o
|
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g)
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2007 |
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
o
|
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
For
the transition period from
|
|
Commission
file number
|
001-16601
|
Frontline
Ltd
|
(Exact
name of Registrant as specified in its charter)
|
Frontline
Ltd
|
(Translation
of Registrant’s name into English)
|
Bermuda
|
(Jurisdiction
of incorporation or organization)
|
Par-la-Ville
Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
|
(Address
of principal executive offices)
|
Georgina
Sousa, (1) 441 295 3494, Par-la-Ville Place, 14 Par-la-Ville Road,
Hamilton, HM 08, Bermuda
|
(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact
Person)
|
Title
of each class
|
Name
of each exchange on which registered
|
|
Ordinary
Shares, $2.50 Par Value
|
New
York Stock Exchange
|
|
None
|
(Title
of Class)
|
Ordinary
Shares, $2.50 Par Value
|
(Title
of Class)
|
Large
accelerated filer
x
|
Accelerated
filer
o
|
Non-accelerated
filer
o
|
U.S.
GAAP
x
|
International
Financial Reporting Standings
o
|
Other
o
|
PAGE
|
||
PART I
|
||
Item
1.
|
Identity
of Directors, Senior Management and Advisers
|
1
|
Item
2.
|
Offer
Statistics and Expected Timetable
|
1
|
Item
3.
|
Key
Information
|
1
|
Item
4.
|
Information
on the Company
|
14
|
Item
4A.
|
Unresolved
Staff Comments
|
35
|
Item
5.
|
Operating
and Financial Review and Prospects
|
35
|
Item
6.
|
Directors,
Senior Management and Employees
|
57
|
Item
7.
|
Major
Shareholders and Related Party Transactions
|
60
|
Item
8.
|
Financial
Information
|
63
|
Item
9.
|
The
Offer and Listing
|
64
|
Item
10.
|
Additional
Information
|
65
|
Item
11.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
78
|
Item
12.
|
Description
of Securities other than Equity Securities
|
79
|
PART II
|
||
Item
13.
|
Defaults,
Dividend Arrearages and Delinquencies
|
80
|
Item
14.
|
Material
Modifications to the Rights of Security Holders and Use of
Proceeds
|
80
|
Item
15.
|
Controls
and Procedures
|
80
|
Item
16.
|
Reserved
|
81
|
Item
16A.
|
Audit
Committee Financial Expert
|
81
|
Item
16B.
|
Code
of Ethics
|
81
|
Item
16C.
|
Principal
Accountant Fees and Services
|
81
|
Item
16D.
|
Exemptions
from the Listing Standards for Audit Committees
|
81
|
Item
16E.
|
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
|
81
|
PART III
|
||
Item
17.
|
Financial
Statements
|
82
|
Item
18.
|
Financial
Statements
|
82
|
Item
19.
|
Exhibits
|
82
|
ITEM
1.
|
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS
|
ITEM
2.
|
OFFER
STATISTICS AND EXPECTED TIMETABLE
|
ITEM
3.
|
KEY
INFORMATION
|
Fiscal
year ended December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(in
thousands of $, except ordinary shares, per share data and
ratios)
|
||||||||||||||||||||
Income Statement Data
1
:
|
||||||||||||||||||||
Total
operating revenues
2
|
1,299,927 | 1,558,369 | 1,495,975 | 1,842,923 | 1,159,439 | |||||||||||||||
Total
operating expenses
2
|
898,904 | 850,623 | 713,919 | 737,389 | 683,515 | |||||||||||||||
Net
operating income
|
519,191 | 803,401 | 858,137 | 1,125,108 | 480,984 | |||||||||||||||
Net
income from continuing operations before income taxes, minority interest
and cumulative effect of change in accounting principle
|
503,991 | 661,330 | 761,078 | 970,936 | 439,518 | |||||||||||||||
Net
income from continuing operations before cumulative effect of change in
accounting principle
|
564,976 | 502,486 | 592,743 | 905,763 | 439,515 | |||||||||||||||
Discontinued
operations
3
|
5,442 | 13,514 | 14,096 | 117,619 | 3,612 | |||||||||||||||
Cumulative
effect of change in accounting
principle
4
|
— | — | — | — | (33,767 | ) | ||||||||||||||
Net
income
|
570,418 | 516,000 | 606,839 | 1,023,382 | 409,360 | |||||||||||||||
Earnings
from continuing operations before cumulative effect of change in
accounting principle per Ordinary Share
|
||||||||||||||||||||
-
basic
|
$ | 7.55 | $ | 6.72 | $ | 7.92 | $ | 12.21 | $ | 5.87 | ||||||||||
-
diluted
|
$ | 7.55 | $ | 6.72 | $ | 7.92 | $ | 12.21 | $ | 5.86 | ||||||||||
Net
income per Ordinary Share
|
||||||||||||||||||||
-
basic
|
$ | 7.62 | $ | 6.90 | $ | 8.11 | $ | 13.79 | $ | 5.47 | ||||||||||
-
diluted
|
$ | 7.62 | $ | 6.90 | $ | 8.11 | $ | 13.79 | $ | 5.45 | ||||||||||
Cash
dividends declared per share
|
$ | 8.30 | $ | 7.00 | $ | 10.10 | $ | 13.60 | $ | 4.55 | ||||||||||
Balance Sheet Data (at end of
year)
1
:
|
||||||||||||||||||||
Cash
and cash equivalents
|
168,432 | 197,181 | 92,782 | 96,879 | 112,000 | |||||||||||||||
Newbuildings
and vessel purchase options
|
160,298 | 166,851 | 15,927 | 24,231 | 8,370 | |||||||||||||||
Vessels
and equipment, net
|
208,516 | 2,446,278 | 2,584,847 | 2,254,361 | 2,165,239 | |||||||||||||||
Vessels
under capital lease, net
|
2,324,789 | 626,374 | 672,608 | 718,842 | 765,126 | |||||||||||||||
Investments
in associated companies
|
5,633 | 17,825 | 15,783 | 28,881 | 179,416 | |||||||||||||||
Total
assets
|
3,762,091 | 4,589,937 | 4,454,817 | 4,211,160 | 4,319,345 | |||||||||||||||
Short-term
debt and current portion of long-term debt
|
96,811 | 281,409 | 228,135 | 137,332 | 174,826 | |||||||||||||||
Current
portion of obligations under capital lease
|
179,604 | 28,857 | 25,142 | 21,498 | 20,138 | |||||||||||||||
Long-term
debt
|
376,723 | 2,181,885 | 2,101,061 | 1,879,598 | 1,966,471 | |||||||||||||||
Obligations
under capital lease
|
2,318,794 | 723,073 | 706,279 | 732,153 | 753,823 | |||||||||||||||
Share
capital
|
187,063 | 187,063 | 187,063 | 187,063 | 184,120 | |||||||||||||||
Stockholders’
equity
|
445,969 | 668,560 | 715,166 | 917,968 | 1,255,417 | |||||||||||||||
Ordinary
Shares outstanding
|
74,825,169 | 74,825,169 | 74,825,169 | 74,825,169 | 73,647,930 | |||||||||||||||
Weighted
average Ordinary Shares outstanding
|
74,825,169 | 74,825,169 | 74,825,169 | 74,192,939 | 74,901,900 | |||||||||||||||
Other
Financial Data:
|
||||||||||||||||||||
Equity
to assets ratio (percentage)
5
|
11.8 | % | 14.6 | % | 16.1 | % | 21.8 | % | 29.1 | % | ||||||||||
Debt
to equity ratio
6
|
6.7 | 4.8 | 4.3 | 3.0 | 2.3 | |||||||||||||||
Price
earnings ratio
7
|
6.3 | 4.6 | 4.7 | 3.2 | 4.7 | |||||||||||||||
Time
charter equivalent revenue
8
|
938,960 | 1,154,029 | 1,155,135 | 1,477,537 | 832,950 |
|
1.
|
The
Company distributed the majority of its remaining shareholding in Ship
Finance International Limited (“Ship Finance”) in March 2007 and no longer
consolidates Ship Finance as of March 31, 2007. A summary of the major
changes to the financial statements is as
follows;
|
|
a.
|
Vessels
leased from Ship Finance, which were previously reported as wholly owned
are reported as vessels held under capital
lease.
|
|
b.
|
Capital
lease obligations with Ship Finance, which were previously eliminated on
consolidation are reported as liabilities with the related interest
recorded in the income statement.
|
|
c.
|
Debt
incurred by Ship Finance, which was previously reported as debt of the
Company is no longer reported.
|
|
d.
|
Derivative
instruments held by Ship Finance are no longer
reported.
|
|
e.
|
Minority
interest expense relating to Ship Finance is no longer
reported.
|
|
f.
|
Profit
share expense relating to amounts due to Ship Finance is shown in the
income statement.
|
|
g.
|
Results
from Ship Finance’s container ships, jack-up rigs and Panamax vessels are
no longer reported in the Company’s consolidated
results
|
|
2.
|
Previously
we reported net operating revenues in our income statement data. Effective
December 31, 2003 we reclassified voyage expenses and commission as a
component of total operating expenses and now report total operating
revenues and total operating
expenses.
|
|
3.
|
The
Company disposed of the container vessel and rig operations of Ship
Finance in the first quarter of 2007 as a result of the spin off of Ship
Finance. These operations have been recorded as discontinued operations in
2007 and 2006. The results from container vessels have also been recorded
in discontinued operations in 2005. These operations have been recorded as
discontinued operations for all applicable years presented, which are
2007, 2006 and 2005. During the years ended December 31, 2005 and 2004 the
Company disposed of portions of its dry-bulk operations, which have been
recorded as discontinued operations in the years ended December 31, 2005,
2004 and 2003.
