean or
dirty condition; and in no event shall Charterer be
required to so release the Vessel gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other
terms set forth or specified in the subparagraphs to
this paragraph (b) and such terms shall be
incorporated verbatim or be deemed incorporated by
reference in any such Bill of Lading. In the
subparagraphs to this paragraph (b) and in any Act
referred to therein, the word "Carrier" shall include
the Owner of the Vessel.
(1) Clause Paramount. This Bill of
Lading shall have effect subject to the
provisions of the Carriage of Goods by Sea
Act of the United States, approved April 16,
1936, except that if this Bill of Lading is
issued at a place where any other Act,
ordinance, or legislation gives statutory
effect to the International Convention for
the Unification of Certain Rules relating to
Bills of Lading at Brussels, August 1924,
then this Bill of Lading shall have effect
subject to the provisions of such Act,
ordinance, or legislation. The applicable
Act, ordinance, or legislation (hereinafter
called "Act") shall be deemed to be
incorporated herein and nothing herein
contained shall be deemed a surrender by the
Owner or Carrier of any of its rights or
immunities or an increase of any of its
responsibilities or liabilities under the
Act. If any term of this Bill of Lading be
repugnant to the Act to any extent, such term
shall be void to that extent but no further.
(2) New Jason Clause. In the event of
accident, danger, damage, or disaster before
or after the commencement of the voyage,
resulting from any cause whatsoever, whether
due to negligence or not, for which, or for
the consequences of which, the Carrier is not
responsible, by statute, contract or
otherwise, the cargo, shippers, consignees,
or owners of the cargo shall contribute with
the Carrier in General Average to the payment
of any sacrifices, losses, or expenses of a
General Average nature that may be made or
incurred and shall pay salvage and special
charges incurred in respect of the cargo. If
a salving ship is owned or operated by the
Carrier, salvage shall be paid for as fully
as if the said salving ship or ships belonged
to strangers. Such deposit as the Carrier or
its Agents may deem sufficient to cover the
estimated contribution of the cargo and any
salvage and special charges thereon shall, if
required, be made by the cargo, shippers,
consignees or owners of the cargo to the
Carrier before delivery.
<PAGE> 8
(3) General Average. General Average
shall be adjusted, stated, and settled
according to York/Antwerp Rules 1974, as
amended, but subject to the provisions of
Clause 9 (c) of this Charter and, as to
matters not provided for by those rules,
according to the laws and usages at the Port
of New York (except that any payment made by
Carrier to Charterer under Clause 20(b) or to
a Government or others to "remove" oil, as
defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil
Pollution (TOVALOP), as well as any other
payments, with respect to the Vessel or
Owner's Liability for Oil Pollution damages,
shall not be deemed to be General Average
sacrifices or expenditures). If a General
Average statement is required, it shall be
prepared at such port by an Adjuster at the
Port of New York appointed by the Charterer
of the Vessel and approved by the Carrier.
Such Adjuster shall attend to the settlement
and the collection of the General Average,
subject to customary charges. General Average
Agreements and/ or security shall be
furnished by Carrier and/or Charterer of the
Vessel, and/or Carrier and/or Consignee of
cargo, if requested. Any cash deposit being
made as security to pay General Average
and/or salvage shall be remitted to the
Average Adjuster and shall be held by him at
his risk in a special account in a duly
authorized and licensed bank at the place
where the General Average statement is
prepared.
(4) Both to Blame. If the Vessel comes
into collision with another ship as a result
of the negligence of the other ship and any
act, neglect or default of the Master,
mariner, pilot, or the servants of the
Carrier in the navigation or in the
management of the Vessel, the owners of the
cargo carried hereunder shall indemnify the
Carrier against all loss or liability to the
other or noncarrying ship or her owners
insofar as such loss or liability represents
loss of, or damage to, or any claim
whatsoever of the owners of said cargo, paid
or payable by the other or non-carrying ship
or her owners to the Owner of said cargo and
set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of
their claim against the carrying ship or
Carrier. The foregoing provisions shall also
apply where the owners, operators, or those
in charge of any ships or objects other than,
or in addition to, the colliding ships or
object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any
provision of this Charter to the contrary
notwithstanding, the Carrier shall have the
benefit of all limitations of, and exemptions
from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or
rule of law for the time being.
(6) Deviation Clause. The Vessel shall
have liberty to sail with or without pilots,
to tow or be towed, to go to the assistance
of Vessels in distress, to deviate for the
purpose of saving life or property or of
landing any ill or injured person on board,
and to call for fuel at any port or ports in
or out of the regular course of the voyage,
subject to the provisions of this Clause.
WAR CLAUSES 16. (a) No contraband of war shall be shipped, but
AND RISKS petroleum and/or its products shall not be deemed
contraband of war for the purposes of this Clause.
Vessel shall not, be required, without the consent of
Owner, which shall not be unreasonably withheld, to
enter any port of zone which is involved in a state of
war, warlike operations or hostilities, whether there
be a declaration of war or not, where it might
reasonably be expected to be subject to capture,
seizure or arrest, or to a hostile act by a
belligerent power (the term "power" meaning any de
jure or de facto authority or any other purported
governmental organization maintaining naval, military
or air forces).
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or under
a Government program in respect of such voyage, route
or port of loading or discharge. If such consent is
given by Owner, Charterer will pay the provable
additional cost of insuring Vessel against all war
risks in an amount equal to (i) the value under her
ordinary marine policy but (ii) in no event exceeding
Fifty-five Million Three-Hundred Thousand USD
(55,300,000 USD). If such insurance is not obtainable
commercially or through a Government program, Vessel
shall not be required to enter or remain at any such
port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer
shall, in respect of voyages to any such port or
zone, assume the provable additional cost of wages
and insurance properly incurred in connection with
Master, Officers and Crew as a consequence of such
war, warlike operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her
properly manned, equipped and supplied; or from any
other cause of whatsoever kind arising without the
actual fault or privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War;
act of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout, stoppage or restraint of
labor, picketing, boycott, or other labor
disturbances or interruptions, from whatever cause,
either partial or general; or riot or civil
commotion.
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's
option to cancel this Charter, as provided in this
Charter.
<PAGE> 9
DAMAGES TO, OR 18. Owner guarantees and warrants that Vessel is
CLAIMS ON CARGO constructed and equipped to carry, without admixture,
at least three (3) qualities or descriptions of oil
but, subject to this, neither Owner nor Vessel shall
be responsible for any on Cargo admixture if more than
three (3) qualities of oil are shipped, nor for
leakage, contamination or deterioration in quality of
the cargo, unless the admixture, leakage,
contamination or deterioration results from (i)
unseaworthiness existing at the time of loading or at
the inception of the voyage which was discoverable by
the exercise of due diligence, or (ii) error or fault
of the servants of Owner in the loading, care or
discharge of the cargo or (iii) because of any breach
of warranty set forth in this Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from
and limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when
no tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the
provisions of Clause 11 except that such equipment
shall be at Owner's expense, if required by
applicable law or to otherwise meet the provisions of
this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred,
sold or assigned by the Owner to any person or
persons or to a company related or affiliated to the
Owner without receipt of Charterer's prior written
consent. However, if Charterer shall assign the
Charter to any company related or affiliated to it,
it shall assign the obligations assumed hereunder,
without any prior written consent of the Owner,
provided that Charterer shall, until termination of
the Charter, also remain primarily liable for the
obligations it has assumed under this Clause.
WATER 21. (a) Owner warrants that the Vessel performing
QUALITY under this Charter shall carry onboard a Certificate
of Financial Responsibility meeting the requirements
of the U.S. Federal Maritime Commission promulgated
pursuant to the U.S. "Water Quality Improvement Act of
1970."
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7 (a).
SALVAGE 22. (a) All salvage moneys earned by Vessel
shall be divided equally between Owner and Charterer
after deducting Master's, Officers' and Crew's share,
legal expenses, hire of Vessel during time lost,
value of fuel consumed, repairs of damage, if any,
and any other extraordinary loss or expense sustained
as a result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit
as Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage
or special charges thereon, as may ultimately be
required to be paid by the Shippers, Consignees or
Owners of the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and
CLAUSES paint Vessel's funnel with its own colors or affix
thereto Charterer's stack insignia, if desired, at
Charterer's expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES OF 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the event
Vessel is so sold without Charterer's consent, in
addition to its other rights and Sub-letting Charterer
may at its absolute discretion, terminate the Charter
whereupon Owner shall immediately reimburse Charterer
for any and hire paid in advance and not earned, the
cost of bunkers, and any other sums to which Charterer
is entitled under this Sub-letting Charter as well as
damages which Charterer may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required to
give Owner hereunder shall be addressed (i) to Owner
at its place of business first designated in this
Charter or (ii) to Owner's Agent TEEKAY SHIPPING
INC., PO Box SS-6293 at Scotiabank Building, First
Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notice which Owner is required to give
to Charterer hereunder shall be addressed to
Charterer at c/o TEEKAY SHIPPING, PO Box SS-6293,
Scotiabank Bldg, 1st Floor, Rawson Square, Bay
St., Nassau, Bahamas. Any notices given by letter
by either party shall, irrespective of any provision
of law otherwise applicable, be deemed to have been
given when such notice, addressed to the other party,
or to Owner's or Charterer's Agent, at its place of
business designated in the Charter, is posted.
<PAGE> 10
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to be
ARBITRATION regarded as essential parts of the Charter, which is
conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
(b) The interpretation of this Charter and the
rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses set forth
herein are for convenience of reference only and shall
not affect the interpretation of this Charter. No
modification, waiver or discharge of any term in this
Charter shall be valid unless it is reduced to writing
and executed by the party to be charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall
be put to arbitration in New York pursuant to
the laws related to arbitration there in force,
before a Board of three persons, consisting of one
(1) arbitrator to be appointed by Owner, one (1) by
Charterer, and one (1) by the two so chosen. In the
event that either Owner or Charterer shall state a
dispute and designate an arbitrator, in writing, the
other party shall have twenty (20) days, excluding
Saturdays, Sundays and legal holidays to designate
his arbitrator failing which the single arbitrator
can render an award hereunder. The decision of any
two (2) of the three (3) on any point or points shall
be final. Until such time as the arbitrators finally
close the Hearings, either party shall have the right
by written notice served on the arbitrators and on
the other party to specify further disputes or
differences under this Charter for hearing and
determination. The arbitrators may grant any relief,
and render an award, which they or a majority of
them, deem just and equitable and within the scope of
the agreement of the parties, including but not
limited to, specific performance. Awards pursuant to
this Clause may include costs, including a reasonable
allowance for attorneys' fees, and judgments may be
entered upon any award made herein in any court
having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through
54 as attached are hereby incorporated into this
Charter Party.
WITNESS OWNER VSSI ATLANTIC INC
__________ By _________________________
WITNESS CHARTERER PALM SHIPPING INC
__________ By _________________________
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
<PAGE> 11
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations promulgated thereunder (hereinafter
called "U.S. Regulations"); the International Convention for the
Prevention of Pollution from Ships (MARPOL 1973) and the 1978 Protocol
thereto as applicable; and the International Convention for Safety of
Lives at Sea (SOLAS 1974) and the 1978 Protocol thereto as applicable
(the foregoing conventions and protocols hereinafter in this clause
called "IMCO Regulations"). Owner warrants that the Vessel shall carry
on board certifications of compliance with U.S. Regulations and IMCO
Regulations and any other records or documentations as may be required
by the U.S. Government authorities, Flay State authorities or port and
government authorities for any port within the trading areas described
in Clause 3 (d). Any delays, losses, expenses or damages arising as a
result of failure to comply with this clause shall be for Owner's
account and in no case shall Charterer be liable for hire or other
expenses during any time lost as a result of Vessel's failure to
comply with the foregoing U.S. Regulations and IMCO Regulations and/or
carry On board the necessary certification of compliance.
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
<PAGE> 12
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred or
expected to be incurred by Charterer for Owner's account less any
amounts that Charterer otherwise may be permitted to withhold or
deduct under the terms of this Charter, and less the estimated value
of bunker fuel remaining at the termination of the voyage; and when
the Vessel is redelivered, any overpayment shall be refunded by Owner
or underpayment paid by Charterer. Notwithstanding the provisions of
Clause 1 hereof, should the Vessel be upon a voyage at expiry of the
period of this Charter, Charterer shall have the use of the Vessel at
the same rate and conditions for such extended time as may be
necessary for the completion of the round voyage on which she is
engaged until her return to a port of redelivery as provided in this
Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and
any extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each
occasion when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel's mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank cleaning and
surveyor's fees, hotel expense, cost of travelling, etc., and the
Vessel shall remain on-hire while changing mode.
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance
of the Notes outstanding during the 365 day period
subsequent to the Determination Date.
y = the principal repayment requirements during the
365 day period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel
(excluding depreciation and amortization) for the 365
day period subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the
vessel, divided by the number of years (and fractions
thereof) between the completion of the most recent
drydocking of the vessel and the commencement of that
next drydocking.
The Determination Dates shall occur on January 10, 1994 and annually
thereafter. In addition, there shall be a Determination Date upon the
occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock budgets
as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent (1-1/4%) on
all hires to Teekay Shipping Limited in the Bahamas which commission
shall be deductible from hire as and when paid.
<PAGE> 1
EXHIBIT 10.3
TIME CHARTER, AS AMENDED, DATED FEBRUARY 1, 1992
BETWEEN VSSI APPIAN INC. AND PALM SHIPPING INC.
IT IS THIS 1st DAY OF February 1992 mutually agreed
between VSSI APPIAN INC. a Liberian corporation,
maintaining an office and place of business at 80
Broad Street, Monrovia as Owner (herein called
"Owner") of the Bahamian flag motor/tank/vessel to be
built by Onomichi Dockyard Co., Ltd. for delivery to
Owner on or about 26 February 1992, named MAYON SPIRIT
(herein called "Vessel") and PALM SHIPPING INC., a
Liberian corporation, maintaining an office and place
of business at c/o TEEKAY SHIPPING LIMITED, P.O. Box
SS-6293, Scotiabank Bldg. First Floor, Rawson Square,
Bay Street, Nassau, Bahamas (herein called
"Charterer"), that the Owner lets and the Charterer
hires the use and service of the Vessel for a period
and on the terms and conditions hereinafter set forth.
TERM 1. (a) The term of this Charter shall be for a
period of about ten (10) consecutive years (herein
called "Original Period") plus any extensions thereof
as provided in paragraph (b)below. The Original Period
shall commence when the Vessel is placed at the
Charterer's disposal, as provided in Clause 3. The
word "about" as used above shall mean "thirty (30)
days more or less" at Charterer's option and shall
apply to the term of this Charter consisting of the
Original Period plus any extensions as hereinafter
provided.
(b) The term of this Charter may be extended
by Charterer for a period equal to all or any part of
the time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least three (3) months before the
expiration of the Original Period, or Extended Period
if Charterer has exercised the option under Clause
2(b). Any Off-Hire incurred after the above notice
shall have been given, whether said Off-Hire occurs
within the Original Period, Extended Period and/or
Off-Hire Extension, shall without any further written
notice, be a further Off-Hire Extension. Off-Hire, for
the purposes of this Clause 2 (c) shall include
incidents of Off-Hire specified in Clause 7 as well as
any other period(s) for which cesser or suspension of
the payment(s) of hire is (are) allowed hereunder
during the Original Period, Extended Period, and, or
Off-Hire Extension.
OWNER'S WARRANTIES 2. (a) Owner undertakes and warrants that, on
the date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of
the particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 755,469 Bbls.*
98% full 740,360 Bbls*
(ii) Weight of stores, etc., permanently
deducted from cargo carrying
capacity LT.*
(iii) a. Fresh water consumption per day
Boilers 5 L.T.*
Potable 20 L.T.*
b. Capacity of evaporators per day
Boilers 40 L.T.*
Potable L.T.*
c. Normal quantity of fresh water
deductible from cargo carrying
capacity 250 L.T.*
(iv) Estimated loss of cargo carrying capacity
due to "sag" when fully loaded with light,
medium, heavy cargo
Light ( S.G.) N/A L.T.
Medium ( S.G.) N/A L.T.*
Heavy ( S.G.) N/A L.T.*
(v) The Vessel can carry ABT 95,768L.T.*** (of
2,240 lbs.) total deadweight (as certified
by Classification Society) of cargo,
bunkers, water, and stores on an assigned
summer freeboard of ft in* in salt water
equalling 47 ft. 03 in.** summer mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks for propulsion
(98% full) APPROX 65 Days at sea*
(ii) Total capacity of fresh water tanks (100%
full)
Boilers 315 M3*
Potable 97 M3*
(iii) Total capacity of permanent segregated
clean ballast tanks (100% full) 39,418 M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo Pumps
a. Number 3
b. Make Shinko
c. Type Steam Turbine Centrifugal
d. Design rated capacity of each pump in
cubic meters per hour 2,700 M3/Hr.
and corresponding discharge head in
meters 150 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Steam Driven Reciprocating
d. Design rated capacity of each pump in
cubic meters per hour 200 M3/Hr.
and corresponding total discharge head
in meters 150 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 2
b. Make Shinko
c. Type Motor Driven Centrifugal
d. Design capacity each pump 1,700 M3/Hr.
<PAGE> 2
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any direction
equivalent to the safe working load of the cargo
hose lifting equipment and will meet OCIMF
recommendations.
(i) a. Number of manifold connections 3
b. Diameter of manifold connections
inches 16 in.
c. Distance between centers of manifold
connections 8 ft. 02 in.
d. Distance from manifold connections
to ship's side 14 ft. 04 in.
e. Distance center of manifold connections
to deck 6 ft. 02 in.
f. Distance bow/center of
manifold 408 ft. 07 in.
(ii) Cargo Manifold Reducing Pieces
Vessel is equipped with a sufficient
number of cargo manifold reducing pieces
of steel or equivalent material to permit
presenting of flanges of
12 in. at 150 ASA
10 in. at 150 ASA
8 in. at 150 ASA
(5) HEATING COILS
(i) Type of coils Strait
Material of which
manufactured Copper Alloy
(ii) Ratio heating surface/volume
a. Slop Tanks 0.060 M2/M3
b. Bunker Tanks Aft 0.060 M2/M3
Fore 0.060 M2/M3
c. Cargo Tanks Fore 0.0095 M2/M3
Wings 0.0166 M2/M3
Center 0.0083 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous cargo at
maximum rate of 12,000 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 803 ft. 02 in.*
(ii) Fully loaded summer draft in salt water
of a density of 1.025
maximum 47 ft. 03 in.**
on an assigned freeboard of ft. in.*
(iii) Fresh Water allowance ft. in.*
(iv) Light ship draft Forward ft. in.*
Aft ft in.*
Mean ft in.*
(v) Moulded Depth 70 ft 10 in.*
(vi) Light ship freeboard ft in.*
(vii) TPI on light ship draft L.T.*
(viii) TPI on summer draft 220 L.T.*
(ix) Extreme beam 135' 02"*
(x) Gross Reg. Tons 57448 Tons**
(xi) Net Reg. Tons 28742 Tons**
(xii) Suez Canal tonnage Tons**
Panama Canal tonnage Tons**
(xiii) Flag of Registry Bahamian
(xiv) Call letters C6KW3
(xv) Classification Society NK
(xvi) Type Engines Diesel
(xvii) Mooring winches
Number 6 Sets
Type Hydraulic
Capacity Tons pull 15T x 15 M/Min
Placement 2 Sets FOCSLE
2 Sets MIDSHIP
2 Sets AFT
(xviii) Trial Speed fully loaded ***
(xix) Fuel Rate at maximum power on trial **
(xx) Guaranteed speed in all weather
Loaded: 14 KT
Ballast: 14 KT
(xxi) Guaranteed fuel consumption in all weather
Amount: 43 MT Laden/41.5 MT Ballast
Type:
HVF 38 CST
Sec. Redwood #1 at 100 degrees F
0.5 MT Diesel Oil
(xxii) Tank cleaning system: Fixed Portable
Type:
No:
Capacity:
(xxiii) Hose handling crane
No. each side 1
SWL 15 Tons
<PAGE> 3
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to communicate
with land stations. In this respect, Vessel
is equipped as follows:
HF Transmitter 36 DBW Output
MF Transmitter 800 W Output
SSB Transmitter Output
VHF Transreceivers Channel Nos Multi
(ii) Vessel is constructed and equipped upon
delivery under this Charter in accordance
with regulations now existing as to enable
Vessel to transit Suez Canal/Panama Canal
in accordance with respective latest
navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in good
operating condition. Owner warrants that
this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of
SOLAS as amended.
(v) Vessel's slop retention system has a
capacity of 26,644 MT and is designed to
meet International Pollution Convention
standards as amended in 1969 or thereafter
revised. Oily water separator has a
capacity of tons/hour with discharge
concentration in accordance with 1969
convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at 10,000 M3/H.
(vii) Vessel is equipped with the following
cargo pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 550 MM Diameter
Direct Filling Lines 550 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is
fitted with expansion bends or of dresser
type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit three (3)
port loading and three (3) port discharging
and to permit 39% of Vessel's deadweight in
clean/ballast to be discharged overboard
from cargo/ballast tanks simultaneously
with loading of cargo.
(xi) Vessel is equipped with float type cargo
tank measuring devices. Maximum rates
at which vessel's lines will receive
bunkers:
Fuel 600 M3/Hour
Diesel 100 M3/Hour
(b) Owner will, on Charterer's request,
supply Charterer with copies of Vessel's plans
provided that in the case of a new-building said
plans and said copies shall be supplied to Charterer
when they are made available to Owner by the New
Building Yard.
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall
be deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during
the Term of this Charter, place any additional
mortgage, lien or encumbrance on the Vessel, without
the prior written consent of Charterer, other than
liens in favor of the crew or routine suppliers to
the Vessel.
(d) Owner warrants that the Vessel will during
the Original and Extended Periods as well as any
Off-Hire Extension of this Charter be manned by
Officers and Crew of European/Indian/PI and PI
nationality respectively.
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT OF during the period of service under this Charter, so
HIRE, TRADE AND that all the representations and warranties set forth
USE in Clause 2 shall, at all times, be true and accurate.
Owner further represents, undertakes warrants that, on
the date Vessel is placed at Charterer's disposal,
Vessel will then be ready with holds and cargo tanks
clear and clean and in every way fitted for the
service and carriage of Crude Oil and/or Dirty
Petroleum Products including crude condensates, dirty
naphtha and carbon black feedstock in bulk maximum
three (3) grades within Vessel's natural segregation
and such other dirty petroleum products and lawful
merchandise as may be suitable for a Vessel of her
description and shall then be tight, staunch and
strong, with pipelines, pumps and heating coils in
cargo, slop and bunker tanks in good working
condition, and with a full complement of properly
certified Master, Officers and Crew for a Vessel of
her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 31 MAR 92/and simultaneously with its
delivery to Owner from the New Building Yard and
shall in no event perform any voyage on behalf of the
Owner or any other person prior to its being so
placed at Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have received
from the Master written notice that Vessel is in all
respects ready for sea and is at Charterer's disposal
at Onomichi, Japan in or at such readily accessible
dock, wharf or place where she can always safely lie a
float, as Charter or its Agents may direct. However,
hire shall not, in any event, commence before 01 FEB
92 unless with Charterer's written consent and
Charterer shall have the option to cancel this Charter
should Vessel not be ready and placed at Charterer's
disposal in accordance with the provisions hereof,
before 31 MARCH 92. Said option to cancel shall be
declared by Charterer not later than the date on which
Vessel is placed at Charterer's disposal delivered to
Owner by New Building Yard, and shall be without
prejudice to any claim for damages Charterer may have
for late tender of Vessel's services.
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading is
prohibited by vessel's flag, unless Owner gives
written consent, trading between safe ports in such
lawful trades as Charterer or its Agents may direct,
subject to Institute Warranties and Clauses, attached
hereto as Attachment A; but including ports on the
East Coast of Canada, St. Lawrence River, North
American Lakes, Greenland and Baltic Sea upon payment
by Charterer of any additional insurance premiums
required by Vessel's underwriters for such latter
trading. Charterer shall be entitled to send Vessel
through the Straits of Magellan at any time of the
year. In the event that the Vessel shall, for any
reason whatsoever, be unable to be employed or trade
in any port of the World (subject to the limitations
specifically set forth herein) Charterer, at its
option, may immediately terminate this Charter and
release the Vessel to the Owner's use pursuant to the
provisions of Clause 14. Charterer shall be permitted
to breach IWL reimbursing Owner for all additional
premiums incurred.
<PAGE> 4
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers,
Crew, tackle, apparel, furniture, fuel, provisions
and stores. Charterer shall have the option of
shipping any lawful dry cargo in bulk for which the
Vessel or her tanks are suitable and lawful
merchandise in cases and/or cans and/or other
packages in Vessel's available, suitable space
subject, however, to Master's approval as to kind and
character, amount and stowage. All charges for
dunnage, loading, stowing and discharging so incurred
shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged,
or lightened, at any port, place, berth, dock,
anchorage, or submarine line or alongside lighters or
vessels whether in a port or not as Charterer may
direct. Notwithstanding anything contained in this
Clause or any other provisions of this Charter,
Charterer shall not be deemed to warrant the safety
of any port, berth, dock, anchorage, submarine line
and/ or lighter or lightening Vessel and shall not be
liable for any loss, damage, injury, or delay
resulting from conditions at or on such ports, place,
berths, docks, anchorages, submarine lines and/or
lighter or lightening Vessel whether in a port or
not, not caused by Charterer's fault or neglect or
which could have been avoided by the exercise of
reasonable care on the part of the Master or Owner.
(g) Charterer, at its risk and
responsibility, may send passengers and/ or
super-cargo in available accommodations in Vessel
upon any voyage made under this Charter, with Owner
to provide provisions and all requisites, except
liquors, and Charterer to pay at the rate of THREE
UNITED STATES DOLLARS (U.S. $3.00) per diem for each
person during the time of such travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of <clause 53>. Payments of
OF HIRE said hire shall be made monthly in advance in United
States Dollars, without any discount, adjustment or
deduction, except as specifically set forth in this
clause or otherwise in this Charter, at Chase
Manhattan Bank, New York, NY, Account of Willow
Limited 910-576825. Hire shall commence from the hour
(GMT) and day that the Vessel is placed at Charterer's
disposal, as provided for in Clause 3, and shall
continue until the hour (GMT) and date that the Vessel
is released to the Owner by the Charterer in
accordance with the provisions of this Charter unless
the Vessel is an actual or constructive total loss or
is Off-Hire in accordance with the terms of this
Charter. Any hire paid in advance and not earned
shall be refundable and payable to Charterer by Owner
and or by any party to whom Owner may have assigned
the hire; Owner at all times remaining ultimately
responsible therefor.
(b) Charterer shall be entitled to deduct
from the payments of hire due under paragraph (a) of
this Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's agents in
excess of the said revolving fund; (ii) lay-up
savings in accordance with Clause 12; (iii) any
previous overpayments of hire, including payments
made with respect to periods of Off-Hire and
including any overpayments of hire concerning which a
bona fide dispute may exist; (iv) Off-Hire
anticipated to occur during month for which payment
of Hire is to be made; (v) any sums due or estimated
to be due under Clause 6 and (vi) any other sums to
which Charterer is entitled under this Charter.
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also
less the amount estimated by Charterer to become
payable by Owner for fuel and water on release of the
Vessel to Owner as provided in Clause 14. Upon
release of the Vessel any difference between the
estimated and actual amounts shall be refunded to or
paid by the Charterer as and to the extent that the
case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of
her loss, or if such time is unknown, at the time
when the Vessel was last heard of. If the Vessel
should become a constructive total loss, hire shall
cease at the time of the casualty resulting in such
loss. In either or any case, hire paid in advance and
not earned, plus any other monies then owing to
Charterer under the provisions of this Charter, shall
be immediately returned to the Charterer. If the
Vessel should be Off-Hire or missing when a payment
of hire would otherwise be due, such payment shall be
postponed until the Off-Hire ceases or the safety of
the Vessel is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights
the Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days
of receipt of said notification from the Owner,
failing which the Owner may have the right to
withdraw the Vessel from the service of the Charterer
without prejudice to any other claim the Owner may
have against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from
any such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire
applicable to said increase in deadweight and until
an Addendum to this Charter embodying such agreement
is executed by Owner and Charterer the said increase
in deadweight shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account
not compensated for by the revolving fund provided
for herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for Owner's
account, (iv) all amounts due under other provisions
of this Charter, and (v) any damages sustained by
Charterer as a result of a breach of any provision of
this Charter by the Owner.
<PAGE> 5
OWNER'S 6. (a) In addition to the warranties set forth
GUARANTEES AND in this Charter, Owner stipulates, agrees and
ADJUSTMENTS guarantees, that Vessel will, throughout the term of
OF HIRE this Charter, maintain on all sea passages, from sea
buoy to sea buoy, a guaranteed average speed of not
less than 14.0 knots loaded and 14.0 knots in ballast
(which speed will be determined by taking the total
mileage of the actual course which Vessel has
travelled divided by the total hours at sea is shown
in the log books, excluding stops at sea which are
considered as periods of Off-Hire under the terms of
this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 43 MT Laden/41.5
MT Ballast 380 CST.
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty four (24)
hours against a head pressure of one hundred and
twenty-five pounds per square inch at the
ship's manifold, and that Vessel is fitted with
sufficient block valves for complete segregation to
enable simultaneous loading and discharge from a
centralized manifold amidships of three (3) grades of
cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each
subsequent period of six (6) calendar months;
provided, however, that if there should be a period
of less than six (6) calendar months remaining prior
to release of the Vessel to Owner, then not later
than the commencement of the final month of this
Charter. If, in respect of any such period or prior
period it is found that Vessel has failed to maintain
the speed and/or fuel consumption and/or pumping
performance guaranteed pursuant to this Clause 6,
Charterer shall be compensated, including retroactive
compensation, in respect of each failing as follows:
(i) SPEED--For each knot, or pro rata for each part
of a knot, below the guaranteed speeds, a reduction
in hire per calendar month of
per each DWT of Vessel's capacity reflected in Clause
2; (ii) FUEL CONSUMPTION--Owner to pay Charterer for
each Metric ton, or pro rata for each part of a Metric
ton, consumed in excess of the guaranteed daily
consumption for main engines and auxiliaries, at
Charterer's Actual average price for the particular
grade of bunkers at Ras Tanura during the particular
period, or prior period, under review; (iii)
PUMPING--Vessel to be considered Off-Hire for each
hour, or part of an hour, in excess of the maximum
number of hours guaranteed herein for completing
pumping of a full cargo or pro-rata for a part thereof
against a head pressure at Vessel's manifold of one
hundred and twenty-five pounds per square inch.
Charterer shall determine whether any delay in pumping
is the result of unique characteristics of the cargo
being pumped or of the receiving terminal, and, if so,
shall consider this factor in assessing the pumping
performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive hours, whether at sea or in port
including but not limited to drydocking pursuant to
Clause 8 or for an accumulation of more than twelve
(12) hours during any voyage (a voyage to be
considered as a round voyage beginning at the time
Vessel tenders for loading at the first port under
the voyage in question until such time as it
completes the voyage and tenders for loading on the
subsequent voyage) or, (ii) for any number of hours
(including any part of an hour) due to deficiency of
personnel or stores, strike, boycotts (including
boycotts by persons or organizations other than
officers and/or members of the crew), refusal to
sail, breach of orders, or failure to have on board
Certificate required pursuant to Clause 21 or neglect
of duty on the part of the Master, Officers, or Crew,
or in order to render salvage services, obtain
medical aid or treatment, or for landing any sick or
injured person or the body of a deceased person
(other than a passenger carried under Clause 3 (g)
hereof), or due to any other deviation (including the
putting back or into any port other than that to
which Vessel is bound), then hire shall cease for all
time so lost until Vessel is again in an efficient
state to resume her service and has regained a point
of progress equivalent to that when hire ceased
hereunder.
(b) Cost of fuel, at Current Market Price,
and water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all
port charges, pilotage, towage and other expenses
incurred during such period and/or consequent upon
putting into any port or place other than to which
Vessel is bound, shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention
by authorities, unless due to Charterer's fault,
shall be for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by
any governmental authority, or by any legal action
against Vessel or Owner, or by any strike or boycott
including a boycott by other than the Vessel's
officers or crew, whereby Vessel is rendered
unavailable for Charterer's service for a period of
thirty (30) days or more, unless brought about by act
or neglect of Charterer, Charterer may, by written
notice given before Vessel is free and ready to
resume service, elect to terminate this Charter, or
to suspend same until the service can again be
resumed, without prejudice to any other rights
Charterer may have under this Charter or to any claim
it may have for damages. Hire shall cease during the
entire time Vessel is out of Charterer's service due
to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all
overhaul and other necessary repairs, at
approximately sixty (60)/
( ) month intervals, for which purpose Charterer
shall allow Vessel to proceed to an appropriate port.
