10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ FORM 10-K ---------- [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 ------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File Number 1-6479-1 ---------- OVERSEAS SHIPHOLDING GROUP, INC. --------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-2637623 ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1114 Avenue of the Americas, New York, New York 10036 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-869-1222 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock - (par New York Stock Exchange value $1.00 per share) Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on the New York Stock Exchange on March 21, 1995: $491,841,461. (For this purpose, all outstanding shares of Common Stock have been considered held by non-affiliates, other than the shares beneficially owned by directors, officers and certain 5% shareholders of the registrant; certain of such persons disclaim that they are affiliates of the registrant.) Number of shares of Common Stock outstanding at March 21, 1995: 36,216,833. Documents incorporated by reference: portions of the registrant's Annual Report to Shareholders for 1994 (incorporated in Parts I and II); portions of the definitive proxy statement to be filed by the registrant in connection with its 1995 Annual Meeting of Shareholders (incorporated in Part III). ITEM 1. BUSINESS ------- --------- Overseas Shipholding Group, Inc. (the "registrant") and its subsidiaries (collectively the "Company") constitute a major international shipping enterprise owning and operating a diversified fleet of oceangoing bulk cargo vessels (principally tankers and dry bulk carriers). The Company's operating bulk fleet consists of 61 vessels having an aggregate carrying capacity of approximately 5,846,100 deadweight tons ("DWT"), including ten ships aggregating approximately 1,536,300 DWT which the Company owns jointly with others and in which the Company has at least a 49% interest.* Sixteen vessels in the Company's operating bulk fleet, which total approximately 993,350 DWT and represent about 30% of the Company's investment in bulk cargo vessels at cost, are registered under the U.S. flag; the balance are registered under foreign flags. Forty-five tankers account for 78% of the total tonnage, and 15 dry bulk carriers and a pure car carrier account for the remainder. A single company and its subsidiaries, for and under the direction and control of the Company, act as agents in respect of the bulk fleet of the registrant's majority-owned subsidiaries and certain of its bulk shipping joint ventures. ------------------------ * Except as otherwise noted, references herein to the Company's "operating bulk fleet" are as of February 21, 1995. Such fleet includes eight vessels that are leased from financial institutions under bareboat charters having remaining terms of from 7 to 17 years, and two 94,000 DWT double-hulled Aframax tankers built in 1994, which the Company recently purchased and were delivered to the Company in March 1995, but does not include a 29,300 DWT petroleum barge, which is owned by a partnership in which the Company has a 50% interest, or the eight newbuildings currently on order which are more fully described under "Bulk Fleet Modernization and Expansion" below. Celebrity Cruise Lines Inc. (together with its subsidiaries collectively "CCLI"), the passenger cruise business joint venture which the Company entered into in late 1992, owns and operates cruise ships marketed primarily under the trade name Celebrity Cruises in the premium segment of the industry. The Celebrity Cruises fleet presently consists of three cruise ships with a total passenger-carrying capacity of 3,834 berths. In addition, CCLI has a budget-priced Fantasy Cruises division, which consists of two vessels. As of February 21, 1995, CCLI had on order three new passenger cruise ships, all for the Celebrity fleet, scheduled for delivery in late 1995, 1996 and 1997, respectively, which will increase the Celebrity Cruises total passenger-carrying capacity to over 9,300 berths. See "Investment in Cruise Business" below. The Company's operating bulk fleet, aggregating approximately 5,846,100 DWT, represents approximately 1% of the total world tonnage of oceangoing bulk cargo vessels. As of February 21, 1995, the Company had on order eight vessels, aggregating over two million DWT, for delivery to its international bulk fleet. See "Bulk Fleet Modernization and Expansion" below. The Company charters its ships to commercial shippers and U.S. and foreign governmental agencies for the carriage of bulk commodities, principally crude oil and petroleum products, coal, iron ore and grain. Generally, each ship is chartered for a specific period of time ("time charter"), or for a specific voyage or voyages ("voyage charter"). Under the terms of time and voyage charters covering the Company's vessels, the ships are equipped and operated by the Company and are manned by personnel in the Company's employ. From time to time, the Company also has some of its vessels on bareboat charter. Under the terms of bareboat charters, the ships are chartered for fixed periods of time (generally medium- or long-term) during which they are operated and manned by the charterer. Generally, the Company's ships engage in carriage of cargo in various parts of the world, principally in carriage of petroleum from Alaska to the lower 48 states and U.S. territories, from Caribbean ports to United States, South American and European ports, from Mediterranean, West African, Arabian Gulf and Far East ports to European, United States, Caribbean, South American and Far East ports, and in the United States coastwise trade, and in carriage of dry cargo between United States ports and Far East, Caribbean, European, Mediterranean, Black Sea and Baltic ports, between South American, African and various European, Black Sea, Baltic and Far East ports, and from Australia to Japan, Korea and European ports. The Company does not employ any container or similar vessels in its operation. Revenues from carriage of petroleum and its derivatives represented approximately 78% of the voyage revenues of the registrant and its majority-owned subsidiaries for 1994, 75% for 1993 and 78% for 1992. Revenues from carriage of dry cargo accounted for the balance of such voyage revenues for each of those years. The carriage of petroleum and its derivatives also accounted for the majority of the voyage revenues of the Company's bulk shipping joint ventures. The relative contributions to voyage revenues of the various types of cargoes carried may vary from year to year, depending upon demand for particular kinds of carriage and the purposes for which and the terms on which the ships are chartered. As of February 21, 1995, with the exception of four U.S.-flag crude oil carriers, all of the vessels in the Company's operating bulk fleet were employed. Forty-six of these vessels were chartered to non-governmental commercial shippers. These 46 ships include eight U.S.-flag ships and 38 foreign-flag ships, which together represent approximately 83% of the combined carrying capacity of the Company's operating bulk fleet. Of the remaining ships in the Company's operating bulk fleet, four U.S.- flag ships and five foreign-flag ships were under charter to foreign or U.S. governmental agencies. U.S.-FLAG AND FOREIGN-FLAG OPERATIONS ------------------------------------- The Company's U.S.-flag and foreign-flag bulk fleets operate substantially in separate markets. The Company believes that ownership of a diversified fleet, with vessels of different flags, types and sizes and with operating flexibility, enables the Company to take advantage of chartering opportunities for domestic and international shipment of bulk commodities and thereby cushion the effects of weakness in particular markets. Information about the Company's operations under U.S. and foreign flags for the three years ended December 31, 1994 is set forth in the table in Note B to the Company's financial statements incorporated by reference in Item 8 below. For information regarding the revenues and net income of the Company's bulk shipping joint ventures for the three years ended December 31, 1994, see Note E to the Company's financial statements incorporated by reference in Item 8 below. In each of the years 1994, 1993 and 1992 the Company had one charterer (BP Oil Company, USA) from which it had revenues in excess of 10% of revenues from voyages, amounting in 1994 to approximately $63.7 million, in 1993 to approximately $73.7 million, and in 1992 to approximately $84.3 million. U.S. DOMESTIC AND PREFERENCE TRADES ----------------------------------- Under the Jones Act, shipping between United States coastal ports, including the movement of Alaskan oil, is reserved by law primarily to U.S.-flag vessels, owned by U.S. citizens, crewed by U.S. seafarers, and built in the United States without construction subsidies and operated without operating differential subsidies. The Company owns the largest independent fleet of unsubsidized U.S.-flag tankers and is a major participant in the Alaskan oil trade. Demand for tonnage in the Alaskan oil trade depends on the volume of crude shipped out of Alaska and its distribution to ports at varying distances from the source. In recent years, the amount of crude shipped on the long-haul route to the Gulf of Mexico, via the Panama Pipeline, has fallen sharply, and this development has reduced tonnage requirements. Alaskan crude oil shipments are the main source of employment for U.S.-flag crude carriers and are carried mostly on unsubsidized U.S.-flag crude carriers of over 60,000 DWT. By law, exports of Alaskan crude oil are effectively prohibited. Initiatives are under way in Washington to permit the export of Alaskan crude oil, which, if successful, are expected to provide significant new employment opportunities for the Company's U.S.-flag tanker fleet. Vessels built with construction differential subsidies and operated with operating differential subsidies ("ODS") are not permitted in the Jones Act trade. Under an interpretation of the law by the Maritime Administration, tankers built with subsidies have been deemed eligible for full coastwise privileges when they reach 20 years of age and their ODS contracts have expired. The Company believes that this interpretation is contrary to law and has commenced litigation seeking to overrule it. Recently, there have been increased calls by members of Congress and efforts to reduce or eliminate cargo preference and, in some cases, to weaken the long-standing requirement that U.S. coastwise trade be conducted by U.S.-flag Jones Act ships. If such changes were implemented, they would adversely affect the already diminished U.S.-flag merchant marine. United States military cargo must be transported on U.S.-flag vessels, if available. The Merchant Marine Act, 1936, as amended, requires that preference be given to U.S.-flag vessels, if available at reasonable rates, in the shipment of at least half of all U.S. government-generated cargoes and 75% of food-aid cargoes. Half of the imports into the Strategic Petroleum Reserve, a U.S. government procurement program, must be transported on U.S.-flag vessels. Vessels in the Company's operating bulk fleet have been chartered from time to time to the Military Sealift Command of the United States Navy ("MSC"), and to recipient nations for the carriage of grain and other cargoes under United States foreign aid and agricultural assistance programs. Charters to MSC reflect in large part the requirements of the United States military for waterborne carriage of cargoes, and, accordingly, depend in part on world conditions and United States foreign policy. EMPLOYMENT OF VESSELS --------------------- The bulk shipping industry is highly fragmented and competitive. The Company competes in its charter operations with other owners of U.S. and foreign-flag tankers and dry cargo ships operating on an unscheduled basis similar to the Company and, to some extent, with owners operating cargo ships on a scheduled basis. About one third of the world's tanker tonnage is owned by oil companies and is primarily engaged in the carriage of proprietary cargoes. In chartering vessels to the United States government, the Company competes primarily with other owners of U.S.-flag vessels. U.S.-flag product carriers, whose trade demand are closely linked to changes in regional energy demands and in refinery activity, also compete with pipelines, oceangoing barges, and, with regard to imports from abroad, foreign-flag product carriers. In the spot and short-term charter market, the Company's vessels compete with all other vessels of a size and type required by a charterer that can be available at the date specified. In the spot market, competition is based primarily on price. Nevertheless, within a narrow price band, factors related to quality of service and safety enter into a potential customer's decision as to which vessel to charter. Prevailing rates for charters of particular types of ships are subject to fluctuations depending on conditions in United States and international bulk shipping markets and other factors. Although medium- and long-term charter business avoids, to some extent, the sharp rate fluctuations characteristic of the spot or voyage markets, the availability of such business in recent years has been relatively limited, and, when available, rates of return have generally been unattractive. For additional information as of February 21, 1995 regarding the 61 vessels in the Company's operating bulk fleet, including information as to the employment of such vessels, see the table in the "To Our Shareholders" section (page 2), and the "International Bulk Fleet" and "U.S. Bulk Fleet" tables (pages 10 and 11), of the registrant's Annual Report to Shareholders for 1994, which tables are incorporated herein by reference. ENVIRONMENTAL MATTERS RELATING TO BULK SHIPPING ----------------------------------------------- Over the past five years, the bulk shipping industry has experienced a more stringent regulatory environment. Classification societies, governmental authorities and charterers have strengthened their inspection programs, and there has been an increasing reluctance among charterers to accept older vessels due to safety and pollution concerns. OPA 90. The Oil Pollution Act of 1990 ("OPA 90") significantly expands the liability of a vessel owner or operator (including a bareboat charterer), for damage resulting from spills in U.S. waters (up to 200 miles offshore). OPA 90 applies to all U.S. and foreign-flag vessels. Some operators are reluctant to trade their vessels to the United States because of OPA 90. Under OPA 90, a vessel owner or operator is liable without fault for removal costs and damages, including economic loss without physical damage to property, up to $1,200 per gross ton of the vessel. When a spill is proximately caused by gross negligence, willful misconduct or a violation of a Federal safety, construction or operating regulation, liability is unlimited. OPA 90 did not preempt state law, and therefore states remain free to enact legislation imposing additional liability. Virtually all coastal states have enacted pollution prevention, liability and response laws, many with some form of unlimited liability. In addition, OPA 90 imposes a requirement that tankers calling at U.S. ports have double hulls. This requirement applies to newly constructed tankers contracted for after June 30, 1990, or delivered after January 1, 1994. Beginning on January 1, 1995, the double-hull requirement is phased in for existing tankers. The age requirement is reduced in stages so that by the year 2000, tankers of at least 30,000 gross tons over 23 years old (and tankers between 15,000 and 30,000 gross tons over 30 years old) must have double hulls, and by 2010, all tankers must have double hulls, except that tankers with double bottoms or double sides are afforded an additional five years for compliance but must comply no later than January 1, 2015. Tankers discharging at a deepwater port or lightering more than 60 miles offshore will not be required to have double hulls until January 1, 2015. The double-hull requirement will not begin to affect the Company's existing tanker fleet until near the end of the decade, with most of the Company's vessels not affected until the next decade. Each of the 16 vessels in the Company's current fleet to which the double-hull requirements are expected to apply in the next nine years will be at least 23 years old on the applicable double-hull requirement date and consequently near the end of its economic life. OPA 90 also requires owners and operators of vessels calling at U.S. ports to adopt contingency plans for responding to a worst case oil spill under adverse weather conditions. The plans must include contractual commitments with clean-up response contractors in order to ensure an immediate response to an oil spill. Furthermore, training programs and drills for vessel, shore and response personnel are required. The Company has developed and timely filed its vessel response plans with the United States Coast Guard and has received approval of such plans. Under new, more stringent U.S. Coast Guard financial responsibility regulations issued pursuant to OPA 90, all tankers entering U.S. waters on or after December 28, 1994 were required to obtain Certificates of Financial Responsibility ("COFRs") from the Coast Guard demonstrating substantially greater financial capability to meet potential spill liabilities. Prior to that date, the Company obtained such COFRs for all the vessels in its U.S.-flag and international flag tanker fleets. INTERNATIONAL REQUIREMENTS. In addition to the OPA 90 requirements, the International Maritime Organization ("IMO") adopted regulations that will phase out all single-hulled tankers in international waters at 25 years of age unless other environmental safety steps are taken. IMO regulations also require double-hulls or equivalent tanker designs for newbuilding orders. These requirements will apply to all vessels trading to ports in countries that are parties to the International Convention for the Prevention of Pollution by Ships, as amended ("MARPOL"), which include the world's major trading countries. The United States has reserved its position on the IMO regulations. Since the schedule for phasing in the double-hull requirements under the IMO regulations is in certain instances faster and in certain instances slower than the requirements under OPA 90, if the United States does not accept the IMO regulations, tankers trading between U.S. ports and ports in countries that are parties to MARPOL will have to meet the requirements of the earlier of the two to apply. The Company believes that as the double-hull requirements imposed by U.S. law and international conventions become applicable, some older vessels will be scrapped. The impact of the double-hull requirements of the IMO regulations on the Company's vessels will not be significantly different from the impact of the double-hull requirements of OPA 90. All of the tankers the Company has on order will be double-hulled. INSURANCE. Consistent with the currently prevailing practice in the industry, the Company presently carries a minimum of $700 million of pollution coverage per occurrence on every vessel in its fleet. While the Company has historically been able to obtain such insurance at commercially reasonable rates, no assurances can be given that such insurance will continue to be available in the future. BULK SHIPPING MARKETS --------------------- Information regarding the international bulk shipping markets and the markets for U.S.-flag vessels, including the Alaskan oil trade, is set forth in the text of the "Global Bulk Shipping Markets" section (pages 14 through 16) of the registrant's Annual Report to Shareholders for 1994, which information is incorporated herein by reference. BULK FLEET MODERNIZATION AND EXPANSION --------------------------------------- The Company is engaged in a major fleet modernization program. This entails periodically selling older vessels, placing newbuilding orders and purchasing existing modern tonnage, when available at attractive prices. The Company's newbuilding program totals eight ships aggregating more than two million DWT. NEWBUILDING ORDERS: In 1994, the Company took delivery of four 93,300 DWT double-hulled Aframax tankers for its international fleet, and placed orders for four double-hulled very large crude carriers ("VLCCs"). Two of these VLCCs, 269,650 DWT tankers, were ordered with a joint venture partner and will commence eight-year charters to the partner when the ships are delivered in December 1996 and March 1997. The other two VLCCs, 302,150 DWT vessels, are scheduled for delivery in late 1996 and early 1997. In late 1995, the Company will take delivery of two double-hulled VLCCs, each 295,250 DWT, ordered in 1993. Upon delivery of the six VLCCs, over half of the Company's tanker tonnage will either be totally double-hulled or protected by double sides or double bottoms. On the dry bulk side, the Company in 1995 placed orders for two 158,100 DWT Capesize ships for delivery in late 1996 and early 1997. All of these eight ships are being built by major shipbuilders (six in South Korea and two in Japan) for delivery to the Company's international fleet. The commitments for these eight vessels are in U.S. Dollars; for additional information as of February 21, 1995 about the commitments, see Notes E and L(1) to the Company's financial statements incorporated by reference in Item 8 below. PURCHASES: In 1995, the Company purchased two 94,000 DWT double-hulled Aframax tankers built in 1994, which were each delivered to the Company in March 1995 for its international fleet. SALES: In 1994, the Company sold four foreign-flag dry bulk carriers and a 50%-owned foreign-flag single-hulled VLCC. The Company's newbuilding program, together with the selective upgrading of the Company's fleet through acquisition and disposition of existing tonnage, reflects changes that the Company makes from time to time in light of its continuing review of changing market conditions. There is no assurance that the Company's fleet will expand, or that the Company will acquire vessels or place orders for the construction of new vessels, to the same extent as in the past. EMPLOYEES --------- At February 21, 1995, the Company employed approximately 2,000 seagoing personnel to operate its ships. The Company has collective bargaining agreements with three different maritime unions, covering seagoing personnel employed on the Company's U.S.-flag vessels, which agreements are in effect through June 15, 1996 with one of the unions and through June 15, 2000 with two of the unions. Under the collective bargaining agreements, the Company is obligated to make contributions to pension and other welfare programs. The Company believes that its relations with its employees are satisfactory. U.S. SUBSIDIES -------------- To encourage private investment in U.S.-flag ships, the Merchant Marine Act of 1970 permits deferral of taxes on earnings deposited into capital construction funds and amounts earned thereon, which can be used for the construction or acquisition of, or retirement of debt on, qualified U.S.-flag vessels (primarily those limited to United States foreign and noncontiguous domestic trades). The registrant is a party to an agreement under the Act. Under the agreement, the general objective is (by use of assets accumulated in the fund) for two vessels to be constructed or acquired by the end of 1999. If the agreement is terminated or amounts are withdrawn from the capital construction fund for non-qualified purposes, such amounts will then be subject to Federal income taxes. Provision has been made in the Company's financial statements for deferred taxes on the amounts deposited in the capital construction fund and on the earnings thereon. Monies can remain tax deferred in the fund for a maximum period of twenty-five years (commencing January 1, 1987 for deposits prior thereto). See the second paragraph of Note J to the Company's financial statements incorporated by reference in Item 8 below. The Company does not receive any operating differential subsidies or any construction differential subsidies under the Merchant Marine Act, 1936, as amended. INVESTMENT IN CRUISE BUSINESS ----------------------------- The Company owns a 49% equity investment in Celebrity Cruise Lines Inc. (together with its subsidiaries collectively "CCLI"), a joint venture formed in late 1992 that owns and operates five cruise vessels. CCLI functions as an equal joint venture and the approval of both shareholders is required for all substantive policy matters. All debt of the joint venture is nonrecourse to the joint venture partners. It is anticipated that CCLI's earnings will be reinvested in the cruise business, and accordingly the Company has made no provision for U.S. income taxation with respect to its share of CCLI's earnings. CCLI markets its ships primarily under the brand name Celebrity Cruises, which is a leading provider of cruises in the premium segment of the North American cruise market. The Celebrity Cruises fleet consists of three ships -- ZENITH, HORIZON and MERIDIAN -- having a total of 3,834 berths and sailing mainly in the Caribbean and to Bermuda. Two vessels operated in 1994 as part of CCLI's budget- priced Fantasy Cruises division. One of these ships, BRITANIS, was chartered in late 1994 to the U.S. Military Sealift Command, while the division's other ship, AMERIKANIS, sailed on European itineraries. The 1994 results for CCLI were below those of 1993. CCLI incurred a loss in the third quarter, normally its most profitable quarter of the year, due to the 11-day withdrawal of a ship from service in July 1994, following isolated cases of Legionnaires' disease among passengers. In addition, the premium segment of the industry experienced greater pricing pressures in the last quarter of the year as the volume of overall bookings declined. During 1993, CCLI's first full year of operation, CCLI contracted to build two cruise ships (to be named CENTURY and GALAXY) which are scheduled for delivery in late 1995 and 1996, respectively, and in 1994 CCLI exercised its option to build a third sistership scheduled for delivery in late 1997. These vessels are all for the Celebrity Cruises fleet. This fleet expansion will increase Celebrity's passenger-carrying capacity to over 9,300 berths and is expected to provide economies of scale in operations and marketing as well as increase brand recognition of Celebrity Cruises. The contracts are with the same European shipyard that built the two newest ships in the Celebrity Cruises fleet. The contracts provide for shipyard- arranged long-term bank financing to CCLI for a substantial portion of the cost of each vessel. For additional information about CCLI and its fleets and the CCLI commitments as of February 21, 1995, see the text of the "CCLI" section (pages 17 and 18), including the Celebrity Cruises fleet table (page 17), and the CCLI fleet table (page 11) of the registrant's Annual Report to Shareholders for 1994, which information is incorporated herein by reference, and Note D to the Company's financial statements incorporated by reference in Item 8 below. COMPETITION. CCLI operates its vessels primarily in the North American cruise market, which accounts for approximately 80% of the total cruise passengers carried. The North American cruise market is characterized by large and generally well-capitalized companies and is highly competitive. There are four companies in the industry each of which has a fleet with an aggregate number of berths in excess of 10,000, substantially more berths than CCLI's current fleet. Larger capacity affords fleet owners certain economies of scale. According to recently published data, the largest three companies have about 46% of total capacity, and the largest seven companies, including CCLI, have approximately 75% of total capacity. Capacity additions in the North American cruise market averaged 7% per year during the past decade versus the 9% per year growth in demand (measured by the number of passengers carried). In 1994, capacity increases slowed to 1% as 6,300 berths were added and nearly 5,400 berths were removed through retirements, redeployments and shutdowns. At year-end 1994, North American cruise capacity was estimated to be 105,000 berths. Consolidation continues in the industry. CCLI and three other cruise companies account for 91% of the total capacity additions slated for 1995 through 1998. On the basis of the newbuilding orderbook, recently published data forecasts that capacity will increase 7% in 1995, and before taking into consideration any retirements and deletions from the existing fleet, capacity is expected to increase 13% in 1996 and 10% in 1997. Cruise lines compete with other vacation alternatives such as land-based resort hotels and sightseeing destinations for consumers' discretionary income. The amount of discretionary income spent on vacations is influenced by general economic conditions. Within the cruise industry, competition is primarily based on product quality, itinerary and price. Product quality is a function of ship design, onboard facilities, amenities, service and cuisine. REGULATORY MATTERS. Each ship is subject to regulations of its country of registry, including regulations issued pursuant to international treaties governing the safety of the ship and its passengers. Each country of registry conducts periodic inspections to verify compliance with these regulations. In addition, ships operating from U.S. ports are subject to inspection by the U.S. Coast Guard for compliance with international treaties and by the U.S. Public Health Service for sanitary conditions. With respect to passengers to and from U.S. ports, CCLI is required to obtain certificates from the U.S. Federal Maritime Commission and the U.S. Coast Guard relating to its ability to satisfy liabilities arising out of nonperformance of obligations to passengers, casualty or personal injury and water pollution. The Company believes CCLI is in compliance with all material regulations applicable to its ships and has all licenses necessary for the conduct of its business. The International Maritime Organization's SOLAS 1974 convention, which became effective in 1980 and was last amended in 1992, established minimum safety, fire prevention and fire protection standards (the "SOLAS '74 standards"). Under the amended SOLAS requirements, all passenger ships must have upgraded fire detection and fire protection systems by October 1, 1997. The schedule for compliance with certain other aspects of the amended requirements for passenger vessels currently meeting SOLAS '74 standards extends until 2005 or 15 years after construction, whichever is later. Since substantial capital expenditures may be needed to bring older vessels into compliance with the SOLAS requirements that become applicable in 1997, it is likely that some ships for which such capital expenditures would not be economical will be removed from the market. About 40,000 berths are on ships that are expected to need the 1997 SOLAS mandated upgrades. The actual number of deletions will depend upon shipowners' willingness to incur the potentially significant cost needed to bring a vessel up to the required standards. Two of CCLI's Celebrity vessels were delivered in 1990 and 1992, respectively, and the third was rebuilt in 1990. Based on present estimates, any work necessary for these vessels to meet SOLAS requirements applicable in 1997 can be done without material capital expenditures. ITEM 2. PROPERTIES ------ ---------- See Item 1. ITEM 3. LEGAL PROCEEDINGS ------- ----------------- The Company and CCLI are parties, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries, collision or other casualty and to claims arising under charter parties. All such personal injury, collision and casualty claims against the Company and CCLI are fully covered by insurance (subject to deductibles not material in amount). Each of the other claims involves an amount which in the opinion of management is not material in relation to the consolidated current assets of the Company as shown in the Company's Consolidated Balance Sheet as at December 31, 1994, incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------ --------------------------------------------------- None. EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------ Has Served as Name Age Position Held Such Since ---- --- ------------- ------------- Morton P. Hyman 59 President October 1971 Michael A. Recanati 37 Executive February 1993 Vice President, Treasurer June 1994 Robert N. Cowen 46 Senior Vice February 1993 President, Secretary, June 1982 General Counsel November 1989 Alan Carus 56 Controller December 1987 Messrs. Hyman, Recanati and Cowen are directors of the registrant and Messrs. Hyman and Recanati are members of the Finance and Development Committee of its Board of Directors (Mr. Recanati is Vice Chairman of the Committee). The term of office of each executive officer continues until the first meeting of the Board of Directors of the registrant immediately following the next annual meeting of its stockholders, to be held in June 1995, and until the election and qualification of his successor. There is no family relationship between the executive officers; Mr. Michael A. Recanati is a son of Mr. Raphael Recanati and a nephew of Mr. Ran Hettena, directors of the registrant. Mr. Morton P. Hyman has served as a director of the registrant since 1969. Mr. Michael A. Recanati has served as a director, senior vice president and treasurer of the registrant and as an officer and director of certain of its subsidiaries during the past five years; he has also served as a director and senior officer of Maritime Overseas Corporation ("MOC"), the agent for the Company's vessels referred to in the first paragraph of Item 1, during the past five years. Mr. Robert N. Cowen has served as a director of the registrant since June 1993, as an officer and director of certain of the registrant's subsidiaries during the past five years, and as a director of MOC since January 1991. Mr. Alan Carus has served as an officer and director of certain of the registrant's subsidiaries during the past five years; he has also served as a senior officer of MOC during the past five years. PART II -------- The information called for by Items 5 through 8 is incorporated herein by this reference from the following respective portions and page numbers of the registrant's Annual Report to Shareholders for 1994: Item Incorporated from: ---- ----------------- ITEM 5.Market for Registrant's Last three paragraphs under ------ Common Equity and Related "Shareholder Information" on Stockholder Matters inside back cover; "Stock ------------------------- Price and Dividend Data" table on last page (page 22) of "Management's Discussion and Analysis" section. ITEM 6.Selected Financial Data The information for the years ------ ----------------------- 1990 through 1994 under "Eleven-Year Statistical Review" section (pages 38 and 39). ITEM 7.Management's Discussion Information set forth in text ------ and Analysis of Financial of "Management's Discussion Condition and Results of and Analysis" section (pages Operations 19 through 22). ------------------------- ITEM 8.Financial Statements and "Consolidated Statements of ------ Supplementary Data Operations and Retained ------------------------ Earnings", "Consolidated Balance Sheets", "Consolidated Statements of Cash Flows", "Notes to Consolidated Financial Statements" and "Report of Independent Auditors" sections (pages 23 through 37). Additional Supplementary Data - Ratio of Earnings to Fixed Charges ---------------------------------- There was a deficiency of earnings to fixed charges for 1994 of $26,977,000. This has been computed by subtracting the sum of loss before Federal income taxes and fixed charges from fixed charges. Fixed charges consist of interest expense, including the proportionate share of interest of joint venture companies, capitalized interest and an estimate of the interest component of an operating lease. ITEM 9.Changes in and Disagreements with Accountants on ------ Accounting and Financial Disclosure ------------------------------------------------- None. PART III --------- The information called for by Items 10 through 13, except for the information set forth in Part I above regarding the executive officers of the registrant, is incorporated herein by this reference from the following respective portions of the definitive proxy statement to be filed by the registrant in connection with its 1995 Annual Meeting of Shareholders. Item Incorporated from: ---- ------------------- ITEM 10. Directors and Executive "Election of Directors" ------- Officers of the Registrant -------------------------- ITEM 11. Executive Compensation "Compensation and Certain ------- -------------------------- Transactions"* ITEM 12. Security Ownership of "Election of Directors" ------- Certain Beneficial Owners and "Information as to and Management Stock Ownership" -------------------------- ITEM 13. Certain Relationships and "Election of Directors" and ------- Related Transactions "Compensation and Certain -------------------------- Transactions"* ----------------- * Excluding material under "Stockholder Return Performance Presentation" and "Executive Compensation Report of the Executive Compensation Committee and the Stock Option Committee". PART IV ------- ITEM 14. Exhibits, Financial Statement Schedules, and Reports on ------- Form 8-K ------------------------------------------------------- (a) See the accompanying index to financial statements and schedules, and the accompanying Exhibit Index. (b) Reports on Form 8-K: The registrant did not file any report on Form 8-K during the quarter ended December 31, 1994. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OVERSEAS SHIPHOLDING GROUP, INC. By: S/Michael A. Recanati -------------------------------- Michael A. Recanati Executive Vice President & Treasurer Date: March 29, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Each of such persons appoints Morton P. Hyman and Michael A. Recanati, and each of them, as his agents and attorneys-in-fact, in his name, place and stead in all capacities, to sign and file with the SEC any amendments to this report and any exhibits and other documents in connection therewith, hereby ratifying and confirming all that such attorneys-in-fact or either of them may lawfully do or cause to be done by virtue of this power of attorney. By S/Morton P. Hyman ------------------------------ Morton P. Hyman, Principal Executive Officer and Director By S/Michael A. Recanati ------------------------------ Michael A. Recanati, Principal Financial Officer and Director By S/Alan Carus ------------------------------ Alan Carus, Controller By S/Ran Hettena ------------------------------ Ran Hettena, Director By S/George C. Blake ------------------------------ George C. Blake, Director By S/Solomon N. Merkin ------------------------------ Solomon N. Merkin, Director By S/William L. Frost ------------------------------ William L. Frost, Director By S/Joel I. Picket ------------------------------ Joel I. Picket, Director By S/Thomas H. Dean ------------------------------ Thomas H. Dean, Director By S/Robert N. Cowen ------------------------------ Robert N. Cowen, Director Date: March 29, 1995 FORM 10-K--ITEM 14(a) (1) and (2) OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of Overseas Shipholding Group, Inc. and subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 1994 are incorporated by reference in Item 8: Consolidated Balance Sheets--December 31, 1994 and 1993 Consolidated Statements of Operations and Retained Earnings-- Years Ended December 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows-- Years Ended December 31, 1994, 1993 and 1992 Notes to Financial Statements --December 31, 1994 All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Exhibit Index 3(i) Certificate of Incorporation of the registrant, as amended to date (filed as Exhibit 3(a) to the registrant's Form 10-K for 1988 and incorporated herein by reference). 3(ii) By-Laws of the registrant, as amended to date (filed via EDGAR as Exhibit 3(ii) to the registrant's Form 10-K for 1993 and incorporated herein by reference). *4(a) Amended and Restated Credit Agreement dated as of February 9, 1990, as amended and restated as of October 31, 1994, among the registrant, two subsidiaries of the registrant and certain banks. 4(b) Form of Note Purchase Agreement dated as of March 1, 1992 between the registrant and each of the purchasers of its senior notes (filed as Exhibit 4(b) to the registrant's Form 10-K for 1991 and incorporated herein by reference). 4(c) Form of Note Purchase Agreement dated as of June 1, 1993 between the registrant and each of the purchasers of its senior notes (filed via EDGAR as Exhibit 4 to the registrant's Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference.) 4(d)(1) Form of Indenture dated as of December 1, 1993 between the registrant and The Chase Manhattan Bank (National Association) providing for the issuance of debt securities by the registrant from time to time (filed via EDGAR as Exhibit 4(d)(1) to the registrant's Form 10-K for 1993 and incorporated herein by reference). 4(d)(2) Resolutions dated December 2, 1993 fixing the terms of two series of debt securities issued by the registrant under the Indenture (filed via EDGAR as Exhibit 4(d)(2) to the registrant's Form 10-K for 1993 and incorporated herein by reference). 4(d)(3) Form of 8% Notes due December 1, 2003 of the registrant (filed via EDGAR as Exhibit 4(d)(3) to the registrant's Form 10-K for 1993 and incorporated herein by reference). 4(d)(4) Form of 8-3/4% Debentures due December 1, 2013 of the registrant (filed via EDGAR as Exhibit 4(d)(4) to the registrant's Form 10-K for 1993 and incorporated herein by reference). NOTE: The Exhibits filed herewith do not include other instruments authorizing long-term debt of the registrant and its subsidiaries, none of which exceeds 10% of total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees to furnish a copy of each such instrument to the Commission upon request. 10(a) Form of Agency Agreements between Maritime Overseas Corporation and each of the registrant's majority-owned subsidiaries that owns or operates a U.S.-flag vessel (refiled as Exhibit 10(a) to the registrant's Form 10-K for 1989 and incorporated herein by reference). 10(b) Form of Agency Agreements between Maritime Overseas Corporation and each of the registrant's majority-owned subsidiaries that owns or operates a foreign-flag vessel (refiled as Exhibit 10(b) to the registrant's Form 10-K for 1989 and incorporated herein by reference). 10(c)(1) Form of Management Agreement dated as of January 1, 1985 between Lion Insurance Company Ltd. and Maritime Overseas Corporation (filed as Exhibit 10(c)(2) to the registrant's Form 10-K for 1985 and incorporated herein by reference). 10(c)(2) Form of Amendment No. 1 dated as of April 1, 1986 to the Management Agreement between Lion Insurance Company Ltd. and Maritime Overseas Corporation (filed as Exhibit 10(c)(2) to the registrant's Form 10-K for 1986 and incorporated herein by reference). 10(d)(1) Form of General Services Agreement dated December 31, 1969 between the registrant and Maritime Overseas Corporation (the form of which was filed as Exhibit 13(3) to Registration Statement No. 2-34124 and is incorporated herein by reference). *10(d)(2) Form of Amendment dated as of January 1, 1975 to General Services Agreement between the registrant and Maritime Overseas Corporation (previously filed more than 10 years ago and refiled herewith). 10(d)(3) Amendment dated January 10, 1980 to General Services Agreement between the registrant and Maritime Overseas Corporation (refiled as Exhibit 10(d)(3) to the registrant's Form 10-K for 1989 and incorporated herein by reference). 10(d)(4) Form of Amendment dated as of January 1, 1981 to General Services Agreement between the registrant and Maritime Overseas Corporation (refiled as Exhibit 10(d)(4) to the registrant's Form 10-K for 1990 and incorporated herein by reference). 10(d)(5) Form of Amendment dated as of October 1, 1987 to General Services Agreement between the registrant and Maritime Overseas Corporation (filed as Exhibit 10(d)(5) to the registrant's Form 10-K for 1987 and incorporated herein by reference). *10(d)(6) Form of Amendment dated as of July 1, 1994 to General Services Agreement between the registrant and Maritime Overseas Corporation. *10(e)(1) Form of Letter Agreement dated as of August 9, 1973 between the registrant and Maritime Overseas Corporation (previously filed more than 10 years ago and refiled herewith). *10(e)(2) Form of Letter Agreement dated as of August 9, 1973 by Maritime Overseas Corporation (previously filed more than 10 years ago and refiled herewith). *10(e)(3) Form of Letter Agreement dated as of August 9, 1973 by Maritime Overseas Corporation (previously filed more than 10 years ago and refiled herewith). 10(e)(4) Form of Letter Agreement dated as of January 1, 1981 between the registrant and Maritime Overseas Corporation (refiled as Exhibit 10(e)(4) to the registrant's Form 10-K for 1991 and incorporated herein by reference). 10(f)(1) Form of Service Agreements between Maritime Overseas Corporation and each of the partnerships First Shipmor Associates, Second Shipmor Associates, Third Shipmor Associates and Fourth Shipmor Associates and related letter agreements between the registrant and each of said partnerships (refiled as Exhibit 10(f)(1) to the registrant's Form 10-K for 1987 and incorporated herein by reference). 10(f)(2) Service Agreement dated January 27, 1983 between Cambridge Tankers, Inc. and Maritime Overseas Corporation relating to the OVERSEAS BOSTON (refiled as Exhibit 10(f)(2) to the registrant's Form 10-K for 1992 and incorporated herein by reference). 10(f)(3) Form of Service Agreement between respective subsidiaries of the registrant and Maritime Overseas Corporation relating to the OVERSEAS NEW ORLEANS and OVERSEAS PHILADELPHIA (not filed--substantially identical in all material respects to the agreement listed as Exhibit 10(f)(2) hereto except as to the parties, the vessels and the dates). *10(g)(1) Form of Management Agreements between Maritime Overseas Corporation and each of First United Shipping Corporation, Interocean Tanker Corporation, Second United Shipping Corporation and Third United Shipping Corporation (previously filed more than 10 years ago and refiled herewith). 10(g)(2) Form of Amendment No. 1 and Amendment No. 2 to Management Agreements between Maritime Overseas Corporation and each of First United Shipping Corporation, Interocean Tanker Corporation, Second United Shipping Corporation and Third United Shipping Corporation (filed as Exhibit 10(g)(1)(b) to the registrant's Form 10-K for 1985 and incorporated herein by reference). *10(g)(3) Form of Amendment No. 3 to Management Agreements between Maritime Overseas Corporation and each of First United Shipping Corporation, Interocean Tanker Corporation, Second United Shipping Corporation and Third United Shipping Corporation. *10(g)(4) Form of Company Service Employees Agreement between Maritime Overseas Corporation and each of First Union Tanker Corporation and Second Union Tanker Corporation. 10(h)(1) Agreement dated April 1, 1992 between the registrant and Maritime Overseas Corporation (filed as Exhibit 10 to the registrant's Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference). 10(h)(2) Letter Agreement dated November 9, 1993 amending the Agreement dated April 1, 1992 referred to above (filed via EDGAR as Exhibit 10(h)(2) to the registrant's Form 10-K for 1993 and incorporated herein by reference). 10(i) Indemnification Agreement dated December 21, 1992 among Continental Grain Company, Third Contiship Inc., Fourth Contiship Inc., OSG Bulk Ships, Inc., Third Shipco Inc., Fourth Shipco Inc. and the registrant (filed as Exhibit 10(i) to registrant's Form 10-K for 1992 and incorporated herein by reference). 10(j)(1) Exchange Agreement dated December 9, 1969 (including exhibits thereto) between the registrant and various parties relating to the formation of the registrant (the form of which was filed as Exhibit 2(3) to Registration Statement No. 2-34124 and is incorporated herein by reference). 10(j)(2) Form of Additional Exchange Agreement referred to in Section 2.02 of Exhibit 10(j)(1) hereto (filed as Exhibit 2(4) to Registration Statement No. 2-34124 and incorporated herein by reference). *10(k) Supplemental Executive Retirement Plan of the registrant, as amended and restated as of January 1, 1995. 10(l)(1) 1989 Stock Option Plan adopted for officers and key employees of the registrant or its subsidiaries (filed as Exhibit 10(l) to the registrant's Form 10-K for 1989 and incorporated herein by reference). 10(l)(2) Amendment adopted October 9, 1990 to the registrant's 1989 Stock Option Plan referred to above (filed as Exhibit 10(l)(2) to the registrant's Form 10-K for 1990 and incorporated herein by reference). 10(m) 1990 Stock Option Plan adopted for officers and employees of the registrant or its subsidiaries, excluding the recipients of options under Exhibits 10(l)(1) and (2) listed above (filed as Exhibit 10(m) to the registrant's Form 10-K for 1990 and incorporated herein by reference). 10(n)(1) Joint Venture Agreement dated September 23, 1992 among Archinav Holdings Ltd. ("Archinav"), Overseas Cruiseship Inc. ("Overseas"), and Celebrity Cruise Lines Inc. ("CCLI") (excluding exhibits and schedules) and the following related agreements: Guarantee of the registrant dated September 23, 1992 and Shareholders Agreement dated October 21, 1992 among Archinav, Overseas and CCLI (excluding exhibits)(filed as Exhibits 2(a), (b) and (c), respectively, to the registrant's Report on Form 8-K dated October 21, 1992 and incorporated herein by reference). 