<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended . . . . . . March 31, 1996. . . . . . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from . . . . . to . . . . . . . . . . . . . . . . . .
Commission file number. . . . . 1-12874 . . . . .
TEEKAY SHIPPING CORPORATION
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Republic of Liberia
(Jurisdiction of incorporation or organization)
Tradewinds Building, Sixth Floor, Bay Street, P.O. Box SS-6293, Nassau, The
Bahamas
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, no par value per share New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
9.625% First Preferred Ship Mortgage Notes due 2003
8.32% First Preferred Ship Mortgage Notes due 2008
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
27,903,611 shares of Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark which financial statement item the registrant has
elected to follow:
Item 17 Item 18 X
----- ------
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TEEKAY SHIPPING CORPORATION
INDEX TO REPORT ON FORM 20-F
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I.
Item 1. Description of Business . . . . . . . . . . . . . . . . . 1
Item 2. Description of Property . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 9
Item 4. Control of Registrant . . . . . . . . . . . . . . . . . . 11
Item 5. Nature of Trading Market . . . . . . . . . . . . . . . . 11
Item 6. Exchange Controls and Other Limitations
Affecting Security Holders . . . . . . . . . . . . . . 11
Item 7. Taxation . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 8. Selected Financial Data . . . . . . . . . . . . . . . . . 13
Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 15
Item 10. Directors and Officers of the Registrant . . . . . . . . 19
Item 11. Compensation of Directors and Officers . . . . . . . . . 21
Item 12. Options to Purchase Securities From Registrant
or Subsidiaries . . . . . . . . . . . . . . . . . . . . 21
Item 13. Interest of Management in Certain Transactions . . . . . 21
PART II.
Item 14. Description of Securities to be Registered . . Not applicable
PART III.
Item 15. Defaults Upon Senior Securities . . . . . . . . . . . . . 22
Item 16. Changes in Securities and Changes in Security
for Registered Securities . . . . . . . . . . . . . . . 22
PART IV.
Item 17. Financial Statements . . . . . . . . . . . . Not applicable
Item 18. Financial Statements . . . . . . . . . . . . . . . . . . 22
Item 19. Financial Statements and Exhibits . . . . . . . . . . . . 23
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
Teekay Shipping Corporation ("Teekay"), together with its subsidiaries (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 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 (75,000 - 115,000 dwt) 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 consider strategic opportunities that may arise from time to
time, including joint ventures and business acquisitions.
The Company's fleet consists of 42 tankers: 38 Aframax 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 one additional
Aframax oil tanker. The Company's vessels are all of Liberian or Bahamian
registry. The Company's fleet has a total cargo capacity of approximately 4.2
million tonnes and its Aframax vessels represent approximately 8.0% 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 7.5 years, compared to an average age for the
world oil tanker fleet of approximately 14.4 years and for the world Aframax
tanker fleet of approximately 12.5 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 are
more than 17 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 1996), 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.
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 Corp. ("VCSC"), which in turn owns one Aframax
tanker which is on long-term charter to a major oil company.
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.
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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 80% of the Company's net revenues were derived from
spot voyages during fiscal 1996.
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 26 vessels
in the second-hand market, as well as disposing of 13 older (mid-1970's built)
tankers over the past three years.
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, Vancouver, British
Columbia, Canada, V6C 3L6. Its telephone number at such address is (604)
683-3529.
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. 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 (115,000 to 200,000 dwt) size
vessels as well as Panamax (50,000 to 75,000 dwt) size vessels can compete for
many of the same charters for which the Company competes. Ultra Large Crude
Carriers (320,000+ dwt) ("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
heighten the already intense 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
though 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 25
vessels trading globally (six of which are on time-charter from Sanko Steamship
Co. Ltd., an independent Japanese shipping company, and eight of which are on
time-charter from various other companies), Neptune Orient Lines Ltd. (owned
partially by the Singapore government), with approximately 14 vessels, and Bona
Shipholding Limited, which controls approximately 26 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.
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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--INTERNATIONAL MARITIME ORGANIZATION ("IMO"). 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 Company's
tanker fleet operates, 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
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.
Under the current regulations, the vessels of the Company's existing fleet will
be able to operate for substantially all of their respective economic lives
before being required to have double-hulls. Although six 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--THE UNITED STATES OIL POLLUTION ACT OF 1990 ("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
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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.
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 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.
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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.
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 European
Community ("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.
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 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 circumstances in foreign countries, hostilities, labor strikes, and
boycotts. 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. The Company does not carry insurance
covering the loss of revenue resulting from vessel off-hire time. There can be
no assurance, that all covered 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 have resulted in increased
costs for, and may result in the lack of availability of, insurance against the
risks of environmental damage or pollution.
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
fiscal 1996, the Company derived 93% 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.
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 126 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. During
fiscal 1996, the
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Company entered into a Collective Bargaining Agreement with the Philippine
Seafarers' Union (PSU), an affiliate of the International Transport Workers'
Federation (ITF), which covers substantially all of the Company's junior
officers and seamen. The Collective Bargaining Agreement resulted in a small
increase in wages and benefits for the vessel crews.
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
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 obtained through Det Norske Veritas, the Norwegian
classification society, ISO 9000 certification to standards of total quality
management. ISO 9000 is a series of international standards for quality
systems; ISO 9002 is the standard most commonly used in the shipping industry.
The Company has also retained Det Norske Veritas for the audit and
implementation of the International Safety Management (ISM) code, which are
required by the IMO to be completed before July 1, 1998.
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.
TAXATION OF THE COMPANY
The legal jurisdictions of the countries in which the Company and its
subsidiaries are incorporated do not impose income taxes upon shipping-related
activities.
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ITEM 2. DESCRIPTION OF PROPERTY
THE COMPANY'S FLEET
The following fleet list provides information with respect to the Company's
vessels as at April 30, 1996.
<TABLE>
<CAPTION>
Year %
Series/Yard Built Type Dwt-MT Flag Ownership
AFRAMAX TANKERS (39)
<S> <C> <C> <C> <C> <C> <C>
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 100%
SEMAKAU SPIRIT . . . . . . . . Imabari 1988 DS 97,172 Liberian 100%
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 DS 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%
----------
4,209,316
===========
</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 with purchase obligation.
**Pre-MARPOL vessel, i.e., non-segregated ballast tanks.
7
<PAGE> 10
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.
During fiscal 1996, the Company sold its two remaining mid-1970's-built tankers
(BRILLIANCY, OSHIMA SPIRIT), acquired two second-hand double-sided Aframax
tankers (SUDONG SPIRIT, ALLIANCE SPIRIT) and one second-hand single-hull
Aframax tanker (MAGELLAN SPIRIT) and took delivery of one double-hull
newbuilding (POUL SPIRIT). In April 1996, the Company acquired another
second-hand double-sided Aframax tanker (SEMAKAU SPIRIT). In addition, the
Company has entered into an agreement to time-charter a second-hand doublesided
Aframax tanker (GALAXY RIVER) for a period of one year and, at the end of such
time, to purchase the vessel for $26.5 million. The Company has also entered
into an agreement for the construction of a double-hull Aframax tanker for a
cost of $44.5 million, scheduled for delivery in July 1997.
The Company purchased the ALLIANCE SPIRIT from its 50%-owned joint venture,
VCSC, which now owns one Aframax tanker (AMERSHAM) on a long-term time charter
to a major oil company. VCSC is 50% directly owned by Teekay and 50% owned by a
company associated with Mr. Thomas Kuo-Yuen Hsu, a director of Teekay.
See note 7 to the Consolidated Financial Statements for information with
respect to major encumbrances against vessels of the Company.
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 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 1996), 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.
8
<PAGE> 11
ITEM 3. 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. Claims of
approximately $1.4 million and $2.5 million for the cost of clean up of the oil
pollution caused by the Nagasaki Spirit and associated costs were made by the
Department of Environment for the Government of Malaysia and by the Government
of Indonesia, respectively. These claims have been settled for approximately
$700,000 and $600,000, which were 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 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
Singaporean 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 claim for
special compensation is now subject to an appeal to the House of Lords in
London, for which hearing dates of October 7-9, 1996 have been fixed. The
liability for salvage 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 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 (the "Trusts"), and certain of
Teekay's officers and directors, including Mr. James Hood and Mr. Arthur Coady,
and
9
<PAGE> 12
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 plaintiff's
motion to amend her statement of claim has been adjourned and has not yet been
heard by the B.C. Court.
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 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.
10
<PAGE> 13
ITEM 4. CONTROL OF REGISTRANT
PRINCIPAL SHAREHOLDERS
(a) The Company is not directly or indirectly owned or controlled by
another corporation or by any foreign government.
(b) The following table sets forth certain information regarding (i)
ownership of Teekay's common stock as of March 31, 1996 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 18,161,881 shares 65.1%
JTK Trust 2,815,880 shares 10.1
All officers and * *
directors as a group
(17 persons)
</TABLE>
(c) The Company is not aware of any arrangements, the operation of which
may at a subsequent date result in a change in control of the Company.
- -------------
* Less than one percent of outstanding shares.
ITEM 5. NATURE OF TRADING MARKET
There has not previously been an active public market within or outside the
United States for Teekay's 9 5/8% First Preferred Ship Mortgage Notes due 2003.
Teekay does not intend to list these Notes on any securities exchange or to
seek approval for quotation through any automated quotation system.
Teekay's 8.32% First Preferred Ship Mortgage Notes due 2008 are listed for
trading on the New York Stock Exchange. These Notes were first offered on the
market January 19, 1996. As this security has not been trading for a full
quarter, no price information is given here.
On July 19, 1995, the Company's common stock listed for trading on the New York
Stock Exchange (NYSE- TK). The following table shows high and low prices for
the two full quarters that the shares have been listed on the NYSE. The
figures have been compiled from Bloomberg.
<TABLE>
<CAPTION>
Fiscal 1996 High Low
-------------------
(in U.S. Dollars)
<S> <C> <C>
Third quarter
Oct. 1 - Dec. 31, 1995 24 7/8 23
Fourth quarter
Jan. 1 - Mar. 31, 1996 27 23 1/4
</TABLE>
Approximately 25% of all outstanding shares at March 31, 1996 were held in the
U.S.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
(a) The Company is not aware of any governmental laws, decrees or
regulations in the Company's country of organization that restrict the
export or import of capital, including, but not limited to, foreign
exchange controls, or that affect the remittance of dividends,
interest or other payments to nonresident holders of the
11
<PAGE> 14
Company's securities.
(b) The Company is not aware of any limitations on the right of
nonresident or foreign owners to hold or vote securities of the
Company imposed by foreign law or by the charter or other constituent
document of the Company.
ITEM 7. TAXATION
Since (i) Teekay Shipping Corporation is and intends to maintain its status as
a "non-resident 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) Teekay's 9 5/8%
First Preferred Ship Mortgage Notes and 8.32% First Preferred Ship Mortgage
Notes and all documentation related to these Notes and to the public offering
of Teekay's common stock were executed outside of the Republic of Liberia, and
assuming the holders of these Notes and the common stock neither reside in,
maintain an office in, nor engage in business in, the Republic of Liberia,
under current Liberian law, no taxes or withholdings are imposed by the
Republic of Liberia on payments to be made in respect of the Notes or on
distributions made in respect of the common stock. Furthermore, no stamp,
capital gains or other taxes will be imposed by the Republic of Liberia on the
ownership or disposition of the common stock by holders thereof.