Owner shall be solely responsible therefor, and also
for gasfreeing the Vessel, upon each such occasion.
All towage, pilotage, fuel, at Current Market Price,
water, if a steamer, and other expenses incurred
while proceeding to and from, and while in, drydock,
shall also be for Owner's account.
<PAGE> 6
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or
discharge under Charterer's orders, hire shall be
suspended from the time Vessel receives free pratique
on arrival, if in ballast, or upon completion of
discharge of cargo, if loaded, until Vessel is again
ready for service. In case of drydocking at a port
other than where Vessel loads, discharges or bunkers,
payment of hire shall cease from the time of
deviation until Vessel is again in the same or
equivalent position as though no deviation had
occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging, sixty (60)
months after Vessel is placed at Charterer's disposal
and thereafter at least once within every sixty
(60)/sixty (60) months, shall be at Charterer's
option.
OWNER OR 9. (a) Owner will provide and/or pay for (i)
CHARTERER TO provisions, supplies, deck and engine stores, galley
PROVIDE and cabin stores, all fresh water if a motor vessel,
all P.&I., Hull and other insurance on Vessel or with
respect to Vessel's liabilities, wages of Master,
Officers and Crew, consular fees pertaining to the
Master, Officers-and Crew, (ii) galley and crew fuel
at the monthly rate payable to Charterer of
, and
(iii) the cost of all fuel oil, and/or diesel oil and
water, if a steamer, on board when Vessel is released
to Owner hereunder, not to exceed
tons fuel and
tons water, respectively (costs for fuel and/or diesel
oil to be determined at the current Market Prices at
the port and date of Vessel's release to Owner; or, if
not available there, at current Market Prices at the
nearest port where bunkers are available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of ;
(iii) all overtime of Officers and Crew worked at
Charter's request, at the monthly rate of
, and (iv) cost of
fuel oil and/or diesel oil and water, if a steamer, on
board when Vessel is placed at Charterer's disposal,
not to exceed tons fuel and
tons water, respectively (costs for fuel and/or diesel
oil to be determined at the current Market Prices at
the port and date the Vessel is placed at Charterer's
disposal where Hire begins; or, if not available
there, at current Market Prices at the nearest port
where bunkers are available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel
oil and water, if a steamer, expended or consumed in
a General Average situation and also during a
consequent related drydocking or repair of the Vessel
and said reimbursement shall not thereafter be deemed
to be a General Average expenditure.
DUTIES OF 10. (a) Master shall prosecute his voyages with
MASTER utmost dispatch and render all reasonable assistance
with Vessel's crew and equipment, including hoisting,
connecting and disconnecting hoses at ports or sea
berths where requested or where such assistance is a
normal practice. Master and Chief Engineer shall be
required to be fluent in written and oral English.
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate
it and if necessary make a change in the
appointments.
(d) Master shall be furnished by Charterer,
from time to time, with all requisite instructions
and sailing orders, and both he and the Engineers
shall keep full and correct logs of the voyages,
which shall at all times be available to Charterer
and its Agents, and abstracts thereof, or such other
forms or reports as Charterer may require, shall be
sent to Charterer from each port of call. Failure of
the Master to promptly forward the Vessel's abstract
and other forms and reports in compliance with the
above shall be adequate grounds for Charterer's
invoking the provisions of Clause 10 (c).
ADDITIONAL 11. Charterer, subject to Owner's approval, which
EQUIPMENT shall not be unreasonably withheld, shall be at
liberty to fit, at Charterer's expense if any,
additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying up
the Vessel for all or any portion of the term of this
Charter, in which case hire hereunder shall continue
to be paid, but there shall be credited against such
hire the whole amount which Owner shall save (or
reasonably should save) during such period of lay-up.
Should Charterer, having exercised the option granted
hereunder, desire the Vessel again to be put into
service, Owner will, upon receipt of written notice
from Charterer to such effect, immediately take steps
to restore Vessel to service as promptly as possible.
The option granted to Charterer hereunder may be
exercised one or more times during the currency of
this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any
person or government under circumstances which are
equivalent to requisition of title), this Charter
shall automatically terminate as of the effective
date of such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of
thirty (30) days, the Charterer shall have the option
to terminate this Charter upon written notice to the
Owner. Any periods of Off-Hire under this Clause
shall be subject to the Charterer's option for
Off-Hire extension set forth in Clause 1 hereof.
<PAGE> 7
RELEASE OF VESSEL 14. Unless the employment of the Vessel under
TO OWNER this Charter shall previously have been terminated by
loss of the Vessel or otherwise, the Charterer shall
redeliver the Vessel to Owner (herein called "release
of the Vessel to the Owner's use"), free of cargo, at
the expiration of the term of this Charter stated in
Clause 1 (including any extension thereof provided in
said Clause or elsewhere in this Charter), at a port
World-Wide at Charterer's option (herein called "Port
of Release"). At the Charterer's option, the Vessel
may be released to the Owner with tanks in a clean or
dirty condition; and in no event shall Charterer be
required to so release the Vessel gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other
terms set forth or specified in the subparagraphs to
this paragraph (b) and such terms shall be
incorporated verbatim or be deemed incorporated by
reference in any such Bill of Lading. In the
subparagraphs to this paragraph (b) and in any Act
referred to therein, the word "Carrier" shall include
the Owner of the Vessel.
(1) Clause Paramount. This Bill of
Lading shall have effect subject to the
provisions of the Carriage of Goods by Sea
Act of the United States, approved April 16,
1936, except that if this Bill of Lading is
issued at a place where any other Act,
ordinance, or legislation gives statutory
effect to the International Convention for
the Unification of Certain Rules relating to
Bills of Lading at Brussels, August 1924,
then this Bill of Lading shall have effect
subject to the provisions of such Act,
ordinance, or legislation. The applicable
Act, ordinance, or legislation (hereinafter
called "Act") shall be deemed to be
incorporated herein and nothing herein
contained shall be deemed a surrender by the
Owner or Carrier of any of its rights or
immunities or an increase of any of its
responsibilities or liabilities under the
Act. If any term of this Bill of Lading be
repugnant to the Act to any extent, such term
shall be void to that extent but no further.
(2) New Jason Clause. In the event of
accident, danger, damage, or disaster before
or after the commencement of the voyage,
resulting from any cause whatsoever, whether
due to negligence or not, for which, or for
the consequences of which, the Carrier is not
responsible, by statute, contract or
otherwise, the cargo, shippers, consignees,
or owners of the cargo shall contribute with
the Carrier in General Average to the payment
of any sacrifices, losses, or expenses of a
General Average nature that may be made or
incurred and shall pay salvage and special
charges incurred in respect of the cargo. If
a salving ship is owned or operated by the
Carrier, salvage shall be paid for as fully
as if the said salving ship or ships belonged
to strangers. Such deposit as the Carrier or
its Agents may deem sufficient to cover the
estimated contribution of the cargo and any
salvage and special charges thereon shall, if
required, be made by the cargo, shippers,
consignees or owners of the cargo to the
Carrier before delivery.
(3) General Average. General Average
shall be adjusted, stated, and settled
according to York/Antwerp Rules 1974, as
amended, but subject to the provisions of
Clause 9 (c) of this Charter and, as to
matters not provided for by those rules,
according to the laws and usages at the Port
of New York (except that any payment made by
Carrier to Charterer under Clause 20(b) or to
a Government or others to "remove" oil, as
defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil
Pollution (TOVALOP), as well as any other
payments, with respect to the Vessel or
Owner's Liability for Oil Pollution damages,
shall not be deemed to be General Average
sacrifices or expenditures). If a General
Average statement is required, it shall be
prepared at such port by an Adjuster at the
Port of New York appointed by the Charterer
of the Vessel and approved by the Carrier.
Such Adjuster shall attend to the settlement
and the collection of the General Average,
subject to customary charges. General Average
Agreements and/ or security shall be
furnished by Carrier and/or Charterer of the
Vessel, and/or Carrier and/or Consignee of
cargo, if requested. Any cash deposit being
made as security to pay General Average
and/or salvage shall be remitted to the
Average Adjuster and shall be held by him at
his risk in a special account in a duly
authorized and licensed bank at the place
where the General Average statement is
prepared.
(4) Both to Blame. If the Vessel comes
into collision with another ship as a result
of the negligence of the other ship and any
act, neglect or default of the Master,
mariner, pilot, or the servants of the
Carrier in the navigation or in the
management of the Vessel, the owners of the
cargo carried hereunder shall indemnify the
Carrier against all loss or liability to the
other or noncarrying ship or her owners
insofar as such loss or liability represents
loss of, or damage to, or any claim
whatsoever of the owners of said cargo, paid
or payable by the other or non-carrying ship
or her owners to the Owner of said cargo and
set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of
their claim against the carrying ship or
Carrier. The foregoing provisions shall also
apply where the owners, operators, or those
in charge of any ships or objects other than,
or in addition to, the colliding ships or
object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any
provision of this Charter to the contrary
notwithstanding, the Carrier shall have the
benefit of all limitations of, and exemptions
from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or
rule of law for the time being.
(6) Deviation Clause. The Vessel shall
have liberty to sail with or without pilots,
to tow or be towed, to go to the assistance
of Vessels in distress, to deviate for the
purpose of saving life or property or of
landing any ill or injured person on board,
and to call for fuel at any port or ports in
or out of the regular course of the voyage,
subject to the provisions of this Clause.
WAR CLAUSES 16. (a) No contraband of war shall be shipped, but
AND RISKS petroleum and/or its products shall not be deemed
contraband of war for the purposes of this Clause.
Vessel shall not, be required, without the consent of
Owner, which shall not be unreasonably withheld, to
enter any port of zone which is involved in a state of
war, warlike operations or hostilities, whether there
be a declaration of war or not, where it might
reasonably be expected to be subject to capture,
seizure or arrest, or to a hostile act by a
belligerent power (the term "power" meaning any de
jure or de facto authority or any other purported
governmental organization maintaining naval, military
or air forces).
<PAGE> 8
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or under
a Government program in respect of such voyage, route
or port of loading or discharge. If such consent is
given by Owner, Charterer will pay the provable
additional cost of insuring Vessel against all war
risks in an amount equal to (i) the value under her
ordinary marine policy but (ii) in no event exceeding
Seven Billion Two Hundred Million Yen (Yen
7,200,000,000). If such insurance is not obtainable
commercially or through a Government program, Vessel
shall not be required to enter or remain at any such
port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer
shall, in respect of voyages to any such port or
zone, assume the provable additional cost of wages
and insurance properly incurred in connection with
Master, Officers and Crew as a consequence of such
war, warlike operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her
properly manned, equipped and supplied; or from any
other cause of whatsoever kind arising without the
actual fault or privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War;
act of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout, stoppage or restraint of
labor, picketing, boycott, or other labor
disturbances or interruptions, from whatever cause,
either partial or general; or riot or civil
commotion.
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's
option to cancel this Charter, as provided in this
Charter.
DAMAGES TO, OR 18. Owner guarantees and warrants that
CLAIMS ON CARGO Vessel is constructed and equipped to carry, without
admixture, at least three (3) qualities or
descriptions of oil but, subject to this, neither
Owner nor Vessel shall be responsible for any on Cargo
admixture if more than three (3) qualities of oil are
shipped, nor for leakage, contamination or
deterioration in quality of the cargo, unless the
admixture, leakage, contamination or deterioration
results from (i) unseaworthiness existing at the time
of loading or at the inception of the voyage which was
discoverable by the exercise of due diligence, or (ii)
error or fault of the servants of Owner in the
loading, care or discharge of the cargo or (iii)
because of any breach of warranty set forth in this
Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from
and limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when
no tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the
provisions of Clause 11 except that such equipment
shall be at Owner's expense, if required by
applicable law or to otherwise meet the provisions of
this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred,
sold or assigned by the Owner to any person or
persons or to a company related or affiliated to the
Owner without receipt of Charterer's prior written
consent. However, if Charterer shall assign the
Charter to any company related or affiliated to it,
it shall assign the obligations assumed hereunder,
without any prior written consent of the Owner,
provided that Charterer shall, until termination of
the Charter, also remain primarily liable for the
obligations it has assumed under this Clause.
WATER 21. (a) Owner warrants that the Vessel performing
QUALITY under this Charter shall carry onboard a Certificate
of Financial Responsibility meeting the requirements
of the U.S. Federal Maritime Commission promulgated
pursuant to the U.S. "Water Quality Improvement Act of
1970."
<PAGE> 9
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7 (a).
SALVAGE 22. (a) All salvage moneys earned by Vessel
shall be divided equally between Owner and Charterer
after deducting Master's, Officers' and Crew's share,
legal expenses, hire of Vessel during time lost,
value of fuel consumed, repairs of damage, if any,
and any other extraordinary loss or expense sustained
as a result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit
as Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage
or special charges thereon, as may ultimately be
required to be paid by the Shippers, Consignees or
Owners of the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and
CLAUSES paint Vessel's funnel with its own colors or affix
thereto Charterer's stack insignia, if desired, at
Charterer's expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES OF 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the event
Vessel is so sold without Charterer's consent, in
addition to its other rights and Sub-letting Charterer
may at its absolute discretion, terminate the Charter
whereupon Owner shall immediately reimburse Charterer
for any and hire paid in advance and not earned, the
cost of bunkers, and any other sums to which Charterer
is entitled under this Sub-letting Charter as well as
damages which Charterer may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required to
give Owner hereunder shall be addressed (i) to Owner
at its place of business first designated in this
Charter or (ii) to Owner's Agent TEEKAY SHIPPING
LIMITED, P.O. BOX SS-6293 at Scotiabank Bldg., First
Floor, Rawson Square, Bay Street, Nassau, Bahamas. Any
notice which owner is required to give to Charterer
hereunder shall be addressed to Charterer at c/o
TEEKAY SHIPPING, P.O. BOX SS-6293, Scotiabank bldg.,
First Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notices given by letter by either party
shall, irrespective of any provision of law otherwise
applicable, be deemed to have been given when such
notice, addressed to the other party, or to Owner's or
Charterer's Agent, at its place of business designated
in the Charter, is posted.
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to be
ARBITRATION regarded as essential parts of the Charter, which is
conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
(b) The interpretation of this Charter and the
rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses set forth
herein are for convenience of reference only and shall
not affect the interpretation of this Charter. No
modification, waiver or discharge of any term in this
Charter shall be valid unless it is reduced to writing
and executed by the party to be charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall be
put to arbitration in New York pursuant to the laws
related to arbitration there in force, before a Board
of three persons, consisting of one (1) arbitrator to
be appointed by Owner, one (1) by Charterer, and one
(1) by the two so chosen. In the event that either
Owner or Charterer shall state a dispute and designate
an arbitrator, in writing, the other party shall have
twenty (20) days, excluding Saturdays, Sundays and
legal holidays to designate his arbitrator failing
which the single arbitrator can render an award
hereunder. The decision of any two (2) of the three
(3) on any point or points shall be final. Until such
time as the arbitrators finally close the Hearings,
either party shall have the right by written notice
served on the arbitrators and on the other party to
specify further disputes or differences under this
Charter for hearing and determination. The arbitrators
may grant any relief, and render an award, which they
or a majority of them, deem just and equitable and
within the scope of the agreement of the parties,
including but not limited to, specific performance.
Awards pursuant to this Clause may include costs,
including a reasonable allowance for attorneys' fees,
and judgments may be entered upon any award made
herein in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through
54 as attached are hereby incorporated into this
Charter Party.
WITNESS OWNER VSSI APPIAN INC.
__________ By ___________________________
WITNESS CHARTERER PALM SHIPPING INC
__________ By _________________________
<PAGE> 10
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations promulgated thereunder (hereinafter
called "U.S. Regulations"); the International Convention for the
Prevention of Pollution from Ships (MARPOL 1973) and the 1978 Protocol
thereto as applicable; and the International Convention for Safety of
Lives at Sea (SOLAS 1974) and the 1978 Protocol thereto as applicable
(the foregoing conventions and protocols hereinafter in this clause
called "IMCO Regulations"). Owner warrants that the Vessel shall carry
on board certifications of compliance with U.S. Regulations and IMCO
Regulations and any other records or documentations as may be required
by the U.S. Government authorities, Flay State authorities or port and
government authorities for any port within the trading areas described
in Clause 3 (d). Any delays, losses, expenses or damages arising as a
result of failure to comply with this clause shall be for Owner's
account and in no case shall Charterer be liable for hire or other
expenses during any time lost as a result of Vessel's failure to
comply with the foregoing U.S. Regulations and IMCO Regulations and/or
carry On board the necessary certification of compliance.
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
<PAGE> 11
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred or
expected to be incurred by Charterer for Owner's account less any
amounts that Charterer otherwise may be permitted to withhold or
deduct under the terms of this Charter, and less the estimated value
of bunker fuel remaining at the termination of the voyage; and when
the Vessel is redelivered, any overpayment shall be refunded by Owner
or underpayment paid by Charterer. Notwithstanding the provisions of
Clause 1 hereof, should the Vessel be upon a voyage at expiry of the
period of this Charter, Charterer shall have the use of the Vessel at
the same rate and conditions for such extended time as may be
necessary for the completion of the round voyage on which she is
engaged until her return to a port of redelivery as provided in this
Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and
any extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each
occasion when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel,s mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank cleaning and
surveyor's fees, hotel expense, cost of travelling, etc., and the
Vessel shall remain on-hire while changing mode.
<PAGE> 12
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance
of the Notes outstanding during the 365 day period
subsequent to the Determination Date.
y = the principal repayment requirements during the
365 day period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel
(excluding depreciation and amortization) for the 365
day period subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the
vessel, divided by the number of years (and fractions
thereof) between the completion of the most recent
drydocking of the vessel and the commencement of that
next drydocking.
The Determination Dates shall occur on January 10, 1994 and annually
thereafter. In addition, there shall be a Determination Date upon the
occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock budgets
as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent (1-1/4%)
on all hires to Teekay Shipping Limited in the Bahamas which
commission shall be deductible from hire as and when paid.
<PAGE> 1
EXHIBIT 10.4
TIME CHARTER, AS AMENDED, DATED DECEMBER 1, 1993
BETWEEN SENANG SPIRIT INC. AND PALM SHIPPING INC.
IT IS THIS 1st DAY OF December, 1993 mutually agreed
between Senang Spirit Inc. a Bahamian corporation,
maintaining an office and place of business at P.O.
Box SS-6293, Nassau, The Bahamas as Owner (herein
called "Owner") of the Bahamian flag motor/tank/vessel
to be built by Imabari Shipbuilding Co., Ltd. for
delivery to Owner on or about 10 January, 1994, named
Senang Spirit (herein called "Vessel") and Palm
Shipping Inc., a Liberian corporation, maintaining an
office and place of business at c/o Teekay Shipping
Ltd., PO Box SS-6293, Scotiabank Building, 1st Floor,
Rawson Square, Bay Street, Nassau, Bahamas (herein
called "Charterer"), that the Owner lets and the
Charterer hires the use and service of the Vessel for
a period and on the terms and conditions hereinafter
set forth.
TERM 1. (a) The term of this Charter shall be for a
period of about ten (10) consecutive years (herein
called "Original Period") plus any extensions thereof
as provided in paragraph (b)below. The Original Period
shall commence when the Vessel is placed at the
Charterer's disposal, as provided in Clause 3. The
word "about" as used above shall mean "thirty (30)
days more or less" at Charterer's option and shall
apply to the term of this Charter consisting of the
Original Period plus any extensions as hereinafter
provided.
(b) The term of this Charter may be extended
by Charterer for a period equal to all or any part of
the time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least three (3) months before the
expiration of the Original Period, or Extended Period
if Charterer has exercised the option under Clause
2(b). Any Off-Hire incurred after the above notice
shall have been given, whether said Off-Hire occurs
within the Original Period, Extended Period and/or
Off-Hire Extension, shall without any further written
notice, be a further Off-Hire Extension. Off-Hire, for
the purposes of this Clause 2 (c) shall include
incidents of Off-Hire specified in Clause 7 as well as
any other period(s) for which cesser or suspension of
the payment(s) of hire is (are) allowed hereunder
during the Original Period, Extended Period, and, or
Off-Hire Extension.
OWNER'S 2. (a) Owner undertakes and warrants that, on
WARRANTIES the date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of the
particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 693,908 Bbls.*
98% full 680,030 Bbls*
(ii) Weight of stores, etc., permanently deducted
from cargo carrying capacity L.T.*
(iii) a. Fresh water consumption per day
Boilers 5 L.T.*
Potable 20 L.T.*
b. Capacity of evaporators per day
Boilers 40 L.T.*
Potable L.T.*
c. Normal quantity of fresh water deductible
from cargo carrying capacity 250 L.T.*
(iv) Estimated loss of cargo carrying capacity
due to "sag" when fully loaded with light,
medium, heavy cargo
Light ( S.G.) N/A L.T.
Medium ( S.G.) N/A L.T.*
Heavy ( S.G.) N/A L.T.*
(v) The Vessel can carry 94,139 L.T.*** (of
2,240 lbs.) total deadweight (as certified by
Classification Society) of cargo, bunkers,
water, and stores on an assigned summer
freeboard of ft. in * in salt water equalling
44 ft. 02 in.** summer mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks for propulsion
(98% full) Approx 70 Days at sea*
(ii) Total capacity of fresh water tanks (100% full)
Boilers 281 M3*
Potable 142 M3*
(iii) Total capacity of permanent segregated clean
ballast tanks (100% full) 36,903 M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo Pumps
a. Number 3
b. Make Shinko
c. Type Steam Turbine Driven
d. Design rated capacity of each pump in
cubic meters per hour 2,600 M3/Hr.
and corresponding discharge head
in meters 135 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Steam Driven Reciprocating
d. Design rated capacity of each pump in
cubic meters per hour 200 M3/Hr.
and corresponding total discharge head
in meters 135 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 1
b. Make Shinko
c. Type Steam Driven Centrifugal
d. Design capacity each pump 3,500 M3/Hr.
<PAGE> 2
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any direction
equivalent to the safe working load of the cargo
hose lifting equipment and will meet OCIMF
recommendations.
(i) a. Number of manifold connections 3
b. Diameter of manifold
connections inches 16 in.
c. Distance between centers of
manifold connections 2.5M
d. Distance from manifold connections
to ship's side 4.6M
e. Distance center of manifold
connections to deck 1.8M
f. Distance bow/center of
manifold 124.96M
(ii) Cargo Manifold Reducing Pieces
Vessel is equipped with a sufficient
number of cargo manifold reducing pieces
of steel or equivalent material to permit
presenting of flanges of
12 in. at 150 ASA
10 in. at 150 ASA
8 in. at 150 ASA
(5) HEATING COILS
(i) Type of coils Strait
Material of which manufactured Al Brass
(ii) Ratio heating surface/volume
a. Slop Tanks .0585 M2/M3
b. Bunker Tanks Aft .03 M2/M3
Fore .03 M2/M3
c. Cargo Tanks Fore .0097 M2/M3
Wings .0085 M2/M3
Center .0087 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous cargo at maximum rate
of 8,000 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 809 ft. 11 in. *
(ii) Fully loaded summer draft
in salt water of
a density of 1.025 maximum 44 ft. 02 in.**
on an assigned freeboard of 20 ft. 01 in. *
(iii) Fresh Water allowance ft. 12.24 in. *
(iv) Light ship draft Forward ft. in. *
Aft ft. in. *
Mean ft. in. *
(v) Moulded Depth 64 ft. 00 in. *
(vi) Light ship freeboard ft in. *
(vii) TPI on light ship draft L.T. *
(viii) TPI on summer draft 227 L.T. *
(ix) Extreme beam 137' 09" *
(x) Gross Reg. Tons 52,508 Tons**
(xi) Net Reg. Tons 28,208 Tons**
(xii) Suez Canal tonnage ABT 54,137 Tons**
Panama Canal tonnage - Tons**
(xiii) Flag of Registry Bahamian
(xiv) Call letters C6ME8
(xv) Classification Society NK
(xvi) Type Engines Diesel
(xvii) Mooring winches
Number 8
Type Hydraulic
Capacity Tons pull 15TX15 at M/Min
Placement Focsle 2
Main Deck 3
Quarter 3
(xviii) Trial Speed fully loaded ***
(xix) Fuel Rate at maximum power on trial **
(xx) Guaranteed speed in all weather
Loaded: 14.0 KT
Ballast: 14.0 KT
(xxi) Guaranteed fuel consumption in all weather
Amount: 38.5 MT Laden/34.5 MT Ballast
Type: HVF 380 CST
Sec. Redwood #1 at 100 degree F
0.5 MT Diesel Oil
(xxii) Tank cleaning system:
Fixed Portable
Type:
No:
Capacity:
(xxiii) Hose handling crane 1
SWL 15 Tons
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to communicate
with land stations. In this respect, Vessel
is equipped as follows:
HF Transmitter 36 DBW Output
MF Transmitter 870W Output
SSB Transmitter Output
VHF Transreceivers Channel Nos Multi
<PAGE> 3
(ii) Vessel is constructed and equipped upon
delivery under this Charter in accordance
with regulations now existing as to enable
Vessel to transit Suez Canal/ Panama Canal
in accordance with respective latest
navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in good
operating condition. Owner warrants that
this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of
SOLAS as amended.
(v) Vessel's slop retention system has a
capacity of 2,753 Cubic Meters and is
designed to meet International Pollution
Convention standards as amended in 1969 or
thereafter revised. Oily water separator
has a capacity of tons/ hour with
discharge concentration in accordance with
1969 convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at 8,000 M3/H.
(vii) Vessel is equipped with the following
cargo pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 550 MM Diameter
Direct Filling Lines 550 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is fitted
with expansion bends or of Dresser type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit three (3)
port loading and three (3) port discharging
and to permit 39% of Vessel's deadweight in
clean/ballast to be discharged overboard
from cargo/ballast tanks simultaneously
with loading of cargo.
(xi) Vessel is equipped with Float type cargo
tank measuring devices. Maximum rates at
which vessel's lines will receive Bunkers:
Fuel 450 M3/Hour
Diesel 100 M3/Hour
(b) Owner will, on Charterer's request, supply
Charterer with copies of Vessel's plans provided that
in the case of a new-building said plans and said
copies shall be supplied to Charterer when they are
made available to Owner by the New Building Yard.
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall
be deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during
the Term of this Charter, place any additional
mortgage, lien or encumbrance on the Vessel, without
the prior written consent of Charterer, other than
liens in favor of the crew or routine suppliers to
the Vessel.
(d) Owner warrants that the Vessel will during
the Original and Extended Periods as well as any
Off-Hire Extension of this Charter be manned by
Officers and Crew of European/Indian/PI and PI
nationality respectively.
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT OF during the period of service under this Charter, so
HIRE, TRADE AND that all the representations and warranties set forth
USE in Clause 2 shall, at all times, be true and accurate.
Owner further represents, undertakes warrants that, on
the date Vessel is placed at Charterer's disposal,
Vessel will then be ready with holds and cargo tanks
clear and clean and in every way fitted for the
service and carriage of Crude oil and/or dirty
petroleum products including crude condensates, dirty
naphtha and carbon black feedstock in bulk maximum
three (3) grades within Vessel's natural segregation
and such other dirty petroleum products and lawful
merchandise as may be suitable for a Vessel of her
description and shall then be tight, staunch and
strong, with pipelines, pumps and heating coils in
cargo, slop and bunker tanks in good working
condition, and with a full complement of properly
certified Master, Officers and Crew for a Vessel of
her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 31 Jan 94/and simultaneously with its
delivery to Owner from the New Building Yard and
shall in no event perform any voyage on behalf of the
Owner or any other person prior to its being so
placed at Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have received
from the Master written notice that Vessel is in all
respects ready for sea and is at Charterer's disposal
at Muragame, Japan in or at such readily accessible
dock, wharf or place where she can always safely lie a
float, as Charter or its Agents may direct. However,
hire shall not, in any event, commence before 01 Jan
94 unless with Charterer's written consent and
Charterer shall have the option to cancel this Charter
should Vessel not be ready and placed at Charterer's
disposal in accordance with the provisions hereof,
before 31 Jan 94. Said option to cancel shall be
declared by Charterer not later than the date on which
Vessel is placed at Charterer's disposal delivered to
Owner by New Building Yard, and shall be without
prejudice to any claim for damages Charterer may have
for late tender of Vessel's services.
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading is
prohibited by vessel's flag, unless Owner gives
written consent, trading between safe ports in such
lawful trades as Charterer or its Agents may direct,
subject to Institute Warranties and Clauses, attached
hereto as Attachment A; but including ports on the
East Coast of Canada, St. Lawrence River, North
American Lakes, Greenland and Baltic Sea upon payment
by Charterer of any additional insurance premiums
required by Vessel's underwriters for such latter
trading. Charterer shall be entitled to send Vessel
through the Straits of Magellan at any time of the
year. In the event that the Vessel shall, for any
reason whatsoever, be unable to be employed or trade
in any port of the World (subject to the limitations
specifically set forth herein) Charterer, at its
option, may immediately terminate this Charter and
release the Vessel to the Owner's use pursuant to the
provisions of Clause 14. Charterer shall be permitted
to breach IWL reimbursing Owner for all additional
premiums incurred.
<PAGE> 4
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers, Crew,
tackle, apparel, furniture, fuel, provisions and
stores. Charterer shall have the option of shipping
any lawful dry cargo in bulk for which the Vessel or
her tanks are suitable and lawful merchandise in cases
and/or cans and/or other packages in Vessel's
available, suitable space subject, however, to
Master's approval as to kind and character, amount and
stowage. All charges for dunnage, loading, stowing and
discharging so incurred shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged, or
lightened, at any port, place, berth, dock, anchorage,
or submarine line or alongside lighters or vessels
whether in a port or not as Charterer may direct.
Notwithstanding anything contained in this Clause or
any other provisions of this Charter, Charterer shall
not be deemed to warrant the safety of any port,
berth, dock, anchorage, submarine line and/or lighter
or lightening Vessel and shall not be liable for any
loss, damage, injury, or delay resulting from
conditions at or on such ports, place, berths, docks,
anchorages, submarine lines and/or lighter or
lightening Vessel whether in a port or not, not caused
by Charterer's fault or neglect or which could have
been avoided by the exercise of reasonable care on the
part of the Master or Owner.
(g) Charterer, at its risk and responsibility,
may send passengers and/or super-cargo in available
accommodations in Vessel upon any voyage made under
this Charter, with Owner to provide provisions and all
requisites, except liquors, and Charterer to pay at
the rate of THREE UNITED STATES DOLLARS (U.S. $3.00)
per diem for each person during the time of such
travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of See Clause 53. Payments of
OF HIRE said hire shall be made monthly in advance in United
States Dollars, without any discount, adjustment or
deduction, except as specifically set forth in this
clause or otherwise in this Charter, at Chase
Manhattan Bank, New York, New York, Account of Willow
Limited 910-576825. Hire shall commence from the hour
(GMT) and day that the Vessel is placed at Charterer's
disposal, as provided for in Clause 3, and shall
continue until the hour (GMT) and date that the Vessel
is released to the Owner by the Charterer in
accordance with the provisions of this Charter unless
the Vessel is an actual or constructive total loss or
is Off-Hire in accordance with the terms of this
Charter. Any hire paid in advance and not earned
shall be refundable and payable to Charterer by Owner
and or by any party to whom Owner may have assigned
the hire; Owner at all times remaining ultimately
responsible therefor.
(b) Charterer shall be entitled to deduct from
the payments of hire due under paragraph (a) of this
Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's agents in
excess of the said revolving fund; (ii) lay-up savings
in accordance with Clause 12; (iii) any previous
overpayments of hire, including payments made with
respect to periods of Off-Hire and including any
overpayments of hire concerning which a bona fide
dispute may exist; (iv) Off-Hire anticipated to occur
during month for which payment of Hire is to be made;
(v) any sums due or estimated to be due under Clause 6
and (vi) any other sums to which Charterer is entitled
under this Charter.