|
|
4.
|
In
2003, the Company adopted FIN 46R “Consolidation of Variable Interest
Entities” and recorded a charge of $33.7 million as a result of this
change in accounting principle.
|
|
5.
|
Equity
to assets ratio is calculated as total stockholders’ equity divided by
total assets.
|
|
6.
|
Debt
to equity ratio is calculated as total interest bearing current and
long-term liabilities, including obligations under capital leases, divided
by stockholders’ equity.
|
|
7.
|
Price
earnings ratio is calculated by dividing the closing year end share price
by basic earnings per share.
|
|
8.
|
A
reconciliation of time charter equivalent revenues to total operating
revenues as reflected in the consolidated statements of operations is as
follows:
|
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(in
thousands of $)
|
||||||||||||||||||||
Total
operating revenues
|
1,299,927 | 1,558,369 | 1,495,975 | 1,842,923 | 1,159,439 | |||||||||||||||
Less:
|
||||||||||||||||||||
Other
revenue
|
(8,516 | ) | (5,294 | ) | (3,877 | ) | (3,777 | ) | (3,111 | ) | ||||||||||
Voyage
expense
|
(352,451 | ) | (399,046 | ) | (336,963 | ) | (361,609 | ) | (323,378 | ) | ||||||||||
Time
charter equivalent revenue
|
938,960 | 1,154,029 | 1,155,135 | 1,477,537 | 832,950 |
·
|
demand
for oil and oil products;
|
·
|
global
and regional economic and political
conditions;
|
·
|
changes
in oil production and refining
capacity;
|
·
|
environmental
and other regulatory developments;
|
·
|
the
distance oil and oil products are to be moved by sea;
and
|
·
|
changes
in seaborne and other transportation
patterns.
|
·
|
the
number of newbuilding deliveries;
|
·
|
the
scrapping rate of older vessels;
|
·
|
port
or canal congestion
|
·
|
vessel
casualties;
|
·
|
price
of steel;
|
·
|
potential
conversion of vessels to alternative
use;
|
·
|
the
number of vessels that are out of service;
and
|
·
|
changes
in environmental and other regulations that may effectively cause
reductions in the carrying capacity of vessels or early obsolescence of
tonnage.
|
·
|
increased
crude oil production from other
areas;
|
·
|
increased
refining capacity in the Arabian Gulf, West Africa or the
FSU;
|
·
|
increased
use of existing and future crude oil pipelines in the Arabian Gulf, West
Africa and FSU;
|
·
|
a
decision by Arabian Gulf, West African and FSU oil-producing nations to
increase their crude oil prices or to further decrease or limit their
crude oil production;
|
·
|
armed
conflict in the Arabian Gulf and West Africa and political or other
factors; and
|
·
|
the
development and the relative costs of nuclear power, natural gas, coal and
other alternative sources of
energy.
|
·
|
a
marine disaster;
|
·
|
piracy;
|
·
|
environmental
accidents;
|
·
|
cargo
and property losses or damage; and
|
·
|
business
interruptions caused by mechanical failure, human error, war, terrorism,
piracy, political action in various countries, labor strikes,
or adverse weather conditions.
|
·
|
general
economic and market conditions affecting the
shipping industry;
|
·
|
competition
from other shipping companies;
|
·
|
types
and sizes of vessels;
|
·
|
other
modes of transportation;
|
·
|
cost
of newbuildings;
|
·
|
shipyard
capacity;
|
·
|
governmental
or other regulations;
|
·
|
age
of vessels;
|
·
|
prevailing
level of charter rates; and
|
·
|
technological
advances.
|
ITEM
4.
|
INFORMATION
ON THE COMPANY
|
|
·
|
In
September 2006, Ship Finance announced the sale of the VLCC Front Tobago
to a third party for gross proceeds of $45.0 million and Frontline
received a compensation payment of $9.6 million from Ship Finance, which
was eliminated on consolidation, in connection with the
sale.
|
|
·
|
In
January 2007, Ship Finance sold its single hull Suezmax tanker Front
Transporter to an unrelated third party for a gross sales price of $38.0
million. We received a compensation payment of $14.8 million from Ship
Finance, which was eliminated on consolidation, on termination of the
charter. The vessel was delivered to her new owner in March
2007.
|
|
·
|
In
March 2007, the single hull VLCC Front Vanadis was sold and delivered to
an unrelated third party in May 2007. Upon delivery, our long-term charter
party contract with Ship Finance was terminated early, and Frontline
received a compensation payment in the amount of $13.2
million.
|
|
·
|
In
August 2007, we sold the single hull Suezmax tanker Front Horizon to a
subsidiary of Farahead Holdings Limited, a company subject to significant
influence or indirect control of our Chairman, John Fredriksen for net
proceeds of $28.0 million resulting in a net gain of $6.2
million.
|
|
·
|
In
October 2007, we mutually agreed with Ship Finance to terminate the
long-term charter party contract for the single hull VLCC Front Duchess.
This termination was cancelled in March
2008.
|
|
·
|
In
December 2007, we agreed with Ship Finance to terminate the long term
charter parties between the companies for the double sided, single bottom
Suezmax vessels Front Birch and Front Maple. Ship Finance simultaneously
sold the vessels. Delivery of the Front Birch and Front Maple took place
in December 2007 and January 2008, respectively. We received compensation
payments of approximately $32.8 million for the early termination of the
current charter parties, which will be recognized at the time of delivery
to the new owners.
|
|
·
|
Additionally,
in March 2008, we agreed with Ship Finance to terminate the long term
charter party between the companies for the single hull VLCC Front Sabang.
Ship Finance simultaneously sold the vessel. We will receive a
compensation payment of approximately $25 million for the early
termination of the current charter party, which will be recognized at the
time of delivery to the new owners, which is expected to take place in the
second quarter of 2008.
|
·
|
emphasizing
operational safety and quality maintenance for all of our
vessels;
|
·
|
complying
with all current and proposed environmental
regulations;
|
·
|
outsourcing
technical operations and crewing;
|
·
|
continuing
to achieve competitive operational
costs;
|
·
|
operating
a modern and homogeneous fleet of
tankers;
|
·
|
achieving
high utilization of our
vessels;
|
·
|
achieving
competitive financing arrangements;
|
·
|
achieving
a satisfactory mix of term charters, contracts of affreightment and spot
voyages; and
|
·
|
developing
and maintaining relationships with major oil companies and industrial
charterers.
|
·
|
25-year
old tankers must be of double hull construction or of a mid-deck design
with double-sided construction,
unless:
|
|
(1)
|
they
have wing tanks or double-bottom spaces not used for the carriage of oil
which cover at least 30% of the length of the cargo tank section of the
hull or bottom; or
|
|
(2)
|
they
are capable of hydrostatically balanced loading (loading less cargo into a
tanker so that in the event of a breach of the hull, water flows into the
tanker, displacing oil upwards instead of into the
sea);
|
·
|
30-year
old tankers must be of double hull construction or mid-deck design with
double-sided construction; and
|
·
|
all
tankers will be subject to enhanced
inspections.
|
·
|
is
the subject of a contract for a major conversion or original construction
on or after July 6, 1993;
|
·
|
commences
a major conversion or has its keel laid on or after January 6, 1994;
or
|
·
|
completes
a major conversion or is a newbuilding delivered on or after July 6,
1996.
|
Category
of Oil Tankers
|
Date
or Year for Phase Out
|
|
Category
1 oil tankers of 20,000 dwt and above carrying crude oil, fuel oil, heavy
diesel oil or lubricating oil as cargo, and of 30,000 dwt and above
carrying other oils, which do not comply with the requirements for
protectively located segregated ballast tanks
|
April
5, 2005 for ships delivered on April 5, 1982 or earlier; or
2005
for ships delivered after April 5, 1982
|
|
Category
2 - oil tankers of 20,000 dwt and above carrying crude oil, fuel oil,
heavy diesel oil or lubricating oil as cargo, and of 30,000 dwt and above
carrying other oils, which do comply with the protectively located
segregated ballast tank requirements
and
Category
3 - oil tankers of 5,000 dwt and above but less than the tonnage specified
for Category 1 and 2 tankers.
|
April
5, 2005 for ships delivered on April 5, 1977 or earlier
2005
for ships delivered after April 5, 1977 but before January 1,
1978
2006
for ships delivered in 1978 and 1979
2007
for ships delivered in 1980 and 1981
2008
for ships delivered in 1982
2009
for ships delivered in 1983
2010
for ships delivered in 1984 or
later
|
Vessel
Name
|
Vessel
type
|
Vessel
Category
|
Year
Built
|
IMO
phase out
|
Flag
state
Exemption
|
||||||
Front
Voyager
|
Suezmax
|
SH
|
1992
|
2010
|
2015
|
||||||
Edinburgh(*)
|
VLCC
|
DS
|
1993
|
2018
|
n/a
|
||||||
Front
Ace(*)
|
VLCC
|
SH
|
1993
|
2010
|
2015
|
||||||
Front
Duchess(*)
|
VLCC
|
SH
|
1993
|
2010
|
2015
|
||||||
Front
Duke(*)
|
VLCC
|
SH
|
1992
|
2010
|
2015
|
||||||
Front
Highness(*)
|
VLCC
|
SH
|
1991
|
2010
|
2015
|
||||||
Front
Lady(*)
|
VLCC
|
SH
|
1991
|
2010
|
2015
|
||||||
Front
Lord(*)
|
VLCC
|
SH
|
1991
|
2010
|
2015
|
||||||
Front
Sabang(*)
|
VLCC
|
SH
|
1990
|
2010
|
2015
|
·
|
the
oil tanker conversion was completed before July 6,
1996;
|
·
|
the
conversion included the replacement of the entire cargo section and
fore-body and the tanker complies with all the relevant provisions of
MARPOL Convention applicable at the date of completion of the major
conversion; and
|
·
|
·
|
crude
oils having a density at 15ºC higher than 900 kg/m
3
;
|
·
|
fuel
oils having either a density at 15ºC higher than 900 kg/m
3
or
a kinematic viscosity at 50ºC higher than 180 mm
2
/s;
or
|
·
|
bitumen,
tar and their emulsions.