12
<PAGE> 15
ITEM 8. SELECTED FINANCIAL DATA
Set forth below are selected consolidated financial and other data of the
Company for the five fiscal periods ended March 31, 1996, which have been
derived from the Company's Consolidated Financial Statements. The data below
should be read in conjunction with the Consolidated Financial Statements and
the notes thereto and the report of Ernst & Young, independent Chartered
Accountants, with respect to the statements for the fiscal periods ended March
31, 1996, 1995 and 1994, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." 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>
11 MONTH
FISCAL YEAR PERIOD ENDED FISCAL YEAR
ENDED MARCH 31, MARCH 31, ENDED APRIL 30,
--------------- ----------------
1996 1995 1994(1) 1993 1992
--------- --------- ---------- --------- ---------
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER DAY DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Voyage revenues . . . . . . . . . . . . . $ 336,320 $ 319,966 $ 317,742 $ 336,994 $ 414,104
Voyage expenses . . . . . . . . . . . . . 90,575 84,957 81,052 108,805 118,678
Net voyage revenues . . . . . . . . . . . 245,745 235,009 236,690 228,189 295,426
Income from vessel operations . . . . . . 75,048 50,833 59,128 36,915 123,354
Interest expense . . . . . . . . . . . . (61,679) (64,321) (48,064) (47,374) (39,015)
Interest income. . . . . . . . . . . . . 6,471 5,904 2,904 1,156 2,369
Other income . . . . . . . . . . . . . . 9,895 11,848 11,777 37,862 9,981
Income from continuing operations before
foreign exchange gain (loss) . . . . . 29,735 4,264 25,745 28,559 96,689
Foreign exchange gain (loss)(2) . . . . . (665) 991 (1,532) (77,917) (7,026)
Net income (loss) from continuing operations 29,070 5,255 24,213 (49,358) 89,663
Net income from discontinued operations . - - 5,945 1,890 1,323
Cumulative effect of change in accounting for
marketable securities . . . . . . . . . - 1,113 - - -
Net income (loss) . . . . . . . . . . . . 29,070 6,368 30,158 (47,468) 90,986
PER SHARE DATA:
Net income (loss) from continuing operations $ 1.17 $ 0.29 $ 1.35 $ (2.74) $ 6.18
Cumulative effect of change in accounting for
marketable securities . . . . . . . . . - 0.06 - - -
Net income (loss) . . . . . . . . . . . . 1.17 0.35 1.68 (2.64) 6.27
Cash dividends declared per share . . . . 0.48 - - - -
Weighted average shares outstanding
(thousands) . . . . . . . . . . . . . . 24,837 18,000 18,000 18,000 14,500
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and marketable securities . . . . . $ 99,790 $ 85,739 $ 107,246 $ 48,770 $ 26,239
Total assets . . . . . . . . . . . . . . 1,355,301 1,306,474 1,405,147 1,368,966 1,237,942
Total debt . . . . . . . . . . . . . . . 725,842 842,874 945,611 884,813 756,454
Total stockholders' equity . . . . . . . 599,395 439,066 433,180 403,022 442,990
OTHER FINANCIAL DATA:
EBITDA (3) . . . . . . . . . . . . . . . $ 166,233 $ 146,756 $ 151,364 $ 136,123 $ 214,196
Cash earnings (4) . . . . . . . . . . . . 113,338 100,699 115,647 126,170 183,164
EBITDA to interest expense (3) (5) . . . 2.69x 2.28x 3.04x 2.59x 4.70x
Total debt to EBITDA (1) (3) . . . . . . 4.37 5.74 5.83 6.50 3.53
Total debt to total capitalization . . . 54.8% 65.7% 68.6% 68.7% 63.1%
Net debt to capitalization (6) . . . . . 51.1 63.3 65.9 67.5 62.2
Capital expenditures:
Vessel purchases, gross . . . . . . . . $ 123,843 $ 7,465 $ 163,509 $ 334,733 $ 373,501
Drydocking . . . . . . . . . . . . . . 11,641 11,917 13,296 16,440 6,240
FLEET DATA:
Average number of ships (7) . . . . . . . 39 42 45 50 46
Average age of Company's Aframax fleet (in
years) (8) . . . . . . . . . . . . . . 7.4 6.7 7.4 8.0 7.7
TCE per ship per day (7)(9) . . . . . . . $ 18,438 $ 16,552 $ 17,431 $ 13,722 $ 19,270
Vessel operating expenses per ship per
day (7)(10) . . . . . . . . . . . . . . 4,787 4,748 4,879 4,276 4,245
Operating cash flow per ship per day (11) 10,613 8,944 9,133 6,511 10,999
(Footnotes on following page)
</TABLE>
13
<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 the eleven-month period ended March 31, 1994, EBITDA for the
12 months ended March 31, 1994 was used for purposes of computing total
debt to EBITDA, 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.
(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) For purposes of computing EBITDA to interest expense, interest expense
includes capitalized interest.
(6) Net debt represents total debt less cash, cash equivalents and marketable
securities.
(7) Excludes vessels of discontinued operations and the joint venture.
(8) 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).
(9) 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 Research Studies Ltd. ("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 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.
(10) 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 expense, port fees
and canal tolls. 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.
(11) 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.
14
<PAGE> 17
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is a leading provider of international crude oil and petroleum
product 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 Company's fleet consists of 42 tankers, including 38
Aframax oil tankers and oil/bulk/ore carriers, two smaller tankers, one VLCC
and, through a joint venture, a 50% interest in an additional Aframax tanker,
for a total cargo-carrying capacity of approximately 4.2 million tonnes.
Approximately 80% of the Company's net revenue is currently derived from spot
voyages. This dependence on spot voyages, which is within industry norms,
contributes to the volatility of the Company's revenue, cash flow from
operations, and net income. The balance of the Company's revenue is generated
by two other modes of employment: time charters, whereby vessels are chartered
to customers for a fixed period at a fixed rate; and by contracts of
affreightment, whereby the Company carries an agreed quantity of cargo for a
customer over a specified trade route over a specified period of time.
Management believes that the Company has a competitive advantage over other
tanker owners in the Aframax spot market.
Historically, the tanker industry has been cyclical, experiencing volatility in
profitability resulting from changes in the supply of and demand for tankers.
Additionally, tanker markets have exhibited seasonal variations in charter
rates. Tanker markets are typically stronger in the winter months as a result
of increased oil consumption in the northern hemisphere and unpredictable
winter weather patterns which tend to disrupt vessel scheduling.
RESULTS OF OPERATIONS
Bulk shipping industry freight rates are commonly measured at the net voyage
revenue level in terms of "time charter equivalent" (or "TCE") rates, defined
as voyage revenues less voyage expenses (excluding commissions), divided by
revenue-generating ship-days for the round-trip voyage. Voyage revenues and
voyage expenses are a function of the type of charter, either spot charter or
time charter, and port, canal and fuel costs depending on the trade route upon
which a vessel is sailing, in addition to being a function of the level of
shipping freight rates. For this reason, shipowners base economic decisions
regarding the deployment of their vessels upon anticipated TCE rates, and
industry analysts typically measure bulk shipping freight rates in terms of TCE
rates. Therefore, the discussion of revenue below focuses on net voyage
revenue and TCE rates.
FISCAL 1996 VERSUS FISCAL 1995
Teekay's net income was $29.1 million, or $1.17 per share, in fiscal 1996, up
from $6.4 million, or 35 cents per share, in fiscal 1995, reflecting an
improvement in the tanker charter market accompanied by a relatively stable
cost environment.
During fiscal 1995, the Company disposed of six older, mid-1970s-built tankers,
and during fiscal 1996, the Company disposed of its remaining two such vessels
and added four newer Aframax tankers to its fleet. As a result, the Company's
fleet was 7.1% smaller on average in fiscal 1996 than in fiscal 1995.
Net voyage revenues were $245.7 million in fiscal 1996, an increase of 4.6% as
compared to fiscal 1995, despite the decrease in average fleet size. This
reflects an improvement in tanker charter market conditions, with an average
TCE rate of $18,438 in fiscal 1996, up 11.4% from $16,552 in fiscal 1995.
Total operating expenses, including vessel operating expenses, depreciation and
amortization, and general and administrative expenses, decreased 7.3% to $170.7
million in fiscal 1996, from $184.2 million in fiscal 1995. Depreciation and
amortization and vessel operating expenses decreased as a result of the
reduction in average fleet size. Depreciation and amortization was further
reduced by a revision to estimates of residual values of the Company's vessels,
which reduced depreciation expense by approximately $9.4 million in fiscal
1996. Depreciation and amortization expense included amortization of
drydocking costs of $8.6 million in fiscal 1996 and $10.3 million in fiscal
1995. General and administrative expenses rose 11.5% to $16.7 million in
fiscal 1996 as a result of increases in expenditures on crew training and
senior management compensation, and increased administrative costs
15
<PAGE> 18
subsequent to the acquisition of Teekay Shipping Limited in March 1995.
The combination of increased voyage revenues and lower total operating expenses
resulted in a 47.6% increase in income from vessel operations, to $75.0 million
in fiscal 1996 from $50.8 million in fiscal 1995.
Interest expense decreased 4.1% to $61.7 million in fiscal 1996, from $64.3
million in fiscal 1995, reflecting a continued decline in the Company's total
debt, partially offset by higher interest rates. Interest income increased to
$6.5 million in fiscal 1996, from $5.9 million in fiscal 1995, as a result of
higher interest rates and an increase in average cash and marketable securities
balances.
Other income during fiscal 1996 was $9.2 million, consisting primarily of an
$8.8 million gain on the sale of two vessels. Other income during fiscal 1995
was $12.8 million, consisting primarily of an $18.2 million gain on the sale of
six vessels, partially offset by $4.3 million in losses on available-for-sale
securities and a $2.1 million equity loss from the Company's 50% investment in
Viking Consolidated Shipping Corp. ("VCSC").
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.
Teekay's net income was $6.4 million in fiscal 1995, down from $30.2 million in
fiscal 1994, reflecting a weaker tanker charter market in fiscal 1995. Fiscal
1995 results were also affected by a decline in average fleet size from 45 to
42 vessels.
Net voyage revenues were $235.0 million in fiscal 1995 as compared to $236.7
million in fiscal 1994, representing an 8.2% decrease on an annualized basis
from fiscal 1994, primarily as a result of the decline in average fleet size
and continuing weak charter markets. The Company's average TCE rate was $16,552
in fiscal 1995, down from $17,431 in fiscal 1994.
Total operating expenses increased from $177.6 million in fiscal 1994 to $184.2
million in fiscal 1995, but on an annualized basis total operating expenses
decreased by 4.7%. Vessel operating expenses decreased 9.9% on an annualized
basis, to $72.7 million in fiscal 1995, primarily as a result of the decline in
fleet size. Depreciation and amortization decreased 1.0% on an annualized basis
to $96.4 million in fiscal 1995 primarily as a result of 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 was lower than the fleet average. Depreciation and amortization
included amortization of drydocking costs of $10.3 million in fiscal 1995 and
$11.8 million in fiscal 1994. General and administrative expenses were $15.0
million in fiscal 1995, virtually unchanged from fiscal 1994 on an annualized
basis.
As a result of the decrease in fleet size and 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 $12.8 million, and included an $18.2
million gain on the sale of six vessels
16
<PAGE> 19
and a $2.1 million equity loss from the Company's 50% investment in VCSC during
the period. Other income during fiscal 1994 was $10.2 million, and included a
$12.3 million gain on the sale of six vessels and $1 million in equity income
from VCSC.
During fiscal 1994 the Company had net income from discontinued operations of
$5.9 million, primarily as a result of a $5.7 million gain arising on the sale
of nine multipurpose dry cargo vessels obtained in connection with the
divestiture of the Company's investment in Baltimar Overseas Limited.
The following table illustrates the relationship between fleet size (measured
in ship-days), time charter equivalent ("TCE") per revenue-generating ship-day
performance, and operating results per calendar ship-day:
<TABLE>
<CAPTION>
Eleven
Year Ended Year Ended Months Ended
March 31/96 March 31/95 March 31/94
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total calendar ship-days 14,310 15,315 15,023
Non-revenue days 698 822 1,140
- ---------------------------------------------------------------------------------------------------
Revenue-generating ship-days (A) 13,612 14,493 13,883
- ---------------------------------------------------------------------------------------------------
Net voyage revenue before commissions (B) $250,981 $239,888 $241,994
(000's)
- ---------------------------------------------------------------------------------------------------
Time charter equivalent (or TCE) (B/A) $18,438 $16,552 $17,431
- ---------------------------------------------------------------------------------------------------
Operating results per calendar ship-day:
Net voyage revenue $17,173 $15,345 $15,755
Vessel operating expense 4,787 4,748 4,879
General and administrative expense 1,171 981 956
Drydocking expense 602 672 787
- ---------------------------------------------------------------------------------------------------
Operating cash flow per calendar ship-day $10,613 $8,944 $9,133
===================================================================================================
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, the Company undertook further steps to improve its
financial position and liquidity. In July 1995, the Company completed an
initial public offering of common stock, and used the $137.6 million net
proceeds to boost liquidity and reduce debt. In addition, $448 million of
existing debt was refinanced during the year in order to take advantage of
lower interest rates and an improved credit profile. This included a $225
million offering of 8.32% First Preferred Ship Mortgage Notes, due 2008, the
proceeds of which were used to refinance existing floating rate debt, and the
establishment of a $223 million corporate revolving credit facility at improved
rates and credit terms. As a result, the Company's total liquidity, including
cash, marketable securities and undrawn lines of credit, increased to $195.3
million from $85.7 million, the current portion of long-term debt decreased to
$19.1 million from $74.5 million, and debt as a percentage of total
capitalization decreased to 54.8% from 65.7%, during fiscal 1996.
Net cash flow from operating activities was $102.7 million in fiscal 1996,
compared to $87.5 million in fiscal 1995, and $117.7 million in the eleven
months ended March 31, 1994, reflecting an improvement in tanker charter market
conditions over the weaker fiscal 1995 year, and in spite of the smaller
average fleet size.
During fiscal 1996, the Company acquired three modern, second-hand Aframax
tankers, including one vessel previously owned by VCSC, and one newbuilding
double-hull Aframax tanker. As a result, capital expenditures for vessels and
17
<PAGE> 20
equipment increased to $79.3 million, net of capital lease financing of $44.5
million, in fiscal 1996 from $7.5 million in fiscal 1995 and $65.7 million in
fiscal 1994. The Company sold its two remaining mid-1970s-built tankers in
fiscal 1996, completing the disposal of thirteen such vessels during the past
three fiscal years. Proceeds from the disposition of vessels totalled $28.4
million in fiscal 1996 and $16.8 million in fiscal 1995. In fiscal 1994,
proceeds totalled $86.4 million, and included some vessel sales which were
intended to enhance the Company's liquidity. Capital expenditures for
drydocking decreased slightly to $11.6 million in fiscal 1996 from $11.9
million in fiscal 1995, and $13.3 million in fiscal 1994, reflecting the
reduction in fleet size.
The Company has entered into agreements for a one-year time-charter and
subsequent purchase of a modern Aframax tanker, and for the construction of a
newbuilding double-hull Aframax tanker scheduled for delivery in July 1997, for
a total cost of $71.0 million. The remaining unpaid cost of $68.8 million for
these two vessels will be financed through a $35.6 million financing
arrangement, existing lines of credit, and cash balances.
The Company made scheduled debt repayments of $57.9 million during fiscal 1996,
and $87.6 million in fiscal 1995. During fiscal 1995, the Company also prepaid
$15.0 million of long-term debt secured by vessels sold during the year. In
October 1995, the Company began making quarterly dividend payments of 21.5
cents per share. Dividend payments during fiscal 1996 were $11.9 million, of
which $7.1 million was paid in cash and $4.8 million was paid in the form of
common shares issued under the Company's dividend reinvestment plan.