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also less
the amount estimated by Charterer to become payable by
Owner for fuel and water on release of the Vessel to
Owner as provided in Clause 14. Upon release of the
Vessel any difference between the estimated and actual
amounts shall be refunded to or paid by the Charterer
as and to the extent that the case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of her
loss, or if such time is unknown, at the time when the
Vessel was last heard of. If the Vessel should become
a constructive total loss, hire shall cease at the
time of the casualty resulting in such loss. In either
or any case, hire paid in advance and not earned, plus
any other monies then owing to Charterer under the
provisions of this Charter, shall be immediately
returned to the Charterer. If the Vessel should be
Off-Hire or missing when a payment of hire would
otherwise be due, such payment shall be postponed
until the Off-Hire ceases or the safety of the Vessel
is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights the
Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days of
receipt of said notification from the Owner, failing
which the Owner may have the right to withdraw the
Vessel from the service of the Charterer without
prejudice to any other claim the Owner may have
against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from any
such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire applicable
to said increase in deadweight and until an Addendum
to this Charter embodying such agreement is executed
by Owner and Charterer the said increase in deadweight
shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account not
compensated for by the revolving fund provided for
herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for Owner's account,
(iv) all amounts due under other provisions of this
Charter, and (v) any damages sustained by Charterer as
a result of a breach of any provision of this Charter
by the Owner.
<PAGE> 5
OWNER'S 6. (a) In addition to the warranties set forth
GUARANTEES AND in this Charter, Owner stipulates, agrees and
ADJUSTMENTS guarantees, that Vessel will, throughout the term of
OF HIRE this Charter, maintain on all sea passages, from sea
buoy to sea buoy, a guaranteed average speed of no
less than 14.0 knots loaded and 14.0 knots in ballast
(which speed will be determined by taking the total
mileage of the actual course which Vessel has
travelled divided by the total hours at sea is shown
in the log books, excluding stops at sea which are
considered as periods of Off-Hire under the terms of
this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 38.5 MT Laden/34.5
MT Ballast 380 CST tons.
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty-four (24)
hours against a head pressure of one hundred and
twenty-five pounds per square inch at the ship's
manifold, and that Vessel is fitted with sufficient
block valves for complete segregation to enable
simultaneous loading and discharge from a centralized
manifold amidships of three (3) grades of cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each subsequent
period of six (6) calendar months; provided, however,
that if there should be a period of less than six (6)
calendar months remaining prior to release of the
Vessel to Owner, then not later than the commencement
of the final month of this Charter. If, in respect of
any such period or prior period it is found that
Vessel has failed to maintain the speed and/or fuel
consumption and/or pumping performance guaranteed
pursuant to this Clause 6, Charterer shall be
compensated, including retroactive compensation, in
respect of each failing as follows: (i) SPEED -- For
each knot, or pro rata for each part of a knot, below
the guaranteed speeds, a reduction in hire per
calendar month of per each DWT of
Vessel's capacity reflected in Clause 2; (ii) FUEL
CONSUMPTION -- Owner to pay Charterer for each Metric
ton, or pro rata for each part of a Metric ton,
consumed in excess of the guaranteed daily consumption
for main engines and auxiliaries, at Charterer's
Actual average price for the particular grade of
bunkers at Ras Tanura during the particular period, or
prior period, under review; (iii) PUMPING -- Vessel to
be considered Off-Hire for each hour, or part of an
hour, in excess of the maximum number of hours
guaranteed herein for completing pumping of a full
cargo or pro-rata for a part thereof against a head
pressure at Vessel's manifold of one hundred and
twenty-five pounds per square inch. Charterer shall
determine whether any delay in pumping is the result
of unique characteristics of the cargo being pumped or
of the receiving terminal, and, if so, shall consider
this factor in assessing the pumping performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive hours, whether at sea or in port
including but not limited to drydocking pursuant to
Clause 8 or for an accumulation of more than twelve
(12) hours during any voyage (a voyage to be
considered as a round voyage beginning at the time
Vessel tenders for loading at the first port under the
voyage in question until such time as it completes the
voyage and tenders for loading on the subsequent
voyage) or, (ii) for any number of hours (including
any part of an hour) due to deficiency of personnel or
stores, strike, boycotts (including boycotts by
persons or organizations other than officers and/or
members of the crew), refusal to sail, breach of
orders, or failure to have on board Certificate
required pursuant to Clause 21 or neglect of duty on
the part of the Master, Officers, or Crew, or in order
to render salvage services, obtain medical aid or
treatment, or for landing any sick or injured person
or the body of a deceased person (other than a
passenger carried under Clause 3(g) hereof), or due to
any other deviation (including the putting back or
into any port other than that to which Vessel is
bound), then hire shall cease for all time so lost
until Vessel is again in an efficient state to resume
her service and has regained a point of progress
equivalent to that when hire ceased hereunder.
(b) Cost of fuel, at Current Market Price, and
water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all port
charges, pilotage, towage and other expenses incurred
during such period and/or consequent upon putting into
any port or place other than to which Vessel is bound,
shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention by
authorities, unless due to Charterer's fault, shall be
for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by any
governmental authority, or by any legal action against
Vessel or Owner, or by any strike or boycott including
a boycott by other than the Vessel's officers or crew,
whereby Vessel is rendered unavailable for Charterer's
service for a period of thirty (30) days or more,
unless brought about by act or neglect of Charterer,
Charterer may, by written notice given before Vessel
is free and ready to resume service, elect to
terminate this Charter, or to suspend same until the
service can again be resumed, without prejudice to any
other rights Charterer may have under this Charter or
to any claim it may have for damages. Hire shall cease
during the entire time Vessel is out of Charterer's
service due to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all overhaul
and other necessary repairs, at approximately sixty
(60)/ ( ) month intervals, for which purpose
Charterer shall allow Vessel to proceed to an
appropriate port. Owner shall be solely responsible
therefor, and also for gasfreeing the Vessel, upon
each such occasion. All towage, pilotage, fuel, at
Current Market Price, water, if a steamer, and other
expenses incurred while proceeding to and from, and
while in, drydock, shall also be for Owner's account.
<PAGE> 6
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or discharge
under Charterer's orders, hire shall be suspended from
the time Vessel receives free pratique on arrival, if
in ballast, or upon completion of discharge of cargo,
if loaded, until Vessel is again ready for service. In
case of drydocking at a port other than where Vessel
loads, discharges or bunkers, payment of hire shall
cease from the time of deviation until Vessel is again
in the same or equivalent position as though no
deviation had occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging, sixty (60)
months after Vessel is placed at Charterer's disposal
and thereafter at least once within every sixty (60)/
months, shall be at Charterer's option.
OWNER OR 9. (a) Owner will provide and/or pay for
CHARTERER TO (i) provisions, supplies, deck and engine stores,
PROVIDE galley and cabin stores, all fresh water if a motor
vessel, all P.&I., Hull and other insurance on Vessel
or with respect to Vessel's liabilities, wages of
Master, Officers and Crew, consular fees pertaining to
the Master, Officers-and Crew, (ii) galley and crew
fuel at the monthly rate payable to Charterer of
, and (iii) the cost of all fuel oil, and/or diesel
oil and water, if a steamer, on board when Vessel is
released to Owner hereunder, not to exceed
tons fuel and tons water, respectively (costs
for fuel and/or diesel oil to be determined at the
current Market Prices at the port and date of Vessel's
release to Owner; or, if not available there, at
current Market Prices at the nearest port where
bunkers are available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of ; (iii) all
overtime of Officers and Crew worked at Charter's
request, at the monthly rate of , and (iv)
cost of fuel oil and/ or diesel oil and water, if a
steamer, on board when Vessel is placed at Charterer's
disposal, not to exceed tons fuel and tons
water, respectively (costs for fuel and/or diesel oil
to be determined at the current Market Prices at the
port and date the Vessel is placed at Charterer's
disposal where Hire begins; or, if not available
there, at current Market Prices at the nearest port
where bunkers are available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel oil
and water, if a steamer, expended or consumed in a
General Average situation and also during a consequent
related drydocking or repair of the Vessel and said
reimbursement shall not thereafter be deemed to be a
General Average expenditure.
DUTIES OF 10. (a) Master shall prosecute his voyages
MASTER with utmost dispatch and render all reasonable
assistance with Vessel's crew and equipment,
including hoisting, connecting and disconnecting hoses
at ports or sea berths where requested or where such
assistance is a normal practice. Master and Chief
Engineer shall be required to be fluent in written and
oral English.
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate it
and if necessary make a change in the appointments.
(d) Master shall be furnished by Charterer,
from time to time, with all requisite instructions and
sailing orders, and both he and the Engineers shall
keep full and correct logs of the voyages, which shall
at all times be available to Charterer and its Agents,
and abstracts thereof, or such other forms or reports
as Charterer may require, shall be sent to Charterer
from each port of call. Failure of the Master to
promptly forward the Vessel's abstract and other forms
and reports in compliance with the above shall be
adequate grounds for Charterer's invoking the
provisions of Clause 10(c).
ADDITIONAL 11. Charterer, subject to Owner's approval,
EQUIPMENT which shall not be unreasonably withheld, shall
be at liberty to fit, at Charterer's expense if
any, additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying up
the Vessel for all or any portion of the term of this
Charter, in which case hire hereunder shall continue
to be paid, but there shall be credited against such
hire the whole amount which Owner shall save (or
reasonably should save) during such period of lay-up.
Should Charterer, having exercised the option granted
hereunder, desire the Vessel again to be put into
service, Owner will, upon receipt of written notice
from Charterer to such effect, immediately take steps
to restore Vessel to service as promptly as possible.
The option granted to Charterer hereunder may be
exercised one or more times during the currency of
this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any person
or government under circumstances which are equivalent
to requisition of title), this Charter shall
automatically terminate as of the effective date of
such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of thirty
(30) days, the Charterer shall have the option to
terminate this Charter upon written notice to the
Owner. Any periods of Off-Hire under this Clause shall
be subject to the Charterer's option for Off-Hire
extension set forth in Clause 1 hereof.
<PAGE> 7
RELEASE OF 14. Unless the employment of the Vessel
VESSEL TO under this Charter shall previously have been
OWNER terminated by loss of the Vessel or otherwise, the
Charterer shall redeliver the Vessel to Owner (herein
called "release of the Vessel to the Owner's use"),
free of cargo, at the expiration of the term of this
Charter stated in Clause 1 (including any extension
thereof provided in said Clause or elsewhere in this
Charter), at a port World-Wide at Charterer's option
(herein called "Port of Release"). At the Charterer's
option, the Vessel may be released to the Owner with
tanks in a clean or dirty condition; and in no event
shall Charterer be required to so release the Vessel
gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other terms
set forth or specified in the subparagraphs to this
paragraph (b) and such terms shall be incorporated
verbatim or be deemed incorporated by reference in any
such Bill of Lading. In the subparagraphs to this
paragraph (b) and in any Act referred to therein, the
word "Carrier" shall include the Owner of the Vessel.
(1) Clause Paramount. This Bill of Lading
shall have effect subject to the provisions of the
Carriage of Goods by Sea Act of the United States,
approved April 16, 1936, except that if this Bill of
Lading is issued at a place where any other Act,
ordinance, or legislation gives statutory effect to
the International Convention for the Unification of
Certain Rules relating to Bills of Lading at Brussels,
August 1924, then this Bill of Lading shall have
effect subject to the provisions of such Act,
ordinance, or legislation. The applicable Act,
ordinance, or legislation (hereinafter called "Act")
shall be deemed to be incorporated herein and nothing
herein contained shall be deemed a surrender by the
Owner or Carrier of any of its rights or immunities or
an increase of any of its responsibilities or
liabilities under the Act. If any term of this Bill of
Lading be repugnant to the Act to any extent, such
term shall be void to that extent but no further.
(2) New Jason Clause. In the event of
accident, danger, damage, or disaster before or after
the commencement of the voyage, resulting from any
cause whatsoever, whether due to negligence or not,
for which, or for the consequences of which, the
Carrier is not responsible, by statute, contract or
otherwise, the cargo, shippers, consignees, or owners
of the cargo shall contribute with the Carrier in
General Average to the payment of any sacrifices,
losses, or expenses of a General Average nature that
may be made or incurred and shall pay salvage and
special charges incurred in respect of the cargo. If a
salving ship is owned or operated by the Carrier,
salvage shall be paid for as fully as if the said
salving ship or ships belonged to strangers. Such
deposit as the Carrier or its Agents may deem
sufficient to cover the estimated contribution of the
cargo and any salvage and special charges thereon
shall, if required, be made by the cargo, shippers,
consignees or owners of the cargo to the Carrier
before delivery.
<PAGE> 8
(3) General Average. General Average shall be
adjusted, stated, and settled according to
York/Antwerp Rules 1974, as amended, but subject to
the provisions of Clause 9 (c) of this Charter and, as
to matters not provided for by those rules, according
to the laws and usages at the Port of New York (except
that any payment made by Carrier to Charterer under
Clause 20(b) or to a Government or others to "remove"
oil, as defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil Pollution
(TOVALOP), as well as any other payments, with respect
to the Vessel or Owner's Liability for Oil Pollution
damages, shall not be deemed to be General Average
sacrifices or expenditures). If a General Average
statement is required, it shall be prepared at such
port by an Adjuster at the Port of New York appointed
by the Charterer of the Vessel and approved by the
Carrier. Such Adjuster shall attend to the settlement
and the collection of the General Average, subject to
customary charges. General Average Agreements and/or
security shall be furnished by Carrier and/or
Charterer of the Vessel, and/or Carrier and/or
Consignee of cargo, if requested. Any cash deposit
being made as security to pay General Average and/or
salvage shall be remitted to the Average Adjuster and
shall be held by him at his risk in a special account
in a duly authorized and licensed bank at the place
where the General Average statement is prepared.
(4) Both to Blame. If the Vessel comes into
collision with another ship as a result of the
negligence of the other ship and any act, neglect or
default of the Master, mariner, pilot, or the servants
of the Carrier in the navigation or in the management
of the Vessel, the owners of the cargo carried
hereunder shall indemnify the Carrier against all loss
or liability to the other or noncarrying ship or her
owners insofar as such loss or liability represents
loss of, or damage to, or any claim whatsoever of the
owners of said cargo, paid or payable by the other or
non-carrying ship or her owners to the Owner of said
cargo and set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of their
claim against the carrying ship or Carrier. The
foregoing provisions shall also apply where the
owners, operators, or those in charge of any ships or
objects other than, or in addition to, the colliding
ships or object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any provision of this
Charter to the contrary notwithstanding, the Carrier
shall have the benefit of all limitations of, and
exemptions from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or rule of
law for the time being.
(6) Deviation Clause. The Vessel shall have liberty
to sail with or without pilots, to tow or be towed, to
go to the assistance of Vessels in distress, to
deviate for the purpose of saving life or property or
of landing any ill or injured person on board, and to
call for fuel at any port or ports in or out of the
regular course of the voyage, subject to the
provisions of this Clause.
<PAGE> 9
WAR CLAUSES 16. (a) No contraband of war shall be shipped,
AND RISKS but petroleum and/or its products shall not be
deemed contraband of war for the purposes of this
Clause. Vessel shall not, be required, without the
consent of Owner, which shall not be unreasonably
withheld, to enter any port of zone which is involved
in a state of war, warlike operations or hostilities,
whether there be a declaration of war or not, where it
might reasonably be expected to be subject to capture,
seizure or arrest, or to a hostile act by a
belligerent power (the term "power" meaning any de
jure or de facto authority or any other purported
governmental organization maintaining naval, military
or air forces).
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or under
a Government program in respect of such voyage, route
or port of loading or discharge. If such consent is
given by Owner, Charterer will pay the provable
additional cost of insuring Vessel against all war
risks in an amount equal to (i) the value under her
ordinary marine policy but (ii) in no event exceeding
fifty-eight million two hundred & fifty thousand USD
(58,250,000 USD). If such insurance is not obtainable
commercially or through a Government program, Vessel
shall not be required to enter or remain at any such
port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer shall,
in respect of voyages to any such port or zone, assume
the provable additional cost of wages and insurance
properly incurred in connection with Master, Officers
and Crew as a consequence of such war, warlike
operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her properly
manned, equipped and supplied; or from any other cause
of whatsoever kind arising without the actual fault or
privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War; act
of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout, stoppage or restraint of
labor, picketing, boycott, or other labor disturbances
or interruptions, from whatever cause, either partial
or general; or riot or civil commotion.
<PAGE> 10
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's option
to cancel this Charter, as provided in this Charter.
DAMAGES TO, OR 18. Owner guarantees and warrants that Vessel is
CLAIMS ON CARGO constructed and equipped to carry, without admixture,
at least three (3) qualities or descriptions of oil
but, subject to this, neither Owner nor Vessel shall
be responsible for any on Cargo admixture if more than
three (3) qualities of oil are shipped, nor for
leakage, contamination or deterioration in quality of
the cargo, unless the admixture, leakage,
contamination or deterioration results from (i)
unseaworthiness existing at the time of loading or at
the inception of the voyage which was discoverable by
the exercise of due diligence, or (ii) error or fault
of the servants of Owner in the loading, care or
discharge of the cargo or (iii) because of any breach
of warranty set forth in this Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from and
limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when no
tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the provisions
of Clause 11 except that such equipment shall be at
Owner's expense, if required by applicable law or to
otherwise meet the provisions of this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred, sold
or assigned by the Owner to any person or persons or
to a company related or affiliated to the Owner
without receipt of Charterer's prior written consent.
However, if Charterer shall assign the Charter to any
company related or affiliated to it, it shall assign
the obligations assumed hereunder, without any prior
written consent of the Owner, provided that Charterer
shall, until termination of the Charter, also remain
primarily liable for the obligations it has assumed
under this Clause.
<PAGE> 11
WATER QUALITY 21. (a) Owner warrants that the Vessel performing
under this Charter shall carry onboard a Certificate
of Financial Responsibility meeting the requirements
of the U.S. Federal Maritime Commission promulgated
pursuant to the U.S. "Water Quality Improvement Act of
1970."
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7(a).
SALVAGE 22. (a) All salvage moneys earned by Vessel shall
be divided equally between Owner and Charterer after
deducting Master's, Officers' and Crew's share, legal
expenses, hire of Vessel during time lost, value of
fuel consumed, repairs of damage, if any, and any
other extraordinary loss or expense sustained as a
result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit as
Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage or
special charges thereon, as may ultimately be required
to be paid by the Shippers, Consignees or Owners of
the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and paint
CLAUSES Vessel's funnel with its own colors or affix thereto
Charterer's stack insignia, if desired, at Charterer's
expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES IN 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the event
Vessel is so sold without Charterer's consent, in
addition to its other rights and Sub-letting Charterer
may at its absolute discretion, terminate the Charter
whereupon Owner shall immediately reimburse Charterer
for any and hire paid in advance and not earned, the
cost of bunkers, and any other sums to which Charterer
is entitled under this Sub-letting Charter as well as
damages which Charterer may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required to
give Owner hereunder shall be addressed (i) to Owner
at its place of business first designated in this
Charter or (ii) to Owner's Agent Teekay Shipping Inc.,
PO Box SS-6293 at Scotiabank Building, First Floor,
Rawson Square, Bay St., Nassau, Bahamas. Any notice
which Owner is required to give to Charterer hereunder
shall be addressed to Charterer at c/o Teekay
Shipping, PO Box SS-6293, Scotiabank Bldg, 1st Floor,
Rawson Square, Bay St., Nassau, Bahamas. Any notices
given by letter by either party shall, irrespective of
any provision of law otherwise applicable, be deemed
to have been given when such notice, addressed to the
other party, or to Owner's or Charterer's Agent, at
its place of business designated in the Charter, is
posted.
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to be
ARBITRATION regarded as essential parts of the Charter, which is
conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
<PAGE> 12
(b) The interpretation of this Charter and the
rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses set forth
herein are for convenience of reference only and shall
not affect the interpretation of this Charter. No
modification, waiver or discharge of any term in this
Charter shall be valid unless it is reduced to writing
and executed by the party to be charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall be
put to arbitration in New York pursuant to the laws
related to arbitration there in force, before a Board
of three persons, consisting of one (1) arbitrator to
be appointed by Owner, one (1) by Charterer, and one
(1) by the two so chosen. In the event that either
Owner or Charterer shall state a dispute and designate
an arbitrator, in writing, the other party shall have
twenty (20) days, excluding Saturdays, Sundays and
legal holidays to designate his arbitrator failing
which the single arbitrator can render an award
hereunder. The decision of any two (2) of the three
(3) on any point or points shall be final. Until such
time as the arbitrators finally close the Hearings,
either party shall have the right by written notice
served on the arbitrators and on the other party to
specify further disputes or differences under this
Charter for hearing and determination. The arbitrators
may grant any relief, and render an award, which they
or a majority of them, deem just and equitable and
within the scope of the agreement of the parties,
including but not limited to, specific performance.
Awards pursuant to this Clause may include costs,
including a reasonable allowance for attorneys' fees,
and judgments may be entered upon any award made
herein in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through 54
as attached are hereby incorporated into this Charter
Party.
WITNESS OWNER SENANG SPIRIT INC
____________________ By _______________________
WITNESS CHARTERER PALM SHIPPING INC
____________________ By _______________________
<PAGE> 13
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations promulgated thereunder (hereinafter
called "U.S. Regulations"); the International Convention for the
Prevention of Pollution from Ships (MARPOL 1973) and the 1978 Protocol
thereto as applicable; and the International Convention for Safety of
Lives at Sea (SOLAS 1974) and the 1978 Protocol thereto as applicable
(the foregoing conventions and protocols hereinafter in this clause
called "IMCO Regulations"). Owner warrants that the Vessel shall carry
on board certifications of compliance with U.S. Regulations and IMCO
Regulations and any other records or documentations as may be required
by the U.S. Government authorities, Flay State authorities or port and
government authorities for any port within the trading areas described
in Clause 3 (d). Any delays, losses, expenses or damages arising as a
result of failure to comply with this clause shall be for Owner's
account and in no case shall Charterer be liable for hire or other
expenses during any time lost as a result of Vessel's failure to
comply with the foregoing U.S. Regulations and IMCO Regulations and/or
carry On board the necessary certification of compliance.
<PAGE> 14
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
<PAGE> 15
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
<PAGE> 16
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred or
expected to be incurred by Charterer for Owner's account less any
amounts that Charterer otherwise may be permitted to withhold or
deduct under the terms of this Charter, and less the estimated value
of bunker fuel remaining at the termination of the voyage; and when
the Vessel is redelivered, any overpayment shall be refunded by Owner
or underpayment paid by Charterer. Notwithstanding the provisions of
Clause 1 hereof, should the Vessel be upon a voyage at expiry of the
period of this Charter, Charterer shall have the use of the Vessel at
the same rate and conditions for such extended time as may be
necessary for the completion of the round voyage on which she is
engaged until her return to a port of redelivery as provided in this
Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and
any extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each
occasion when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel's mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank cleaning and
surveyor's fees, hotel expense, cost of travelling, etc., and the
Vessel shall remain on-hire while changing mode.
<PAGE> 17
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance of the
Notes outstanding during the 365 day period subsequent to the
Determination Date.
y = the principal repayment requirements during the 365 day
period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel
(excluding depreciation and amortization) for the 365 day
period subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the vessel,
divided by the number of years (and fractions thereof) between
the completion of the most recent drydocking of the vessel and
the commencement of that next drydocking.
The Determination Dates shall occur on January 10, 1994 and
annually thereafter. In addition, there shall be a
Determination Date upon the occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock
budgets as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent
(1-1/4%) on all hires to Teekay Shipping Limited in the
Bahamas which commission shall be deductible from hire as
and when paid.
<PAGE> 1
EXHIBIT 10.5
TIME CHARTER, AS AMENDED, DATED AUGUST 1, 1992
BETWEEN EXUMA SPIRIT INC. AND PALM SHIPPING INC.
IT IS THIS 1st DAY OF August 1992 mutually
agreed between Exuma Spirit Inc. a Bahamian
corporation, maintaining an office and place of
business at P.O. Box SS-6293, Scotiabank Bldg., First
Floor, Rawson Square, Bay Street, Nassau, Bahamas as
Owner (herein called "Owner") of the Bahamian flag
motor/tank/vessel to be built by Onomichi
Dockyard Co., Ltd. for delivery to Owner on or about
27 August 1992, named Leyte Spirit
(herein called "Vessel") and Palm Shipping Inc., a
Liberian corporation, maintaining an office and place
of business at c/o Teekay Shipping Limited, P.O. Box
SS- 6293, Scotiabank Bldg., First Floor Rawson Square,
Bay Street, Nassau, Bahamas (herein called
"Charterer"), that the Owner lets and the Charterer
hires the use and service of the Vessel for a period
and on the terms and conditions hereinafter set forth.
TERM 1. (a) The term of this Charter shall be for a period
of about ten (10) consecutive years (herein
called "Original Period") plus any extensions thereof
as provided in paragraph (b)below. The Original Period
shall commence when the Vessel is placed at the
Charterer's disposal, as provided in Clause 3. The
word "about" as used above shall mean "thirty (30)
days more or less" at Charterer's option and shall
apply to the term of this Charter consisting of the
Original Period plus any extensions as hereinafter
provided.
(b) The term of this Charter may be extended by
Charterer for a period equal to all or any part of the
time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least three (3) months
before the expiration of the Original Period, or
Extended Period if Charterer has exercised the option
under Clause 2(b). Any Off-Hire incurred after the
above notice shall have been given, whether said
Off-Hire occurs within the Original Period, Extended
Period and/or Off-Hire Extension, shall without any
further written notice, be a further Off-Hire
Extension. Off-Hire, for the purposes of this Clause 2
(c) shall include incidents of Off-Hire specified in
Clause 7 as well as any other period(s) for which
cesser or suspension of the payment(s) of hire is
(are) allowed hereunder during the Original Period,
Extended Period, and, or Off-Hire Extension.
OWNER'S WARRANTIES 2. (a) Owner undertakes and warrants that, on the
date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of the
particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 755,469 Bbls.*
98% full 740,360 Bbls.*
(ii) Weight of stores, etc., permanently
deducted from cargo carrying
capacity L.T.*
(iii) a. Fresh water consumption per day
Boilers 5 L.T.*
Potable 20 L.T.*
b. Capacity of evaporators per day
Boilers 40 L.T.*
Potable L.T.*
c. Normal quantity of fresh water
deductible from cargo carrying
capacity 250 L.T.*
(iv) Estimated loss of cargo carrying
capacity due to "sag" when fully
loaded with light, medium, heavy
cargo Light ( S.G.) N/A L.T.
Medium ( S.G.) N/A L.T.*
Heavy ( S.G.) N/A L.T.*
(v) The Vessel can carry ABT 97,000 L.T.***
(of 2,240 lbs.) total deadweight (as
certified by Classification Society) of
cargo, bunkers, water, and stores on an
assigned summer freeboard of ft. in * in
salt water equalling 47 ft. 04 in.**
summer mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks
for propulsion
(98% full) Approx 65 Days at sea*
(ii) Total capacity of fresh water tanks
(100% full)
Boilers 315 M3*
Potable 97 M3*
(iii) Total capacity of permanent segregated
clean ballast tanks
(100% full) 39,418 M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo Pumps
a. Number 3
b. Make Shinko
c. Type Steam Turbine Centrifugal
d. Design rated capacity of each
pump in cubic meters
per hour 2,700 M3/Hr.
and corresponding discharge head
in meters 150 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Steam Driven Reciprocating
d. Design rated capacity of each
pump in cubic meters
per hour 200 M3/Hr.
and corresponding total discharge
head in meters 150 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 2
b. Make Shinko
c. Type Motor Driven Centrifugal
d. Design capacity each
pump 1,700 M3/Hr.
<PAGE> 2
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any direction
equivalent to the safe working load of the cargo
hose lifting equipment and will meet OCIMF
recommendations.
(i) a. Number of manifold connections 3
b. Diameter of manifold connections
inches 16 in.
c. Distance between centers of
manifold connections 8 ft. 02 in.
d. Distance from manifold connections
to ship's side 14 ft. 04 in.
e. Distance center of manifold
connections to deck 6 ft. 02 in.
f. Distance bow/center of
manifold 408 ft. 07 in.
(ii) Cargo Manifold Reducing Pieces Vessel is
equipped with a sufficient number of cargo
manifold reducing pieces of steel or
equivalent material to permit presenting
of flanges of
12 in. at 150 ASA
10 in. at 150 ASA
8 in. at 150 ASA
(5) HEATING COILS
(i) Type of coils Strait
Material of which
manufactured Copper Alloy
(ii) Ratio heating surface/volume
a. Slop Tanks 0.060 M2/M3
b. Bunker Tanks Aft 0.060 M2/M3
Fore 0.060 M2/M3
c. Cargo Tanks Fore 0.0095 M2/M3
Wings 0.0166 M2/M3
Center 0.0083 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous cargo at
maximum rate of 12,000 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 803 ft. 02 in. *
(ii) Fully loaded summer draft
in salt water of a density
of 1.025 maximum 47 ft. 04 in.**
on an assigned
freeboard of 20 ft. 05 in. *
(iii) Fresh Water allowance ft. 12.8 in.*
(iv) Light ship draft Forward 2 ft. 00 in.*
Aft 15 ft. 03 in.*
Mean 8 ft. 00 in.*
(v) Moulded Depth 70 ft. 10 in.*
(vi) Light ship freeboard ft. in.*
(vii) TPI on light ship draft L.T.*
(viii) TPI on summer draft 220 L.T.*
(ix) Extreme beam 135' 02"*
(x) Gross Reg. Tons 57,448 Tons**
(xi) Net Reg. Tons 28,742 Tons**
(xii) Suez Canal tonnage 54,649 Tons**
Panama Canal tonnage Tons**
(xiii) Flag of Registry Bahamian
(xiv) Call letters C6LC6
(xv) Classification Society NK
(xvi) Type Engines Diesel
(xvii) Mooring winches
Number 6 Sets
Type Hydraulic
Capacity Tons pull 15 T x 15 M/Min
Placement 2 sets FOCSLE
2 Sets Midship
2 Sets AFT
(xviii) Trial Speed fully loaded ***
(xix) Fuel Rate at maximum power on trial **
(xx) Guaranteed speed in all weather
Loaded: 14 KT
Ballast: 14 KT
(xxi) Guaranteed fuel consumption in
all weather
Amount: 43 MT Laden/41.5 MT Ballast
Type:
HVF 380 CST
Sec. Redwood #1 at 100#F
0.5 MT Diesel Oil
(xxii) Tank cleaning system:
Fixed Portable
Type:
No:
Capacity:
(xxiii) Hose handling crane 1
SWL 15 Tons
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to
communicate with land stations. In this
respect, Vessel is equipped as follows:
HF Transmitter 36 DBW Output
MF Transmitter 800 W Output
SSB Transmitter Output
VHF Transreceivers Channel Nos Multi
<PAGE> 3
(ii) Vessel is constructed and equipped upon
delivery under this Charter in accordance
with regulations now existing as to enable
Vessel to transit Suez Canal/ Panama Canal
in accordance with respective latest
navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in good
operating condition. Owner warrants that
this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of
SOLAS as amended.
(v) Vessel's slop retention system has a
capacity of 26,644 MT and is designed to
meet International Pollution Convention
standards as amended in 1969 or thereafter
revised. Oily water separator has a
capacity of tons/ hour with
discharge concentration in accordance with
1969 convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at 10,000 M3/H.
(vii) Vessel is equipped with the following
cargo pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 550 MM Diameter
Direct Filling Lines 550 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is
fitted with expansion bends or of dresser
type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit three (3)
port loading and three (3) port discharging
and to permit 39% of Vessel's deadweight in
clean/ballast to be discharged overboard
from cargo/ballast tanks simultaneously
with loading of cargo.
(xi) Vessel is equipped with float type cargo
tank measuring devices. Maximum rates at
which vessel's lines will receive Bunkers:
Fuel 600 M3/Hour
Diesel 100 M3/Hour
(b) Owner will, on Charterer's request,
supply Charterer with copies of Vessel's plans
provided that in the case of a new-building said
plans and said copies shall be supplied to Charterer
when they are made available to Owner by the New
Building Yard.
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall
be deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during
the Term of this Charter, place any additional
mortgage, lien or encumbrance on the Vessel, without
the prior written consent of Charterer, other than
liens in favor of the crew or routine suppliers to
the Vessel.
(d) Owner warrants that the Vessel will
during the Original and Extended Periods as well as
any Off-Hire Extension of this Charter be manned by
Officers and Crew of European/Indian/PI and PI
nationality respectively.