10(n)(2) Supplemental Agreement dated January 29, 1993 to the Shareholders Agreement referred to in Exhibit 10(n)(1) above (filed as Exhibit 10(n)(2) to the registrant's Form 10-K for 1992 and incorporated herein by reference). *12 Computation of Ratio of Earnings to Fixed Charges. *13 Such portions of the Annual Report to security holders for 1994 as are expressly incorporated herein by reference. *21 List of subsidiaries of the registrant. *23 Consent of Independent Auditors of the registrant. *27 Financial Data Schedule. NOTE: The Exhibits which have not previously been filed or listed or are being refiled are marked with an asterisk (*). List of Executive Compensation Plans and Arrangements - See Exhibits 10(k), 10(l)(1) and (2), and 10(m) above. EX-4 2 EXHIBIT 4(a) ------------ [EXECUTION COPY] $500,000,000 AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 9, 1990, as amended and restated as of October 31, 1994 among OVERSEAS SHIPHOLDING GROUP, INC., OSG BULK SHIPS, INC. and OSG INTERNATIONAL, INC., THE BANKS LISTED HEREIN, CITIBANK, N.A., as Administrative Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent TABLE OF CONTENTS* Page ARTICLE I DEFINITIONS SECTION 1.01. Definitions 1 SECTION 1.02. Accounting Terms and Determinations 26 SECTION 1.03. Types of Borrowings 27 ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend 27 SECTION 2.02. Notice of Committed Borrowing 28 SECTION 2.03. Money Market Borrowings 28 SECTION 2.04. Notice to Banks; Funding of Loans 32 SECTION 2.05. Notes 34 SECTION 2.06. Maturity of Loans 35 SECTION 2.07. Interest Rates 35 SECTION 2.08. Fees 38 SECTION 2.09. Optional Termination or Reduction of Commitments 39 SECTION 2.10. Scheduled Termination of Commitments 39 SECTION 2.11. Optional Prepayments 39 SECTION 2.12. General Provisions as to Payments 41 SECTION 2.13. Funding Losses 42 SECTION 2.14. Computation of Interest and Fees 42 SECTION 2.15. Regulation D Compensation 42 SECTION 2.16. Judgment Currency 43 SECTION 2.17. Withholding Tax Exemption 44 SECTION 2.18. Taxes 46 ARTICLE III CONDITIONS SECTION 3.01. Effectiveness 47 SECTION 3.02. Consequences of Effectiveness 50 SECTION 3.03. Borrowings 50 ------------- *The Table of Contents is not a part of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power 51 SECTION 4.02. Corporate and Governmental Authorization; No Contravention 51 SECTION 4.03. Binding Effect 52 SECTION 4.04. Financial Information 52 SECTION 4.05. Litigation 53 SECTION 4.06. Compliance with ERISA 53 SECTION 4.07. Environmental Matters 54 SECTION 4.08. Taxes 54 SECTION 4.09. Subsidiaries 54 SECTION 4.10. Not an Investment Company 54 ARTICLE V COVENANTS SECTION 5.01. Information 55 SECTION 5.02. Payment of Obligations 60 SECTION 5.03. Maintenance of Property; Insurance 60 SECTION 5.04. Conduct of Business and Maintenance of Existence 61 SECTION 5.05. Compliance with Laws 63 SECTION 5.06. Books and Records 63 SECTION 5.07. Negative Pledge; Minimum Unencumbered Assets to Unsecured Debt Ratio 63 SECTION 5.08. Company Debt 66 SECTION 5.09. Subsidiary Debt 66 SECTION 5.10. Consolidations, Mergers and Sales of Assets 66 SECTION 5.11. Use of Proceeds 67 SECTION 5.12. Security Interest 67 SECTION 5.13. Letters of Credit 69 SECTION 5.14. Ownership of OBS and OIN 71 SECTION 5.15. Agent for Service of Process for OIN 71 SECTION 5.16. Minimum Consolidated Working Capital 72 SECTION 5.17. Minimum Consolidated Tangible Net Worth 72 SECTION 5.18. Maximum Total Debt to Consolidated Tangible Net Worth Ratio 72 SECTION 5.19. Minimum Liquid Cash Flow Coverage Ratio 72 SECTION 5.20. Maximum Investments in Joint Ventures 72 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default 73 SECTION 6.02. Notice of Default 75 ARTICLE VII THE AGENTS SECTION 7.01. Appointment and Authorization 75 SECTION 7.02. Agents and Affiliates 76 SECTION 7.03. Action by Agents 76 SECTION 7.04. Consultation with Experts 76 SECTION 7.05. Liability of the Agents 76 SECTION 7.06. Indemnification 77 SECTION 7.07. Credit Decision 77 SECTION 7.08. Successor Administrative Agent 77 SECTION 7.09. Agents' Fees 78 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair 78 SECTION 8.02. Illegality 79 SECTION 8.03. Increased Cost and Reduced Return 80 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans 82 SECTION 8.05. Substitution of Bank 82 ARTICLE IX GUARANTY SECTION 9.01. The Guaranty 83 SECTION 9.02. Guaranty Unconditional 83 SECTION 9.03. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances 84 SECTION 9.04. Waiver by the Company 85 SECTION 9.05. Waiver of Subrogation 85 SECTION 9.06. Stay of Acceleration 85 ARTICLE X MISCELLANEOUS SECTION 10.01. Notices 85 SECTION 10.02. No Waivers 86 SECTION 10.03. Expenses; Documentary Taxes; Indemnification 86 SECTION 10.04. Amendments and Waivers 87 SECTION 10.05. Successors and Assigns 87 SECTION 10.06. Collateral 90 SECTION 10.07. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Agent for Service of Process 90 SECTION 10.08. Counterparts; Integration 91 SECTION 10.09. Certain Provisions of the Existing Agreement 91 Schedule 1 - Permitted Liens Schedule 2 - Non-Recourse Subsidiaries Pricing Schedule Exhibit A - Note Exhibit B-1 - Money Market Quote Request Exhibit B-2 - Invitation for Money Market Quotes Exhibit B-3 - Money Market Quote Exhibit C-1 - Opinion of Proskauer Rose Goetz & Mendelsohn, special counsel for the Borrowers Exhibit C-2 - Opinion of Samuel M. Rosenbloom, Esq., Senior Vice President of MOC and Counsel for the Borrowers Exhibit C-3 - Opinion of Davis Polk & Wardwell, special counsel for the Agents Exhibit D - Assignment and Assumption Agreement Exhibit E - Form of Acceptance of Appointment as Agent for Service of Process Exhibit F - Administrative Questionnaire Exhibit G - Form of Reimbursement Agreement AMENDED AND RESTATED CREDIT AGREEMENT AGREEMENT dated as of February 9, 1990, as amended and restated as of October 31, 1994, among OVERSEAS SHIPHOLDING GROUP, INC., OSG BULK SHIPS, INC. and OSG INTERNATIONAL, INC., the CO-ARRANGERS and the other BANKS party hereto, CITIBANK, N.A., as Administrative Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent. WHEREAS, Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., certain banks, Citibank, N.A., as manager and administrative agent, and The Chase Manhattan Bank (National Association), as co-manager, are parties to a Credit Agreement dated as of February 9, 1990, as amended prior to October 31, 1994 (the "Existing Agreement"); and WHEREAS, the parties hereto desire to amend the Existing Agreement as set forth herein; NOW, THEREFORE, the parties hereto agree that, upon satisfaction of the conditions set forth in Section 3.01 below, the Existing Agreement will be amended and restated to read in full as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Administrative Agent" means Citibank, N.A., in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire, substantially in the form of Exhibit F hereto, submitted to the Administrative Agent (with a copy to the Company) duly completed by such Bank. "Affiliate" means, with respect to any Person, (i) any Person that directly, or indirectly through one or more intermediaries, Controls such Person (a "Controlling Person") or (ii) any Person (other than such Person or a Subsidiary of such Person) which is Controlled by or is under common Control with a Controlling Person. "Agents" means the Administrative Agent and the Documentation Agent, and "Agent" means either of them. "Agreement" means, when used with reference to this Agreement, the Credit Agreement dated as of February 9, 1990 among Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., the banks listed therein, Citibank, N.A., as manager and administrative agent, and The Chase Manhattan Bank (National Association), as co-manager, as amended from time to time, including, with reference to any time on or after the Amendment Effective Date, the Amended Agreement. "Amended Agreement" means the Existing Agreement, as amended and restated as of October 31, 1994 by this Amended Agreement, and as further amended from time to time after the Amendment Effective Date. "Amendment Effective Date" means the date this Amended Agreement becomes effective in accordance with Section 3.01. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" means a bank or other financial institution (including, without limitation, a Bank) to which any Bank assigns all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes in accordance with Section 2.17(c), 8.05 or 10.05(c). "Assignment and Assumption Agreement" has the meaning set forth in Section 2.17(c). "Attributable Debt" has the meaning set forth in Note Agreement dated as of March 1, 1992 among the Borrower and the Purchasers named in Schedule I thereto, without regard to any amendments or supplements thereto or waivers of compliance with any provision thereof, PROVIDED that the definition of the term "Sale and Leaseback Transaction" shall have the meaning set forth in this Section 1.01. "Bank" means each Co-arranger and other bank listed on the signature pages of this Amended Agreement, each Assignee which becomes a Bank after the Amendment Effective Date pursuant to Section 2.17(c), 8.05 or 10.05(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/4 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan to be made by a Bank as a Base Rate Loan pursuant to the applicable Notice of Committed Borrowing or Article VIII. "Beneficial Ownership" means beneficial ownership within the meaning of Rule 13d-3 (or any successor rule) promulgated by the Securities and Exchange Commission under the Exchange Act. "Borrower" means any of the Company, OBS or OIN, as the context may require, and "Borrowers" means all of the foregoing. "Borrowing" has the meaning set forth in Section 1.03. "Capital Construction Funds" means, for any period, the aggregate amount on deposit in capital construction funds established and maintained pursuant to agreements with the Secretary of Transportation in accordance with Section 1177 of the Merchant Marine Act, 1936, as amended, 46 U.S.C. Appx. Section 1177, for the account of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of the last day of such period, as the same is reflected in a consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of such date. "Cash" means (i) for purposes of the definition of "Liquid Cash Flow Coverage Ratio", with respect to the Company for any period, the aggregate amount of cash, including interest-bearing deposits with maturities of less than one year, held by the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) on the last day of such period, as the same is reflected in a consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of such last day and (ii) for purposes of the definition of "Quick Assets", with respect to any Guaranteed Person as of any date, the aggregate amount of cash, including interest-bearing deposits with maturities of less than one year, held by such Guaranteed Person on such date, as the same is (or would be) reflected in a balance sheet of such Guaranteed Person as of such date. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means a Committed Loan to be made by a Bank as a CD Loan pursuant to the applicable Notice of Committed Borrowing. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Reference Banks" means The Chase Manhattan Bank (National Association), Citibank, N.A. and Morgan Guaranty Trust Company of New York. "Co-arrangers" means each Bank identified as a "Co- arranger" on the signature pages of this Amended Agreement, so long as such Bank remains a Bank hereunder, and their respective successors; PROVIDED, HOWEVER, that such term shall not include any Assignee of any of the foregoing. "Collateral" has the meaning set forth in Section 5.12(a). "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages of this Amended Agreement, as such amount may be increased from time to time pursuant to Sections 2.17(c), 8.05 and 10.05(c) or any combination thereof or reduced from time to time pursuant to Sections 2.09 and 2.10. "Committed Loan" means a loan to be made by a Bank pursuant to Section 2.01. "Company" means Overseas Shipholding Group, Inc., a Delaware corporation, and its successors. "Company's 1993 Form 10-K" means the Company's annual report on Form 10-K for 1993 (including any information incorporated by reference therein), all as filed with the Securities and Exchange Commission pursuant to the Exchange Act. "Consolidated Defined Assets" has the meaning set forth in Section 5.04. "Consolidated Net Income" means, for any period, the consolidated net income of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such period, as the same is reflected in a consolidated statement of income and retained earnings of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such period; PROVIDED that, for purposes of this Agreement, Consolidated Net Income shall never be less than zero for any period. "Consolidated Net Tangible Assets" has the meaning set forth in Section 5.20. "Consolidated Subsidiary" means, with respect to any Person at any date, any Subsidiary of such Person or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Net Worth" means at any date the consolidated total common stockholders' equity of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries), as the same is reflected in the consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries), LESS their consolidated Intangible Assets, all determined as of such date; PROVIDED that Consolidated Tangible Net Worth at any date shall be reduced by the amount, if any, by which the aggregate amount of cash and cash equivalents subject to any Lien permitted under Section 5.07(a)(viii) on such date exceeds 5% of Consolidated Tangible Net Worth as of such date, determined without reference to this proviso. "Consolidated Working Capital" means at any date the amount by which Total Current Assets exceeds Total Current Liabilities as of such date. "Continuing Director" means a member of the Company's board of directors who (i) is a member of such board as of October 31, 1994 or (ii) was nominated or appointed to fill a vacancy by the board of directors of the Company, PROVIDED that at the time of such nomination or appointment a majority of (i) the board of directors of the Company shall be Continuing Directors and (ii) the directors voting in favor of such nomination or appointment shall be Continuing Directors. "Control" means, for purposes of the definitions of "Affiliate", "Parent" and "Uncontrolled Joint Venture", with respect to any Person, possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of the aforesaid definitions, the term "Control" used as a verb has a corresponding meaning. "Corporate Tax Rate" means, for any period, the highest marginal rate of federal income tax which could be applicable to the Company as of the last day of such period, expressed as a decimal. "current liabilities" of any Borrower as of any date shall not, for purposes of the definitions of "Total Current Debt" and "Total Current Liabilities", include any Loans hereunder to such Borrower, except Loans (or portions thereof) to such Borrower which would be classified under generally accepted accounting principles as current liabilities as a result of Section 2.10, 2.11 or 6.01 (i.e., with respect to Section 2.11 and as a result of any irrevocable notice of prepayment given pursuant thereto, an aggregate principal amount of Loans to such Borrower equal to the principal amount of Loans to such Borrower which, measured as of such date, will become due and payable pursuant to such Section within one year from such date shall be treated as current liabilities of such Borrower as of such date to the extent that the same would be treated as such under generally accepted accounting principles). "Debt" of any Person means at any date, without duplication, (i) all obligations 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 to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid or which may be paid under a letter of credit, letter of guarantee or similar instrument, such obligations to constitute Debt (x) in the case of any such obligation of the Company or any Subsidiary of the Company in respect of a letter of credit, letter of guarantee or similar instrument issued solely to support an obligation of the Company or any Subsidiary of the Company which obligation does not constitute Debt hereunder, on the date that a drawing is made under such letter of credit, letter of guarantee or similar instrument if the bank or other Person issuing such letter of credit, letter of guarantee or similar instrument shall not have been reimbursed therefor on such date, (y) in all other cases (except as provided in clause (z) below), at the time at which such bank or other Person is committed (whether or not such commitment is subject to any conditions) to issue, or has issued, such letter of credit, letter of guarantee or similar instrument and (z) notwithstanding any other provision herein to the contrary, for purposes of (I) Section 5.07(a), the term "Debt" shall include all contingent obligations to reimburse any bank or other Person in respect of amounts paid or which may be paid under a letter of credit, letter of guarantee or similar instrument and (II) the definitions of "Material Debt" and "Material Financial Obligations", the term "Debt" shall include all contingent obligations referred to in clause (I) above, but only if the relevant letter of credit, letter of guarantee or similar instrument has been actually issued (as opposed to only the issuance of a commitment to issue the same), (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by such Person. For purposes of this Agreement, at any date, neither Debt of the Company owed on such date to any Subsidiary of the Company nor Debt of any Subsidiary of the Company owed to the Company or any other Subsidiary of the Company on such date shall be considered to be Debt of the Company or such Subsidiary, as the case may be. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "Documentation Agent" means Morgan Guaranty Trust Company of New York, in its capacity as documentation agent for the Banks hereunder, and its successors in such capacity. "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Administrative Agent; PROVIDED that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Domestic Tax" means, with respect to any Bank, a Tax that is not a Foreign Tax with respect to it. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions binding on any Borrower or to which any asset of any Borrower is subject, regulations, ordinances, rules, judgments, orders, decrees, plans or injunctions binding on any Borrower or to which any asset of any Borrower is subject, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute and the regulations promulgated and the rulings issued thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is a member of a group of which any member of the ERISA Group is a member and which is under common control within the meaning of Section 414 of the Internal Revenue Code. "ERISA Group" means the Company and those of its Subsidiaries whose financial statements are from time to time consolidated with the Company, in accordance with generally accepted accounting principles. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Administrative Agent. "Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed Borrowing. "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Reference Banks" means the principal London offices of The Chase Manhattan Bank (National Association), Citibank, N.A. and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute. "Excluded Subsidiary Debt" means (i) unsecured Debt of a Subsidiary of the Company incurred for the purpose of financing all or any part of the cost of acquiring any ship from any Person (other than the Company or any of its Subsidiaries or any of their respective Affiliates), PROVIDED that such Debt (x) is incurred or assumed concurrently with or within 180 days after the acquisition thereof, (y) is supported in full by a direct-pay or standby letter of credit on which the Company is the sole account party and the terms of the related reimbursement agreement shall not permit the issuing bank any recourse against any Subsidiary or Affiliate of the Company and (z) is not supported by any other letter of credit, letter of guarantee or similar instrument in respect of which any Subsidiary or Affiliate of the Company has any obligation and (ii) Debt of Subsidiaries of the Company of the types referred to in clauses (i), (iii), (iv) and (v) of Section 5.09(a). "Existing Agreement" has the meaning set forth in the first recital hereto. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, PROVIDED that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Citibank, N.A. on such day on such transactions as determined by the Administrative Agent. "Fiscal Quarter" means a fiscal quarter of the Company. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Foreign Tax" means, with respect to any Bank, any Tax now or hereafter imposed on such Bank or upon any Payment due to or made to such Bank, except a Tax imposed on such Bank by a governmental authority under the laws of which such Bank is organized or a Tax (other than a Tax collected by deduction or withholding from a Payment) imposed by a governmental authority within the territorial jurisdiction of which such Bank maintains a place of business. "Gain (Loss) on Disposal of Vessels" means, for any period, the aggregate net amount of gains (losses) on disposals of vessels by the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) during such period, but only to the extent such gains are not included (or such losses are not deducted) in determining Net Cash Provided by Operating Activities for such period, as the same is reflected in a consolidated statement of cash flows of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such period. "Gain (Loss) on Sale of Securities" means, for any period, the aggregate net amount of gains (losses) on sales of securities by the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) during such period, but only to the extent such gains are not included (or such losses are not deducted) in determining Net Cash Provided by Operating Activities for such period, as the same is reflected in a consolidated statement of cash flows of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such period. "Guarantee" by any Person means, without duplication, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt 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 Debt or other obligation (whether arising by virtue of partnership arrangements, 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 the purpose of assuring in any other manner the obligee of such Debt or other 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. "Guaranteed Current Liabilities" means at any date with respect to any Guaranteed Person the lesser of (i) the aggregate amount of current liabilities of such Guaranteed Person which are Guaranteed by the Company or a Consolidated Subsidiary of the Company and (ii) the excess, if any, of (x) the aggregate amount of current liabilities of such Guaranteed Person over (y) the Quick Assets of such Guaranteed Person, all as reflected in the balance sheet of such Guaranteed Person or the certificate of the Company with respect to such Guaranteed Person, as the case may be, most recently delivered or required to be delivered to the Banks pursuant to Section 4.04(e) or 5.01(d), as the case may be, prior to such date; PROVIDED that if, as of the date of such balance sheet or the last day of the fiscal quarter of such Guaranteed Person covered by such certificate, as the case may be, the Quick Assets of such Guaranteed Person shall exceed its current liabilities, the Guaranteed Current Liabilities of such Guaranteed Person shall be determined to be zero as of such date. "Guaranteed Person" means any Person (other than the Company or a Consolidated Subsidiary of the Company) some of the current liabilities of which are Guaranteed by the Company or a Consolidated Subsidiary of the Company. "Intangible Assets" means the amount (to the extent reflected in determining consolidated total common stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made after the acquisition of such business in accordance with generally accepted accounting principles) subsequent to December 31, 1993 in the book value of any asset owned by the Company or a Consolidated Subsidiary of the Company, (ii) all Investments in Persons which are not Subsidiaries of the Company unless such Investments are accounted for in accordance with generally accepted accounting principles, (iii) the aggregate amount of the Investment of the Company and its Subsidiaries (other than Non-Recourse Subsidiaries) in all Non-Recourse Subsidiaries and (iv) all unamortized debt discount and expense, unamortized deferred charges (excluding unamortized deferred drydock costs), goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry-forwards, copyrights, organization or developmental expenses and other intangible assets. The term "Intangible Assets", when used in Section 5.07(b)(ii), shall have a correlative meaning. "Interest Expense" means, for any period, the aggregate amount, without duplication, of (i) interest accrued during such period on Debt of the Company and its Subsidiaries (other than Non-Recourse Subsidiaries), including the interest portion of payments under capitalized leases, capitalized interest (except interest incurred in connection with vessel construction prior to the delivery thereof, which interest is converted to Debt), amortization of debt discount and the value of interest paid in pay-in-kind securities, (ii) interest (as defined in clause (i) above) on Debt of other Persons paid during such period by the Company or any of its Subsidiaries (other than Non-Recourse Subsidiaries) and (iii) dividends accrued (whether or not paid) during such period on outstanding preferred stock of the Company or any of its Subsidiaries (other than Non-Recourse Subsidiaries). For purposes of any determination of Interest Expense for any period, any amount paid by the Company or any of its Subsidiaries (other than Non-Recourse Subsidiaries) on, or with respect to, Debt of other Persons during such period shall be allocated first to the payment of interest on such Debt (but only to the extent that the Company or any of its Subsidiaries is obligated to pay interest on such Debt for such period). "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing (or such greater number of months or such other number of days as the Borrower and all of the Banks shall agree in writing not later than the date of the applicable Notice of Borrowing); PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period (other than an Interest Period determined pursuant to clause (c) below) which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (5) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than 14 days) as the Borrower may elect in accordance with Section 2.03; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, advance, Guarantee or otherwise. Each advance of funds to a Person (whether documented as a loan or advance or otherwise) and each provision of goods or services to or on behalf of an Affiliate of the provider at less than the fair market value thereof shall be an Investment in the amount of such advance or the excess of the fair market value thereof over the price (if any) paid therefor, as the case may be. "Investments in Marketable Securities" means, for any period, the aggregate amount of all investments by the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) in marketable securities as of the last day of such period, as the same is reflected in a consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of such date. "Joint Venture" means at any date any Person (other than a Subsidiary of the Company) in which the Company or any Subsidiary of the Company has an ownership interest which would be accounted for in the consolidated financial statements of the Company and its Consolidated Subsidiaries by the equity method if such statements were prepared as of such date. "Letter of Credit" has the meaning set forth in Section 5.13. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary of the Company shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Liquid Cash Flow Coverage Ratio" means, for any period, the ratio determined pursuant to the following formula: LCFC = CFO + GSS + GSV + IE + 1/2 (C + MS + ((1 - CTR) (CCF)) + RF) ----------------------------------------------------------- IE + TCD Where: LCFC = Liquid Cash Flow Coverage Ratio CFO = Net Cash Provided by Operating Activities for such period GSS = Gain (Loss) on Sale of Securities for such period GSV = Gain (Loss) on Disposal of Vessels for such period C = Cash of the Company for such period MS = Investments in Marketable Securities for such period CTR = Corporate Tax Rate for such period CCF = Capital Construction Funds for such period RF = Restricted Funds for such period IE = Interest Expense for such period TCD = Total Current Debt for such period "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "managed" has the meaning set forth in Section 5.04. "Material Adverse Change" means the occurrence of an event or condition which materially impairs the ability of the Company or any of its Subsidiaries to meet any of their respective obligations under this Agreement or any Note or any of their respective other obligations that are material to the Company and its Consolidated Subsidiaries, considered as a whole. "Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $5,000,000 (or its equivalent in any other currency). "Material Financial Obligations" means (i) a principal or face amount of Debt and/or (ii) payment obligations in respect of Derivatives Obligations, in each case of the Company and/or one or more of its Subsidiaries and arising in one or more related or unrelated transactions, exceeding in the aggregate $5,000,000 (or its equivalent in any other currency). "Material Subsidiary" means at any date each of the following: (i) OBS, (ii) OIN, (iii) any Subsidiary of the Company (other than OBS or OIN) which owns, leases or charters any ship on such date and (iv) any Subsidiary or Subsidiaries of the Company (other than any such Subsidiary or Subsidiaries referred to in the foregoing clauses) the assets of which, individually or in the aggregate, had an aggregate book value (net of depreciation) as of the date of the consolidated balance sheet of the Company and its Consolidated Subsidiaries most recently delivered or required to be delivered to the Banks pursuant to Section 4.04 or 5.01, as the case may be, prior to such date in excess of the lesser of (x) $50,000,000 and (y) 2% of the aggregate book value (net of depreciation) of all assets of the Company and its Consolidated Subsidiaries as of the date of such balance sheet; PROVIDED that, for purposes of clauses (g) and (h) of Section 6.01, "Material Subsidiary" shall mean any Subsidiary of the Company of the type referred to in clause (i), (ii) or (iv) hereof. "Maximum Amount" means at any date a percentage of Consolidated Tangible Net Worth as of the date of the balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) most recently delivered or required to be delivered to the Banks pursuant to Section 4.04 or 5.01, as the case may be, equal to (i) prior to February 16, 1995, 51% and (vi) at any time on or after February 16, 1995, 50%. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Administrative Agent; PROVIDED that any Bank may from time to time by notice to the Company and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which the Company or any ERISA Affiliate is making or accruing an obligation to make contributions or has within any of the preceding three plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means at any time an employee benefit plan, other than a Multiemployer Plan, subject to Title IV of ERISA to which the Company or any ERISA Affiliate, and one or more employers other than the Company or an ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Company or any ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. "Net Cash Provided by Operating Activities" means, for any period, the net cash provided by operating activities of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such period, as the same is reflected in a consolidated statement of cash flows of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such period. "Non-Recourse Debt" means Debt of any Subsidiary of the Company (i) that is not Guaranteed by the Company or any other Subsidiary of the Company (other than a Non-Recourse Subsidiary), (ii) that is not secured by a Lien on any asset of the Company or any other Subsidiary of the Company (other than any asset of any Non-Recourse Subsidiary) and (iii) in respect of which neither the Company nor any of its other Subsidiaries (other than a Non-Recourse Subsidiary) has any express obligation or has written any instrument or letter indicating its support for such Subsidiary; PROVIDED that Debt of such Subsidiary shall constitute Non-Recourse Debt only if (x) the Company shall have given the Banks, through the Administrative Agent, written notice at least 20 days prior to the incurrence, issuance, assumption or Guarantee thereof (or, in the case of Debt of a Person to be acquired by such Subsidiary, prior to the time of such acquisition) and (y) the terms and conditions of the related documentation insofar as they relate to the non-recourse nature of such Debt, and the final form of such documentation with respect thereto, shall be reasonably satisfactory to the Required Banks. "Non-Recourse Subsidiary" means, at any time, a Subsidiary of the Company (i) having no Debt at such time (other than Non-Recourse Debt) and (ii) as to which an officer of the Company has, prior to the issuance, incurrence, assumption or Guarantee of any Non-Recourse Debt by such Subsidiary, delivered a certificate to the Administrative Agent certifying that such Subsidiary is a Non-Recourse Subsidiary in accordance with the terms of this Agreement. "Non-Shipping Asset" has the meaning set forth in Section 5.04. "Non-Shipping Person" has the meaning set forth in Section 5.04. "Notes" means promissory notes of a Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "OBS" means OSG Bulk Ships, Inc., a New York corporation, and its successors. "OIN" means OSG International, Inc., a Liberian corporation, and its successors. "Parent" means, with respect to any Bank, any Person Controlling such Bank. "Participant" has the meaning set forth in Section 10.05(b). "Payment" means any amount due to a Bank from a Borrower pursuant to this Agreement or a Note. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Liens" means Liens permitted under Section 5.07(a). "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. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan or a Multiple Employer Plan) maintained for the benefit of employees of the Company or any ERISA Affiliate and subject to Title IV of ERISA. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means the rate of interest publicly announced by Citibank, N.A. in New York City from time to time as its base rate. "Quick Assets" means, with respect to any Guaranteed Person as of any date, the aggregate amount of Cash, accounts receivable and marketable securities of such Guaranteed Person as of such date, as the same is (or would be) reflected in a balance sheet of such Guaranteed Person as of such date. "Reconciliation Statement" means a written statement of the chief financial officer or chief accounting officer of the Company or of the Company's independent public accountants setting forth in reasonable detail (i) any changes in generally accepted accounting principles or the application thereof adopted by the Company and its Consolidated Subsidiaries from the principles applied, as so applied, in the preparation of the financial statements of the Company and its Consolidated Subsidiaries referred to in Section 4.04(a) which, under the then applicable rules and regulations of the Securities and Exchange Commission (or its successor) or the Financial Accounting Standards Board (or its successor), would be required to be disclosed in the financial statements of the Company and its Consolidated Subsidiaries (including the related notes or auditor's report), (ii) the effect of such changes on the financial statements of the Company and its Consolidated Subsidiaries and of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) delivered to the Banks concurrently with such statement and (iii) the calculations required to establish whether the covenants set forth in Sections 5.04, 5.07, 5.08, 5.09(b), 5.16, 5.17, 5.18, 5.19 and 5.20 were complied with on the date of the financial statements referred to in clause (ii), using generally accepted accounting principles, applied consistently with the audited consolidated financial statements of the Company and its Consolidated Subsidiaries referred to in Section 4.04(a). "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Refunding Borrowing" means a Committed Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Committed Loans made by any Bank to any Borrower. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Reimbursement Agreement" has the meaning specified in Section 5.13. "Restricted Funds" means restricted funds established and maintained pursuant to Title XI reserve fund and financial agreements between the Company or any of its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) and the Secretary of Transportation in accordance with Title XI of the Merchant Marine Act, 1936, as amended, and the regulations promulgated thereunder; PROVIDED that "Restricted Funds" means, for any period, the aggregate amount on deposit in Restricted Funds as so defined as of the last day of such period, as the same is reflected in a consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of such date. "Revolving Credit Period" means the period from and including the Amendment Effective Date to but excluding the Termination Date. "Sale and Leaseback Transaction" shall mean any arrangement with any Person (not including the Company or any Consolidated Subsidiary) or to which any such Person is a party, providing for the leasing by the Company or a Consolidated Subsidiary other than a Non-Recourse Subsidiary for a period, including renewals, in excess of three years of any asset which has been or is to be sold or transferred more than 180 days after the acquisition or occupancy thereof or the completion of construction and commencement of full operation thereof, whichever is later, by the Company or any Consolidated Subsidiary other than a Non-Recourse Subsidiary to such Person. "Secured Debt" has the meaning set forth in Section 5.07(b). "Secured Issuer" has the meaning set forth in Section 5.13. "Security Documents" has the meaning set forth in Section 5.12(a). "Shipping and Related Businesses" has the meaning set forth in Section 5.04. "Shipping Manager" has the meaning set forth in Section 5.04. "Short-Term Debt" means unsecured Debt of any Subsidiary of the Company (i) which matures within one year of the date of the incurrence thereof unless such maturity can be extended at the sole option of such Subsidiary to a date later than one year after the incurrence thereof and (ii) the proceeds of which are used for working capital purposes, PROVIDED that (A) such Debt is not outstanding for more than 270 days (including any extensions or renewals thereof) and (B) the aggregate principal amount of such Debt at any time outstanding does not exceed (x) $2,000,000 in the case of any Subsidiary of the Company other than OBS and OIN, (y) $15,000,000 in the case of each of OBS and OIN and (z) $20,000,000 in the aggregate for all Subsidiaries of the Company. "Subsidiary" means, with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Successor of the Shipping Manager" has the meaning set forth in Section 5.04. "Tangible Assets" has the meaning set forth in Section 5.07(b). "Tax" means any charge (whether described as a tax or duty or otherwise and whether measured by income or value or otherwise, whether collected by withholding or otherwise) imposed by a governmental authority upon this Agreement, upon or with respect to a Payment or upon any profit realized in whole or part from this Agreement, and any interest or penalty with respect to any such charge. "Termination Date" means the earliest of (i) the fifth anniversary of the Amendment Effective Date, (ii) the date that is four months after the date on which an Unapproved Takeover of the type referred to in clause (ii) of the definition thereof shall have occurred and (iii) the fifth Domestic Business Day after the date on which an Unapproved Takeover of the type referred to in clause (i) or (iii) of the definition thereof shall have occurred. "Termination Event" means (i) a "reportable event", as such term is defined in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4068(f) of ERISA, (ii) the withdrawal of the Company or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Company or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, (iii) the filing of a notice of intent to terminate a Plan under Section 4041 of ERISA or the treatment of a Plan amendment as a termination under Section 4041A of ERISA, (iv) the institution of proceedings to terminate a Plan or a Multiemployer Plan or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan. "Total Current Assets" means at any date the consolidated current assets of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) determined as of such date. "Total Current Debt" means, as of any date, all Debt of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) to the extent that such Debt is reflected as a current liability in the consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of such date. "Total Current Liabilities" means at any date (i) the consolidated current liabilities of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) plus (ii) the aggregate amount of all Guaranteed Current Liabilities of all Guaranteed Persons, all determined as of such date. "Total Debt" means at any date all Debt of the Company and its Consolidated Subsidiaries (other than Non-Recourse Debt of Non-Recourse Subsidiaries), determined on a consolidated basis as of such date. "Unapproved Acquisition" means the acquisition, directly or indirectly, by any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) including the Company or any Subsidiary or Affiliate of the Company or any combination of the foregoing of Beneficial Ownership of 25% (or such other percent as shall result in the Beneficial Ownership by such person or group of persons of 25%) or more of the outstanding securities of any Person having voting power at such time to elect a majority of the board of directors of such Person (other than any Person which prior to such acquisition was a Subsidiary of the Company), unless such acquisition has been approved by a majority of the board of directors of such Person as of the date that the Company or such Subsidiary or Affiliate or combination of the foregoing shall have first acquired 20% or more of such securities. "Unapproved Takeover" means (i) Continuing Directors no longer constitute a majority of the board of directors of the Company, (ii) the acquisition by any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) of Beneficial Ownership of 40% (or such other percent as shall result in such person or group of persons having Beneficial Ownership of 40%) or more of the outstanding securities of the Company having voting power to elect a majority of the board of directors of the Company, if a majority of the Continuing Directors shall have disapproved such acquisition; or (iii) the acquisition by any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) of Beneficial Ownership of more than 50% (or such other percent as shall result in such person or group of persons having Beneficial Ownership of more than 50%) of the outstanding securities of the Company having voting power at such time to elect a majority of the board of directors of the Company, if a majority of the Continuing Directors shall have disapproved such acquisition; PROVIDED that, for purposes of the definition of "Termination Date", an Unapproved Takeover of the type referred to in clause (ii) or (iii) shall be deemed to have occurred on the later of (x) the relevant acquisition and (y) the date on which a majority of the Continuing Directors shall disapprove such acquisition. "Uncontrolled Joint Venture" means a Joint Venture over which the Company and its Subsidiaries, collectively, do not have Control. "Unencumbered Assets" has the meaning set forth in Section 5.07(b). "Unsecured Debt" has the meaning set forth in Section 5.07(b). "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary of the Company all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. "Withdrawal Liability" shall have the meaning given to such term under Part 1 of Subtitle E of Title IV of ERISA. SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect on December 31, 1993, applied on a basis consistent (except, in the case of any financial statements delivered pursuant to Section 5.01, (x) for any change which, under the then applicable rules and regulations of the Securities and Exchange Commission (or its successor) and the Financial Accounting Standards Board (or its successor), is not required to be disclosed in the financial statements of the Company and its Consolidated Subsidiaries (including the related notes and auditor's report) or (y) for any change as to which a Reconciliation Statement is delivered concurrently with the delivery of such financial statements, in each case, as to which the Company's independent public accountants have not taken exception) with the audited consolidated financial statements of the Company and its Consolidated Subsidiaries for the fiscal year ended December 31, 1993 delivered to the Banks pursuant to Section 4.04(a); PROVIDED that at any time when, as a result of any such change in generally accepted accounting principles or the application thereof, the Company shall be required to deliver a Reconciliation Statement pursuant hereto, the Company may, by notice to the Banks, request that the Required Banks amend the financial covenants to take into account the effect of such change. Upon receipt thereof by each Bank, such Bank hereby agrees to negotiate in good faith with the Company an amendment to the financial covenants that would provide the Banks with protection equivalent (determined in good faith in the Required Banks' sole discretion) to that afforded by the financial covenants prior to such amendment; PROVIDED that no Bank shall have any obligation (other than its obligation to negotiate in good faith) to propose any such amendment or to agree to any such amendment so proposed. From and after the effective date of any such amendment, the Company shall have no further obligation hereunder to deliver a Reconciliation Statement with respect to such change. SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to a single Borrower pursuant to Article II on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS TO LEND. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to any Borrower pursuant to this Section 2.01 from time to time in amounts such that the aggregate principal amount of Loans made by such Bank pursuant to this Section 2.01 at any one time outstanding to all Borrowers shall not exceed the amount of its Commitment. Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount of the unused Commitments), and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, any Borrower may borrow under this Section 2.01, repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section 2.01. SECTION 2.02. NOTICE OF COMMITTED BORROWING. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (iv) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION. At any time that Level I, II or III Status (in each case, as defined in the Pricing Schedule) exists, any Borrower may, in addition to Committed Borrowings pursuant to Section 2.01, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower, except that no such request may be made if on the date of such request Level IV Status or Level V Status exists (each as defined in the Pricing Schedule), and no Money Market Loans may be made if on the date such Loans are to be made either Level IV Status or Level V Status exists. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B-1 hereto so as to be received no later than 10:30 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. (c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit B-2 hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 10.01 not later than 9:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); PROVIDED that Money Market Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit B-3 hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested, and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit B- 3 hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) NOTICE TO BORROWER. The Administrative Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; PROVIDED that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not, except as otherwise provided in this Agreement, thereafter be revocable by the Borrower. Notwithstanding the foregoing, no more than ten Fixed Rate Committed Borrowings shall be outstanding at any one time, and any Borrowing which would exceed such limitation shall be made as a Base Rate Borrowing. (b) Not later than 11:00 A.M. (or 1:30 P.M. in the case of a Base Rate Borrowing) (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 10.01. Unless the Administrative Agent determines that any applicable condition specified in Section 3.03 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the aforesaid address, subject to the receipt of funds by the Administrative Agent as provided in the immediately preceding sentence, not later than 2:30 P.M. (New York City time) on the date of such Borrowing, and in any event as soon as practicable after receipt. (c) If any Bank makes a new Loan hereunder to a Borrower on a day on which such Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by such Borrower and the amount being repaid shall be made available by such Bank to the Administrative Agent as provided in subsection (b) of this Section, or remitted by such Borrower to the Administrative Agent as provided in Section 2.12, as the case may be. (d) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. Nothing in this subsection (d) shall be deemed to relieve any Bank of its obligation to make Loans to the extent provided in this Agreement. SECTION 2.05. NOTES. (a) The Loans of each Bank to each Borrower shall be evidenced by a single Note of such Borrower payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to such Borrower. (b) Each Bank may, by notice to a Borrower and the Administrative Agent, request that its Loans of a particular type to such Borrower be evidenced by a separate Note of such Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Notes pursuant to Section 3.01(b), the Documentation Agent shall send by registered mail or courier or deliver by hand such Notes to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it to each Borrower and the date and amount of each payment of principal made by the Borrower with respect thereto, and shall, prior to any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; PROVIDED that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of any Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by each Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. MATURITY OF LOANS. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. INTEREST RATES. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan made on or after the Amendment Effective Date shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin applicable on such day plus the Adjusted CD Rate applicable to such Interest Period; PROVIDED that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin applicable on such day plus the Adjusted CD Rate applicable to such Loan for such day and (ii) the rate applicable to Base Rate Loans for such day. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate -------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan made on or after the Amendment Effective Date shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin applicable on such day plus the London Interbank Offered Rate applicable for such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin applicable on such day plus the London Interbank Offered Rate applicable to such Loan for such day and (ii) the Euro-Dollar Margin applicable on such day plus the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than one month as the Administrative Agent may select) deposits in Dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day). (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated hereby. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. FEES. (a) COMMITMENT FEES. The Company shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at the Commitment Fee Rate (determined daily in accordance with the Pricing Schedule) on the daily amount by which the aggregate amount of the Commitments exceeds the aggregate outstanding principal amount of the Loans. Such commitment fees shall accrue from and including the Amendment Effective Date to but excluding the Termination Date and shall be payable quarterly on each January 15, April 15, July 15 and October 15, commencing on the first such date after the Amendment Effective Date, and upon the earlier of the Termination Date or the date of termination of the Commitments in their entirety. (b) PARTICIPATION FEES. On the Amendment Effective Date, the Company shall pay to the Administrative Agent (i) for the account of each of the Co-arrangers a fee equal to .08% of such Co-arranger's Commitment and (ii) for the account of each Bank that is not a Co-arranger a fee equal to .05% of such Bank's Commitment. (c) FACILITY FEE. The Company shall pay to the Administrative Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Amendment Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date or such earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans. Accrued facility fees under this subsection (c) shall be payable quarterly on each January 15, April 15, July 15 and October 15, commencing on the first such date after the Amendment Effective Date and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.09. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The Company may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000 the unused portions of the Commitments. If the Commitments are terminated in their entirety, all accrued commitment fees shall be payable on the effective date of such termination. SECTION 2.10. SCHEDULED TERMINATION OF COMMITMENTS. The Commitments shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.11. OPTIONAL PREPAYMENTS. (a) A Borrower may, upon at least one Domestic Business Days' notice to the Administrative Agent, prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000 by paying the principal amount to be prepaid together with accrued interest thereon to but excluding the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. Upon receipt of a notice of prepayment pursuant to this subsection (a), the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. (b) A Borrower may, upon at least seven Euro-Dollar Business Days' notice to the Administrative Agent, prepay any CD Borrowing or Euro-Dollar Borrowing in whole at any time by paying the principal amount to be prepaid together with accrued interest thereon to but excluding the date of prepayment; PROVIDED that the Company shall reimburse each Bank for any loss or expense incurred by it as a result of such prepayment pursuant to Section 2.13. A Borrower may include in any notice of prepayment delivered to the Administrative Agent pursuant to this subsection (b) a request that each Bank submit to the Borrower a reasonable estimate of the amount of any loss or expense expected to be incurred by it as a result of such prepayment. Upon receipt of a notice of prepayment pursuant to this subsection (b), the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment. If a Borrower shall have requested an estimate of losses and expenses to be incurred by the Banks in connection with any prepayment pursuant to this subsection (b), then at least four Euro-Dollar Business Days prior to the date of such proposed prepayment, each Bank shall notify the Administrative Agent of the estimated amount of the losses and expenses to be incurred by such Bank; PROVIDED, HOWEVER, that no such estimate shall be binding on any Bank nor shall any such estimate or the failure to provide any such estimate by such fourth Euro-Dollar Business Day affect the obligation of the Borrower to reimburse any Bank pursuant to, and to the extent provided in, Section 2.13 for the amount of any such losses or expenses incurred as a result of such prepayment. Upon receipt of any Bank's estimate of losses or expenses pursuant to this subsection (b), the Administrative Agent shall promptly notify the Borrower of the contents thereof. Unless the Borrower notifies the Administrative Agent at least three Euro-Dollar Business Days before the date of any proposed prepayment pursuant to this subsection (b) for which a notice of prepayment has previously been given that it elects not to prepay the relevant CD Borrowing or Euro-Dollar Borrowing on such date, such notice of prepayment shall not thereafter be revocable by the Borrower. (c) Except as provided in subsection (a) of this Section, no Borrower may prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) All Payments to be made by the Borrowers shall be made not later than 11:00 A.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 10.01. The Administrative Agent will promptly distribute to each Bank its ratable share of each such Payment received by the Administrative Agent for the account of the Banks. (b) Whenever any Payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any Payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day, unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any Payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any Payment of principal, interest, fees or other amounts payable hereunder is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (c) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any Payment is due from such Borrower to the Banks hereunder that such Borrower will not make such Payment in full, the Administrative Agent may assume that such Borrower has made such Payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank from such Borrower. If and to the extent that such Borrower shall not have so made such Payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.13. FUNDING LOSSES. If (x) a Borrower makes any Payment of principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or VIII or clause (ii) or (iii) of the definition of Termination Date or otherwise) or (y) any Assignee purchases the Notes of any Bank pursuant to Section 2.17(c) or 8.05 in either case on any day other than the last day of the Interest Period applicable thereto or to any Loan evidenced by such Notes, as the case may be (or, in the case of clause (x), on any day other than the end of an applicable period fixed pursuant to Section 2.07(d)), or, in the case of any Payment pursuant to clause (ii) or (iii) of the definition of Termination Date, on any day other than the last day of the Interest Period applicable thereto (determined, for this sentence only, as if the definition of Termination Date did not contain either such clause) or if a Borrower fails to borrow or prepay any Fixed Rate Loans then, in each case, after notice has been given to any Bank in accordance with Section 2.04(a) or 2.11, such Borrower shall reimburse each Bank (or the transferor Bank in the case of a purchase of the Notes thereof pursuant to Section 2.17(c) or 8.05) within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, PROVIDED that such Bank shall have delivered to such Borrower a certificate in reasonable detail as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the Prime Rate and commitment and facility fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. REGULATION D COMPENSATION. For so long as any Bank maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of such Bank to United States residents), and as a result the cost to such Bank (or its Euro-Dollar Lending Office) of making or maintaining any of its Euro-Dollar Loans is increased, then such Bank may require the Borrower of such Euro-Dollar Loans to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans of such Borrower, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one MINUS the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify such Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least five Euro-Dollar Business Days after the giving of such notice and (y) shall furnish to such Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans an officer's certificate setting forth the amount to which such Bank is then entitled under this Section 2.15 (which amount shall be consistent with such Bank's good faith estimate of the level at which the related reserves are maintained by it and with any such amounts required by such Bank to be paid by similarly situated borrowers which are parties to credit or loan documentation containing a provision similar to this Section 2.15). Each such certificate shall be accompanied by such information as such Borrower may reasonably request as to the computation set forth therein. SECTION 2.16. JUDGMENT CURRENCY. If for the purposes of obtaining judgment in any court (including the entry thereof), it is necessary to convert a Payment due from any Borrower hereunder or under the Notes in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at the Administrative Agent's New York office on the Domestic Business Day preceding that on which final judgment is given. The obligations of each Borrower in respect of any sum due to any Bank or either Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Domestic Business Day following receipt by such Bank or such Agent, as the case may be, of any sum adjudged to be so due in such other currency such Bank or such Agent, as the case may be, may in accordance with normal banking procedures purchase Dollars with such other currency; if the amount of Dollars so purchased is less than the sum originally due to such Bank or such Agent, as the case may be, in Dollars, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or such Agent, as the case may be, against such loss, and if the amount of Dollars so purchased exceeds the sum originally due to such Bank or such Agent, as the case may be, in Dollars, such Bank or such Agent, as the case may be, agrees to remit such excess to the appropriate Borrower. SECTION 2.17. WITHHOLDING TAX EXEMPTION. (a) On or prior to the Amendment Effective Date, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Company and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Bank is entitled to receive Payments without deduction or withholding of any United States federal income tax. Each Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Administrative Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Administrative Agent, in each case certifying that such Bank is entitled to receive Payments without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank advises the Company and the Administrative Agent that it is not capable of receiving Payments without any deduction or withholding of United States federal income tax. (b) If at any time the Applicable Lending Office of any Bank becomes unable to receive any Payment without deduction or withholding of United States federal income tax, such Bank shall thereupon designate as its Applicable Lending Office one of its offices (if any) which can receive all Payments thereafter due to it without withholding or deduction for United States federal income tax if such Bank can, in its judgment, do so without suffering any disadvantage. (c) If no designation pursuant to subsection (b) of this Section will result at the time of designation in the designating Bank being able to receive all Payments thereafter due to it without deduction or withholding of United States federal income tax, the Company shall have the right, upon 20 Business Days' prior notice to such Bank, to cause one or more banks (which may be one or more of the Banks), each such bank (except any Bank) to be reasonably satisfactory to the Required Banks (determined for this purpose as if such Bank had no Commitment and held no Notes hereunder) and, in each case, with the written acknowledgement of the Administrative Agent, to purchase the Notes and assume the Commitment of the transferor Bank pursuant to an Assignment and Assumption Agreement, in substantially the form of Exhibit D hereto (an "Assignment and Assumption Agreement"). If one or more such banks are identified by the Company and, if required pursuant to this subsection (c), approved as being reasonably satisfactory to the Required Banks (determined as provided above), the transferor Bank shall consent to such sale and assumption by executing and delivering an Assignment and Assumption Agreement. Upon execution and delivery of an Assignment and Assumption Agreement by the Company, the transferor Bank, the Assignee, the Administrative Agent and, if required pursuant to this subsection (c), the Required Banks (determined as provided above) and payment by the Assignee to the transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall become a Bank party to this Agreement (if it is not already a party hereto) and shall have all the rights and obligations of a Bank with a Commitment (which, if such Assignee is already a party hereto, shall take into account such Assignee's then existing Commitment hereunder) as set forth in such Assignment and Assumption Agreement and the transferor Bank shall be released from its obligations hereunder and no further consent or action by any other Person shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In the event that the Administrative Agent, in its capacity as a Bank, is required to sell its Note or Notes and its Commitment hereunder pursuant to this subsection (c), the Administrative Agent shall, promptly upon the consummation of any assignment by it pursuant to this subsection (c), resign as Administrative Agent hereunder and the Company shall (subject to the consent of the Required Banks) have the right to appoint another Co-arranger as successor Administrative Agent, all in accordance with Section 7.08. (d) Each Bank that is required to deliver a Form 1001 or 4224 pursuant to subsection (a) of this Section or Section 10.05(d) hereby indemnifies each Borrower and the Administrative Agent and holds each Borrower and the Administrative Agent harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, any Tax and the reasonable fees and disbursements of counsel, which may be incurred by such Borrower or the Administrative Agent, as the case may be, in connection with, or arising out of, any action taken, or omitted to be taken, by it in good faith and in reliance on any erroneous information provided by such Bank in such Form or Forms so delivered. SECTION 2.18. TAXES. (a) Each Payment by each Borrower shall be made without deduction or withholding of any Foreign Tax, PROVIDED that if a Borrower is required by law to deduct or withhold a Foreign Tax from a Payment, it will: (i) pay, together with that first Payment, a second Payment sufficient to ensure that the sum of the two Payments, after all withholdings and deductions from both, will be equal to the amount of the first Payment originally provided for in this Agreement; (ii) pay the full amount deducted or withheld from both Payments to the relevant taxation or other authorities within the time allowed under applicable law; and (iii) furnish within 45 days thereafter to the Administrative Agent, the official receipt or receipts from the relevant taxation or other authorities for the full amount so deducted or withheld or other documentary evidence of the deduction or withholding reasonably satisfactory to the Bank to which such Payments were made. (b) Each Borrower will pay (i) any Foreign Tax imposed on a Bank, other than by deduction or withholding, and (ii) any Domestic Tax imposed on a Bank, in each case, to the extent that such Tax results from such Bank receiving or becoming entitled to reimbursement from such Borrower pursuant to this Section 2.18. Each Borrower shall furnish to the Administrative Agent, within 45 days after any payment pursuant to this subsection (b), the official receipt or receipts from the relevant taxation or other authorities for the full amount of any Foreign Tax so paid or other documentary evidence of such payment reasonably satisfactory to such Bank. If any Tax to be paid by a Borrower pursuant to this Section 2.18 is imposed on and paid by any Bank, such Borrower shall, upon the request of such Bank and whether or not such Tax shall have been correctly or legally imposed, reimburse such Bank therefor (together with any expenses reasonably incurred by such Bank in connection therewith in any contest thereof requested by such Borrower) plus interest thereon at the rate applicable to Base Rate Loans pursuant to the first sentence of Section 2.07(a). If any Bank reimbursed by a Borrower pursuant to this subsection (b) thereafter receives any amount with respect to a Tax for which it has been so reimbursed such Bank shall thereupon pay such amount over to such Borrower (without interest except to the extent that such Bank receives interest with respect to a repayment or refund of such Tax) to the extent such amount was received by such Bank because such Tax was erroneously imposed. (c) OIN agrees not to designate any Borrowing pursuant to this Agreement as a liability of a trade or business conducted within the United States pursuant to the amendments to Section 1.884-4T(b)(1)(i)(B) of the regulations under Section 884 of the Internal Revenue Code described in Section I, Part 2 of Notice 89-80 dated July 6, 1989 issued by the United States Internal Revenue Service or pursuant to any other statute, regulation or administrative ruling permitting such a designation. ARTICLE III CONDITIONS SECTION 3.01. EFFECTIVENESS. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 10.04): (a) receipt by the Documentation Agent of counterparts of this Amended Agreement signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Documentation Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of the execution of a counterpart of this Amended Agreement by such party); (b) receipt by the Documentation Agent for the account of each Bank of a duly executed Note of each Borrower dated on or before the Amendment Effective Date complying with the provisions of Section 2.05; (c) receipt by the Documentation Agent of an opinion of Proskauer Rose Goetz & Mendelsohn, special counsel for the Borrowers, dated the Amendment Effective Date and addressed to the Banks and the Agents, substantially in the form of Exhibit C-1 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Documentation Agent of an opinion of Samuel M. Rosenbloom, Esq., Senior Vice President of Maritime Overseas Corporation and counsel for the Borrowers, dated the Amendment Effective Date and addressed to the Banks and the Agents, substantially in the form of Exhibit C-2 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (e) receipt by the Documentation Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agents, dated the Amendment Effective Date and addressed to the Banks and the Agents, substantially in the form of Exhibit C-3 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (f) the fact that (i) no Default (as defined in the Existing Agreement) and no Default (as defined in this Amended Agreement) shall have occurred and be continuing and (ii) the representations and warranties of the Borrowers contained in this Amended Agreement shall be true on and as of the Amendment Effective Date and the Documentation Agent shall have received certificates signed by the President or the chief financial officer or chief accounting officer of each of the Borrowers, dated the Amendment Effective Date, to the effect of the foregoing; (g) receipt by the Administrative Agent on or prior to the Amendment Effective Date for the account of the Co-arrangers and the other Banks, of the fees payable under Section 2.08(b); (h) receipt by the Documentation Agent of a duly executed copy of the acceptance by North American Ship Agencies, Inc. of its appointment as agent for service of process for OIN pursuant to Section 10.07 dated on or prior to the Amendment Effective Date, in substantially the form of Exhibit E hereto; (i) receipt by the Documentation Agent of confirmation from each of the Company and the Administrative Agent of receipt by it of the forms, if any, required to be delivered under Section 2.17 on or prior to the Amendment Effective Date; (j) the fact that on the Amendment Effective Date the principal amount of, and accrued interest on, all outstanding loans under the Existing Agreement and all other amounts payable by the Company and its Subsidiaries and Affiliates thereunder shall have been paid in full, the commitment of each bank or other lender thereunder shall have been terminated and the Administrative Agent shall have received a certificate signed by the President or chief financial officer or chief accounting officer of the Company as to the foregoing (it being understood that satisfaction of this condition (j) may occur simultaneously with the first Borrowing hereunder if all other conditions contained in this Section 3.01 and in Section 3.03 are first satisfied); (k) receipt by the Administrative Agent of evidence satisfactory to it of the existence and effectiveness of the insurance required to be maintained by the Company, its Subsidiaries and its Joint Ventures (other than Uncontrolled Joint Ventures) pursuant to the last sentence of Section 5.03(b); (l) receipt by each Bank at least three Domestic Business Days prior to the Amendment Effective Date of a copy of the Note Agreement referred to in the definition of "Attributable Debt" contained in Section 1.01 hereof, certified as to the accuracy and completeness thereof by the Secretary or an Assistant Secretary of the Borrower; and (m) receipt by the Documentation Agent of all documents, opinions and other instruments it may reasonably request relating to the existence of each of the Borrowers, the corporate authority for and the validity and enforceability of this Amended Agreement and the Notes and any other matters relevant hereto, all in form and substance satisfactory to the Documentation Agent; PROVIDED that this Amended Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than November 22, 1994. The Documentation Agent shall promptly notify the Borrowers, the Banks and the Administrative Agent of the Amendment Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. CONSEQUENCES OF EFFECTIVENESS. (a) On the Amendment Effective Date the Existing Agreement will be automatically amended to read as this Amended Agreement reads. (b) On and after the Amendment Effective Date, the rights and obligations of the parties hereto shall be governed by the provisions of this Amended Agreement, and the rights and obligations of the parties under the Existing Agreement with respect to the period prior to the Amendment Effective Date shall continue to be governed by the provisions thereof as in effect prior to the Amendment Effective Date except that (i) all loans outstanding under the Existing Agreement shall be due and payable on the Amendment Effective Date, (ii) all interest and commitment fees accrued to but not including the Amendment Effective Date and all other amounts owing by the Borrowers or any of them under the Existing Agreement shall be due and payable on the Amendment Effective Date and (iii) the commitment of each non-continuing bank under the Existing Agreement shall terminate on the Amendment Effective Date. SECTION 3.03. BORROWINGS. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrowers contained in this Agreement (except, in the case of a Refunding Borrowing, the representations and warranties set forth in Sections 4.04(f) and 4.05 as to any matter which has theretofore been disclosed in writing by the Company to the Banks) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrowers jointly and severally represent and warrant that: SECTION 4.01. CORPORATE EXISTENCE AND POWER. Each of the Borrowers is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by each Borrower of this Agreement and its Notes are within such Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with (except for disclosure in periodic filings made by the Company with the Securities and Exchange Commission), any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Borrower or any of its assets or result in the creation or imposition of any Lien on any asset of such Borrower or any of its Subsidiaries. SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of each Borrower and the Notes of each Borrower, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of such Borrower, in each case enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally or by equitable principles of general applicability. SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of income and retained earnings and cash flows for the fiscal year then ended, reported on by Ernst & Young and set forth in the Company's 1993 Form 10-K, a copy of which has been delivered to each of the Banks, present fairly, in all material respects in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheets of the Company and its Consolidated Subsidiaries as of March 31, 1994 and June 30, 1994 and the related unaudited consolidated statements of income and retained earnings and cash flows for the periods then ended, set forth in the Company's quarterly reports for the respective Fiscal Quarters then ended, as filed with the Securities and Exchange Commission on Form 10-Q, copies of which have been delivered to each of the Banks, present fairly, in all material respects in conformity with all applicable rules and regulations promulgated by the Securities and Exchange Commission with respect to interim financial statements, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods (subject to normal year-end adjustments). (c) The unaudited consolidated balance sheet of OBS and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of income and retained earnings and cash flows for the fiscal year then ended, copies of which have been delivered to each of the Banks, have been derived on a reasonable basis from the consolidated financial statements of the Company and its Consolidated Subsidiaries referred to in subsection (a) above and, except for the omission of footnotes, present fairly, in all material respects in conformity with generally accepted accounting principles, the consolidated financial position of OBS and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (d) The unaudited consolidated balance sheet of OIN and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of income and retained earnings and cash flows for the fiscal year then ended, copies of which have been delivered to each of the Banks, have been derived on a reasonable basis from the consolidated financial statements of the Company and its Consolidated Subsidiaries referred to in subsection (a) above and, except for the omission of footnotes, present fairly, in all material respects in conformity with generally accepted accounting principles, the consolidated financial position of OIN and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (e) As of December 31, 1993 and the Amendment Effective Date, there are no Guaranteed Persons. (f) Since June 30, 1994, there has been no Material Adverse Change. SECTION 4.05. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of any of the Borrowers threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could result in a Material Adverse Change or which in any manner draws into question the validity or enforceability of this Agreement or any of the Notes. SECTION 4.06. COMPLIANCE WITH ERISA. Neither any member of the ERISA Group nor any ERISA Affiliate, individually or collectively, has incurred, or reasonably expects to incur, Withdrawal Liabilities or liabilities upon the happening of a Termination Event the aggregate of which for all such Withdrawal Liabilities and other liabilities exceeds or would exceed $30,000,000. With respect to any Plan, neither the Company nor any ERISA Affiliate is aware of or has been notified that any "variance" from the "minimum funding standard" has been requested (each such term as defined in Part 3, Subtitle B, of Title I of ERISA). No member of the ERISA Group nor any ERISA Affiliate has received any notice that any Multiemployer Plan is in reorganization, within the meaning of Title IV of ERISA, which reorganization could have a material adverse effect on the consolidated financial condition of the Company and its Consolidated Subsidiaries, taken as a whole. SECTION 4.07. ENVIRONMENTAL MATTERS. The Company and each of its Subsidiaries is in compliance with all applicable Environmental Laws, except where non-compliance with such Environmental Laws could not have a material adverse effect on the consolidated financial condition of the Company and its Consolidated Subsidiaries, taken as a whole, after taking into account any insurance coverage available to the Company or any of its Subsidiaries under existing policies with respect to any potential liability resulting from such non-compliance. SECTION 4.08. TAXES. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1980. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all material taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary of the Company, other than taxes which are being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate in all material respects. SECTION 4.09. SUBSIDIARIES. (a) Each of the Company's corporate Material Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. (b) There are no Non-Recourse Subsidiaries as of the Amendment Effective Date. SECTION 4.10. NOT AN INVESTMENT COMPANY. None of the Borrowers is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. ARTICLE V COVENANTS The Borrowers jointly and severally agree that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. INFORMATION. The Company (or, in the case of clauses (g), (k) and (l) below, each Borrower) will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Company, (i) a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and retained earnings and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, complying in all material respects with all applicable rules and regulations promulgated by the Securities and Exchange Commission, all reported on by Ernst & Young or other independent public accountants of nationally recognized standing and (ii) an unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of the end of such fiscal year and the related unaudited consolidated statements of income and retained earnings and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, together with a letter from the independent public accountants referred to in the foregoing clause (i) confirming the mathematical accuracy of such financial statements and the derivation thereof on a reasonable basis from the audited financial statements referred to in clause (i); (b) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each fiscal year of the Company (i) an unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and retained earnings and cash flows for such Fiscal Quarter and for the portion of the Company's fiscal year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation and compliance in all material respects with all applicable rules and regulations of the Securities and Exchange Commission with respect to interim financial statements and consistency by the chief financial officer or the chief accounting officer of the Company and (ii) an unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and retained earnings and cash flows for such Fiscal Quarter and for the portion of the Company's fiscal year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the Company's previous fiscal year, together with a certificate of the chief financial officer or chief accounting officer of the Company as to the derivation of such financial statements from the financial statements referred to in clause (i) of this subsection (b); (c) as soon as available and in any event within 150 days after the end of each fiscal year of the Company, an unaudited consolidated balance sheet of OBS and its Consolidated Subsidiaries and an unaudited consolidated balance sheet of OIN and its Consolidated Subsidiaries, in each case as of the end of such fiscal year, and the related unaudited consolidated statements of income and retained earnings and cash flows for such fiscal year, all in reasonable detail and certified as to derivation on a reasonable basis from the consolidated financial statements of the Company and its Consolidated Subsidiaries referred to in clause (a)(i) and, except for the omission of footnotes, fairness of presentation and conformity in all material respects with generally accepted accounting principles by the chief financial officer or chief accounting officer of OBS or OIN, as the case may be; (d) (i) as soon as available and in any event within 120 days after the end of each fiscal year of each Guaranteed Person, an audited balance sheet of such Guaranteed Person as of the end of such fiscal year, reported on by independent public accountants of nationally recognized standing or, if such Guaranteed Person does not regularly prepare an audited balance sheet in the ordinary course of its business, an unaudited balance sheet of such Guaranteed Person as of the end of such fiscal year, together with a certificate of the chief financial officer or chief accounting officer of the Company to the effect that (x) in the case of any Guaranteed Person, the books and records of which are maintained by, and the financial statements of which are prepared by, the Company, any Subsidiary of the Company or any Joint Venture (other than an Uncontrolled Joint Venture) or the Shipping Manager or any Successor of the Shipping Manager, in either case acting as agent for the Company or any Subsidiary of the Company, such balance sheet presents fairly, in all material respects in conformity with generally accepted accounting principles consistently applied, the financial position of such Guaranteed Person as of the end of such fiscal year and (y) in any other case, none of the Borrowers has any actual knowledge that such balance sheet does not present fairly, in all material respects in conformity with generally accepted accounting principles consistently applied, the financial position of such Guaranteed Person as of the end of such fiscal year and (ii) as soon as practicable and in any event within 60 days after the end of each fiscal quarter of each Guaranteed Person, a certificate of the chief financial officer or chief accounting officer of the Company setting forth in reasonable detail the amounts and calculations required to determine the amount of Guaranteed Current Liabilities of such Guaranteed Person as of the last day of such fiscal quarter; (e) simultaneously with the delivery of each set of financial statements referred to in clauses (a)(i) and (b)(i) above, a certificate of the Company executed by its chief financial officer or chief accounting officer (i) setting forth in reasonable detail the calculations required to establish whether the covenants set forth in Sections 5.07, 5.08, 5.09(b), 5.16, 5.17, 5.18, 5.19 and 5.20 were complied with on the date of such financial statements, (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto and (iii) (x) if the Company or any Subsidiary of the Company has made any Investment in any Non-Shipping Person equal to or greater than $10,000,000 or any purchase or other acquisition of any Non-Shipping Asset or Non-Shipping Assets having an aggregate purchase price equal to or greater than $10,000,000, in each case, in one transaction or a series of related transactions during the Fiscal Quarter ended on the date of such financial statements, setting forth in reasonable detail, to the extent required to establish whether the covenant set forth in the first sentence of Section 5.04 was complied with on the date of the last such Investment, purchase or acquisition made during such Fiscal Quarter, the applicable pro forma adjustments to the consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of the preceding Fiscal Quarter, reflecting the consummation of such last transaction (and any other purchases or acquisitions of Non-Shipping Assets and Investments in Non-Shipping Persons that shall have occurred after the date of such consolidated balance sheet and on or prior to the date of such last transaction) or (y) if neither the Company nor any Subsidiary of the Company has made an Investment, purchase or other acquisition described in subclause (x) of this clause (iii) during such Fiscal Quarter, stating the foregoing; (f) simultaneously with the delivery of each set of financial statements referred to in clause (a)(i) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that the Company and its Subsidiaries were not in compliance with any of the covenants set forth in Section 5.07, 5.08, 5.09(b), 5.16, 5.17, 5.18, 5.19 or 5.20 on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (e) above or, with respect to the calculations required to derive the amount referred to in the covenants set forth in Section 5.17, verifying the mathematical accuracy of such calculations and comparing Consolidated Net Income for each of the relevant Fiscal Quarters with the consolidated income statement of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such Fiscal Quarter; (g) within three Domestic Business Days after the date on which any executive officer of any Borrower obtains knowledge of (i) any Default, if such Default is then continuing, (ii) a Material Adverse Change or any action, suit or proceeding of the type referred to in Section 4.05 or (iii) an Unapproved Takeover, a certificate of the chief financial officer or the chief accounting officer of such Borrower setting forth the details thereof and the action which such Borrower is taking or proposes to take with respect thereto; (h) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (i) promptly (x) upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company shall have filed with the Securities and Exchange Commission and (y) upon receipt thereof, copies of each Schedule 13D or Schedule 13G (or any successor form) or any amendment thereto disclosing the acquisition by any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) of Beneficial Ownership of 5% (or such other percent as shall result in such person or group of persons having Beneficial Ownership of 5%) or more of any class of equity securities of the Company or any of its Subsidiaries or Affiliates which is registered pursuant to Section 12 of the Exchange Act; (j) as soon as possible, (i) copies of all reports and notices which the Company or any of its Subsidiaries files under ERISA with the Internal Revenue Service or the PBGC or the U.S. Department of Labor or the sponsor of a Multiemployer Plan or which the Company or any of its Subsidiaries receives from the PBGC or the sponsor of a Multiemployer Plan relating to (a) any Termination Event and (b) with respect to a Multiemployer Plan, any Withdrawal Liability, any actual or expected reorganization (within the meaning of Title IV of ERISA), any termination of a Multiemployer Plan (within the meaning of Title IV of ERISA) and (ii) a certificate of the chief financial officer or chief accounting officer of the Company setting forth in reasonable detail the calculation of the amount (to the extent then reasonably determinable) of any liability in connection with the foregoing; (k) at least 10 Domestic Business Days prior to (i) any consolidation or merger of or with the Company, OBS or OIN or (ii) any sale, lease (other than chartering in the ordinary course of business, which shall not include bareboat chartering for periods in excess of 10 years) or other transfer (including without limitation by means of a merger or consolidation of any Subsidiary of the Company (other than OBS and OIN) with or into any other Person) of all or substantially all of the assets of the Company and its Consolidated Subsidiaries, considered as a whole, notice thereof, which notice shall describe in reasonable detail the contemplated consolidation, merger, sale, lease or other transfer; (l) promptly after any officer of the Company becomes aware of any change in the rating by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group of the Company's publicly-traded senior unsecured long-term debt securities, notice of such change; and (m) from time to time such additional information regarding the financial position, results of operations, business or prospects of the Company and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 5.02. PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and will cause each of its Material Subsidiaries to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each of its Subsidiaries to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep, and will cause each of its Material Subsidiaries to keep, all material property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Company will maintain, will cause each of its Subsidiaries and each Joint Venture (other than any Uncontrolled Joint Venture) to maintain, and will use reasonable efforts to cause each Uncontrolled Joint Venture to maintain, with financially sound and reputable insurance companies (which may include protection and indemnity clubs) (i) in the case of the Company or any Subsidiary of the Company or any Joint Venture which engages in any oil or oil-related business (including any business in products related to oil), including without limitation, owning, leasing or chartering any ship engaged in the transport of oil or related products, oil pollution insurance covering risks in amounts up to and including $700,000,000 or, if such insurance is not available at reasonable cost after taking into account the level of exposure to which the Company, its Subsidiaries and Joint Ventures may be subject, such other amount as is usually insured against by companies of established repute engaged in the same or similar business from time to time and (ii) such other insurance on all their respective properties and against all such risks in at least such amounts as are usually insured against by companies of established repute engaged in the same or similar business from time to time. The Company will furnish to the Administrative Agent on or prior to the Amendment Effective Date and annually thereafter documentation from an independent insurance broker evidencing the insurance required to be maintained hereunder in such form as is satisfactory to the Required Banks. SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. None of the Company, OBS and OIN shall, and the Company shall not permit any of its Subsidiaries to (i) purchase or otherwise acquire any Non-Shipping Asset or Non-Shipping Assets or (ii) make any Investment in any Non-Shipping Person, unless immediately after such purchase, acquisition or Investment not less than 60% of Consolidated Defined Assets of the Company will be employed in Shipping and Related Businesses; PROVIDED that, for purposes of this Section only, "Investment" shall not include (x) the provision of goods or services to or on behalf of an Affiliate of the provider, (y) the Guarantee of any Debt, PROVIDED, HOWEVER, that any payment pursuant to any such Guarantee shall constitute an Investment for purposes of this Agreement or (z) any Investment in marketable securities of a Non-Shipping Person which, in accordance with generally accepted accounting principles, would not be accounted for by the equity method of accounting. Not less than 66 2/3% of Consolidated Defined Assets of the Company so employed will at all times be managed by the Company, any Subsidiary of the Company, the Shipping Manager, any Subsidiary of the Shipping Manager, any Successor of the Shipping Manager, one or more other shipping management companies reasonably acceptable to the Required Banks or any combination of the foregoing. For the purposes of this Section 5.04, (a) "Consolidated Defined Assets" means, as of any date as of which a determination is to be made (a "Determination Date"), with respect to any Person, all assets of such Person and its Consolidated Subsidiaries other than cash (including interest-bearing deposits with maturities of less than one year) or investments in marketable securities, as reflected (i) if such Person is the Company, in the consolidated balance sheet of the Company and its Consolidated Subsidiaries most recently delivered to the Banks pursuant to Section 4.04 or 5.01, as the case may be, adjusted on a pro forma basis to reflect the consummation of the transaction referred to in clause (i) or (ii), as the case may be, of the first sentence of this Section (and any other such transactions that shall have occurred after the date of such consolidated balance sheet and on or prior to such Determination Date) as if such transaction (and any such other transactions) had occurred on the date of such balance sheet and (ii) in the case of any Person other than the Company, in the most recent audited consolidated balance sheet of such Person and its Consolidated Subsidiaries, which shall be as of a date not earlier than 15 months prior to the date of any Investment by the Company or any Subsidiary of the Company in such Person (or, if no such audited consolidated balance sheet shall be available, the most recent unaudited consolidated balance sheet of such Person and its Consolidated Subsidiaries, which shall be as of a date not earlier than 15 months prior to the date of such Investment) and which shall, in either case, be delivered by the Company to each of the Banks on or prior to the date on which the Company is required to deliver any certificate referred to in Section 5.01(e)(iii); (b) any assets (or portion thereof) of a Joint Venture that are reflected on the consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries) shall be deemed to be "managed" by the Company if the Company has the power to elect or appoint 50% of the board of directors (or other persons performing similar functions) of such Joint Venture; (c) "Shipping Manager" means the principal company that, as of October 31, 1994, is acting as agent for the Company and its Subsidiaries in respect of ships owned, leased or chartered by, and is providing substantially all of the general and administrative services to, the Company and its Subsidiaries; (d) "Successor of the Shipping Manager" means, any Person if, for the period of two years after the date of formation of such Person, all or substantially all of the executive officers and directors were executive officers or directors, as the case may be, of the Shipping Manager immediately prior to the formation of such Person except any executive officer or director who shall have been appointed or elected to such position as a result of any death, disability, retirement or incapacity of any such executive officer or director; (e) "Non-Shipping Person" means, at any time, any Person less than 60% of the Consolidated Defined Assets of which are employed in Shipping and Related Businesses at such time; (f) "Non-Shipping Asset" means (i) a capital asset or (ii) an asset other than a capital asset which, together with any other such assets purchased in one transaction or a series of related transactions, has an aggregate purchase price in excess of $2,500,000, other than (x) cash (including interest-bearing deposits with maturities of less than one year), (y) an investment in marketable securities and (z) any asset employed regularly in Shipping and Related Businesses; and (g) "Shipping and Related Businesses" means any or all of the following: owning, chartering, leasing, crewing, navigating, managing, supplying, operating, building or repairing commercial vessels of all kinds, including but not limited to cargo ships, liners, container ships, passenger vessels, fishing vessels, dredges, submersible and semi-submersible platforms, tugs, barges and ferries; owning, operating or managing transportation assets ancillary to or in furtherance of the transportation of freight and passengers by water; owning, operating or managing warehouses, terminals and other facilities of any kind incidental or ancillary to or in furtherance of the transportation of freight and passengers by water; owning, managing or operating pipelines, terminals, docks, piers, quays, wharves, dry docks, storage facilities and port facilities incidental or ancillary to or in furtherance of the transportation of freight and passengers by water. SECTION 5.05. COMPLIANCE WITH LAWS. The Company will comply, and cause each of its Subsidiaries to comply, in all respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the failure so to comply could not reasonably be expected to result in a Material Adverse Change or where the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. BOOKS AND RECORDS. The Company will keep, and will cause each of its Material Subsidiaries to keep, proper books of record and account in which full, true and correct entries shall be made of all material dealings and transactions in relation to its business and activities. SECTION 5.07. NEGATIVE PLEDGE; MINIMUM UNENCUMBERED ASSETS TO UNSECURED DEBT RATIO. (a) Neither the Company nor any Subsidiary of the Company will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (i) Liens securing Debt of the Company and its Subsidiaries set forth in Schedule 1 hereto, PROVIDED that no such Debt may be extended, renewed, refinanced with secured Debt, increased in amount or secured by additional assets without the consent of the Required Banks; (ii) Liens on any asset acquired after October 31, 1994 from Persons other than the Company or any of its Subsidiaries securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, PROVIDED that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof; (iii) Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivatives Obligations and (ii) do not, individually or in the aggregate, materially detract from the value of the assets of the Company and its Subsidiaries, taken as a whole, or materially impair the use thereof in the operation of the business of the Company and its Subsidiaries, taken as a whole; (iv) Liens on amounts required to be deposited in Restricted Funds pursuant to Title XI reserve fund and financial agreements between the Company or any of its Subsidiaries and the Secretary of Transportation in accordance with Title XI of the Merchant Marine Act, 1936, as amended, and the regulations promulgated thereunder; (v) Liens on assets of Non-Recourse Subsidiaries securing Non-Recourse Debt thereof; (vi) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary of the Company or becomes a Subsidiary of the Company and not created in contemplation of such event; (vii) any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary of the Company and not created in contemplation of such acquisition; (viii) Liens on cash and cash equivalents securing Derivatives Obligations; and (ix) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $20,000,000; PROVIDED that, immediately after giving effect to the creation or assumption of any such Lien, the sum, without duplication, of (x) the aggregate principal amount of Debt of the Company and its Subsidiaries (other than Non-Recourse Debt of a Non-Recourse Subsidiary) secured by Permitted Liens and (y) the aggregate principal amount of Debt of Subsidiaries of the Company (other than Excluded Subsidiary Debt) shall not exceed the Maximum Amount. (b) The ratio of Unencumbered Assets to Unsecured Debt will not at any time be less than 1.5 to 1. For purposes of this subsection (b), (i) "Unencumbered Assets" means, as of any date, Tangible Assets (excluding any assets which consist of shares of stock of Subsidiaries (other than Non-Recourse Subsidiaries) of the Company which have been pledged to secure any obligations) LESS the sum of (i) Attributable Debt and (without duplication) (ii) the book value of all assets of the Company and its Subsidiaries (other than Non- Recourse Subsidiaries) which are subject to a Lien securing Secured Debt; (ii) "Tangible Assets" means, as of any date, the aggregate book value of all assets (except Intangible Assets) of the Company and its Subsidiaries (other than Non- Recourse Subsidiaries), LESS depreciation, depletion and other properly deductible valuation reserves; (iii) "Secured Debt" means, as of any date, Debt of the Company or a Subsidiary of the Company (other than a Non- Recourse Subsidiary) which is secured by a Lien on any of the property or assets of the Company or any Subsidiary of the Company (other than a Non-Recourse Subsidiary), but only up to the fair value of such property or assets at the time such Debt was initially incurred PROVIDED that no letter of credit, letter of guarantee or other similar instrument shall constitute Debt for purposes of this Section 5.07(b) unless a drawing thereunder is not reimbursed on the date of such drawing; and (iv) "Unsecured Debt" means, as of any date, all Debt of the Company and its Subsidiaries (other than Non-Recourse Subsidiaries) as of such date other than Secured Debt PROVIDED that no letter of credit, letter of guarantee or other similar instrument shall constitute Debt for purposes of this Section 5.07(b) unless a drawing thereunder is not reimbursed on the date of such drawing. SECTION 5.08. COMPANY DEBT. The Company will not issue, incur, assume or Guarantee any Debt secured by Permitted Liens if, immediately after giving effect thereto, the sum, without duplication, of (x) the aggregate principal amount of Debt of the Company and its Subsidiaries (other than Non-Recourse Debt of Non-Recourse Subsidiaries) secured by Permitted Liens and (y) the aggregate principal amount of Debt of Subsidiaries (other than Excluded Subsidiary Debt) shall exceed the Maximum Amount. SECTION 5.09. SUBSIDIARY DEBT. (a) Neither OBS nor OIN will, and the Company will not permit any of its Subsidiaries to, issue, incur, assume or Guarantee any Debt other than (i) Debt to the Banks hereunder, (ii) Debt incurred for the purpose of financing all or any part of the cost of acquiring any asset from any Person (other than the Company or any of its Subsidiaries or any of their respective Affiliates), PROVIDED that such Debt is incurred concurrently with or within 180 days after the acquisition thereof, (iii) Non-Recourse Debt of Non-Recourse Subsidiaries, (iv) Debt of Subsidiaries of the Company (other than Non-Recourse Subsidiaries) to the Company or any of its Subsidiaries (other than Non-Recourse Subsidiaries) and (v) Short-Term Debt. (b) Neither OBS nor OIN will, and the Company will not permit any of its Subsidiaries to, issue, incur, assume or Guarantee any Debt (other than Excluded Subsidiary Debt which, in the case of any such Debt other than Non-Recourse Debt, is not secured), including, without limitation, Debt referred to in subsection (a) if, immediately after giving effect thereto, the sum, without duplication, of (x) the aggregate principal amount of Debt of all Subsidiaries of the Company (other than Excluded Subsidiary Debt) and (y) Debt of the Company and its Subsidiaries (other than Non-Recourse Debt of Non-Recourse Subsidiaries) secured by Permitted Liens shall exceed the Maximum Amount. SECTION 5.10. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. (a) None of the Company, OBS or OIN will consolidate or merge with or into any other Person and (b) none of the Company, OBS or OIN will, and the Company will not permit any of its Subsidiaries (other than OBS and OIN) to, sell, lease (other than chartering in the ordinary course of business, which shall not include bareboat chartering for periods in excess of 10 years) or otherwise transfer, directly or indirectly, including without limitation by means of a merger or consolidation of any Subsidiary of the Company (other than OBS or OIN) with or into any other Person, all or substantially all of the assets of the Company and its Consolidated Subsidiaries, considered as a whole, to any other Person, unless (x) (i) in the case of any such consolidation, merger, sale, lease or other transfer by the Company, the Company is the surviving Person or (ii) in the case of any such consolidation, merger, sale, lease or other transfer by OBS, OIN or any other Subsidiary of the Company, the Company or a Wholly-Owned Consolidated Subsidiary is the surviving Person and (except in the case of a consolidation, merger, sale, lease or other transfer by OIN or any other Subsidiary of the Company that is not on October 31, 1994 organized under the laws of the United States or any state thereof) if a Wholly-Owned Consolidated Subsidiary shall be the surviving Person, it shall be organized under the law of the United States or any state thereof; (y) immediately before and immediately after giving effect to such consolidation, merger, sale, lease or transfer, no Default shall have occurred and be continuing; and (z) if the Administrative Agent shall have theretofore notified or shall, within 10 Domestic Business Days after receiving notice of such consolidation, merger, sale, lease or transfer, notify the Company of the determination of the Co-arrangers pursuant to clauses (i) and (ii) of Section 5.12(a), the Company shall, notwithstanding any provisions of Section 5.12 to the contrary, prior to or concurrently with such merger, consolidation, sale, lease or transfer, comply with the provisions of clauses (x) through (z), inclusive, of Section 5.12(a). SECTION 5.11. USE OF PROCEEDS. The proceeds of the Loans made under this Agreement will be used by the Borrowers for general corporate purposes (which may include acquisitions); PROVIDED that, without the consent of all the Banks, none of such proceeds will be used, directly or indirectly, for the purpose of effecting an Unapproved Acquisition. None of such proceeds will be used in violation of Regulation U or any applicable law or regulation. SECTION 5.12. SECURITY INTEREST. (a) If the Co- arrangers shall have unanimously determined in their reasonable judgment that (i) a change in control of the Company has occurred and (ii) such change in control is materially detrimental to the Company and its Subsidiaries, considered as a whole, then the Company shall, or shall cause one or more of its Subsidiaries to, not later than the 90th day after receipt of notice by the Company from the Administrative Agent of such determination (or, if such day is not a Domestic Business Day, the next succeeding Domestic Business Day), (x) grant a security interest in, pledge, assign or mortgage, pursuant to one or more agreements or other instruments to which the Company (and any relevant Subsidiary of the Company) is a party (collectively, the "Security Documents"), assets of the Company or any Subsidiary of the Company (the "Collateral") to or in favor of the Administrative Agent for the benefit of the Banks as collateral for the Loans made or to be made hereunder, such assets to be subject to no other Liens (other than (i) Liens arising in the ordinary course of business which (A) do not secure Debt and (B) do not, individually or in the aggregate, materially detract from the value of the Collateral as collateral hereunder and (ii) Liens securing the liabilities of each Borrower and its subsidiaries under the Reimbursement Agreements, in each case with respect to the Liens referred to in this clause (ii), on an equal and ratable basis with the obligations of the Borrowers hereunder) and to have an aggregate fair market value (taking into account such Liens) at least equal to 130% of the sum of the aggregate principal amount of all Loans outstanding on such 90th day (or such next succeeding Domestic Business Day) and the aggregate amount of all liabilities of each Borrower and its subsidiaries under the Reimbursement Agreements as of such date, (y) provide to the Administrative Agent one or more opinions of counsel, the form and substance of each such opinion and such counsel to be reasonably satisfactory to the Required Banks, as to the creation, validity, effectiveness, perfection and priority of such security interests, pledges, assignments and mortgages, compliance with Regulation U, the absence of any fraudulent conveyance or transfer and such other matters as the Required Banks may reasonably request and (z) amend or modify this Agreement, pursuant to one or more amendments or modifications in form and substance satisfactory to the Required Banks, to the extent necessary or desirable, in the reasonable judgment of the Required Banks, to take into account the Security Documents and such security interests, pledges, assignments and mortgages and such other matters related thereto as the Required Banks may reasonably request, such amendments and modifications to include, without limitation, one or more representations and warranties, covenants, events of default and indemnities relating to the subject matter addressed in clauses (x) through (z) above, or the Security Documents, opinions or other writings referred to therein. In order for the Company to satisfy its obligations under this Section 5.12 and without limiting the provisions set forth above, the assets constituting Collateral hereunder, the determination of the fair market value thereof and the form and substance of the Security Documents, the opinions referred to in clause (y) above and the amendments and modifications referred to in clause (z) above must each be satisfactory in form and substance to the Required Banks and the Company must have received a certificate signed by the Required Banks stating that the Company has complied with its obligations under this Section 5.12. (b) At all times after the 90th day (or the next succeeding Domestic Business Day) referred to in subsection (a) above the fair market value (determined as provided in subsection (a)) of the Collateral securing Loans hereunder shall be at least equal to 130% of the aggregate principal amount of all Loans outstanding hereunder from time to time. (c) No Co-arranger shall incur any liability to any Person (including, without limitation, any other Bank) as a result of any determination (or any failure to make any determination) pursuant to clauses (i) and (ii) of subsection (a). Each of the Borrowers hereby indemnifies, and each of the Banks hereby indemnifies ratably in accordance with its Commitment (to the extent that the Borrowers do not so indemnify), each Agent and each of the Co-arrangers against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from its gross negligence or wilful misconduct) that it may suffer or incur in connection with any action taken or omitted to be taken pursuant to this Section 5.12. SECTION 5.13. LETTERS OF CREDIT. (a) No Borrower shall, and the Company shall not permit any of its Subsidiaries to, incur any obligation to any bank (including any Bank) or other Person (a "Secured Issuer") in respect of any letter of credit, letter of guaranty or similar instrument ("Letter of Credit") issued by such Secured Issuer, which obligation is secured by a Lien on any asset of the Company or any of its Subsidiaries, unless (i) such Secured Issuer is acceptable to the beneficiary of the proposed Letter of Credit, (ii) the relevant Borrower (or the Company in the case of any Subsidiary of the Company other than OBS or OIN) shall have, at least 20 days prior thereto, requested offers to issue such Letter of Credit on an unsecured basis, from the Banks (or any of them) by notice to each of the Banks specifying: (A) the date of issuance of the proposed Letter of Credit, (B) the aggregate amount of the proposed Letter of Credit, (C) the expiration date of the proposed Letter of Credit, and (D) the other terms of the proposed Letter of Credit; and (iii) such Borrower (or the Company) shall not have received an offer from one or more Banks pursuant to subsection (b) below to issue such Letter of Credit on the proposed terms at a fee which does not exceed by more than 1/4 of 1% per annum the fee offered by such Secured Issuer in connection with the issuance of such Letter of Credit. The Company shall determine in good faith whether the fee offered by any Bank or Banks which offer to issue such Letter of Credit on the proposed terms exceeds by more than 1/4 of 1% per annum the fee offered by such Secured Issuer in the event that such fees are not directly comparable. At the time of any request by any Borrower for offers to issue any Letter of Credit pursuant to this subsection, such Borrower shall deliver to each of the Banks a detailed description of the underlying transaction in support of which the Letter of Credit is proposed to be issued. (b) Each Bank may submit an offer or offers, individually or in conjunction with any other Bank or Banks, to issue any proposed Letter of Credit. Any such offer shall be delivered to the Borrower within 15 days of such Bank's receipt of notice from such Borrower (or the Company) pursuant to subsection (a) and shall specify: (i) the date of issuance of the proposed Letter of Credit, (ii) the aggregate amount of the proposed Letter of Credit, (iii) the expiration date of the proposed Letter of Credit and (iv) the fee offered for such Letter of Credit. The liability of any Bank with respect to any offer to issue any Letter of Credit pursuant to this Section shall be several, not joint. (c) If such Borrower (or the Company) shall have received an offer from one or more Banks to issue such Letter of Credit on the proposed terms at a fee which shall not exceed by more than 1/4 of 1% per annum (determined as provided in subsection (a) above) the fee offered by such Secured Issuer for the issuance of such Letter of Credit, then (i) such Borrower shall accept the offer of such Bank or Banks to issue such Letter of Credit or (ii) none of the Borrowers shall, and the Company shall not permit any of its Subsidiaries to, solicit or accept any offer from any Secured Issuer for the issuance of any Letter of Credit relating to the underlying transaction in connection with which such initial Letter of Credit was proposed to be issued for a period of six months from the 15th day referred to in subsection (b) above. If such Borrower (or the Company) shall have received more than one offer from one or more Banks to issue such Letter of Credit on the proposed terms at a fee which shall not exceed by more than 1/4 of 1% per annum the fee offered by any such Secured Issuer, then such Borrower shall accept the offer of such Bank or Banks offering to issue such unsecured Letter of Credit at the lowest fee per annum. The Company shall determine in good faith which such fee is the lowest in the event that the fees offered by such Bank or Banks are not directly comparable. If any Borrower (or the Company) shall accept the offer of any Bank or Banks to issue a Letter of Credit pursuant to this Section 5.13, then such Borrower (or the Company) and such Bank or Banks shall execute and deliver a reimbursement agreement (a "Reimbursement Agreement") in the form of Exhibit G hereto, but with such changes and additions thereto and deletions therefrom as shall be satisfactory to each of such Borrower (or the Company) and such Bank or Banks. Unless such Borrower (or the Company) shall have otherwise notified the Administrative Agent, Banks party to this Agreement shall at all times be required to have interests in each Letter of Credit issued pursuant to this Section 5.13 at least equal to the aggregate percentage interest therein that is required to approve amendments or waivers (other than any such amendments or waivers requiring a unanimous vote) under the related Reimbursement Agreement. (d) Nothing in this Section is intended to restrict the ability of the Company or any of its Subsidiaries to incur any obligation otherwise permitted under this Agreement in respect of any Letter of Credit, on an unsecured basis, from any bank that is not a party to this Agreement. SECTION 5.14. OWNERSHIP OF OBS AND OIN. Each of OBS and OIN shall at all times be a Wholly-Owned Consolidated Subsidiary. SECTION 5.15. AGENT FOR SERVICE OF PROCESS FOR OIN. The Company shall cause OIN to maintain at all times North American Ship Agencies, Inc. or another agent acceptable to the Required Banks as its agent for service of process in the State of New York and shall cause any other such agent to execute and deliver to the Company and the Administrative Agent a letter accepting such agency, in substantially the form of Exhibit E hereto, prior to or concurrently with such other agent's acceptance of its appointment as agent for service of process for OIN and the predecessor agent's resignation as such agent. SECTION 5.16. MINIMUM CONSOLIDATED WORKING CAPITAL. Consolidated Working Capital will not at the end of any Fiscal Quarter be less than $0. SECTION 5.17. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Consolidated Tangible Net Worth will at no time be less than the sum of $578,000,000 PLUS an amount equal to 50% of Consolidated Net Income for each Fiscal Quarter from and including the Fiscal Quarter ended March 31, 1994 to but excluding the second Fiscal Quarter preceding the Fiscal Quarter as of the end of which this determination is to be made. SECTION 5.18. MAXIMUM TOTAL DEBT TO CONSOLIDATED TANGIBLE NET WORTH RATIO. The ratio of Total Debt to Consolidated Tangible Net Worth will at no time be greater than 1.75 to 1. SECTION 5.19. MINIMUM LIQUID CASH FLOW COVERAGE RATIO. The Liquid Cash Flow Coverage Ratio for the most recent period of four consecutive Fiscal Quarters (including Fiscal Quarters ending prior to the Amendment Effective Date until four Fiscal Quarters shall have ended subsequent to the Amendment Effective Date) shall not be less than 2.00 to 1. SECTION 5.20. MAXIMUM INVESTMENTS IN JOINT VENTURES. The Company will not, and will not permit any of its Subsidiaries (other than Non-Recourse Subsidiaries) to, make any Investment in any Joint Venture on any date if, immediately after giving effect to such Investment, the aggregate amount of all such Investments made by the Company and its Subsidiaries (other than Non-Recourse Subsidiaries) after June 30, 1994 would exceed 22.5% of Consolidated Net Tangible Assets as of the date of determination. For purposes of this Section, "Consolidated Net Tangible Assets" means, as of any date, the aggregate net book value of all assets of the Company and its Consolidated Subsidiaries (other than Non- Recourse Subsidiaries), as the same is reflected in the consolidated balance sheet of the Company and its Consolidated Subsidiaries (other than Non-Recourse Subsidiaries), LESS the sum of (x) their consolidated Intangible Assets and (y) Total Current Liabilities, all determined as of such date. ARTICLE VI DEFAULTS SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) (i) any Borrower shall fail to pay when due any principal of any Loan, (ii) the Company shall fail to pay when due any amount payable by the Company under Article IX in respect of the principal of any Loan to OBS or OIN, (iii) the Company shall fail to pay within two Domestic Business Days of the due date thereof any other amount payable by the Company under Article IX or (iv) any Borrower shall fail to pay within two Domestic Business Days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (b) any Borrower shall fail to observe or perform any covenant contained in Sections 5.03(b), 5.07 to 5.12, inclusive, and 5.14 to 5.20, inclusive; (c) any Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 15 days after written notice thereof has been given to the Company by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by any Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant hereto shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary of the Company shall fail to make any payment in respect of any Material Financial Obligation (other than the Notes) when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Company or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Material Subsidiary of the Company under the federal bankruptcy laws as now or hereafter in effect; (i) (i) any member of the ERISA Group or any ERISA Affiliate shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it or they shall have become liable to pay under Title IV of ERISA or (ii) any member of the ERISA Group or any ERISA Affiliate, individually or collectively, shall incur, or shall reasonably expect to incur, any Withdrawal Liability or liability upon the happening of a Termination Event and the aggregate of all such Withdrawal Liabilities and such other liabilities shall be in excess of $30,000,000; (j) judgments or orders for the payment of money in excess of $5,000,000 (or its equivalent in any other currency) shall be rendered against the Company or any Subsidiary of the Company and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; or (k) the obligations of the Company under Article IX shall at any time and for any reason cease to be valid and binding or the Company shall purport to renounce its guarantee of the obligations of OBS or OIN hereunder; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrowers, terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrowers, declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; PROVIDED that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Company, without any notice to any Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and, in the case of any of the Events of Default specified in clause (g) or (h) above with respect to any Borrower other than the Company, without any notice to any Borrower or any other act by the Administrative Agent or the Banks, the Commitments available to such Borrower shall thereupon terminate and the Notes of such Borrower (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by such Borrower and the Company. SECTION 6.02. NOTICE OF DEFAULT. The Administrative Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENTS SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to such Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. AGENTS AND AFFILIATES. Morgan Guaranty Trust Company of New York and Citibank, N.A., shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not an Agent and each Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with, the Company or any Subsidiary of the Company or any Affiliate thereof as if it were not an Agent hereunder. SECTION 7.03. ACTION BY AGENTS. The obligations of each Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, neither Agent shall be required to take any action with respect to any Default, except, in the case of the Administrative Agent, as expressly provided in Article VI. SECTION 7.04. CONSULTATION WITH EXPERTS. Each Agent may consult with legal counsel (who may be counsel for one or more of the Borrowers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. LIABILITY OF THE AGENTS. Neither Agent nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither Agent nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any Borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any Borrower (including, without limitation, Section 5.12); (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to such Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. Neither Agent shall incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance with its Commitment, indemnify each Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrowers) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitee's gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or that such indemnitees may suffer or incur in connection with any action taken or omitted by such indemnitees hereunder. Without limiting the generality of the foregoing, each Bank agrees to reimburse each Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees and disbursements) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that such Agent is not reimbursed for such expenses by the Borrowers. Under no circumstances shall either Agent be obligated to expend its own funds for the protection of the interests of the Banks, but each Agent shall be entitled to be indemnified to its satisfaction hereunder by the Banks prior to taking any action or expending any funds hereunder. SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon either Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon either Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving written notice thereof to the Banks and the Company. Upon any such resignation, the Company shall appoint a successor Administrative Agent, subject to the consent of the Required Banks (determined for this purpose as if the Bank resigning as Administrative Agent had no Commitment and held no Notes hereunder). If no successor Administrative Agent shall have been so appointed by the Company, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 7.09. AGENTS' FEES. The Company shall pay to each Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and such Agent. In connection with any assignment pursuant to Section 2.17(c), 8.05 or 10.05(c), the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $2,000. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing: (a) the Administrative Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Administrative Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Company (and the Borrower, if the Company is not the Borrower) and the Banks, whereupon until the Administrative Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any related Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. ILLEGALITY. If, on or after October 31, 1994, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to any Borrower and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Company (and such Borrower if the Company is not such Borrower), whereupon until such Bank notifies the Company (and such Borrower if the Company is not such Borrower) and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to such Borrower shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to such Borrower to maturity and shall so specify in such notice, such Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If, on or after (x) October 31, 1994, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax or the imposition of a new tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (x) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (y) with respect to any Euro-Dollar Loan any such requirement with respect to which such Bank is entitled to compensation during the relevant Period under Section 2.15), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement included in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent and the Company if the Company is not the Borrower), the applicable Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after October 31, 1994, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Administrative Agent of any event of which it has knowledge, occurring after October 31, 1994, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS. If (i) the obligation of any Bank to make Euro-Dollar Loans to any Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies such Borrower (and the Company if it is not such Borrower) that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans to such Borrower which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, to such Borrower has been repaid, all Payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.05. SUBSTITUTION OF BANK. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03, the Company shall have the right, upon 20 Business Days' prior notice to such Bank, to cause one or more banks (which may be one or more of the Banks), each such bank (except any Bank) to be reasonably satisfactory to the Required Banks (determined for this purpose as if such Bank had no Commitment and held no Notes hereunder) and, in each case, with the written acknowledgement of the Administrative Agent, to purchase the Notes and assume the Commitment of such Bank pursuant to an Assignment and Assumption Agreement. If one or more such banks are identified by the Company and, if required pursuant to this Section, approved as being reasonably satisfactory to the Required Banks (determined as provided above), the transferor Bank shall consent to such sale and assumption by executing and delivering an Assignment and Assumption Agreement. Upon execution and delivery of an Assignment and Assumption Agreement by the Company, the transferor Bank, the Assignee, the Administrative Agent and, if required pursuant to this Section, the Required Banks (determined as provided above), and payment by the Assignee to the transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall become a Bank party to this Agreement (if it is not already a party hereto) and shall have all the rights and obligations of a Bank with a Commitment (which, if such Assignee is already a party hereto, shall take into account such Assignee's then existing Commitment hereunder) as set forth in such Assignment and Assumption Agreement and the transferor Bank shall be released from its obligations hereunder and no further consent or action by any other Person shall be required. Upon the consummation of any assignment pursuant to this Section 8.05, the transferor Bank, the Administrative Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In the event that the Administrative Agent, in its capacity as a Bank, is required to sell its Notes and its Commitment hereunder pursuant to this Section 8.05, the Administrative Agent shall, promptly upon the consummation of any assignment pursuant to this Section 8.05, resign as Administrative Agent hereunder and the Company shall (subject to the consent of the Required Banks) have the right to appoint another Co-arranger as successor Administrative Agent, all in accordance with Section 7.08. ARTICLE IX GUARANTY SECTION 9.01. THE GUARANTY. The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by OBS and OIN pursuant to this Agreement and the full and punctual payment of all other amounts payable by OBS and OIN under this Agreement. Upon failure by OBS or OIN to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. SECTION 9.02. GUARANTY UNCONDITIONAL. The obligations of the Company hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of OBS or OIN under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of OBS or OIN under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of OBS or OIN, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting OBS or OIN or their respective assets or any resulting release or discharge of any obligation of OBS or OIN contained in this Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against OBS, OIN, either Agent, any Bank or any other Person, whether in connection herewith or any unrelated transaction, PROVIDED that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against OBS or OIN for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by OBS or OIN of the principal of or interest on any Note or any other amount payable by OBS or OIN under this Agreement; or (vii) any other act or omission to act or delay of any kind by OBS or OIN, either Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. SECTION 9.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full force and effect until the principal of and interest on the Notes and all other amounts payable by OBS and OIN under this Agreement shall have been paid in full. If at any time any Payment of the principal of or interest on any Note or any other amount payable by OBS or OIN under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of OBS or OIN or otherwise, the Company's obligations hereunder with respect to such Payment shall be reinstated as though such Payment had been due but not made at such time. SECTION 9.04. WAIVER BY THE COMPANY. The Company irrevocably waives acceptance hereof and presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against OBS or OIN or any other Person. SECTION 9.05. WAIVER OF SUBROGATION. The Company irrevocably waives, but only until the Commitments hereunder shall terminate and all amounts payable hereunder by the Company to the Banks (or any of them) or either Agent have been paid in full, any and all rights to which it may be entitled, by operation of law or otherwise, upon making any Payment hereunder to be subrogated to the rights of the payee against OBS or OIN with respect to such Payment or otherwise to be reimbursed, indemnified or exonerated by OBS or OIN in respect thereof. SECTION 9.06. STAY OF ACCELERATION. If acceleration of the time for payment of any amount payable by OBS or OIN under this Agreement or the Notes is stayed upon the insolvency, bankruptcy or reorganization of OBS or OIN, as the case may be, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Administrative Agent made at the request of the requisite proportion of the Banks specified in Article VI of this Agreement. ARTICLE X MISCELLANEOUS SECTION 10.01. NOTICES. All notices, requests, consents and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of any Borrower or any Agent, at its address, telex number or telecopier number set forth on the signature pages of this Amended Agreement, (y) in the case of any Bank, at its address, telex or telecopier number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address, telex or telecopier number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrowers; PROVIDED that, the Company shall at all times maintain its address for such purposes in the State of New York and that, in the case of any other Borrower, notice shall be given to such Borrower at the address applicable to the Company pursuant to this Section. Each such notice, request, consent or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; PROVIDED that notices to the Administrative Agent under Article II or Article VIII shall not be effective until received. SECTION 10.02. NO WAIVERS. No failure or delay by either Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 10.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a) The Company shall pay (i) all out-of-pocket expenses of each Agent, including reasonable fees and disbursements of Davis Polk & Wardwell, special counsel for the Agents (or any successor firm selected by the Agents to serve as such counsel), in connection with the preparation of this Amended Agreement and each Note, any waiver or consent hereunder or any amendment hereof (other than any such amendment that expressly states that it is being entered into at the request of one or more Banks) or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by each Agent or any Bank, including reasonable fees and disbursements of its counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. The Company shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Amended Agreement or any Note or the transfer of any Note pursuant to Section 2.17(c) or 8.05. (b) Neither Agent nor any of its directors, officers, agents or employees shall be liable to any Borrower for any action taken or not taken by it in connection herewith in the absence of its own gross negligence or willful misconduct. The Company hereby agrees to indemnify each Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; PROVIDED that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 10.04. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by each of the Borrowers and the Required Banks (and, if the rights or duties of either Agent are affected thereby, by such Agent); PROVIDED that no amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any Payment of principal of or interest on any Loan or any fees hereunder or for any termination of any Commitment, (iv) amend, modify or waive any provision of Article IX or Section 5.12 (other than clause (y) of subsection (a) thereof) or (v) amend or modify this Section 10.04 or otherwise change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number or category of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. SECTION 10.05. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that none of the Borrowers may assign or otherwise transfer any of its rights under this Agreement without the prior consent of all Banks. (b) Any Bank or Assignee may at any time grant to one or more banks or other financial institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrowers and the Agents, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrowers and the Agents shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank grants such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company and the other Borrowers hereunder, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; PROVIDED that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 10.04 or any amendment or waiver of any provision of Article IX or any release of any security delivered as collateral for the Loans pursuant to Section 5.12 without the written consent of the Participant. Each Borrower agrees that each Participant shall, subject to subsection (f) of this Section, be entitled to a portion of the benefits of Article VIII and Sections 2.15 and 2.18 to be derived by the Bank that sold such Participant a participating interest in its Commitment or Loans hereunder which is attributable to the participating interest of such Participant. An assignment or other transfer which is not permitted by subsection (c) or (e) below or Section 2.17(c) or 8.05 shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to any bank (including, without limitation, a Bank) or other financial institution all, or a proportionate part in an amount equal to $10,000,000 or any multiple thereof of all of its rights and obligations under this Agreement and the Notes of each Borrower, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement executed by such Assignee and such transferor Bank, with (and subject to), the subscribed consent of the Company, which consent shall not be unreasonably withheld, and the subscribed acknowledgement of the Administrative Agent; PROVIDED that if an Assignee is an affiliate of such transferor Bank or was a Bank immediately prior to such assignment, no such consent shall be required; and PROVIDED FURTHER that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. Upon execution and delivery of an Assignment and Assumption Agreement pursuant to this subsection (c) and payment by the Assignee to the transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement (if it is not already a party hereto) and shall have all the rights and obligations of a Bank with a Commitment (which, if such Assignee is already a party hereto, shall take into account such Assignee's then existing Commitment hereunder) as set forth in such Assignment and Assumption Agreement and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any other Person shall be required. Except as set forth in this Section 10.05 and as provided in Sections 2.17(c) and 8.05, no Bank may assign or otherwise transfer all or any part of its rights or obligations under this Agreement without the prior consent of the Company. (d) Upon the consummation of any assignment pursuant to subsection (c) of this Section, the transferor Bank, the Administrative Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. If any Assignee which becomes a Bank pursuant to this Agreement is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Company and the Administrative Agent a certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with subsection (a) of Section 2.17. (e) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to any Affiliate of such Bank or any Federal Reserve Bank, without the consent of any Borrower, PROVIDED that no Bank shall, without the consent of the Company, change its Applicable Lending Office with respect to any Loan or make any assignment pursuant to this Section if (x) immediately prior to such change or assignment such Bank shall have been entitled to receive Payments without withholding or deduction for United States federal income tax and (y) immediately after such change or assignment such Bank or the assignee of such Bank, as the case may be, would not be entitled to receive Payments without any such deduction or withholding. No assignment pursuant to this subsection (e) shall release the transferor Bank from its obligations hereunder. (f) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 2.15, 2.18 or 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made (i) with the Company's prior consent, (ii) by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances, (iii) with respect to any Assignee pursuant to subsection (c) or (e) above at a time when the circumstances giving rise to such greater payment did not exist or (iv) pursuant to the provisions of Section 2.17(b) or (c) or 8.05. SECTION 10.06. COLLATERAL. Each of the Banks represents to each of the Agents and the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 10.07. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; AGENT FOR SERVICE OF PROCESS. (a) This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each of the Borrowers, the Agents and the Banks hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. (b) OIN hereby irrevocably designates and appoints North American Ship Agencies, Inc., 1114 Avenue of the Americas, New York, New York 10036, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid or until the appointment of a successor agent satisfactory to the Required Banks and such successor agent's acceptance of such appointment, as the agent of OIN to receive on its behalf service of all process brought against it with respect to any such proceeding in any such court in New York, such service being hereby acknowledged by OIN to be effective and binding in every respect whether or not OIN shall then be doing or shall have at any time done business in New York. A copy of any such process so served shall, if permitted by law, be sent by registered air mail to OIN and delivered to it at its address specified pursuant to Section 10.01. Nothing herein shall affect the right to serve process in any other manner permitted by any law or limit the right of any Bank or either Agent to institute proceedings against OIN in the courts of any other jurisdiction. SECTION 10.08. COUNTERPARTS; INTEGRATION. This Amended Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amended Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 10.09. CERTAIN PROVISIONS OF THE EXISTING AGREEMENT. If and to the extent that the Amendment Effective Date occurs and a Borrowing occurs on that date, each Bank agrees to waive the seven Domestic Business Day notice period contained in Section 2.08 of the Existing Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amended Agreement to be duly executed by their respective authorized officers as of the day and year first above written. OVERSEAS SHIPHOLDING GROUP, INC. By S/Robert N.Cowen ----------------------------- Title: Senior Vice President 1114 Avenue of the Americas New York, New York 10036 Attention: General Counsel Telex number: 426011 OSHG OSG BULK SHIPS, INC. By S/Ran Hettena --------------------------- Title: President c/o Overseas Shipholding Group, Inc. 1114 Avenue of the Americas New York, New York 10036 Attention: Secretary Telex number: 426011 OSHG OSG INTERNATIONAL, INC. By S/Ran Hettena --------------------------- Title: Vice President c/o Overseas Shipholding Group, Inc. 1114 Avenue of the Americas New York, New York 10036 Attention: Secretary Telex number: 426011 OSHG COMMITMENTS ----------- CO-ARRANGERS: $ 51,875,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By S/Diana H. Imhof ---------------------------- Title: Associate $ 51,875,000 CITIBANK, N.A. By S/John Hess ---------------------------- Title: Vice President $ 51,875,000 THE BANK OF NOVA SCOTIA By S/Terry K. Fryett --------------------------- Title: Vice President $ 51,875,000 BARCLAYS BANK PLC By S/Peter Yetman -------------------------- Title: Associate Director $ 51,875,000 CIBC, INC. By S/Judith D. Domkowski ------------------------- Title: Vice President $ 51,875,000 THE CHASE MANHATTAN BANK, N.A. By S/Francis J. Bergold ------------------------- Title: Vice President $ 51,875,000 CHEMICAL BANK By S/Richard W. Stewart ------------------------ Title: Vice President $ 51,875,000 LTCB TRUST COMPANY By S/Rene O. LeBlanc ------------------------ Title: Senior Vice President OTHER BANKS: $ 35,000,000 ROYAL BANK OF CANADA By S/D.G. Calancie ----------------------- Title: Senior Manager $ 25,000,000 THE FIRST NATIONAL BANK OF BOSTON By S/Daniel O'Connor ----------------------- Title: Director $ 25,000,000 THE MITSUBISHI BANK, LIMITED By S/Paula Mueller ------------------------ Title: Vice President ----------------- Total Commitments $500,000,000 ================= MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent By S/Diana H. Imhof --------------------------- Title: Associate 60 Wall Street New York, New York 10260 Telecopy Number:(212)648-5014 Attention: Diana Imhof CITIBANK, N.A., as Administrative Agent By S/John Hess -------------------------- Title: Vice President One Court Square 7th Floor Long Island City, NY 11120 Telecopy Number: (718)248-4844 Attention: Leonard Sarcona The undersigned agrees to the amendments made under the foregoing Amended and Restated Credit Agreement (including without limitation Section 10.09) and acknowledges that, once it has been paid all amounts owed to it thereunder, it will not be a Bank thereunder for purposes of the period commencing on the Amendment Effective Date. SWISS BANK CORPORATION By S/David S. Dickenson ---------------------- Title: Director International Merchant Banking By S/William M. Coulter ---------------------- Title: Director Commodity Trade Finance Agreed and accepted as of the Amendment Effective Date. CITIBANK, N.A., as Manager and Administrative Agent By: S/John Hess ---------------------- Title: Vice President SCHEDULE 1 OSG SUPER FACILITY SCHEDULE OF PERMITTED LIENS DEBT/LEASE OBLIGATION OUTSTANDING AS OF SEPTEMBER 30, 1994 --------------------- CAPITAL LEASES O/S CHICAGO $17,077,202 O/S OHIO 18,291,623 O/S NEW YORK 20,853,285 O/S WASHINGTON 22,048,418 O/S HARRIETTE 10,866,227 O/S MARILYN 11,013,349 O/S PHILADELPHIA 36,807,441 O/S NEW ORLEANS 37,056,747 ------------ CAPITAL LEASE SUBTOTAL $174,014,291 TITLE XI BONDS O/S BOSTON $11,820,000 C. ITOH DEBT SUZANNE $10,443,317 TEACHERS PRIVATE PLACEMENTS PACIFIC HUNTER 10,221,319 ATLANTIA 11,827,921 ----------- TEACHERS SUBTOTAL $22,049,240 ----------- TOTAL SCHEDULE 1 LIENS $218,326,848 SCHEDULE 2 NON-RECOURSE SUBSIDIARIES There are no Non-Recourse Subsidiaries as of the Amendment Effective Date. See Section 4.09(b). PRICING SCHEDULE The "Euro-Dollar Margin", "CD Margin", "Commitment Fee Rate" and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day: (basis points per annum) ------------------------ Status Level Level Level Level Level I II III IV V Euro-Dollar Margin 36.25 43.125 47.50 55.00 92.50 CD Margin 48.75 55.625 60.00 67.50 105.00 Commitment Fee Rate 5.00 5.00 5.00 5.00 5.00 Facility Fee Rate 13.75 16.875 20.00 25.00 32.50 For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Company's long-term debt is rated BBB or higher by S&P and Baa2 or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Company's long-term debt is rated BBB- or higher by S&P and Baa3 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Company's long-term debt is rated (x) BBB- or higher by S&P and Ba1 or higher by Moody's or (y) BB+ or higher by S&P and Baa3 or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Company's long-term debt is rated BB+ or higher by S&P and Ba1 or higher by Moody's and (ii) none of Level I Status, Level II Status and Level III Status exists. "Level V Status" exists at any date if, at such date, no other Status exists. "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Ratings Group. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists at any date. The credit ratings to be utilized for purposes of this Schedule are those assigned to the publicly-traded senior unsecured long-term debt securities of the Company without third-party credit enhancement, and any rating assigned to any other debt security of the Company shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. EXHIBIT A NOTE New York, New York , 199 -------- -- -- For value received, , a corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Citibank, N.A., 399 Park Avenue, New York, New York 10043. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding shall be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Amended and Restated Credit Agreement dated as of February 9, 1990, as amended and restated as of October 31, 1994, among Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., the banks listed on the signature pages thereof, Citibank, N.A., as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. [BORROWER] By---------------------------- Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL ------------------------------------------------------------ Type and Amount of Amount Principal Maturity Notation Date of Loan Repaid Date Made By ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ EXHIBIT B-1 FORM OF MONEY MARKET QUOTE REQUEST [Date] To: Citibank, N.A. (the "Administrative Agent") From: [Name of Borrower] Re: Amended and Restated Credit Agreement (the "Credit Agreement") dated as of February 9, 1990, as amended and restated as of October 31, 1994, among Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., the Banks party thereto, the Administrative Agent and Morgan Guaranty Trust Company of New York, as Documentation Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: ----------------- PRINCIPAL AMOUNT* INTEREST PERIOD** $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. [NAME OF BORROWER] By--------------------------- Title: --------------- *Amount must be $10,000,000 or a larger multiple of $1,000,000. **Not less than one month (LIBOR Auction) or not less than 14 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. EXHIBIT B-2 FORM OF INVITATION FOR MONEY MARKET QUOTES To: [Name of Bank] Re: Invitation for Money Market Quotes to [Name of Borrower] (the "Borrower") Pursuant to Section 2.03 of the Amended and Restated Credit Agreement dated as of February 9, 1990, as amended and restated as of October 31, 1994, among Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., the Banks party thereto, the undersigned, as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: ----------------- PRINCIPAL AMOUNT INTEREST PERIOD $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.] (New York City time) on [date]. CITIBANK, N.A. By--------------------------- Authorized Officer EXHIBIT B-3 FORM OF MONEY MARKET QUOTE To: Citibank, N.A., as Administrative Agent Re: Money Market Quote to [Name of Borrower] (the "Borrower") In response to your invitation on behalf of the Borrower dated , 19 , we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ----------------------------- 2. Person to contact at Quoting Bank: --------------------------------- 3. Date of Borrowing: --------------* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market AMOUNT** PERIOD*** [MARGIN****] [ABSOLUTE RATE*****] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $ .]** ----------- * As specified in the related Invitation. ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Amended and Restated Credit Agreement dated as of February 9, 1990, as amended and restated as of October 31, 1994, among Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., the Banks party thereto, yourselves, as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:-------------- By:--------------------------- Authorized Officer -------------- *** Not less than one month or not less than 14 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). EXHIBIT D ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of , 19 among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), OVERSEAS SHIPHOLDING GROUP, INC. (the "Company") and CITIBANK, N.A., as Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Amended and Restated Credit Agreement dated as of February 9, 1990, as amended and restated as of October 31, 1994, as amended (the "Credit Agreement") among the Assignor and the other Banks party thereto, as Banks, Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc. and OSG International, Inc., as borrowers, Citibank, N.A., as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent; WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrowers in an aggregate principal amount at any time outstanding not to exceed $ ; WHEREAS, Loans made to the Borrowers by the Assignor under the Credit Agreement in the aggregate principal amount of $ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of [a portion of]* its Commitment thereunder in an amount equal to $ (the "Assigned Amount"), together with [a corresponding portion of] its outstanding Loans, and the Assignee proposes to accept assignment of such rights and assume the [corresponding] obligations from the Assignor on such terms; ----------- *Bracketed language should be deleted if this Assignment and Assumption Agreement is executed and delivered pursuant to Section 2.17(c) or 8.05 of the Credit Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement [to the extent of the Assigned Amount], and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement [to the extent of the Assigned Amount], including the purchase from the Assignor of [the corresponding portion of] the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement [to the extent such obligations have been assumed by the Assignee]. The assignment provided for herein shall be without recourse to the Assignor.* SECTION 3. PAYMENTS. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $ .** It is understood that commitment and facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and --------------- *Bracketed language should be deleted if this Assignment and Assumption Agreement is executed and delivered pursuant to Section 2.17(c) or 8.05 of the Credit Agreement. **Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. CONSENT OF THE COMPANY AND ACKNOWLEDGEMENT OF THE ADMINISTRATIVE AGENT. This Agreement is conditioned upon the consent of [the Company and the acknowledgement of the Administrative Agent pursuant to Section 10.05(c)] [the Company [and the Required Banks] and the acknowledgement of the Administrative Agent pursuant to Section [2.17(c)] [8.05]] of the Credit Agreement. The execution of this Agreement by the Company [, the Required Banks] and the Administrative Agent is evidence of this consent and acknowledgement. Pursuant to Section [2.17(c)] [8.05] [10.05(d)] the Company agrees to execute and deliver, and to cause each other Borrower to execute and deliver, a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein, and (if such a Note is delivered to the Assignee) the Assignor agrees to return its Note to the Borrowers (i) for cancellation, if the Assignor assigns all of its rights and obligations under the Agreement to the Assignee or (ii) in exchange for a new Note, reflecting the unassigned amount, if the Assignor does not assign all of its rights and obligations under the Agreement.] SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor or either Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers. SECTION 6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By-------------------------- Title: [Address] Telex Number: Attention: [ASSIGNEE] By-------------------------- Title: [Address] Telex Number: Attention: OVERSEAS SHIPHOLDING GROUP, INC. By-------------------------- Title: [REQUIRED BANKS]* Acknowledged by: CITIBANK, N.A., as Administrative Agent By----------------------- Title: ------------ *The consent of the Required Banks is only required in the case of an assignment to any bank other than a Bank pursuant to Section 2.17(c) or 8.05. EXHIBIT E [NORTH AMERICAN SHIP AGENCIES, INC. LETTERHEAD] [Amendment Effective Date] OSG International, Inc. c/o Overseas Shipholding Group, Inc. 511 Fifth Avenue New York, New York 10019 Morgan Guaranty Trust Company of New York, as Documentation Agent 60 Wall Street New York, New York 10260 Citibank, N.A., as Administrative Agent 320 Park Avenue New York, New York 10043 Re: Amended and Restated Credit Agreement dated as of February 9, 1990, as amended and restated as of October 31, 1994, among Overseas Shipholding Group, Inc., OSG Bulk Ships, Inc., and OSG International, Inc., the Banks party thereto, Citibank, N.A., as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent Gentlemen: This letter is to indicate our acceptance of our appointment as agent for OSG International, Inc. ("OIN"), as borrower, for service of all process brought against OIN in the State of New York at 1114 Avenue of the Americas, New York, New York 10036 pursuant to the above-referenced Credit Agreement (the "Credit Agreement"). Further, it is our understanding that our appointment is irrevocable and will remain in effect so long as any Bank has any Commitment under the Credit Agreement or any amount payable under the Credit Agreement or any Note issued under the Credit Agreement remains unpaid or until the appointment of, and acceptance by, a successor agent. We agree to give OIN a copy of any such process so served pursuant to such appointment by hand delivery and registered air mail. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. Very truly yours, NORTH AMERICAN SHIP AGENCIES, INC. By------------------------------- Name: Title: EXHIBIT F ADMINISTRATIVE QUESTIONNAIRE 1) NAME OF LENDING ENTITY FOR SIGNATURE PAGE 2) DOMESTIC LENDING OFFICE Names and Titles: ------------------------------ ------------------------------ Addresses: ------------------------------ ------------------------------ ------------------------------ Telephone(s): ------------------------------ Facsimile: ------------------------------ Telex: ------------------------------ Answer Back: ------------------------------ 3) EURODOLLAR LENDING OFFICE Names and Titles: ------------------------------ ------------------------------ Addresses: ------------------------------ ------------------------------ ------------------------------ Telephone(s): ------------------------------ Facsimile: ------------------------------ Telex: ------------------------------ Answer Back: ------------------------------ 4) CONTACTS - CREDIT MATTERS Names and Titles: ------------------------------ ------------------------------ Addresses: ------------------------------ ------------------------------ ------------------------------ Telephone(s): ------------------------------ Telex: ------------------------------ Answer Back: ------------------------------ 5) CONTACTS - OPERATIONS/ADMINISTRATION Names and Titles: ------------------------------ ------------------------------ Addresses: ------------------------------ ------------------------------ ------------------------------ Telephone(s): ------------------------------ Facsimile: ------------------------------ Telex: ------------------------------ Answer Back: ------------------------------ 6) CONTACTS-DISTRIBUTIONS OF EXECUTION COPIES Names and Titles: ------------------------------ ------------------------------ Addresses: ------------------------------ ------------------------------ ------------------------------ Telephone(s): ------------------------------ Facsimile: ------------------------------ Telex: ------------------------------ Answer Back: ------------------------------ 7) CONTACTS-DISTRIBUTIONS OF CONFORMED COPIES Names and Titles: ------------------------------ Addresses: ------------------------------ ------------------------------ ------------------------------ Telephone(s): ------------------------------ Facsimile: ------------------------------ Telex: ------------------------------ Answer Back: ------------------------------ 8) PAYMENT INSTRUCTIONS (Specify type of lending office) Payment to: ------------------------------ (Name of Bank) ------------------------------ City, State: ------------------------------ ABA Number: ------------------------------ Account Number: ------------------------------ Account Name: ------------------------------ Reference: ------------------------------ EX-10 3 EXHIBIT 10(d)(2) ---------------- AMENDMENT NO. 1 TO GENERAL SERVICES AGREEMENT BETWEEN OVERSEAS SHIPHOLDING GROUP, INC. AND MARITIME OVERSEAS CORPORATION This Amendment No. 1 dated as of January 1, 1975 to General Services Agreement dated December 31, 1969 (the "General Services Agreement") between Overseas Shipholding Group, Inc., a Delaware corporation (the "Owner") and Maritime Overseas Corporation, a New York corporation ("MOC"). WITNESSETH: ----------- WHEREAS, the Owner and MOC desire to amend the General Services Agreement as hereinafter set forth: NOW, THEREFORE, the parties hereto do mutually agree as follows: 1. Section 5(a) of the General Services Agreement is hereby amended by inserting "(the "Allocable Cost") at the end of subdivision (i) thereof. 2. Section 5(b) of the General Services Agreement is hereby deleted in its entirety and the following is substituted therefor: "(b) Anything herein to the contrary notwithstanding, the total fee payable hereunder for any year commencing with the year 1975 may not be increased by more than 10% of the Allocable Cost for the immediately preceding year after adjusting same to reflect changes in the weighted number of Vessels owned or operated during the respective years by the Owner and its subsidiaries (including the Maritime Service Vessels). For example, if the weighted number of such vessels in 1974 is 50 and in 1975 is 60, and if the Allocable Cost for 1974 is $ , the total fee payable hereunder for 1975 may not be increased by more than $ (10% of $ times 60/50ths)." 3. Except as hereby amended, the General Services Agreement shall remain unaltered and continue in full force and effect. 4. Nothing herein contained shall affect the terms of letter agreement dated as of August 9, 1973 between the Owner and MOC, providing, among other things, for certain limitations on MOC's consolidated net income from shipping operations, which letter of agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be executed and delivered as of the day and year first above written. OVERSEAS SHIPHOLDING GROUP, INC. MARITIME OVERSEAS CORPORATION By:---------------------------- By:------------------------- EX-10 4 EXHIBIT 10(d)(6) ---------------- AMENDMENT NO. 4 TO GENERAL SERVICES AGREEMENT BETWEEN OVERSEAS SHIPHOLDING GROUP, INC. AND MARITIME OVERSEAS CORPORATION This Amendment No. 4 dated as of July 1, 1994 to General Services Agreement dated December 31, 1969, as heretofore amended (the "General Services Agreement") between Overseas Shipholding Group, Inc., a Delaware corporation (the "Owner") and Maritime Overseas Corporation, a New York corporation ("MOC"). W I T N E S S E T H: WHEREAS, the Owner and MOC desire to amend the General Services Agreement as hereinafter set forth; NOW, THEREFORE, the parties hereto do mutually agree as follows: 1. Section 5 of the General Services Agreement is hereby deleted in its entirety and the following is substituted therefor: "5. COMPENSATION - (a) For the duties and services to be performed hereunder and in addition to the fees set forth in the respective American Agency Agreements and Foreign Agency Agreements, MOC shall receive, for each year a fee equal to (i) that portion of MOC's total costs of carrying on its shipping operations for that year which the number of Vessels owned or operated by the Owner and its subsidiaries (including vessels operated under Maritime Service Agreements as defined in Section 15 of the American Agency Agreements and herein called "Maritime Service Vessels") bears to the sum of the number of said Vessels (including Maritime Service Vessels ) and the number of vessels managed by MOC and its subsidiaries for third parties in that year (ii) less the amount of fees (other than brokerage commissions) paid or payable to MOC and its subsidiaries for that year under the American Agency Agreements, the Foreign Agency Agreements and the Maritime Service Agreements. " (b) For purposes of this Section 5, each vessel managed by MOC and its subsidiaries whether under this Agreement or otherwise, shall be counted as one vessel; and, in each case, a vessel so managed for less than a full year shall be counted as a fraction of a vessel prorated by days on the basis of a 365 day year. (To illustrate the operation of the foregoing sentence, a vessel managed by MOC for 90 days shall count for the computation hereunder as 90/365th of 1 vessel). Newbuilding vessels shall be deemed managed and included in the computation from the date of commencement of work at the builder's shipyard, in accordance with the advice received from the builder. " (c) MOC's total costs of carrying on its shipping operations for any year shall be determined on an accrual basis in accordance with generally accepted accounting principles applied on a consistent basis from year to year, and shall include all necessary expenses of whatsoever kind of MOC and its subsidiaries relating to shipping operations, including, without limitation, fees payable to any shipping agency affiliate of MOC other than subsidiaries of MOC, rent, depreciation of furniture, fixtures, vehicles and equipment, amortization of leasehold improvements, interest expense, salaries and other compensation (excluding 50% of the total amount of salary and related employee benefit costs paid by MOC to or for the account of persons employed in its chartering and brokerage department), contributions to pension plans, profit-sharing plans, or other employee benefit plans which are not required to be reimbursed to MOC, office and administration expense, all taxes other than income taxes and taxes measured by income, and legal and accounting expenses, but excluding all expenses incurred for the account of the Vessels' respective owners under Sections 3 and 7 of the American Agency Agreements and Foreign Agency Agreements, or otherwise. Costs, if any, relating to both shipping and non- shipping operations shall be equitably allocated between such operations. The fee hereunder shall be calculated as of the end of each calendar year and at the termination of this Agreement. " (d) To illustrate the operation of this Section 5, if the Owner and its subsidiaries in any year own or operate 30 Vessels and MOC and its subsidiaries manage 20 other vessels, the total costs of carrying on shipping operations for that year is $ , and the fees payable under the American Agency Agreements and Foreign Agency Agreements aggregate $ , then the fee payable under this Section would be $ , calculated as follows: " (e) If, in any year, the total fees payable under the American Agency Agreements and the Foreign Agency Agreements exceed the fee payable for that year under this Section (said fee under this Section for this purpose being computed without deducting therefrom the fee under the American Agency Agreements and Foreign Agency Agreements) then one half of the amount of such excess shall be refunded to the Owner. " (f) The total costs of carrying on shipping operations and the fee due for each year under this Section 5 shall be evidenced by a detailed written statement with supporting schedules in form acceptable to the Owner (the "Accounting") prepared by independent certified public accountants acceptable to the Owner, confirming same, which statement shall be presented to the Owner within 90 days after the end of such year. The amount due for such year, as shown by such statement, shall be final, conclusive and binding upon the parties and shall not be subject to review or dispute. " (g) It is understood that the fee payable under this Section 5 is to be paid in consideration of the services set forth in Section 3 of this Agreement and does not constitute payment for other services which may be rendered by MOC and its subsidiaries in respect of any non-shipping activities which the Owner may hereafter undertake and in writing request MOC to perform. Compensation for such other services shall be subject to agreement between the parties." 2. Except as hereby amended, the General Services Agreement shall remain unaltered and continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to be executed and delivered as of the day and year first above written. OVERSEAS SHIPHOLDING GROUP, INC. MARITIME OVERSEAS CORPORATION By:------------------------- By:-------------------------- Senior Vice President Senior Vice President EX-10 5 EXHIBIT 10 (e)(1) ----------------- MARITIME OVERSEAS CORPORATION 511 FIFTH AVENUE NEW YORK, N.Y. 10017 As of August 9, 1973 Overseas Shipholding Group, Inc. 511 Fifth Avenue New York, N.Y. 10017 Gentlemen: Reference is made to the various agreements between Maritime Overseas Corporation ("MOC") and Overseas Shipholding Group, Inc. ("OSG"), OSG's subsidiaries and OSG's 50%-owned corporations (hereinafter collectively the "OSG Group of Companies"), under which MOC serves as agent in connection with the management and operation of vessels, as exclusive chartering broker, and as exclusive broker in connection with purchase, sale and construction of vessels for the OSG Group of Companies and renders certain additional services to the OSG Group of Companies. MOC hereby agrees that if its consolidated net income from shipping operations in any calendar year commencing with the year ending December 31, 1973 shall exceed the agreed maximum hereinafter set forth, brokerage commissions payable by the OSG Group of Companies in respect of such year shall be reduced to such extent as will result in reducing MOC's consolidated net income from shipping operations for such year to the agreed maximum for such year. The agreed maximum consolidated net income from shipping operations for the year ending December 31, 1973 shall be $ ; the agreed maximum for each year thereafter shall be 10% more than the agreed maximum for the immediately preceding year, so that the agreed maximum for the year ending December 31, 1974 will be $ , the agreed maximum for the year ending December 31, 1975 will be $ uand so forth. Consolidated net income from shipping operations shall be calculated each year by MOC's regularly employed accountants, subject to verification by OSG, in accordance with generally accepted accounting principles applied on a consistent basis, after provision for all federal and state taxes on income from shipping operations. MOC's shipping operations include management and operation of vessels, serving as ship brokers, and any and all operations relating to shipping, including without limitation all services rendered by MOC or its subsidiaries to the OSG Group of Companies and any similar services that may be rendered by MOC or its subsidiaries to any other person, firm or corporation engaged in the shipping business. If there should be any reduction in brokerage fees payable by the OSG Group of Companies by reason of the foregoing provisions, the reduction in such fees shall be allocated among the OSG Group of Companies in such manner and in such amounts as shall be designated by OSG. Any overpayment of brokerage fees shall be refunded by MOC promptly upon the determination of the amount thereof and the designation by OSG of the companies entitled thereto. MOC understands that effective from the effective date hereof the salaries of all officers of OSG will be determined by the Board of Directors of OSG and paid by OSG. Messrs. Hettena, Feder and Kliger, all of whom are now officers of OSG, have in the past served as officers of MOC, and have received compensation from MOC. It is anticipated that each will continue to serve as an officer of MOC. We hereby confirm that to the extent services performed by Messrs. Hettena, Feder and Kliger are required to be provided by MOC to the OSG Group of Companies pursuant to existing agreements between MOC and the OSG Group of Companies, MOC will reimburse such salaries to OSG, with a view to having the OSG Group of Companies bear the economic cost of only the same portion of the salaries of Messrs. Hettena, Feder and Kliger as is required to be borne by the OSG Group of Companies under the existing agreements. MOC further undertakes that so long as it manages vessels of the OSG Group of Companies, the rate of salary MOC pays to its highest paid executive shall not exceed twice the rate of salary being paid by OSG to OSG's highest paid executive except with the specific approval of the Board of Directors of OSG. Very truly yours, MARITIME OVERSEAS CORPORATION By:-------------------------- AGREED TO: OVERSEAS SHIPHOLDING GROUP, INC. By: -------------------------- EX-10 6 EXHIBIT 10(e)(2) ---------------- MARITIME OVERSEAS CORPORATION 511 FIFTH AVENUE NEW YORK, N.Y. 10017 As of August 9, 1973 Overseas Shipholding Group, Inc. 511 Fifth Avenue New York, N.Y. 10017 Gentlemen: We wish to confirm our agreement that so long as we continue to serve as agents for the management and operation of ships and as ship and chartering broker for Overseas Shipholding Group, Inc. ("OSG"), its subsidiaries and 50%-owned corporations (collectively the "OSG Group of Companies"), we shall offer to OSG for itself or for such of the OSG Group of Companies as OSG may designate, a right of first refusal on all transactions (including charters, contracts of affreightment, acquisition of vessels and newbuildings) which become available to Maritime Overseas Corporation, of which one of the OSG Group of Companies is able to avail itself and which the Board of OSG determines might be suitable for the OSG Group of Companies. Such offers shall be communicated promptly to such officer or officers of OSG as may be designated from time to time by the Board of Directors of OSG. It is, of course, understood that the standards of suitability for the OSG Group of Companies will be reviewed periodically by OSG's Board of Directors and, therefore, may be subject to change from time to time. Very truly yours, MARITIME OVERSEAS CORPORATION By:--------------------------- EX-10 7 EXHIBIT 10(e)(3) ---------------- MARITIME OVERSEAS CORPORATION 511 FIFTH AVENUE NEW YORK, NEW YORK 10017 As of August 9, 1973 Overseas Shipholding Group, Inc. 511 Fifth Avenue New York, N.Y. 10017 Gentlemen: We wish to confirm our undertaking that in case of any proposed sale of the business of Maritime Overseas Corporation ("MOC") while MOC serves as agent for the management of your ships MOC shall first offer on substantially the same terms and conditions for a period of 30 days to sell such business to Overseas Shipholding Group, Inc. ("OSG"). In case of any proposed sale of all the equity interests in MOC while MOC serves as agent for the management of you ships MOC shall cause such equity interests to be offered to OSG on substantially the same terms and conditions for a period of 30 days, or failing that, shall offer to sell the business of MOC to OSG on substantially such terms and conditions for such period. Very truly yours, MARITIME OVERSEAS CORPORATION By:------------------------- EX-10 8 EXHIBIT 10(g)(1) ---------------- MANAGEMENT AGREEMENT made and entered into this day of by and between , a Liberian corporation (the "Owner"), and MARITIME OVERSEAS CORPORATION, a New York corporation ("MOC"). W I T N E S S E T H : - - - - - - - - - - - WHEREAS, the Owner is or may hereafter become the registered owner of certain seagoing vessels; and WHEREAS, the Owner desires to arrange (subject to the Owner's direction and control) for the sole and exclusive management by MOC of the said vessels and other vessels hereinafter owned or operated by the Owner and for the furnishing of certain facilities and services by MOC to the Owner, on the terms herein provided. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it is agreed as follows: 1. APPOINTMENT OF MOC - The Owner appoints MOC as its sole and exclusive agent to manage and conduct the business of the vessel listed in Schedule "A" hereto and all other vessels now or hereafter owned or operated by the Owner (the "Vessels") and to furnish the facilities and perform the services hereafter set forth, in accordance with such directions and orders as the Owner has issued or from time to time may issue, and upon the terms and conditions herein provided. For purposes of this Agreement, vessels which are "owned or operated" by the Owner shall be deemed to include any vessel which is being constructed for or on behalf of the Owner or owned by the Owner or leased by the Owner under bareboat charter or which the Owner has the right to manage and operate whether by reason of any charter, agreement or otherwise. The foregoing shall not include, however, (i) any vessel which the Owner owns jointly with others, unless the Owner owns a majority interest in such vessel or has the right to manage and operate such vessel for the joint owners, (ii) any vessel which is under bareboat charter from the Owner to third parties, and (iii) any vessel which is under time charter to the Owner from a person, firm or corporation for whom MOC or a subsidiary acts as agent under a management agreement in substantially the same form as this Agreement. 2. ACCEPTANCE OF APPOINTMENT - MOC accepts such appointment and undertakes to manage the Vessels and to furnish the facilities and provide the services herein described all under this Agreement for the account of the Owner and in accordance with such directions and instructions as the Owner has issued or from time to time may issue, and upon the terms and conditions herein provided. MOC shall perform its duties under this Agreement in accordance with the standards of care of first- class vessel operators. Nothing in this Agreement shall be deemed to grant to MOC any interest in any Vessel or in the profits resulting from its operation or as creating any relationship other than that of principal and agent. MOC shall not, on behalf of the Owner, enter in any transaction not in the ordinary course of shipping business or enter into any commitment extending (or at the option of the other party, renewable) beyond two years, without the prior approval of the Owner. All charter parties will be entered into only with the prior approval of, and executed by, the Owner. 3. DUTIES OF MOC - For the account of the Owner, in accordance with such directions, orders, forms and methods of supervision and inspection as the Owner may from time to time issue, in an economical and efficient manner, and exercising due diligence to protect and safeguard the interests of the Owner, in connection with the duties prescribed in this Agreement, MOC shall: (A) AGENCY (a) Engage and dismiss the Masters, Officers and crews of the Vessels, and al other personnel necessary for the operation of the Vessels (all of whom shall be employees of the Owner), and supervise payment of their wages and other compensation (including overtime and vacation pay) and payment to unions. (b) Prepare and file on behalf of the Owner payroll tax returns, if any, and make payment of all payroll taxes due thereon. (c) Purchase all necessary stores, supplies, services and provisions for the Vessels and supervise the distribution thereof to the Vessels. (d) Arrange for and supervise all repairs and maintenance of the Vessels and arrange for and supervise vessel classification and other vessel surveys, shipyard overhaul, major repairs and drydocking, and appoint classification, Coast Guard and other surveyors. (e) Conduct all business of the Vessels, including but not limited to all matters with respect to voyages, cargoes and persons to be carried, and procure or provide all services incident thereto including, but not limited to, cargo handling, port activities (including pilotage, towing wharfage and dockage), canal transits, services of agents, brokers and consultants, and arrange payment of all expenses in respect of the foregoing as necessary for the operation of the Vessels. (f) Issue or cause to be issued all necessary shipping documents, freight contracts and bills of lading. (g) Place all Hull Machinery, Protection and Indemnity, War Risk insurances and any other insurance, on Vessels, crew, cargo or freight, and pay all insurance premiums thereon. (h) Process and handle all insurance claims an collect the proceeds thereof. (i) Execute voyage schedules, routing, loading and discharging. (j) Arrange for all stevedoring, bunkering, towage and other contracts. (k) Attend to relations with charterers of Vessels. (l) Handle all claims and collections arising out of the operations of the Vessels, including the collection and handling of all hire payments, demurrage and dispatch. (m) Arrange for taking inventories of stores, food and equipment, as required. (n) Arrange for the entry and clearance of the Vessels, and or berth and terminal facilities when necessary. (o) Handle all functions ashore which usually devolve upon the owner of a vessel. (p) Perform all necessary services in connection with salvage and general average. (q) Keep the Owner advised with respect to the operation of the Vessels and the performance by MOC of its services hereunder. (r) Keep books, records and accounts (which shall be the property of the Owner) relating to the activities, maintenance and business of the Vessels in such form as may be required by the Owner. (s) Attend to the chartering of Vessels. (B) ACCOUNTING (i) Handle all accounting and financial activities relating to the Owner. (ii) Keep records and books of account for the Owner, in accordance with the procedures heretofore followed by MOC, and provide it and its accountants and representatives access to such records and books of account at all times during normal business hours. (iii) Process accounts payable and accounts receivable. (iv) Prepare periodic accounting and financial reports, including balance sheets, profit and loss statements and cash flow statements as required. (v) Assist the accounts and tax advisors of the Owner in preparing tax returns. (B) FINANCE (i) Assist, when required, in arranging for the financing through banks, lending institutions and others. (ii) Advise with respect to alternative means for raising of equity and debt capital. (D) SHIPBUILDING AND ACQUISITIONS (i) As required by the Owner, prepare and arrange for studies, surveys, and projections with respect to vessel construction and conversion, the charter and ship sales market, economic conditions in the shipping and other industries, and make recommendations with respect to vessel construction and acquisition based thereon. (ii) Negotiate and supervise newbuilding construction and other vessel acquisitions for account of the Owner, advise with respect thereto, and accept delivery on its behalf of all vessel being constructed or otherwise acquired. (E) GENERAL (i) Prepare reports and information which the Owner may from time to time be required or elect to file with governmental agencies in connection with any of the Vessels, and as otherwise required by law. (ii) Furnish office space and facilities. In connection with the performance of its duties under the Agreement, MOC shall, from time to time, consult with members of its legal department and, upon instructions of the Owner, retain independent counsel for the account of the Owner. Nothing in this Agreement shall be deemed to obligate MOC to expend its own funds in the payment of any amounts to be disbursed for the account of the Owner and for which Owner is, pursuant to Section 6 of this Agreement, required to reimburse MOC, it being understood that all such funds shall be provided by the Owner as herein set forth. 4. OFFICE AND STAFF; BONDING - MOC shall at all times maintain appropriate offices, facilities and staff in order to perform properly the duties and services set forth in this Agreement. MOC's employees who handle or are responsible for the funds of the Owner shall be bonded by a fidelity bond for the benefit of MOC and the Owner as their interests may appear. 5. COMPENSATION - (a) For the duties and services to be performed hereunder, MOC shall receive in respect of each Vessel (i) during the period commencing with the date of delivery of such vessel by the builder thereof to the Owner or the date of acquisition of such Vessel by the Owner, as the case may be, the sum of $ per month, payable in each case in advance on the first business day of each month and (ii) if such Vessel is being constructed for or on behalf of the Owner, during the period from the date of the laying of the keel of such Vessel until such date of delivery the sum of $ per month, payable in the same manner as in clause (i). (b) The fee payable to MOC shall be automatically increased or decreased at the end of each year (commencing at the end of 1970) in proportion to the increase or decrease from the preceding year in the total fees (the "General Services Fee") which MOC would be entitled to receive in such years from Overseas Shipholding Group, Inc. ("Overseas") under Section 5 of the General Services Agreement dated December 31, 1969 between Overseas and MOC, if no effect were given in the computation of such fee payable by Overseas to the deduction provided for in clause (ii) of Section 5(a) of such General Services Agreement, and with appropriate adjustment for changes in the number of ships managed by MOC for Overseas and its subsidiaries during the respective years (not including ships jointly owned, directly or indirectly, by Overseas and any other company which has an equity interest in the Owner), to the extent such increase or decrease is unrelated to a material change in the services to be performed by MOC for Overseas and its subsidiaries. Such adjustment shall be effective commencing January 1 of the year as to which such increase or decrease is calculated. Any payments relating to such year to be made as a result of such adjustment shall be made not later than April 30 of the following year, and the fee as adjusted shall be paid commencing January 1 of such following year. If, at any time there shall be no General Services Fee in effect, the fee payable to MOC shall be subject to adjustment from time to time by written agreement of the parties to reflect fees generally paid in the industry for comparable services and to reflect changes in the costs of providing services contemplated by this Agreement, it being understood that the fee set forth in this Section 5 has been computed in such a manner as to contain all components of the General Services Fee plus chartering brokerage commissions. Anything herein to the contrary notwithstanding, the total fee payable hereunder for any Vessel for any year may not be increased by more than 10% of the total fee paid for the immediately preceding year nor be less than the applicable rate set forth in Section 5(a). (c) For purposes of this Section 5, in respect of a Vessel managed by MOC for less than a full month, or as to which a fee at a given rate as provided in Section 5(a) is applicable for less than a full month, MOC's fees shall be pro-rated on a daily basis on the basis of the number of days in such month. 6. EXPENSES - The fees set forth in Section 5 of this Agreement shall not include, and the Owner shall promptly reimburse MOC for, all amounts incurred, expended or disbursed by MOC for the direct account of the Vessels or the Owner pursuant to Section 3 of this Agreement or otherwise including without limitation, travel expenses (including without limitation living expenses during travel), awards and costs of arbitration and litigation, and outside legal, accounting and other professional fees and charges, but not including MOC's office and other overhead expenses (such office and other overhead expenses include, without limitation, telegrams, cables, long-distance telephone calls, postage, stationery, printing for MOC, and salaries of employees of MOC and its subsidiaries). MOC shall, when it may legally do so, pay and pass on to the Owner the full amounts and benefits of any refunds, rebates, credits or commissions which it may receive from any persons furnishing services or supplies for the account of the Vessels. 7. ADVANCE AND COLLECTIONS - The Owner shall from time to time advance or cause to be advanced to MOC all funds necessary to enable MOC to pay those of the necessary costs and expenses of managing the Vessels and performing its duties under this Agreement for which Owner is, pursuant to Section 6 of this Agreement, required to reimburse MOC. MOC shall collect when due all freights and other funds accruing to the Owner arising out of the performance of its duties hereunder. MOC shall keep all funds received by way of advances or collections separate and apart from its own funds and such funds shall be held in trust for the Owner. 8. AGENTS. MOC may appoint steamship or other agents in various ports of call of the Vessels for the husbanding, handling and servicing thereof, from the regularly established list of agents customarily used by MOC. Such agents may include Maritime Overseas Company, Ltd., London, or any other shipping agency affiliate of MOC. MOC assumes no responsibility for the acts or omissions of any agents so appointed which are not affiliated with MOC provided that MOC shall use reasonable care in the selection and supervision of such agents. MOC shall, however, be responsible for the acts or omissions of any agents so appointed which are affiliated with MOC to the same extent as if such acts or omissions had been acts or omissions of MOC. Compensation payable by MOC to such agents shall not exceed the scales of fees from time to time in effect in the respective ports or as is customary in the trade at such locality and shall be for the Owner's account, provided that the Owner shall not be responsible for or required to reimburse MOC for fees payable by it to Maritime Overseas Company Ltd., London, or to any other shipping or management affiliate of MOC. 9. INDEMNIFICATION OF MOC - The Owner shall indemnify hold harmless and defend MOC against any and all claims and demands (including costs and reasonable attorneys' fees in defending such claims and demands), whether or not any such claims or demands be found to be valid, of whatsoever kind or nature and by whomsoever asserted (but not arising out of MOC's negligence or willful misconduct), for injury to persons or property arising out of or in any way connected with the condition, use or operation of the Vessels or the performance of MOC's services in good faith hereunder, including, but not limited to, claims for damages or injuries to, or loss of, property, cargo or personal effects, claims for damages for personal injury or loss of life and claims for maintenance and cure; and shall warrant MOC free of any right or subrogation by insurance underwriters against MOC with respect to any and all of the foregoing risks or claims. The Owner shall cause MOC to be named as an additional insured party in all liability policies relating to the Vessels. MOC shall be under no responsibility or liability for loss or damage to any of the Vessels, or for loss of profits, or otherwise to the Owner, arising out of any act or omission (other than acts or omissions constituting negligence or willful misconduct) on the part of its officers or employees, selected with due care, in connection with the management of the Vessels or in the performance of MOC's duties under this Agreement. MOC shall promptly notify the Owner of any claim or demand in respect of which MOC may be indemnified hereunder and shall cooperate with the Owner in the defense thereof. 10. FORCE MAJEURE - MOC shall be under no liability of any kind or nature whatsoever in the event that it should fail to perform any services hereunder if such failure is directly or indirectly caused by war, war-like activities, government order, supervening illegality, riot, civil commotion or any labor shortage, labor trouble, strike or lock-out, or any shortage of material or Act of God or peril of the sea or any other cause whatsoever beyond MOC's control, whether or not of the same or similar nature. 11. DEALINGS WITH AFFILIATES - If MOC shall utilize any related or affiliated company to render any service or to furnish any stores, supplies, equipment, provisions, materials or facilities in connection with the performance of its duties under this Agreement, it shall disclose such relationship to the Owner and shall purchase or acquire same at prices and on terms at least as favorable as those generally obtainable from independent furnishes of such services or supplies. 12. DIRECTIONS AND APPROVALS - In acting under this Agreement, MOC may, subject to any other arrangement then in effect between MOC and the parents of the Owner, accept and rely upon directions or approvals made or given on behalf of the Owner by any officer of the Owner or by any other person designated by the Owner to give such directions and approvals, unless and until MOC shall have received written notice from the Owner of the revocation or limitation of the authority of such persons to act on behalf of the Owner. Nothing in this Section 12 or in any other arrangement between MOC and the parents of the Owner shall be construed as requiring MOC to obtain such direction or approvals in any particular case, irrespective of whether the amount of any commitment or expenditure may exceed the amounts specified in any such arrangement. 13. EXISTING MANAGEMENT AGREEMENTS - All existing management or agency agreements between the Owner and MOC are hereby terminated and cancelled, and the Owner and MOC each acknowledge that neither has, nor shall hereafter have, any obligation to the other arising out of any such agreement or agreements between the Owner and MOC heretofore in effect except as provided in any other arrangement between MOC and the parents of the Owner and except for obligations of MOC to the Owner relating to commissions to be paid by the builder in connection with the construction of the Vessel listed on Schedule A. Credit against payment to MOC of amounts which may hereafter be owing by the Owner to MOC hereunder shall be allowed the Owner for any amounts reimbursed to MOC prior to the date of this Agreement which would not have been so reimbursed under Section 6 of this Agreement had this Agreement been effect on the date of such reimbursement. 14. TERM OF AGREEMENT. This Agreement shall commence on the date hereof and shall not be terminated except as expressly set forth herein or as may be expressly set forth in any other arrangement then in effect between MOC and the parents of the Owner. Anything herein to the contrary notwithstanding, this Agreement shall terminate upon the happening of any of the following events: (a) The Owner shall sell or otherwise dispose of all its Vessels and cease to be engaged in the shipping business. (b) At the option of the Owner, if a petition in bankruptcy or for arrangement or reorganization shall be filed by MOC or such a petition shall be filed against MOC and shall not be dismissed within 90 days after such filing, or MOC shall become insolvent or commit an act of bankruptcy or make an assignment for the benefit of creditors. (c) At the option of MOC, if a petition in bankruptcy or for arrangement or reorganization shall be filed by the Owner or such a petition shall be filed against the Owner and shall not be dismissed within 90 days after such filing, or the Owner shall become insolvent or commit an act of bankruptcy or make an assignment for the benefit of creditors. Upon termination of this Agreement, the Owner shall make prompt arrangements to have all outstanding matters with respect to the Vessels taken over by the successor agent. MOC shall co-operate with the Owner and with the successor agent whom the Owner appoints to effect the prompt and efficient transfer of all records, funds and duties relating to the Vessels, and thereafter MOC shall be permitted to inspect all such records at any reasonable time during normal business hours. MOC and the Owner agree that any successor agent shall be appointed in such manner as may be set forth in any other arrangement then in effect between MOC and the parents of the Owner. 15. MANAGEMENT FOR THIRD PARTIES - The Owner recognizes that MOC has managed and may continue to manage vessels for persons other than the Owner and that such services may be performed for persons, firms or corporations which are affiliated with MOC. 16. ASSIGNMENT - This Agreement shall not be assigned by either party without the consent in writing of the other. 