18
<PAGE> 21
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
MANAGEMENT
The directors, executive officers and senior management of the Company are
listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
Karlshoej, Axel 55 Director and Chairman of the Board
Hood, James N. 61 Director, President and Chief Executive
Officer
Coady, Arthur F. 62 Director, EVP and General Counsel
Dingman, Michael D. 64 Director
Feder, Morris L. 79 Director
Hsu, Steve G. K. 62 Director
Hsu, Thomas Kuo-Yuen 49 Director
Alsleben, Veronica A. E. 45 Managing Director (London)
Antturi, Peter S. 37 Controller (Vancouver)
Chad, Greg 44 VP, Corporate Services (Vancouver)
Gibson, Esther E. 41 Secretary (Nassau)
Glendinning, David 42 VP, Marine and Commercial Operations
(Vancouver)
Gurnee, Anthony 36 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. He also serves as
Director/Executive to a number of other industrial concerns.
19
<PAGE> 22
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 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 24 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 seven vessels, ranging in size from 80,000
dwt to 280,000 dwt. He has been a Committee Director of the Britannia 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 23 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).
20
<PAGE> 23
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.
YOSHIO NAGAO has been employed in the shipping industry for the past 29 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 35 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.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
The aggregate annual compensation paid to the 12 executive officers and senior
managers listed in Item 10 above was $2,291,884 for fiscal 1996, 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 1996, the Company contributed an aggregate amount of
approximately $84,000 to provide pension and similar benefits for the 12
executive officers and senior managers listed above.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
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 has been reserved for issuance under the Plan.
As of May 30, 1996, options to purchase a total of 1,111,750 shares of Teekay's
common stock were outstanding, with options to purchase a total of 373,250
shares then effective and with the directors and the 12 executive officers and
senior managers listed in Item 10 above holding options to purchase a total of
703,750 shares. The options are exercisable at prices ranging from $21.50
to $27.375 per share and expire between July 19, 2005 and May 28, 2006, ten
years after the date of grant.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
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. 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 9 5/8%
First Preferred Ship Mortgage Notes have been paid in full.
21
<PAGE> 24
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Not applicable.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
ITEM 18. FINANCIAL STATEMENTS
See item 19(a) below.
22
<PAGE> 25
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements and schedules, together with the
report of Ernst & Young thereon, are filed as part of this Annual
Report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Financial Statements
Consolidated Statements of Income and Retained Earnings . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . F-4
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . F-5
Schedule A to the Consolidated Financial Statements . . . . . . . . . . . . . . . . F-16
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required, are
inapplicable or have been disclosed in the Notes to the Consolidated Financial
Statements and therefore have been omitted.
23
<PAGE> 26
(b) The following exhibits are filed as part of this Annual Report:
<TABLE>
<C> <S>
*2.1 Articles of Incorporation of Teekay, with all amendments thereto.
**2.2 Bylaws of Teekay, with all amendments thereto.
+2.3 Indenture dated as of July 15, 1993 among Teekay, VSSI Sun Inc., Diamond Spirit
Inc., VSSI Deepsea Inc., VSSI Bulkers Inc., VSSI Star Inc., VSSI Ulsan Inc. and
United States Trust Company of New York, as Trustee.
+2.4 Registration Rights Agreement dated July 15, 1993 among Teekay, VSSI Sun Inc.,
Diamond Spirit Inc., VSSI Deepsea Inc., VSSI Bulkers Inc., VSSI Star Inc., VSSI
Ulsan Inc., and Morgan Stanley & Co. Incorporated, as Placement Agent.
+2.5 Specimen of Teekay's 9 5/8% First Preferred Ship Mortgage Note due 2003.
+++2.6 First Preferred Ship Mortgage dated July 15, 1993 by VSSI Sun Inc. to United
States Trust Company of New York, as Trustee.
+++2.7 Assignment of Time Charter dated as of July 15, 1993 from VSSI Sun Inc. to
United States Trust Company of New York, as Trustee.
+++2.8 Assignment of Insurance dated July 15, 1993 from VSSI Sun Inc. to United States
Trust Company of New York, as Trustee.
+2.9 Pledge Agreement and Irrevocable Proxy dated July 15, 1993 made by Teekay in
favor of United States Trust Company of New York, as Trustee.
+++2.10 Guarantee dated as of July 15, 1993 by VSSI Sun Inc. in favor of United States
Trust Company of New York, as Trustee.
+++2.11 Assignment of Freights and Hires dated July 15, 1993 from VSSI Sun Inc. to
United States Trust Company of New York, as Trustee.
+++2.12 Cash Collateral Account Agreement dated July 15, 1993 between VSSI Sun Inc. and
United States Trust Company of New York, as Trustee.
+2.13 Investment Account Agreement dated July 15, 1993 between Teekay and United
States Trust Company of New York, as Trustee.
+2.14 Assumption Agreement dated August 13, 1993 between United States Trust Company
of New York, as Trustee and Sebarok Spirit Inc.
+2.15 Pledge Agreement and Irrevocable Proxy dated August 13, 1993 made by Teekay in
favor of United States Trust Company of New York, as Trustee.
**2.16 Registration Rights Agreement among Teekay, Tradewinds Trust Co. Ltd., as
Trustee for the Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee for
the JTK Trust.
**2.17 Specimen of Teekay Common Stock Certificate.
2.18 Indenture among 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.
2.19 Specimen of Teekay's First Preferred Ship Mortgage Notes Due 2008.
++2.20 Bahamian Statutory Ship Mortgage dated January 29, 1996 by Nassau Spirit Inc. to
United States Trust Company of New York.
++2.21 Deed of Covenants dated January 29, 1996 by Nassau Spirit Inc. to United States
Trust Company of New York.
</TABLE>
24
<PAGE> 27
<TABLE>
<C> <S>
2.22 First Preferred Ship Mortgage dated January 29, 1996 by VSSI Oceans Inc. to
United States Trust Company of New York, as Trustee.
++2.23 Assignment of Time Charter dated January 29, 1996 by Nassau Spirit Inc. to
United States Trust Company of New York, as Trustee.
++2.24 Assignment of Insurance dated January 29, 1996 by Nassau Spirit Inc. to United
States Trust Company of New York, as Trustee.
2.25 Pledge Agreement and Irrevocable Proxy dated January 29, 1996 by Teekay in favor
of United States Trust Company of New York, as Trustee.
++2.26 Guarantee dated January 29, 1996 by Nassau Spirit Inc. in favor of United States
Trust Company of New York, as Trustee.
++2.27 Assignment of Freights and Hires dated January 29, 1996 by Nassau Spirit Inc. to
United States Trust Company of New York, as Trustee.
++2.28 Cash Collateral Account Agreement dated January 29, 1996 between Nassau Spirit
Inc. and United States Trust Company of New York, as Trustee.
2.29 Investment Account Agreement dated January 29, 1996 between Teekay and United
States Trust Company of New York, as Trustee.
**2.30 1995 Stock Option Plan.
**2.31 Form of Indemnification Agreement between Teekay and each of its officers and
directors.
**2.32 Reducing Revolving Credit Facility Agreement dated June 6, 1995 between Chiba
Spirit Inc., VSSI Sun Inc., VSSI Gemini Inc., VSSI Carriers Inc., Mendana Spirit
Inc., Musashi Spirit Inc., VSSI Condor Inc., Palm Monarch Inc., VSSI Drake Inc.,
VSSI Tokyo Inc., VSSI Marine Inc., Tasman Spirit Inc., Vancouver Spirit Inc. and
Elcano Spirit Inc. and Den norske Bank AS, Christiania Bank og Kreditkasse,
acting through its New York Branch, and Nederlandse Scheepshypotheskbank N.V.
+2.33 Charter Party, as amended, dated September 21, 1989 between Palm Shipping Inc.
and BP Shipping Limited
+2.34 Time Charter, as amended, dated August 14, 1986 between VSSI Sun Inc. and Palm
Shipping Inc.
+2.35 Time Charter, as amended, dated April 1, 1989 between Diamond Spirit Inc. and
Palm Shipping Inc.
+2.36 Time Charter, as amended, dated August 14, 1986 between VSSI Deepsea Inc. and
Palm Shipping Inc.
+2.37 Time Charter, as amended, dated August 14, 1986 between VSSI Bulkers Inc. and
Palm Shipping Inc.
+2.38 Time Charter, as amended, dated August 14, 1986 between VSSI Star Inc. and Palm
Shipping Inc.
+2.39 Time Charter, as amended, dated January 15, 1990 between VSSI Ulsan Inc. and
Palm Shipping Inc.
+2.40 Time Charter, as amended, dated June 1, 1993 between Sebarok Spirit Inc. and
Palm Shipping Inc.
#2.41 Time Charter, as amended, dated July 3, 1995 between VSSI Oceans Inc. and Palm
Shipping Inc.
</TABLE>
25
<PAGE> 28
<TABLE>
<C> <S>
#2.42 Time Charter, as amended, dated January 4, 1994 between VSSI Atlantic Inc. and
Palm Shipping Inc.
#2.43 Time Charter, as amended, dated February 1, 1992 between VSSI Appian Inc. and
Palm Shipping Inc.
#2.44 Time Charter, as amended, dated December 1, 1993 between Senang Spirit Inc. and
Palm Shipping Inc.
#2.45 Time Charter, as amended, dated August 1, 1992 between Exuma Spirit Inc. and
Palm Shipping Inc.
#2.46 Time Charter, as amended, dated May 1, 1992 between Nassau Spirit Inc. and Palm
Shipping Inc.
#2.47 Time Charter, as amended, dated November 1, 1992 between Andros Spirit Inc. and
Palm Shipping Inc.
#++2.48 Management Agreement, as amended, dated June 1, 1992 between Teekay Shipping
Limited and Nassau Spirit Inc.
</TABLE>
- ---------------
* Previously filed as an exhibit to the Company's Registration Statement on Form
S-8, filed with the Securities and Exchange Commission (the "SEC") on October
27, 1995, and hereby incorporated by reference to such Registration Statement.
**Previously filed as an exhibit to the Company's Registration Statement on Form
F-1 (Registration No. 33-7573-4), filed with the SEC on July 14, 1995, and
hereby incorporated by reference to such Registration Statement.
+ Previously filed as an exhibit to the Company's Registration Statement on Form
F-1 (Registration No. 33-68680), as declared effective by the SEC on November
29, 1993, and hereby incorporated by reference to such Registration
Statements.
++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 as an exhibit to the Company's Registration Statement on Form
F-3 (Registration No. 33-65139), filed with the SEC on January 19, 1996, and
hereby incorporated by reference to such Registration Statement.
26
<PAGE> 29
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TEEKAY SHIPPING CORPORATION
By: /s/ Anthony Gurnee
----------------------------------------
Anthony Gurnee
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: June 4, 1996
27
<PAGE> 30
[LOGO - ERNST & YOUNG]
CHARTERED ACCOUNTANTS Phone: 809 322 3805/7/8
Sassoon House Fax: 809 326 8180
Shirley & Victoria Telex: 20 240 (AUDAC)
P.O. Box N-3231
Nassau, Bahamas
AUDITORS' REPORT
To the Shareholders of
TEEKAY SHIPPING CORPORATION
We have audited the accompanying consolidated balance sheets of TEEKAY
SHIPPING CORPORATION AND SUBSIDIARIES as of March 31, 1996 and 1995,
and the related consolidated statements of income and retained
earnings and cash flows for the years ended March 31, 1996 and 1995
and the eleven month period ended March 31, 1994. Our audits also
included the financial statement schedule listed in the Index Item
19[a]. These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule 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 consolidated financial position
of TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES at March 31, 1996 and
1995, and the consolidated results of their operations and their cash
flows for the years ended March 31, 1996 and 1995 and for the eleven
month period ended March 31, 1994, in conformity with accounting
principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material aspects the information set forth therein.