<PAGE> 4
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT OF during the period of service under this Charter,
HIRE, TRADE AND so that all the representations and warranties set
USE forth in Clause 2 shall, at all times, be true and
accurate. Owner further represents, undertakes
warrants that, on the date Vessel is placed at
Charterer's disposal, Vessel will then be ready
with holds and cargo tanks clear and clean and
in every way fitted for the service and carriage
of crude oil and/or dirty petroleum products
including crude condensates, dirty naphtha and carbon
black feedstock in bulk maximum three (3) grades
within Vessel's natural segregation and such other
dirty petroleum products and lawful merchandise as may
be suitable for a Vessel of her description and shall
then be tight, staunch and strong, with pipelines,
pumps and heating coils in cargo, slop and bunker
tanks in good working condition, and with a full
complement of properly certified Master, Officers and
Crew for a Vessel of her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 30Sep92 /and simultaneously with its
delivery to Owner from the New Building Yard and shall
in no event perform any voyage on behalf of the Owner
or any other person prior to its being so placed at
Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have received
from the Master written notice that Vessel is in all
respects ready for sea and is at Charterer's disposal
at Onomichi, Japan in or at such readily accessible
dock, wharf or place where she can always safely lie a
float, as Charter or its Agents may direct. However,
hire shall not, in any event, commence before 01Aug92
unless with Charterer's written consent and Charterer
shall have the option to cancel this Charter should
Vessel not be ready and placed at Charterer's disposal
in accordance with the provisions hereof, before
30Sep92. Said option to cancel shall be declared by
Charterer not later than the date on which Vessel is
placed at Charterer's disposal delivered to Owner by
New Building Yard, and shall be without prejudice to
any claim for damages Charterer may have for late
tender of Vessel's services.
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading is
prohibited by vessel's flag, unless Owner gives
written consent, trading between safe ports in such
lawful trades as Charterer or its Agents may direct,
subject to Institute Warranties and Clauses, attached
hereto as Attachment A; but including ports on the
East Coast of Canada, St. Lawrence River, North
American Lakes, Greenland and Baltic Sea upon payment
by Charterer of any additional insurance premiums
required by Vessel's underwriters for such latter
trading. Charterer shall be entitled to send Vessel
through the Straits of Magellan at any time of the
year. In the event that the Vessel shall, for any
reason whatsoever, be unable to be employed or trade
in any port of the World (subject to the limitations
specifically set forth herein) Charterer, at its
option, may immediately terminate this Charter and
release the Vessel to the Owner's use pursuant to the
provisions of Clause 14. Charterer shall be permitted
to breach IWL reimbursing Owner for all additional
premiums incurred.
<PAGE> 5
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers, Crew,
tackle, apparel, furniture, fuel, provisions and
stores. Charterer shall have the option of shipping
any lawful dry cargo in bulk for which the Vessel or
her tanks are suitable and lawful merchandise in cases
and/or cans and/or other packages in Vessel's
available, suitable space subject, however, to
Master's approval as to kind and character, amount and
stowage. All charges for dunnage, loading, stowing and
discharging so incurred shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged, or
lightened, at any port, place, berth, dock, anchorage,
or submarine line or alongside lighters or vessels
whether in a port or not as Charterer may direct.
Notwithstanding anything contained in this Clause or
any other provisions of this Charter, Charterer shall
not be deemed to warrant the safety of any port,
berth, dock, anchorage, submarine line and/ or lighter
or lightening Vessel and shall not be liable for any
loss, damage, injury, or delay resulting from
conditions at or on such ports, place, berths, docks,
anchorages, submarine lines and/or lighter or
lightening Vessel whether in a port or not, not caused
by Charterer's fault or neglect or which could have
been avoided by the exercise of reasonable care on the
part of the Master or Owner.
(g) Charterer, at its risk and responsibility,
may send passengers and/ or super-cargo in available
accommodations in Vessel upon any voyage made under
this Charter, with Owner to provide provisions and all
requisites, except liquors, and Charterer to pay at
the rate of THREE UNITED STATES DOLLARS (U.S. $3.00)
per diem for each person during the time of such
travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of <see clause 53>. Payments of
HIRE said hire shall be made monthly in advance in United
States Dollars, without any discount, adjustment or
deduction, except as specifically set forth in this
clause or otherwise in this Charter, at Chase
Manhattan Bank, New York, New York, Account of Willow
Limited 910-576825. Hire shall commence from the hour
(GMT) and day that the Vessel is placed at Charterer's
disposal, as provided for in Clause 3, and shall
continue until the hour (GMT) and date that the Vessel
is released to the Owner by the Charterer in
accordance with the provisions of this Charter unless
the Vessel is an actual or constructive total loss or
is Off-Hire in accordance with the terms of this
Charter. Any hire paid in advance and not earned
shall be refundable and payable to Charterer by Owner
and or by any party to whom Owner may have assigned
the hire; Owner at all times remaining ultimately
responsible therefor.
(b) Charterer shall be entitled to deduct from
the payments of hire due under paragraph (a) of this
Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's agents in
excess of the said revolving fund; (ii) lay-up savings
in accordance with Clause 12; (iii) any previous
overpayments of hire, including payments made with
respect to periods of Off-Hire and including any
overpayments of hire concerning which a bona fide
dispute may exist; (iv) Off-Hire anticipated to occur
during month for which payment of Hire is to be made;
(v) any sums due or estimated to be due under Clause 6
and (vi) any other sums to which Charterer is entitled
under this Charter.
<PAGE> 6
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also less
the amount estimated by Charterer to become payable by
Owner for fuel and water on release of the Vessel to
Owner as provided in Clause 14. Upon release of the
Vessel any difference between the estimated and actual
amounts shall be refunded to or paid by the Charterer
as and to the extent that the case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of her
loss, or if such time is unknown, at the time when the
Vessel was last heard of. If the Vessel should become
a constructive total loss, hire shall cease at the
time of the casualty resulting in such loss. In either
or any case, hire paid in advance and not earned, plus
any other monies then owing to Charterer under the
provisions of this Charter, shall be immediately
returned to the Charterer. If the Vessel should be
Off-Hire or missing when a payment of hire would
otherwise be due, such payment shall be postponed
until the Off-Hire ceases or the safety of the Vessel
is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights the
Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days of
receipt of said notification from the Owner, failing
which the Owner may have the right to withdraw the
Vessel from the service of the Charterer without
prejudice to any other claim the Owner may have
against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from any
such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire applicable
to said increase in deadweight and until an Addendum
to this Charter embodying such agreement is executed
by Owner and Charterer the said increase in deadweight
shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account not
compensated for by the revolving fund provided for
herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for Owner's account,
(iv) all amounts due under other provisions of this
Charter, and (v) any damages sustained by Charterer as
a result of a breach of any provision of this Charter
by the Owner.
<PAGE> 7
OWNER'S 6. (a) In addition to the warranties set forth
GUARANTEES AND in this Charter, Owner stipulates, agrees and
ADJUSTMENTS guarantees, that Vessel will, throughout the term
OF HIRE of this Charter, maintain on all sea passages, from
sea buoy to sea buoy, a guaranteed average speed of
no less than 14.0 knots loaded and 14.0 knots in
ballast (which speed will be determined by taking the
total mileage of the actual course which Vessel has
travelled divided by the total hours at sea is shown
in the log books, excluding stops at sea which are
considered as periods of Off-Hire under the terms of
this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 43 MT Laden/41.5
MT Ballast 380 CST.
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty-four (24)
hours against a head pressure of one hundred and
twenty-five pounds per square inch at the
ship's manifold, and that Vessel is fitted with
sufficient block valves for complete segregation to
enable simultaneous loading and discharge from a
centralized manifold amidships of three (3) grades of
cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each subsequent
period of six (6) calendar months; provided, however,
that if there should be a period of less than six (6)
calendar months remaining prior to release of the
Vessel to Owner, then not later than the commencement
of the final month of this Charter. If, in respect of
any such period or prior period it is found that
Vessel has failed to maintain the speed and/or fuel
consumption and/or pumping performance guaranteed
pursuant to this Clause 6, Charterer shall be
compensated, including retroactive compensation, in
respect of each failing as follows: (i) SPEED---For
each knot, or pro rata for each part of a knot, below
the guaranteed speeds, a reduction in hire per
calendar month of per each DWT of Vessel's
capacity reflected in Clause 2; (ii) FUEL
CONSUMPTION--Owner to pay Charterer for each Metric
ton, or pro rata for each part of a Metric ton,
consumed in excess of the guaranteed daily consumption
for main engines and auxiliaries, at Charterer's
Actual average price for the particular grade of
bunkers at Ras Tanura during the particular period, or
prior period, under review; (iii) PUMPING---Vessel to
be considered Off-Hire for each hour, or part of an
hour, in excess of the maximum number of hours
guaranteed herein for completing pumping of a full
cargo or pro-rata for a part thereof against a head
pressure at Vessel's manifold of one hundred and
twenty-five pounds per square inch. Charterer shall
determine whether any delay in pumping is the result
of unique characteristics of the cargo being pumped or
of the receiving terminal, and, if so, shall consider
this factor in assessing the pumping performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
<PAGE> 8
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive hours, whether at sea or in port
including but not limited to drydocking pursuant to
Clause 8 or for an accumulation of more than twelve
(12) hours during any voyage (a voyage to be
considered as a round voyage beginning at the time
Vessel tenders for loading at the first port under
the voyage in question until such time as it
completes the voyage and tenders for loading on the
subsequent voyage) or, (ii) for any number of hours
(including any part of an hour) due to deficiency of
personnel or stores, strike, boycotts (including
boycotts by persons or organizations other than
officers and/or members of the crew), refusal to
sail, breach of orders, or failure to have on board
Certificate required pursuant to Clause 21 or neglect
of duty on the part of the Master, Officers, or Crew,
or in order to render salvage services, obtain
medical aid or treatment, or for landing any sick or
injured person or the body of a deceased person
(other than a passenger carried under Clause 3 (g)
hereof), or due to any other deviation (including the
putting back or into any port other than that to
which Vessel is bound), then hire shall cease for all
time so lost until Vessel is again in an efficient
state to resume her service and has regained a point
of progress equivalent to that when hire ceased
hereunder.
(b) Cost of fuel, at Current Market Price, and
water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all port
charges, pilotage, towage and other expenses incurred
during such period and/or consequent upon putting into
any port or place other than to which Vessel is bound,
shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention
by authorities, unless due to Charterer's fault,
shall be for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by
any governmental authority, or by any legal action
against Vessel or Owner, or by any strike or boycott
including a boycott by other than the Vessel's
officers or crew, whereby Vessel is rendered
unavailable for Charterer's service for a period of
thirty (30) days or more, unless brought about by act
or neglect of Charterer, Charterer may, by written
notice given before Vessel is free and ready to
resume service, elect to terminate this Charter, or
to suspend same until the service can again be
resumed, without prejudice to any other rights
Charterer may have under this Charter or to any claim
it may have for damages. Hire shall cease during the
entire time Vessel is out of Charterer's service due
to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all overhaul
and other necessary repairs, at approximately sixty
(60)/ ( ) month intervals, for which purpose
Charterer shall allow Vessel to proceed to an
appropriate port. Owner shall be solely responsible
therefor, and also for gasfreeing the Vessel, upon
each such occasion. All towage, pilotage, fuel, at
Current Market Price, water, if a steamer, and other
expenses incurred while proceeding to and from, and
while in, drydock, shall also be for Owner's account.
<PAGE> 9
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or
discharge under Charterer's orders, hire shall be
suspended from the time Vessel receives free pratique
on arrival, if in ballast, or upon completion of
discharge of cargo, if loaded, until Vessel is again
ready for service. In case of drydocking at a port
other than where Vessel loads, discharges or bunkers,
payment of hire shall cease from the time of
deviation until Vessel is again in the same or
equivalent position as though no deviation had
occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging,
sixty (60) months after Vessel is placed
at Charterer's disposal and thereafter at least once
within every sixty (60) months, shall be at
Charterer's option.
OWNER OR 9. (a) Owner will provide and/or pay for (i)
CHARTERER TO provisions, supplies, deck and engine stores, galley
PROVIDE and cabin stores, all fresh water if a motor vessel,
all P.&I., Hull and other insurance on Vessel or
with respect to Vessel's liabilities, wages of
Master, Officers and Crew, consular fees pertaining to
the Master, Officers-and Crew, (ii) galley and crew
fuel at the monthly rate payable to Charterer of
( ), and (iii) the cost of all fuel oil, and/or diesel
oil and water, if a steamer, on board when Vessel is
released to Owner hereunder, not to exceed tons
fuel and tons water, respectively (costs for
fuel and/or diesel oil to be determined at the
current Market Prices at the port and date of
Vessel's release to Owner; or, if not available
there, at current Market Prices at the nearest
port where bunkers are available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of ; (iii) all
overtime of Officers and Crew worked at Charter's
request, at the monthly rate of , and
(iv) cost of fuel oil and/ or diesel oil and water, if
a steamer, on board when Vessel is placed at
Charterer's disposal, not to exceed tons fuel
and tons water, respectively (costs for
fuel and/or diesel oil to be determined at the current
Market Prices at the port and date the Vessel is
placed at Charterer's disposal where Hire begins; or,
if not available there, at current Market Prices at
the nearest port where bunkers are available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel
oil and water, if a steamer, expended or consumed in
a General Average situation and also during a
consequent related drydocking or repair of the Vessel
and said reimbursement shall not thereafter be deemed
to be a General Average expenditure.
DUTIES OF 10. (a) Master shall prosecute his voyages with
MASTER utmost dispatch and render all reasonable
assistance with Vessel's crew and equipment,
including hoisting, connecting and disconnecting
hoses at ports or sea berths where requested or where
such assistance is a normal practice. Master and Chief
Engineer shall be required to be fluent in written and
oral English.
<PAGE> 10
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate it
and if necessary make a change in the appointments.
(d) Master shall be furnished by
Charterer, from time to time, with all requisite
instructions and sailing orders, and both he and the
Engineers shall keep full and correct logs of the
voyages, which shall at all times be available to
Charterer and its Agents, and abstracts thereof, or
such other forms or reports as Charterer may require,
shall be sent to Charterer from each port of call.
Failure of the Master to promptly forward the Vessel's
abstract and other forms and reports in compliance
with the above shall be adequate grounds for
Charterer's invoking the provisions of Clause 10 (c).
ADDITIONAL 11. Charterer, subject to Owner's approval,
EQUIPMENT which shall not be unreasonably withheld, shall be
at liberty to fit, at Charterer's expense if any,
additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/ or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying up the
Vessel for all or any portion of the term of this
Charter, in which case hire hereunder shall continue
to be paid, but there shall be credited against such
hire the whole amount which Owner shall save (or
reasonably should save) during such period of lay-up.
Should Charterer, having exercised the option granted
hereunder, desire the Vessel again to be put into
service, Owner will, upon receipt of written notice
from Charterer to such effect, immediately take steps
to restore Vessel to service as promptly as possible.
The option granted to Charterer hereunder may be
exercised one or more times during the currency of
this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any
person or government under circumstances which are
equivalent to requisition of title), this Charter
shall automatically terminate as of the effective
date of such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of
thirty (30) days, the Charterer shall have the option
to terminate this Charter upon written notice to the
Owner. Any periods of Off-Hire under this Clause
shall be subject to the Charterer's option for
Off-Hire extension set forth in Clause 1 hereof.
<PAGE> 11
RELEASE OF VESSEL 14. Unless the employment of the Vessel under
TO OWNER this Charter shall previously have been terminated by
loss of the Vessel or otherwise, the Charterer shall
redeliver the Vessel to Owner (herein called "release
of the Vessel to the Owner's use"), free of cargo, at
the expiration of the term of this Charter stated in
Clause 1 (including any extension thereof provided in
said Clause or elsewhere in this Charter), at a port
World-Wide at Charterer's option (herein called "Port
of Release"). At the Charterer's option, the Vessel
may be released to the Owner with tanks in a clean or
dirty condition; and in no event shall Charterer be
required to so release the Vessel gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other terms
set forth or specified in the subparagraphs to this
paragraph (b) and such terms shall be incorporated
verbatim or be deemed incorporated by reference in any
such Bill of Lading. In the subparagraphs to this
paragraph (b) and in any Act referred to therein, the
word "Carrier" shall include the Owner of the Vessel.
(1) Clause Paramount. This Bill of
Lading shall have effect subject to the
provisions of the Carriage of Goods by Sea Act
of the United States, approved April 16, 1936,
except that if this Bill of Lading is issued
at a place where any other Act, ordinance, or
legislation gives statutory effect to the
International Convention for the Unification
of Certain Rules relating to Bills of Lading
at Brussels, August 1924, then this Bill of
Lading shall have effect subject to the
provisions of such Act, ordinance, or
legislation. The applicable Act, ordinance, or
legislation (hereinafter called "Act") shall
be deemed to be incorporated herein and
nothing herein contained shall be deemed a
surrender by the Owner or Carrier of any of
its rights or immunities or an increase of any
of its responsibilities or liabilities under
the Act. If any term of this Bill of Lading be
repugnant to the Act to any extent, such term
shall be void to that extent but no further.
(2) New Jason Clause. In the event of
accident, danger, damage, or disaster before
or after the commencement of the voyage,
resulting from any cause whatsoever, whether
due to negligence or not, for which, or for
the consequences of which, the Carrier is not
responsible, by statute, contract or
otherwise, the cargo, shippers, consignees, or
owners of the cargo shall contribute with the
Carrier in General Average to the payment of
any sacrifices, losses, or expenses of a
General Average nature that may be made or
incurred and shall pay salvage and special
charges incurred in respect of the cargo. If a
salving ship is owned or operated by the
Carrier, salvage shall be paid for as fully as
if the said salving ship or ships belonged to
strangers. Such deposit as the Carrier or its
Agents may deem sufficient to cover the
estimated contribution of the cargo and any
salvage and special charges thereon shall, if
required, be made by the cargo, shippers,
consignees or owners of the cargo to the
Carrier before delivery.
<PAGE> 12
(3) General Average. General Average
shall be adjusted, stated, and settled
according to York/Antwerp Rules 1974, as
amended, but subject to the provisions of
Clause 9 (c) of this Charter and, as to
matters not provided for by those rules,
according to the laws and usages at the Port
of New York (except that any payment made by
Carrier to Charterer under Clause 20(b) or to
a Government or others to "remove" oil, as
defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil
Pollution (TOVALOP), as well as any other
payments, with respect to the Vessel or
Owner's Liability for Oil Pollution damages,
shall not be deemed to be General Average
sacrifices or expenditures). If a General
Average statement is required, it shall be
prepared at such port by an Adjuster at the
Port of New York appointed by the Charterer
of the Vessel and approved by the Carrier.
Such Adjuster shall attend to the settlement
and the collection of the General Average,
subject to customary charges. General Average
Agreements and/ or security shall be
furnished by Carrier and/or Charterer of the
Vessel, and/or Carrier and/or Consignee of
cargo, if requested. Any cash deposit being
made as security to pay General Average
and/or salvage shall be remitted to the
Average Adjuster and shall be held by him at
his risk in a special account in a duly
authorized and licensed bank at the place
where the General Average statement is
prepared.
(4) Both to Blame. If the Vessel comes
into collision with another ship as a result
of the negligence of the other ship and any
act, neglect or default of the Master,
mariner, pilot, or the servants of the
Carrier in the navigation or in the
management of the Vessel, the owners of the
cargo carried hereunder shall indemnify the
Carrier against all loss or liability to the
other or noncarrying ship or her owners
insofar as such loss or liability represents
loss of, or damage to, or any claim
whatsoever of the owners of said cargo, paid
or payable by the other or non-carrying ship
or her owners to the Owner of said cargo and
set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of
their claim against the carrying ship or
Carrier. The foregoing provisions shall also
apply where the owners, operators, or those
in charge of any ships or objects other than,
or in addition to, the colliding ships or
object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any
provision of this Charter to the contrary
notwithstanding, the Carrier shall have the
benefit of all limitations of, and exemptions
from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or
rule of law for the time being.
(6) Deviation Clause. The Vessel shall
have liberty to sail with or without pilots,
to tow or be towed, to go to the assistance
of Vessels in distress, to deviate for the
purpose of saving life or property or of
landing any ill or injured person on board,
and to call for fuel at any port or ports in
or out of the regular course of the voyage,
subject to the provisions of this Clause.
<PAGE> 13
WAR CLAUSES 16. (a) No contraband of war shall be shipped,
AND RISKS but petroleum and/or its products shall not be deemed
contraband of war for the purposes of this Clause.
Vessel shall not, be required, without the consent of
Owner, which shall not be unreasonably withheld, to
enter any port of zone which is involved in a state of
war, warlike operations or hostilities, whether there
be a declaration of war or not, where it might
reasonably be expected to be subject to capture,
seizure or arrest, or to a hostile act by a
belligerent power (the term "power" meaning any de
jure or de facto authority or any other purported
governmental organization maintaining naval, military
or air forces).
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or under
a Government program in respect of such voyage, route
or port of loading or discharge. If such consent is
given by Owner, Charterer will pay the provable
additional cost of insuring Vessel against all war
risks in an amount equal to (i) the value under her
ordinary marine policy but (ii) in no event exceeding
Seven billion six hundred million yen (Yen
7,600,000,000). If such insurance is not obtainable
commercially or through a Government program, Vessel
shall not be required to enter or remain at any such
port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer
shall, in respect of voyages to any such port or
zone, assume the provable additional cost of wages
and insurance properly incurred in connection with
Master, Officers and Crew as a consequence of such
war, warlike operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her
properly manned, equipped and supplied; or from any
other cause of whatsoever kind arising without the
actual fault or privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War;
act of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout, stoppage or restraint of
labor, picketing, boycott, or other labor
disturbances or interruptions, from whatever cause,
either partial or general; or riot or civil
commotion.
<PAGE> 14
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's
option to cancel this Charter, as provided in this
Charter.
DAMAGES TO, OR 18. Owner guarantees and warrants that Vessel is
CLAIMS ON CARGO constructed and equipped to carry, without admixture,
at least three (3) qualities or descriptions of oil
but, subject to this, neither Owner nor Vessel shall
be responsible for any on Cargo admixture if more than
three (3) qualities of oil are shipped, nor for
leakage, contamination or deterioration in quality of
the cargo, unless the admixture, leakage,
contamination or deterioration results from (i)
unseaworthiness existing at the time of loading or at
the inception of the voyage which was discoverable by
the exercise of due diligence, or (ii) error or fault
of the servants of Owner in the loading, care or
discharge of the cargo or (iii) because of any breach
of warranty set forth in this Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/ or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from
and limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when
no tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the
provisions of Clause 11 except that such equipment
shall be at Owner's expense, if required by
applicable law or to otherwise meet the provisions of
this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred,
sold or assigned by the Owner to any person or
persons or to a company related or affiliated to the
Owner without receipt of Charterer's prior written
consent. However, if Charterer shall assign the
Charter to any company related or affiliated to it,
it shall assign the obligations assumed hereunder,
without any prior written consent of the Owner,
provided that Charterer shall, until termination of
the Charter, also remain primarily liable for the
obligations it has assumed under this Clause.
<PAGE> 15
WATER 21. (a) Owner warrants that the Vessel
QUALITY performing under this Charter shall carry onboard a
Certificate of Financial Responsibility meeting the
requirements of the U.S. Federal Maritime Commission
promulgated pursuant to the U.S. "Water Quality
Improvement Act of 1970."
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7 (a).
SALVAGE 22. (a) All salvage moneys earned by Vessel
shall be divided equally between Owner and Charterer
after deducting Master's, Officers' and Crew's share,
legal expenses, hire of Vessel during time lost,
value of fuel consumed, repairs of damage, if any,
and any other extraordinary loss or expense sustained
as a result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit
as Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage
or special charges thereon, as may ultimately be
required to be paid by the Shippers, Consignees or
Owners of the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and
CLAUSES paint Vessel's funnel with its own colors or affix
thereto Charterer's stack insignia, if desired, at
Charterer's expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES OF 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the
event Vessel is so sold without Charterer's consent,
in addition to its other rights and Sub-letting
Charterer may at its absolute discretion, terminate
the Charter whereupon Owner shall immediately
reimburse Charterer for any and hire paid in advance
and not earned, the cost of bunkers, and any other
sums to which Charterer is entitled under this
Sub-letting Charter as well as damages which Charterer
may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required to
give Owner hereunder shall be addressed (i) to Owner
at its place of business first designated in this
Charter or (ii) to Owner's Agent Teekay Shipping
Limited, P.O. Box SS-6293 at Scotiabank Building,
First Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notice which Owner is required to give to
Charterer hereunder shall be addressed to Charterer at
c/o Teekay Shipping, P.O. Box SS-6293, Scotiabank
Bldg., 1st Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notices given by letter by either party
shall, irrespective of any provision of law otherwise
applicable, be deemed to have been given when such
notice, addressed to the other party, or to Owner's or
Charterer's Agent, at its place of business designated
in the Charter, is posted.
<PAGE> 16
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to be
ARBITRATION regarded as essential parts of the Charter, which is
conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
(b) The interpretation of this Charter and the
rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses set forth
herein are for convenience of reference only and shall
not affect the interpretation of this Charter. No
modification, waiver or discharge of any term in this
Charter shall be valid unless it is reduced to writing
and executed by the party to be charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall be
put to arbitration in New York pursuant to the laws
related to arbitration there in force, before a Board
of three persons, consisting of one (1) arbitrator to
be appointed by Owner, one (1) by Charterer, and one
(1) by the two so chosen. In the event that either
Owner or Charterer shall state a dispute and designate
an arbitrator, in writing, the other party shall have
twenty (20) days, excluding Saturdays, Sundays and
legal holidays to designate his arbitrator failing
which the single arbitrator can render an award
hereunder. The decision of any two (2) of the three
(3) on any point or points shall be final. Until such
time as the arbitrators finally close the Hearings,
either party shall have the right by written notice
served on the arbitrators and on the other party to
specify further disputes or differences under this
Charter for hearing and determination. The arbitrators
may grant any relief, and render an award, which they
or a majority of them, deem just and equitable and
within the scope of the agreement of the parties,
including but not limited to, specific performance.
Awards pursuant to this Clause may include costs,
including a reasonable allowance for attorneys' fees,
and judgments may be entered upon any award made
herein in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through
54 as attached are hereby incorporated into this
Charter Party.
WITNESS OWNER EXUMA SPIRIT INC
________________________ By _________________________
WITNESS CHARTERER PALM SHIPPING INC
________________________ By _________________________
<PAGE> 17
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations promulgated thereunder (hereinafter
called "U.S. Regulations"); the International Convention for the
Prevention of Pollution from Ships (MARPOL 1973) and the 1978 Protocol
thereto as applicable; and the International Convention for Safety of
Lives at Sea (SOLAS 1974) and the 1978 Protocol thereto as applicable
(the foregoing conventions and protocols hereinafter in this clause
called "IMCO Regulations"). Owner warrants that the Vessel shall carry
on board certifications of compliance with U.S. Regulations and IMCO
Regulations and any other records or documentations as may be required
by the U.S. Government authorities, Flay State authorities or port and
government authorities for any port within the trading areas described
in Clause 3 (d). Any delays, losses, expenses or damages arising as a
result of failure to comply with this clause shall be for Owner's
account and in no case shall Charterer be liable for hire or other
expenses during any time lost as a result of Vessel's failure to
comply with the foregoing U.S. Regulations and IMCO Regulations and/or
carry On board the necessary certification of compliance.
<PAGE> 18
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
<PAGE> 19
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
<PAGE> 20
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred or
expected to be incurred by Charterer for Owner's account less any
amounts that Charterer otherwise may be permitted to withhold or
deduct under the terms of this Charter, and less the estimated value
of bunker fuel remaining at the termination of the voyage; and when
the Vessel is redelivered, any overpayment shall be refunded by Owner
or underpayment paid by Charterer. Notwithstanding the provisions of
Clause 1 hereof, should the Vessel be upon a voyage at expiry of the
period of this Charter, Charterer shall have the use of the Vessel at
the same rate and conditions for such extended time as may be
necessary for the completion of the round voyage on which she is
engaged until her return to a port of redelivery as provided in this
Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and
any extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each
occasion when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel,s mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank cleaning and
surveyor's fees, hotel expense, cost of travelling, etc., and the
Vessel shall remain on-hire while changing mode.
<PAGE> 21
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance of the
Notes outstanding during the 365 day period subsequent to the
Determination Date.
y = the principal repayment requirements during the 365 day
period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel (excluding
depreciation and amortization) for the 365 day period
subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the vessel, divided
by the number of years (and fractions thereof) between the
completion of the most recent drydocking of the vessel and the
commencement of that next drydocking.
The Determination Dates shall occur on January 10, 1994 and
annually thereafter. In addition, there shall be a
Determination Date upon the occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock
budgets as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent (1-1/4%)
on all hires to Teekay Shipping Limited in the Bahamas which
commission shall be deductible from hire as and when paid.
<PAGE> 1
EXHIBIT 10.6
TIME CHARTER, AS AMENDED, DATED MAY 1, 1992
BETWEEN NASSAU SPIRIT INC. AND PALM SHIPPING INC.
IT IS THIS 1st DAY OF May 1992 mutually agreed between
Nassau Spirit Inc. a Bahamian corporation, maintaining
an office and place of business at P.O. Box SS-6293,
Scotiabank Bldg., First Floor, Rawson Square, Bay
Street, Nassau, Bahamas as Owner (herein called
"Owner") of the Bahamian flag motor/tank/vessel to be
built by Onomichi Dockyard Co., Ltd. for delivery to
Owner on or about 01 June 1992, named Luzon Spirit
Inc. (herein called "Vessel") and Palm Shipping Inc.,
a Liberian corporation, maintaining an office and
place of business at c/o Teekay Shipping Limited, P.O.
Box SS- 6293, Scotiabank Bldg., First Floor Rawson
Square, Bay Street, Nassau, Bahamas (herein called
"Charterer"), that the Owner lets and the Charterer
hires the use and service of the Vessel for a period
and on the terms and conditions hereinafter set forth.
TERM 1. (a) The term of this Charter shall be for a
period of about ten (10) consecutive years (herein
called "Original Period") plus any extensions thereof
as provided in paragraph (b) below. The Original
Period shall commence when the Vessel is placed at the
Charterer's disposal, as provided in Clause 3. The
word "about" as used above shall mean "thirty (30)
days more or less" at Charterer's option and shall
apply to the term of this Charter consisting of the
Original Period plus any extensions as hereinafter
provided.
(b) The term of this Charter may be extended by
Charterer for a period equal to all or any part of the
time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least three (3) months before the
expiration of the Original Period, or Extended Period
if Charterer has exercised the option under Clause
2(b). Any Off-Hire incurred after the above notice
shall have been given, whether said Off-Hire occurs
within the Original Period, Extended Period and/or
Off-Hire Extension, shall without any further written
notice, be a further Off-Hire Extension. Off-Hire, for
the purposes of this Clause 2 (c) shall include
incidents of Off-Hire specified in Clause 7 as well as
any other period(s) for which cesser or suspension of
the payment(s) of hire is (are) allowed hereunder
during the Original Period, Extended Period, and, or
Off-Hire Extension.
OWNER'S WARRANTIES 2. (a) Owner undertakes and warrants that, on
the date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of
the particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 755,469 Bbls.*
98% full 740,360 Bbls*
(ii) Weight of stores, etc.,
permanently deducted from
cargo carrying capacity L.T.*
(iii) a. Fresh water consumption per day
<PAGE> 2
Boilers 5 L.T.*
Potable 20 L.T.*
b. Capacity of evaporators per day
Boilers 40 L.T.*
Potable L.T.*
c. Normal quantity of fresh water
deductible from cargo carrying
capacity 250 L.T.*
(iv) Estimated loss of cargo carrying capacity
due to "sag" when fully loaded with
light, medium, heavy cargo
Light (S.G.) N/A L.T.