17. NOTICES - All notices, demands, requests, approvals and other communications ("Notices") which are given or required to be given under or with respect to this Agreement, shall be sent by registered or certified mail, postage prepaid (except in case of emergency or urgency when they shall be sent by telex, cable or telegram and confirmed by such registered or certified mail), addressed to the party for whom intended at its address specified below or to such other address as such party shall hereafter specify by like Notice. Notices to the Owner shall be sent in duplicate addressed to such addresses as may be furnished to the parties by the parents of the Owner in writing. Notices to MOC shall be addressed, until further notice as follows: 511 Fifth Avenue New York, New York 10017 18. ENTIRE AGREEMENT AND AMENDMENTS - Subject to any other written agreement now or hereafter existing between MOC and the parents of the Owner, this Agreement sets forth the entire understanding of the parties relating to the subject matter thereof and supersedes all other proposals and agreements, oral or written, between the parties concerning the subject matter hereof. None of the terms or provisions hereof shall be modified, and this Agreement may not be amended, except by a written instrument signed by the party against which such modification or amendment is to be enforced. 19. WAIVER - No waiver of any provision of this Agreement shall be effective unless in writing signed by the waiving party and no waiver of any breach or default hereunder shall constitute a waiver of any other subsequent breach or default, whether of the same or different nature. 20. GOVERNING LAW - This Agreement shall be governed, construed, performed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed within that State. 21. PARTIES IN INTEREST - This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers the day and year first above written. ATTEST: By:--------------------------- By:--------------------------- MARITIME OVERSEAS CORPORATION ATTEST: By:--------------------------- By:--------------------------- EX-10 9 EXHIBIT 10(G)(3) ---------------- AMENDMENT NO. 3 DATED AS OF TO MANAGEMENT AGREEMENT DATED BETWEEN CORPORATION (THE "OWNER") AND MARITIME OVERSEAS CORPORATION ("MOC") W I T N E S S E T H : IT IS HEREBY MUTUALLY AGREED as follows: l. Section 5(a) of the Management Agreement is hereby amended, commencing as of , to read as follows: "(a) For the duties and services to be performed hereunder, MOC shall receive in respect of the Vessel listed on Schedule "A" hereto, during such period as said Vessel is chartered under Time Charter Party dated ,as amended from time to time, the sum of $ per month, payable in advance on the first business day of each month." 2. Except as amended hereby, all of the terms and condi tions of the Management Agreement, as amended by Amendment No. 2, shall remain unaltered and continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 3 to the Management Agreement the day and year first above written. CORPORATION By:-------------------------- MARITIME OVERSEAS CORPORATION By:------------------------- EX-10 10 EXHIBIT 10(g)(4) --------------- COMPANY SERVICE EMPLOYEES AGREEMENT made and entered into this day of , by and between , a company incorporated in the Republic of Liberia (the "Company"), and MARITIME OVERSEAS CORPORATION, a company incorporated in New York ("MOC"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company may hereafter become the registered owner of a certain Metric DWT double hulled tank vessel, Hull No. (the "Vessel"), to be built by Hyundai Corporation and Hyundai Heavy Industries Co., Ltd.; WHEREAS, the Vessel will be time chartered by the Company to pursuant to a Time Charter (the "Time Charter") dated ; and WHEREAS, the Company in order to operate the Vessel, wishes to avail itself of the services of MOC and certain employees of MOC and MOC is willing to perform such services and lease certain of its employees to the Company for full or part- time service with the Company, on the terms herein provided. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it is agreed as follows: 1. COMPANY SERVICE EMPLOYEES. MOC agrees to provide employees to assist the Company in the operation of the Vessel and the management and operation of the Company's business, and to perform such services as the Company may from time to time request in connection therewith. Such employees shall consist of employees of MOC who will perform on behalf of the Company the functions described in Section 3 of this Agreement. All employees subject to this Agreement from time to time are referred to in this Agreement as "Company Service Employees". Company Service Employees shall be and remain the employees of MOC. 2. COMPENSATION FOR COMPANY SERVICE EMPLOYEES. (a) MOC will continue to pay the salary of the Company Service Employees and will permit them to participate in insurance and benefit plans of MOC for which they are or may become eligible and will at all times in respect of such personnel have the rights of promotion, discharge, job classification and determination of salary, expense allowance and special allowances, including vacation and leave of absence. (b) The Company will pay MOC for providing such Company Service Employees and such other services as are provided for in this Agreement (i) a monthly fee of $ during the period commencing with the date of delivery of the Vessel by the builders thereof to the Company or (ii) a monthly fee of $ during the period from the date of laying the keel of the Vessel until such date of delivery. (c) MOC shall be solely responsible for paying the monthly salary of each Company Service Employee provided to the Company under this Agreement and shall be solely responsible for the payment of Social Security and other insurances and employment taxes imposed on MOC on account of such personnel; expenses and special allowances; and MOC's accrual of benefit plans' expense on behalf of Company Service Employees. (d) For purposes of this Section 2, in respect of MOC providing Company Service Employees to the Company for less than a full month, such fee as set forth in Section 2(b) shall be pro-rated on a daily basis on the basis of the number of days in such month. 3. DUTIES OF COMPANY SERVICE EMPLOYEES. The Company Service Employees will be under the direction of MOC, shall observe the working schedule of MOC and shall comply with such directions, orders, forms and methods of supervision and inspection as MOC may from time to time issue, in an economical and efficient manner, and exercising due diligence to protect and safeguard the interests of the Company, in connection with the duties prescribed in this Agreement. The Company shall be entitled to exercise MOC's authority with respect to setting the working schedules of the Company Service Employees and directing and supervising the work activities of the Company Service Employees, subject to MOC's right to override or modify any such act of the Company. The Company shall not have the authority to perform any other functions of MOC, such as the right to discharge Company Service Employees. The Company Service Employees shall follow all instructions of MOC and/or the Company that are given pursuant to this Section. The Company Service Employees and MOC when requested by one or more of the Company Service Employees or the Company shall perform the duties and services set forth in Exhibit A hereto. In connection with the performance of their duties under this Agreement, the Company Service Employees may, from time to time, consult with members of the legal department of MOC or, if MOC has no legal department at the time, with members of the legal department of one of MOC's affiliates, and, upon instructions of the Executive Committee of the Company, shall retain independent counsel for the account of the Company. Nothing in this Agreement shall be deemed to obligate MOC to expend its own funds in the payment of any amounts to be disbursed for the account of the Company and for which Company is, pursuant to Section 5 of this Agreement, required to reimburse MOC, it being understood that all such funds shall be provided by the Company as herein set forth. 4. OFFICE AND STAFF; BONDING. MOC shall at all times maintain appropriate offices, facilities and staff in order to permit the Company Service Employees to perform properly the duties and services set forth in this Agreement. Company Service Employees who handle or are responsible for the funds of the Company shall at the sole cost of MOC and in accordance with MOC's normal procedures be bonded by a fidelity bond for the benefit of MOC and the Company as their interests may appear. 5. COMPANY EXPENSES. All amounts incurred, expended or disbursed by Company Service Employees for the direct account of the Vessel or the Company pursuant to Section 3 of this Agreement or otherwise including without limitation, travel expenses (including without limitation living expenses during travel), awards and costs of arbitration and litigation, and outside legal, accounting and other professional fees and charges, (together, "Company Expenses") shall be paid by the Company. In the event that any funds of MOC are used to pay any Company Expenses, the Company shall promptly reimburse MOC for the amount of such Company Expenses paid by MOC, and the Company acknowledges and agrees that the monthly fee set forth in Section 2 does not include any amount with respect to Company Expense. Except as otherwise included in the monthly fee referred to in Section 2(b), in no event shall Company Expenses include, and the Company shall not be obligated to reimburse MOC for, MOC's office and other overhead expenses (such office and other overhead expenses include, without limitation, telegrams, cables, long- distance telephone calls, postage, stationery, printing for MOC, and salaries of employees of MOC and its subsidiaries). The Company shall be entitled to the full amounts and benefits of any refunds, rebates, credits or commissions which MOC or any of the Company Service Employees may receive from any persons furnishing services or supplies for the account of the Vessel. 6. ADVANCES AND COLLECTIONS. The Company shall from time to time deposit funds in its bank account sufficient to enable the Company Service Employees to pay necessary Company Expenses and MOC shall from time to time obtain the Company's consent to the Company Service Employees to be authorized to access such account and to sign checks on behalf of the Company. 7. AGENTS. The Company Service Employees may appoint steamship or other agents in various ports of call of the Vessel for the husbanding, handling and servicing thereof, from the regularly established list of agents customarily used by MOC. Such agents may include any shipping agency affiliate of MOC. MOC assumes no responsibility for the acts or omissions of any agents so appointed which are not affiliated with MOC provided that the Company Service Employees shall use reasonable care in the selection and supervision of such agents. MOC shall, however, be responsible for the acts or omissions of any agents so appointed which are affiliated with MOC to the same extent as if such acts or omissions had been acts or omissions of MOC. Compensation payable to such agents shall not exceed the scales of fees from time to time in effect in the respective ports as is customary in the trade at such locality and shall be for the Company's account, provided that the Company shall not be responsible for or required to reimburse MOC for fees payable by it to any shipping or management affiliate of MOC. 8. INDEMNIFICATION OF MOC. The Company shall indemnify, hold harmless and defend MOC and the Company Service Employees against any and all claims and demands (including costs and reasonable lawyers' fees in defending such claims and demands), whether or not any such claims or demands be found to be valid, of whatsoever kind or nature and by whomsoever asserted (but not arising out of MOC's or any of the Company Service Employees' negligence or wilful misconduct), for injury to persons or property arising out of or in any way connected with the condition, use or operation of the Vessel or the performance of the Company Service Employees' services in good faith hereunder, including, but not limited to, claims for damages or injuries to, or loss of, property, cargo or personal effects, claims for damages for personal injury or loss of life and claims for maintenance and cure; and shall warrant MOC free of any right of subrogation by insurance underwriters against MOC with respect to any and all of the foregoing risks or claims. The Company shall cause MOC to be named as an additional insured party in all insurance policies relating to the Vessel. MOC shall be under no responsibility or liability for loss or damage to the Vessel, or for loss of profits, or otherwise to the Company, arising out of any act or omission (other than acts or omissions constituting negligence or wilful misconduct) on the part of its officers or employees selected with due care, in the performance of the duties under this Agreement. MOC shall promptly notify the Company of any claim or demand in respect of which MOC may be indemnified hereunder and shall cooperate with the Company in the defense thereof. 9. FORCE MAJEURE. MOC shall be under no liability of any kind or nature whatsoever in the event that the Company Service Employees should fail to perform any services hereunder if such failure is directly or indirectly caused by war, war-like activities, government order, supervening illegality, riot, civil commotion or any labor shortage, labor trouble, strike or lock- out, or any shortage of material or Act of God or peril of the sea or any other cause whatsoever beyond MOC's control, whether or not of the same or similar nature. 10. DEALINGS WITH AFFILIATES. If any Company Service Employee shall utilize on behalf of the Company any related or affiliated company of MOC to render any service or to furnish any stores, supplies, equipment, provisions, materials or facilities in connection with the performance of the Company Service Employee's duties under this Agreement, the Company Service Employees and/or MOC shall disclose such relationship to the Executive Committee of the Company and shall purchase or acquire same at prices and on terms at least as favorable as those generally obtainable from independent furnishers of such services or supplies. 11. DIRECTIONS AND APPROVALS. In activities under this Agreement, MOC and the Company Service Employees shall accept and rely upon directions or approvals made or given on behalf of the Company by the Executive Committee of the Company, by any officer of the Company or by any other person designated by the Company to give such directions and approvals, unless and until MOC or the Company Service Employees shall have received written notice from the Company of the revocation or limitation of the authority of such persons to act on behalf of the Company. 12. TERM OF AGREEMENT. This Agreement shall commence on the date hereof and unless terminated in accordance with the other provisions of this Agreement shall continue for the term of the Time Charter and thereafter until terminated by not less than ninety days' notice in writing from one party to the other. Anything herein to the contrary notwithstanding, this Agreement shall terminate upon the happening of any of the following events: (a) The Company shall sell or otherwise dispose of the Vessel or the Vessel shall be deemed an actual total loss, a construction total loss or a compromised total loss. (b) At the option of the Company, if a petition in bankruptcy or for arrangement or reorganization shall be filed by MOC or such a petition shall be filed against MOC and shall not be dismissed within 90 days after such filing, or MOC shall become insolvent or commit an act of bankruptcy or make an assignment for the benefit of creditors; (c) At the option of MOC, if a petition in bankruptcy or for arrangement or reorganization shall be filed by the Company or such a petition shall be filed against the Company and shall not be dismissed within 90 days after such filing, or the Company shall become insolvent or commit an act of bankruptcy or make an assignment for the benefit of creditors. Upon termination of this Agreement, the Company shall make prompt arrangements to have all outstanding matters with respect to the Vessel taken over from the Company Service Employees and/or MOC, as the case may be, by persons hired or appointed by it. MOC shall cooperate, and shall cause the Company Service Employees to cooperate, with the Company and with any persons whom the Company hires or appoints pursuant to this Section 12 to effect the prompt and efficient transfer of all records, funds and duties relating to the Vessel and the business of the Company, and for three years subsequent to such termination, MOC shall be permitted to inspect all such records at any reasonable time during normal business hours. 13. ASSIGNMENT. This Agreement shall not be assigned by either party without the consent in writing of the other. 14. NOTICES. All notices, demands, request, approvals and other communications ("Notices") which are given or required to be given under or with respect to this Agreement, shall be sent by registered or certified mail, postage prepaid, (except in case of emergency or urgency when they shall be sent by telex, cable, telefax or telegram and confirmed by such registered or certified mail), addressed to the party for whom intended at its address specified below or to such other address as such party shall hereafter specify by like Notice. Notices to the Company shall be sent in duplicate addressed, until further notice, as follows: One Copy: c/o Another Copy: Notices to MOC shall be addressed, until further notice as follows: Maritime Overseas Corporation 511 Fifth Avenue New York, New York 10017 Attention: Secretary 15. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement and the Joint Venture Companies Agreement set forth the entire understanding of the parties relating to the subject matter hereof and supersede all other proposals and agreements, oral or written, between the parties concerning the subject matter hereof. None of the terms or provisions hereof shall be modified, and this Agreement may not be amended, except by a written instrument signed by the party against which such modification or amendment is to enforced. 16. WAIVER. No waiver of any provision of this Agreement shall be effective unless in writing signed by the waiving party and no waiver of any breach or default hereunder shall constitute a waiver of any other subsequent breach or default, whether of the same or different nature. 17. GOVERNING LAW. This Agreement shall be governed, construed, performed and enforced in accordance with the laws of State of New York as applied to contracts to be performed entirely within the State of New York. 18. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their fully authorized officers the day and year first above written. By:------------------------------- Name: Title: MARITIME OVERSEAS CORPORATION By:------------------------------- Name: Title: EXHIBIT A A. OPERATIONS (1) Engage and dismiss the Masters, Officers and crew of the Vessel, and all other personnel necessary for the operation of the Vessel and the conduct of the Company's business, (all of whom shall be employees of the Company). (2) Prepare and file on behalf of the Company tax returns relating to the Vessel, if any, and make payment of all taxes due thereon. (3) Purchase all necessary stores, supplies, services and provisions for the Vessel and supervise the distribution thereof to the Vessel. (4) Arrange for and supervise all repairs and maintenance of the Vessel and arrange for and supervise vessel classification and other vessel surveys, shipyard overhaul, major repairs and drydocking, and appoint classification, Coast Guard and other surveyors. (5) Conduct all business of the Vessel, including but not limited to all matters with respect to voyages, cargoes and persons to be carried, and procure or provide all services incident thereto including, but not limited to, cargo handling, port activities (including pilotage, towing, wharfage and dockage), canal transits, services of agents, brokers and consultants, and arrange payment of all expenses in respect of the foregoing as necessary for the operation of the Vessel. (6) Issue or cause to be issued all necessary shipping documents, freight contracts and bills of lading. (7) Place all Hull Machinery, Protection and Indemnity, War Risk insurances and any other insurance, on the Vessel, crew, cargo or freight, and pay all insurance premiums thereon. (8) Process and handle all insurance claims and collect the proceeds thereof. (9) Execute voyage schedules, routing, loading and discharging. (10) Arrange for all stevedoring, bunkering, towage and other contracts. (11) Attend to relations with charterers of the Vessel. (12) Handle all claims and collections arising out of the operations of the Vessel and the business of the Company, including the collection and handling of all hire payments, freight, demurrage, dispatch and other funds accruing to the Company. (13) Arrange for taking inventories of stores, food and equipment, as required. (14) Arrange for the entry and clearance of the Vessel, and for berth and terminal facilities when necessary. (15) Handle all functions ashore which usually devolve upon the owner of a vessel. (16) Perform all necessary services in connection with salvage and general average. (17) Keep the Executive Committee of the Company advised with respect to the operation of the Vessel. (18) Keep books, records and accounts (which shall be the property of the Company) relating to the activities, maintenance and business of the Vessel in such form as may be required by the Executive Committee of the Company. (B) ACCOUNTING (1) Handle all accounting and financial activities relating to the Vessel. (2) Keep records and books of account for the Vessel, in accordance with the procedures generally followed in the shipping industry. (3) Process accounts payable and accounts receivable for the Vessel. (4) Prepare periodic accounting and financial reports, including balance sheets, profit and loss statements and cash flow statements as required by the Executive Committee of the Company. (5) Assist the accountants and tax advisors of the Company in preparing tax returns. (C) FINANCE (1) Assist, when required, in arranging for financing through banks, lending institutions and others. (2) Advise with respect to alternative means for raising of equity and debt capital. (D) SHIPBUILDING - Negotiate and supervise the construction of the Vessel, advise with respect thereto, and accept delivery of the Vessel. (E) GENERAL - Prepare reports and information which the Executive Committee of the Company may from time to time require or elect to file with governmental agencies in connection with the Vessel, and as otherwise required by law. EX-10 11 EXHIBIT 10(k) ------------- OVERSEAS SHIPHOLDING GROUP, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AS AMENDED AND RESTATED AS OF JANUARY 1, 1995 This Plan is restated, effective as of January 1, 1995. Maritime Overseas Corporation ("MOC") initially established a supplemental executive retirement plan in 1984 and established a subsequent supplemental executive retirement plan in 1988 (the "Prior Plans"), both primarily for the purpose of providing supplementary retirement benefits for a select group of management and highly compensated employees of MOC and certain Participating Entities (as defined herein). Overseas Shipholding Group, Inc. (the "Company") was a Participating Entity in the Prior Plans. This Plan merges and restates the provisions of the Prior Plans as they apply to Participants who are Employees of the Company on January 1, 1995. Any participant in the Prior Plans who terminated employment prior to January 1, 1995 remains under the terms of the Prior Plan in existence at the time of his termination. Plan in This Plan also applies to future Participants designated by the Board. 1. DEFINITIONS. For purposes of this Plan, the following definitions apply: (a) "ACTUARIAL EQUIVALENT" means an amount equal in value on an actuarial basis, as determined by an actuary selected by the Committee, based upon the mortality and interest rates set forth in the Qualified Plan, as amended from time to time. (b) "BOARD" means the Board of Directors of the Company. (c) "CHANGE OF CONTROL" means a Change of Control as provided in Exhibit A hereto. (d) "CODE" means the Internal Revenue Code of 1986, as amended. (e) "COMMITTEE" means the committee, if any, appointed by the Board to administer this Plan on its behalf. If no committee is appointed, the Board shall be deemed to be the Committee. (f) "COMPANY" means Overseas Shipholding Group, Inc. or any successor thereto as a result of a merger or consolidation. (g) "EMPLOYEE" means any person employed by the Company. (h) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (i) "INITIAL PAYMENT DATE" means, except as otherwise provided herein, the first day of the month coinciding with or next following the latest of (i) three (3) months after the date on which the Participant incurs a Termination of Employment, (ii) the Participant's fifty-fifth (55th) birthday, or (iii) such later date as the Participant elects in a writing filed with the Committee at least one (1) year prior to the Employee's Termination of Employment, provided, that such election is approved by the Committee in its sole discretion. Such an election may be revoked by the Participant by written notice filed with the Committee at least one (1) year prior to Termination of Employment. (j) "MOC" means Maritime Overseas Corporation or any successor thereto as a result of a merger or consolidation. (k) "PARTICIPANT" means the persons set forth on Exhibit B hereto and any other Employee of the Company who is designated as a Participant in this Plan by the Board. (l) "PARTICIPATING ENTITY" means any entity that participates in the Qualified Plan or that is otherwise classified as a Participating Entity by the Committee. (m) "PLAN" means this Overseas Shipholding Group, Inc. Supplemental Executive Retirement Plan, as amended from time to time. (n) "QUALIFIED PLAN" means the Pension Plan for Employees of Maritime Overseas Corporation, as it is amended from time to time. (o) "STANDARD FORM" means a straight life annuity with no contingent benefit and no period certain. (p) "SUPPLEMENTAL BENEFIT" means the lump sum benefit payable under this Plan. (q) "TERMINATION OF EMPLOYMENT" means termination of employment as an Employee of the Company and all Participating Entities for any reason whatsoever, including but not limited to death, retirement, resignation or firing (with or without cause). 2. SUPPLEMENTAL BENEFITS. (a) The Supplemental Benefit shall be equal to the Actuarial Equivalent lump sum of the (i) hypothetical vested monthly accrued benefit (based on the provisions of the Qualified Plan) in the Standard Form the Participant would have received under the Qualified Plan (based solely on the Participant's compensation and service with the Company), on the Initial Payment Date if the limitations of Code Sections 401(a)(17), 415 and 416 (as applied under The Qualified Plan) did not apply, less (ii) the Actuarial Equivalent monthly benefit on the Initial Payment Date of the Participant's actual monthly benefit in the Standard Form being received (or, if not then being received, assuming benefits under the Qualified Plan then commenced) under the Qualified Plan. The Supplemental Benefit shall be calculated based on all compensation and service recognized under the Qualified Plan, whether or not with the Company, and then prorated as set forth in (b) below. (b) If the compensation and service used in determining the Supplemental Benefit pursuant to (a) above includes compensation or service with a Participating Entity other than the Company, the Supplemental Benefit paid hereunder shall be limited to the allocable portion attributable to the Company. The allocable portion attributable to the Company shall be determined by (i) calculating the total benefit payable under the Qualified Plan and this Plan, if any, to a Participant from each Participating Entity based only on his compensation and service with such Participating Entity (but aggregating total Hours of Employment in a Plan Year for purposes of determining Years of Service) and (ii) multiplying the Supplemental Benefit under this Plan by the ratio of such benefit attributable to the Company to the aggregate benefit attributable to all Participating Entities. Notwithstanding the foregoing, the Committee may, in its sole discretion, if it determines it to be equitable based on the Participant's compensation and service, otherwise allocate responsibility for any portion of the Supplemental Benefit, provided that the Participating Entity allocated to has a plan similar to this and its Committee agrees to such allocation. The Company shall not be responsible for any portion of the Supplemental Benefit attributable to or allocated to service with another Participating Entity and no such other Participating Entity shall have any obligation by virtue of the Plan. (c) Notwithstanding (a) above, the Board, in its sole discretion, may increase a Participant's Supplemental Benefit, his recognized service or his recognized compensation and may establish such conditions on such increase as it deems appropriate. Extra service shall be recognized as provided in Exhibit C hereto. 3. PAYMENT. (a) BASIC FORM OF BENEFIT. Subject to (b) below, a Participant's Supplemental Benefit shall be paid in the form of a lump sum benefit, payable as soon as administratively feasible after the Initial Payment Date. (b) OPTIONAL FORM OF BENEFIT. The Participant shall have the right, in a writing filed with the Committee, to elect a form of benefit other than that specified in (a) above, provided, however, that such optional form of benefit is available under the Qualified Plan on the Initial Payment Date and that such election is made and filed at least one (1) year prior to the Participant's Termination of Employment and is approved by the Committee in its sole discretion. Such an election may be revoked by the Participant by written notice filed with the Committee at least one (1) year prior to Termination of Employment. (c) RIGHT TO ACCELERATE PAYMENT. Notwithstanding anything else herein, the Company shall have the right, in its sole and absolute discretion, to accelerate the payment of any Supplemental Benefit payable hereunder; provided, that any accelerated payment(s) shall be equal to the Actuarial Equivalent of the Participant's Supplemental Benefit assuming that the acceleration date is the Initial Payment Date and that the Participant has commenced to receive his benefits under the Qualified Plan on the date of such payment. (d) CHANGE OF CONTROL. Notwithstanding the above, upon the occurrence of a Change of Control, the Actuarial Equivalent of each Participant's then accrued Supplemental Benefit (calculated based on the assumption that the Participant has commenced to receive his benefits under the Qualified Plan on the date of such payment) shall be promptly paid in a lump sum to such Participant and, the Actuarial Equivalent of such payment shall be offset from the Supplemental Benefit due the Participant on the Initial Payment Date. (e) FORFEITURE. A Participant shall, in the sole discretion of the Committee, forfeit his Supplemental Benefit in the event that within three (3) years after his Termination of Employment he engages, without the prior written consent of the Committee, in any activity which the Committee, in its sole discretion, believes to be competitive with the activities of the Company or MOC. Such forfeiture shall be equal to the greater of (i) the unpaid portion of his Supplemental Benefit and (ii) the portion of his Supplemental Benefit, whether theretofore paid or not paid, which in the Standard Form would be attributable to the period after which he commences to compete. To the extent any forfeited amounts shall have theretofore been paid to the Participant, upon demand, he shall promptly refund such amounts to the Company. If he fails to promptly do so, he shall be liable to the Company for its costs of collection, including reasonable attorneys' fees and disbursements. This Section 3(e) shall not be applicable to any Participant whose Termination of Employment is less than ninety (90) days before or less than two (2) years after a Change of Control. 4. DEATH OF PARTICIPANT. (a) DEATH PRIOR TO INITIAL PAYMENT DATE. In the event of the death of a Participant who has accrued a Supplemental Benefit prior to his Initial Payment Date, his spouse and/or beneficiary shall receive a benefit calculated in the same manner as in the Qualified Plan (but without regard to Code Sections 401(a)(17), 415 and 416)) to the extent such benefit would be receivable under the terms of the Qualified Plan upon his death prior to commencement of benefits if the benefit was payable from the Qualified Plan less the benefit payable from the Qualified Plan. His spouse and/or beneficiary shall be the same persons or entities as designated or determined under the Qualified Plan. The benefit payable hereunder, however, shall be paid in an Actuarial Equivalent lump sum as soon as administratively feasible after the Participant's death. (b) DEATH AFTER INITIAL PAYMENT DATE. If a Participant dies on or after the Initial Payment Date, no death benefits will be payable hereunder upon the death of the Participant unless the Participant is receiving a form of benefit with a survivor benefit pursuant to Section 3(b) above. If a Participant is receiving a form of benefit with a survivor benefit, any benefits becoming due will, subject to Section 3(c) above, be paid in accordance with such form of benefit. 5. REEMPLOYMENT If a Participant is reemployed by the Company after commencing to receive a Supplemental Benefit hereunder but does not again become a Participant, the Company shall have the right at its election to suspend benefits payable hereunder during such period of employment with an appropriate Actuarial Equivalent adjustment in his benefits when they recommence. If the former Participant again becomes a Participant accruing benefits under the Plan, he shall cease to receive Supplemental Benefits, his prior election as to his form of benefit shall be deemed cancelled, he shall have his benefits recalculated based on his entire service for the Company offset by the Actuarial Equivalent of the previously received Supplemental Benefit, and benefits shall be payable in accordance with Sections 3 and 4 above. In no event shall the combined Supplemental Benefit (as actuarially adjusted to reflect Actuarial Equivalents) be greater than the Supplemental Benefit the Participant would have received if his service had been continuous. 6. CLAIMS PROCEDURE. (a) The Committee shall be responsible for determining all claims for benefits under this Plan by the Participants or their beneficiaries. Within ninety (90) days after receiving a claim (or within up to one hundred eighty (180) days, if the claimant is so notified, including notification of the reason for the delay), the Committee shall notify the Participant or beneficiary of its decision in writing, giving the reasons for its decision if adverse to the claim. If the decision is adverse to the claimant, the Committee shall advise him of the Plan provisions involved, of any additional information which he must provide to perfect his claim and why, and of his right to request a review of the decision. (b) A claimant may request a review of an adverse decision by written request to the Committee made within sixty (60) days after receipt of the decision. The claimant, or his duly authorized representative, may review pertinent documents and submit written issues and comments. (c) Within sixty (60) days after receiving a request for review, the Committee shall notify the claimant in writing of (i) its decision, (ii) the reasons therefore, and (iii) the Plan provisions upon which it is based. (d) The Committee may at any time alter the claims procedure set forth above, so long as the revised claims procedure complies with ERISA, and the regulations issued thereunder. (e) The Committee shall have the full power and authority to interpret, construe and administer this Plan in their sole discretion based on the provisions of the Plan and to decide any questions and settle all controversies that may arise in connection with the Plan. Both the Committee's and the Board's interpretations and construction thereof, and actions thereunder, made in the sole discretion of the Committee and the Board, including any valuation of the Supplemental Benefit, any determination under this Section 6, or the amount of the payment to be made hereunder, shall be final, binding and conclusive on all persons for all persons. No member of the Board or Committee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan. (f) The Board shall determine, subject to the provisions of this Plan: (i) the additional Employees who shall participate in the Plan from time to time; and (ii) when an Employee shall cease to be a Participant. 7. CONSTRUCTION OF PLAN. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and the Participants, their designated beneficiaries or any other person. Any funds which may be invested under the provisions of this Plan shall continue for all purposes to be part of the general funds of the Company and no person other than the Company shall by virtue of the provisions of this Plan have any interest in such funds. To the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. 8. MINORS AND INCOMPETENTS. If the Committee shall find that any person to whom payment is payable under this Plan is unable to care for his affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, parent, or brother or sister, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Committee may determine it its sole discretion. Any such payment shall be a complete discharge of the liabilities of the Company, the Committee and the Board under this Plan. 9. LIMITATION OF RIGHTS. Nothing contained herein shall be construed as conferring upon an Employee the right to continue in the employ of the Company as an executive or in any other capacity or to interfere with the Company's right to discharge him at any time for any reason whatsoever. 10. PAYMENT NOT SALARY. Any Supplemental Benefit payable under this Plan shall not be deemed salary or other compensation to the Employee for the purposes of computing benefits to which he may be entitled under any pension plan or other arrangement of the Company for the benefit of its employees. 11. SEVERABILITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision never existed. 12. WITHHOLDING. The Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments or accrual pursuant to this Plan. 13. ASSIGNMENT. This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns and the Participants and their heirs, executors, administrators and legal representatives. In the event that the Company sells all or substantially all of the assets of its business and the acquiror of such assets assumes the obligations hereunder, the Company shall be released from any liability imposed herein and shall have no obligation to provide any benefits payable hereunder. 14. NON-ALIENATION OF BENEFITS. The benefits payable under this Plan shall not be subject to alienation, transfer, assignment, garnishment, execution or levy of any kind, and any attempt to cause any benefits to be so subjected shall not be recognized. 15. GOVERNING LAW. To the extent legally required, the Code and ERISA shall govern this Plan and, if any provision hereof is in violation of any applicable requirement thereof, the Company reserves the right to retroactively amend this Plan to comply therewith. To the extent not governed by the Code and ERISA, this Plan shall be governed by the laws of the State of New York, without regard to conflict of law provisions. 16. AMENDMENT OR TERMINATION OF PLAN. The Board or the Committee may amend this Plan from time to time in any respect, and may at any time terminate the Plan in its entirety. In addition, at any time, the Board or the Committee may exclude any Participant from further participation in the Plan. In the event of any amendment, Termination or exclusion, the Participant shall have a vested right to a benefit from this Plan equal to his total vested benefit from this Plan as of the date of such Termination, amendment or exclusion reduced by future growth, if any, of the benefit under the Qualified Plan attributable to increases thereafter, but prior to payment of the benefit, in the Code Sections 401(a)(17), 415 and 416 limits, including without limitation increase in the Participant's final average compensation recognized under the Qualified Plan as a result of increases in the Code 401(a)(17) limit even though it is applied to future earnings so long as it is not in excess of the Participant's compensation at the time of the amendment, termination or exclusion, but not increases in the Qualified Plan benefit attributable to future service credit, future compensation, future vesting or increase in the benefit formula. In the event of a Termination of the Plan or exclusion of a Participant, the Company may distribute to each or any Participant, as it deems appropriate, the Actuarial Equivalent of his vested accrued benefit as of such date (as if a Termination of Employment had occurred) and have no further obligation hereunder. Section 3(e) above shall continue to apply to the Participant. Any such action by the Board or the Committee with respect to the Plan shall be binding on the Company and Employee. 17. NON-EXCLUSIVITY. The adoption of the Plan by the Company shall not be construed as creating any limitations on the power of the Company to adopt such other supplemental retirement income arrangements as it deems desirable, and such arrangements may be either generally applicable or limited in application. 18. GENDER AND NUMBER. Wherever used in this Plan, the masculine shall be deemed to include the feminine and the singular shall be deemed to include the plural, unless the context clearly indicates otherwise. 19. HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only. They shall not be considered part of the Plan and shall not be employed in the construction of the Plan. IN WITNESS WHEREOF, the Company has caused this Plan to be executed this 17th day of March, 1995. OVERSEAS SHIPHOLDING GROUP, INC. By: S/ALAN CARUS ----------------------------- Title: Controller EXHIBIT A CHANGE OF CONTROL For purposes of this Plan, a "Change of Control" shall be deemed to have occurred if: (i) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof)), excluding the Company, Maritime Overseas Corporation ("MOC"), any "Subsidiary" of either, any employee benefit plan sponsored or maintained by the Company, MOC or any Subsidiary of either (including any trustee of any such plan acting in his capacity as trustee) and any person who (or group which includes a person who) is the beneficial owner (as defined in Rule 13(d)-3 under the Exchange Act) as of January 1, 1994 of at least fifteen percent (15%) of the common stock of the Company, becomes the beneficial owner (as defined in Rule 13(d)-3 under the Exchange Act) of shares of the Company having at least thirty percent (30%) of the total number of votes that may be cast for the election of directors of the Company; (ii) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of all or substantially all of the Company's assets or combination of the foregoing transactions (a "Transaction"), other than a Transaction involving only the Company and one or more of its Subsidiaries, or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity (excluding for this purpose any shareholder of the Company owning directly or indirectly more than ten percent (10%) of the shares of the other company involved in the Transaction if such shareholder is not as of January 1, 1994, the beneficial owner (as defined in Rule 13(d)-3 under the Exchange Act) of at least fifteen percent (15%) of the common stock of the Company); or (iii) within any twenty-four (24) month period beginning on or after the date hereof, the persons who were directors of the Company immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the board of directors of the Company or the board of directors of any successor to the Company (the "Board"), provided that, any director who was not a director as of the date hereof shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually or by prior operation of the foregoing unless such election, recommendation or approval was the result of an actual or threatened election contest of the type contemplated by Regulation 14a-11 promulgated under the Exchange Act or any successor provision. Notwithstand ing the foregoing, no Change of Control of the Company shall be deemed to have occurred for purposes of this Plan by reason of any Transaction which shall have been approved by action or vote of a majority of the Incumbent Directors. EXHIBIT B Morton P. Hyman Michael A. Recanati George Blake Alan Carus Francis De Salvo Robert N. Cowen EXHIBIT C Morton P. Hyman shall be credited with four (4) years extra service for purposes of calculating his Supplemental Benefit and the death benefit. EX-12 12 EXHIBIT 12 ---------- OVERSEAS SHIPHOLDING GROUP, INC. RATIO OF EARNINGS TO FIXED CHARGES FOR THE YEAR ENDED DECEMBER 31, 1994 (IN THOUSANDS) PRESENTED IN CONNECTION WITH AMENDMENT NO. 1 FILED ON NOVEMBER 9, 1993 TO REGISTRATION STATEMENT NO. 33-50441 Loss before Federal income taxes $( 9,950) Adjustments of income related to companies owned less than 100% ( 2,310) Interest expense 56,988 Proportionate share of interest of 50% - owned companies 9,137 Interest component of an operating lease 3,003 Amortization of capitalized interest 2,352 -------- Earnings $ 59,220 ======== Interest expense $ 56,988 Proportionate share of fixed charges of 50% - owned companies 12,049 Capitalized interest 14,157 Interest component of an operating lease 3,003 Fixed charges $ 86,197 ======== Deficiency of earnings available to cover $(26,977) fixed charges ========= EX-13 13 EXHIBIT 13 ---------- [From page 2 of the 1994 Annual Report] TWO-YEAR CHARTER POSITION OF OSG FLEET -------------------------------------- (Including Scheduled Deliveries)
Through Year-End 1995 1996 Total Fleet DWT 6,436,600 7,166,500 % of Total Fleet on Charter 23 20 U.S. Fleet DWT 993,350 993,350 % of U.S. Fleet on Charter 2 2 Intl. Fleet DWT 5,443,250 6,173,150 % of Intl. Fleet on Charter 27 24
THE FLEET --------- Operating Bulk Fleet: 61 vessels, 5,846,100 dwt On Order: 8 vessels, 2,050,300 dwt February 21, 1995 Total Bulk Tonnage: 69 vessels, 7,896,400 dwt INTERNATIONAL BULK FLEET ------------------------
Year Deadweight Charter Type of Ship Built Tonnage Expiration Date Tankers 1973 50%-owned 264,900 November 1996 1975 50%-owned 264,850 September 1998 1974 50%-owned 264,850 December 1997 1974 50%-owned 264,850 July 1997 1989 254,000 Voyage Charter 1990 254,000 March 2002 1989 133,000 Voyage Charter 1989 133,000 June 2005 1976 128,450 Voyage Charter 1975 128,250 Voyage Charter 1975 128,200 Voyage Charter 1980 96,050 March 1995 1981 96,000 Voyage Charter 1979 95,600 Voyage Charter 1994 94,850 (a) 1994 94,650 (a) 1994 93,350 Voyage Charter 1994 93,350 Voyage Charter 1994 93,300 Voyage Charter 1994 93,300 Voyage Charter Petroleum Products Carriers 1986 65,150 August 1995 1986 65,150 Voyage Charter 1986 63,200 September 1995 1987 63,150 September 1995 1989 39,450 Voyage Charter 1988 39,450 Voyage Charter 1989 39,100 Voyage Charter 1989 39,050 July 1995 1979 31,600 Voyage Charter 1981 30,800 Voyage Charter 1981 30,800 (b) 1982 29,500 Voyage Charter Bulk Carriers 1982 138,800 Voyage Charter 1982 138,800 Voyage Charter 1975 121,050 March 1995 1975 121,000 April 1995 1990 120,900 Voyage Charter 1990 120,800 Voyage Charter 1973 116,100 Voyage Charter 1981 64,550 March 1995 1983 64,200 Voyage Charter 1989 63,350 March 1995 1989 63,250 Voyage Charter 1977 49%-owned 60,300 Voyage Charter 1973 49%-owned 54,450 August 1995 ------------------------------------------------------------------------ OPERATING INTERNATIONAL BULK FLEET TOTAL 45 vessels 4,852,750 dwt ======================================================================== ON ORDER BULK FLEET ------------------- Delivery Deadweight Charter Type of Ship Date Tonnage Expiration Date Tankers August 1995 295,250 October 1995 295,250 December 1996 50%-owned 269,650 2004 Quarter 4 1996 302,150 March 1997 50%-owned 269,650 2005 Quarter 1 1997 302,150 Bulk Carriers December 1996 158,100 March 1997 158,100 ------------------------------------------------------------------------ 8 vessels 2,050,300 dwt ------------------------------------------------------------------------ INTERNATIONAL BULK FLEET TOTAL 53 vessels 6,903,050 dwt ========================================================================
U.S. BULK FLEET ---------------
Year Deadweight Charter Type of Ship Built Tonnage Expiration Date Tankers 1974 120,800 Idle 1973 120,500 Idle 1977 (c) 80%-owned 90,650 Idle 1977 (c) 80%-owned 90,550 March 1995 1978 (c) 80%-owned 90,500 March 1995 1977 (c) 80%-owned 90,400 Idle 1971 62,000 May 1995 1970 62,000 August 1995 Petroleum Products Carriers 1983 (d) 42,950 Voyage Charter 1982 (d) 42,600 May 1995 1969 37,800 August 1995 1968 37,800 Voyage Charter 1968 37,800 September 1995 Geared Bulk Carriers 1978 (c) 25,550 Voyage Charter 1978 (c) 25,550 Voyage Charter Pure Car Carrier (5,000 cars) 1987 15,900 1997 ------------------------------------------------------------------------ OPERATING U.S. BULK FLEET TOTAL(e) 16 vessels 993,350 dwt ======================================================================== (a) The Company recently contracted to purchase these two ships for delivery in March 1995. (b) Undergoing major shipyard work. (c) 25-year capital leases, commencing in year built. (d) 22-year capital leases, commencing in 1989 (e) Does not include a 29,300 dwt petroleum barge, 50%-owned by OSG.