Nassau, Bahamas, /s/ Ernst & Young
May 17, 1996. Chartered Accountants
F-1
<PAGE> 31
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(in thousands of U.S. dollars, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
MARCH 31, MARCH 31, MARCH 31,
--------- --------- ---------
1996 1995 1994
$ $ $
---- ---- ----
<S> <C> <C> <C>
NET VOYAGE REVENUES
Voyage revenues 336,320 319,966 317,742
Voyage expenses 90,575 84,957 81,052
- -------------------------------------------------------------------------------------------------------
Net voyage revenues 245,745 235,009 236,690
- -------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Vessel operating expenses 67,841 72,723 73,597
Time charter hire expense 2,503
Depreciation and amortization 83,603 96,435 89,902
General and administrative (note 3) 16,750 15,018 14,063
- -------------------------------------------------------------------------------------------------------
170,697 184,176 177,562
- -------------------------------------------------------------------------------------------------------
Income from vessel operations 75,048 50,833 59,128
- -------------------------------------------------------------------------------------------------------
OTHER ITEMS
Interest expense (61,679) (64,321) (48,064)
Interest income 6,471 5,904 2,904
Other income (note 12) 9,230 12,839 10,245
- -------------------------------------------------------------------------------------------------------
(45,978) (45,578) (34,915)
- -------------------------------------------------------------------------------------------------------
Net income from continuing operations 29,070 5,255 24,213
Net income from discontinued operations (note 4) 5,945
- -------------------------------------------------------------------------------------------------------
Net income before cumulative
effect of accounting change 29,070 5,255 30,158
Cumulative effect of change in accounting for
marketable securities (notes 1 and 5) 1,113
- -------------------------------------------------------------------------------------------------------
Net income 29,070 6,368 30,158
Retained earnings, beginning of the period 406,547 400,179 370,021
- -------------------------------------------------------------------------------------------------------
435,617 406,547 400,179
Exchange of redeemable preferred stock (note 10) (60,000)
Dividends declared and paid (11,927)
- -------------------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF THE PERIOD 363,690 406,547 400,179
- -------------------------------------------------------------------------------------------------------
Earnings per share amounts (note 1)
Continuing operations $1.17 $0.29 $1.35
Cumulative effect of change in accounting for
marketable securities 0.06
Net income per common share 1.17 0.35 1.68
Weighted average number of common shares
outstanding 24,837,109 18,000,000 18,000,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 32
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
AS AT AS AT
MARCH 31, MARCH 31,
--------- ---------
1996 1995
$ $
---- ----
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 99,790 16,500
Marketable securities (notes 5 and 12) 69,239
Restricted cash (note 7) 1,990 7,634
Accounts receivable
-trade 22,213 16,875
-vessel sales (note 12) 17,283
-other 2,725 3,271
Prepaid expenses and other assets 15,331 13,273
- -------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 142,049 144,075
- -------------------------------------------------------------------------------------
VESSELS AND EQUIPMENT (notes 1,7 and 11)
At cost, less accumulated depreciation of $377,105
(1995 - $312,281) 1,193,557 1,142,972
Advances on vessels 5,250 5,066
- -------------------------------------------------------------------------------------
TOTAL VESSELS AND EQUIPMENT 1,198,807 1,148,038
- -------------------------------------------------------------------------------------
Investment 1,624 3,758
Other assets 12,821 10,603
- -------------------------------------------------------------------------------------
1,355,301 1,306,474
- -------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable 11,761 11,480
Accrued liabilities (note 6) 18,303 13,054
Current portion of long-term debt (note 7) 19,102 74,479
- -------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 49,166 99,013
- -------------------------------------------------------------------------------------
Long-term debt (note 7) 706,740 768,395
- -------------------------------------------------------------------------------------
TOTAL LIABILITIES 755,906 867,408
- -------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock (note 10) 235,705 33,001
Retained earnings 363,690 406,547
Less net unrealized loss on marketable
securities (notes 1 and 5) 482
- -------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 599,395 439,066
- -------------------------------------------------------------------------------------
1,355,301 1,306,474
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Commitments and contingencies (notes 7 and 11)
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 33
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
MARCH 31, MARCH 31, MARCH 31,
--------- --------- ---------
1996 1995 1994
$ $ $
---- ---- ----
<S> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income from operating activities 29,070 5,255 24,213
Add (deduct) charges to operations not requiring
a payment of cash and cash equivalents:
Depreciation and amortization 83,603 96,435 89,902
Foreign currency exchange loss (gain) (1,050) 2,583
Gain on disposition of assets (8,784) (18,245) (12,347)
Loss on marketable securities 1,553
Loss (gain) on available-for-sale securities (55) 4,303
Equity loss (income) (net of dividend received:
March 31, 1994 - $500) (1,139) 2,089 (483)
Other - net 1,276 (19)
Change in non-cash working capital items
related to operating activities (note 13) (1,320) (1,263) 12,313
- ------------------------------------------------------------------------------------------------
NET CASH FLOW FROM OPERATING ACTIVITIES 102,651 87,505 117,734
- ------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 448,000 220,000
Scheduled repayments of long-term debt (57,850) (87,570) (37,067)
Prepayments of long-term debt (505,962) (15,033) (132,416)
Scheduled payments on capital lease obligations (1,527) (18,472)
Prepayments of capital lease obligations (43,023) (110,839)
Decrease (increase) in restricted cash 5,644 (1,296) 8,143
Net proceeds from issuance of Common Stock 137,872
Cash dividends paid (7,094)
Capitalized loan costs (5,965) (1,565) (9,955)
Financing activities associated with
discontinued operations (20,077)
- ------------------------------------------------------------------------------------------------
NET CASH FLOW FROM FINANCING ACTIVITIES (29,905) (105,464) (100,683)
- ------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (net of
capital lease financing of: March 31, 1996 - $44,550;
March 31, 1995 - $NIL; March 31,
1994 - $97,776) (79,293) (7,465) (65,733)
Expenditures for drydocking (11,641) (11,917) (13,296)
Proceeds from disposition of assets 28,428 16,817 86,351
Net cashflow from investment 3,273 2,650
Increase in marketable securities (70,185)
Proceeds on sale of available-for-sale securities 111,770 110,806
Purchases of available-for-sale securities (41,993) (115,085)
Other 39 (50)
Investing activities associated
with discontinued operations 35,706
- ------------------------------------------------------------------------------------------------
NET CASH FLOW FROM INVESTING ACTIVITIES 10,544 (4,155) (27,207)
- ------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 83,290 (22,114) (10,156)
Cash and cash equivalents, beginning of the period 16,500 38,614 48,770
- ------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD 99,790 16,500 38,614
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 34
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
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.
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. As a
result, certain voyage expenses which were paid to TSL have been reclassified
to general and administrative expenses, in order to conform with the
presentation adopted subsequent to March 31, 1995.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
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.
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:
F-5
<PAGE> 35
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
$ $
----- -----
(UNAUDITED)
<S> <C> <C>
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 12,839 12,814
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 operating activities 87,505 125,694
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>
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 operating 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 ended March 31, 1995 (see note 5).
F-6
<PAGE> 36
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
VESSELS AND EQUIPMENT
All pre-delivery costs incurred during the construction of newbuildings,
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 years ended March
31, 1996 and 1995, and for the eleven-month period ended March 31, 1994
aggregated $106,000, $151,000, and $1,653,000, 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 expenses amortized for the years
ended March 31, 1996 and 1995, and for the eleven-month period ended March 31,
1994 aggregated $8,617,000, $10,281,000, and $11,831,000, 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 year ended March 31, 1996 by $9.4
million (or $0.38 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 AND CAP AGREEMENTS
The differential to be paid or received is accrued as interest rates change and
is recognized as an adjustment to interest expense. Premiums paid for interest
rate cap agreements are recorded at cost. Premiums and receipts, if any, are
recognized as adjustments to interest expense 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 deferred and recognized in
the period when the hedged transaction is recorded in the accounts.
CASH FLOWS
Cash interest paid during the years ended March 31, 1996 and 1995, and for the
eleven-month period ended March 31, 1994 totalled $59,021,000, $65,368,000, and
$49,456,000, respectively.
The Company classifies all highly liquid investments with a maturity date of
three months or less when purchased to be included in cash and cash
equivalents.
F-7
<PAGE> 37
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
INCOME TAXES
The legal jurisdictions of the countries in which Teekay and its subsidiaries
are incorporated do not impose income taxes upon shipping-related activities.
EARNINGS PER SHARE
Earnings per share amounts are 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 the earnings per share amounts since their
effect thereon would not be material.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for its stock option plans in accordance with provisions
of the Accounting Principles Board's Opinion No. 25 (APB 25), "Accounting for
Stock Issued to Employees." In 1995, the Financial Accounting Standards Board
released the Statement of Financial Accounting Standard No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation." SFAS 123 provides an alternative to
APB 25 and is effective for fiscal years beginning after December 15, 1995.
The Company expects to continue to account for its employee stock plans in
accordance with the provisions of APB 25.
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. Fees and commissions incurred,
included in general and administrative expenses, for the year ended March 31,
1995 and the eleven-month period ended March 31, 1994 aggregated $11,826,000
and $12,030,000, respectively. Commissions incurred, related to vessel
dispositions, for the year ended March 31, 1995 and the eleven-month period
ended March 31, 1994 aggregated $295,000 and $579,000, respectively.
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.
Revenues from discontinued operations for the eleven-month period ended March
31, 1994 amounted to $8,653,000.
F-8
<PAGE> 38
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
5. INVESTMENTS IN MARKETABLE SECURITIES
<TABLE>
<CAPTION>
APPROXIMATE
GROSS GROSS MARKET AND
UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES AMOUNT
$ $ $ $
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
1996
Available-For-Sale Securities NIL NIL
- ----------------------------------------------------------------------------------------------------------
1995
Available-For-Sale Securities 69,721 450 932 69,239
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The cost and approximate market value of available-for-sale debt securities by
contractual maturity, as at March 31, 1995, are shown as follows:
<TABLE>
<CAPTION>
APPROXIMATE
MARKET AND
COST CARRYING AMOUNT
$ $
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Less than one year 44,767 44,424
Due after one year through five years 24,954 24,815
Due after 5 years NIL NIL
- ----------------------------------------------------------------------------------------------------------
69,721 69,239
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The unrealized loss on marketable securities included as a separate component
of shareholders' equity decreased by $482,000 for the year ended March 31,
1996.
6. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
--------- ---------
1996 1995
$ $
----- -----
<S> <C> <C>
Voyage and vessel 9,053 5,776
Interest 7,789 5,415
Payroll and benefits 1,461 1,863
------- -------
18,303 13,054
====== ======
</TABLE>
F-9
<PAGE> 39
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
--------- ---------
1996 1995
$ $
----- -----
<S> <C> <C>
Revolving Credit Facility 118,000
First Preferred Ship Mortgage Notes (8.32%)
U.S. dollar debt due through 2008 225,000
First Preferred Ship Mortgage Notes (9 5/8%)
U.S. dollar debt due through 2004 151,200 175,000
Floating rate (LIBOR + 1% to 1 1/2%)
U.S. dollar debt due through 2006 231,642 667,874
------- -------
725,842 842,874
Less current portion 19,102 74,479
------ -------
706,740 768,395
======= =======
</TABLE>
In June 1995, the Company entered into a revolving credit facility, (the
"Revolver"), with three commercial banks providing for borrowings of up to $223
million in order to refinance certain of the existing debt obligations of the
Company and to finance vessel acquisitions. The Revolver is collateralized 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
reduces by $9.5 million semi-annually commencing six months after the initial
drawdown date, together with a final balloon reduction coincident with the
final semi-annual reduction on June 6, 2003. Interest payments are based on
LIBOR plus a margin ranging from 0.80% to 1.25% depending on the financial
leverage of the Company. Principal repayments under the Revolver are required
when the Revolver borrowings exceed the commitment amount.
The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the "8.32%
Notes") are collateralized by first preferred mortgages on seven of the
Company's Aframax tankers, together with certain other related collateral, and
are guaranteed by seven subsidiaries of Teekay that own the mortgaged vessels
(the "8.32% Notes Guarantor Subsidiaries") to a maximum of 95% of the fair
value of their net assets. As at March 31, 1996, the fair value of these net
assets approximated $305 million. The 8.32% Notes are also subject to a
sinking fund, which will retire $45 million principal amount of the 8.32% Notes
on each February 1, commencing 2004.
Upon the 8.32% Notes achieving Investment Grade Status and subject to certain
other conditions, the guarantees of the 8.32% Notes Guarantor Subsidiaries will
terminate, all of the collateral securing the obligations of the Company and
the 8.32% Notes Guarantor Subsidiaries under the Indenture and the Security
Documents will be released (whereupon the Notes will become general unsecured
obligations of the Company) and certain covenants under the Indenture will no
longer be applicable to the Company.
The 9 5/8% First Preferred Ship Mortgage Notes due July 15, 2003 (the "9 5/8%
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 six subsidiaries of Teekay that own the mortgaged vessels (the "9
5/8% Notes Guarantor Subsidiaries") to a maximum of 95% of the fair value of
their net assets. As at March 31, 1996, the fair value of these net assets
approximated $199 million. The 9 5/8% Notes are also subject to a sinking
fund, which will retire $25 million principal amount of the 9 5/8% Notes, on
each July 15, commencing July 15, 1997. The 9 5/8% 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:
F-10
<PAGE> 40
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
7. LONG-TERM DEBT (CONT'D)
<TABLE>
<CAPTION>
JULY 15 REDEMPTION PRICE
------- ----------------
<S> <C>
1998 104.813%
1999 102.406%
2000 100.000%
</TABLE>
During the first quarter of fiscal 1996, the Company retired $23.8 million of
the 9 5/8% Notes, utilizing approximately $18.5 million of funds available
under the Revolver.
Upon a Change of Control each 9 5/8% Note holder and 8.32% Note holder has the
right, unless the Company elects to redeem these Notes, to require the Company
to purchase these Notes at 101% of their principal amount plus accrued
interest.
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
second preferred mortgages have been recorded against specific vessels.
Condensed financial information regarding the Company, the 9 5/8% Guarantor
Subsidiaries, the 8.32% Guarantor Subsidiaries and non-guarantor subsidiaries
of the Company is set out in Schedule A of these audited consolidated financial
statements.
Among other matters, the long-term debt agreements generally provide for such
items as maintenance of certain vessel market 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 March
31, 1996, approximately $477,000 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 March 31, 1996 were $1,648,000
(March 31, 1995 - $4,443,000).
As at March 31, 1996, the Company was committed to a series of interest rate
swap agreements whereby $250 million of the Company's floating rate debt was
swapped with fixed rate obligations having an average remaining term of 19.1
months. The swap agreements expire between April 1996 and December 1998. These
arrangements effectively change the Company's interest rate exposure on $250
million of debt from a floating LIBOR rate to an average fixed rate of 6.17%.