|
·
|
natural
resource damages and related assessment
costs;
|
·
|
real
and personal property damages;
|
·
|
net
loss of taxes, royalties, rents, profits or earnings capacity;
and
|
·
|
net
cost of public services necessitated by a spill response, such as
protection from fire, safety or health hazards; and loss of subsistence
use of natural resources.
|
·
|
address
a worst case scenario and identify and ensure, through contract or other
approved means, the availability of necessary private response resources
to respond to a worst case
discharge;
|
·
|
describe
crew training and drills; and
|
·
|
identify
a qualified individual with full authority to implement removal
actions.
|
·
|
on-board
installation of automatic identification systems to provide a means for
the automatic transmission of safety-related information from among
similarly equipped ships and shore stations, including information on a
ship’s identity, position, course, speed and navigational
status;
|
·
|
on-board
installation of ship security alert systems, which do not sound on the
vessel but only alerts the authorities on
shore;
|
·
|
the
development of vessel security
plans;
|
·
|
ship
identification number to be permanently marked on a vessel’s
hull;
|
·
|
a
continuous synopsis record kept onboard showing a vessel’s history
including, name of the ship and of the state whose flag the ship is
entitled to fly, the date on which the ship was registered with that
state, the ship’s identification number, the port at which the ship is
registered and the name of the registered owner(s) and their registered
address; and
|
·
|
compliance
with flag state security certification
requirements.
|
·
|
Annual
Surveys. For seagoing ships, annual surveys are conducted for the hull and
the machinery, including the electrical plant and where applicable for
special equipment classed, at intervals of 12 months from the date of
commencement of the class period indicated in the
certificate.
|
·
|
Intermediate
Surveys. Extended annual surveys are referred to as intermediate surveys
and typically are conducted two and one-half years after commissioning and
each class renewal. Intermediate surveys may be carried out on the
occasion of the second or third annual
survey.
|
·
|
Class
Renewal Surveys. Class renewal surveys, also known as special surveys, are
carried out for the ship’s hull, machinery, including the electrical plant
and for any special equipment classed, at the intervals indicated by the
character of classification for the hull. At the special survey the vessel
is thoroughly examined, including audio-gauging to determine the thickness
of the steel structures. Should the thickness be found to be less than
class requirements, the classification society would prescribe steel
renewals. The classification society may grant a one year grace period for
completion of the special survey. Substantial amounts of money may have to
be spent for steel renewals to pass a special survey if the vessel
experiences excessive wear and tear. In lieu of the special survey every
four or five years, depending on whether a grace period was
granted, a ship owner has the option of arranging
with the classification society for the vessel’s hull or machinery to be
on a continuous survey cycle, in which every part of the vessel would be
surveyed within a five year cycle. At an owner’s application, the surveys
required for class renewal may be split according to an agreed schedule to
extend over the entire period of class. This process is referred to as
continuous class renewal.
|
Vessel
|
Built
|
Approximate Dwt.
|
Construction
|
Flag
|
Type of Employment
|
Tonnage Owned Directly
|
|||||
VLCCs
|
|||||
Antares
Voyager
|
1998
|
310,000
|
Double-hull
|
BA
|
Bareboat
charter
|
Phoenix
Voyager
|
1999
|
308,500
|
Double-hull
|
BA
|
Bareboat
charter
|
Hull
2396 (Newbuilding)
|
2009
|
297,000
|
Double-hull
|
n/a
|
n/a
|
Hull
2397 (Newbuilding)
|
2009
|
297,000
|
Double-hull
|
n/a
|
n/a
|
Hull
2419 (Newbuilding)
|
2010
|
297,000
|
Double-hull
|
n/a
|
n/a
|
Hull
2420 (Newbuilding)
|
2010
|
297,000
|
Double-hull
|
n/a
|
n/a
|
Front
Shanghai
|
2006
|
298,500
|
Double-hull
|
HK
|
Spot
market
|
Suezmax Tankers
|
|||||
Hull
1017 (Newbuilding)
|
2008
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Hull
1018 (Newbuilding)
|
2009
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Hull
1019 (Newbuilding)
|
2008
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Hull
1026 (Newbuilding)
|
2009
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Hull
1056 (Newbuilding)
|
2010
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Hull
1057 (Newbuilding)
|
2010
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Hull
1060 (Newbuilding)
|
2010
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Vessel
|
Built
|
Approximate Dwt.
|
Construction
|
Flag
|
Type of Employment
|
Tonnage Owned Directly
|
|||||
Hull
1061 (Newbuilding)
|
2010
|
156,000
|
Double-hull
|
n/a
|
n/a
|
Front
Voyager
|
1992
|
155,000
|
Single-hull
|
BA
|
Spot
market
|
Cygnus
Voyager
|
1993
|
157,000
|
Double-hull
|
BA
|
Bareboat
charter
|
Altair
Voyager
|
1993
|
136,000
|
Double-hull
|
BA
|
Bareboat
charter
|
Sirius
Voyager
|
1994
|
156,000
|
Double-hull
|
BA
|
Bareboat
charter
|
2007
|
2006
|
2005
|
||||||||||
VLCCs
|
||||||||||||
At
start of period
|
41 | 43 | 38 | |||||||||
Acquisitions
|
2 | 2 | 5 | |||||||||
Dispositions
|
1 | 4 | — | |||||||||
At
end of period
|
42 | 41 | 43 | |||||||||
VLCCs
owned by equity investees
|
||||||||||||
At
start of period
|
— | — | 1 | |||||||||
Acquisitions
|
— | — | — | |||||||||
Dispositions
|
— | — | 1 | |||||||||
At
end of period
|
— | — | — |
2007
|
2006
|
2005
|
||||||||||
Suezmax
|
||||||||||||
At
start of period
|
23 | 23 | 28 | |||||||||
Acquisitions
|
— | — | — | |||||||||
Dispositions
|
7 | — | 5 | |||||||||
At
end of period
|
16 | 23 | 23 | |||||||||
Suezmax
OBOs
|
||||||||||||
At
start and end of period
|
8 | 8 | 8 | |||||||||
Aframax
|
||||||||||||
At
start of period
|
1 | — | — | |||||||||
Acquisitions
|
— | 1 | — | |||||||||
Dispositions
|
1 | — | — | |||||||||
At
end of period
|
— | 1 | — | |||||||||
Drybulk
|
||||||||||||
At
start of period
|
— | — | 1 | |||||||||
Dispositions
|
— | — | 1 | |||||||||
At
end of period
|
— | — | — | |||||||||
Total
fleet
|
||||||||||||
At
start of period
|
73 | 74 | 76 | |||||||||
Acquisitions
|
2 | 3 | 5 | |||||||||
Dispositions
|
9 | 4 | 7 | |||||||||
At
end of period
|
66 | 73 | 74 |
As
of December 31,
|
||||||||||||||||||||||||
2007
|
2006
|
2005
|
||||||||||||||||||||||
Number
of vessels
|
Percentage
of fleet
|
Number
of vessels
|
Percentage
of fleet
|
Number
of vessels
|
Percentage
of fleet
|
|||||||||||||||||||
VLCCs
|
||||||||||||||||||||||||
Spot
or pool
|
17 | 40 | % | 18 | 44 | % | 29 | 67 | % | |||||||||||||||
Time
charter
|
15 | 36 | % | 13 | 32 | % | 9 | 21 | % | |||||||||||||||
Bareboat
charter
|
10 | 24 | % | 10 | 24 | % | 5 | 12 | % | |||||||||||||||
Total
|
42 | 100 | % | 41 | 100 | % | 43 | 100 | % | |||||||||||||||
Suezmax
|
||||||||||||||||||||||||
Spot
or pool
|
12 | 75 | % | 16 | 70 | % | 22 | 96 | % | |||||||||||||||
Time
charter
|
1 | 6 | % | 3 | 13 | % | 1 | 4 | % | |||||||||||||||
Bareboat
charter
|
3 | 19 | % | 3 | 13 | % | — | — | ||||||||||||||||
Under
Conversion
|
— | — | 1 | 4 | % | — | — | |||||||||||||||||
Total
|
16 | 100 | % | 23 | 100 | % | 23 | 100 | % | |||||||||||||||
Aframax
|
||||||||||||||||||||||||
Under
Conversion
|
— | — | 1 | 100 | % | — | — | |||||||||||||||||
Total
|
— | — | 1 | 100 | % | — | — |
As
of December 31,
|
||||||||||||||||||||||||
2007
|
2006
|
2005
|
||||||||||||||||||||||
Number
of vessels
|
Percentage
of fleet
|
Number
of vessels
|
Percentage
of fleet
|
Number
of vessels
|
Percentage
of fleet
|
|||||||||||||||||||
Suezmax
OBOs
|
||||||||||||||||||||||||
Time
charter
|
8 | 100 | % | 8 | 100 | % | 8 | 100 | % | |||||||||||||||
Total
|
8 | 100 | % | 8 | 100 | % | 8 | 100 | % | |||||||||||||||
Total
fleet
|
||||||||||||||||||||||||
Spot
or pool
|
29 | 44 | % | 34 | 47 | % | 51 | 69 | % | |||||||||||||||
Time
charter
|
24 | 36 | % | 24 | 32 | % | 18 | 24 | % | |||||||||||||||
Bareboat
charter
|
13 | 20 | % | 13 | 18 | % | 5 | 7 | % | |||||||||||||||
Under
Conversion
|
— | — | 2 | 3 | % | — | — | |||||||||||||||||
Total
|
66 | 100 | % | 73 | 100 | % | 74 | 100 | % |
·
|
Vessels
leased from Ship Finance, which were previously reported as wholly owned
are reported as vessels held under capital
lease.