Medium (S.G.) N/A L.T.*
Heavy (S.G.) N/A L.T.*
(v) The Vessel can carry ABT 97,000 L.T.***
(of 2,240 lbs.) total deadweight (as
certified by Classification Society) of
cargo, bunkers, water, and stores on an
assigned summer freeboard of ft. in * in
salt water equalling 47 ft. 03 in.**
summer mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks for
propulsion
(98% full) Approx 65 Days at sea*
(ii) Total capacity of fresh water tanks
(100% full)
Boilers 315 M3*
Potable 97 M3*
(iii) Total capacity of permanent
segregated clean ballast tanks
(100% full) 39,418 M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo
a. Number 3
b. Make Shinko
c. Type Steam Turbine Centrifugal
d. Design rated capacity of
each pump in cubic meters
per hour 2,700 M3/Hr.
and corresponding discharge
head in meters 150 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Steam Driven Reciprocating
d. Design rated capacity of
each pump in cubic meters
per hour 200 M3/Hr.
and corresponding total
discharge head in
meters 150 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 2
<PAGE> 3
b. Make Shinko
c. Type Motor Driven Centrifugal
d. Design capacity each pump 1,700 M3/Hr.
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any direction
equivalent to the safe working load of the cargo
hose lifting equipment and will meet OCIMF
recommendations.
(i) a. Number of manifold connections 3
b. Diameter of manifold connections
inches 16 in.
c. Distance between centers of
manifold connections 8 ft. 02 in.
d. Distance from manifold
connections to ship's
side 14 ft. 04 in.
e. Distance center of manifold
connections to deck 6 ft. 02 in.
f. Distance bow/center of
manifold 408 ft. 07 in.
(ii) Cargo Manifold Reducing Pieces Vessel is
equipped with a sufficient number of cargo
manifold reducing pieces of steel or
equivalent material to permit presenting
of flanges of
12 in. at 150 ASA
10 in. at 150 ASA
8 in. at 150 ASA
(5) HEATING COILS
(i) Type of coils Strait
Material of which
manufactured Copper Alloy
(ii) Ratio heating surface/volume
a. Slop Tanks 0.060 M2/M3
b. Bunker Tanks Aft 0.060 M2/M3
Fore 0.060 M2/M3
c. Cargo Tanks Fore 0.0095 M2/M3
Wings 0.0166 M2/M3
Center 0.0083 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous cargo at
maximum rate of 12,000 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 803 ft. 02in.*
(ii) Fully loaded summer draft
in salt water of a density
of 1.025 maximum 47 ft. 03 in.**
on an assigned
freeboard of 20 ft. 05 in.*
(iii) Fresh Water allowance ft. 12.8 in.*
(iv) Light ship draft Forward 2 ft. 00 in.*
Aft 15 ft 03 in.*
Mean 8 ft 00 in.*
<PAGE> 4
(v) Moulded Depth 70 ft 10 in.*
(vi) Light ship freeboard ft in.*
(vii) TPI on light ship draft L.T.*
(viii) TPI on summer draft 220 L.T.*
(ix) Extreme beam 135' 02"*
(x) Gross Reg. Tons 57,448 Tons**
(xi) Net Reg. Tons 28,742 Tons**
(xii) Suez Canal tonnage 54,649 Tons**
Panama Canal tonnage Tons**
(xiii) Flag of Registry Bahamian
(xiv) Call letters C6KW3
(xv) Classification Society NK
(xvi) Type Engines Diesel
(xvii) Mooring winches
Number 6 Sets
Type Hydraulic
Capacity Tons pull 15 T x 15 at M/Min
Placement 2 sets FOCSLE
2 Sets Midship
2 Sets AFT
(xviii) Trial Speed fully loaded ***
(xix) Fuel Rate at maximum power on trial **
(xx) Guaranteed speed in all weather
Loaded: 14 KT
Ballast: 14 KT
(xxi) Guaranteed fuel consumption
in all weather
Amount: 43 MT Laden/41.5 MT Ballast
Type:
HVF 380 CST
Sec. Redwood #1 at 100 degrees F
0.5 MT Diesel Oil
(xxii) Tank cleaning system:
Fixed Portable
Type:
No:
Capacity:
(xxiii) Hose handling crane 1
SWL 15 Tons
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to communicate
with land stations. In this respect,
Vessel is equipped as follows:
HF Transmitter 36 DBW Output
<PAGE> 5
MF Transmitter 800 W Output
SSB Transmitter Output
VHF Transreceivers Channel Nos Multi
(ii) Vessel is constructed and equipped
upon delivery under this Charter in
accordance with regulations now existing
as to enable Vessel to transit Suez Canal/
Panama Canal in accordance with respective
latest navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in
good operating condition. Owner warrants
that this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of
SOLAS as amended.
(v) Vessel's slop retention system has a
capacity of 26,644 MT and is designed
to meet International Pollution
Convention standards as amended in 1969 or
thereafter revised. Oily water separator
has a capacity of tons/ hour with
discharge concentration in accordance with
1969 convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at 10,000 M3/H.
(vii) Vessel is equipped with the following
cargo pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 550 MM Diameter
Direct Filling Lines 550 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is
fitted with expansion bends or of dresser
type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit three (3)
port loading and three (3) port
discharging and to permit 39% of Vessel's
deadweight in clean/ballast to be
discharged overboard from cargo/ballast
tanks simultaneously with loading of
cargo.
(xi) Vessel is equipped with float type cargo
tank measuring devices. Maximum rates at
which vessel's lines will receive Bunkers:
Fuel M3/Hour
Diesel 100 M3/Hour
(b) Owner will, on Charterer's request, supply
Charterer with copies of Vessel's plans
provided that in the case of a
new-building said plans and said copies
shall be supplied to Charterer when they
are made available to Owner by the New
Building Yard.
<PAGE> 6
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall
be deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during
the Term of this Charter, place any additional
mortgage, lien or encumbrance on the Vessel, without
the prior written consent of Charterer, other than
liens in favor of the crew or routine suppliers to
the Vessel.
(d) Owner warrants that the Vessel will during
the Original and Extended Periods as well as any
Off-Hire Extension of this Charter be manned by
Officers and Crew of European/Indian/PI and PI
nationality respectively.
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT OF during the period of service under this Charter, so
HIRE, TRADE AND that all the representations and warranties set
USE forth in Clause 2 shall, at all times, be true and
accurate. Owner further represents, undertakes
warrants that, on the date Vessel is placed at
Charterer's disposal, Vessel will then be ready with
holds and cargo tanks clear and clean and in every way
fitted for the service and carriage of crude oil
and/or dirty petroleum products including crude
condensates, dirty naphtha and carbon black feedstock
in bulk maximum three (3) grades within Vessel's
natural segregation and such other dirty petroleum
products and lawful merchandise as may be suitable for
a Vessel of her description and shall then be tight,
staunch and strong, with pipelines, pumps and heating
coils in cargo, slop and bunker tanks in good working
condition, and with a full complement of properly
certified Master, Officers and Crew for a Vessel of
her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 30 Jun 92/and simultaneously with its
delivery to Owner from the New Building Yard and shall
in no event perform any voyage on behalf of the Owner
or any other person prior to its being so placed at
Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have received
from the Master written notice that Vessel is in all
respects ready for sea and is at Charterer's disposal
at Onomichi, Japan in or at such readily accessible
dock, wharf or place where she can always safely lie a
float, as Charter or its Agents may direct. However,
hire shall not, in any event, commence before 20 May
92 unless with Charterer's written consent and
Charterer shall have the option to cancel this Charter
should Vessel not be ready and placed at Charterer's
disposal in accordance with the provisions hereof,
before 30 Jun 92. Said option to cancel shall be
declared by Charterer not later than the date on which
Vessel is placed at Charterer's disposal delivered to
Owner by New Building Yard, and shall be without
prejudice to any claim for damages Charterer may have
for late tender of Vessel's services.
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading is
prohibited by vessel's flag, unless Owner gives
written consent, trading between safe ports in such
lawful trades as Charterer or its Agents may direct,
<PAGE> 7
subject to Institute Warranties and Clauses, attached
hereto as Attachment A; but including ports on the
East Coast of Canada, St. Lawrence River, North
American Lakes, Greenland and Baltic Sea upon payment
by Charterer of any additional insurance premiums
required by Vessel's underwriters for such latter
trading. Charterer shall be entitled to send Vessel
through the Straits of Magellan at any time of the
year. In the event that the Vessel shall, for any
reason whatsoever, be unable to be employed or trade
in any port of the World (subject to the limitations
specifically set forth herein) Charterer, at its
option, may immediately terminate this Charter and
release the Vessel to the Owner's use pursuant to the
provisions of Clause 14. Charterer shall be permitted
to breach IWL reimbursing Owner for all additional
premiums incurred.
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers,
Crew, tackle, apparel, furniture, fuel, provisions
and stores. Charterer shall have the option of
shipping any lawful dry cargo in bulk for which the
Vessel or her tanks are suitable and lawful
merchandise in cases and/or cans and/or other
packages in Vessel's available, suitable space
subject, however, to Master's approval as to kind and
character, amount and stowage. All charges for
dunnage, loading, stowing and discharging so incurred
shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged,
or lightened, at any port, place, berth, dock,
anchorage, or submarine line or alongside lighters or
vessels whether in a port or not as Charterer may
direct. Notwithstanding anything contained in this
Clause or any other provisions of this Charter,
Charterer shall not be deemed to warrant the safety
of any port, berth, dock, anchorage, submarine line
and/ or lighter or lightening Vessel and shall not be
liable for any loss, damage, injury, or delay
resulting from conditions at or on such ports, place,
berths, docks, anchorages, submarine lines and/or
lighter or lightening Vessel whether in a port or
not, not caused by Charterer's fault or neglect or
which could have been avoided by the exercise of
reasonable care on the part of the Master or Owner.
(g) Charterer, at its risk and
responsibility, may send passengers and/ or
super-cargo in available accommodations in Vessel
upon any voyage made under this Charter, with Owner
to provide provisions and all requisites, except
liquors, and Charterer to pay at the rate of THREE
UNITED STATES DOLLARS (U.S. $3.00) per diem for each
person during the time of such travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of <see clause 53>. Payments
OF HIRE of said hire shall be made monthly in advance in
United States Dollars, without any discount,
adjustment or deduction, except as specifically
set forth in this clause or otherwise in
this Charter, at Chase Manhattan Bank, New York, New
York, Account of Willow Limited 910-576825. Hire
shall commence from the hour (GMT) and day that the
Vessel is placed at Charterer's disposal, as provided
for in Clause 3, and shall continue until the hour
(GMT) and date that the Vessel is released to the
Owner by the Charterer in accordance with the
provisions of this Charter unless the Vessel is an
actual or constructive total loss or is Off-Hire in
accordance with the terms of this Charter. Any hire
paid in advance and not earned shall be refundable and
payable to Charterer by Owner and or by any party to
whom Owner may have assigned the hire; Owner at all
times remaining ultimately responsible therefor.
(b) Charterer shall be entitled to deduct
from the payments of hire due under paragraph (a) of
this Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's
<PAGE> 8
agents in excess of the said revolving fund; (ii)
lay-up savings in accordance with Clause 12; (iii)
any previous overpayments of hire, including payments
made with respect to periods of Off-Hire and
including any overpayments of hire concerning which a
bona fide dispute may exist; (iv) Off-Hire
anticipated to occur during month for which payment
of Hire is to be made; (v) any sums due or estimated
to be due under Clause 6 and (vi) any other sums to
which Charterer is entitled under this Charter.
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also
less the amount estimated by Charterer to become
payable by Owner for fuel and water on release of the
Vessel to Owner as provided in Clause 14. Upon
release of the Vessel any difference between the
estimated and actual amounts shall be refunded to or
paid by the Charterer as and to the extent that the
case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of
her loss, or if such time is unknown, at the time
when the Vessel was last heard of. If the Vessel
should become a constructive total loss, hire shall
cease at the time of the casualty resulting in such
loss. In either or any case, hire paid in advance and
not earned, plus any other monies then owing to
Charterer under the provisions of this Charter, shall
be immediately returned to the Charterer. If the
Vessel should be Off-Hire or missing when a payment
of hire would otherwise be due, such payment shall be
postponed until the Off-Hire ceases or the safety of
the Vessel is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights
the Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days
of receipt of said notification from the Owner,
failing which the Owner may have the right to
withdraw the Vessel from the service of the Charterer
without prejudice to any other claim the Owner may
have against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from
any such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire
applicable to said increase in deadweight and until
an Addendum to this Charter embodying such agreement
is executed by Owner and Charterer the said increase
in deadweight shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account
not compensated for by the revolving fund provided
for herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for
<PAGE> 9
Owner's account, (iv) all amounts due under other
provisions of this Charter, and (v) any damages
sustained by Charterer as a result of a breach of any
provision of this Charter by the Owner.
OWNER'S 6. (a) In addition to the warranties set forth
GUARANTEES AND in this Charter, Owner stipulates, agrees and
ADJUSTMENTS guarantees, that Vessel will, throughout the term of
OF HIRE this Charter, maintain on all sea passages, from sea
buoy to sea buoy, a guaranteed average speed of no
less than 14.0 knots loaded and 14.0 knots in ballast
(which speed will be determined by taking the total
mileage of the actual course which Vessel has
travelled divided by the total hours at sea is shown
in the log books, excluding stops at sea which are
considered as periods of Off-Hire under the terms of
this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 43 MT Laden/41.5
MT Ballast 380 CST.
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty-four (24)
hours against a head pressure of one hundred and
twenty-five pounds per square inch at the ship's
manifold, and that Vessel is fitted with sufficient
block valves for complete segregation to enable
simultaneous loading and discharge from a centralized
manifold amidships of three (3) grades of cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each subsequent
period of six (6) calendar months; provided, however,
that if there should be a period of less than six (6)
calendar months remaining prior to release of the
Vessel to Owner, then not later than the commencement
of the final month of this Charter. If, in respect of
any such period or prior period it is found that
Vessel has failed to maintain the speed and/or fuel
consumption and/or pumping performance guaranteed
pursuant to this Clause 6, Charterer shall be
compensated, including retroactive compensation, in
respect of each failing as follows: (i) SPEED--For
each knot, or pro rata for each part of a knot, below
the guaranteed speeds, a reduction in hire per
calendar month of per each DWT of Vessel's
capacity reflected in Clause 2; (ii) FUEL
CONSUMPTION--Owner to pay Charterer for each Metric
ton or pro rata for each part of a Metric ton,
consumed in excess of the guaranteed daily consumption
for main engines and auxiliaries, at Charterer's
Actual average price for the particular grade of
bunkers at Ras Tanura during the particular period, or
prior period, under review; (iii) PUMPING--Vessel to
be considered Off-Hire for each hour, or part of an
hour, in excess of the maximum number of hours
guaranteed herein for completing pumping of a full
cargo or pro-rata for a part thereof against a head
pressure at Vessel's manifold of one hundred and
twenty-five pounds per square inch. Charterer shall
determine whether any delay in pumping is the result
of unique characteristics of the cargo being pumped or
of the receiving terminal, and, if so, shall consider
this factor in assessing the pumping performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
<PAGE> 10
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive hours, whether at sea or in port
including but not limited to drydocking pursuant to
Clause 8 or for an accumulation of more than twelve
(12) hours during any voyage (a voyage to be
considered as a round voyage beginning at the time
Vessel tenders for loading at the first port under
the voyage in question until such time as it
completes the voyage and tenders for loading on the
subsequent voyage) or, (ii) for any number of hours
(including any part of an hour) due to deficiency of
personnel or stores, strike, boycotts (including
boycotts by persons or organizations other than
officers and/or members of the crew), refusal to
sail, breach of orders, or failure to have on board
Certificate required pursuant to Clause 21 or neglect
of duty on the part of the Master, Officers, or Crew,
or in order to render salvage services, obtain
medical aid or treatment, or for landing any sick or
injured person or the body of a deceased person
(other than a passenger carried under Clause 3 (g)
hereof), or due to any other deviation (including the
putting back or into any port other than that to
which Vessel is bound), then hire shall cease for all
time so lost until Vessel is again in an efficient
state to resume her service and has regained a point
of progress equivalent to that when hire ceased
hereunder.
(b) Cost of fuel, at Current Market Price,
and water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all
port charges, pilotage, towage and other expenses
incurred during such period and/or consequent upon
putting into any port or place other than to which
Vessel is bound, shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention
by authorities, unless due to Charterer's fault,
shall be for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by
any governmental authority, or by any legal action
against Vessel or Owner, or by any strike or boycott
including a boycott by other than the Vessel's
officers or crew, whereby Vessel is rendered
unavailable for Charterer's service for a period of
thirty (30) days or more, unless brought about by act
or neglect of Charterer, Charterer may, by written
notice given before Vessel is free and ready to
resume service, elect to terminate this Charter, or
to suspend same until the service can again be
resumed, without prejudice to any other rights
Charterer may have under this Charter or to any claim
it may have for damages. Hire shall cease during the
entire time Vessel is out of Charterer's service due
to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all overhaul
and other necessary repairs, at approximately sixty
(60)/month
<PAGE> 11
intervals, for which purpose Charterer shall allow
Vessel to proceed to an appropriate port. Owner shall
be solely responsible therefor, and also for
gasfreeing the Vessel, upon each such occasion. All
towage, pilotage, fuel, at Current Market Price,
water, if a steamer, and other expenses incurred while
proceeding to and from, and while in, drydock, shall
also be for Owner's account.
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or
discharge under Charterer's orders, hire shall be
suspended from the time Vessel receives free pratique
on arrival, if in ballast, or upon completion of
discharge of cargo, if loaded, until Vessel is again
ready for service. In case of drydocking at a port
other than where Vessel loads, discharges or bunkers,
payment of hire shall cease from the time of
deviation until Vessel is again in the same or
equivalent position as though no deviation had
occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging, sixty (60)
months after Vessel is placed at Charterer's disposal
and thereafter at least once within every sixty
(60)/months, shall be at Charterer's
option.
OWNER OR 9. (a) Owner will provide and/or pay for (i)
CHARTERER TO provisions, supplies, deck and engine stores, galley
PROVIDE and cabin stores, all fresh water if a motor vessel,
all P.&I., Hull and other insurance on Vessel or with
respect to Vessel's liabilities, wages of Master,
Officers and Crew, consular fees pertaining to the
Master, Officers-and Crew, (ii) galley and crew fuel
at the monthly rate payable to Charterer of ,
and (iii) the cost of all fuel oil, and/or diesel oil
and water, if a steamer, on board when Vessel is
released to Owner hereunder, not to exceed
tons fuel and tons water, respectively (costs
for fuel and/ or diesel oil to be determined at the
current Market Prices at the port and date of Vessel's
release to Owner; or, if not available there, at
current Market Prices at the nearest port where
bunkers are available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of ;
(iii) all overtime of Officers and Crew
worked at Charter's request, at the monthly rate
of , and (iv) cost of fuel oil and/ or
diesel oil and water, if a steamer, on board
when Vessel is placed at Charterer's disposal,
not to exceed tons fuel and tons
water, respectively (costs for fuel and/or diesel
oil to be determined at the current Market Prices
at the port and date the Vessel is placed
at Charterer's disposal where Hire begins; or,
if not available there, at current Market Prices
at the nearest port where bunkers are available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel
oil and water, if a steamer, expended or consumed in
a General Average situation and also during a
consequent related drydocking or repair of the Vessel
and said reimbursement shall not thereafter be deemed
to be a General Average expenditure.
<PAGE> 12
DUTIES OF 10. (a) Master shall prosecute his voyages with
MASTER utmost dispatch and render all reasonable assistance
with Vessel's crew and equipment, including hoisting,
connecting and disconnecting hoses at ports or sea
berths where requested or where such assistance is a
normal practice. Master and Chief Engineer shall be
required to be fluent in written and oral English.
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate
it and if necessary make a change in the
appointments.
(d) Master shall be furnished by Charterer,
from time to time, with all requisite instructions
and sailing orders, and both he and the Engineers
shall keep full and correct logs of the voyages,
which shall at all times be available to Charterer
and its Agents, and abstracts thereof, or such other
forms or reports as Charterer may require, shall be
sent to Charterer from each port of call. Failure of
the Master to promptly forward the Vessel's abstract
and other forms and reports in compliance with the
above shall be adequate grounds for Charterer's
invoking the provisions of Clause 10 (c).
ADDITIONAL 11. Charterer, subject to Owner's approval,
EQUIPMENT which shall not be unreasonably withheld, shall be at
liberty to fit, at Charterer's expense if any,
additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/ or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying
up the Vessel for all or any portion of the term of
this Charter, in which case hire hereunder shall
continue to be paid, but there shall be credited
against such hire the whole amount which Owner shall
save (or reasonably should save) during such period of
lay-up. Should Charterer, having exercised the option
granted hereunder, desire the Vessel again to be put
into service, Owner will, upon receipt of written
notice from Charterer to such effect, immediately take
steps to restore Vessel to service as promptly as
possible. The option granted to Charterer hereunder
may be exercised one or more times during the currency
of this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any
person or government under circumstances which are
equivalent to requisition of title), this Charter
shall automatically terminate as of the effective
date of such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of
thirty (30) days, the Charterer shall have
<PAGE> 13
the option to terminate this Charter upon written
notice to the Owner. Any periods of Off-Hire under
this Clause shall be subject to the Charterer's option
for Off-Hire extension set forth in Clause 1 hereof.
RELEASE OF VESSEL 14. Unless the employment of the Vessel under
TO OWNER this Charter shall previously have been terminated by
loss of the Vessel or otherwise, the Charterer shall
redeliver the Vessel to Owner (herein called "release
of the Vessel to the Owner's use"), free of cargo, at
the expiration of the term of this Charter stated in
Clause 1 (including any extension thereof provided in
said Clause or elsewhere in this Charter), at a port
World-Wide at Charterer's option (herein called "Port
of Release"). At the Charterer's option, the Vessel
may be released to the Owner with tanks in a clean or
dirty condition; and in no event shall Charterer be
required to so release the Vessel gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other terms
set forth or specified in the subparagraphs to this
paragraph (b) and such terms shall be incorporated
verbatim or be deemed incorporated by reference in any
such Bill of Lading. In the subparagraphs to this
paragraph (b) and in any Act referred to therein, the
word "Carrier" shall include the Owner of the Vessel.
(1) Clause Paramount. This Bill of
Lading shall have effect subject to the
provisions of the Carriage of Goods by Sea
Act of the United States, approved April 16,
1936, except that if this Bill of Lading is
issued at a place where any other Act,
ordinance, or legislation gives statutory
effect to the International Convention for
the Unification of Certain Rules relating to
Bills of Lading at Brussels, August 1924,
then this Bill of Lading shall have effect
subject to the provisions of such Act,
ordinance, or legislation. The applicable
Act, ordinance, or legislation (hereinafter
called "Act") shall be deemed to be
incorporated herein and nothing herein
contained shall be deemed a surrender by the
Owner or Carrier of any of its rights or
immunities or an increase of any of its
responsibilities or liabilities under the
Act. If any term of this Bill of Lading be
repugnant to the Act to any extent, such term
shall be void to that extent but no further.
(2) New Jason Clause. In the event of
accident, danger, damage, or disaster before
or after the commencement of the voyage,
resulting from any cause whatsoever, whether
due to negligence or not, for which, or for
the consequences of which, the Carrier is not
responsible, by statute, contract or
otherwise, the cargo, shippers, consignees,
or owners of the cargo shall contribute with
the Carrier in General Average to the payment
of any sacrifices, losses, or expenses of a
General Average nature that may be made or
incurred and shall pay salvage and special
charges incurred in respect of the cargo. If
a salving ship is owned or operated by the
Carrier, salvage shall be paid for as fully
as if the said salving ship or ships belonged
to strangers. Such deposit as the Carrier or
its Agents may deem
<PAGE> 14
sufficient to cover the estimated
contribution of the cargo and any salvage and
special charges thereon shall, if required,
be made by the cargo, shippers, consignees or
owners of the cargo to the Carrier before
delivery.
(3) General Average. General Average
shall be adjusted, stated, and settled
according to York/Antwerp Rules 1974, as
amended, but subject to the provisions of
Clause 9 (c) of this Charter and, as to
matters not provided for by those rules,
according to the laws and usages at the Port
of New York (except that any payment made by
Carrier to Charterer under Clause 20(b) or to
a Government or others to "remove" oil, as
defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil
Pollution (TOVALOP), as well as any other
payments, with respect to the Vessel or
Owner's Liability for Oil Pollution damages,
shall not be deemed to be General Average
sacrifices or expenditures). If a General
Average statement is required, it shall be
prepared at such port by an Adjuster at the
Port of New York appointed by the Charterer
of the Vessel and approved by the Carrier.
Such Adjuster shall attend to the settlement
and the collection of the General Average,
subject to customary charges. General Average
Agreements and/ or security shall be
furnished by Carrier and/or Charterer of the
Vessel, and/or Carrier and/or Consignee of
cargo, if requested. Any cash deposit being
made as security to pay General Average
and/or salvage shall be remitted to the
Average Adjuster and shall be held by him at
his risk in a special account in a duly
authorized and licensed bank at the place
where the General Average statement is
prepared.
(4) Both to Blame. If the Vessel comes
into collision with another ship as a result
of the negligence of the other ship and any
act, neglect or default of the Master,
mariner, pilot, or the servants of the
Carrier in the navigation or in the
management of the Vessel, the owners of the
cargo carried hereunder shall indemnify the
Carrier against all loss or liability to the
other or noncarrying ship or her owners
insofar as such loss or liability represents
loss of, or damage to, or any claim
whatsoever of the owners of said cargo, paid
or payable by the other or non-carrying ship
or her owners to the Owner of said cargo and
set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of
their claim against the carrying ship or
Carrier. The foregoing provisions shall also
apply where the owners, operators, or those
in charge of any ships or objects other than,
or in addition to, the colliding ships or
object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any
provision of this Charter to the contrary
notwithstanding, the Carrier shall have the
benefit of all limitations of, and exemptions
from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or
rule of law for the time being.
(6) Deviation Clause. The Vessel shall
have liberty to sail with or without pilots,
to tow or be towed, to go to the assistance
of Vessels in distress, to deviate for the
purpose of saving life or property or of
landing any ill or injured person on board,
and to call for fuel at any port or ports in
or out of the regular course of the voyage,
subject to the provisions of this Clause.
WAR CLAUSES 16. (a) No contraband of war shall be shipped,
AND RISKS but petroleum and/or its products shall not be
deemed contraband of war for the purposes of this
Clause. Vessel shall not, be required, without the
consent of Owner, which shall not be unreasonably
withheld, to enter any port of zone
<PAGE> 15
which is involved in a state of war, warlike
operations or hostilities, whether there be a
declaration of war or not, where it might reasonably
be expected to be subject to capture, seizure or
arrest, or to a hostile act by a belligerent power
(the term "power" meaning any de jure or de facto
authority or any other purported governmental
organization maintaining naval, military or air
forces).
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or
under a Government program in respect of such voyage,
route or port of loading or discharge. If such
consent is given by Owner, Charterer will pay the
provable additional cost of insuring Vessel against
all war risks in an amount equal to (i) the value
under her ordinary marine policy but (ii) in no event
Seven Billion Six Hundred Million Yen (Yen
7,600,000,000). If such insurance is not obtainable
commercially or through a Government program, Vessel
shall not be required to enter or remain at any such
port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer
shall, in respect of voyages to any such port or
zone, assume the provable additional cost of wages
and insurance properly incurred in connection with
Master, Officers and Crew as a consequence of such
war, warlike operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her
properly manned, equipped and supplied; or from any
other cause of whatsoever kind arising without the
actual fault or privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War;
act of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout,
<PAGE> 16
stoppage or restraint of labor, picketing, boycott,
or other labor disturbances or interruptions, from
whatever cause, either partial or general; or riot or
civil commotion.
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's
option to cancel this Charter, as provided in this
Charter.
DAMAGES TO, OR 18. Owner guarantees and warrants that Vessel is
CLAIMS ON CARGO constructed and equipped to carry, without admixture,
at least three (3) qualities or descriptions of oil
but, subject to this, neither Owner nor Vessel shall
be responsible for any on Cargo admixture if more than
three (3) qualities of oil are shipped, nor for
leakage, contamination or deterioration in quality of
the cargo, unless the admixture, leakage,
contamination or deterioration results from (i)
unseaworthiness existing at the time of loading or at
the inception of the voyage which was discoverable by
the exercise of due diligence, or (ii) error or fault
of the servants of Owner in the loading, care or
discharge of the cargo or (iii) because of any breach
of warranty set forth in this Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/ or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from
and limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when
no tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the
provisions of Clause 11 except that such equipment
shall be at Owner's expense, if required by
applicable law or to otherwise meet the provisions of
this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred,
sold or assigned by the Owner to any person or
persons or to a company related or affiliated to the
Owner without receipt of Charterer's prior written
consent. However, if Charterer shall assign the
Charter to any company related or affiliated to it,
it shall assign the obligations assumed hereunder,
<PAGE> 17
without any prior written consent of the Owner,
provided that Charterer shall, until termination of
the Charter, also remain primarily liable for the
obligations it has assumed under this Clause.
WATER 21. (a) Owner warrants that the Vessel
QUALITY performing under this Charter shall carry onboard a
Certificate of Financial Responsibility meeting the
requirements of the U.S. Federal Maritime Commission
promulgated pursuant to the U.S. "Water Quality
Improvement Act of 1970."
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7 (a).
SALVAGE 22. (a) All salvage moneys earned by Vessel
shall be divided equally between Owner and Charterer
after deducting Master's, Officers' and Crew's share,
legal expenses, hire of Vessel during time lost,
value of fuel consumed, repairs of damage, if any,
and any other extraordinary loss or expense sustained
as a result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit
as Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage
or special charges thereon, as may ultimately be
required to be paid by the Shippers, Consignees or
Owners of the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and
CLAUSES paint Vessel's funnel with its own colors or affix
thereto Charterer's stack insignia, if desired, at
Charterer's expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES OF 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the
event Vessel is so sold without Charterer's consent,
in addition to its other rights and Sub-letting
Charterer may at its absolute discretion, terminate
the Charter whereupon Owner shall immediately
reimburse Charterer for any and hire paid in advance
and not earned, the cost of bunkers, and any other
sums to which Charterer is entitled under this
Sub-letting Charter as well as damages which Charterer
may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required to
give Owner hereunder shall be addressed (i) to Owner
at its place of business first designated in this
Charter or (ii) to Owner's Agent Teekay Shipping
Limited, P.O. Box SS-6293 at Scotiabank Building,
First Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notice which Owner is required to give
to Charterer hereunder shall be addressed to
Charterer at c/o Teekay Shipping, P.O. Box
SS-6293, Scotiabank Bldg., 1st Floor, Rawson Square,
Bay Street, Nassau, Bahamas. Any
<PAGE> 18
notices given by letter by either party shall,
irrespective of any provision of law otherwise
applicable, be deemed to have been given when such
notice, addressed to the other party, or to Owner's
or Charterer's Agent, at its place of business
designated in the Charter, is posted.
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to be
ARBITRATION regarded as essential parts of the Charter, which is
conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
(b) The interpretation of this Charter and
the rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses
set forth herein are for convenience of reference
only and shall not affect the interpretation of this
Charter. No modification, waiver or discharge of any
term in this Charter shall be valid unless it is
reduced to writing and executed by the party to be
charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall
be put to arbitration in New York pursuant
to the laws related to arbitration there in force,
before a Board of three persons, consisting of one
(1) arbitrator to be appointed by Owner, one (1) by
Charterer, and one (1) by the two so chosen. In the
event that either Owner or Charterer shall state a
dispute and designate an arbitrator, in writing, the
other party shall have twenty (20) days, excluding
Saturdays, Sundays and legal holidays to designate
his arbitrator failing which the single arbitrator
can render an award hereunder. The decision of any
two (2) of the three (3) on any point or points shall
be final. Until such time as the arbitrators finally
close the Hearings, either party shall have the right
by written notice served on the arbitrators and on
the other party to specify further disputes or
differences under this Charter for hearing and
determination. The arbitrators may grant any relief,
and render an award, which they or a majority of
them, deem just and equitable and within the scope of
the agreement of the parties, including but not
limited to, specific performance. Awards pursuant to
this Clause may include costs, including a reasonable
allowance for attorneys' fees, and judgments may be
entered upon any award made herein in any court
having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through
54 as attached are hereby incorporated into this
Charter Party (excluding clause 47).