CELEBRITY CRUISE LINES INC. ---------------------------
Gross Year Registered Name of Ship Built/Rebuilt Berths Tonnage Zenith 1992 1,374 47,250 Horizon 1990 1,354 46,800 Meridian 1990 1,106 30,450 ------------------------------------------------------------------------ OPERATING CRUISE FLEET TOTAL* 3 ships 3,834 berths ======================================================================== * The fleet of CCLI's Fantasy Cruises division consists of Britanis (926 berths) and Amerikanis (617 berths).
ON ORDER CRUISE FLEET ---------------------
Gross Delivery Registered Name of Ship Date Berths Tonnage Century November 1995 1,760 70,000 Galaxy November 1996 1,870 72,000 To be named October 1997 1,870 72,000 ------------------------------------------------------------------------ ON ORDER CRUISE FLEET TOTAL 3 ships 5,500 berths ========================================================================
GLOBAL BULK SHIPPING MARKETS ---------------------------- The bulk shipping industry is highly fragmented, with no one shipowner holding more than 2% of the world fleet. With 61 ships totaling 5.8 million dwt, OSG ranks among the ten largest owners, including fleets owned by oil companies and by national governments. Approximately 78% of the Company's voyage revenues in 1994, 75% in 1993 and 78% in 1992 came from carrying petroleum and its derivatives. These liquid cargoes also accounted for the majority of the voyage revenues of OSG's bulk shipping joint ventures. INTERNATIONAL TANKER MARKETS ---------------------------- In 1994, the international tanker markets remained under pressure despite a modest increase in the volume of seaborne oil trade and a decline in the size of the international tanker fleet. Oil demand in the major oil-importing regions increased 2.8% in 1994 as Europe and Japan began to emerge from recession. In Europe, demand rose by less than 1%, while in Japan, demand improved by 5%, spurred in part by a hot summer that resulted in greater oil usage for electricity generation. An unusually cold winter and strong economic growth helped lift U.S. oil demand by 2.6%. Growth in oil consumption in developing Asia maintained its upward course, expanding by over 6%. SHIFTING SUPPLY PATTERNS While crude oil supplies from the Middle East increased only marginally, those from other areas rose substantially, particularly from the North Sea and Latin America. In addition, oil exports from the former Soviet Union (FSU) continued to be significant despite the steady decline in its production. The net effect of increased quantities moving on shorter routes was to moderate the rise in tonnage requirements. WORLD TANKER FLEET DECLINES SLIGHTLY For the first time since 1988, the world tanker fleet registered a decline, easing by about 3 million dwt to 263 million dwt at year-end 1994. Newbuilding deliveries totaled only 10 million dwt, compared with 18 million dwt a year ago, and were the smallest since 1990. Higher charter rates in the Capesize sector (dry bulk carriers over 100,000 dwt) drew combination carriers from the tanker markets into the dry trades, further reducing available tanker supply. The amount of international tanker tonnage in lay-up at year-end 1994 remained relatively small at 4 million dwt. Low charter rates, more stringent inspection requirements, an aging fleet and rising scrap steel prices resulted in sales of ships for demolition increasing to 13 million dwt from 11 million dwt in 1993. Given the age of the fleet, it is anticipated that scrappings will continue at relatively robust levels over the next few years. Newbuilding prices trended lower during 1994, reflecting poor charter rates and increased competition among shipbuilders. Secondhand prices for modern vessels were steady to slightly improved except for VLCCs (very large crude carriers), which declined. Contracting for newbuildings rose from 11 million dwt in 1993 to 13 million dwt in 1994. The newbuilding orderbook increased 2 million dwt to 26 million dwt for delivery over the next three years, of which 12 million dwt is scheduled for 1995. INCREASING ENVIRONMENTAL REGULATIONS AND CONCERNS Over the past five years, the shipping industry has experienced a more stringent regulatory environment. Classification societies, governmental authorities and charterers have strengthened their inspection programs, and there has been an increasing reluctance among charterers to accept older vessels due to safety and pollution concerns. During 1994, these trends continued. The shipping industry again addressed requirements of the Oil Pollution Act of 1990 (OPA 90) as well as heightened safety and environmental concerns worldwide. Between 1995 and 2015, OPA 90 will phase in a requirement that all tankers entering U.S. waters have double hulls. The Act also significantly expands the potential liability of tanker owners for environmental accidents in U.S. waters. Some operators are reluctant to trade their vessels to the United States because of OPA 90. In addition to the OPA 90 requirements, the International Maritime Organization (IMO) will phase out all single-hulled tankers in international waters at 25 years of age unless other environmental safety steps are taken. IMO regulations also require double hulls or equivalent tanker designs for newbuilding orders. Since OSG maintains a modern fleet, these double-hull requirements will not apply to most of the Company's existing tanker fleet until after the year 2000, at which time the affected ships will have operated for substantially all of their economic lives. All of the tankers OSG has on order will be double-hulled. INTERNATIONAL DRY BULK MARKETS ------------------------------ Rates for international dry bulk carriers improved markedly in the second half of 1994 as seaborne trade in iron ore and coal expanded. Demand for Capesize ships, which haul about 80% of the world's seaborne iron ore and a third of seaborne coal, was particularly strong. STRONG DEMAND FOR IRON ORE AND COAL Seaborne shipments of iron ore moved upward as world steel production (excluding the FSU) rose, fueled by economic recovery in Europe and continued strong growth in the Far East. Seaborne steam coal trade also benefited from revived economic growth in Europe as well as new coal-fired power stations in Asia and increased electrical demand brought on by hotter than normal weather. U.S. East Coast coal users continued to import record levels of low sulfur coal, mainly from Colombia and Venezuela, in order to meet Clean Air Act requirements. While seaborne grain shipments were lower in 1994 than in 1993, there was a marked increase in the trade late in the year, buoyed by record U.S. corn and soybean harvests and sharply reduced short-haul supplies from drought-stricken Australia to the Far East. DRY BULK FLEET EXPANDING The international dry bulk fleet increased by nearly 4% in 1994 to an all-time high of 229 million dwt. Newbuilding deliveries rose for the second consecutive year, reaching 12 million dwt, the largest since 1985. At 4 million dwt, sales for scrap were close to the highest levels of the previous six years. The amount of vessels in lay-up at year-end remained small at less than 2 million dwt. Contracting for new orders increased over 1993 and exceeded 1994 deliveries in every quarter. Consequently, the newbuilding orderbook for delivery over the next three years increased steadily during 1994, reaching 29 million dwt at year-end, up from 21 million dwt in 1993. Approximately 15 million dwt is scheduled for delivery in 1995. U. S. MARKETS ------------- Under the Jones Act, shipping between U.S. coastal ports, including the movement of Alaskan oil, is reserved primarily to U.S. flag vessels, owned by U.S. citizens, crewed by U.S. seafarers, and built in the United States without construction subsidies and operated without operating differential subsidies. U.S. flag vessels also receive preference in carrying U.S. military and U.S. government- sponsored shipments throughout the world. OSG is the largest independent owner of unsubsidized U.S. flag tankers. The Company also has two dry bulk carriers that participate in the preference trades and one car carrier, which is on a long-term charter and is presently transporting vehicles to and from Japan. The size of the total U.S. flag fleet has been declining in recent years because of decreasing commercial opportunities, higher operating and construction costs, and the stricter operating environment mandated by OPA 90. There has been no significant U.S. flag tanker construction in the last six years and the average age of the existing fleet is approximately 19.5 years. At year-end, the unsubsidized U.S. tanker fleet totaled 7.9 million dwt, a decline of 105,000 dwt from a year earlier. ALASKAN CRUDE DEVELOPMENTS Alaskan crude shipments are the main source of employment for U.S. flag crude carriers. Four of OSG's U.S. flag crude carriers are presently employed in this trade. Four are currently idle. In 1994, as the rate of decline in Alaskan production moderated, Alaskan crude shipments fell only modestly. Increased efficiencies and the installation of new equipment in some of Alaska's major oil fields helped to bolster oil production, which is estimated at 1.63 million barrels per day (b/d) in 1994, just 2% below the previous year. Based on forecasts by the State of Alaska, 1995 production is expected to remain near the level of 1994. However, long-haul shipments of Alaskan crude via Panama declined in 1994, reducing tonnage requirements. In addition, the entry of previously laid-up tonnage into the trade further adversely affected employment opportunities for OSG vessels. REGULATORY MATTERS By law, exports of Alaskan crude oil are effectively prohibited. Initiatives are under way in Washington to permit the export of Alaskan crude oil, which, if successful, are expected to provide significant new employment opportunities for the U.S. flag tanker fleet. Vessels built with construction differential subsidies and operated with operating differential subsidies (ODS) are not permitted in the Jones Act trade. Under an interpretation of the law by the Maritime Administration, tankers built with subsidies have been deemed eligible for full coastwise privileges after they have reached 20 years of age and their ODS contracts have expired. The Company believes that this interpretation is contrary to law and has commenced litigation seeking to overrule it. Recently, there have been increased calls by members of Congress and efforts to reduce or eliminate cargo preference and, in some cases, to weaken the long-standing requirement that U.S. coastwise trade be conducted by U.S. flag Jones Act ships. If such changes were implemented, they would adversely affect the already diminished U.S. flag merchant marine. The Company believes such changes are not in the national interest and, as a major owner and operator of Jones Act tonnage, remains committed to its U.S. flag fleet. -------------- Primary Data Sources: Fearnleys Review 1994, Clarkson Research Studies, International Energy Agency, Maritime Administration, State of Alaska and U.S. Department of Energy CELEBRITY CRUISE LINES INC. --------------------------- Celebrity Cruise Lines Inc. (CCLI), OSG's joint venture in the cruise industry, is a leading provider of premium cruises in the North American cruise market. Formed in 1992, CCLI markets its ships primarily under the brand name Celebrity Cruises. Today the five-star Celebrity fleet consists of three ships - Zenith, Horizon and Meridian - having a total of 3,834 berths and sailing mainly in the Caribbean and to Bermuda. Last year, two vessels operated as part of CCLI's budget-priced Fantasy Cruises division. One of these ships, Britanis, was chartered in late 1994 to the U.S. Military Sealift Command, while the line's other ship, Amerikanis, sailed on European itineraries. In 1994, Celebrity and Fantasy Cruises' five ships sailed on 45 different itineraries that ranged from two to 52 nights and called at 114 destinations on five continents. Celebrity Cruises Ships No. of Berths Primary Areas of Operation Zenith 1,374 Caribbean Horizon 1,354 Bermuda, Caribbean Meridian 1,106 Bermuda, Caribbean NORTH AMERICAN CRUISE MARKET CCLI operates its vessels primarily in the North American cruise market, which accounts for approximately 80% of the total cruise passengers carried. The North American cruise industry is characterized by large and generally well-capitalized companies and is highly competitive. According to the Cruise Lines International Association (CLIA), the largest three companies have about 46% of total capacity, and the largest seven companies, including CCLI, have approximately 75% of total capacity. GROWTH IN CRUISE DEMAND Over the past decade, growth in demand (measured by the number of passengers carried) averaged 9% per annum for the North American cruise market. In 1994, U.S. and Canadian passengers carried reached an industry record of 4.5 million, up 1% from the prior year. Growth in the cruise industry has been influenced by a number of factors. The all-inclusive price of a cruise - which encompasses airfare, lodging, meals and entertainment - appeals to many vacationers. A reduction in the average cruise length, more and varied itineraries, and an expansion of shipboard and shoreside activities have also stimulated demand for cruises. Studies by CLIA indicate that awareness of cruising and intent to try a cruise vacation are at an all-time high. Even though growth has been strong, the North American cruise market still holds significant untapped potential. According to industry estimates, cruise vacations currently represent 5% or less of the overall vacation market. SUPPLY OUTLOOK Capacity additions in the North American cruise market averaged 7% per year during the past decade versus the 9% demand growth noted above. In 1994, capacity increases slowed to 1% as 6,300 berths were added and nearly 5,400 berths were removed through retirements, redeployments and shutdowns. At year-end 1994, North American cruise capacity was estimated to be 105,000 berths. Consolidation continues in the industry. CCLI and three other cruise companies account for 91% of the total capacity additions slated for 1995 through 1998. On the basis of the newbuilding orderbook, CLIA forecasts that capacity will increase 7% in 1995. Before taking into consideration any retirements and deletions from the existing fleet, CLIA expects capacity to increase 13% in 1996 and 10% in 1997. An important factor influencing supply in the next several years is the International Maritime Organization's Safety of Life at Sea (SOLAS) convention, which establishes minimum safety, fire prevention and fire protection standards. Under SOLAS requirements, all passenger ships must have upgraded fire detection and fire protection systems by October 1, 1997. About 40,000 berths are on ships that are expected to need SOLAS upgrades. The actual number of deletions will depend upon shipowners' willingness to incur the potentially significant cost needed to bring a vessel up to the required standards. Two of Celebrity's vessels were delivered in 1990 and 1992 and the third was rebuilt in 1990. Because Celebrity maintains a modern fleet, the work necessary for its ships to meet 1997 SOLAS requirements can be done without material capital expenditures. CELEBRITY NEWBUILDING PROGRAM To achieve operating efficiencies, extend its market coverage and offer passengers more itineraries, Celebrity is expanding its fleet through the construction of three new vessels. The first of these new ships, Century, will be delivered in late 1995. Century will be joined by two sisterships, one in the fall of 1996 and one in the fall of 1997. GOING FORWARD Over the past decade, the cruise business has enjoyed robust growth as the industry has increased its product offerings and itineraries. The next few years will be challenging as new ships enter the market and SOLAS regulations take effect. With the delivery of its new ships and its reputation for outstanding cuisine and service, CCLI is well positioned to compete as a leading provider of premium cruises. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------- OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES OPERATIONS INCOME FROM VESSEL OPERATIONS Revenues and income from vessel operations of the Company are highly sensitive to patterns of supply and demand for vessels of the types and sizes owned and operated by the Company and the markets in which those vessels operate. Freight rates for major bulk commodities are determined by market forces including local and worldwide demand for such commodities, volumes of trade, distances between sources and destinations of cargoes and amount of available tonnage both at the time such tonnage is required and over periods of projected requirements. Available tonnage is affected, over time, by the amount of newbuilding deliveries and removal of existing tonnage from service. Results in particular periods are also affected by such factors as the mix between voyage and time charters, the timing of the completion of voyage charters, the time and prevailing rates when charters that are currently being performed were negotiated, the levels of applicable rates and the business available as particular vessels come off existing charters, and the timing of drydocking of vessels. Overall, rates during 1994 were disappointing for international flag crude carriers, particularly for VLCCs (over 200,000 dwt) and, on average, were below those in 1993. Rates for certain size categories of tankers improved toward the end of 1994. Dry bulk rates generally stabilized during the first half of 1994, but remained near the lowest levels seen in the past several years, except for Capesize vessels (100,000 dwt or more). Rates for the Capesize ships were at about the same levels as in the first half of 1993. In the second half of 1994, dry bulk rates rose above those of the comparable 1993 period for all sizes. Dry bulk rates remained firm in the early part of 1995. Rates for most sizes of tankers trended downward in early 1995 compared with their late 1994 levels, although small products tankers were earning substantially more in early 1995 than the average rates prevailing during the last two years. Rates for U.S. flag products tankers fell sharply in early 1994 as seasonal requirements eased and tankers that had operated in the crude market for a time returned to the products trades. Rates for such vessels did not improve until the early part of the fourth quarter of 1994, when there was a significant firming; these rates declined somewhat in early 1995. Tonnage demand for U.S. flag crude carriers was weak throughout 1994 and early 1995; as of February 21, 1995, four of the Company's U.S. flag crude carriers were unemployed. Income from vessel operations for 1994 decreased by approximately $12,300,000 compared with the results for 1993. This decrease occurred due to a decline in the results of operations of the U.S. flag fleet. In the second quarter of 1994, there was an unusually sharp decline in demand for OSG's tonnage in the U.S. crude market that persisted throughout the second half of 1994. Three of the Company's U.S. flag crude carriers and an older U.S. flag products carrier were idle for substantial portions of the second half of 1994. Results from two U.S. flag dry bulk carriers were less favorable in 1994 compared with 1993. The effect on revenues of increased drydockings in 1994 compared with 1993 is also included. The U.S. flag decline was partially mitigated by increased rates in 1994 for a U.S. flag crude carrier and certain modern U.S. flag petroleum products carrier tonnage and increased employment for a U.S. flag crude carrier in 1994 compared with 1993. Income from foreign flag vessel operations was approximately the same in 1994 as it was in 1993. This reflected lower rates obtained for foreign flag crude carrier tonnage, primarily Suezmaxes (approximately 128,000 dwt) and Aframaxes (approximately 96,000 dwt). This was offset by higher rates obtained in 1994 than in 1993 for a VLCC that commenced a long-term charter in early 1994 and improved rates earned by certain dry cargo vessels in the second half of 1994 compared with 1993. The effect of vessels delivered in 1994 and vessels sold in 1994 and 1993 is also reflected. Income from vessel operations for 1993 increased by approximately $3,000,000 from the results for 1992. This increase was attributable to an improvement of $9,500,000 in income from foreign flag vessel operations, which reflects increased charter market rates obtained in 1993 for certain Suezmax and Aframax tonnage, primarily in the second half of the year, compared with the rates obtained during 1992 for those vessels. The favorable effects of less tonnage being idle due to lack of employment in 1993 compared with 1992 and reduced agency fees are also reflected. Income from foreign flag vessel operations in 1993 was adversely affected by lower charter rates in the first half of 1993 (primarily in the first quarter) for most classes of tankers and dry bulk vessels compared with rates obtained in 1992, and by substantially lower VLCC rates for certain tonnage throughout 1993. During 1992, certain foreign flag vessels were operating on time charters negotiated in prior periods when rates were more favorable. Income from operations of the U.S. flag fleet declined approximately $6,500,000 in 1993 compared with 1992, resulting primarily from a crude carrier being idle due to lack of employment. This was partially offset by better operating results for two U.S. flag dry bulk carriers, reflecting fewer idle days and better rates. EQUITY IN RESULTS OF CELEBRITY CRUISE LINES INC. ("CCLI") OSG's share of CCLI's earnings was approximately $800,000 for 1994 compared with approximately $6,800,000 for 1993. This decline reflects the 11-day withdrawal of a vessel from service during the third quarter of 1994, normally CCLI's most profitable quarter of the year, following isolated cases of Legionnaires' disease among passengers. The 1994 results also reflect greater pricing pressure experienced in the premium segment of the industry during the fourth quarter of 1994; this situation continued in early 1995. In 1992, OSG had a loss of $200,000 from its equity in the results of CCLI, which was acquired in October of that year. The Company's equity in the results of CCLI is before interest expense of approximately $12,800,000 (1994), $12,500,000 (1993) and $3,600,000 (1992), estimated to have been incurred in connection with the funding of its investment in CCLI. OTHER INCOME (NET) The details of other income for the three-year period are shown in Note K on page 34 of this report. Interest and dividends increased in 1994 compared with 1993 because of higher rates of return on interest- bearing deposits and investments and increased amounts utilized for such deposits and investments. The 1994 increase was net of a decrease, reflecting the sale or redemption of certain preferred stocks during and subsequent to 1993 that were replaced with lower yielding investments. Interest and dividends decreased in 1993 from 1992 because of reduced amounts utilized for interest-bearing deposits and investments and generally lower rates of return on such deposits and investments. Disposal of vessels resulted in gains of approximately $6,800,000 in 1994 and $12,100,000 in 1993 and a provision for loss of approximately $1,300,000 in 1992. Gain on sale of securities was approximately $8,000,000 in 1994 compared with approximately $9,100,000 in 1993 and $14,100,000 in 1992. There was a decrease in income earned from other investments in 1994 compared with 1993 and an increase in that item in 1993 over 1992 (such income is included in miscellaneous - net). Other income also reflects the results of foreign currency transactions and the effect of minority interest in all three years. In 1992, the Company took a reserve of $20,000,000 ($13,100,000, or $.40 per share, net of income tax) for its entire investment in GPA Group plc. INTEREST EXPENSE Interest expense increased in 1994 from 1993 primarily as a result of increased rates on floating rate debt and increases in the average amount of debt outstanding in 1994, net of increased interest costs capitalized in connection with vessel construction. Interest expense decreased in 1993 from 1992 as a result of reduced rates on floating rate debt and increased interest costs capitalized in connection with vessel construction. The decrease was net of the effect of more debt being outstanding in 1993 compared with 1992. Interest expense in 1994, 1993 and 1992 also reflects $6,500,000, $13,300,000 and $5,600,000, respectively, of net benefits from the interest rate swaps referred to below in Liquidity and Sources of Capital. PROVISION FOR FEDERAL INCOME TAXES There was an income tax credit in 1994 of $3,750,000 as a result of the pretax loss, adjusted to reflect income items that are not subject to tax and the dividends received deduction. The provision for taxes of $8,900,000 in 1993 includes $2,900,000, or $.09 per share, of additional deferred taxes resulting from the increase in the Federal statutory rate from 34% to 35% enacted in August 1993. The balance of the 1993 provision was based on pretax income, adjusted for the same items referred to above. The tax credit in 1992 results from the pretax loss, similarly adjusted. Federal income taxes for each of the three years reflect the effects of the Tax Reform Act of 1986, including current taxation of the post- 1986 results of the Company's foreign-owned bulk vessels. CUMULATIVE EFFECT OF ACCOUNTING CHANGE The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), starting in 1992. The impact of applying FAS 109 was to reduce deferred tax liabilities by $16,000,000, with a corresponding increase in net income (cumulative effect of change in accounting) for 1992. LIQUIDITY AND SOURCES OF CAPITAL Working capital at December 31, 1994 was approximately $90,000,000 compared with $99,000,000 at year-end 1993 and $101,000,000 at year- end 1992. Current assets are highly liquid, consisting principally of cash, interest-bearing deposits and receivables. The Company also has investments in marketable securities carried as noncurrent assets, other than securities included in restricted funds, with a market value of approximately $36,000,000 at December 31, 1994. Net cash provided by operating activities approximated $10,000,000 in 1994, $69,000,000 in 1993 and $10,000,000 in 1992. The reserve in 1992 of $20,000,000 referred to in Other Income (Net) above had no effect on the Company's cash flow or cash resources. In addition to payments of current installments of long-term debt in all three years, the Company prepaid long-term debt aggregating $62,332,000 in 1992. Current financial resources, together with cash anticipated to be generated from operations, are expected to be adequate to meet requirements for short-term funds in 1995. The Company has an unsecured long-term credit facility of $500,000,000, of which $152,000,000 was used at December 31, 1994, and an unsecured short-term credit facility of $30,000,000, which was unused at that date. The Company finances vessel additions primarily with cash provided by operating activities, long-term borrowings and capital lease obligations. Long-term borrowings in 1994, 1993 and 1992 aggregated approximately $60,000,000, $310,000,000 and $292,000,000 (including amounts borrowed in connection with the investment in CCLI - see below), respectively. The Company has used interest rate swaps to effectively convert a portion of its fixed rate debt to a floating rate basis, reflecting management's interest rate outlook. As of December 31, 1994, the Company is a party to fixed to floating interest rate swaps (designated as hedges against certain debt) with various banks covering notional amounts aggregating $685,000,000, pursuant to which it pays LIBOR and receives fixed rates ranging from 5.3% to 8.1% calculated on the notional amounts. These agreements contain no leverage features and have various maturity dates from 1995 to 2008. The Company uses derivative financial instruments for trading purposes from time to time. The Company has hedged its exchange rate risk with respect to contracted future charter revenues receivable in Japanese yen to minimize the effect of foreign exchange rate fluctuations on reported income by entering into currency swaps with a major financial institution to deliver such foreign currency at fixed rates that will result in the Company receiving approximately $145,000,000 for such foreign currency from 1995 through 2004. In March 1994, the Company sold 3,450,000 shares of its common stock for net proceeds of approximately $76,000,000, of which $50,000,000 was used to reduce amounts outstanding under the Revolving Credit Agreement. The remaining proceeds were added to working capital. In 1994, 1993 and 1992, cash used for vessel additions approximated $146,000,000, $164,000,000 and $81,000,000, respectively. In February 1995, foreign subsidiaries contracted to buy two Aframax tankers at an aggregate cost of approximately $80,000,000. At February 21, 1995, the Company has commitments with an aggregate unpaid cost of approximately $300,000,000 for the construction of six foreign flag bulk vessels, two of which are scheduled for delivery in 1995, two in late 1996 and the other two in 1997. Long-term shipyard financing arrangements are anticipated for approximately $76,000,000 of the unpaid cost of certain of the vessels. In 1992, the Company invested cash of approximately $220,000,000 for 49% of the equity of CCLI. The cash invested by the Company in CCLI is being used primarily to finance the expansion of CCLI's fleet. EFFECTS OF INFLATION Additions to the costs of operating the fleet due to wage increases and price level increases in certain other expense categories were experienced over the three-year period. In some cases, these increases were offset by rates available to tonnage open for chartering and to some extent by charter escalation provisions. ENVIRONMENTAL MATTERS See "Increasing Environmental Regulations and Concerns" on page 15 hereof for a discussion regarding OPA 90 and certain regulations of the IMO. [from page 22 of the Annual Report] STOCK PRICE AND DIVIDEND DATA
1994 Quarter 1st 2nd 3rd 4th ------------------------------------------------- High 26-3/4 21-5/8 21-7/8 24-3/8 Low 19-7/8 17-7/8 17-1/4 19-1/2 Dividend $.15 $.15 $.15(a) $.15 1993 Quarter 1st 2nd 3rd 4th ------------------------------------------------- High 19-3/4 19-7/8 20-1/2 24-1/4 Low 15-3/4 18 17 19-1/8 Dividend $.15 $.15 $.15(a) $.15(b) (a) Declared in second quarter of the respective year. (b) Declared in third quarter.
[from inside back cover of Annual Report "Shareholder Information"] The Company's stock is listed for trading on the New York Stock Exchange and the Pacific Stock Exchange. Stock Symbol: OSG Shareholders of Record February 21, 1995: 1,146 CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS ----------------------------------------------------------- OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES In thousands, except per share amounts, for the year ended December 31,
1994 1993 1992 SHIPPING REVENUES: Revenues from voyages - Note B $358,537 $376,885 $367,324 Income attributable to bulk shipping joint ventures - Note E 5,599 5,695 3,761 ------------------------------------------------------------------------- 364,136 382,580 371,085 ------------------------------------------------------------------------- SHIPPING EXPENSES: Vessel and voyage - Note H 243,684 252,153 244,205 Depreciation of vessels and amortization of capital leases 59,992 58,734 56,472 Agency fees - Note H 30,302 30,225 33,310 General and administrative 9,825 8,826 7,484 ------------------------------------------------------------------------- 343,803 349,938 341,471 ------------------------------------------------------------------------- Income from Vessel Operations 20,333 32,642 29,614 Equity in Results of Celebrity Cruise Lines Inc. - Note D 797 6,841 (200) Other Income (Net) - Note K 25,908 30,674 12,337 ------------------------------------------------------------------------- 47,038 70,157 41,751 Interest Expense 56,988 43,311 44,580 ------------------------------------------------------------------------- Income/(Loss) before Federal Income Taxes and Cumulative Effect of Accounting Change (9,950) 26,846 (2,829) Provision/(Credit) for Federal Income Taxes - Note J (3,750) 8,900 (2,900) ------------------------------------------------------------------------- Income/(Loss) before Cumulative Effect of Accounting Change (6,200) 17,946 71 Cumulative Effect of Change in Accounting for Income Taxes - Note A6 - - 16,000 ------------------------------------------------------------------------- Net Income/(Loss) (6,200) 17,946 16,071 Retained Earnings at Beginning of Year 764,987 766,647 770,265 ------------------------------------------------------------------------- 758,787 784,593 786,336 Cash Dividends Declared and Paid 21,204 19,606 19,689 ------------------------------------------------------------------------- Retained Earnings at End of Year $737,583 $764,987 $766,647 ========================================================================= PER SHARE AMOUNTS - NOTE N: Income/(loss) before cumulative effect of accounting change $ (.17) $ .55 $ - Cumulative effect of change in accounting for income taxes - - $ .49 Net income/(loss) $ (.17) $ .55 $ .49 Cash dividends declared and paid $ .60 $ .60 $ .60 ------------------------------------------------------------------------- See notes to financial statements.
CONSOLIDATED BALANCE SHEETS --------------------------- OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Dollars in thousands at December 31, 1994 1993 ASSETS CURRENT ASSETS: Cash Including interest-bearing deposits of $88,490 and $101,790 $ 100,034 $ 110,167 Receivables: Voyages 11,699 8,523 Refundable Federal income taxes 5,200 - Other 16,905 18,659 Prepaid expenses 26,868 25,738 --------------------------------------------------------------------------- Total Current Assets 160,706 163,087 Investments in Marketable Securities - Note F 36,052 21,158 Capital Construction and Restricted Funds - Notes F, J and M1 105,570 105,654 Vessels, at cost, less accumulated depreciation of $500,477 and $463,864 - Notes G and L1 1,063,784 999,782 Vessels Under Capital Leases, less accumulated amortization of $140,020 and $129,135 - Note M1 119,457 130,342 Investment in Celebrity Cruise Lines Inc. - Note D 230,642 229,780 Investments in Bulk Shipping Joint Ventures - Note E 82,894 78,484 Other Assets 106,304 95,450 --------------------------------------------------------------------------- $1,905,409 $1,823,737 =========================================================================== Dollars in thousands at December 31, 1994 1993 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 4,563 $ 3,811 Sundry liabilities and accrued expenses - Note L2 33,042 25,848 Federal income taxes - Note J 6,200 10,403 --------------------------------------------------------------------------- 43,805 40,062 Current installments of long-term debt - Note G 17,638 15,003 Current obligations under capital leases - Note M1 9,737 8,555 --------------------------------------------------------------------------- Total Current Liabilities 71,180 63,620 Advance Time Charter Revenues 4,828 7,722 Long-term Debt - Note G 749,185 705,558 Obligations Under Capital Leases - Note M1 160,871 170,716 Minority Interest 3,803 4,368 Deferred Federal Income Taxes ($102,170 and $100,161) and Deferred Credits - Notes A6 and J 105,763 103,316 Shareholders' Equity - Notes F, G, J and N: Common Stock, par value $1 per share: Authorized - 60,000,000 shares Issued - 39,590,759 and 36,140,759 shares 39,591 36,141 Paid-in Additional Capital 93,599 21,035 Retained Earnings 737,583 764,987 --------------------------------------------------------------------------- 870,773 822,163 Less-cost of Treasury Stock - 3,380,838 and 3,436,765 shares 49,491 50,136 --------------------------------------------------------------------------- 821,282 772,027 Less-net unrealized loss on marketable securities 11,503 3,590 --------------------------------------------------------------------------- Total Shareholders' Equity 809,779 768,437 Commitments, Leases and Other Comments - Notes L and M --------------------------------------------------------------------------- $1,905,409 $1,823,737 =========================================================================== See notes to financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
In thousands for the year ended December 31, 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss) $ (6,200) $ 17,946 $ 16,071 Items included in net income/(loss) not affecting cash flows: Depreciation and amortization 59,992 58,734 56,472 Cumulative effect of change in accounting for income taxes - - (16,000) Provision/(credit) for deferred Federal income taxes 1,909 5,315 (2,842) Equity in results of Celebrity Cruise Lines Inc. (797) (6,841) 200 Equity in net income of bulk shipping joint ventures (6,360) (5,796) (2,704) Other - net (6,243) (7,036) (12,928) Items included in net income/(loss) related to investing activities: Provision for loss (noncash) on investment in GPA Group plc - - 20,000 (Gain) on sale of securities - net (7,986) (9,128) (14,112) (Gain) on disposal of vessels (6,815) (12,088) - Changes in operating assets and liabilities: Decrease/(increase) in receivables (12,147) 12,420 (9,599) Net change in prepaid items, accounts payable and sundry liabilities and accrued expenses (2,596) 15,078 (20,221) Increase/(decrease) in advance time charter revenues (2,894) 492 (4,374) ---------------------------------------------------------------------------- Net cash provided by operating activities 9,863 69,096 9,963 ---------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (34,811) (42,529) (54,881) Proceeds from sales of marketable securities 21,022 44,509 107,889 Additions to vessels (146,133) (163,538) (81,213)* Proceeds from disposal of vessels 40,780 48,994 - Investment in Celebrity Cruise Lines Inc. - (2,733) (220,086) Other investments (667) (16,996) (2,937) Proceeds from dispositions of other investments 4,406 13,939 19,117 Other - net 1,078 (1,001) 2,193 ---------------------------------------------------------------------------- Net cash (used in) investing activities (114,325) (119,355) (229,918) ---------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 76,004 - - Purchases of treasury stock - (237) (4,968) Withdrawals from restricted funds - - 20,017 Issuance of long-term debt 60,000 309,439 292,000 Payments on long-term debt and obligations under capital leases (22,442) (215,542) (95,835) Cash dividends paid (21,204) (19,606) (19,689) Other - net 1,971 673 81 ---------------------------------------------------------------------------- Net cash provided by financing activities 94,329 74,727 191,606 ---------------------------------------------------------------------------- Net increase/(decrease) in cash (10,133) 24,468 (28,349) Cash, including interest-bearing deposits, at beginning of year 110,167 85,699 114,048 ---------------------------------------------------------------------------- Cash, including interest-bearing deposits, at end of year $ 100,034 $ 110,167 $ 85,699 ============================================================================ * Excludes the carrying amount ($19,350) of a vessel reclassified from investments in bulk shipping joint ventures, upon dissolution of partnership. See notes to financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1. The consolidated financial statements include the accounts of the Company and its subsidiaries ("Company" or "OSG"). All subsidiaries are wholly owned, except four which are 80%-owned. Significant intercompany items and transactions have been eliminated in consolidation. Investments in Celebrity Cruise Lines Inc. and the bulk shipping joint ventures (which are 50%-owned except one small venture which is 49%-owned) are stated at the Company's cost thereof adjusted for its proportionate share of the undistributed operating results of such companies. The consolidated statements of operations for 1993 and 1992 and Notes B and O have been reclassified to conform with the 1994 presentation of equity in results of Celebrity Cruise Lines Inc. 2. As required by Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," only interest-bearing deposits that are highly liquid investments and have a maturity of three months or less when purchased are included in cash. 3. Depreciation of vessels is computed for financial reporting purposes based on cost, less estimated salvage value, by the straight- line method primarily using a vessel life of 25 years. 4. Certain subsidiaries have bareboat charters-in on vessels that are accounted for as capital leases. Amortization of capital leases is computed by the straight-line method over 22 or 25 years, representing the terms of the leases (see Note M). 5. Time charters and a bareboat charter that are operating leases are reported on the accrual basis. Voyage charters are reported on the completed voyage basis. 6. The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), starting in the first quarter of 1992. In accordance with FAS 109, the financial statements of years prior to 1992 were not restated. The impact of applying FAS 109 was to reduce deferred tax liabilities by $16,000,000, with a corresponding increase in net income (cumulative effect of change in accounting) for 1992. 7. Interest costs incurred during the construction of vessels (until the vessel is substantially complete and ready for its intended use) are capitalized. Interest capitalized aggregated $14,157,000 (1994), $7,416,000 (1993) and $6,158,000 (1992). Interest paid amounted to $53,182,000 (1994), $42,093,000 (1993) and $42,865,000 (1992), excluding capitalized interest. 8. The Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115"), as of December 31, 1993. Adoption of this standard had no significant effect on the Company's financial statements. Under FAS 115, the Company's investments in marketable securities are classified as available-for-sale and are carried at market value. Net unrealized gains or losses are reported as a separate component of shareholders' equity. For prior years, the Company's investments in marketable equity securities were carried at the lower of aggregate cost or market, and the amount of the allowance for net unrealized loss on the noncurrent marketable equity securities was shown as a reduction of shareholders' equity. 9. Amounts receivable or payable under interest rate swaps (designated as hedges against certain existing debt and capital lease obligations - see Note G) are accrued and reflected as adjustments of interest expense. Such receivables or payables are included in other receivables or sundry liabilities and accrued expenses, respectively. Any gain or loss realized upon the early termination of an interest rate swap is recognized as an adjustment of interest expense over the remaining term of the hedged debt. Changes in the value of currency swaps (designated as hedges against contracted future charter revenues receivable in a foreign currency) are deferred and are offset against corresponding changes in the value of the charter hire, over the related charter periods (see Note M2). Any gain or loss realized upon the termination of foreign currency swaps would be recognized as an adjustment of voyage revenues over the remaining term of the related charter. The Company uses derivative financial instruments for trading purposes from time to time. Realized and unrealized changes in fair values are recognized in income in the period in which the changes occur (see Note K). NOTE B - BUSINESS-DOMESTIC AND FOREIGN OPERATIONS: The Company is principally engaged in the ocean transportation of liquid and dry bulk cargoes in both the worldwide markets and the self- contained U.S. markets through the ownership and operation of a diversified fleet of bulk cargo vessels (principally tankers and dry bulk carriers). It also owns an equity investment in Celebrity Cruise Lines Inc. (see Note D), an owner and operator of cruise ships. Information about the Company's operations for the three years ended December 31, 1994 follows:
Foreign Flag (principally In thousands Consolidated U.S. Flag Liberian) 1994 Shipping Revenues $ 364,136 $ 130,832 $ 233,304 Net Income/(Loss) $ (6,200) $ (30,505) $ 24,305 Identifiable Assets at December 31, 1994 $1,905,409 $ 538,596 $1,366,813 1993 Shipping Revenues $ 382,580 $ 154,652 $ 227,928 Net Income/(Loss) $ 17,946 $ (12,842) $ 30,788 Identifiable Assets at December 31, 1993 $1,823,737 $ 551,341 $1,272,396 1992 Shipping Revenues $ 371,085 $ 151,191 $ 219,894 Net Income $ 16,071 $ 11,523* $ 4,548 Identifiable Assets at December 31, 1992 $1,714,548 $530,996 $1,183,552 *Reflects $16,000,000 from change in accounting for income taxes (see Note A6).