|
·
|
Capital
lease obligations with Ship Finance, which were previously eliminated on
consolidation are reported as liabilities with the related interest
recorded in the income statement.
|
·
|
Debt
incurred by Ship Finance, which was previously reported as debt of the
Company is no longer reported.
|
·
|
Derivative
instruments held by Ship Finance are no longer
reported.
|
·
|
Minority
interest expense relating to Ship Finance is no longer
reported.
|
·
|
Profit
share expense relating to amounts due to Ship Finance is shown in the
income statement.
|
·
|
Results
from Ship Finance’s container ships, jack-up rigs and Panamax vessels are
no longer reported in the Company’s consolidated
results
|
·
|
the
earnings of our vessels in the charter
market;
|
·
|
gains
from the sale of assets;
|
·
|
vessel
operating expenses;
|
·
|
profit
share expense;
|
·
|
administrative
expenses;
|
·
|
depreciation;
|
·
|
interest
expense;
|
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Voyage
charter revenues
|
801,546 | 1,114,531 | (312,985 | ) | (28 | ) | ||||||||||
Time
charter revenues
|
432,813 | 352,575 | 80,238 | 23 | ||||||||||||
Bareboat
charter revenues
|
57,052 | 85,969 | (28,917 | ) | (34 | ) | ||||||||||
Other
income
|
8,516 | 5,294 | 3,222 | 61 | ||||||||||||
Total
operating revenues
|
1,299,927 | 1,558,369 | (258,442 | ) | (17 | ) |
·
|
A
reduction in trading days due to the sale of three vessels in 2006 and
three vessels in 2007, which resulted in a decrease of $68.4 million in
2007.
|
·
|
Switching the
employment of four VLCCs from the spot voyage market to time charters in
the second quarter of 2006 resulted in a decrease of $49.2 million in
2007.
|
·
|
The
Aframax Front Puffin stopped trading at the end of 2006 when conversion
into an FPSO commenced. Front Puffin spot voyage revenue in 2006 was $2.8
million.
|
·
|
The
sale of a single hull Suezmax in March 2007 and the delivery of three
single hull Suezmaxes to shipyards for conversion to heavy lift vessels
during 2007. The single hull Suezmax Front Sunda was delivered for
conversion in 2006. These transactions resulted in a decrease in spot
voyage revenues of $33.0 million.
|
·
|
During
2007, seven vessels (three Suezmax double hulls, one Suezmax single hull
and three VLCC double hulls) changed employment from spot voyage to time
charter resulting in a decrease in voyage charter revenues of $71.2
million.
|
·
|
TCE
rates decreased in 2007 compared to 2006 contributing to a general
decrease in voyage charter revenues. The TCE earned in 2007 for
our double hull Suezmaxes was approximately $41,100 compared to $49,900 in
2006 and single hull Suezmax average daily rate earned in 2007 was $22,900
compared to $29,100 in 2006. The average daily rate earned for
our double hull VLCCs in 2007 was $48,200 compared to $67,600 in 2006 and
the single hull VLCC average daily rate earned in 2007 was $37,600
compared to $54,100 in 2006. The rates earned highlight a continuing
differential in market rates for single and double hull
vessels.
|
·
|
Our
OBO’s were fixed on new time charters with higher prevailing rates
resulting in an increase in revenues of $25.0
million.
|
·
|
During
2007, we chartered in two VLCCs and subsequently chartered these vessels
out on time charters which contributed to an increase in revenues of $17.6
million.
|
·
|
Two
VLCCs which were previously employed on bareboat charters and four VLCCs
which were previously employed on spot voyages began time charters during
the first six months of 2006 resulting in an increase in time charter
revenues of $20.4 million. The earnings on these time charters
are based on the vessels’ actual earnings by the
charterer.
|
·
|
During
the year, seven vessels changed employment from spot voyage to time
charter resulting in an increase in time charter revenues of $25.2
million.
|
(in
$ per day)
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||||||
VLCC
|
45,700 | 56,800 | 57,400 | 78,000 | 42,300 | |||||||||||||||
Suezmax
|
33,000 | 37,800 | 40,300 | 57,900 | 33,900 | |||||||||||||||
Suezmax
OBO
|
39,700 | 31,700 | 34,900 | 27,900 | 31,900 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Gain
on sale of assets
|
118,168 | 95,655 | 22,513 | 24 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Suezmax
OBO
|
24,064 | 32,111 | (8,047 | ) | (25 | ) | ||||||||||
Suezmax
|
52,642 | 63,068 | (10,426 | ) | (17 | ) | ||||||||||
VLCC
|
119,552 | 97,274 | 22,278 | 23 | ||||||||||||
Aframax
|
- | 2,182 | (2,182 | ) | (100 | ) | ||||||||||
196,258 | 194,635 | 1,623 | 1 |
·
|
In
2007, five Suezmaxes (two single hull and three double hull) were
drydocked compared with seven Suezmaxes (five single hulls and two double
hulls) in 2006 which resulted in a decrease of $7.5 million in drydock
related expenses.
|
·
|
We
sold a single hull Suezmax in March 2007 and delivered three single hull
Suezmaxes to shipyards for conversion to heavy lift vessels during 2007.
All of these vessels reported a full year’s operating expenses in 2006
which resulted in a decrease of $4.0 million in 2007. The single hull
Suezmax Front Sunda was delivered for conversion in 2006 resulting in a
decrease in operating costs of $2.1 million in
2007.
|
·
|
In
2007, nine VLCCs were drydocked (six double hulls and three single hulls)
compared to six in 2006 (three double hulls and three single hulls).
Operating costs for the vessels drydocked in 2007 increased by $22.7
million of which, $15.1 million relates to single hull vessels and $7.6
million relates to double hull vessels. This increase is partially offset
by a decrease in operating costs of $9.5 million for vessels drydocked in
2006.
|
·
|
In
early 2006, four vessels that were on bareboat charters were redelivered
and subsequently chartered out on time charters which contributed to an
increase in operating expenses of $3.3 million in
2007.
|
·
|
One
VLCC was delivered in the third quarter of 2006 resulting in an increase
in costs of $1.5 million in 2007.
|
·
|
We
sold three VLCCs during 2006 which has resulted in a decrease in operating
costs of $5.3 million. We sold another VLCC in June 2007 which has
resulted in only six months of operating costs being reported in 2007
compared to a full year in 2006 which contributed to a $1.3 million
decrease in operating costs
|
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Profit
share expense
|
37,279 | — | 37,279 | — |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Charterhire
expenses
|
56,868 | 24,923 | 31,945 | 128 | ||||||||||||
Number
of vessels chartered in and accounted for
as
operating leases:
|
2007 | 2006 |
|
|
||||||||||||
VLCC
|
3 | 1 | ||||||||||||||
Suezmax
|
6 | 1 | ||||||||||||||
9 | 2 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Administrative
expenses
|
36,410 | 32,143 | 4,267 | 13 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Interest
income
|
54,316 | 47,612 | 6,704 | 14 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Interest
expense
|
204,535 | 200,396 | 4,139 | 2 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Share
of results of associated companies
|
573 | 1,118 | (545 | ) | (49 | ) |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Foreign
currency exchange gains
|
3,312 | 1,056 | 2,256 | 214 | ||||||||||||
Mark
to market adjustments for financial derivatives
|
3,541 | (2,735 | ) | 6,276 | — | |||||||||||
Gains
and losses from freight forward agreements
|
(11 | ) | (8,162 | ) | (8,151 | ) | — | |||||||||
Dividends
received
|
533 | 13,317 | (12,784 | ) | — | |||||||||||
Gain
on sale of securities
|
122,120 | 9,782 | 112,338 | — |
Other
financial items, net
|
4,951 | (3,663 | ) | 8,614 | — |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Gain
on issuance of shares by associate
|
83,566 | — | 83,566 | — |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2007
|
2006
|
$ | % | ||||||||||||
Discontinued
operations
|
5,442 | 13,514 | (8,072) | (60) |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Voyage
charter revenues
|
1,114,531 | 1,152,245 | (37,714 | ) | (3 | ) | ||||||||||
Time
charter revenues
|
352,575 | 197,291 | 155,284 | 79 | ||||||||||||
Bareboat
charter revenues
|
85,969 | 142,562 | (56,593 | ) | (40 | ) | ||||||||||
Other
income
|
5,294 | 3,877 | 1,417 | 37 | ||||||||||||
Total
operating revenues
|
1,558,369 | 1,495,975 | 62,394 | 4 |
(in
thousands of $)
|
2006
|
2005
|
||||||
Pool
earnings allocated on gross basis
|
131,099 | 128,726 | ||||||
Pool
earnings allocated on net basis
|
— | 25,015 | ||||||
Total
pool earnings
|
131,099 | 153,741 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Suezmax
OBO
|
32,111 | 17,658 | 14,453 | 82 | ||||||||||||
Suezmax
|
63,068 | 53,935 | 9,133 | 17 | ||||||||||||
VLCC
|
97,274 | 75,931 | 21,343 | 28 | ||||||||||||
Aframax
|
2,182 | — | 2,182 | — | ||||||||||||
194,635 | 147,524 | 47,111 | 32 |
·
|
An
increase in drydockings during the year from 10 vessels in 2005 to 19
vessels in 2006. This resulted in an operating expense increase
of $27.8 million.