As at March 31, 1996, 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 and the remaining $100 million of
contracts became effective in October 1995. All of the contracts expire on
April 1, 1997. The Company is exposed to credit loss in the event of
non-performance by the counter parties to the interest rate swap and cap
agreements; however, the Company does not anticipate non-performance by any of
the counter parties.
F-11
<PAGE> 41
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
7. LONG-TERM DEBT (CONT'D)
Long-term debt principal repayments required to be made in the fiscal years
subsequent to March 31, 1996 are as follows:
<TABLE>
<CAPTION>
$
<S> <C>
- ---------------------------------------------------------------
1997 19,102
1998 22,598
1999 62,423
2000 62,423
2001 78,296
Thereafter 481,000
- ---------------------------------------------------------------
725,842
- ---------------------------------------------------------------
</TABLE>
8. LEASES
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>
<CAPTION>
$
<S> <C>
- ---------------------------------------------------------------
1997 33,854
1998 4,144
- ---------------------------------------------------------------
37,998
- ---------------------------------------------------------------
</TABLE>
The minimum future revenues should not be construed to reflect total charter
hire revenues for any of the years.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of all financial instruments approximate fair market value
except for the following:
Long-term debt - The fair values of the Company's fixed rate 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 and cap 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 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.
F-12
<PAGE> 42
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT'D)
The estimated fair value of the Company's financial instruments is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
$ $ $ $
-------- ------ ------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents, restricted cash,
and marketable securities 101,780 101,780 93,373 93,373
Long-term debt 725,842 723,056 842,874 834,562
Interest rate swap agreements - net receivable
(payable) position (60) 3,047
Interest rate cap agreements 618 10 975 820
</TABLE>
The Company transacts with investment grade rated financial institutions and
requires no collateral from these institutions.
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 PREFERRED
STOCK THOUSANDS STOCK THOUSANDS
$ OF SHARES $ OF SHARES
----- ----------- ----- ----------
<S> <C> <C> <C> <C>
ISSUED AND OUTSTANDING
Balance April 30, 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)
Reinvested Dividends 4,833 201
Exercise of Stock Options 259 12
-------- ------ ---- --------
Balance March 31, 1996 235,705 27,904 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.
F13
<PAGE> 43
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
10. CAPITAL STOCK (CONT'D)
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
(the "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. As at March 31, 1996, options for 778,450
shares were outstanding, of which 383,200 options were exercisable. These
options remain exercisable until July 2005.
11. COMMITMENTS AND CONTINGENCIES
As at March 31, 1996, the Company was committed to foreign exchange contracts
for the forward purchase of approximately Japanese Yen 150 million and
Singapore dollars 851,300 for U.S. dollars, at an average rate of Japanese Yen
105.69 per U.S. dollar and Singapore dollar 1.39 per U.S. dollar, respectively,
for the purpose of hedging accounts payable and accrued liabilities.
In October 1995, the Company entered into an agreement for a one-year
time-charter and subsequent purchase of a modern second-hand Aframax tanker for
a cost of $26.5 million. The cost of this vessel will be financed through cash
balances. As at March 31, 1996, the Company was committed to the construction
of an Aframax vessel for a cost of $44.5 million, scheduled for delivery in
July 1997. A long-term financing arrangement exists for approximately $35.6
million of the unpaid cost of this vessel.
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>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
-------- --------- ---------
1996 1995 1994
$ $ $
---- ---- ----
<S> <C> <C> <C>
Gain on disposition of assets 8,784 18,245 12,347
Loss on marketable securities (1,553)
Gain (loss) on available-for-sale securities 55 (4,303)
Equity in results of 50% owned company 1,139 (2,089) 983
Foreign currency exchange gain (loss) (665) 991 (1,532)
Miscellaneous - net (83) (5)
----- ------ ------
9,230 12,839 10,245
===== ====== ======
</TABLE>
During the year ended March 31, 1995, the Company disposed of six vessels
resulting in a gain of $18,245,000. Proceeds of $11,490,000 relating to the
sale of two vessels were received in May 1995.
Gross realized gains on sales of available-for-sale securities for the years
ended March 31, 1996 and 1995
F14
<PAGE> 44
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS)
aggregated $1,787,000 and $691,000, respectively. Gross realized losses on
sales of available-for-sale securities for the years ended March 31, 1996 and
1995 aggregated $1,732,000 and $4,994,000, respectively.
13. CHANGE IN NON-CASH WORKING CAPITAL ITEMS RELATED TO OPERATING ACTIVITIES
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
-------- --------- ---------
1996 1995 1994
$ $ $
----- ------ -----
<S> <C> <C> <C>
Accounts receivable (4,792) 3,585 4,492
Prepaid expenses and other assets (2,058) (1,597) 6,054
Accounts payable 281 (310) 22
Accrued liabilities 5,249 (2,941) 1,745
------ ------- -------
(1,320) (1,263) 12,313
======= ======== =======
</TABLE>
14. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform with the
presentation adopted in the current period.
15. SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Company acquired a second-hand Aframax tanker
for $30.2 million, which was financed through a combination of a Revolver
drawdown and cash on hand.
F15
<PAGE> 45
SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Year Ended March 31, 1996
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net voyage revenues 29,755 49,402 390,450 (223,862) 245,745
Operating expenses 1,521 20,681 31,861 340,496 (223,862) 170,697
-----------------------------------------------------------------------------------------------
Income (loss) from (1,521) 9,074 17,541 49,954 75,048
vessel operations
Net interest income (expense) (17,711) 394 (13,759) (24,132) (55,208)
Equity in net income
of subsidiaries 47,043 (45,904) 1,139
Other income 1,259 15,940 (9,108) 8,091
-----------------------------------------------------------------------------------------------
Net income 29,070 9,468 3,782 41,762 (55,012) 29,070
Retained earnings (deficit),
beginning of the period 406,547 22,309 (5,027) 89,301 (106,583) 406,547
-----------------------------------------------------------------------------------------------
435,617 31,777 (1,245) 131,063 (161,595) 435,617
Exchange of redeemable
preferred stock (60,000) (60,000)
Dividends declared and paid (11,927) (14,400) (64,370) 78,770 (11,927)
-----------------------------------------------------------------------------------------------
Retained earnings (deficit),
end of the period 363,690 17,377 (1,245) 66,693 (82,825) 363,690
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1995
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net voyage revenues 32,687 47,593 400,844 (246,115) 235,009
Operating expenses 1,999 24,410 29,434 374,541 (246,208) 184,176
-----------------------------------------------------------------------------------------------
Income (loss) from (1,999) 8,277 18,159 26,303 93 50,833
vessel operations
Net interest income (expense) (16,963) 491 (13,736) (28,209) (58,417)
Equity in net income (loss)
of subsidiaries 24,161 (26,250) (2,089)
Other income 56 1 14,871 14,928
-----------------------------------------------------------------------------------------------
Net income from continuing
operations 5,255 8,769 4,423 12,965 (26,157) 5,255
Net income from discontinued
operations
Cumulative effect of change
in accounting for marketable
securities 1,113 1,113
-----------------------------------------------------------------------------------------------
Net income 6,368 8,769 4,423 12,965 (26,157) 6,368
Retained earnings (deficit),
beginning of the period 400,179 46,735 (9,450) 90,396 (127,681) 400,179
-----------------------------------------------------------------------------------------------
406,547 55,504 (5,027) 103,361 (153,838) 406,547
Dividends declared and paid (25,266) (21,989) 47,255
-----------------------------------------------------------------------------------------------
Retained earnings (deficit),
end of the period 406,547 30,238 (5,027) 81,372 (106,583) 406,547
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Eleven Months Ended March 31, 1994
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net voyage revenues 30,932 39,003 408,577 (241,822) 236,690
Operating expenses 921 22,666 21,323 374,586 (241,934) 177,562
-----------------------------------------------------------------------------------------------
Income (loss) from (921) 8,266 17,680 33,991 112 59,128
vessel operations
Net interest income (expense) (11,794) (545) (8,865) (23,956) (45,160)
Equity in net income (loss)
of subsidiaries 42,873 (41,890) 983
Other income 9,262 9,262
-----------------------------------------------------------------------------------------------
Net income from continuing
operations 30,158 7,721 8,815 19,297 (41,778) 24,213
Net income from discontinued
operations 5,945 5,945
Cumulative effect of change
in accounting for marketable
securities
-----------------------------------------------------------------------------------------------
Net income 30,158 7,721 8,815 25,242 (41,778) 30,158
Retained earnings (deficit),
beginning of the period 370,021 39,014 (18,265) 88,938 (109,687) 370,021
-----------------------------------------------------------------------------------------------
400,179 46,735 (9,450) 114,180 (151,465) 400,179
Dividends declared and paid (23,784) 23,784
Retained earnings (deficit), -----------------------------------------------------------------------------------------------
end of the period 400,179 46,735 (9,450) 90,396 (127,681) 400,179
===============================================================================================
</TABLE>
- ---------------
(See Note 7)
F-16
<PAGE> 46
SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
As at March 31, 1996
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents 28 8,613 5,210 85,939 99,790
Restricted cash 1,990 1,990
Other current assets 293 1,475 1,064 37,527 (90) 40,269
-----------------------------------------------------------------------------------------------
Total current assets 321 10,088 6,274 125,456 (90) 142,049
Vessels and equipment (net) 139,652 362,424 696,731 1,198,807
Advances due from subsidiaries 372,233 (372,233)
Other assets (principally
investments in subsidiaries) 606,269 12,826 (604,650) 14,445
-----------------------------------------------------------------------------------------------
978,823 149,740 368,698 835,013 (976,973) 1,355,301
===============================================================================================
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities 3,228 539 613 44,876 (90) 49,166
Long-term debt 376,200 330,540 706,740
Due to parent 382,023 (382,023)
-----------------------------------------------------------------------------------------------
Total liabilities 379,428 539 613 757,439 (382,113) 755,906
-----------------------------------------------------------------------------------------------
Stockholders' Equity
Capital stock 235,705 6 23 5,933 (5,962) 235,705
Contributed capital 131,818 369,307 4,948 (506,073)
Retained earnings (deficit) 363,690 17,377 (1,245) 66,693 (82,825) 363,690
Less net unrealized loss on
marketable securities
-----------------------------------------------------------------------------------------------
Total stockholders' equity 599,395 149,201 368,085 77,574 (594,860) 599,395
-----------------------------------------------------------------------------------------------
978,823 149,740 368,698 835,013 (976,973) 1,355,301
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
As at March 31, 1995
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 97 6,856 3,076 6,471 16,500
Restricted cash 7,634 7,634
Other current assets 180 1,287 1,317 117,368 (211) 119,941
-----------------------------------------------------------------------------------------------
Total current assets 277 8,143 4,393 131,473 (211) 144,075
-----------------------------------------------------------------------------------------------
Vessels and equipment (net) 162,812 333,896 651,330 1,148,038
Advances due from subsidiaries 354,330 (354,330)
Other assets (principally
investments in subsidiaries) 264,302 4,935 (254,876) 14,361
-----------------------------------------------------------------------------------------------
618,909 170,955 338,289 787,738 (609,417) 1,306,474
===============================================================================================
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities 4,843 2,214 22,559 69,583 (186) 99,013
Long-term debt 175,000 187,418 405,977 768,395
Due to parent 133,316 224,907 (358,223)
-----------------------------------------------------------------------------------------------
Total liabilities 179,843 2,214 343,293 700,467 (358,409) 867,408
-----------------------------------------------------------------------------------------------
Stockholders' Equity
Capital stock 33,001 11 23 5,899 (5,933) 33,001
Contributed capital 138,492 (138,492)
Retained earnings (deficit) 406,547 30,238 (5,027) 81,372 (106,583) 406,547
Less net unrealized loss on
marketable securities 482 482
Total stockholders' equity 439,066 168,741 (5,004) 87,271 (251,008) 439,066
-----------------------------------------------------------------------------------------------
618,909 170,955 338,289 787,738 (609,417) 1,306,474
===============================================================================================
</TABLE>
- -------------
(See Note 7)
F-17
<PAGE> 47
SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Year Ended March 31, 1996
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents
provided by (used for)
OPERATING ACTIVITIES
-----------------------------------------------------------------------------------------------
Net cash flow from
operating activities (23,772) 16,284 22,798 87,341 102,651
-----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 225,000 223,000 448,000
Repayments of long-term debt (22,580) (208,964) (332,268) (563,812)
Repayments of capital
lease obligations (44,550) (44,550)
Net proceeds from issuance
of Common Stock 137,872 137,872
Other (29,879) (14,400) (133,234) 170,098 (7,415)
-----------------------------------------------------------------------------------------------
Net cash flow from
financing activities 310,413 (14,400) (386,748) 60,830 (29,905)
-----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels
and equipment 344 (3,223) (88,055) (90,934)
Proceeds from disposition of
assets 28,428 28,428
Other (286,710) 499 369,307 (10,046) 73,050
-----------------------------------------------------------------------------------------------
Net cash flow from
investing activities (286,710) 843 366,084 (69,673) 10,544
-----------------------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (69) 2,727 2,134 78,498 83,290
Cash and cash equivalents,
beginning of the period 97 5,886 3,076 7,441 16,500
-----------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of the period 28 8,613 5,210 85,939 99,790
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1995
-----------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
-----------------------------------------------------------------------------------------------
Net cash flow from (40,919) 20,403 23,110 84,911 87,505
operating activities
-----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt
Repayments of long-term debt (21,854) (80,749) (102,603)
Payments on capital
lease obligations
Other (31,518) (25,263) (188) 54,108 (2,861)
Financing activities of
discontinued operations
-----------------------------------------------------------------------------------------------
Net cash flow from
financing activities (31,518) (25,263) (22,042) (26,641) (105,464)
-----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels
and equipment (2,039) (3,197) (14,146) (19,382)
Proceeds from disposition
of assets 16,817 16,817
Other 72,776 19 1 (74,386) (1,590)
Investing activities
of discontinued operations
-----------------------------------------------------------------------------------------------
Net cash flow from
investing activities 72,776 (2,020) (3,196) (71,715) (4,155)
-----------------------------------------------------------------------------------------------
Increase (decrease) in cash 339 (6,880) (2,128) (13,445) (22,114)
Cash (deficiency), beginning
of the period (242) 13,736 5,204 19,916 38,614
-----------------------------------------------------------------------------------------------
Cash (deficiency), 97 6,856 3,076 6,471 16,500
end of the period
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Eleven Months Ended March 31, 1994
--------------------------------------------------------------------------------------------------
9 5/8% Notes 8.32% Notes Teekay
Teekay Guarantor Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
---------------- -------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used for)
OPERATING ACTIVITIES
-----------------------------------------------------------------------------------------------
Net cash flow from
operating activities (8,310) 16,849 21,308 87,887 117,734
-----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 175,000 45,000 220,000
Repayments of long-term debt (75,452) (10,633) (83,398) (169,483)
Payments on capital
lease obligations (47,129) (53,745) (28,437) (129,311)
Other (51,652) (52,367) 65,493 36,714 (1,812)
Financing activities of
discontinued operations (20,077) (20,077)
-----------------------------------------------------------------------------------------------
Net cash flow from
financing activities 123,348 (174,948) 46,115 (95,198) (100,683)
-----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels
and equipment (1,882) (62,236) (14,911) (79,029)
Proceeds from disposition
of assets 86,351 86,351
Other (114,739) 138,473 (230) (93,739) (70,235)
Investing activities of
discontinued operations 35,706 35,706
-----------------------------------------------------------------------------------------------
Net cash flow from
investing activities (114,739) 136,591 (62,466) 13,407 (27,207)
-----------------------------------------------------------------------------------------------
Increase (decrease) in cash 299 (21,508) 4,957 6,096 (10,156)
Cash (deficiency), beginning
of the period (541) 35,244 247 13,820 48,770
-----------------------------------------------------------------------------------------------
Cash (deficiency), end
of the period (242) 13,736 5,204 19,916 38,614
==============================================================================================
</TABLE>
(See Note 7)
F-18
<PAGE> 48
EXHIBIT INDEX
<TABLE>
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*2.1 Articles of Incorporation of Teekay, with all amendments thereto.