WITNESS OWNER NASSAU SPIRIT INC
__________________________________ By __________________________________
WITNESS CHARTERER PALM SHIPPING INC
__________________________________ By ___________________________________
<PAGE> 19
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations
<PAGE> 20
promulgated thereunder (hereinafter called "U.S. Regulations"); the
International Convention for the Prevention of Pollution from Ships
(MARPOL 1973) and the 1978 Protocol thereto as applicable; and the
International Convention for Safety of Lives at Sea (SOLAS 1974) and
the 1978 Protocol thereto as applicable (the foregoing conventions and
protocols hereinafter in this clause called "IMCO Regulations"). Owner
warrants that the Vessel shall carry on board certifications of
compliance with U.S. Regulations and IMCO Regulations and any other
records or documentations as may be required by the U.S. Government
authorities, Flay State authorities or port and government authorities
for any port within the trading areas described in Clause 3 (d). Any
delays, losses, expenses or damages arising as a result of failure to
comply with this clause shall be for Owner's account and in no case
shall Charterer be liable for hire or other expenses during any time
lost as a result of Vessel's failure to comply with the foregoing U.S.
Regulations and IMCO Regulations and/or carry On board the necessary
certification of compliance.
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
<PAGE> 21
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
<PAGE> 22
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred or
expected to be incurred by Charterer for Owner's account less any
amounts that Charterer otherwise may be permitted to withhold or
deduct under the terms of this Charter, and less the estimated value
of bunker fuel remaining at the termination of the voyage; and when
the Vessel is redelivered, any overpayment shall be refunded by Owner
or underpayment paid by Charterer. Notwithstanding the provisions of
Clause 1 hereof, should the Vessel be upon a voyage at expiry of the
period of this Charter, Charterer shall have the use of the Vessel at
the same rate and conditions for such extended time as may be
necessary for the completion of the round voyage on which she is
engaged until her return to a port of redelivery as provided in this
Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and
any extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each
occasion when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel's mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank
<PAGE> 23
cleaning and surveyor's fees, hotel expense, cost of travelling, etc.,
and the Vessel shall remain on-hire while changing mode.
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance of the
Notes outstanding during the 365 day period subsequent to the
Determination Date.
y = the principal repayment requirements during the 365 day
period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel (excluding
depreciation and amortization) for the 365 day period
subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the vessel, divided
by the number of years (and fractions thereof) between the
completion of the most recent drydocking of the vessel and the
commencement of that next drydocking.
<PAGE> 24
The Determination Dates shall occur on January 10, 1994 and annually
thereafter. In addition, there shall be a Determination Date upon the
occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock budgets
as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent (1-1/4%) on
all hires to Teekay Shipping Limited in the Bahamas which commission
shall be deductible from hire as and when paid.
<PAGE> 1
EXHIBIT 10.7
TIME CHARTER, AS AMENDED, DATED NOVEMBER 1, 1992
BETWEEN ANDROS SPIRIT INC. AND PALM SHIPPING INC.
IT IS THIS 1st DAY OF November 1992 mutually agreed
between Andros Spirit Inc. a Liberian corporation,
maintaining an office and place of business at 80
Broad Street, Monrovia as Owner (herein called
"Owner") of the Bahamian flag motor/tank/vessel to be
built by Onomichi Dockyard Co., Ltd. for delivery to
Owner on or about 26 November 1992, named Samar
Spirit Inc. (herein called "Vessel") and Palm Shipping
Inc., a Liberian corporation, maintaining an office
and place of business at c/o Teekay Shipping Limited,
P.O. Box SS-6293, Scotiabank Bldg., First Floor Rawson
Square, Bay Street, Nassau, Bahamas (herein called
"Charterer"), that the Owner lets and the Charterer
hires the use and service of the Vessel for a period
and on the terms and conditions hereinafter set forth.
TERM 1. (a) The term of this Charter shall be for a
period of about ten (10) consecutive years (herein
called "Original Period") plus any extensions thereof
as provided in paragraph (b) below. The Original
Period shall commence when the Vessel is placed at the
Charterer's disposal, as provided in Clause 3. The
word "about" as used above shall mean "thirty (30)
days more or less" at Charterer's option and shall
apply to the term of this Charter consisting of the
Original Period plus any extensions as hereinafter
provided.
(b) The term of this Charter may be extended
by Charterer for a period equal to all or any part of
the time Vessel is Off-Hire (herein called "Off-Hire
Extension"), when and if Charterer gives written
notice to Owner of such Off-Hire Extension (in no
particular form) at least three (3) months before the
expiration of the Original Period, or Extended Period
if Charterer has exercised the option under Clause
2(b). Any Off-Hire incurred after the above notice
shall have been given, whether said Off-Hire occurs
within the Original Period, Extended Period and/or
Off-Hire Extension, shall without any further written
notice, be a further Off-Hire Extension. Off-Hire, for
the purposes of this Clause 2 (c) shall include
incidents of Off-Hire specified in Clause 7 as well as
any other period(s) for which cesser or suspension of
the payment(s) of hire is (are) allowed hereunder
during the Original Period, Extended Period, and, or
Off-Hire Extension.
OWNER'S WARRANTIES 2. (a) Owner undertakes and warrants that, on
the date that the Vessel is placed at Charterer's
disposal, as provided in Clause 3, the following
representations are and will be the description of
the particulars and capacities of the Vessel and her
equipment.
(1) CARGO CARRYING CAPACITY
(i) Total cargo tank capacity
100% full 755,044 Bbls.*
98% full 739,943 Bbls.*
(ii) Weight of stores, etc.,
permanently deducted from
cargo carrying capacity L.T.*
(iii) a. Fresh water consumption per day
<PAGE> 2
Boilers 5 L.T.*
Potable 20 L.T.*
b. Capacity of evaporators per day
Boilers 40 L.T.*
Potable L.T.*
c. Normal quantity of fresh
water deductible from cargo
carrying capacity 250 L.T.*
(iv) Estimated loss of cargo carrying capacity
due to "sag" when fully loaded with light,
medium, heavy cargo
Light ( S.G.) N/A L.T.
Medium ( S.G.) N/A L.T.*
Heavy ( S.G.) N/A L.T.*
(v) The Vessel can carry ABT 97,000 L.T.***
(of 2,240 lbs.) total deadweight (as
certified by Classification Society) of
cargo, bunkers, water, and stores on an
assigned summer freeboard of ft. in.*
in salt water equalling 47 ft. 03 in.**
summer mean draft
(2) OTHER TANK CAPACITIES
(i) Total capacity of fuel tanks for
propulsion
(98% full) Approx 65 Days at sea*
(ii) Total capacity of fresh water tanks
(100% full)
Boilers 315 M3*
Potable 97 M3*
(iii) Total capacity of permanent
segregated clean ballast tanks
(100% full) 39,418M3*
(3) CAPACITY OF PUMPS
(i) Main Cargo Pumps
a. Number 3
b. Make Shinko
c. Type Steam Turbine Centrifugal
d. Design rated capacity
of each pump in cubic
meters per hour 2 ,700 M3/Hr.
and corresponding discharge
head in meters 150 Meters/Head
(ii) Stripping Pumps
a. Number 1
b. Make Shinko
c. Type Steam Driven Reciprocating
d. Design rated capacity
of each pump in cubic meters
per hour 200 M3/Hr.
and corresponding total
discharge head in
meters 150 Meters/Head
(iii) Segregated Clean Ballast Pumps
a. Number 2
<PAGE> 3
b. Make Shinko
c. Type Motor Driven Centrifugal
d. Design capacity each pump 1,700 M3/Hr.
(4) CARGO LOADING/DISCHARGE MANIFOLD
The whole manifold is made of steel or equivalent
material and is strengthened and supported to
avoid damage from loading and discharge equipment
and to withstand a maximum load from any direction
equivalent to the safe working load of the cargo
hose lifting equipment and will meet OCIMF
recommendations.
(i) a. Number of manifold connections 3
b. Diameter of manifold
connections inches 16 in.
c. Distance between centers of
manifold connections 8 ft. 02 in.
d. Distance from manifold
connections to ship's
side 14 ft. 04 in.
e. Distance center of manifold
connections to deck 6 ft. 02 in.
f. Distance bow/center of
manifold 408 ft. 07 in.
(ii) Cargo Manifold Reducing Pieces
Vessel is equipped with a sufficient
number of cargo manifold reducing pieces
of steel or equivalent material to permit
presenting of flanges of
12 in. at 150 ASA
10 in. at 150 ASA
8 in. at 150 ASA
(5) HEATING COILS
(i) Type of coils Strait
Material of which
manufactured Copper Alloy
(ii) Ratio heating surface/volume
a. Slop Tanks 0.060 M2/M3
b. Bunker Tanks Aft 0.060 M2/M3
Fore 0.060 M2/M3
c. Cargo Tanks Fore 0.0095 M2/M3
Wings 0.0166 M2/M3
Center 0.0083 M2/M3
(6) CARGO LOADING/PERFORMANCE
Vessel can load homogeneous cargo at
maximum rate of 12,000 M3/Hr.
(7) VESSEL PARTICULARS
(i) Length overall 803 ft. 02 in. *
(ii) Fully loaded summer draft
in salt water of a density
of 1.025 maximum 47 ft. 03 in.**
on an assigned freeboard
of 20 ft. 05 in. *
(iii) Fresh Water allowance ft. 12.8 in.*
(iv) Light ship draft Forward 2 ft. 00 in.*
Aft 15 ft. 03 in.*
Mean 8 ft. 00 in.*
<PAGE> 4
(v) Moulded Depth 70 ft 10 in.*
(vi) Light ship freeboard ft in.*
(vii) TPI on light ship draft L.T.*
(viii) TPI on summer draft 220 L.T.*
(ix) Extreme beam 135' 02"*
(x) Gross Reg. Tons 57,448 Tons**
(xi) Net Reg. Tons 28,742 Tons**
(xii) Suez Canal tonnage 54,649 Tons**
Panama Canal tonnage Tons**
(xiii) Flag of Registry Bahamian
(xiv) Call letters C6L15
(xv) Classification Society NK
(xvi) Type Engines Diesel
(xvii) Mooring winches
Number 6 Sets
Type Hydraulic
Capacity Tons pull 15 T x 15 M/Min
Placement 2 sets FOCSLE
2 Sets Midship
2 Sets AFT
(xviii) Trial Speed fully loaded ***
(xix) Fuel Rate at maximum power on trial **
(xx) Guaranteed speed in all weather
Loaded: 14 KT
Ballast: 14 KT
(xxi) Guaranteed fuel consumption in all weather
Amount: 43 MT Laden/41.5 MT Ballast
Type:
HVF 380 CST
Sec. Redwood #1 at 100 degrees F
0.5 MT Diesel Oil
(xxii) Tank cleaning system:
Fixed Portable
Type:
No:
Capacity:
(xxiii) Hose handling crane 1
SWL 15 Tons
(8) MISCELLANEOUS
Owner warrants the following:
(i) Vessel is equipped with communications
equipment to comply with International
Regulations to allow Vessel to communicate
with land stations. In this respect,
Vessel is equipped as follows:
HF Transmitter 36 DBW Output
<PAGE> 5
MF Transmitter 800 W Output
SSB Transmitter Output
VHF Transreceivers Channel Nos Multi
(ii) Vessel is constructed and equipped upon
delivery under this Charter in accordance
with regulations now existing as to enable
Vessel to transit Suez Canal/ Panama Canal
in accordance with respective latest
navigation regulations.
(iii) Vessel is equipped with a fresh water
evaporator which will be maintained in
good operating condition. Owner warrants
that this evaporator is capable of making
sufficient fresh water to supply Vessel's
daily needs as established in items (1)
(iii) a & b.
(iv) Vessel will meet all requirements of
SOLAS as amended.
(v) Vessel's slop retention system has a
capacity of 26,644 MT and is designed
to meet International Pollution
Convention standards as amended in 1969 or
thereafter revised. Oily water separator
has a capacity of tons/hour with discharge
concentration in accordance with 1969
convention as amended.
(vi) Vessel is fitted with common type cargo
ventline system which has capacity to
permit loading of cargo at 10,000 M3/H.
(vii) Vessel is equipped with the following
cargo pipeline system:
Cargo Tank Suction Lines 550 MM Diameter
Discharge Lines 550 MM Diameter
Direct Filling Lines 550 MM Diameter
(viii) Vessel is equipped with hydraulic cargo
valve control system.
(ix) Vessel cargo deck pipeline system is
fitted with expansion bends or of dresser
type.
(x) Vessel's cargo segregation and pipeline
system to be designed to permit three (3)
port loading and three (3) port
discharging and to permit 39% of Vessel's
deadweight in clean/ballast to be
discharged overboard from cargo/ballast
tanks simultaneously with loading of
cargo.
(xi) Vessel is equipped with float type cargo
tank measuring devices. Maximum rates at
which vessel's lines will receive Bunkers:
Fuel M3/Hour
Diesel 100 M3/Hour
(b) Owner will, on Charterer's request, supply
Charterer with copies of Vessel's plans provided that
in the case of a new-building said plans and said
copies shall be supplied to Charterer when they are
made available to Owner by the New Building Yard.
<PAGE> 6
(c) Owner represents and warrants that no
other person or corporation has any right, title or
interest in the Vessel or any lien, mortgage or
encumbrance on the Vessel except as specifically
indicated, in writing, to Charterer when the Vessel
was offered to Charterer. Said written notice shall be
deemed to be a warranty by Owner to Charterer that
Vessel is not otherwise encumbered and if no such
notice was then received by Charterer it shall be
deemed to be a warranty by Owner that Vessel was not
then so encumbered. Owner further warrants that it
has not prior to execution of this Charter and will
not following execution of this Charter and during the
Term of this Charter, place any additional mortgage,
lien or encumbrance on the Vessel, without the prior
written consent of Charterer, other than liens in
favor of the crew or routine suppliers to the Vessel.
(d) Owner warrants that the Vessel will
during the Original and Extended Periods as well as
any Off-Hire Extension of this Charter be manned by
Officers and Crew of Russian/Ukrainian and
Russian/Ukrainian/Eatvian nationality respectively.
DELIVERY, 3. (a) Owner undertakes to maintain Vessel,
COMMENCEMENT OF during the period of service under this Charter, so
HIRE, TRADE AND that all the representations and warranties set
USE forth in Clause 2 shall, at all times, be true
and accurate. Owner further represents, undertakes
warrants that, on the date Vessel is placed
at Charterer's disposal, Vessel will then be
ready with holds and cargo tanks clear and clean and
in every way fitted for the service and carriage of
crude oil and/or dirty petroleum products including
crude condensates, dirty naphtha and carbon black
feedstock in bulk maximum three (3) grades within
Vessel's natural segregation and such other dirty
petroleum products and lawful merchandise as may
be suitable for a Vessel of her description and
shall then be tight, staunch and strong, with
pipelines, pumps and heating coils in cargo, slop and
bunker tanks in good working condition, and with a
full complement of properly certified Master, Officers
and Crew for a Vessel of her size and character.
(b) Vessel shall be placed at Charterer's
disposal in accordance with the provisions hereof no
later than 15 Dec 92/and simultaneously with
its delivery to Owner from the New Building Yard and
shall in no event perform any voyage on behalf of the
Owner or any other person prior to its being so
placed at Charterer's disposal.
(c) Hire shall commence when the Vessel is so
placed at Charterer's disposal, which shall be
evidenced when Charterer, or its Agents, have
received from the Master written notice that Vessel
is in all respects ready for sea and is at
Charterer's disposal at in or at such readily
accessible dock, wharf or place where
she can always safely lie a float, as Charter or its
Agents may direct. However, hire shall not, in any
event, commence before 20 Nov 92 unless with
Charterer's written consent and Charterer shall
have the option to cancel this Charter should Vessel
not be ready and placed at Charterer's disposal in
accordance with the provisions hereof, before
15 Dec 92. Said option to cancel shall be declared
by Charterer not later than the date on which Vessel
is placed at Charterer's disposal delivered to Owner
by New Building Yard, and shall be without prejudice
to any claim for damages Charterer may have for late
tender of Vessel's services.
(d) Vessel may be employed in any part of the
World, excluding those countries with which trading
is prohibited by vessel's flag, unless Owner
gives written consent, trading between safe ports in
such lawful trades as Charterer or its Agents may
direct, subject to Institute Warranties and Clauses,
attached hereto as Attachment A; but including ports
on
<PAGE> 7
the East Coast of Canada, St. Lawrence River, North
American Lakes, Greenland and Baltic Sea upon payment
by Charterer of any additional insurance premiums
required by Vessel's underwriters for such latter
trading. Charterer shall be entitled to send Vessel
through the Straits of Magellan at any time of the
year. In the event that the Vessel shall, for any
reason whatsoever, be unable to be employed or trade
in any port of the World (subject to the limitations
specifically set forth herein) Charterer, at its
option, may immediately terminate this Charter and
release the Vessel to the Owner's use pursuant to the
provisions of Clause 14. Charterer shall be permitted
to breach IWL reimbursing Owner for all additional
premiums incurred.
(e) The whole reach and burden of Vessel (but
not more than she can reasonably stow and safely
carry) shall be at Charterer's disposal, reserving
appropriate space for Vessel's Master, Officers, Crew,
tackle, apparel, furniture, fuel, provisions and
stores. Charterer shall have the option of shipping
any lawful dry cargo in bulk for which the Vessel or
her tanks are suitable and lawful merchandise in cases
and/or cans and/or other packages in Vessel's
available, suitable space subject, however, to
Master's approval as to kind and character, amount and
stowage. All charges for dunnage, loading, stowing and
discharging so incurred shall be paid by Charterer.
(f) The Vessel shall be loaded, discharged,
or lightened, at any port, place, berth, dock,
anchorage, or submarine line or alongside lighters or
vessels whether in a port or not as Charterer may
direct. Notwithstanding anything contained in this
Clause or any other provisions of this Charter,
Charterer shall not be deemed to warrant the safety
of any port, berth, dock, anchorage, submarine line
and/ or lighter or lightening Vessel and shall not be
liable for any loss, damage, injury, or delay
resulting from conditions at or on such ports, place,
berths, docks, anchorages, submarine lines and/or
lighter or lightening Vessel whether in a port or
not, not caused by Charterer's fault or neglect or
which could have been avoided by the exercise of
reasonable care on the part of the Master or Owner.
(g) Charterer, at its risk and responsibility,
may send passengers and/ or super-cargo in available
accommodations in Vessel upon any voyage made under
this Charter, with Owner to provide provisions and all
requisites, except liquors, and Charterer to pay at
the rate of THREE UNITED STATES DOLLARS (U.S. $3.00)
per diem for each person during the time of such
travel.
HIRE AND 4. (a) Charterer shall pay hire for the use of
ADJUSTMENTS the Vessel at the rate of <see clause 53>. Payments
OF HIRE of said hire shall be made monthly in advance in
United States Dollars, without any discount,
adjustment or deduction, except as specifically set
forth in this clause or otherwise in this Charter, at
Chase Manhattan Bank, New York, New York, Account of
Willow Limited 910-576825. Hire shall commence from
the hour (GMT) and day that the Vessel is placed at
Charterer's disposal, as provided for in Clause 3, and
shall continue until the hour (GMT) and date that the
Vessel is released to the Owner by the Charterer in
accordance with the provisions of this Charter unless
the Vessel is an actual or constructive total loss or
is Off-Hire in accordance with the terms of this
Charter. Any hire paid in advance and not earned
shall be refundable and payable to Charterer by Owner
and or by any party to whom Owner may have assigned
the hire; Owner at all times remaining ultimately
responsible therefor.
(b) Charterer shall be entitled to deduct
from the payments of hire due under paragraph (a) of
this Clause (i) any sums necessary to replenish the
revolving fund established herein and or actual or
estimated disbursements, if any, for Owner's account
and any advances to the Master or Owner's agents in
excess of the said revolving fund; (ii) lay-up
savings in accordance with Clause 12; (iii)
<PAGE> 8
any previous overpayments of hire, including payments
made with respect to periods of Off-Hire and including
any overpayments of hire concerning which a bona fide
dispute may exist; (iv) Off-Hire anticipated to occur
during month for which payment of Hire is to be made;
(v) any sums due or estimated to be due under Clause 6
and (vi) any other sums to which Charterer is entitled
under this Charter.
(c) Should the Vessel be on her final voyage
at the time a payment of hire becomes due, said
payment shall be made for the time estimated by
Charterer to be necessary to complete the voyage and
effect release of the Vessel to Owner, less all
deductions provided for in paragraph (b) of this
Clause which shall be estimated by Charterer if the
actual amounts have not been determined, and also less
the amount estimated by Charterer to become payable by
Owner for fuel and water on release of the Vessel to
Owner as provided in Clause 14. Upon release of the
Vessel any difference between the estimated and actual
amounts shall be refunded to or paid by the Charterer
as and to the extent that the case may require.
(d) Should the Vessel be lost, or if missing
and presumed lost, hire shall cease at the time of
her loss, or if such time is unknown, at the time
when the Vessel was last heard of. If the Vessel
should become a constructive total loss, hire shall
cease at the time of the casualty resulting in such
loss. In either or any case, hire paid in advance and
not earned, plus any other monies then owing to
Charterer under the provisions of this Charter, shall
be immediately returned to the Charterer. If the
Vessel should be Off-Hire or missing when a payment
of hire would otherwise be due, such payment shall be
postponed until the Off-Hire ceases or the safety of
the Vessel is ascertained, as the case may be.
(e) If the Vessel shall not fulfill the
Owner's warranties or any other part of her
description as warranted in Clause 2, Charterer shall
be entitled, without prejudice to any other rights
the Charterer may have, to a reduction in the hire to
correct (compensate) for such deficiency.
(f) In default of punctual and regular
payments of hire as herein specified Owner shall
notify Charterer at his Office and place of business
as specified in Clause 25 as to said default in
writing, cable or telex whereupon the Charterer shall
make payment of the amount due within ten (10) days
of receipt of said notification from the Owner,
failing which the Owner may have the right to
withdraw the Vessel from the service of the Charterer
without prejudice to any other claim the Owner may
have against the Charterer under this Charter.
(g) Should compliance with future legislation
or regulations of Classification Societies, or other
authorities, result in a loss of deadweight, the Hire
due hereunder shall be correspondingly decreased to
conform to the actual deadweight of the Vessel.
However, any increase in deadweight resulting from
any such future legislation or regulations shall not
result in a corresponding increase in Hire. Owner and
Charterer may agree upon a new rate of hire
applicable to said increase in deadweight and until
an Addendum to this Charter embodying such agreement
is executed by Owner and Charterer the said increase
in deadweight shall not be used by Charterer.
LIENS 5. The Owner shall have a lien on all cargoes for
all amounts due to them under this Charter and the
Charterer shall have a lien on the Vessel for (i) all
moneys paid in advance and not earned, (ii) all
disbursements and advances for the Owner's account
not compensated for by the revolving fund provided
for herein or otherwise, (iii) the value of any of
Charterer's fuel used or accepted for
<PAGE> 9
Owner's account, (iv) all amounts due under other
provisions of this Charter, and (v) any damages
sustained by Charterer as a result of a breach of any
provision of this Charter by the Owner.
OWNER'S 6. (a) In addition to the warranties
GUARANTEES AND set forth in this Charter, Owner stipulates, agrees
ADJUSTMENTS and guarantees, that Vessel will, throughout the term
OF HIRE of this Charter, maintain on all sea passages,
from sea buoy to sea buoy, a guaranteed average
speed of no less than 14.0 knots loaded and 14.0
knots in ballast (which speed will be determined
by taking the total mileage of the actual course which
Vessel has travelled divided by the total hours at sea
is shown in the log books, excluding stops at sea
which are considered as periods of Off-Hire under the
terms of this Charter).
(b) Owner further stipulates, agrees and
guarantees that Vessel will, throughout the term of
this Charter, maintain the above guaranteed speeds on
a fuel consumption of not more than 43 MT Laden/41.5
MT Ballast 380 CST tons.
(c) Owner further stipulates, agrees and
guarantees that the cargo and stripping pumps will,
throughout the term of this Charter, discharge
Vessel's cargo within a maximum of twenty-four (24)
hours against a head pressure of one hundred and
twenty-five pounds per square inch at the ship's
manifold, and that Vessel is fitted with sufficient
block valves for complete segregation to enable
simultaneous loading and discharge from a centralized
manifold amidships of three (3) grades of cargo.
(d) The speed, fuel consumption and pumping
performance which Owner, pursuant to this Clause 6,
has guaranteed, throughout the term of this Charter,
will be reviewed by Charterer six (6) calendar months
after the date Vessel is placed at Charterer's
disposal, and thereafter at the end of each subsequent
period of six (6) calendar months; provided, however,
that if there should be a period of less than six (6)
calendar months remaining prior to release of the
Vessel to Owner, then not later than the commencement
of the final month of this Charter. If, in respect of
any such period or prior period it is found that
Vessel has failed to maintain the speed and/or fuel
consumption and/or pumping performance guaranteed
pursuant to this Clause 6, Charterer shall be
compensated, including retroactive compensation, in
respect of each failing as follows: (i) SPEED---For
each knot, or pro rata for each part of a knot, below
the guaranteed speeds, a reduction in hire per
calendar month of per each DWT of Vessel's capacity
reflected in Clause 2; (ii) FUEL CONSUMPTION--Owner to
pay Charterer for each Metric ton, or pro rata for
each part of a Metric ton, consumed in excess of the
guaranteed daily consumption for main engines and
auxiliaries, at Charterer's Actual average price for
the particular grade of bunkers at Ras Tanura during
the particular period, or prior period, under review;
(iii) PUMPING---Vessel to be considered Off-Hire for
each hour, or part of an hour, in excess of the
maximum number of hours guaranteed herein for
completing pumping of a full cargo or pro-rata for a
part thereof against a head pressure at Vessel's
manifold of one hundred and twenty-five pounds per
square inch. Charterer shall determine whether any
delay in pumping is the result of unique
characteristics of the cargo being pumped or of the
receiving terminal, and, if so, shall consider this
factor in assessing the pumping performance.
(e) The provisions of this Clause 6, with
respect to speed and fuel consumption shall be
administered in accordance with Exhibit 1, attached
hereto, and entitled "Administration of Provisions of
Time-Charter All Weather Clause."
<PAGE> 10
OFF-HIRE 7. (a) In the event that a loss of time, not
caused by Charterer's fault, shall continue, (i) due
to repairs, breakdown, accident or damage to Vessel,
collision, stranding, fire, interference by
authorities or any other cause preventing the
efficient working of the Vessel, for more than twelve
(12) consecutive hours, whether at sea or in port
including but not limited to drydocking pursuant to
Clause 8 or for an accumulation of more than twelve
(12) hours during any voyage (a voyage to be
considered as a round voyage beginning at the time
Vessel tenders for loading at the first port under the
voyage in question until such time as it completes the
voyage and tenders for loading on the subsequent
voyage) or, (ii) for any number of hours (including
any part of an hour) due to deficiency of personnel or
stores, strike, boycotts (including boycotts by
persons or organizations other than officers and/or
members of the crew), refusal to sail, breach of
orders, or failure to have on board Certificate
required pursuant to Clause 21 or neglect of duty on
the part of the Master, Officers, or Crew, or in order
to render salvage services, obtain medical aid or
treatment, or for landing any sick or injured person
or the body of a deceased person (other than a
passenger carried under Clause 3 (g) hereof), or due
to any other deviation (including the putting back or
into any port other than that to which Vessel is
bound), then hire shall cease for all time so lost
until Vessel is again in an efficient state to resume
her service and has regained a point of progress
equivalent to that when hire ceased hereunder.
(b) Cost of fuel, at Current Market Price, and
water, if a steamer, consumed while Vessel is
Off-Hire, pursuant to this Clause, as well as all port
charges, pilotage, towage and other expenses incurred
during such period and/or consequent upon putting into
any port or place other than to which Vessel is bound,
shall be borne by Owner.
(c) Any delay by ice or time spent in
quarantine shall be for Charterer's account, except
that delay in quarantine, resulting from the Master,
Officers or Crew having communication with the shore
at an infected port, where Charterer has given the
Master adequate notice of the infection, shall be for
Owner's account. Any loss of time through detention
by authorities, unless due to Charterer's fault,
shall be for Owner's account.
(d) In the event of a breakdown or delay from
any cause whatsoever, not otherwise covered by this
Clause, and Vessel remains on hire, it is mutually
understood and agreed that the cost of port charges,
tugs, pilots and all other expenses, incurred by
reason of such delay, shall be for Owner's account.
(e) In the event of detention of Vessel by
any governmental authority, or by any legal action
against Vessel or Owner, or by any strike or boycott
including a boycott by other than the Vessel's
officers or crew, whereby Vessel is rendered
unavailable for Charterer's service for a period of
thirty (30) days or more, unless brought about by act
or neglect of Charterer, Charterer may, by written
notice given before Vessel is free and ready to
resume service, elect to terminate this Charter, or
to suspend same until the service can again be
resumed, without prejudice to any other rights
Charterer may have under this Charter or to any claim
it may have for damages. Hire shall cease during the
entire time Vessel is out of Charterer's service due
to any such detention.
(f) Nothing in this Clause shall affect any
other provision in this Charter providing for cesser
or suspension of hire where specifically allowed.
DRY DOCKING 8. (a) Owner, at its expense, shall drydock,
clean and paint Vessel's bottom, and make all
overhaul and other necessary repairs, at
approximately sixty (60) month
<PAGE> 11
intervals, for which purpose Charterer shall allow
Vessel to proceed to an appropriate port. Owner shall
be solely responsible therefor, and also for
gasfreeing the Vessel, upon each such occasion. All
towage, pilotage, fuel, at Current Market Price,
water, if a steamer, and other expenses incurred
while proceeding to and from, and while in, drydock,
shall also be for Owner's account.
(b) In case of drydocking pursuant to this
Clause at a port where Vessel is to load, or
discharge under Charterer's orders, hire shall be
suspended from the time Vessel receives free pratique
on arrival, if in ballast, or upon completion of
discharge of cargo, if loaded, until Vessel is again
ready for service. In case of drydocking at a port
other than where Vessel loads, discharges or bunkers,
payment of hire shall cease from the time of
deviation until Vessel is again in the same or
equivalent position as though no deviation had
occurred.
(c) Nothing contained herein shall, however,
be interpreted to mean that Charterer agrees to
program (schedule) the Vessel to any port for
drydocking, repairing or crewchange. The timing of
such drydocking, repairing or crewchanging, sixty (60)
months after Vessel is placed at Charterer's disposal
and thereafter at least once within every sixty
(60) months, shall be at Charterer's option.
OWNER OR 9. (a) Owner will provide and/or pay for (i)
CHARTERER TO provisions, supplies, deck and engine stores, galley
PROVIDE and cabin stores, all fresh water if a motor vessel,
all P.&I., Hull and other insurance on Vessel or with
respect to Vessel's liabilities, wages of Master,
Officers and Crew, consular fees pertaining to the
Master, Officers-and Crew, (ii) galley and crew fuel
at the monthly rate payable to Charterer of , and
(iii) the cost of all fuel oil, and/or diesel oil and
water, if a steamer, on board when Vessel is released
to Owner hereunder, not to exceed tons fuel and
tons water, respectively (costs for fuel and/ or
diesel oil to be determined at the current Market
Prices at the port and date of Vessel's release to
Owner; or, if not available there, at current Market
Prices at the nearest port where bunkers are
available).
(b) Except when the Vessel is Off-Hire,
Charterer will provide and pay for (i) all fuel oil
and/or diesel oil and fresh water, if a steamer, and
all port charges, light dues, docking dues, Canal
dues, pilotages, Consular fees (except those
pertaining to the Master, Officers and Crew), tugs
necessary to assist Vessel in, about and out of port
(but only in the performance of this Charter),
Charterer's agency fees, and expenses of loading and
unloading cargoes, (ii) all telephone calls, radio
messages and telegrams sent at the request of
Charterer and extra victualling for Charterer's
account at the monthly rate of ; (iii) all overtime
of Officers and Crew worked at Charter's request, at
the monthly rate of , and (iv)
cost of fuel oil and/ or diesel oil and water, if a
steamer, on board when Vessel is placed at
Charterer's disposal, not to exceed tons
fuel and tons water, respectively
(costs for fuel and/or diesel oil to be determined at
the current Market Prices at the port and date the
Vessel is placed at Charterer's disposal where Hire
begins; or, if not available there, at current Market
Prices at the nearest port where bunkers are
available.
(c) Notwithstanding the provisions of
paragraph (b) (i) of this Clause, Owner shall
reimburse Charterer for any fuel oil and/or diesel
oil and water, if a steamer, expended or consumed in
a General Average situation and also during a
consequent related drydocking or repair of the Vessel
and said reimbursement shall not thereafter be deemed
to be a General Average expenditure.