|
·
|
Costs
associated with the newly acquired Aframax vessel Front Puffin were $2.1
million before we started the conversion of this vessel to an FPSO
vessel.
|
·
|
Increased
commercial management fees of $3.4 million in relation to certain charters
beginning in 2006.
|
·
|
General
increase of $15.9 million due to vessels acquired and delivered from
bareboat during 2006.
|
·
|
Vessel
sales did not result in a significant decline in ship operating expenses
due to vessels sold during the year being primarily bareboat
vessels.
|
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Charterhire
expenses
|
24,923 | 11,711 | 13,212 | 113 | ||||||||||||
Number
of vessels chartered in and accounted for
as
operating leases:
|
2006 | 2005 |
|
|
||||||||||||
VLCC
|
1 | — | ||||||||||||||
Suezmax
|
1 | 1 | ||||||||||||||
2 | 1 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Administrative
expenses
|
32,143 | 21,049 | 11,094 | 53 |
·
|
$6.0
million due to increased salary costs as the result of an increase in
total employees and performance related
bonuses,
|
·
|
$3.4
million due to an increase in professional fees in relation to corporate
transactions and Sarbanes-Oxley section 404
compliance,
|
·
|
$0.3
million due to increased rent costs,
and
|
·
|
$0.7
million due to increased travel
costs.
|
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Interest
income
|
47,612 | 40,840 | 6,772 | 17 |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Interest
expense
|
200,396 | 205,937 | (5,541) | (3) |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Share
of results of associated companies
|
1,118 | 3,379 | (2,261) | (67) |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Foreign
currency exchange gains
|
1,056 | 18,829 | (17,773) | (94) |
Year
ended December 31,
|
Change
|
|||||||||||||||
(in
thousands of $)
|
2006
|
2005
|
$ | % | ||||||||||||
Mark
to market adjustments for financial derivatives
|
(2,735 | ) | 16,068 | (18,803 | ) | (117 | ) | |||||||||
Gains
and losses from freight forward agreements
|
(8,162 | ) | (1,569 | ) | (6,593 | ) | (420 | ) | ||||||||
Dividends
received
|
13,317 | 1,540 | 11,777 | 765 | ||||||||||||
Gain
on sale of securities
|
9,782 | 28,035 | (18,253 | ) | (65 | ) | ||||||||||
Other
financial items, net
|
(3,663 | ) | 1,756 | (5,419 | ) | (309 | ) |
·
|
recognise
100% of the fair values of acquired assets, including goodwill, and
assumed liabilities even if the acquirer has not acquired 100% of the
target entity
|
·
|
apply
fair value to contingent consideration arrangements at the acquisition
date
|
·
|
expense
transaction costs as incurred rather than including as part of the fair
value of an acquirer’s interest
|
·
|
fair
value certain pre-acquisition contingencies such as environmental or legal
issues
|
·
|
limit
the accrual of the costs for a restructuring plan in purchase
accounting
|
·
|
non
controlling interests are reported as an element of consolidated equity,
thereby removing the current practice of classifying minority interest
within the mezzanine section of the balance
sheet
|
·
|
reported
net income will consist of the total income of all consolidated
subsidiaries, with separate disclosure on the face of the income statement
of the split of that income between the controlling and non controlling
interests
|
·
|
movements
in the non controlling ownership interest amount will be accounted for as
equity transactions. If the controlling interest loses control and
deconsolidates a subsidiary, full gain or loss on the transition will be
recognised
|
·
|
non
controlling interests are required to be reclassified from the mezzanine
section to equity in the consolidated balance
sheet
|
·
|
consolidated
net income must be recast to include net income attributable to both
controlling and non controlling
interests.
|
Payment
due by period
|
||||||||||||||||||||
(In
thousands of $)
|
Less
than
1
year
|
1
– 3 years
|
3
– 5 years
|
After
5 years
|
Total
|
|||||||||||||||
Serial
notes (6.5% to 6.68%)
|
10,800 | 6,300 | - | - | 17,100 | |||||||||||||||
Term
notes (7.84% to 8.04%)
|
5,765 | 18,715 | 37,905 | 302,475 | 364,860 | |||||||||||||||
Term
notes (8.52%)
|
- | 1,174 | 1,640 | 8,514 | 11,328 | |||||||||||||||
Other
long-term debt
|
80,246 | - | - | - | 80,246 | |||||||||||||||
Operating
lease obligations
|
38,857 | 69,853 | 36,586 | 5,928 | 151,224 | |||||||||||||||
Capital
lease obligations
|
345,231 | 903,456 | 584,514 | 1,726,150 | 3,559,351 | |||||||||||||||
Heavylift
commitments
|
49,538 | - | - | - | 49,538 | |||||||||||||||
Newbuilding
commitments
|
243,390 | 636,798 | - | - | 880,188 | |||||||||||||||
Total
|
773,827 | 1,636,296 | 660,645 | 2,043,067 | 5,113,835 | |||||||||||||||
Name
|
Age
|
Position
|
John
Fredriksen
|
63
|
Chairman,
Chief Executive Officer, President
and Director
|
Katherine
Fredriksen
|
24
|
Director
|
Kate
Blankenship
|
43
|
Director
and Audit Committee Chairman
|
Frixos
Savvides
|
56
|
Director
and Audit Committee member
|
Bj
ø
rn
Sjaastad
|
50
|
Chief
Executive Officer of Frontline Management AS
|
Inger
M. Klemp
|
45
|
Chief
Financial Officer of Frontline Management
AS
|
Director
or Officer
|
Ordinary
Shares of $2.50 each |
%
of Ordinary
Shares
Outstanding
|
Options
for Ordinary Shares of $2.50 each
|
|||||||||
John
Fredriksen*
|
26,079,053 | 34.85% | 100,000 | |||||||||
Katherine
Fredriksen
|
- | ** | 30,000 | |||||||||
Kate
Blankenship
|
2,000 | ** | 30,000 | |||||||||
Frixos
Savvides
|
- | ** | 30,000 | |||||||||
Inger
M. Klemp
|
16,000 | ** | 50,000 | |||||||||
Bjorn
Sjaastad***
|
43,333 | ** | 141,667 |
* | Includes Ordinary Shares held by Hemen Holding Ltd. and other companies indirectly controlled by Mr. John Fredriksen. |
** | Less than one per cent |
*** | The number of Ordinary Shares includes 33,333 options to acquire Ordinary Shares that have vested. |
·
|
All
options, with the exception of 100,000 held by Bjorn Sjaastad, vest over a
three year period beginning in February 2009 and expire in February 2013.
The exercise price of these options is NOK 243.00, which is reduced by the
amount of dividends paid after the date of
grant.
|
·
|
100,000
of the options held by Bjorn Sjaastad began to vest in November 2007 and
expire in November 2011. 33,333 have vested at February 29, 2008. These
100,000 options had an exercise price of NOK 238.50 at the date of grant.
This exercise price is reduced by the amount of dividends paid after the
date of grant. The exercise price at December 31, 2007 of the options
which have vested is NOK162.36.
|
Ordinary Shares
|
||||||
Owner
|
Amount
|
|
% | |||
Hemen
Holding Ltd. and associated companies
(1)
|
26,079,053
|
34.85
|
%
|
Barclays
Global Investors, NA.
|
5,768,112
|
7.71
|
%
|
(1)
|
Hemen
Holding Ltd is a Cyprus holding company indirectly controlled by Mr. John
Fredriksen, who is our Chairman and Chief Executive
Officer.