**2.2 Bylaws of Teekay, with all amendments thereto.
+2.3 Indenture dated as of July 15, 1993 among Teekay, VSSI Sun Inc., Diamond Spirit
Inc., VSSI Deepsea Inc., VSSI Bulkers Inc., VSSI Star Inc., VSSI Ulsan Inc. and
United States Trust Company of New York, as Trustee.
+2.4 Registration Rights Agreement dated July 15, 1993 among Teekay, VSSI Sun Inc.,
Diamond Spirit Inc., VSSI Deepsea Inc., VSSI Bulkers Inc., VSSI Star Inc., VSSI
Ulsan Inc., and Morgan Stanley & Co. Incorporated, as Placement Agent.
+2.5 Specimen of Teekay's 9 5/8% First Preferred Ship Mortgage Note due 2003.
+++2.6 First Preferred Ship Mortgage dated July 15, 1993 by VSSI Sun Inc. to United
States Trust Company of New York, as Trustee.
+++2.7 Assignment of Time Charter dated as of July 15, 1993 from VSSI Sun Inc. to
United States Trust Company of New York, as Trustee.
+++2.8 Assignment of Insurance dated July 15, 1993 from VSSI Sun Inc. to United States
Trust Company of New York, as Trustee.
+2.9 Pledge Agreement and Irrevocable Proxy dated July 15, 1993 made by Teekay in
favor of United States Trust Company of New York, as Trustee.
+++2.10 Guarantee dated as of July 15, 1993 by VSSI Sun Inc. in favor of United States
Trust Company of New York, as Trustee.
+++2.11 Assignment of Freights and Hires dated July 15, 1993 from VSSI Sun Inc. to
United States Trust Company of New York, as Trustee.
+++2.12 Cash Collateral Account Agreement dated July 15, 1993 between VSSI Sun Inc. and
United States Trust Company of New York, as Trustee.
+2.13 Investment Account Agreement dated July 15, 1993 between Teekay and United
States Trust Company of New York, as Trustee.
+2.14 Assumption Agreement dated August 13, 1993 between United States Trust Company
of New York, as Trustee and Sebarok Spirit Inc.
+2.15 Pledge Agreement and Irrevocable Proxy dated August 13, 1993 made by Teekay in
favor of United States Trust Company of New York, as Trustee.
**2.16 Registration Rights Agreement among Teekay, Tradewinds Trust Co. Ltd., as
Trustee for the Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee for
the JTK Trust.
**2.17 Specimen of Teekay Common Stock Certificate.
2.18 Indenture among 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.
2.19 Specimen of Teekay's First Preferred Ship Mortgage Notes Due 2008.
++2.20 Bahamian Statutory Ship Mortgage dated January 29, 1996 by Nassau Spirit Inc. to
United States Trust Company of New York.
++2.21 Deed of Covenants dated January 29, 1996 by Nassau Spirit Inc. to United States
Trust Company of New York.
</TABLE>
<PAGE> 49
<TABLE>
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2.22 First Preferred Ship Mortgage dated January 29, 1996 by VSSI Oceans Inc. to
United States Trust Company of New York, as Trustee.
++2.23 Assignment of Time Charter dated January 29, 1996 by Nassau Spirit Inc. to
United States Trust Company of New York, as Trustee.
++2.24 Assignment of Insurance dated January 29, 1996 by Nassau Spirit Inc. to United
States Trust Company of New York, as Trustee.
2.25 Pledge Agreement and Irrevocable Proxy dated January 29, 1996 by Teekay in favor
of United States Trust Company of New York, as Trustee.
++2.26 Guarantee dated January 29, 1996 by Nassau Spirit Inc. in favor of United States
Trust Company of New York, as Trustee.
++2.27 Assignment of Freights and Hires dated January 29, 1996 by Nassau Spirit Inc. to
United States Trust Company of New York, as Trustee.
++2.28 Cash Collateral Account Agreement dated January 29, 1996 between Nassau Spirit
Inc. and United States Trust Company of New York, as Trustee.
2.29 Investment Account Agreement dated January 29, 1996 between Teekay and United
States Trust Company of New York, as Trustee.
**2.30 1995 Stock Option Plan.
**2.31 Form of Indemnification Agreement between Teekay and each of its officers and
directors.
**2.32 Reducing Revolving Credit Facility Agreement dated June 6, 1995 between Chiba
Spirit Inc., VSSI Sun Inc., VSSI Gemini Inc., VSSI Carriers Inc., Mendana Spirit
Inc., Musashi Spirit Inc., VSSI Condor Inc., Palm Monarch Inc., VSSI Drake Inc.,
VSSI Tokyo Inc., VSSI Marine Inc., Tasman Spirit Inc., Vancouver Spirit Inc. and
Elcano Spirit Inc. and Den norske Bank AS, Christiania Bank og Kreditkasse,
acting through its New York Branch, and Nederlandse Scheepshypotheskbank N.V.
+2.33 Charter Party, as amended, dated September 21, 1989 between Palm Shipping Inc.
and BP Shipping Limited
+2.34 Time Charter, as amended, dated August 14, 1986 between VSSI Sun Inc. and Palm
Shipping Inc.
+2.35 Time Charter, as amended, dated April 1, 1989 between Diamond Spirit Inc. and
Palm Shipping Inc.
+2.36 Time Charter, as amended, dated August 14, 1986 between VSSI Deepsea Inc. and
Palm Shipping Inc.
+2.37 Time Charter, as amended, dated August 14, 1986 between VSSI Bulkers Inc. and
Palm Shipping Inc.
+2.38 Time Charter, as amended, dated August 14, 1986 between VSSI Star Inc. and Palm
Shipping Inc.
+2.39 Time Charter, as amended, dated January 15, 1990 between VSSI Ulsan Inc. and
Palm Shipping Inc.
+2.40 Time Charter, as amended, dated June 1, 1993 between Sebarok Spirit Inc. and
Palm Shipping Inc.
#2.41 Time Charter, as amended, dated July 3, 1995 between VSSI Oceans Inc. and Palm
Shipping Inc.
</TABLE>
<PAGE> 50
<TABLE>
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#2.42 Time Charter, as amended, dated January 4, 1994 between VSSI Atlantic Inc. and
Palm Shipping Inc.
#2.43 Time Charter, as amended, dated February 1, 1992 between VSSI Appian Inc. and
Palm Shipping Inc.
#2.44 Time Charter, as amended, dated December 1, 1993 between Senang Spirit Inc. and
Palm Shipping Inc.
#2.45 Time Charter, as amended, dated August 1, 1992 between Exuma Spirit Inc. and
Palm Shipping Inc.
#2.46 Time Charter, as amended, dated May 1, 1992 between Nassau Spirit Inc. and Palm
Shipping Inc.
#2.47 Time Charter, as amended, dated November 1, 1992 between Andros Spirit Inc. and
Palm Shipping Inc.
#++2.48 Management Agreement, as amended, dated June 1, 1992 between Teekay Shipping
Limited and Nassau Spirit Inc.
</TABLE>
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* Previously filed as an exhibit to the Company's Registration Statement on Form
S-8, filed with the Securities and Exchange Commission (the "SEC") on October
27, 1995, and hereby incorporated by reference to such Registration Statement.
**Previously filed as an exhibit to the Company's Registration Statement on Form
F-1 (Registration No. 33-7573-4), filed with the SEC on July 14, 1995, and
hereby incorporated by reference to such Registration Statement.
+ Previously filed as an exhibit to the Company's Registration Statement on Form
F-1 (Registration No. 33-68680), as declared effective by the SEC on November
29, 1993, and hereby incorporated by reference to such Registration
Statements.
++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 as an exhibit to the Company's Registration Statement on Form
F-3 (Registration No. 33-65139), filed with the SEC on January 19, 1996, and
hereby incorporated by reference to such Registration Statement.
<PAGE> 1
EXHIBIT 2.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
----------------------------------------
8.32% FIRST PREFERRED SHIP MORTGAGE NOTES DUE 2008
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS 1
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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>
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1 Note: The Table of Contents shall not for any purposes be deemed to be
part of the Indenture.
i
<PAGE> 3
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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
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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
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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
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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>
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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>
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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 8.32% 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
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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.
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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
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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
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<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.
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"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.
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"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
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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.
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"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
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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
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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
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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
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<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
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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
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<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
February 1 and August 1 of each year, commencing August 1, 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
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<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
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<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.
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"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.
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"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:
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<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
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<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,
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<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.
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"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
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<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 January 15 or July 15 (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).
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<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.
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<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.
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<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
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<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
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<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.
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<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
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<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.
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<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
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<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
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<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,
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<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
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<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 February 1, 2004, and prior to 11:15 a.m. (New York time) on
February 1 in each year thereafter to and including February 1, 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 February 1 as herein provided.
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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
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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
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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
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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
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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
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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
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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
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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;
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(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
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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.
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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
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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);
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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;
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(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
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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
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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:
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(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.
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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
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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:
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(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
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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
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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
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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
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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.
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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;
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(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.
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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
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(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;
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(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
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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;
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(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
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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
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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;
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(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
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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
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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
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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:
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(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
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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.
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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
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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;
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(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.
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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
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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.
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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;
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(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.
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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.
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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.
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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.
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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
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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;
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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.
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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.
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(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
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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
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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
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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,
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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;
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(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
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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
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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;
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(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
February 1, 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;
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(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
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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,
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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
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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.
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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:
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(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.
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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
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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,
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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
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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
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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
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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
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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),
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<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
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<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:
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(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.
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<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.
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<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.
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<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:
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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.
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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.
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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.
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<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
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<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.
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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: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Vice President, Chief
Financial Officer
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
VSSI OCEANS INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
126
<PAGE> 135
VSSI ATLANTIC INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
VSSI APPIAN INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
SENANG SPIRIT INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
127
<PAGE> 136
EXUMA SPIRIT INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
NASSAU SPIRIT INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
ANDROS SPIRIT INC.,
as Guarantor
By: /s/ Anthony Gurnee
----------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Attest: /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
128
<PAGE> 137
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: /s/ Cynthia Chaney
----------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
Attest: /s/ Patricia Sterman
----------------------------
Name: Patricia Sterman
Title: Assistant Vice President
129
<PAGE> 138
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of January, 1996, before me personally came Anthony
Gurnee, to me known, who, being by me duly sworn, did depose and say that (A) he
is Vice President, Chief Financial Officer of TEEKAY SHIPPING CORPORATION, one
of the corporations described in and which executed the foregoing instrument and
(B) he is an Attorney-in-Fact for each of VSSI OCEANS INC., VSSI ATLANTIC INC.,
VSSI APPIAN INC., SENANG SPIRIT INC., EXUMA SPIRIT INC., NASSAU SPIRIT INC. and
ANDROS SPIRIT INC., each of which are corporations described in and which
executed the foregoing instrument; that he knows the seals of said corporations;
that the seals affixed to said instrument are such corporate seals; that such
seals were so affixed by authority of the Boards of Directors of said
corporations, and that he signed his name thereto by like authority.