<PAGE> 12
DUTIES OF 10. (a) Master shall prosecute his voyages with
MASTER utmost dispatch and render all reasonable
assistance with Vessel's crew and equipment, including
hoisting, connecting and disconnecting hoses at ports
or sea berths where requested or where such assistance
is a normal practice. Master and Chief Engineer shall
be required to be fluent in written and oral English.
(b) Master, although appointed by, and in the
employ of Owner, and subject to Owner's direction and
control, shall observe the orders of Charterer as
regards employment of Vessel, Charterer's Agents or
other arrangements required to be made by Charterer
hereunder.
(c) If Charterer should be dissatisfied with
the conduct of Master or Officers, Owner shall, on
receiving particulars of the complaint, investigate
it and if necessary make a change in the
appointments.
(d) Master shall be furnished by Charterer,
from time to time, with all requisite instructions
and sailing orders, and both he and the Engineers
shall keep full and correct logs of the voyages,
which shall at all times be available to Charterer
and its Agents, and abstracts thereof, or such other
forms or reports as Charterer may require, shall be
sent to Charterer from each port of call. Failure of
the Master to promptly forward the Vessel's abstract
and other forms and reports in compliance with the
above shall be adequate grounds for Charterer's
invoking the provisions of Clause 10 (c).
ADDITIONAL 11. Charterer, subject to Owner's approval,
EQUIPMENT which shall not be unreasonably withheld, shall be at
liberty to fit, at Charterer's expense if any,
additional pumps and/or gear for loading or
discharging cargo it may require beyond that which is
on board when Vessel is placed at Charterer's
disposal, and to make the necessary connections with
steam or water pipes, such work to be done at
Charterer's expense and time, and such pumps and/ or
gear so fitted to be considered Charterer's property,
and Charterer shall be at liberty to remove said
equipment at its expense and time during or at the
expiry of this Charter; the Vessel to be left in her
original condition to Owner's satisfaction except for
reasonable wear and tear. Owner shall, however,
provide normal maintenance for any equipment installed
by Charterer.
LAY-UP 12. Charterer shall have the option of laying
up the Vessel for all or any portion of the term of
this Charter, in which case hire hereunder shall
continue to be paid, but there shall be credited
against such hire the whole amount which Owner shall
save (or reasonably should save) during such period of
lay-up. Should Charterer, having exercised the option
granted hereunder, desire the Vessel again to be put
into service, Owner will, upon receipt of written
notice from Charterer to such effect, immediately take
steps to restore Vessel to service as promptly as
possible. The option granted to Charterer hereunder
may be exercised one or more times during the currency
of this Charter or any extension thereof.
REQUISITION 13. (a) In the event that title to the Vessel
shall be requisitioned or seized by any government
authority (or the Vessel shall be seized by any
person or government under circumstances which are
equivalent to requisition of title), this Charter
shall automatically terminate as of the effective
date of such requisition or seizure.
(b) In the event that the Vessel should be
requisitioned for use or seized by any government
authority (or any person) on any basis not involving,
or not equivalent to, requisition of title, she shall
be Off-Hire hereunder during the period of such
requisition, and any hire or any other compensation
paid in respect of such requisition shall be for
Owner's account, provided, however, that if such
requisition continues for a period in excess of
thirty (30) days, the Charterer shall have
<PAGE> 13
the option to terminate this Charter upon written
notice to the Owner. Any periods of Off-Hire under
this Clause shall be subject to the Charterer's
option for Off-Hire extension set forth in Clause 1
hereof.
RELEASE OF VESSEL 14. Unless the employment of the Vessel under
TO OWNER this Charter shall previously have been terminated by
loss of the Vessel or otherwise, the Charterer shall
redeliver the Vessel to Owner (herein called "release
of the Vessel to the Owner's use"), free of cargo, at
the expiration of the term of this Charter stated in
Clause 1 (including any extension thereof provided in
said Clause or elsewhere in this Charter), at a port
World-Wide at Charterer's option (herein called "Port
of Release"). At the Charterer's option, the Vessel
may be released to the Owner with tanks in a clean or
dirty condition; and in no event shall Charterer be
required to so release the Vessel gas free.
BILLS OF LADING 15. (a) Bills of Lading shall be signed by the
Master as presented, the Master attending daily, if
required, at the offices of the Charterer or its
Agents. However, at Charterer's option, the Charterer
or its Agents may sign Bills of Lading on behalf of
the Master. All Bills of Lading shall be without
prejudice to this Charter and the Charterer shall
indemnify the Owner against all consequences or
liabilities which may arise from any inconsistency
between this Charter and any Bills of Lading or other
document relating to cargo signed by the Charterer or
its Agents or by the Master at their request or which
may arise from any irregularity in such documents
supplied by the Charterer or its Agents.
(b) The carriage of cargo under this Charter
and under Bills of Lading issued for the cargo shall
be subject to the statutory provisions and other
terms set forth or specified in the subparagraphs to
this paragraph (b) and such terms shall be
incorporated verbatim or be deemed incorporated by
reference in any such Bill of Lading. In the
subparagraphs to this paragraph (b) and in any Act
referred to therein, the word "Carrier" shall include
the Owner of the Vessel.
(1) Clause Paramount. This Bill of
Lading shall have effect subject to the
provisions of the Carriage of Goods by Sea
Act of the United States, approved April 16,
1936, except that if this Bill of Lading is
issued at a place where any other Act,
ordinance, or legislation gives statutory
effect to the International Convention for
the Unification of Certain Rules relating to
Bills of Lading at Brussels, August 1924,
then this Bill of Lading shall have effect
subject to the provisions of such Act,
ordinance, or legislation. The applicable
Act, ordinance, or legislation (hereinafter
called "Act") shall be deemed to be
incorporated herein and nothing herein
contained shall be deemed a surrender by the
Owner or Carrier of any of its rights or
immunities or an increase of any of its
responsibilities or liabilities under the
Act. If any term of this Bill of Lading be
repugnant to the Act to any extent, such term
shall be void to that extent but no further.
(2) New Jason Clause. In the event of
accident, danger, damage, or disaster before
or after the commencement of the voyage,
resulting from any cause whatsoever, whether
due to negligence or not, for which, or for
the consequences of which, the Carrier is not
responsible, by statute, contract or
otherwise, the cargo, shippers, consignees,
or owners of the cargo shall contribute with
the Carrier in General Average to the payment
of any sacrifices, losses, or expenses of a
General Average nature that may be made or
incurred and shall pay salvage and special
charges incurred in respect of the cargo. If
a salving ship is owned or operated by the
Carrier, salvage shall be paid for as fully
as if the said salving ship or ships belonged
to strangers. Such deposit as the Carrier or
its Agents may deem sufficient
<PAGE> 14
to cover the estimated contribution of the
cargo and any salvage and special charges
thereon shall, if required, be made by the
cargo, shippers, consignees or owners of the
cargo to the Carrier before delivery.
(3) General Average. General Average
shall be adjusted, stated, and settled
according to York/Antwerp Rules 1974, as
amended, but subject to the provisions of
Clause 9 (c) of this Charter and, as to
matters not provided for by those rules,
according to the laws and usages at the Port
of New York (except that any payment made by
Carrier to Charterer under Clause 20(b) or to
a Government or others to "remove" oil, as
defined in the Tanker Owners Voluntary
Agreement Concerning Liability for Oil
Pollution (TOVALOP), as well as any other
payments, with respect to the Vessel or
Owner's Liability for Oil Pollution damages,
shall not be deemed to be General Average
sacrifices or expenditures). If a General
Average statement is required, it shall be
prepared at such port by an Adjuster at the
Port of New York appointed by the Charterer
of the Vessel and approved by the Carrier.
Such Adjuster shall attend to the settlement
and the collection of the General Average,
subject to customary charges. General Average
Agreements and/ or security shall be
furnished by Carrier and/or Charterer of the
Vessel, and/or Carrier and/or Consignee of
cargo, if requested. Any cash deposit being
made as security to pay General Average
and/or salvage shall be remitted to the
Average Adjuster and shall be held by him at
his risk in a special account in a duly
authorized and licensed bank at the place
where the General Average statement is
prepared.
(4) Both to Blame. If the Vessel comes
into collision with another ship as a result
of the negligence of the other ship and any
act, neglect or default of the Master,
mariner, pilot, or the servants of the
Carrier in the navigation or in the
management of the Vessel, the owners of the
cargo carried hereunder shall indemnify the
Carrier against all loss or liability to the
other or noncarrying ship or her owners
insofar as such loss or liability represents
loss of, or damage to, or any claim
whatsoever of the owners of said cargo, paid
or payable by the other or non-carrying ship
or her owners to the Owner of said cargo and
set-off, recouped or recovered by the other
or non-carrying ship or her owners as part of
their claim against the carrying ship or
Carrier. The foregoing provisions shall also
apply where the owners, operators, or those
in charge of any ships or objects other than,
or in addition to, the colliding ships or
object are at fault in respect of a collision
or contact.
(5) Limitation of Liability. Any
provision of this Charter to the contrary
notwithstanding, the Carrier shall have the
benefit of all limitations of, and exemptions
from, liability accorded to the Owner or
Chartered Owner of Vessels by any statute or
rule of law for the time being.
(6) Deviation Clause. The Vessel shall
have liberty to sail with or without pilots,
to tow or be towed, to go to the assistance
of Vessels in distress, to deviate for the
purpose of saving life or property or of
landing any ill or injured person on board,
and to call for fuel at any port or ports in
or out of the regular course of the voyage,
subject to the provisions of this Clause.
WAR CLAUSES 16. (a) No contraband of war shall be shipped,
AND RISKS but petroleum and/or its products shall not be deemed
contraband of war for the purposes of this Clause.
Vessel shall not, be required, without the consent of
Owner, which shall not be unreasonably withheld, to
enter any port of zone
<PAGE> 15
which is involved in a state of war, warlike
operations or hostilities, whether there be a
declaration of war or not, where it might reasonably
be expected to be subject to capture, seizure or
arrest, or to a hostile act by a belligerent power
(the term "power" meaning any de jure or de facto
authority or any other purported governmental
organization maintaining naval, military or air
forces).
(b) For the purposes of this Clause it shall
be unreasonable for Owner to withhold consent to any
voyage, route, or port of loading or discharge if
insurance against all risks defined in paragraph (a)
of this Clause is then available commercially or
under a Government program in respect of such voyage,
route or port of loading or discharge. If such
consent is given by Owner, Charterer will pay the
provable additional cost of insuring Vessel against
all war risks in an amount equal to (i) the value
under her ordinary marine policy but (ii) in no event
exceeding Seven Billion Six Hundred Million Yen
(Yen 7,600,000,000). If such insurance is not
obtainable commercially or through a Government
program, Vessel shall not be required to enter or
remain at any such port or zone.
(c) In the event of the existence of the
conditions described in paragraph (a) of this Clause
subsequent to the date of this Charter and while
Vessel is on-hire under this Charter, Charterer
shall, in respect of voyages to any such port or
zone, assume the provable additional cost of wages
and insurance properly incurred in connection with
Master, Officers and Crew as a consequence of such
war, warlike operations or hostilities.
(d) The provisions of this Clause shall apply
with the same manner and the same effect to the
consequences of civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or
piracy.
(e) During the term of this Charter, Owner
shall bear all risk of loss or damage to the Vessel
and/or liabilities of the Vessel (except and to the
extent that it is otherwise specifically provided
herein) and Owner shall indemnify and hold Charterer
harmless with respect to such risks.
EXCEPTIONS 17. (a) Vessel, her Master and Owner, shall not,
unless otherwise in this Charter expressly provided,
be responsible to Charterer for any loss or damage
arising or resulting from: (i) any act, neglect,
default or barratry of Master, pilots, mariners or
other servants of Owner in the navigation or
management of Vessel; fire, unless caused by the
personal design or neglect of Owner; collision,
stranding or peril, danger or accident of the sea or
other navigable waters; saving or attempting to save
life or property; wastage in weight or bulk, or any
other loss or damage arising from inherent defect,
quality or inherent vice of the cargo; any act or
omission of Charterer or Shipper, Consignee or Owner
of the cargo, their Agents or representatives;
insufficiency of packing; insufficiency or inadequacy
of marks; (ii) explosion or bursting of boilers,
breakage of shafts or unseaworthiness of Vessel,
unless caused by want of due diligence on the part of
Owner to make Vessel seaworthy or to have her
properly manned, equipped and supplied; or from any
other cause of whatsoever kind arising without the
actual fault or privity of Owner.
(b) Neither Vessel, her Master or Owner, nor
Charterer, shall, unless otherwise in this Charter
expressly provided, be responsible for any loss,
damage, delay or failure in performing hereunder
arising or resulting from: act of God; act of War;
act of public enemies, pirates or assailing thieves;
arrest or restraint of princes, rulers or people, or
seizure under legal process provided bond or other
security is promptly furnished to release Vessel or
cargo; strike, lockout,
<PAGE> 16
stoppage or restraint of labor, picketing, boycott,
or other labor disturbances or interruptions, from
whatever cause, either partial or general; or riot or
civil commotion.
(c) This Clause is not to be construed as in
any way affecting the provisions for Off-Hire,
cessation or suspension of hire, or Charterer's
option to cancel this Charter, as provided in this
Charter.
DAMAGES TO, OR 18. Owner guarantees and warrants that Vessel is
CLAIMS ON CARGO constructed and equipped to carry, without admixture,
at least three (3) qualities or descriptions of oil
but, subject to this, neither Owner nor Vessel shall
be responsible for any on Cargo admixture if more than
three (3) qualities of oil are shipped, nor for
leakage, contamination or deterioration in quality of
the cargo, unless the admixture, leakage,
contamination or deterioration results from (i)
unseaworthiness existing at the time of loading or at
the inception of the voyage which was discoverable by
the exercise of due diligence, or (ii) error or fault
of the servants of Owner in the loading, care or
discharge of the cargo or (iii) because of any breach
of warranty set forth in this Charter.
NEGLIGENCE OF 19. (a) Charterer shall not be held responsible
PILOTS, ETC. for losses sustained by Owner or Vessel through the
negligence of pilots, tugboats or stevedores, even
though Charterer and/ or its Agents engage or furnish
such services. Owner hereby authorizes Charterer and
its Agents to bind Vessel and its Owner to all the
terms and conditions of written or implied contracts
or agreements for pilotage, towing or stevedoring in
accordance with established local practice in the
ports where such services are engaged, and Owner shall
indemnify and hold Charterer and its Agents harmless
from all damages and expenses that may be sustained or
incurred in the event of Charterer and/or its Agents
engaging or furnishing such services.
(b) Charterer shall have the option of using
its own tugs or pilots, or tugs owned or pilots
employed by subsidiary or related companies, in the
towing, docking, undocking, piloting or other
assistance of Vessel. In this event, the terms and
conditions for such services prevailing in the port
where such services are rendered, and applied by
independent tugboat owners or pilots, shall be
applicable, and Charterer, its subsidiaries and their
pilots shall be entitled to all the exemptions from
and limitations of liability applicable to said
independent tugboat owners or pilots and their
published terms and conditions. The exemption from
and limitation of liability accorded Charterer, its
subsidiaries or related companies and their pilots
shall also include services rendered by pilots when
no tugboats are in attendance of Vessel.
OIL POLLUTION 20. (a) Owner undertakes and guarantees that
Master will, at all times, comply with Charterer's
requirements, which will from time to time be made
available to Master, for the Prevention of the
Pollution of the Sea by Oil and will retain on board
all oily residues at all times and be able to pump
such residues ashore either separately or commingled
with dirty ballast or cargo as Charterer may require.
Owner will also place on board the Vessel any
additional equipment Charterer might require to
further reduce the possibility or probability of
Pollution of the Sea by Oil, subject to the
provisions of Clause 11 except that such equipment
shall be at Owner's expense, if required by
applicable law or to otherwise meet the provisions of
this Charter.
(b) The obligations which Charterer has
assumed under this Clause may not be transferred,
sold or assigned by the Owner to any person or
persons or to a company related or affiliated to the
Owner without receipt of Charterer's prior written
consent. However, if Charterer shall assign the
Charter to any company related or affiliated to it,
it shall assign the obligations assumed hereunder,
<PAGE> 17
without any prior written consent of the Owner,
provided that Charterer shall, until termination of
the Charter, also remain primarily liable for the
obligations it has assumed under this Clause.
WATER 21. (a) Owner warrants that the Vessel
QUALITY performing under this Charter shall carry onboard a
Certificate of Financial Responsibility meeting the
requirements of the U.S. Federal Maritime Commission
promulgated pursuant to the U.S. "Water Quality
Improvement Act of 1970."
(b) Owner further warrants that said
Certificate of Financial Responsibility will be
maintained throughout the Original or Extended Period
of this Charter.
(c) Charterer shall not be liable for any
delay as a result of Owner's failure to have onboard
the aforementioned Certificate, and Vessel shall be
Off-Hire as provided in Clause 7 (a).
SALVAGE 22. (a) All salvage moneys earned by Vessel
shall be divided equally between Owner and Charterer
after deducting Master's, Officers' and Crew's share,
legal expenses, hire of Vessel during time lost,
value of fuel consumed, repairs of damage, if any,
and any other extraordinary loss or expense sustained
as a result of salvage service.
(b) If a salving ship is owned or operated by
Owner, salvage shall be paid for as fully as if the
salving Vessel belonged to a stranger. Such deposit
as Owner or Agents may deem sufficient to cover the
estimated contribution of the cargo in General
Average, or salvage or special charges solely in
respect of the cargo, shall, if required, be made by
the Shippers, Consignees or Owners of the cargo to
Owner before delivery of the cargo. In lieu of said
deposit, Charterer may give Owner a written guarantee
to pay any contribution by the cargo or any salvage
or special charges thereon, as may ultimately be
required to be paid by the Shippers, Consignees or
Owners of the cargo.
MISCELLANEOUS 23. (a) Charterer may fly its house flag and
CLAUSES paint Vessel's funnel with its own colors or affix
thereto Charterer's stack insignia, if desired, at
Charterer's expense and time.
(b) Owner at its expense, throughout the
period of this Charter, shall have Vessel fully
entered in a Protection and Indemnity Association or
Club, in good standing, in both Protection and
Indemnity classes.
CHANGES OF 24. (a) Owner's rights and obligations under this
OWNERSHIP, Charter are not transferable by either sale or
ASSIGNMENT assignment, without Charterer's consent. ln the
event Vessel is so sold without Charterer's consent,
in addition to its other rights and Sub-letting
Charterer may at its absolute discretion, terminate
the Charter whereupon Owner shall immediately
reimburse Charterer for any and hire paid in advance
and not earned, the cost of bunkers, and any other
sums to which Charterer is entitled under this
Sub-letting Charter as well as damages which Charterer
may sustain.
(b) Charterer may sub-charter or assign this
Charter to another, but Charterer shall remain
responsible for the continued performance hereunder.
NOTICES 25. Any notices which Charterer is required to
give Owner hereunder shall be addressed (i) to Owner
at its place of business first designated in this
Charter or (ii) to Owner's Agent Teekay Shipping
Limited, P.O. Box SS-6293 at Scotiabank Building,
First Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notice which Owner is required to give
to Charterer hereunder shall be addressed to
Charterer at
<PAGE> 18
c/o Teekay Shipping, P.O. Box SS-6293, Scotiabank
Bldg., 1st Floor, Rawson Square, Bay Street, Nassau,
Bahamas. Any notices given by letter by
either party shall, irrespective of any provision of
law otherwise applicable, be deemed to have been
given when such notice, addressed to the other party,
or to Owner's or Charterer's Agent, at its place of
business designated in the Charter, is posted.
COMMISSION 26. Any Commission which may be payable as a
result of fixing or executing this Charter shall be
for the account of Owner.
LAWS AND 27. (a) All warranties in this Charter are to be
ARBITRATION regarded as essential parts of the Charter, which is
conditional on their truth or performance, so that
their breach entitles the Charterer to terminate the
Charter as well as to recover any damages allowable in
Law, Equity or Admiralty.
(b) The interpretation of this Charter and
the rights and obligations of the parties shall be
governed by the laws applicable to Charter Parties
made in New York. The headings of Clauses
set forth herein are for convenience of reference
only and shall not affect the interpretation of this
Charter. No modification, waiver or discharge of any
term in this Charter shall be valid unless it is
reduced to writing and executed by the party to be
charged therewith.
(c) Any and all differences and disputes of
whatsoever nature arising out of this Charter shall
be put to arbitration in New York pursuant
to the laws related to arbitration there in force,
before a Board of three persons, consisting of one
(1) arbitrator to be appointed by Owner, one (1) by
Charterer, and one (1) by the two so chosen. In the
event that either Owner or Charterer shall state a
dispute and designate an arbitrator, in writing, the
other party shall have twenty (20) days, excluding
Saturdays, Sundays and legal holidays to designate
his arbitrator failing which the single arbitrator
can render an award hereunder. The decision of any
two (2) of the three (3) on any point or points shall
be final. Until such time as the arbitrators finally
close the Hearings, either party shall have the right
by written notice served on the arbitrators and on
the other party to specify further disputes or
differences under this Charter for hearing and
determination. The arbitrators may grant any relief,
and render an award, which they or a majority of
them, deem just and equitable and within the scope of
the agreement of the parties, including but not
limited to, specific performance. Awards pursuant to
this Clause may include costs, including a reasonable
allowance for attorneys' fees, and judgments may be
entered upon any award made herein in any court
having jurisdiction.
IN WITNESS WHEREOF, the parties have caused
this Charter to be executed in duplicate the day and
year herein first above written. Clauses 28 through
54 as attached are hereby incorporated into this
Charter Party.
WITNESS OWNER ANDROS SPIRIT INC
______________________ By_____________________
WITNESS CHARTERER PALM SHIPPING INC
______________________ By ____________________
<PAGE> 19
28. TOVALOP CLAUSE
A. Owner warrants that the Vessel is a participating tanker in
TOVALOP and will so remain during the currency of this Charter
provided, however, that if Owner acquires the right to
withdraw from TOVALOP under Clause Viii thereof nothing herein
shall prevent it from exercising that right provided Owner
notifies Charterer forthwith of its intention to withdraw.
B. Whenever within the meaning of TOVALOP there is a "Threat of
Discharge of Oil" or a "Discharge of Oil" from the Vessel
which threatens to cause or causes "Damage by Pollution",
Charterer or such person or company as Charterer designates
may at its option upon notice by Charterer to Owner or Master
undertake (a) with respect to a threatened discharge of oil,
such pollution damage likely to result from such a discharge,
and (b) with respect to a discharge of oil, such measures as
are reasonably necessary to "Remove" the oil or to prevent or
mitigate pollution damage, unless Owner promptly undertakes
same. Charterer shall keep Owner advised of the nature and
results of any such measures taken by it or its designee and
if time permits of the measures intended to be taken. Any of
the aforementioned measures actually taken by Charterer or its
designee shall be taken on Owner's authority and shall be at
Owner's expense (except to the extent that such escape or
discharge was caused or contributed to by Charterer), provided
that if Owner considers said measures should be discontinued,
Owner shall so notify Charterer and thereafter neither
Charterer nor its designee shall have any right to continue
said measure under the provisions of this clause.
C. Any dispute between Owner and Charterer as to the
reasonableness of the measures undertaken and/or the
expenditure incurred by Charterer hereunder, shall be referred
to arbitration or the competent Court as provided for in this
Charter.
D. The above provisions are not in derogation of such other
rights as Charterer or Owner may have under this Charter, or
may otherwise have or acquire by law or any international
convention.
29. FMC CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto it will comply with the U.S. Federal water Pollution
Control Act, as amended, and any amendments or successors to said Act,
and will have secured and will carry onboard the Vessel a current U.S.
Federal Maritime Commission Certificate of Financial Responsibility
(Oil Pollution).
In no case shall Charterer be liable for hire or other expenses during
any time lost as a result of Owner's failure to obtain or maintain the
aforementioned Certificate.
30. U.S. COAST GUARD REGULATION CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereof, the Vessel will be in full compliance with U.S.
Coast Guard pollution prevention regulation as specifically described
in 33 CFR parts 154, 155, 156, 157, and 164, and any amendments
thereto, or will hold necessary waivers if not in compliance. In no
case shall Charterer be liable for hire or other expenses during any
time lost as a result of noncompliance.
31. IMCO CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto Vessel will be in full compliance with: the
requirements of the United States Port and Tanker Safety Act of 1978
and any applicable regulations
<PAGE> 20
promulgated thereunder (hereinafter called "U.S. Regulations"); the
International Convention for the Prevention of Pollution from Ships
(MARPOL 1973) and the 1978 Protocol thereto as applicable; and the
International Convention for Safety of Lives at Sea (SOLAS 1974) and
the 1978 Protocol thereto as applicable (the foregoing conventions and
protocols hereinafter in this clause called "IMCO Regulations"). Owner
warrants that the Vessel shall carry on board certifications of
compliance with U.S. Regulations and IMCO Regulations and any other
records or documentations as may be required by the U.S. Government
authorities, Flay State authorities or port and government authorities
for any port within the trading areas described in Clause 3 (d). Any
delays, losses, expenses or damages arising as a result of failure to
comply with this clause shall be for Owner's account and in no case
shall Charterer be liable for hire or other expenses during any time
lost as a result of Vessel's failure to comply with the foregoing U.S.
Regulations and IMCO Regulations and/or carry On board the necessary
certification of compliance.
32. CAST IRON CLAUSE
Owner warrants that all riser valves and fittings and reducer outboard
of the last fixed rigid support to the Vessel's deck that are used in
the transfer of cargo or ballast will be made of steel or nodular
iron, and that only one steel reducer or spacer will be used between
the Vessel's valve and the loading arm. The fixed rigid support must
be designed to prevent both lateral and vertical movement of the
transfer manifold.
33. IGS CLAUSE
Owner warrants that the Vessel is equipped with an Inert Gas System
which shall be maintained in good working order during the term of
this Charter party and any extension thereto and that the Vessel's
officers and crew shall be trained and experienced in the operation of
the Inert Gas System.
34. CRUDE OIL WASHING CLAUSE
Owner warrants that the Vessel is equipped for Crude Oil Washing and
that the equipment used for Crude Oil Washing shall be maintained in
good working order during the term of this Charter party and any
extension thereto and that the Vessel's officers shall have valid COW
certificates and that Vessel's officers and crew shall be trained and
experience in the operation of the Crude Oil Washing System.
35. ISGOTT CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be equipped and operated in
accordance with the most current applicable recommendations contained
in the International Safety Guide for Oil Tankers and Terminals.
36. CLC CERTIFICATE
Owner warrants to have received and to carry aboard the Vessel a Civil
Liability Convention Certificate to verify financial indemnification
against pollution.
37. SLOW STEAMING CLAUSE
Charterer shall have the right to order the Vessel to proceed at any
speed within the range of the Vessel's capabilities and Charterer
shall not submit speed and/or consumption claims for such periods
during which Vessel is operating at reduced speed in accordance with
Charterers instructions.
<PAGE> 21
38. SHIP-TO-SHIP TRANSFER CLAUSE
Charterer shall have the right to require Vessel to perform lighterage
operations and/or ship-to-ship transfer operations at anchor or
underweigh at on or off ports of loading and/or discharge or enroute
thereto and such ship-to-ship transfer operations shall be conducted
in accordance with the provisions of the latest ICS/OCIMF Ship-to-Ship
Transfer Guide (petroleum).
39. ELIGIBILITY CLAUSE
Owner warrants that during the term of this Charter party and any
extension thereto the Vessel shall be eligible for trading within the
trading areas described in Clause 3(d) and that the Vessel is not in
any way listed as unacceptable by any major oil company, government or
similar organization nor is she barred from any activity within any
port within the trading areas described in Clause 3(d).
40. EQUIPMENT CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto:
1. The Vessel shall meet the Standards for Equipment Employed in
the Mooring of Ships at Single Point Moorings and the
Standards for Oil Tanker Manifolds and Associated Equipment as
contained in the most current OCIMF publications.
2. The Vessel's mooring, loading and discharging equipment and
fittings shall meet the requirements of all major oil
companies (e.g. Chevron, Exxon, Shell and Texaco) and port
authorities.
41. CARGO RETENTION CLAUSE
Charterer shall have the right to deduct from hire any amount withheld
from a Voyage Freight by a sub-charterer pursuant to a cargo retention
clause in a Voyage Charter Party between Charterer and that
subcharterer.
42. TELEX SYSTEM
If not already fitted, Owner shall equip Vessel with telex system of
the Marisat type at the first practical opportunity after delivery
under this Charter Party but not later than three (3) months after
delivery.
43. POLLUTIONS, STRANDINGS, INCIDENTS
Owner warrants that Vessel has had no groundings, strandings,
collisions, pollution incidents and/or other severe accidents within
two years prior to delivery under this Charter Party.
44. SURVEYS
On-hire survey shall be performed in Owner's time, offhire survey
shall be performed in Charterer's time. Costs shall be equally shared
between the two parties.
<PAGE> 22
45. BUNKERING CLAUSE
Charterer shall have the right to bunker the Vessel at a convenient
port prior to delivery and Owner shall have the right to bunker Vessel
at a convenient port prior to redelivery under this Charter Party. The
cost of any delays and/or other expenses incurred thereby shall be
borne by the party supplying bunkers.
46. REMEASUREMENT CLAUSE
Charterer shall have the option of remeasuring the Vessel to a lower
deadweight tonnage at any time during the term of this Charter Party
and any extension thereto. Time and cost of remeasurement to a lower
deadweight and subsequent remeasurement to original Charter Party
Summer Deadweight shall be for Charter's account and hire shall always
be paid basis Vessel's full Summer Deadweight as described herein.
47. CARGO HEATING CLAUSE
Owner warrants that the Vessel's cargo tanks are fully coiled and that
the Vessel shall be capable at all times of heating and maintaining
cargo at a temperature of at least 135 degrees Fahrenheit.
48. FINAL VOYAGE CLAUSE
Should the Vessel be on her voyage towards the port of redelivery at
the time a payment of hire is due, payment of hire shall be made for
such length of time as Owner and Charterer may agree upon as being the
estimated time necessary to complete the voyage, less any disbursements
made or expected to be made or expenses incurred or expected to be
incurred by Charterer for Owner's account less any amounts that
Charterer otherwise may be permitted to withhold or deduct under the
terms of this Charter, and less the estimated value of bunker fuel
remaining at the termination of the voyage; and when the Vessel is
redelivered, any overpayment shall be refunded by Owner or underpayment
paid by Charterer. Notwithstanding the provisions of Clause 1 hereof,
should the Vessel be upon a voyage at expiry of the period of this
Charter, Charterer shall have the use of the Vessel at the same rate
and conditions for such extended time as may be necessary for the
completion of the round voyage on which she is engaged until her return
to a port of redelivery as provided in this Charter.
49. BILL OF LADING/LETTER OF INDEMNITY CLAUSE
In the event, at any time during the term of this Charter Party and any
extension thereto, that Bills of Lading are not available at any
discharge port and/or the actual discharge port is different from the
destination appearing on the Bills of Lading, Owner shall nevertheless
discharge the cargo carried by the Vessel in compliance with
Charterer's instructions upon a consignee nominated by Charterer
presenting reasonable identification to the Master in consideration of
which the following Letter of Indemnity shall be deemed to have been
signed by Charterer and to be in full force and effect on each occasion
when discharged as aforesaid takes place.
(Insert here Owner's P and I Club word of Letter of Indemnity.)
50. COW/CBT CLAUSE
In the event Charterer requires to change the Vessel's mode from COW
to CBT or vice versa, Charterer shall use its best endeavors to advise
Owner in advance of such change to enable Owner to arrange for class
surveyor promptly. Charterer shall pay any expenses arising from
change of mode including bunker consumption for tank
<PAGE> 23
cleaning and surveyor's fees, hotel expense, cost of travelling, etc.,
and the Vessel shall remain on-hire while changing mode.
51. ITF CLAUSE
Owner warrants that the minimum terms and conditions of employment of
the crew of the Vessel are now or will be prior to delivery of the
Vessel and will remain for the term of this Charter Party and any
extension thereto covered by an ITF Agreement or a bona fide Trade
Union Agreement acceptable to the ITF.
If berthing, unberthing, loading or discharging of the Vessel is
prevented or delayed by or as a consequence of any industrial dispute
arising directly or indirectly from the terms and conditions or
employment of the crew, hire shall cease during the continuance of
such prevention or delay and the Owner shall reimburse the Charterer
for any expense whatsoever caused thereby.