See Note J for information relating to taxation of income and undistributed earnings of foreign companies. The Company had one charterer (a U.S. oil company) during the above periods from which revenues exceeded 10% of revenues from voyages. Revenues from such charterer amounted to $63,668,000 in 1994, $73,656,000 in 1993 and $84,349,000 in 1992. NOTE C - ASSETS AND LIABILITIES OF FOREIGN SUBSIDIARIES: A condensed summary of the combined assets and liabilities of the Company's foreign (incorporated outside the U.S.) subsidiaries, whose operations are principally conducted in U.S. dollars, follows:
In thousands at December 31, 1994 1993 Current assets $ 41,515 $ 38,730 Vessels, net 859,939 765,850 Investment in Celebrity Cruise Lines Inc. 230,642 229,780 Other assets 119,065 95,628 ----------------------------------------------------------------------- 1,251,161 1,129,988 ----------------------------------------------------------------------- Current installments of long-term debt 11,958 9,728 Other current liabilities 17,212 8,692 ----------------------------------------------------------------------- Total current liabilities 29,170 18,420 Long-term debt (including intercompany) and deferred credits, etc. 276,477 187,252 ----------------------------------------------------------------------- 305,647 205,672 ----------------------------------------------------------------------- Net assets $ 945,514 $ 924,316 =======================================================================
NOTE D - INVESTMENT IN CELEBRITY CRUISE LINES INC.: The Company owns a 49% equity investment in Celebrity Cruise Lines Inc. ("CCLI"), a joint venture that owns and operates five cruise vessels. Pursuant to related agreements, CCLI functions as an equal joint venture and the approval of both shareholders is required for all substantive policy matters. A condensed summary of the assets and liabilities of CCLI and the results of its operations follows:
In thousands at December 31, 1994 1993 Current assets $ 101,149 $147,344 Vessels, net 696,126 670,459 Other assets 51,084 48,072 ----------------------------------------------------------------------- 848,359 865,875 ----------------------------------------------------------------------- Short-term debt and current installments of long-term debt 54,676 42,593 Other current liabilities 65,289 70,612 ----------------------------------------------------------------------- Total current liabilities 119,965 113,205 Long-term debt 260,643 286,624 ----------------------------------------------------------------------- 380,608 399,829 ----------------------------------------------------------------------- Net assets (principally capital contributions) $ 467,751 $466,046 ======================================================================= Year Ended December 31, October 1 to In thousands 1994 1993 December 31, 1992 Revenue $ 307,565 $ 315,700 $ 68,046 Gain on sale of vessel - - 2,190 Costs and expenses (305,860) (301,642) (70,667) -------------------------------------------------------------------------- Net income/(loss) $ 1,705 $ 14,058 $ (431) ==========================================================================
The Company's equity in the results of CCLI for each of the periods is before interest expense of approximately $12,800,000 (1994), $12,500,000 (1993) and $3,600,000 (1992), estimated to have been incurred by the Company in connection with the funding of its investment in CCLI. These amounts were calculated based on the Company's average long-term interest rates during the respective periods. As of February 21, 1995, CCLI has commitments (which are nonrecourse to OSG) with an approximate aggregate unpaid cost of $940,000,000 for the construction of three cruise ships, one scheduled for delivery in late 1995, one in late 1996 and the third in late 1997. Unpaid costs are net of $81,400,000 of progress payments (all paid prior to January 1, 1995). Long-term financing arrangements exist for substantially all of the unpaid cost of these ships. Approximately 57% of the unpaid cost is denominated in German marks. Approximately 27% of the unpaid cost was hedged by currency option contracts that terminate in the event that the exchange rate of the German mark to the dollar falls below certain levels. NOTE E - BULK SHIPPING JOINT VENTURES: Certain subsidiaries have investments in bulk shipping joint ventures (see Note A1). A condensed summary of the combined assets and liabilities and results of operations of the bulk shipping joint ventures follows:
In thousands at December 31, 1994 1993 Cash ($62,486 and $60,070) and other current assets (including $8,265 and $6,814 due from owners) $ 78,412 $ 75,236 Vessels, net 73,286 64,013 Other assets (including $26,279 and $33,172 due from owners) 29,573 34,880 -------------------------------------------------------------------- 181,271 174,129 Current liabilities 4,214 6,792 -------------------------------------------------------------------- Net assets (principally undistributed net earnings) $177,057 $167,337 ==================================================================== In thousands for the year ended December 31, 1994 1993 1992 Revenue, primarily from voyages (including $28,627, $36,008 and $36,490 from vessels chartered to other owners) $42,825 $42,083 $48,461 Costs and expenses 30,105 30,495 43,053 ------------------------------------------------------------------------ Net income $12,720 $11,588 $ 5,408 ========================================================================
As of February 21, 1995, certain 50%-owned companies have commitments (which are nonrecourse to OSG) with an aggregate unpaid cost of $162,000,000 for the construction of two foreign flag VLCCs (very large crude carriers) scheduled for delivery in late 1996 and early 1997. Unpaid costs are net of $18,000,000 of progress payments (all paid prior to January 1, 1995). The joint venture companies expect to pay the unpaid costs from their available cash resources and to utilize existing long-term shipyard financing arrangements as needed. Upon delivery, these vessels will commence eight-year charters to the joint venture partner. NOTE F - INVESTMENTS IN MARKETABLE SECURITIES: Certain information concerning the Company's marketable securities (including securities in Capital Construction and Restricted Funds), which consist of available-for-sale securities, follows:
Approximate Gross Unrealized Market and In thousands at December 31, Cost Gains Losses Carrying Amount 1994 Equity securities $ 80,638 $ 1,350 $ 10,589 $ 71,399 U.S. Treasury securities and obligations of U.S. government agencies 50,788 - 2,264 48,524 --------------------------------------------------------------------------- $131,426 $ 1,350 $ 12,853 $119,923 =========================================================================== 1993 Equity securities $ 72,974 $ 972 $ 4,562 $ 69,384 =========================================================================== The cost and approximate market value of debt securities, by contractual maturity, are shown below: Approximate In thousands at December 31, 1994 Cost Market Due after one year through five years $ 41,391 $ 39,660 Due after five years through ten years 5,063 4,801 Due after ten years 4,334 4,063 -------------------------------------------------------------------------- $ 50,788 $ 48,524 ==========================================================================
The unrealized loss on marketable securities included as a separate component of shareholders' equity increased $7,913,000 (1994) and decreased $7,261,000 (1993) and $10,775,000 (1992). At February 21, 1995, the approximate aggregate market quotation of the above marketable securities was $123,300,000 and the net unrealized loss was reduced to approximately $8,150,000. NOTE G - DEBT: Long-term debt exclusive of current installments follows:
In thousands at December 31, 1994 1993 Unsecured Senior Notes, due from 2000 through 2013, interest from 7.77% to 9.57% $310,000 $310,000 Unsecured Revolving Credit Agreement with banks 152,000 92,000 8 3/4% Debentures due 2013, net of unamortized discount of $305 and $321 99,695 99,679 8% Notes due 2003, net of unamortized discount of $215 and $239 99,785 99,761 8% to 10.58% unsecured Promissory Notes and Term Loans, due through 2001 49,661 47,925 10.5% and 10.58% secured Promissory Notes and Term Loans, due through 2001 27,254 44,373 8.45% United States Government Guaranteed Merchant Marine Bonds, due through 2006 10,790 11,820 ------------------------------------------------------------------------ $749,185 $705,558 ========================================================================
The Revolving Credit Agreement, as amended, provides for borrowings of up to $500,000,000 on a revolving credit basis through November 1999, at which time any outstanding balance is due. As of December 31, 1994, interest was at the rate of .475% above the London Interbank Offered rate ("LIBOR"). The Company also has interest rate options related to the certificate of deposit, money market or prime rates. Agreements related to long-term debt provide for prepayment privileges (in certain instances with penalties), limitations on the amount of secured debt and total borrowings, and acceleration of payment under certain circumstances, including if any of the minimum consolidated financial covenants contained in certain of such agreements are not met. The most restrictive of these covenants require the Company to maintain positive consolidated working capital, consolidated net worth as of December 31, 1994 of approximately $581,000,000 (increasing quarterly by an amount related to net income), a ratio of total debt to net worth of not more than 1.75:1, and a liquid cash flow coverage ratio of at least 2.00:1. The amount that the Company can use for Restricted Payments, as defined, including dividends and purchases of its capital stock, is limited as of December 31, 1994, to $75,600,000. The Company has used interest rate swaps to effectively convert a portion of its fixed rate debt to a floating rate basis, reflecting management's interest rate outlook. As of December 31, 1994, the Company is a party to fixed to floating interest rate swaps with various banks covering notional amounts aggregating $685,000,000, pursuant to which it pays LIBOR (7% as of December 31, 1994) and receives fixed rates ranging from 5.3% to 8.1% calculated on the notional amounts. These agreements contain no leverage features and have various maturity dates from 1995 to 2008. In March 1994, the Company terminated a floating to fixed interest rate swap (which was designated as a hedge against certain debt) expiring in 1996, covering a notional amount of $24,000,000. Approximately 20% of the net book amount of the Company's vessels, representing approximately 8% of the number of foreign flag and 55% of the number of U.S. flag vessels, is pledged as collateral for certain long-term debt. In some instances, debt is collateralized by revenues from certain charters. The aggregate annual principal payments required to be made on long- term debt for the five years subsequent to December 31, 1994 are $17,638,000 (1995), $21,337,000 (1996), $19,336,000 (1997), $13,774,000 (1998) and $167,085,000 (1999). The Company also has a $30,000,000 committed short-term line of credit facility with a bank, under which there were no outstanding borrowings as of December 31, 1994. NOTE H - AGENCY FEES AND BROKERAGE COMMISSIONS: All subsidiaries with vessels and certain joint ventures are parties to agreements with Maritime Overseas Corporation ("Maritime") that provide, among other matters, for Maritime and its subsidiaries to render services related to the chartering and operation of the vessels and certain general and administrative services for which Maritime and its subsidiaries receive specified compensation. Vessel and voyage expenses include $5,118,000 (1994), $6,009,000 (1993) and $5,743,000 (1992) of brokerage commissions to Maritime. By agreement, Maritime's compensation for any year is limited to the extent Maritime's consolidated net income from shipping operations would exceed a specified amount (approximately $834,000 (1994), $758,000 (1993) and $689,000 (1992)). Maritime is owned by a director of the Company; directors or officers of the Company constitute all four of the directors and the majority of the principal officers of Maritime. NOTE I - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used to estimate the fair value of each class of financial instruments: CASH AND INTEREST-BEARING DEPOSITS The carrying amount reported in the balance sheet for interest-bearing deposits approximates its fair value. INVESTMENT SECURITIES The fair value for marketable securities is based on quoted market prices or dealer quotes. DEBT The carrying amounts of the borrowings under the Revolving Credit Agreement approximate their fair value. The fair values of the Company's other debt are estimated using discounted cash flow analyses, based on the rates currently available for debt with similar terms and remaining maturities. INTEREST RATE SWAPS The fair value of interest rate swaps (used for hedging purposes) is the estimated amount that the Company would receive or pay to terminate the swaps at the reporting date. FOREIGN CURRENCY SWAPS AND FORWARD CONTRACTS The fair value of foreign currency swaps (used for hedging purposes) is the estimated amount that the Company would receive or pay to terminate the swaps at the reporting date. At December 31, 1994, the Company had foreign currency forward contracts (held for trading purposes) scheduled to mature in March 1995 with a notional amount of approximately $15,000,000, the unrealized loss on which was insignificant at that date. The average fair values of foreign currency forward contracts held for trading during 1994 and 1993 were not material. The estimated fair value of the Company's financial instruments follows:
Carrying Fair Carrying Fair Amount Value Amount Value In thousands at December 31, 1994 1994 1993 1993 Financial assets (liabilities) Cash and interest-bearing deposits $100,034 $100,034 $110,167 $110,167 Interest-bearing deposits in restricted funds 20,544 20,544 57,428 57,428 Investments in marketable securities 119,923 119,923 69,384 69,384 Debt (937,431) (913,238) (899,832) (952,920) Interest rate swaps - (51,869) - 29,755 Foreign currency swaps - (16,267) - (2,666)
NOTE J - TAXES: Effective from January 1, 1987, earnings of the foreign shipping companies (exclusive of CCLI) are subject to U.S. income taxation currently; post-1986 taxable income may be distributed to the U.S. parent without further tax. The foreign companies' shipping income earned from January 1, 1976 through December 31, 1986 ("Deferred Income") is excluded from U.S. income taxation to the extent that such income is reinvested in foreign shipping operations and the foreign shipping income earned before 1976 is not subject to tax unless distributed to the U.S. parent. A determination of the amount of qualified investments in foreign shipping operations, as defined, is made at the end of each year and such amount is compared to the corresponding amount at December 31, 1986. If during any determination period there is a reduction of qualified investments in foreign shipping operations, Deferred Income, limited to the amount of such reduction, would become subject to tax. Treasury Department regulations regarding the foregoing have not been revised to reflect law changes effective for post-1986 years. The Company believes that it will be reinvesting sufficient amounts in foreign shipping operations so that any significant U.S. income taxes on the undistributed income of its foreign companies accumulated through December 31, 1986 will be postponed indefinitely. U.S. income taxes on the income of its foreign companies accumulated through December 31, 1986 will be provided at such time as it becomes probable that a liability for such taxes will be incurred and the amount thereof can reasonably be estimated. No provision for U. S. income taxes on the income of the foreign shipping companies accumulated through December 31, 1986 was required at December 31, 1994 since undistributed earnings of foreign shipping companies have been reinvested or are intended to be reinvested in foreign shipping operations. As of December 31, 1994, such undistributed earnings aggregated approximately $475,000,000, including $114,000,000 earned prior to 1976; the unrecognized deferred U.S. income tax attributable to such undistributed earnings approximated $165,000,000. Further, no provision for U.S. income taxes on the Company's share of the undistributed earnings of CCLI was required, since it is intended that such undistributed earnings ($7,500,000 at December 31, 1994) will be indefinitely reinvested; the unrecognized deferred U.S. income tax attributable thereto approximated $2,600,000. Pursuant to the Merchant Marine Act of 1936, as amended, the Company is a party to an agreement that permits annual deposits, related to taxable income of certain of its domestic subsidiaries, into a Capital Construction Fund. Payments of Federal income taxes on such deposits and earnings thereon are deferred until, and if, such funds are withdrawn for nonqualified purposes or termination of the agreement; however, if withdrawn for qualified purposes (acquisition of vessels or retirement of debt on vessels), such funds remain tax deferred and the Federal income tax basis of any such vessel is reduced by the amount of such withdrawals. Under the agreement, the general objective is (by use of assets accumulated in the fund) for two vessels to be constructed or acquired by the end of 1999. Monies can remain tax deferred in the fund for a maximum of 25 years (commencing January 1, 1987 for deposits prior thereto). The Company has historically provided deferred taxes on amounts in the fund. The significant components of the Company's deferred tax liabilities and assets follow:
In thousands at December 31, 1994 1993 Deferred tax liabilities: Excess of tax over statement depreciation-net $ 73,369 $ 74,159 Tax benefits of the Merchant Marine Act of 1936, as amended, on amounts accumulated in the Capital Construction Fund 30,503 28,739 Costs capitalized and amortized for statement, expensed for tax 9,678 9,656 Other-net 24,640 19,868 ------------------------------------------------------------------------ Total deferred tax liabilities 138,190 132,422 ------------------------------------------------------------------------ Deferred tax assets: Capital leases 11,760 12,052 Excess of tax over statement basis of investment in securities 2,188 7,070 Alternative minimum tax credit carry forwards, which can be carried forward indefinitely 15,872 6,839 ------------------------------------------------------------------------ Total deferred tax assets 29,820 25,961 ------------------------------------------------------------------------ Net deferred tax liabilities $108,370 $106,461 ========================================================================
Federal income taxes paid amounted to $4,200,000 in 1994 (all of which related to 1993) and $6,400,000 in 1992. A Federal income tax refund of $6,221,000 was received in 1993. The components of income/(loss) before Federal income taxes and cumulative effect of accounting change follow:
In thousands for the year ended December 31, 1994 1993 1992 Domestic $(31,456) $(15,980) $(11,584) Foreign 21,506 42,826 8,755 -------------------------------------------------------------------------- $ (9,950) $ 26,846 $ (2,829) ==========================================================================
Substantially all of the above foreign income was earned by companies that were not subject to income taxes in their countries of incorporation. The components of the provision/(credit) for Federal income taxes follow:
In thousands for the year ended December 31, 1994 1993 1992 Current $(5,659) $ 3,585 $ (58) Deferred 1,909 2,415 (2,842) Adjustment of net deferred tax liabilities to reflect increase in tax rates - 2,900 - -------------------------------------------------------------------------- $(3,750) $ 8,900 $(2,900) ==========================================================================
Reconciliations of the actual Federal income tax rate and the U.S. statutory income tax rate follow:
For the year ended December 31, 1994 1993 1992 Actual Federal income tax provision/ (credit) rate (37.7%) 33.1% (102.5%) Adjustment of net deferred tax liabilities to reflect increase in tax rates - (10.8%) - Adjustment due to: Dividends received deduction 4.9% 3.2% 54.0% Income not subject to U.S. income taxes 2.2% 9.7% 13.2% Other (4.4%) (.2%) 1.3% -------------------------------------------------------------------------- U.S. statutory income tax provision/ (credit) rate (35.0%) 35.0% (34.0%) ==========================================================================
NOTE K - OTHER INCOME (NET): Other income (net) consists of:
In thousands for the year ended December 31, 1994 1993 1992 Interest $ 6,116 $ 4,017 $ 5,293 Dividends 2,072 3,473 6,502 Gain on sales of securities-net (based on first-in, first-out method) 7,986 9,128 14,112 Provision for loss on investment in GPA Group plc - - (20,000) Gain/(loss) on disposal of vessels 6,815 12,088 (1,259)* Foreign currency exchange gains/(losses) 490 (1,647) 4,830 Minority interest 285 (116) 735 Miscellaneous-net 2,144 3,731 2,124 ---------------------------------------------------------------------------- $ 25,908 $ 30,674 $ 12,337 ============================================================================ * Represents a provision for loss on a vessel sold subsequent to year- end. Gross realized gains on sales of securities were $10,199,000 (1994), $10,802,000 (1993) and $15,728,000 (1992), and gross realized losses were $2,213,000 (1994), $1,674,000 (1993) and $1,616,000 (1992).
NOTE L - COMMITMENTS AND OTHER COMMENTS: 1. In February 1995, foreign subsidiaries contracted to buy two Aframax tankers at an aggregate cost of approximately $80,000,000. As of February 21, 1995, the Company has commitments with an aggregate unpaid cost of approximately $300,000,000 for the construction of six foreign flag bulk vessels, two of which are scheduled for delivery in 1995, two in late 1996 and the other two in 1997. Unpaid costs are net of $150,000,000 of progress payments (all paid prior to January 1, 1995). Long-term shipyard financing arrangements are anticipated for approximately $76,000,000 of the unpaid cost of certain of the vessels. 2. Sundry liabilities and accrued expenses consist of:
In thousands at December 31, 1994 1993 Payroll and benefits $ 2,501 $ 3,384 Interest 12,697 11,902 Insurance 10,778 4,350 Other 7,066 6,212 ----------------------------------------------------------------- $33,042 $ 25,848 =================================================================
3. Certain subsidiaries make contributions to union-sponsored multi- employer pension plans covering seagoing personnel. The Employee Retirement Income Security Act requires employers who are contributors to domestic multi-employer plans to continue funding their allocable share of each plan's unfunded vested benefits in the event of withdrawal from or termination of such plans. The Company has been advised by the trustees of such plans that it has no withdrawal liability as of December 31, 1994. Certain other seagoing personnel of U.S. flag vessels are covered under a subsidiary's defined contribution plan, the cost of which is funded as accrued. NOTE M - LEASES: 1. Charters-in: The approximate minimum commitments under capital leases for eight U.S. flag vessels were:
In thousands at December 31, 1994 1996 25,528 1997 25,528 1998 25,528 1999 25,660 Beyond 1999 165,958 ----------------------------------------------------------------- Net minimum lease payments 293,730 Less amount representing interest 123,122 ----------------------------------------------------------------- Present value of net minimum lease payments $170,608 =================================================================
Certain of the capital leases provide for deposits in restricted funds under certain circumstances. Such deposits aggregated approximately $4,821,000 at December 31, 1994 and are held as collateral for the related obligations. The Company has a time charter (which is an operating lease) for a 1992-built foreign flag tanker, which charter has a remaining term of approximately four years, at an annual time charter rental of approximately $8,800,000, assuming a full year's operations. Under the charter, the Company has renewal and purchase options. Time charter rental expense is not payable when the vessel is off-hire. The total rental expense for charters accounted for as operating leases, including the one referred to above, amounted to $12,150,000 in 1994, $8,842,000 in 1993 and $8,048,000 in 1992. 2. Charters-out: The Company's subsidiaries, as the owners of a diversified fleet of bulk vessels, engage in chartering out the vessels primarily on time and voyage charters and occasionally on bareboat charters. Revenues from vessels on time charter are dependent upon the ability to deliver and operate vessels in accordance with charter terms. Revenues from a time charter are not received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. The minimum future revenues expected to be received subsequent to December 31, 1994 on noncancelable time charters and a bareboat charter are $79,080,000 (1995), $25,872,000 (1996), $23,032,000 (1997), $19,535,000 (1998) and $18,288,000 (1999); the aggregate for 2000 and later years is $99,724,000. The foregoing amounts do not include escalations and do not purport to be an estimate of aggregate voyage revenues for any of the years. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be reflective of the actual off-hire in the future. The Company has hedged its exchange rate risk with respect to contracted future charter revenues receivable in Japanese yen to minimize the effect of foreign exchange rate fluctuations on reported income by entering into currency swaps with a major financial institution to deliver such foreign currency at fixed rates that will result in the Company receiving approximately $145,000,000 for such foreign currency from 1995 through 2004. NOTE N - CAPITAL STOCK AND PER SHARE AMOUNTS: The Company's 1989 nonqualified stock option plan, as amended, covered 570,000 treasury shares. Options were granted to certain officers of the Company and a subsidiary for the purchase of all the shares covered by the amended plan, at $14.00 per share, which was in excess of the market price at the date of grant; 20% of the options vest and become exercisable on each October 9, from 1991 through 1995. These options remain exercisable until October 2000. During 1993, options for 10,000 shares were exercised. Options for 560,000 shares are outstanding and options for 446,000 shares are exercisable at December 31, 1994. At December 31, 1994, the Company has reserved 707,579 treasury shares for issuance pursuant to (i) its 1990 nonqualified stock option plan, which covered options for 3,515 shares granted by the Company to employees (except senior officers), and (ii) an agreement, as amended, to make available for purchase by Maritime (see Note H) 704,064 shares (including an increase of 200,000 shares in 1993). Maritime can acquire the shares reserved for it only for the purpose of fulfilling its obligations under its 1990 nonqualified stock option plan, as amended. The exercise price of the options granted by the Company to its employees is $16.00 per share, and the prices for any shares Maritime purchases from the Company range from $16.00 to $19.63 per share (the market prices at dates of grant). The options granted have a term of approximately ten years and become exercisable in annual increments of 20% upon the option holder's completion of five years of service. Certain details of activity in the Company's 1990 plan and Maritime's plan are summarized as follows:
Company's 1990 Plan Maritime's Plan Options Outstanding at January 1, 1992 16,360 464,518 Granted - 30,000 Canceled (9,968) (31,262) Exercised ($16.00 per share) - (5,035) -------------------------------------------------------------------------- Options Outstanding at December 31, 1992 6,392 458,221 Granted - 190,000 Canceled - (23,899) Exercised ($16.00 per share) (872) (20,409) -------------------------------------------------------------------------- Options Outstanding at December 31, 1993 5,520 603,913 Granted - 24,600 Canceled (1,005) (80,430) Exercised ($16.00 per share) (1,000) (54,927) -------------------------------------------------------------------------- Options Outstanding at December 31, 1994 3,515 493,156 ========================================================================== Options Exercisable at December 31, 1994 1,880 244,858 ==========================================================================
Net income/(loss) per share is based on the weighted average number of common shares outstanding during each year, 35,587,856 shares (1994), 32,678,031 shares (1993) and 32,805,549 shares (1992). The aforementioned stock options have not been included in the computation of net income/(loss) per share since their effect thereon would either be antidilutive or not be material. In March 1994, the Company sold 3,450,000 shares of its common stock in a public offering. Net proceeds were $76,004,000, which were credited to common stock ($3,450,000) and paid-in additional capital ($72,554,000). The effect on net loss per share assuming that the aforementioned sale of shares and the use of a portion of the proceeds to reduce amounts outstanding under the Revolving Credit Agreement had occurred at the beginning of 1994 was not material. NOTE O - 1994 AND 1993 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
Results of Operations for Quarter Ended (in thousands, except per share amounts) March 31, June 30, September 30, December 31, 1994 Shipping revenues $100,498 $78,316 $ 89,563 $95,759 Income/(loss) from vessel operations 10,759 (2,827) 4,037 8,364 Gain on disposal of vessels 2,512 - 4,303 - Net income/(loss) $ 5,016 $(4,599) $ (2,313) $ 4,304) --------------------------------------------------------------------------- Net income/(loss) per share $ .15 $ (.14) $ (.06) $ (.12) =========================================================================== 1993 Shipping revenues $101,250 $93,151 $ 95,267 $92,912 Income from vessel operations 9,167 6,914 9,702 6,859 Gain on disposal of vessels 6,077 6,011 - - Net income $ 4,876 $ 5,514 $ 4,519 $ 3,037 --------------------------------------------------------------------------- Net income per share $ .15 $ .17 $ .14 $ .09 ===========================================================================
REPORT OF INDEPENDENT AUDITORS To the Shareholders Overseas Shipholding Group, Inc. We have audited the accompanying consolidated balance sheets of Overseas Shipholding Group, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations and retained earnings and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Overseas Shipholding Group, Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As discussed in Note A6 to the consolidated financial statements, in 1992, the Company changed its method of accounting for income taxes, in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." ERNST & YOUNG LLP New York, New York February 21, 1995 ELEVEN-YEAR STATISTICAL REVIEW (UNAUDITED) In thousands, except per share amounts
1994 1993 1992 1991 1990 Total revenues(a) $390,841 $420,095 $383,222 $452,459 $429,040 Income from vessel operations 20,333 32,642 29,614 102,046 112,894 Income/(loss) before Federal income taxes (9,950) 26,846 (2,829) 79,826 80,757 Net income/(loss) (6,200) 17,946 16,071(c) 55,076 55,857 Depreciation of vessels and amortization of capital leases 59,992 58,734 56,472 56,214 55,567 Vessels, capital leases and direct financing leases, at net book amount 1,183,241 1,130,124 1,067,122 1,026,817 1,046,103 Total assets 1,905,409 1,823,737 1,714,548 1,545,675 1,498,277 Long-term debt and lease obligations (exclusive of current portions) 910,056 876,274 784,452 576,321 612,819 Reserve for deferred Federal income taxes - noncurrent 102,170 100,161 94,247 114,589 102,575 Shareholders' equity $809,779 $768,437 $762,425 $760,322 $707,128 Per share amounts(b): Net income/(loss) $ (.17) $ .55 $ .49(c) $ 1.67 $ 1.63 Shareholders' equity $ 22.36 $ 23.50 $ 23.33 $ 23.05 $ 21.40 Cash dividends paid $ .60 $ .60 $ .60 $ .55 $ .50 Average shares outstanding 35,588 32,678 32,806 33,012 34,317 (a) Represents shipping revenues and other income. (b) Gives effect to a 7-for-5 stock split declared in February 1989. (c) Includes $16,000,000 ($.49 per share) from the cumulative effect of the change in accounting for income taxes in accordance with FAS 109, and a provision of $13,100,000 ($.40 per share) for loss on investment in GPA Group plc.
EX-21 14 EXHIBIT 21 ---------- as of 3/21/95 SUBSIDIARIES OF OVERSEAS SHIPHOLDING GROUP, INC. The following table lists all subsidiaries of the registrant and all companies in which the registrant directly or indirectly owns at least a 49% interest, except for certain companies which, if considered in the aggregate as a single entity, would not constitute a significant entity. All the entities named below are corporations, unless otherwise noted. Where Incorporated Name or Organized Ajax Navigation Corporation Liberia Alice Tankships Corporation New York American Shipholding Group, Inc. New York Amity Products Carriers, Inc. Delaware Ania Tanker Corporation Liberia Antilles Bulk Holdings N.V. Netherlands Antilles Atlantia Tanker Corporation Liberia Baywatch Marine Inc. Liberia Blue Sapphire Marine Inc. Liberia Cambridge Tankers, Inc. New York Canopus Tankers, Inc. Liberia Caribbean Tanker Corporation Liberia Celebrity Cruise Lines Inc. Cayman Islands Celebrity Cruises (Management) Inc. Liberia Celebrity Cruises Inc. Liberia Chrismir Shipping Corporation Liberia Columbia Tanker Corporation Liberia Commonwealth Shipping Company Limited Bermuda Community Ocean Services, Inc. New York Concert Tanker Corporation Liberia Concord Tanker S.A. Panama Corolla Shipping S.A. Panama Cruise Mar Investment Inc. Liberia Cruise Mar Shipping Holdings Ltd. Liberia Delphina Tanker Corporation Delaware Diane Tanker Corporation Liberia Edinburgh Bulk Carriers Limited Bermuda Enterprise Shipping Company Limited Bermuda ERN Holdings Inc. Panama Esker Marine Shipping Inc. Liberia Excelsior Bulk Carriers Limited Bermuda Exemplar Bulk Carriers Limited Bermuda Explorer Bulk Carriers, Inc. Liberia Fantasia Cruising Inc. Liberia Fifth Transoceanic Shipping Liberia Company Limited First Aframax Tanker Corporation Liberia First Pacific Corporation. Liberia First Products Tankers, Inc. Liberia First Shipco Inc. Liberia First Shipmor Associates (partnership) Delaware First Union Tanker Corporation Liberia First United Shipping Corporation Liberia Fourth Aframax Tanker Corporation Liberia Fourth Products Tankers, Inc. Liberia Fourth Shipmor Associates (partnership) Delaware Fourth Spirit Holding N.V. Netherlands Antilles Fourth Transoceanic Shipping Liberia Company Limited Friendship Marine Inc. Liberia General Guaranty Corporation Delaware General Ship Services, Inc. Delaware Glasgow Bulk Carriers Limited Bermuda Global Bulk Oil S.A. Panama Global Tankers S.A. Panama Hyperion Shipping Corporation Liberia Hyperion Transportation S.A. Panama Imperial Tankers Corporation Liberia Intercontinental Bulktank Corporation New York Intercontinental Coal Transport Inc. Delaware Intercontinental Coal Transport Limited Bermuda International Seaways, Inc. Delaware International Seaways, Inc. Liberia Interocean Tanker Corporation Liberia Island Tanker S.A. Panama ITI Shipping S.A. Panama Jostelle Shipping Company Limited Bermuda Juneau Tanker Corporation New York Kaigai Shipping Corporation Liberia Lake Michigan Bulk Carriers, Inc. New York Lake Ontario Bulk Carriers, Inc. New York Lion Insurance Company Ltd. Bermuda Lion Shipping Ltd. Liberia Majestic Tankers Corporation Liberia Mansfield Marine Corporation Liberia Marina Tanker Corporation. Liberia Matilde Tanker Corporation Liberia Mediterranean Blue Sea Holdings Ltd. Liberia Mercury Bulkcarriers S.A. Panama Mermi Shipping Holdings Ltd. Liberia Monarch Tanker S.A. Panama Moran Maritime Associates (partnership) Delaware New Orleans Tanker Corporation Delaware North American Ship Agencies, Inc. New York Northanger Shipping Corporation Liberia Northwestern Tanker Corporation Liberia Ocean Bulk Ships, Inc. Delaware Oleron Tanker S.A. Panama Olympia Tanker Corporation Liberia Ore-Oil Carriers S.A. Panama OSG Bulk Ships, Inc. New York OSG Car Carriers, Inc. New York OSG Financial Corp. Delaware OSG Foundation New York OSG International, Inc. Liberia OSG International Partners (partnership) Liberia Overseas Airship Corporation Delaware Overseas Bulktank Corporation New York Overseas Coal Transport Inc. Delaware Overseas Coal Transport Limited Bermuda Overseas Cruiseship Inc. Cayman Islands Overseas Petroleum Carriers, Inc. Delaware Phaidon Navegacion S.A. Panama Philadelphia Tanker Corporation Delaware Pluto Tankers, Inc. Liberia Polycon Investment Inc. Liberia Regency Tankers Corporation Liberia Reliance Shipping B.V. Netherlands Rex Shipholdings Inc. . Liberia Rio Grande Bulk Carriers, Inc. Liberia Royal Tankers Corporation Liberia Ruby Tanker Corporation Liberia San Diego Tankers, Inc. Delaware San Jose Tankers, Inc. Delaware Santa Barbara Tankers, Inc. Delaware Santa Monica Tankers, Inc. Delaware Sapphire Tanker Corporation Liberia Sargasso Tanker Corporation Liberia Saturn Bulk Carriers, Inc. Liberia Seabrook Maritime Inc. Liberia Second Pacific Corporation Liberia Second Products Tankers, Inc. Liberia Second Shipmor Associates (partnership) Delaware Second Union Tanker Corporation Liberia Second United Shipping Corporation Liberia Ship Paying Corporation No. 1 Delaware Ship Paying Corporation No. 2 Delaware Ship Paying Corporation No. 3 Liberia Spirit Shipping B.V. Netherlands Third Aframax Tanker Corporation Liberia Third Products Tankers, Inc. Liberia Third Shipco Inc. Delaware Third Shipmor Associates (partnership) Delaware Third United Shipping Corporation Liberia Timor Navigation Ltd. Liberia TRA Shipping S.A. Panama Trader Shipping Corporation. Liberia Tranquillity Maritime Ltd. Liberia Transbulk Carriers, Inc. Delaware Tropical United Shipping Corporation Liberia TSC Shipping S.A. Panama Tubarao Bulk Carriers, Inc. Liberia U.S. Shipholding Group, Inc. New York United Partners (partnership) Liberia United Steamship Corporation Panama Universal Cruise Holdings Limited British Virgin Islands Upperway Investments Ltd. Liberia Valdez Tankships Corporation New York Vega Tanker Corporation Delaware Venus Tanker Corporation Liberia Vivian Tankships Corporation New York Western Ship Agencies Limited England Wolcon Corp. Delaware Zenith Shipping Corporation Liberia EX-23 15 EXHIBIT 23 ---------- Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Overseas Shipholding Group, Inc. of our report dated February 21, 1995, included in the 1994 Annual Report to Shareholders of Overseas Shipholding Group, Inc. We also consent to the incorporation by reference in the Registration Statements, Form S-8 (No. 33-44013) pertaining to the Overseas Shipholding Group, Inc. 1989 Stock Option Plan, the Overseas Shipholding Group, Inc. 1990 Stock Option Plan, and the Maritime Overseas Corporation 1990 Stock Option Plan, and Form S-3 (No. 33-50441) pertaining to the registration of $500,000,000 of Overseas Shipholding Group, Inc. debt securities, of our report dated February 21, 1995, with respect to the consolidated financial statements of Overseas Shipholding Group, Inc., incorporated herein by reference. ERNST & YOUNG LLP New York, New York March 29, 1995 EX-27 16
5 This schedule contains summary financial information extracted from SEC Form 10-K and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1994 DEC-31-1994 100,034 0 33,804 0 0 160,706 1,823,738 640,497 1,905,409 71,180 910,056 39,591 0 0 770,188 1,905,409 0 390,841 0 343,803 0 0 56,988 ( 9,950 ) ( 3,750 ) ( 6,200 ) 0 0 0 ( 6,200 ) ( 0.17 ) ( 0.17 )