/s/ D.L. FIGUEROA-THOMAS
------------------------------------
D.L. FIGUEROA-THOMAS
Notary Public State of New York
(No. 41-5039483)
Qualified in Queens County
Certificate Filed in New York County
Commission Expires February 21, 1997
<PAGE> 139
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 25th day of January, 1996, before me personally came Cynthia Chaney,
to me known, who, being by me duly sworn, did depose and say that she is
Assistant Vice President of UNITED STATES TRUST COMPANY OF NEW YORK, one of the
corporations described in and which executed the foregoing instrument; that she
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 she signed her name thereto by like
authority.
/s/ Christine C. Collins
--------------------------------------
Christine C. Collins
Notary Public, State of New York
No. 03-4624735
Qualified in Bronx County
Commission Expires March 30, 1996
<PAGE> 1
EXHIBIT 2.19
[FACE OF NOTE]
TEEKAY SHIPPING CORPORATION
8.32% First Preferred Ship Mortgage Note Due 2008
CUSIP879006 AA 2
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 February 1, 2008.
Initial Interest Rate: 8.32% per annum.
Interest Payment Dates: February 1 and August 1, commencing August 1,
1996.
Regular Record Dates: January 15 and July 15.
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:
TEEKAY SHIPPING CORPORATION
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 8.32% 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
8.32% FIRST PREFERRED SHIP MORTGAGE NOTE DUE 2008
1. Principal and Interest.
The Company will pay the principal of this Note on February 1, 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 8.32% per
annum.
Interest will be payable semiannually (to the Holders of record of the
Notes at the close of business on the January 15 or July 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
August 1, 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 29, 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 February 1 and August 1 to the persons who are Holders (as
reflected in the Security Register at the close of business on each January 15
and July 15 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 February 1, 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
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<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 29,
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
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<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 February 1 in each
year commencing February 1, 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
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<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.
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<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
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<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
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<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).
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<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.
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<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 2.20
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
720776 LUZON SPIRIT L84/1992 NASSAU MOTOR: SINGLE SCREW 13128 KW
</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............................... 235 5.2 Gross.............
Main breadth to outside of plating..................... 41 2.0 Number of Tons.... 57,448
Depth in hold from tonnage deck to ceiling amidships... 21 6.0 Register.......... 28,742
</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) NASSAU SPIRIT INC., 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 29, 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 NASSAU SPIRIT INC. 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 29th day
of January One thousand nine hundred and Ninety-six.
The Common Seal of the )
was affixed hereunto in the presence of: )
Richard J. Seville, Notary Public London, England )
)
)
(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> 2
SCHEDULE TO EXHIBIT 2.20
The Bahamian Statutory Ship Mortgages not required to be filed because each
of them is substantially identical to Exhibit 2.20, and the material details by
which each such Bahamian Statutory Ship Mortgage differs from such Exhibit are
as follows:
1. Bahamian Statutory Ship Mortgage dated January 29, 1996 by VSSI Atlantic
Inc. to United States Trust Company of New York.
a. Name of Mortgagor: VSSI Atlantic Inc.
b. Official Number of Ship: 723526
c. Name of Ship: TORBEN SPIRIT
d. No., Year and Port of Registry of Ship: L27/1994 Nassau
e. Number of tons: 57,446
2. Bahamian Statutory Ship Mortgage dated January 29, 1996 by VSSI Appian Inc.
to United States Trust Company of New York.
a. Name of Mortgagor: VSSI Appian Inc.
b. Official Number of Ship: 720752
c. Name of Ship: MAYON SPIRIT
d. No., Year and Port of Registry of Ship: L53/1992 Nassau
3. Bahamian Statutory Ship Mortgage dated January 29, 1996 by Senang Spirit
Inc. to United States Trust Company of New York.
a. Name of Mortgagor: Senang Spirit Inc.
b. Official Number of Ship: 723521
c. Name of Ship: SENANG SPIRIT
d. No., Year and Port of Registry of Ship: L26/1994 Nassau
e. Horsepower of Ship: 13126 KW
f. Length of Ship from forepart of stern, to the aft side of the head of
the stern post: 236 metres, 5.8 tenths
g. Main breadth of outside plating of Ship: 42 metres, 0.0 tenths
h. Depth in hold of Ship from tonnage deck to ceiling amidships: 19
metres, 5.0 tenths
i. Number of tons: 52,508
j. Register: 28,208
4. Bahamian Statutory Ship Mortgage dated January 29, 1996 by Exuma Spirit
Inc. to United States Trust Company of New York.
a. Name of Mortgagor: Exuma Spirit Inc.
b. Official Number of Ship: 720790
c. Name of Ship: LEYTE SPIRIT
d. No., Year and Port of Registry of Ship: L128/1992 Nassau
5. Bahamian Statutory Ship Mortgage dated January 29, 1996 by Andros Spirit
Inc. to United States Trust Company of New York.
a. Name of Mortgagor: Andros Spirit Inc.
b. Official Number of Ship: 723134
c. Name of Ship: SAMAR SPIRIT
d. No., Year and Port of Registry of Ship: L164/1992 Nassau
<PAGE> 1
EXHIBIT 2.21
DEED OF COVENANTS
TO ACCOMPANY FIRST PRIORITY
STATUTORY MORTGAGE OF A SHIP
BY
NASSAU SPIRIT INC.
TO
UNITED STATES TRUST COMPANY OF NEW YORK
AS
TRUSTEE
DATED January 29, 1996
M/T LUZON SPIRIT
<PAGE> 2
This Deed made the 29th day of January, 1996 by NASSAU SPIRIT INC., a
corporation organized and existing under the laws of 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 29, 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 8.32%
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 LUZON SPIRIT, registered in the name of the
Shipowner with its home port being Nassau, Bahamas under Official No. 720776, of
57,448 gross and 28,742 net tons, built in Japan in 1992 by Onomichi Dockyard;
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 May 1,
1992, 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
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<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:
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<PAGE> 6
"NOTICE OF MORTGAGE
This Vessel is owned by NASSAU SPIRIT INC., 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.
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<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
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<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.
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<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 $41,000,000) 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
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<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
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<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.
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<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:
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(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:
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(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 /s/ Esther E. Gibson )
the duly authorized )
Secretary of )
NASSAU SPIRIT INC.
in the presence of:- )
/s/ Anthony Gurnee
SIGNED, SEALED AND DELIVERED )
by /s/ Cynthia Chaney )
the duly authorized )
Assistant Vice President of )
United States Trust Company
of New York, not )
in its individual capacity )
but solely as Trustee )
in the presence of:- )
/s/ Jeffrey Spindler
20
<PAGE> 22
<TABLE>
<S> <C>
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
)
</TABLE>
I, Anthony Gurnee, Attorney-in-Fact of NASSAU SPIRIT INC., a corporation
organized and existing under the laws of 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 29th day of January,
1996, by Esther E. Gibson, the Secretary of the Company and that I saw the said
Esther E. Gibson 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 Esther E. Gibson by the order and with the authority of the
Board of Directors of the Company and in conformity with the organizational
documents of the Company.
<TABLE>
<S> <C>
SWORN to this 29th
------------------------------ )
day of January, 1996 /s/ Anthony Gurnee
-----------------------------, ) ------------------------------
)
</TABLE>
Before me, /s/ D.L. Figueroa-Thomas
NOTARY PUBLIC
<PAGE> 23
<PAGE> 24
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 29th day of January, 1996, before me personally came CYNTHIA CHANEY,
to me known, who, being by me duly sworn, did depose and say that she is
Assistant Vice President of UNITED STATES TRUST COMPANY OF NEW YORK, one of the
corporations described in and which executed the foregoing instrument; that she
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 she signed her name thereto by like
authority.
/s/ D.L. FIGUEROA-THOMAS
-------------------------------------
<PAGE> 25
SCHEDULE I
TO
DEED OF COVENANTS
DATED January 29, 1996
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 29, 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 NASSAU SPIRIT INC. (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> 26
SCHEDULE II
TO
DEED OF COVENANTS
LOSS PAYABLE CLAUSE
By assignment dated January 29, 1996, NASSAU SPIRIT INC. (the "Owner"), the
owner of the LUZON SPIRIT (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> 27
SCHEDULE TO EXHIBIT 2.21
The Deeds of Covenants not required to be filed because each of them is
substantially identical to Exhibit 2.21, and the material details by which each
such Deed of Covenants differs from such Exhibit are as follows:
1. Deed of Covenants dated January 29, 1996 by VSSI Atlantic Inc. to United
States Trust Company of New York
a. Name of Mortgagor: VSSI Atlantic Inc.
b. Name of Ship: TORBEN SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Official Number of Ship: 723526
e. Gross Tonnage of Ship: 57,446
f. Date of Related Time Charter Party: January 4, 1994
g. Fair Market Value of Ship: $46 million
2. Deed of Covenants dated January 29, 1996 by VSSI Appian Inc. to United
States Trust Company of New York.
a. Name of Mortgagor: VSSI Appian Inc.
b. Name of Ship: MAYON SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Official Number of Ship: 720752
e. Location, Year and By Whom Ship Built: Japan, 1991, Onomichi Dockyard
f. Date of Related Time Charter Party: February 1, 1992
3. Deed of Covenants dated January 29, 1996 by Senang Spirit Inc. to United
States Trust Company of New York.
a. Name of Mortgagor: Senang Spirit Inc.
b. Name of Ship: SENANG SPIRIT
c. Jurisdiction of Organization: Commonwealth of the Bahamas
d. Official Number of Ship: 723521
e. Gross Tonnage of Ship: 52,508
f. Net Tonnage of Ship: 28,208
g. Location, Year and By Whom Ship Built: Japan, 1994, Imabari
Shipbuilding
h. Date of Related Time Charter Party: December 1, 1993
i. Fair Market Value of Ship: $45 million
4. Deed of Covenants dated January 29, 1996 by Exuma Spirit Inc. to United
States Trust Company of New York.
a. Name of Mortgagor: Exuma Spirit Inc.
b. Name of Ship: LEYTE SPIRIT
c. Jurisdiction of Organization: Commonwealth of the Bahamas
d. Official Number of Ship: 720790
e. Date of Related Time Charter Party: August 1, 1992
<PAGE> 28
5. Deed of Covenants dated January 29, 1996 by Andros Spirit Inc. to United
States Trust Company of New York.
a. Name of Mortgagor: Andros Spirit Inc.
b. Name of Ship: SAMAR SPIRIT
c. Jurisdiction of Organization: Commonwealth of the Bahamas
d. Official Number of Ship: 723134
e. Date of Related Time Charter Party: November 1, 1992
<PAGE> 1
EXHIBIT 2.22
FIRST PREFERRED SHIP MORTGAGE
BY
VSSI OCEANS INC.
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
AS
TRUSTEE
DATED January 29, 1996
M/T POUL SPIRIT
<PAGE> 2
FIRST PREFERRED SHIP MORTGAGE made the 29th day of January, 1996 by VSSI
Oceans Inc., a corporation organized and existing under the laws of the
Republic of Liberia (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 8.32%
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 POUL SPIRIT, Official
Number 10328, of approximately 57,463 gross and 28,828 net tons, having its home
port at the Port of Monrovia, Republic of Liberia, which vessel was built at
Onomichi, Hiroshima, Japan in the year 1995, 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 July 3, 1995, 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.
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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
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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
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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.
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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
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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 $47,000,000.00) 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.
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(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.
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(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)
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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
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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
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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
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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.
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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.
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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,
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<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
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<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
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<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.]
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<PAGE> 21
IN WITNESS WHEREOF, the Shipowner has executed this Mortgage on the day and
year first above written.
VSSI OCEANS INC.
By /s/ Esther E. Gibson
-----------------------
Name: Esther E. Gibson
Title: Secretary
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<PAGE> 22
STATE OF New York )
) ss. :
COUNTY OF New York )
On this 29th day of January, 1996, before me personally appeared Esther E.
Gibson, to me known, who being by me duly sworn, did depose and say that she
resides at Winton Highway, Nassau, Bahamas; that she is an authorized individual
of VSSI Oceans Inc., the Corporation described in and which executed the
foregoing instrument; and that she 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.
/s/ Margaret J. Wilson
--------------------------------------
Notary Public
[For use in the Republic of Liberia.]
<PAGE> 23
SCHEDULE I
to
First Preferred Ship Mortgage
dated January 29, 1996
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 29, 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 VSSI Oceans Inc. (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 29, 1996, VSSI Oceans Inc. (the "Owner"), the
owner of the POUL SPIRIT (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> 1
EXHIBIT 2.23
NASSAU SPIRIT INC.
LUZON SPIRIT
ASSIGNMENT OF TIME CHARTER
Nassau Spirit Inc., a corporation organized and existing under the laws of
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 May 1, 1992, between the Assignor and
Palm Shipping Inc. (the "Charterer"), a Liberian company, as charterer, with
respect to the Assignor's Bahamian flag vessel LUZON SPIRIT (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
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<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 29th day of January, 1996.
NASSAU SPIRIT INC.
By /s/ Anthony Gurnee
----------------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
6
<PAGE> 7
ASSIGNMENT OF TIME CHARTER
AGREEMENT AND CONSENT TO ASSIGNMENT
TO: PALM SHIPPING INC.
LUZON SPIRIT
We refer to the time charter party dated May 1, 1992, as amended, made
between us, Nassau Spirit Inc., 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 LUZON SPIRIT of about 28,742 net
tons and 57,448 gross tons registered in our name under the 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.
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<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.
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5
<PAGE> 12
For and on behalf of
NASSAU SPIRIT INC.