|
(in
thousands of $)
|
2007
|
|||
Charterhire
paid (principal and interest)
|
273,239 | |||
Payments
received for termination of leases
|
29,343 | |||
Profit
share expense
|
37,279 | |||
Remaining
lease obligation
|
1,767,758 |
Net
amounts earned from related parties
|
Year
ended December 31,
|
|||||||||||
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Seatankers
Management Co. Ltd
|
582 | 432 | 265 | |||||||||
Golar
LNG Limited
|
284 | 180 | 255 | |||||||||
Ship
Finance International Limited
|
1,525 | - | - | |||||||||
Norse
Energy Group ASA (formerly Northern Oil ASA)
|
- | - | 6 | |||||||||
Golden
Ocean Group Limited
|
2,099 | 597 | 362 | |||||||||
Individual
related to John Fredriksen
|
- | 12 | - | |||||||||
Aktiv
Kapital First Investment Ltd
|
- | - | 10 | |||||||||
Greenwich
Holdings Ltd
|
69 | - | - | |||||||||
Bryggegata
AS
|
(1,430 | ) | (1,021 | ) | (692 | ) | ||||||
Seadrill
Limited
|
(52 | ) | 545 | (24 | ) | |||||||
CalPetro
Tankers (Bahamas I) Limited
|
40 | 40 | 38 | |||||||||
CalPetro
Tankers (Bahamas II) Limited
|
40 | 40 | 38 | |||||||||
CalPetro
Tankers (Bahamas III) Limited
|
- | - | 38 | |||||||||
CalPetro
Tankers (IOM) Limited
|
40 | 40 | 38 |
Receivables
(payables) with related parties
|
As
of December 31,
|
|||||||
(in
thousands of $)
|
2007
|
2006
|
||||||
Ship
Finance International Limited
|
(36,718 | ) | - | |||||
Seatankers Management
Co. Ltd
|
(900 | ) | 275 | |||||
Golar
LNG Limited
|
93 | (553 | ) | |||||
Northern
Offshore Ltd
|
13 | 49 | ||||||
Golden
Ocean Group Limited
|
1,160 | 942 | ||||||
Seadrill
Limited
|
73 | 30 | ||||||
Greenwich
Holdings
|
51 | - | ||||||
CalPetro
Tankers (Bahamas I) Limited
|
13 | 10 | ||||||
CalPetro
Tankers (Bahamas II) Limited
|
13 | 10 | ||||||
CalPetro
Tankers (IOM) Limited
|
13 | 10 |
Payment
Date
|
Amount
per Share
|
|||
2005
|
||||
March
18, 2005
|
$ |
3.50
|
||
June
24, 2005
|
$ |
3.10
|
||
September
20, 2005
|
$ |
2.00
|
||
December
13, 2005
|
$ |
1.50
|
||
2006
|
||||
March
20, 2006
|
$ |
1.50
|
||
June
26, 2006
|
$ |
1.50
|
||
September
18, 2006
|
$ |
1.50
|
||
December
21, 2006
|
$ |
2.50
|
||
2007
|
||||
March
22, 2007
|
$ |
2.05
|
||
June
22, 2007
|
$ |
1.50
|
||
October
24, 2007
|
$ |
1.50
|
||
October
24, 2007
|
$ |
1.75
|
||
December
12 2007
|
$ |
1.50
|
NYSE
|
OSE
|
|||||||||||
High
|
Low
|
High
|
Low
|
|||||||||
Fiscal
year ended December 31,
|
||||||||||||
2007
|
$ | 53.09 | $ | 29.35 |
NOK306.00
|
NOK183.75
|
||||||
2006
|
$ | 44.65 | $ | 28.80 |
NOK280.00
|
NOK184.00
|
||||||
2005
|
$ | 57.97 | $ | 35.89 |
NOK355.00
|
NOK230.00
|
||||||
2004
|
$ | 62.33 | $ | 24.36 |
NOK367.81
|
NOK158.06
|
||||||
2003
|
$ | 27.69 | $ | 8.93 |
NOK185.00
|
NOK61.00
|
NYSE
|
OSE
|
|||||||||||
High
|
Low
|
High
|
Low
|
|||||||||
Fiscal
year ended December 31,2007
|
||||||||||||
First
quarter
|
$ | 36.55 | $ | 29.35 |
NOK224.75
|
NOK183.75
|
||||||
Second
quarter
|
$ | 47.94 | $ | 34.26 |
NOK286.00
|
NOK205.75
|
||||||
Third
quarter
|
$ | 53.09 | $ | 38.25 |
NOK306.00
|
NOK232.00
|
||||||
Fourth
quarter
|
$ | 51.06 | $ | 37.49 |
NOK278.00
|
NOK204.00
|
||||||
Fiscal
year ended December 31, 2006
|
||||||||||||
First
quarter
|
$ | 41.29 | $ | 32.70 |
NOK270.50
|
NOK218.00
|
||||||
Second
quarter
|
$ | 38.25 | $ | 28.80 |
NOK237.50
|
NOK184.00
|
||||||
Third
quarter
|
$ | 44.65 | $ | 36.32 |
NOK280.00
|
NOK228.50
|
||||||
Fourth
quarter
|
$ | 39.76 | $ | 31.63 |
NOK254.50
|
NOK196.75
|
NYSE
|
OSE
|
|||||||||||
High
|
Low
|
High
|
Low
|
|||||||||
April 2008 | $ | 56.70 |
$
|
46.34
|
NOK287.50
|
NOK231.50
|
||||||
March
2008
|
$ | 47.05 | $ | 41.15 |
NOK239.75
|
NOK214.00
|
||||||
February
2008
|
$ | 49.33 | $ | 40.00 |
NOK263.50
|
NOK218.50
|
||||||
January
2008
|
$ | 49.66 | $ | 34.00 |
NOK268.00
|
NOK180.00
|
||||||
December
2007
|
$ | 49.00 | $ | 42.67 |
NOK272.00
|
NOK232.00
|
||||||
November
2007
|
$ | 48.96 | $ | 37.49 |
NOK268.00
|
NOK204.00
|
ITEM
10.
|
ADDITIONAL
INFORMATION
|
Year
|
VLCC
|
Suezmax
|
||||||
2007
to 2010
|
$ | 25,175 | $ | 20,700 | ||||
2011
and beyond
|
$ | 24,175 | $ | 19,700 |
Vessel
|
2007
to 2010
|
2011
to 2018
|
2019
and beyond
|
|||||||||
Front
Champion
|
$ | 31,140 | $ | 30,640 | $ | 28,464 | ||||||
Front
Century
|
$ | 31,301 | $ | 30,801 | $ | 28,625 | ||||||
Golden
Victory
|
$ | 33,793 | $ | 33,793 | $ | 33,793 | ||||||
Front
Energy
|
$ | 30,014 | $ | 30,014 | $ | 30,014 | ||||||
Front
Force
|
$ | 29,853 | $ | 29,853 | $ | 29,853 |
·
|
amend
its organizational documents in a manner that would adversely affect Ship
Finance;
|
·
|
violate
its organizational documents;
|
·
|
engage
in businesses other than the operation and chartering of Ship Finance
vessels; (not
|
|
applicable
for Frontline Shipping II)
|
·
|
incur
debt, other than in the ordinary course of
business;
|
·
|
sell
all or substantially all of its assets or the assets of any of its
subsidiaries or enter into any merger, consolidation or business
combination transaction;
|
·
|
enter
into transactions with affiliates, other than on an arm’s-length
basis;
|
·
|
permit
the incurrence of any liens on any of its assets, other than liens
incurred in the ordinary course of
business;
|
·
|
issue
any capital stock to any person or entity other than Frontline;
and
|
·
|
make
any investments in, provide loans or advances to, or grant guarantees for
the benefit of any person or entity other than in the ordinary course of
business.
|
·
|
the
relevant Charterer materially breaches any of its obligations under any of
the charters, including the failure to make charterhire payments when due,
subject to Frontline Shipping’s deferral rights explained
above,
|
·
|
the
relevant Charterer or Frontline materially breaches any of its obligations
under the charter ancillary agreement or the Frontline performance
guarantee,
|
·
|
Frontline
Management materially breaches any of its obligations under any of the
management agreements or
|
·
|
Frontline
Shipping and Frontline Shipping II fails at any time to hold at least
$55 million or $7.5 million in cash and cash equivalents,
respectively.
|
·
|
terminate
any or all of the charters with the relevant
Charterer,
|
·
|
foreclose
on any or all of our security interests described above with respect to
the relevant charterer and/or
|
·
|
pursue
any other available rights or
remedies.
|
|
(i)
|
It
is organised in a qualified foreign country which is one that grants an
equivalent exemption from tax to corporations organised in the United
States in respect of the shipping income for which exemption is being
claimed under Section 883 (a “qualified foreign country”) and which
the Company refers to as the “country of organisation requirement”;
and
|
|
(ii)
|
It
can satisfy any one of the following two stock ownership requirements
for more than half the days during the taxable
year:
|
·
|
the
Company’s stock is “primarily and regularly” traded on an established
securities market located in the United States or a qualified foreign
country, which the Company refers to as the “Publicly-Traded Test”;
or
|
·
|
more
than 50% of the Company’s stock, in terms of value, is beneficially owned
by any combination of one or more individuals who are residents of a
qualified foreign country or foreign corporations that satisfy the country
of organisation requirement and the Publicly-Traded Test, which the
Company refers to as the “50% Ownership
Test.”
|
·
|
at
least 75% of our gross income for such taxable year consists of passive
income (e.g., dividends, interest, capital gains and rents derived other
than in the active conduct of a rental business),
or
|
·
|
at
least 50% of the average value of the assets held by the corporation
during such taxable year produce, or are held for the production of,
passive income.
|
·
|
the
excess distribution or gain would be allocated ratably over the
Non-Electing Holders’ aggregate holding period for the common
stock;
|
·
|
the
amount allocated to the current taxable year and any taxable years before
the Company became a PFIC would be taxed as ordinary income;
and
|
·
|
the
amount allocated to each of the other taxable years would be subject to
tax at the highest rate of tax in effect for the applicable class of
taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed with respect to the resulting tax attributable to
each such other taxable year.
|
·
|
fail
to provide an accurate taxpayer identification
number;
|
·
|
are
notified by the Internal Revenue Service that you have failed to report
all interest or dividends required to be shown on your federal income tax
returns; or
|
·
|
in
certain circumstances, fail to comply with applicable certification
requirements.
|
·
|
Pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of Company’s management and
directors; and
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Audit
Fees (a)
|
1,166 | 2,014 | ||||||
Audit-Related
Fees (b)
|
— | — | ||||||
Tax
Fees (c)
|
— | — | ||||||
All
Other Fees (d)
|
— | — | ||||||
Total
|
1,166 | 2,014 |
(a)
|
Audit
Fees
|
(b)
|
Audit–Related
Fees
|
(c)
|
Tax
Fees
|
(d)
|
All
Other Fees
|
Consolidated
Financial Statements of Frontline Ltd
|
|
Index
to Consolidated Financial Statements of Frontline Ltd
|
F-1
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Report
of Independent Registered Public Accounting Firm
|
F-4
|
Consolidated
Statements of Operations for the years ended December 31, 2007, 2006 and
2005
|
F-5
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
F-6
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006 and
2005
|
F-7
|
Consolidated
Statements of Changes in Stockholders’ Equity for the years ended December
31, 2007, 2006 and 2005
|
F-8
|
Notes
to Consolidated Financial Statements
|
F-9
|
Number
|
Description
of Exhibit
|
1.1*
|
Memorandum
of Association of the Company, incorporated by reference to Exhibit 3.1 of
the Company’s Registration Statement on Form F-1, Registration No.