52. ENGLISH LANGUAGE PROFICIENCY CLAUSE
Owner warrants that during the term of this Charter Party and any
extension thereto, the Master, Chief Engineer, Chief Officer, Radio
Officer and any officer designated to be in charge of cargo and/or
bunker fuel and/or ballast handling or mooring operations shall be
proficient in the use of spoken English language and, in addition,
that the Master, Chief Engineer, Chief Officer and Radio Officer shall
be proficient also in written English language.
53. RATE OF HIRE
Charterer shall pay hire at the rate determined, on each Determination
Date (as defined below), in accordance with the following formula:
(A + B + C) / 365
where A, B and C are defined as follows:
A = ((w * x) + y), where w, x, and y are defined follows:
w = the estimated interest rate for the 365 day period
subsequent to the Determination Date.
x = the projected weighted average principal balance
of the Notes outstanding during the 365 day period
subsequent to the Determination Date.
y = the principal repayment requirements during the
365 day period subsequent to the Determination Date.
B = the budgeted operating expenses for the vessel
(excluding depreciation and amortization) for the 365
day period subsequent to the Determination Date.
C = the budgeted cost of the next drydocking of the
vessel, divided by the number of years (and fractions
thereof) between the completion of the most recent
drydocking of the vessel and the commencement of that
next drydocking.
<PAGE> 24
The Determination Dates shall occur on January 10, 1994 and annually
thereafter. In addition, there shall be a Determination Date upon the
occurrence of any of the following:
a) Principal Repayment
b) The Company's annual operating expense and/or drydock budgets
as calculated above have been revised upwards.
54. COMMISSION CLAUSE
Owner shall pay a commission of one and one-quarter percent (1-1/4%) on
all hires to Teekay Shipping Limited in the Bahamas which commission shall be
deductible from hire as and when paid.
<PAGE> 1
EXHIBIT 10.8
MANAGEMENT AGREEMENT, AS AMENDED, DATED JUNE 1, 1992
BETWEEN TEEKAY SHIPPING LIMITED AND NASSAU SPIRIT INC.
This Agreement dated as of the 1st day of October 1993 and made between:
Teekay Shipping Limited, a Bahamian Corporation (hereinafter "TKS") and
Nassau Spirit Inc, a Liberian Corporation (hereinafter "Shipco").
WHEREAS:
a) TKS and Shipco entered into a Management Agreement in the form of
the Baltic and International Council Standard Ship Management Agreement
dated June 1, 1992 (the "Ship Management Agreement"), whereby TKS
agreed to provide Ship Management Services for the Vessel "Luzon Spirit";
b) the consideration for the said Ship Management Services was left to
be agreed upon by the parties;
c) it has been verbally agreed between the TKS and Shipco that
commencing October 1, 1993 Shipco shall pay to TKS the sum of U.S.
$17,000.00 per month in consideration for the Ship Management Services;
d) it is now desirable to document the consideration being paid
Now therefore this Agreement witnesseth that the parties hereto, for and in
consideration of the premises, do hereby agree as follows:
1) the consideration to be paid to TKS for the Ship Management
Services pursuant to Clause 15.1 of the Ship Management Agreement shall,
effective October 1, 1993 be and remain the sum of U.S. $17,000.00
per month;
2) in all other respects the parties hereby confirm the terms of the
Ship Management Agreement which shall remain in full force and effect.
In witness whereof the Parties hereto have executed this Agreement as of the
day and year first above written.
Teekay Shipping Limited
per:
J.N. HOOD
President
Nassau Spirit Inc.
per:
A.F. COADY
Vice-President
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
1. Date of Agreement
June 1, 1992
2. Owners (name, place of registered office) 3. Managers (name, place of registered
office and law of registry)
NASSAU SPIRIT INC. TEEKAY SHIPPING LIMITED
Name Name
NASSAU, BAHAMAS P.O. BOX SS-6293
Place of registered office Place of registered office
BAHAMAS NASSAU, BAHAMAS
Law of registry Law of registry
4. Day and year of commencement of Agreement
Cl. 2.1.)
June 1, 1992
5. Crewing (state "yes" or "no" as agreed) 6. Technical Management (state "yes" or "no"
Cl. 2.3(I) and Cl. 3) as agreed) (Cl.2.3.(ff) and Cl. 4)
YES YES
7. Insurance (state "yes" or "no" as agreed) 8. Freight Management (state "yes" or "no" as agreed)
(Cl. 2.3.(III) and Cl. 6) (Cl. 2.3.(iv) and Cl. 6)
YES NO
9. Accounting (state "yes" or "no" as agreed) 10. Chartering (state "yes" or "no" as agreed; if
(Cl. 2.3.(v) and Cl.7) "yes", also state period of employment
(Cl. 2.3.(vi) and Cl. 8)
YES NO
period of employment in excess of which owners'
prior consent shall first be obtained
11. Sale or purchase of vessel (state "yes" or 12. Provisions (state "yes" or "no" as agreed)
"no" as agreed)(Cl. 2.3.(vii) and Cl. 9) (Cl. 2.3.(viii) and Cl. 10)
YES YES
13. Bunkering (state "yes" or "no" as agreed) 14. Operation (state "yes" or "no" as agreed)
(Cl. 2.3.(ix) and Cl. 11) (Cl.2.3.(x) and Cl. 12)
YES YES
15. Annual management fee (state lump sum amount) 16. Redundancy costs (state maximum amount)
(Cl. 15.1) (Cl. 15.3(b))
AS AGREED AS AGREED
17. Day and year of termination of Agreement
UNTIL REVOKED
18. Law and arbitration (state 24.1, 24.2 or 24.3 of Cl. 24, as agreed;
if 24.3. agreed also state place of arbitration)(if Box 18 not filled in 24.1 shall apply)(Cl. 24)
NASSAU, BAHAMAS
19. Notices (state postal and cable address, 20. Notices (state postal and cable address, telex
telex and telefax number for service of notice and telefax number for service of notice and
and communication to the Owners)(Cl. 25) communication to the Managers)(Cl. 25)
1ST FLOOR, SCOTIABANK BUILDING DOWNTOWN BAY STREET
P.O. BOX SS-6293 NASSAU, BAHAMAS
NASSAU, BAHAMAS TELEX: 20375
TELEX: 20374 FAX: (809) 328-7330
</TABLE>
It is mutually agreed between the party mentioned in Box 2 (hereinafter called
"the Owners") and the party mentioned in Box 3 (hereinafter called "the
Managers") that this Agreement consisting of PART I and PART II as well as
ANNEX "A" or ANNEX "B" (as applicable) and ANNEX "C" attached hereto, shall be
performed subject to the conditions contained herein. In the event of a
conflict of conditions, the provisions of PART I shall prevail over those of
PART II and ANNEX "A" or ANNEX "B" (as applicable) and ANNEX "C" to the extent
of such conflict but no further.
Signature(s)(Owners) Signature(s)(Managers)
<PAGE> 3
PART II
"SHIPMAN" STANDARD SHIP MANAGEMENT AGREEMENT
DEFINITIONS
In this Agreement save where the context otherwise requires, the following
words and expressions shall have the meanings hereby assigned to them.
"The Vessel" shall mean the vessel details of which are set out in Annex "A"
hereto.
"The Fleet" shall mean the vessels details of which are set out in Annex "B"
hereto.
"Crew Support Costs" shall mean all expenses of a general nature which are not
particularly referable to any individual vessel for the time being managed by
the Managers and which are incurred by the Managers for the purpose of
providing an efficient and economic management service and, without prejudice
to the generality of the foregoing, shall include the cost of crew standby pay,
training schemes for officers and ratings, cadet training schemes, sickpay,
study pay, recruitment and interviews.
1. MARGINAL HEADINGS
The Marginal Headings of this Agreement are for identification only
and shall not be deemed to be part hereof or be taken into
consideration in the interpretation or construction of this Agreement.
2. APPOINTMENT OF MANAGERS
2.1. With effect from the day and year stated in Box 4 and continuing
unless and until terminated as provided herein, the Owners hereby
appoint the Managers and the Managers hereby agree to act as the
Managers of the Vessel.
2.2. The Managers undertake to use their best endeavours to provide
the Management Services specified in sub-clause 2.3. on behalf of the
Owners in accordance with sound ship management practice and to
protect and promote the interests of the Owners in all matters
relating to the provision of services hereunder.
Provided however that the Managers in the performance of their
management responsibilities under this Agreement shall be entitled to
have regard to their overall responsibility in relation to all vessels
as may from time to time be entrusted to their management and in
particular, but without prejudice to the generality of the foregoing,
the Managers shall be entitled to allocate available supplies,
manpower and services in such manner as in the prevailing
circumstances the Managers in their absolute discretion consider to be
fair and reasonable.
2.3. Subject to the terms and conditions herein provided, during the
period of this Agreement, the Managers shall carry out, as agents for
and on behalf of the Owners, such of the following functions in
respect of the Vessel as shall have been indicated affirmatively in
Boxes 5 to 14 in PART I:
(i) Crewing (see Clause 3)
(ii) Technical Management (see Clause 4)
(iii) Insurance (see Clause 5)
(iv) Freight Management (see Clause 6)
(v) Accounting (see Clause 7)
(vi) Chartering (see Clause 8)
(vii) Sale or Purchase of Vessel (see Clause 9)
(viii) Provisions (see Clause 10)
(ix) Bunkering (see Clause 11)
(x) Operation (see Clause 12)
and shall have authority to take such actions as the Managers may from
time to time in their absolute discretion consider to be necessary to
enable them to perform this Agreement in accordance with sound ship
management practice.
2.3. (i) to (x) are options to be agreed, and Boxes 5 to 14 in PART I
should be filled in with either "yes" or "no" accordingly.
3. CREWING (only applicable if 2.3. (i) agreed according to Box 5)
The Managers shall provide adequate and properly qualified Crew for
the Vessel as required by the Owners, provision of which includes but
is not limited to the following functions:
(i) employment of Master, officers and crew (hereinafter
collectively referred to as "the Crew") of the Vessel;
(ii) arrangement of transportation of the Crew, including
repatriation;
<PAGE> 4
(iii) training of the Crew;
(iv) supervision of the efficiency of the Crew and
administration of all other crew matters such as
planning for the manning of the Vessel;
(v) payroll arrangement;
(vi) arrangement and administration of pensions and Crew
insurance;
(vii) discipline and union negotiations;
(viii) enforcement of appropriate standing orders.
4. TECHNICAL MANAGEMENT (only applicable if 2.3.(ii) agreed according to
Box 6)
The Managers shall provide technical management which includes, but is
not limited to, the following functions:
(i) provision of competent personnel to supervise the
maintenance and general efficiency of the Vessel;
(ii) arrangement and supervision of drydockings, repairs,
alterations and the upkeep of the Vessel to the
standards required by the Owners provided that the
Managers shall be entitled to incur the necessary
expenditure to ensure that the Vessel will comply
with all requirements and recommendations of the
classification society, and with the laws and
regulations of the country of registry of the Vessel
and of the places where she trades;
(iii) arrangement of the supply of necessary stores, spares
and lubricating oil;
(iv) appointment of surveyors and technical consultants as
the Managers may consider from time to time to be
necessary.
5. INSURANCE (only applicable if 2.3. (iii) agreed according to Box 7).
The Managers shall arrange such insurances as the Owners shall have
instructed or agreed, in particular as regards insured values,
deductibles.
6. FREIGHT MANAGEMENT (only applicable if 2.3.(iv) agreed according to
Box 8).
The Managers shall provide freight management which includes but is
not limited to the following functions:
(i) provision of voyage estimates and accounts and calculation of
hire and freights and/or demurrage and despatch moneys due
from or due to the Charterers of the Vessel if required by the
Owners;
(ii) arrangement of the proper payment to Owners of all hire and/or
freight revenues or other moneys of whatsoever kind to which
Owners may be entitled arising out of the employment of or
otherwise in connection with the Vessel.
7. ACCOUNTING (only applicable if 2.3.(v) agreed according to Box 9).
The Managers shall:
(i) establish an accounting system which meets the requirements of
the Owners and provide regular accounting services, supply
regular reports and records in accordance therewith;
(ii) maintain the records of all costs and expenditures incurred
hereunder as well as data necessary or proper for the
settlement of accounts between the parties.
8. CHARTERING (only applicable if 2.3. (vi) agreed according to Box 10).
The Managers shall, in accordance with the Owners' Instructions,
provide chartering services which includes but is not limited to
seeking and negotiating employment for the Vessel and the conclusion
(including the execution thereof) of charterparties or other contracts
relating to the employment of the Vessel. If such a contract exceeds
the period stated in Box 10, consent thereto in writing shall first be
obtained from the Owners.
9. SALE OR PURCHASE OF VESSEL (only applicable if 2.3. (vii) agreed
according to Box 11).
The Managers shall, in accordance with the Owners' instructions,
supervise the sale or purchase of the Vessel, including the
performance of any sale or purchase agreement, but not negotiation of
the same.
<PAGE> 5
10. PROVISIONS (only applicable if 2.3. (viii) agreed according to
Box 12).
The Managers shall arrange for the supply of provisions.
11. BUNKERING (only applicable if 2.3. (ix) agreed according to Box 13).
The Managers shall arrange for the provision of bunker fuel of the
quality specified by the Owners as required for the Vessel's trade.
12. OPERATION (only applicable if 2.3. (x) agreed according to Box 14)
The Managers shall provide for the operation of the Vessel, as
required by the Owners, which includes but is not limited to the
following functions:
(i) provision of voyage estimates and accounts and
calculation of hire, freights, demurrage and/or
despatch moneys due from or due to the Charterers of
the Vessel;
(ii) issue of voyage instructions;
(iii) appointment of agents;
(iv) appointment of stevedores;
(v) arrangement of the surveying of cargoes.
13. INSURANCE POLICIES
All Insurances shall be in the joint names of the Owners and the
Managers provided that, unless the Managers give their express prior
consent, no liability to pay premiums or P&I Calls shall be imposed on
the Managers, notwithstanding the restrictions on P&I Cover which
would thereby result.
14. INCOME COLLECTED AND EXPENSE PAID ON BEHALF OF OWNERS
14.1. All moneys collected by the Managers under the terms of this
Agreement (other than moneys payable by the Owners to the Managers)
and shall be held to the credit of the Owners.
14.2. All expenses incurred by the Managers under the terms of this
Agreement on behalf of the Owners (including expenses as provided in
Clause 15) may be debited against the Owners in the account referred
to under Clause 14.1 but shall in any event remain payable by the
Owners to the Managers on demand.
15. MANAGEMENT FEE
15.1. The Owners shall pay to the Managers for their services as
Managers under this Agreement an annual basic Management Fee in the
lump sum amount as stated in Box 15 which shall be payable by equal
monthly instalments in advance, the first instalment being payable on
the commencement of this Agreement (see Clause 2.1 and Box 4) and
subsequent instalments being payable every month.
15.2. The Managers shall, at no extra cost to the Owners, provide
their own office accommodation, office staff and stationery. Without
limiting the generality of Clause 14 the Owners shall reimburse the
Managers for postage and communication expenses, travelling expenses,
and other out-of-pocket expenses properly incurred by the Managers in
pursuance of the Management Services.
15.3. In the event of the appointment of the Managers being
terminated by the Owners or the Managers in accordance with the
provisions of Clause 23 other than by reason of default by the
Managers, or if the Vessel is lost, sold or otherwise disposed of, the
Management Fee payable to the Managers according to the provisions of
sub-clause 15.1. shall continue to be payable for a further period of
three calendar months. In addition, provided that the Managers
provide Crew for the Vessel in accordance with Clause 3.
(a) the Owners shall continue to pay Crew Support Costs during the
said further period of three calendar months and
(b) the Owners shall pay an equitable proportion of any redundancy
costs which may materialize not exceeding the amount stated in
Box 16.
15.4. Whilst this Agreement remains in subsistence, if the Owners
decide to (MISSING LINE ON COPY) appropriate reduction of the
Management Fee for the period exceeding three months until one month
before the Vessel is again put into service shall be mutually agreed
between the parties.
15.5. All discounts and commissions obtained by the Managers in the
course of the management of the Vessel shall be credited to the
Owners.
<PAGE> 6
16. BUDGETS AND MANAGEMENT OF FUNDS
16.1. The Managers shall present to the Owners budget for the [ ]
in such form as the Owners require. The budget for the first year
hereof is set out in Annex "C" hereto. Subsequent [ ] budgets
shall be prepared by the Managers and submitted to the Owners. (see
Clause 2.1. and Box 4).
16.2. The Owners shall indicate to the Managers their acceptance and
approval of the budget within one month of presentation and in the
absence of any such indication the Managers shall be entitled to
assume that the Owners have accepted the said budget.
16.3 Following the agreement of the budget, the Managers shall
prepare and present to the Owners their estimate of the working
capital requirement of the Vessel and the Managers shall up-date this
estimate. Based thereon, the Managers shall request the Owners for
the Funds required to run the Vessel for the ensuing __?__, including
the payment of any occasional or extraordinary item of expenditure,
such as emergency repair costs, additional insurance premiums, bunkers
or provisions. Such Funds shall be received by the Managers within
ten days after the receipt of such request and shall be held to the
credit of the Owners.
16.4.
16.5. The Managers shall produce a monthly comparison between
budgeted and actual income and expenditure of the Vessel as required
by the Owners.
16.6. Notwithstanding anything contained herein, the Managers shall
in no circumstances be required to use or commit their own funds to
finance the provision of the Management Services.
17. MANAGERS' RIGHT TO SUB-CONTRACT
The Managers shall not sub-contract any of their obligations hereunder
to a third party without the consent of the Owners.
18. RESPONSIBILITIES
18.1. Force Majeure.-- Neither the Owners nor the Managers shall be
under any liability for any failure to perform any of their
obligations hereunder by reason of any cause whatsoever of any nature
or kind beyond their reasonable control.
18.2. Liability to Owners.-- Without prejudice to sub-clause 18.1.,
the Managers shall be under no liability whatsoever to the Owners for
any loss, damage, delay or expense of whatsoever nature, whether
direct or indirect, (including but not limited to loss of profit
arising out of or in connection with detention of or delay to the
Vessel) and howsoever arising in the course of performance of the
Management Services.
UNLESS same is proved to have resulted solely from the negligence,
gross negligence or wilful default of the Managers or their employees
or agents, or sub-contractors employed by them in connection with the
Vessel, in which case (save where loss, damage, delay or expense has
resulted from the Managers' personal act or omission committed with
the intent to cause same or recklessly and with knowledge that such
loss, damage, delay or expense would probably result) the Managers'
liability for each incident or series of incidents giving rise to a
claim or claims shall never exceed a total of ten times the annual
management fee payable hereunder.
18.3. Indemnity.-- Except to the extent and solely for the amount
therein set out that the Managers would be liable under sub-clause
18.2. the Owners hereby undertake to keep the Managers and their
employees, agents and sub-contractors indemnified and to hold them
harmless against all actions, proceedings, claims, demands or
liabilities whatsoever or howsoever arising which may be brought
against them or incurred or suffered by them arising out of or in
connection with the performance of the Agreement, and against and in
respect of all costs, loss, damages and expenses (including legal costs
and expenses on a full indemnity basis) which the Managers may suffer
or incur (either directly or indirectly) in the course of the
performance of this Agreement.
18.4. "Himalaya".-- It is hereby expressly agreed that no employee or
agent of the Managers (including every sub- contractor from time to
time employed by the Managers) shall in any circumstances whatsoever be
under any liability whatsoever to the Owners for any loss, damage or
delay of whatsoever kind arising or resulting directly or indirectly
from any act, neglect or default on his part while acting in the course
of or in connection with his employment and, without prejudice to the
generality of the foregoing provisions in this Clause, every exemption,
limitation, condition and liberty herein contained and every right,
exemption from liability, defence and immunity of whatsoever nature
applicable to the Managers or to which the Managers are entitled
hereunder shall also be available and shall extend to protect every
such employee or agent of the Managers acting as aforesaid and for the
purpose of all the foregoing provisions of this Clause 18 the Managers
are or shall be deemed to the acting as agent or trustee on behalf of
and for the benefit of all persons who are or might be his servants or
agents from time to time (including sub-contractors as aforesaid) and
all such persons shall to this extent be or be deemed to be parties to
this Agreement.
<PAGE> 7
19. GENERAL ADMINISTRATION
19.1. The Managers shall handle and settle all claims arising out of
the Management Services hereunder and keep the Owners informed
regarding any incident of which the Managers become aware which gives
or may give rise to claims or disputes involving third parties.
19.2. The Managers shall, as instructed by the Owners, bring or
defend actions, suits or proceedings in connection with matters
entrusted to the Managers according to this Agreement.
19.3. The Managers shall also have power to obtain legal or technical
or other outside expert advice in relation to the handling and
settlement of claims and disputes or all other matters affecting the
interests of the Owners in respect to the Vessel.
19.4. The Owners shall arrange for the provision of any necessary
guarantee bond or other security.
19.5. Any costs incurred by the Managers in carrying out their
obligations according to Clause 19 shall be reimbursed by the Owners.
20. AUDITING
The Managers shall at all times maintain and keep true and correct
accounts and shall make the same available for inspection and auditing
by the Owners or their nominee at such times as may be mutually
agreed.
21. INSPECTION OF VESSEL
The Owners shall have the right at any time after giving reasonable
notice to the Managers to inspect the vessel for any reason they
consider necessary.
22. COMPLIANCE WITH LAW AND REGULATIONS
The Managers will not do or permit anything to be done which might
cause any breach or infringement of the laws and regulations of the
country of registry of the Vessel, and of the places where she trades.
23. DURATION OF THE AGREEMENT
23.1. This Agreement shall come into effect on the date stated in Box
4 and shall continue until the date stated in Box 17. Thereafter it
shall continue until terminated by either party giving to the other
notice in writing. In which event the Agreement shall terminate upon
the expiration of a period of two months from the date upon which such
notice was given.
23.2. Termination by default.-- The Managers shall be entitled to
terminate the Agreement by notice in writing if any moneys payable by
the owners of any vessel in the Fleet, whether under this or any other
Management Agreement, shall not have been received in the Managers'
nominated account within ten days of payment having been requested in
writing by the Managers.
The Managers shall also be entitled to terminate the Agreement by
notice in writing if after receipt of written notice of objection
thereto from the Managers the owners of any vessel in the Fleet
whether under this or any other Management Agreement proceed with
employment of or continue to employ their vessel in a trade or in a
manner which is, in the opinion of the Managers, likely to be
detrimental to their reputation as Managers or (otherwise than by
virtue of ordinary business competition) be prejudicial to the
commercial interest of the Managers.
This Agreement shall terminate forthwith in the event of an order
being made or resolution passed for the winding up, dissolution,
liquidation or bankruptcy of either party (otherwise than for the
purpose of reconstruction or amalgamation) or if a receiver is
appointed, or if it suspends payment, ceases to carry on business or
makes any special arrangement or composition with its creditors.
23.3. Extraordinary Termination.-- This Agreement shall be deemed to
be terminated in the case of the sale of the Vessel of if the Vessel
becomes a total loss or is declared as a constructive or compromised
or arranged total loss or is requisitioned.
23.4. For the purpose of sub-clause 23.3. hereof:
a) the date upon which the Vessel is to be treated as having been
sold or otherwise disposed of shall be the date on which the
Owners cease to be registered as Owners of the Vessel;
b) the Vessel shall not be deemed to be lost unless either she
has become an actual total loss or agreement has been reached
with here Underwriters in respect of her constructive,
compromised or arranged total loss or if such agreement with
her Underwriters is not reached it is adjudged by a competent
tribunal that a constructive loss of the Vessel has occurred.
<PAGE> 8
23.5. The termination of this Agreement shall be without prejudice to
all rights accrued due between the parties prior to the date of
termination.
24. LAW AND ARBITRATION
24.1. This Agreement shall be governed by English law and any dispute
arising out of this Agreement shall be referred to arbitration in
London, one arbitrator being appointed by each party. In accordance
with the Arbitration Acts 1950 and 1979 or any statutory modification
or re-enactment thereof for the time being in force. On the receipt
by one party of the nomination in writing of the other party's
arbitrator, that party shall appoint their arbitrator within fourteen
days, failing which the decision of the single Arbitrator appointed
shall apply. If two Arbitrators properly appointed shall not agree
they shall appoint an umpire whose decision shall be final.
24.2. Should any dispute arise out of this Agreement, the matter in
dispute shall be referred to three persons at New York, one to be
appointed by each of the parties hereto, and the third by the two so
chosen; their decision or that of any two of them shall be final, and
for purpose of enforcing any award, this agreement may be made a rule
of the Court. The arbitrators shall be members of the Society of
Maritime Arbitrators, Inc. of New York and the proceedings shall be
conducted in accordance with the rules of the Society.
24.3. Any dispute arising out of this Agreement shall be referred to
arbitration at the place indicated in Box 18, subject to the law and
procedures applicable there.
24.4. If Box 18 in PART I is not filled in, sub-clause 24.1. of this
Clause shall apply.
24.1., 24.2. and 24.3. are alternatives; indicate alternative agreed
in Box 18.
25. NOTICES
25.1. Any communication may be sent by telex, telefax, registered or
recorded mail or by personal service.
25.2. The address of the Parties for service of such (UNREADABLE).
<PAGE> 9
SCHEDULE TO EXHIBIT 10.8
The Management Agreements not required to be filed because each of
them is substantially identical to Exhibit 10.8, and the material details by
which each such Management Agreement differs from Exhibit 10.8 are as follows:
1. Management Agreement dated August 8, 1995 between VSSI Oceans Inc. and
Teekay Shipping Limited.
a. Name of Owner: VSSI Oceans Inc.
b. Name of vessel owned by VSSI Oceans Inc.:
Poul Spirit, Official No. 10328
2. Management Agreement dated December 3, 1993 and amendments thereto, between
VSSI Atlantic Inc. and Teekay Shipping Limited.
a. Name of Owner: VSSI Atlantic Inc.
b. Name of vessel owned by VSSI Atlantic Inc.
Torben Spirit, Official No. 723526
3. Management Agreement dated December 3, 1993 and amendments thereto, between
Senang Spirit Inc. and Teekay Shipping Limited.
a. Name of Owner: Senang Spirit Inc.
b. Name of vessel owned by Senang Spirit Inc.
Senang Spirit, Official No. 723521
4. Management Agreement dated February 1, 1992 and amendments thereto, between
VSSI Appian Inc. and Teekay Shipping Limited.
a. Name of Owner: VSSI Appian Inc.
b. Name of vessel owned by VSSI Appian Inc.
Mayon Spirit, Official No. 720752
5. Management Agreement dated August 27, 1992 and amendments thereto, between
Exuma Spirit Inc. and Teekay Shipping Limited.
a. Name of Owner: Exuma Spirit Inc.
b. Name of vessel owned by Exuma Spirit Inc.
Leyte Spirit, Official No. 720796
6. Management Agreement dated November 26, 1992 and amendments thereto,
between Andros Spirit Inc. and Teekay Shipping Limited.
a. Name of Owner: Andros Spirit Inc.
b. Name of vessel owned by Andros Spirit Inc.
Samar Spirit, Official No. 723134
<PAGE> 10
ANNEX A TO EXHIBIT 10.8
Date of Agreement: June 1, 1992
Name of Vessel: LUZON SPIRIT
Particulars of Vessel: PORT OF REGISTRY: NASSAU, BAHAMAS
OFFICIAL NO: 720776
<PAGE> 11
ANNEX B (FLEET) TO EXHIBIT 10.8
Date of Agreement: June 1, 1992
Name of Vessel: LUZON SPIRIT
Particulars of Vessel: PORT OF REGISTRY: NASSAU, BAHAMAS
OFFICIAL NO: 720776
<PAGE> 12
ANNEX C TO EXHIBIT 10.8
Date of Agreement: June 1, 1992
Managers' Budget for the first year with effect from the Commencement Date
of this Agreement:
<PAGE> 1
"EXHIBIT 15.1"
To the Board of Directors of
TEEKAY SHIPPING CORPORATION
We are aware of the inclusion in the Registration Statement of Teekay
Shipping Corporation ("Teekay") for the registration of $225,000,000 First
Preferred Ship Mortgage Notes due 2008 of our report dated December 15, 1995
relating to the unaudited consolidated interim financial statements as of and
for the six-month periods ended September 30, 1995 and 1994 of Teekay.
Pursuant to Rule 436(c) of the Securities Act of 1933, as amended, 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,
as amended.
Nassau, Bahamas, ERNST & YOUNG
January 18, 1996 Chartered Accountants
<PAGE> 1
"EXHIBIT 23.4"
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated May 15, 1995 (except for note 16, which is as of
December 15, 1995), on the consolidated financial statements of Teekay Shipping
Corporation ("Teekay") and subsidiaries and dated December 15, 1995 on the
financial statements of Andros Spirit Inc., Exuma Spirit Inc., Nassau Spirit
Inc., Senang Spirit Inc., VSSI Appian Inc., VSSI Atlantic Inc. and VSSI Oceans
Inc. (the "Companies"), in the Registration Statement (Form F-3) and related
Prospectus of Teekay and certain other co-registrants for the registration of
$225,000,000 First Preferred Ship Mortgage Notes due 2008 to be issued by
Teekay.
We also consent to the incorporation by reference therein of our report
dated May 15, 1995 (except for note 1, which is as of December 15, 1995), with
respect to the consolidated financial statements and schedule of Teekay and its
subsidiaries included in its Annual Report (Form 20-F), as amended, for the
fiscal year ended March 31, 1995, filed with the Securities and Exchange
Commission.
Nassau, Bahamas ERNST & YOUNG
January 18, 1996 Chartered Accountants
<PAGE> 1
EXHIBIT 23.5
E. A. GIBSON SHIPBROKERS LTD.
P.O. Box 278, Audrey House, 16-20 Ely Place
London EC1P 1HP
Telephone: 0171 404 5847
January 5, 1996
Teekay Shipping Corporation
Tradewinds Building, Sixth Floor
Bay Street, P.O. Box SS-6293
Nassau, The Bahamas
RE: REGISTRATION STATEMENT ON FORM F-3 (NO. 33-65139)
Dear Sirs:
We have provided to Teekay Shipping Corporation, a Liberian
corporation (the "Company"), our opinion as to the value as of December 13,
1995 of the following vessels: Mayon Spirit, Luzon Spirit, Leyte Spirit, Samar
Spirit, Senang Spirit, Torben Spirit and Poul Spirit.
We hereby consent to the reference to our firm under the caption "The
Mortgaged Vessels" in the Prospectus made part of the Registration Statement on
Form F-3 (File No. 33-65139), as amended, filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations promulgated thereunder
(the "Rules") in connection with the proposed underwritten public offering of
up to an aggregate principal amount of U.S. $225 million of First Preferred
Ship Mortgage Notes Due 2008 to be issued by the Company and guaranteed by
certain subsidiaries thereof. This Consent may be incorporated by reference in
any registration statement filed pursuant to Rule 462(b) of Regulation C under
the Securities Act.
Very truly yours,
/s/ E. A. GIBSON SHIPBROKERS LTD
<PAGE> 1
EXHIBIT 23.6
SIMPSON SPENCE & YOUNG SHIPBROKERS LTD.
83 St. Mary Axe
London EC3A 8DR
Telephone: 44-171-283-5200
January 5, 1996
Teekay Shipping Corporation
Tradewinds Building, Sixth Floor
Bay Street, P.O. Box SS-6293
Nassau, The Bahamas
RE: REGISTRATION STATEMENT ON FORM F-3 (NO. 33-65139)
Dear Sirs:
We have provided to Teekay Shipping Corporation, a Liberian
corporation (the "Company"), our opinion as to the value as of December 13,
1995 of the following vessels: Mayon Spirit, Luzon Spirit, Leyte Spirit, Samar
Spirit, Senang Spirit, Torben Spirit and Poul Spirit.
We hereby consent to the reference to our firm under the caption "The
Mortgaged Vessels" in the Prospectus made part of the Registration Statement on
Form F-3 (File No. 33-65139), as amended, filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations promulgated thereunder
(the "Rules") in connection with the proposed underwritten public offering of up
to an aggregate principal amount of U.S.D. 225 Million of First Preferred Ship
Mortgage Notes Due 2008 to be issued by the Company and guaranteed by certain
subsidiaries thereof. This Consent may be incorporated by reference in any
registration statement filed pursuant to Rule 462(b) of Regulation C under the
Securities Act.
Yours faithfully,
FOR SIMPSON SPENCE & YOUNG
SHIPBROKERS, LTD.
/s/ John A. Welham
John A. Welham
Executive Director