By: /s/ Anthony Gurnee
-------------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
Dated: January 29, 1996
To: Nassau Spirit Inc.
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: /s/ Esther E. Gibson
----------------------------------
Name: Esther E. Gibson
Title: Secretary
Dated: January 29, 1996
6
<PAGE> 13
SCHEDULE TO EXHIBIT 2.23
The Assignments of Time Charter not required to be filed because each of
them is substantially identical to Exhibit 2.23, and the material details by
which each such Assignment of Time Charter differs from such Exhibit are as
follows:
1. Assignment of Time Charter dated January 29, 1996 by VSSI Atlantic Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Atlantic Inc.
b. Name of Ship: TORBEN SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Gross Tonnage of Ship: 57,486
e. Date of Related Time Charter Party: January 4, 1994
2. Assignment of Time Charter dated January 29, 1996 by VSSI Appian Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Appian Inc.
b. Name of Ship: MAYON SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Date of Related Time Charter Party: February 1, 1992
3. Assignment of Time Charter dated January 29, 1996 by Senang Spirit Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: Senang Spirit Inc.
b. Name of Ship: SENANG SPIRIT
c. Gross Tonnage of Ship: 52,508
d. Net Tonnage of Ship: 28,208
e. Date of Related Time Charter Party: December 1, 1993
4. Assignment of Time Charter dated January 29, 1996 by Exuma Spirit Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: Exuma Spirit Inc.
b. Name of Ship: LEYTE SPIRIT
c. Date of Related Time Charter Party: August 1, 1992
5. Assignment of Time Charter dated January 29, 1996 by Andros Spirit Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: Andros Spirit Inc.
b. Name of Ship: SAMAR SPIRIT
c. Date of Related Time Charter Party: November 1, 1992
6. Assignment of Time Charter dated January 29, 1996 by VSSI Oceans Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Oceans Inc.
b. Name of Ship: POUL SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Flag of Ship: Liberian
e. Gross Tonnage of Ship: 57,463
f. Net Tonnage of Ship: 28,828
g. Date of Related Time Charter Party: July 3, 1995
<PAGE> 1
EXHIBIT 2.24
NASSAU SPIRIT INC.
LUZON SPIRIT
ASSIGNMENT OF INSURANCE
Nassau Spirit Inc., a corporation organized and existing under the laws of
the Commonwealth of the Bahamas (the "Assignor"), the owner of the Bahamian
documented vessel LUZON SPIRIT, Official No. 720776 (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:
Nassau Spirit Inc.
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.
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6
<PAGE> 7
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed this 29th day of January, 1996.
NASSAU SPIRIT INC.
By: /s/ Anthony Gurnee
---------------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
The terms and conditions of
this Assignment are hereby
ACCEPTED BY:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: /s/ Cynthia Chaney
--------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
7
<PAGE> 8
NOTICE OF ASSIGNMENT
The Nippon Fire & Marine Insurance Co., Ltd.
The Britannia Steam Ship Insurance Association Limited
Miller Marine Limited
Nassau Spirit Inc. (the "Owner"), owner of the Bahamian documented vessel
LUZON SPIRIT, Official No. 720776 (the "Vessel"), HEREBY GIVES NOTICE that by an
Assignment dated January 29, 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 29, 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.
NASSAU SPIRIT INC.
By: /s/ Anthony Gurnee
---------------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
<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 29, 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 Nassau Spirit Inc. (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
SCHEDULE TO EXHIBIT 2.24
The Assignments of Insurance not required to be filed because each of them
is substantially identical to Exhibit 2.24, and the material details by which
each such Assignment of Insurance differs from such Exhibit are as follows:
1. Assignment of Insurance dated January 29, 1996 by VSSI Atlantic Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Atlantic Inc.
b. Name of Ship: TORBEN SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Official Number of Ship: 723526
2. Assignment of Insurance dated January 29, 1996 by VSSI Appian Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Appian Inc.
b. Name of Ship: MAYON SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Official Number of Ship: 720752
3. Assignment of Insurance dated January 29, 1996 by Senang Spirit Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: Senang Spirit Inc.
b. Name of Ship: Senang Spirit
c. Official Number of 723521
4. Assignment of Insurance dated January 29, 1996 by Exuma Spirit Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: Exuma Spirit Inc.
b. Name of Ship: LEYTE SPIRIT
c. Official Number of Ship: 720790
5. Assignment of Insurance dated January 29, 1996 by Andros Spirit Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: Andros Spirit Inc.
b. Name of Ship: SAMAR SPIRIT
c. Official Number of Ship: 723134
6. Assignment of Insurance dated January 29, 1996 by VSSI Oceans Inc. to
United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Oceans Inc.
b. Name of Ship: POUL SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Documentation of Ship: Liberian
e. Official Number of Ship: 10328
<PAGE> 1
EXHIBIT 2.25
PLEDGE AGREEMENT AND IRREVOCABLE PROXY, dated January 29, 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 8.32% 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
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<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
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<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.]
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<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 /s/ Anthony Gurnee
----------------------------------
Name: Anthony Gurnee
Title: Vice President,
Chief Financial Officer
UNITED STATES TRUST COMPANY OF NEW
YORK,
as Trustee
By /s/ Cynthia Chaney
----------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
10
<PAGE> 11
SCHEDULE I
ATTACHED TO AND FORMING A PART OF THAT CERTAIN
PLEDGE AGREEMENT AND IRREVOCABLE PROXY, DATED JANUARY 29, 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 29, 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: /s/ Anthony Gurnee
------------------------------
Name: Anthony Gurnee
Title: Vice President, Chief
Financial Officer
<PAGE> 1
EXHIBIT 2.26
GUARANTEE
GUARANTEE, dated as of January 29, 1996, made by NASSAU SPIRIT INC., a
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 8.32% 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
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
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<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.
NASSUA SPIRIT INC.
By: /s/ Anthony Gurnee
--------------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
7
<PAGE> 8
SCHEDULE TO EXHIBIT 2.26
The Guarantees not required to be filed because each of them is
substantially identical to Exhibit 2.26, and the material details by which each
such Guarantee differs from such Exhibit are as follows:
1. Guarantee dated January 29, 1996 by VSSI Atlantic Inc. in favor of United
States Trust Company of New York, as Trustee.
a. Name of Guarantor: VSSI Atlantic Inc.
b. Jurisdiction of Organization: Republic of Liberia
2. Guarantee dated January 29, 1996 by VSSI Appian Inc. in favour of United
States Trust Company of New York, as Trustee.
a. Name of Guarantor: VSSI Appian Inc.
b. Jurisdiction of Organization: Republic of Liberia
3. Guarantee dated January 29, 1996 by Senang Spirit Inc. in favor of United
States Trust Company of New York, as Trustee.
a. Name of Guarantor: Senang Spirit Inc.
4. Guarantee dated January 29, 1996 by Exuma Spirit Inc. in favor of United
States Trust Company of New York, as Trustee.
a. Name of Guarantor: Exuma Spirit Inc.
5. Guarantee dated January 29, 1996 by Andros Spirit Inc. in favor of United
States Trust Company of New York, as Trustee.
a. Name of Guarantor: Andros Spirit Inc.
6. Guarantee dated January 29, 1996 by VSSI Oceans Inc. in favor of United
States Trust Company of New York, as Trustee.
a. Name of Guarantor: VSSI Oceans Inc.
b. Jurisdiction of Organization: Republic of Liberia
<PAGE> 1
EXHIBIT 2.27
NASSAU SPIRIT INC.
LUZON SPIRIT
ASSIGNMENT OF FREIGHTS AND HIRES
The undersigned, NASSAU SPIRIT INC., a corporation organized and existing
under the laws of 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 Bahamian documented
vessel LUZON SPIRIT, Official No. 720776 (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
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<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
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<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
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<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:
Nassau Spirit Inc.
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.
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<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 29th day of January, 1996.
NASSAU SPIRIT INC.
By: /s/ Anthony Gurnee
------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
The terms and conditions of
this Assignment are hereby
ACCEPTED BY:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: /s/ Cynthia Chaney
------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
8
<PAGE> 9
SCHEDULE TO EXHIBIT 2.27
The Assignments of Freights and Hires not required to be filed because each
of them is substantially identical to Exhibit 2.27, and the material details by
which each such Assignment of Freights and Hires differs from such Exhibit are
as follows:
1. Assignment of Freights and Hires dated January 29, 1996 by VSSI Atlantic
Inc. to United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Atlantic Inc.
b. Name of Ship: TORBEN SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Official Number of Ship: 723526
2. Assignment of Freights and Hires dated January 29, 1996 by VSSI Appian Inc.
to United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Appian Inc.
b. Name of Ship: MAYON SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Official Number of Ship: 720752
3. Assignment of Freights and Hires dated January 29, 1996 by Senang Spirit
Inc. to United States Trust Company of New York, as Trustee.
a. Name of Assignor: Senang Spirit Inc.
b. Name of Ship: SENANG SPIRIT
c. Official Number of Ship: 723521
4. Assignment of Freights and Hires dated January 29, 1996 by Exuma Spirit
Inc. to United States Trust Company of New York, as Trustee.
a. Name of Assignor: Exuma Spirit Inc.
b. Name of Ship: LEYTE SPIRIT
c. Official Number of Ship: 720790
5. Assignment of Freights and Hires dated January 29, 1996 by Andros Spirit
Inc. to United States Trust Company of New York, as Trustee.
a. Name of Assignor: Andros Spirit Inc.
b. Name of Ship: SAMAR SPIRIT
c. Official Number of Ship: 723134
6. Assignment of Freights and Hires dated January 29, 1996 by VSSI Oceans Inc.
to United States Trust Company of New York, as Trustee.
a. Name of Assignor: VSSI Oceans Inc.
b. Name of Ship: POUL SPIRIT
c. Jurisdiction of Organization: Republic of Liberia
d. Documentation of Ship: Liberian
e. Official Number of Ship: 10328
<PAGE> 1
EXHIBIT 2.28
CASH COLLATERAL ACCOUNT AGREEMENT
CASH COLLATERAL ACCOUNT AGREEMENT, dated January 29, 1996 (this
"Agreement"), made by NASSAU SPIRIT INC., a 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. 093-061-00 (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 29, 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
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<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 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
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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.
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<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
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<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
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<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
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<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.
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<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.
NASSAU SPIRIT INC.
By: /s/ Anthony Gurnee
---------------------------------
Name: Anthony Gurnee
Title: Attorney-in-Fact
ACCEPTED AND AGREED:
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Cynthia Chaney
---------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
9
<PAGE> 10
SCHEDULE TO EXHIBIT 2.28
The Cash Collateral Account Agreements not required to be filed because
each of them is substantially identical to Exhibit 2.28, and the material
details by which each such Cash Collateral Account Agreement differs from such
Exhibit are as follows:
1. Cash Collateral Account Agreement dated January 29, 1996 between VSSI
Atlantic Inc. and United States Trust Company of New York, as Trustee.
a. Name of Subsidiary Guarantor: VSSI Atlantic Inc.
b. Account Number: 093-053-00
c. Jurisdiction of Organization: Republic of Liberia
2. Cash Collateral Account Agreement dated January 29, 1996 between VSSI
Appian Inc. and United States Trust Company of New York, as Trustee.
a. Name of Subsidiary Guarantor: VSSI Appian Inc.
b. Account Number: 093-054-00
c. Jurisdiction of Organization: Republic of Liberia
3. Cash Collateral Account Agreement dated January 29, 1996 between Senang
Spirit Inc. and United States Trust Company of New York, as Trustee.
a. Name of Subsidiary Guarantor: Senang Spirit Inc.
b. Account Number: 093-056-00
4. Cash Collateral Account Agreement dated January 29, 1996 between Exuma
Spirit Inc. and United States Trust Company of New York, as Trustee.
a. Name of Subsidiary Guarantor: Exuma Spirit Inc.
b. Account Number: 093-057-00
5. Cash Collateral Account Agreement dated January 29, 1996 between Andros
Spirit Inc. and United States Trust Company of New York, as Trustee.
a. Name of Subsidiary Guarantor: Andros Spirit Inc.
b. Account Number: 093-062-00
6. Cash Collateral Account Agreement dated January 29, 1996 between VSSI
Oceans Inc. and United States Trust Company of New York, as Trustee.
a. Name of Subsidiary Guarantor: VSSI Oceans Inc.
b. Account Number: 093-052-00
c. Jurisdiction of Organization: Republic of Liberia
<PAGE> 1
EXHIBIT 2.29
INVESTMENT ACCOUNT AGREEMENT
INVESTMENT ACCOUNT AGREEMENT, dated January 29, 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. 043-497-00 (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 29, 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
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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
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<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
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<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
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<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: /s/ Anthony Gurnee
---------------------------------
Name: Anthony Gurnee
Title: Vice President,
Chief Financial Officer
ACCEPTED AND AGREED:
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Cynthia Chaney
---------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TEEKAY
SHIPPING CORPORATION AND SUBSIDARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 99,790
<SECURITIES> 0
<RECEIVABLES> 22,213
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 142,049
<PP&E> 1,575,912
<DEPRECIATION> 377,105
<TOTAL-ASSETS> 1,355,301
<CURRENT-LIABILITIES> 49,166
<BONDS> 706,740
0
0
<COMMON> 235,705
<OTHER-SE> 363,690
<TOTAL-LIABILITY-AND-EQUITY> 1,355,301
<SALES> 0
<TOTAL-REVENUES> 336,320
<CGS> 0
<TOTAL-COSTS> 90,575
<OTHER-EXPENSES> 170,697
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,679
<INCOME-PRETAX> 29,070
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,070
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,070
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