33-70158 filed on October 12, 1993 (the “Original Registration
Statement”).
|
1.2
|
Amended
and Restated Bye-Laws of the Company as adopted by shareholders on
September 28, 2007.
|
2.1*
|
Form
of Ordinary Share Certificate, incorporated by reference to Exhibit 4.1 of
the Original Registration Statement.
|
2.2*
|
Form
of Deposit Agreement dated as of November 24, 1993, among Frontline Ltd
(F/K/A London & Overseas Freighters Limited), The Bank of New York as
Depositary, and all Holders from time to time of American Depositary
Receipts issued there under, including form of ADR, incorporated by
reference to Exhibit 4.2 of the Original Registration
Statement.
|
2.3*
|
Form
of Deposit Agreement dated as of November 24, 1993, as amended and
restated as of May 29, 2001, among Frontline Ltd (F/K/A London &
Overseas Freighters Limited), The Bank of New York as Depositary, and all
Holders from time to time of American Depositary Receipts issued there
under, including form of ADR, incorporated by reference to Exhibit 2
of the Company’s Annual Report on Form 20-F, filed on June 13,
2001 for the fiscal year ended December 31, 2000.
|
2.4*
|
Amendment
No. 1 to the Rights Agreement incorporated by reference to Exhibit 4.3 of
the Amalgamation Registration Statement.
|
2.5*
|
The
Subregistrar Agreement related to the registration of certain securities
issued by Frontline Ltd in the Norwegian Registry of Securities between
Frontline Ltd and Christiania Bank og Kreditkasse ASA together with the
Form of Warrant Certificate and Conditions attaching thereto, incorporated
by reference to Exhibit 1.1 of the Company’s Annual Report on Form 20-F
for the fiscal year ended December 31, 1998.
|
4.4*
|
Master
Agreement, dated September 22, 1999, among Frontline AB and Frontline Ltd
(collectively “FL”), Acol Tankers Ltd. (“Tankers”), ICB Shipping AB
(“ICB”), and Ola Lorentzon (the “Agent”), incorporated by reference to
Exhibit 3.1 of the Company’s Annual Report on Form 20-F for the fiscal
year ended December 31, 1999.
|
4.6
|
Charter
Ancillary Agreement between Frontline Ltd and Ship Finance International
Limited dated January 1, 2004.
|
4.7*
|
Addendum
to Charter Ancillary Agreement between Frontline Ltd and Ship Finance
International Limited dated June 15, 2004 incorporated by reference to
Exhibit 10.3 of the Company’s Annual Report on From 20-F for the fiscal
year ended December 31, 2004.
|
4.8*
|
Form
of Performance Guarantee issued by the Company incorporated by reference
to Exhibit 10.4 of the Company’s Annual Report on From 20-F for the fiscal
year ended December 31, 2004.
|
4.9*
|
Form
of Time Charter incorporated by reference to Exhibit 10.5 of the Company’s
Annual Report on Form 20-F for the fiscal year ended December 31,
2004.
|
4.10*
|
Form
of Vessel Management Agreements incorporated by reference to Exhibit 10.6
of the Company’s Annual Report on Form 20-F for the fiscal year ended
December 31, 2004.
|
4.11*
|
Administrative
Services Agreement incorporated by reference to Exhibit 10.7 of the
Company’s Annual Report on Form 20-F for the fiscal year ended December
31, 2004.
|
4.12*
|
Contribution
Agreement between Frontline Ltd and Golden Ocean Group Limited dated
November 29, 2004 incorporated by reference to Exhibit 10.8 of the
Company’s Annual Report on From 20-F for the fiscal year ended December
31, 2004.
|
4.13
|
Second
Supplemental Purchase Agreement between Sealift Ltd., Southwest Tankers
Inc., Front Target Inc., Front Traveller Inc., West Tankers Inc., Granite
Shipping Ltd., Quadrant Marine Inc. and Frontline Ltd. dated April 27,
2007.
|
4.14
|
Shareholder’s
Agreement Relating to Sealift Ltd dated April 27, 2007.
|
4.15
|
Merger
Agreement between Dockwise Limited and Sealift Ltd dated April 27,
2007.
|
4.16
|
Frontline
Ltd Share Option Scheme dated November 16, 2006.
|
4.17
|
Management
Agreement between Ship Finance International Limited and its subsidiaries
and Frontline Management (Bermuda) Ltd, dated November 29, 2007. (Replaces
Administrative Services Agreement dated December 31,
2004).
|
4.18
|
Addendum
No. 3 to Charter Ancillary Agreement between Frontline Ltd, Ship Finance
International Limited and Frontline Shipping Ltd, dated August 21,
2007.
|
4.19
|
Addendum
No. 1 to Charter Ancillary Agreement between Frontline Ltd, Ship Finance
International Limited and Frontline Shipping II Ltd, dated August 21,
2007.
|
8.1
|
Subsidiaries
of the Company.
|
12.1
|
Certification
of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended.
|
12.2
|
Certification
of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended.
|
13.1
|
Certification
of the Principal Executive Officer pursuant to 18 USC Section 1350, as
adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
13.2
|
Certification
of the Principal Financial Officer pursuant to 18 USC Section 1350, as
adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
*
Incorporated herein by reference.
|
Frontline
Ltd
|
|||||
(Registrant)
|
|||||
Date: May 2, 2008 |
By:
|
/s/ Inger
M. Klemp
|
|||
Name: | Inger M. Klemp | ||||
Title: | Chief Financial Officer |
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Report
of Independent Registered Public Accounting Firm
|
F-4
|
Consolidated
Statements of Operations for the years ended December 31, 2007, 2006 and
2005
|
F-5
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
F-6
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006 and
2005
|
F-7
|
Consolidated
Statements of Changes in Stockholders’ Equity for the years ended December
31, 2007, 2006 and 2005
|
F-8
|
Notes
to Consolidated Financial Statements
|
F-9
|
2007
|
2006
|
2005
|
||||||||||
Operating
revenues
|
||||||||||||
Time
charter revenues
|
432,813 | 352,575 | 197,291 | |||||||||
Bareboat
charter revenues
|
57,052 | 85,969 | 142,562 | |||||||||
Voyage
charter revenues
|
801,546 | 1,114,531 | 1,152,245 | |||||||||
Other
income
|
8,516 | 5,294 | 3,877 | |||||||||
Total
operating revenues
|
1,299,927 | 1,558,369 | 1,495,975 | |||||||||
Gain
on sale of assets
|
118,168 | 95,655 | 76,081 | |||||||||
Operating
expenses
|
||||||||||||
Voyage
expenses and commission
|
352,451 | 399,046 | 336,963 | |||||||||
Ship
operating expenses
|
196,258 | 194,635 | 147,524 | |||||||||
Profit
share expense
|
37,279 | - | - | |||||||||
Charterhire
expenses
|
56,868 | 24,923 | 11,711 | |||||||||
Administrative
expenses
|
36,410 | 32,143 | 21,049 | |||||||||
Depreciation
|
219,638 | 199,876 | 196,672 | |||||||||
Total
operating expenses
|
898,904 | 850,623 | 713,919 | |||||||||
Net
operating income
|
519,191 | 803,401 | 858,137 | |||||||||
Other
income (expenses)
|
||||||||||||
Interest
income
|
54,316 | 47,612 | 40,840 | |||||||||
Interest
expense
|
(204,535 | ) | (200,396 | ) | (205,937 | ) | ||||||
Equity
earnings of unconsolidated subsidiaries and associated
companies
|
573 | 1,118 | 3,379 | |||||||||
Foreign
currency exchange gain
|
3,312 | 1,056 | 18,829 | |||||||||
Mark
to market of derivatives
|
3,530 | (10,897 | ) | 14,499 | ||||||||
Gain
on sale of securities
|
122,120 | 9,782 | 28,035 | |||||||||
Dividends
received
|
533 | 13,317 | 1,540 | |||||||||
Other
financial items, net
|
4,951 | (3,663 | ) | 1,756 | ||||||||
Net
other expenses
|
(15,200 | ) | (142,071 | ) | (97,059 | ) | ||||||
Net
income from continuing operations before income taxes and minority
interest
|
503,991 | 661,330 | 761,078 | |||||||||
Minority
interest
|
(22,162 | ) | (158,682 | ) | (169,459 | ) | ||||||
Income
tax (expense) benefit
|
(419 | ) | (162 | ) | 19 | |||||||
Gain
on issuance of shares by subsidiaries and associates
|
83,566 | - | 1,105 | |||||||||
Net
income from continuing operations
|
564,976 | 502,486 | 592,743 | |||||||||
Discontinued
operations
|
5,442 | 13,514 | 14,096 | |||||||||
Net
income
|
570,418 | 516,000 | 606,839 | |||||||||
Earnings
per share:
|
||||||||||||
Basic
earnings per share from continuing operations
|
$ | 7.55 | $ | 6.72 | $ | 7.92 | ||||||
Diluted
earnings per share from continuing operations
|
$ | 7.55 | $ | 6.72 | $ | 7.92 | ||||||
Basic
and diluted earnings per share from discontinued
operations
|
$ | 0.07 | $ | 0.18 | $ | 0.19 | ||||||
Basic
and diluted earnings per share
|
$ | 7.62 | $ | 6.90 | $ | 8.11 | ||||||
Weighted
average shares outstanding, basic
|
74,825 | 74,825 | 74,825 | |||||||||
Weighted
average shares outstanding, diluted
|
74,867 | 74,825 | 74,825 | |||||||||
Cash
dividends per share declared
|
$ | 8.30 | $ | 7.00 | $ | 10.10 |
2007
|
2006
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
168,432 | 197,181 | ||||||
Restricted
cash
|
651,377 | 677,533 | ||||||
Marketable
securities
|
15,684 | 1,469 | ||||||
Trade
accounts receivable, net
|
59,523 | 59,728 | ||||||
Related
party receivables
|
14,804 | 1,683 | ||||||
Other
receivables
|
28,564 | 37,335 | ||||||
Inventories
|
55,435 | 43,791 | ||||||
Voyages
in progress
|
60,479 | 43,412 | ||||||
Prepaid
expenses and accrued income
|
8,424 | 11,900 | ||||||
Net
investment in finance lease, current portion
|
- | 23,608 | ||||||
Derivative
instruments receivable amounts, short term
|
- | 2,931 | ||||||
Other
current assets
|
64 | 11,571 | ||||||
Total
current assets
|
1,062,786 | 1,112,142 | ||||||
Newbuildings
|
160,298 | 166,851 | ||||||
Vessels
and equipment, net
|
208,516 | 2,446,278 | ||||||
Vessels
and equipment under capital lease, net
|
2,324,789 | 626,374 | ||||||
Investment
in unconsolidated subsidiaries and associated companies
|
5,633 | 17,825 | ||||||
Net
investment in finance lease, long term portion
|
- | 175,141 | ||||||
Deferred
charges
|
49 | 16,937 | ||||||
Derivative
instruments receivable amounts, long term
|
- | 17,807 | ||||||
Other
long-term assets
|
20 | 10,582 | ||||||
Total
assets
|
3,762,091 | 4,589,937 | ||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities
|
||||||||
Short-term
debt and current portion of long-term debt
|
96,811 | 281,409 | ||||||
Current
portion of obligations under capital leases
|
179,604 | 28,857 | ||||||
Related
party payables
|
50,988 | 941 | ||||||
Trade
accounts payable
|
16,043 | 17,573 | ||||||
Accrued
expenses
|
101,128 | 90,316 | ||||||
Deferred
charter revenue
|
13,342 | 15,783 | ||||||
Other
current liabilities
|
132,310 | 9,037 | ||||||
Total
current liabilities
|
590,226 | 443,916 | ||||||
Long-term
liabilities
|
||||||||
Long-term
debt
|
376,723 | 2,181,885 | ||||||
Obligations
under capital leases
|
2,318,794 | 723,073 | ||||||
Deferred
gains on sales of vessels
|
19,810 | 21,732 | ||||||
Derivative
instruments liabilities, long term
|
- | 8,743 | ||||||
Other
long-term liabilities
|
10,569 | 906 | ||||||
Total
liabilities
|
3,316,122 | 3,380,255 | ||||||
Commitments
and contingencies
|
||||||||
Minority
interest
|
- | 541,122 | ||||||
Stockholders’
equity
|
||||||||
Share
capital (74,825,169 shares outstanding, par value $2.50)
|
187,063 | 187,063 | ||||||
Additional
paid in capital
|
14,242 | 494,067 | ||||||
Contributed
surplus
|
248,360 | (8,145 | ) | |||||
Accumulated
other comprehensive loss
|
(3,696 | ) | (4,425 | ) | ||||
Retained
earnings
|
- | - | ||||||
Total
stockholders’ equity
|
445,969 | 668,560 | ||||||
Total
liabilities and stockholders’ equity
|
3,762,091 | 4,589,937 |
2007
|
2006
|
2005
|
||||||||||
Net
income
|
570,418 | 516,000 | 606,839 | |||||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Depreciation
|
221,246 | 203,849 | 198,875 | |||||||||
Amortisation
of deferred charges
|
810 | 3,346 | 16,705 | |||||||||
Gain
from sale of assets (including marketable securities)
|
(323,860 | ) | (105,439 | ) | (109,657 | ) | ||||||
Equity
earnings of unconsolidated subsidiaries and associated
companies
|
(573 | ) | (1,118 | ) | (3,380 | ) | ||||||
Unrealised
foreign exchange loss (gain)
|
689 | 75 | (2,222 | ) | ||||||||
Adjustment
of derivatives to market value
|
(3,541 | ) | 9,348 | (12,335 | ) | |||||||
Minority
interest
|
22,162 | 158,682 | 169,459 | |||||||||
Other,
net
|
(12,324 | ) | (5,326 | ) | (3,030 | ) | ||||||
Changes
in operating assets and liabilities, net of effect of
acquisitions:
|
||||||||||||
Trade
accounts receivable
|
(1,208 | ) | 12,991 | 64,981 | ||||||||
Other
receivables
|
22,495 | (13,464 | ) | (6,493 | ) | |||||||
Inventories
|
(11,772 | ) | 1,193 | (12,967 | ) | |||||||
Voyages
in progress
|
(17,068 | ) | 51,067 | 54,421 | ||||||||
Prepaid
expenses and accrued income
|
3,341 | (4,231 | ) | 2,144 | ||||||||
Trade
accounts payable
|
47,830 | 8,191 | 1,114 | |||||||||
Accrued
expenses
|
17,241 | 4,777 | 7,126 | |||||||||
Deferred
charter revenue
|
2,441 | 8,179 | 2,689 | |||||||||
Other,
net
|
7,483 | (16,564 | ) | 5,781 | ||||||||
Net
cash provided by operating activities
|
545,810 | 831,556 | 980,050 | |||||||||
Investing
activities
|
||||||||||||
Maturity
(placement) of restricted cash
|
12,674 | 13,730 | (44,183 | ) | ||||||||
Additions
to newbuildings, vessels and equipment
|
(337,774 | ) | (569,819 | ) | (558,163 | ) | ||||||
Proceeds
from sale of vessels and equipment
|
503,407 | 275,190 | 250,339 | |||||||||
Insurance
proceeds from loss of vessels and equipment
|
- | 12,173 | - | |||||||||
Investments
in associated companies
|
(60,510 | ) | (3,431 | ) | (2,610 | ) | ||||||
Dividends
received from associated companies
|
255 | 1,318 | 20,911 | |||||||||
Purchase
of minority interest
|
- | (7,198 | ) | (33,083 | ) | |||||||
Proceeds
from sale of investments in associated companies
|
116,631 | - | - | |||||||||
Receipts
from finance leases and loans receivable
|
5,564 | 12,562 | 7,051 | |||||||||
Purchases
of other assets
|
(43,375 | ) | (71,067 | ) | (168,038 | ) | ||||||
Proceeds
from sale of other assets
|
162,392 | 154,409 | 152,752 | |||||||||
Proceeds
from issuance of shares in subsidiary
|
- | 7,800 | - | |||||||||
Proceeds
from sale of newbuilding contracts
|
- | 9,769 | 16,800 | |||||||||
Sale
of subsidiary, net of cash sold
|
38, 308 | - | - | |||||||||
Cash
effect of deconsolidation of subsidiary
|
(146,435 | ) | - | - | ||||||||
Net
cash provided by (used in) investing activities
|
251,137 | (164,564 | ) | (358,224 | ) | |||||||
Financing
activities
|
||||||||||||
Proceeds
from long-term debt
|
127,188 | 539,748 | 1,660,503 | |||||||||
Repayments
of long-term debt
|
(165,108 | ) | (420,925 | ) | (1,347,217 | ) | ||||||
Payment
of obligations under capital leases
|
(130,362 | ) | (24,706 | ) | (22,230 | ) | ||||||
Debt
fees paid
|
(1,406 | ) | (2,230 | ) | (7,405 | ) | ||||||
Cash
dividends paid including amounts paid to minority interest
|
(656,008 | ) | (654,480 | ) | (909,574 | ) | ||||||
Net
cash used in financing activities
|
(825,696 | ) | (562,593 | ) | (625,923 | ) | ||||||
Net
(decrease) increase in cash and cash
equivalents
|
(28,749 | ) | 104,399 | (4,097 | ) | |||||||
Cash
and cash equivalents at beginning of year
|
197,181 | 92,782 | 96,879 | |||||||||
Cash
and cash equivalents at end of year
|
168,432 | 197,181 | 92,782 | |||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Interest
paid, net of interest capitalized
|
206,495 | 207,610 | 225,053 | |||||||||
Income
taxes paid
|
215 | 62 | 46 |
2007
|
2006
|
2005
|
|||||||||||
NUMBER
OF SHARES OUTSTANDING
|
|||||||||||||
Balance
at beginning and end of year
|
74,825,169 | 74,825,169 | 74,825,169 | ||||||||||
SHARE
CAPITAL
|
|||||||||||||
Balance
at beginning and end of year
|
187,063 | 187,063 | 187,063 | ||||||||||
ADDITIONAL
PAID IN CAPITAL
|
|||||||||||||
Balance
at beginning of year
|
494,067 | 494,067 | 494,067 | ||||||||||
Shares
issued
|
- | - | - | ||||||||||
Shares
bought back and cancelled
|
- | - | - | ||||||||||
Stock
option expense
|
962 | - | - | ||||||||||
Transfer
to contributed surplus
|
(480,787 | ) | - | - | |||||||||
Balance
at end of year
|
14,242 | 494,067 | 494,067 | ||||||||||
CONTRIBUTED
SURPLUS
|
|||||||||||||
Balance
at beginning of year
|
(8,145 | ) | 40,720 | 74,060 | |||||||||
Contribution
from related party
|
- | - | 85,364 | ||||||||||
Cash
dividends
|
(212,896 | ) | (35,634 | ) | (203,643 | ) | |||||||
Minority
interest in deemed equity contributions and deemed
dividends
|
(11,386 | ) | (13,231 | ) | 84,939 | ||||||||
Transfer
from additional paid in capital
|
480,787 | - | - | ||||||||||
Balance
at end of year
|
248,360 | (8,145 | ) | 40,720 | |||||||||
ACCUMULATED
OTHER COMPREHENSIVE LOSS
|
|||||||||||||
Balance
at beginning of year
|
(4,425 | ) | (6,684 | ) | 5,414 | ||||||||
Other
comprehensive income (loss)
|
729 | 2,259 | (12,098 | ) | |||||||||
Balance
at end of year
|
(3,696 | ) | (4,425 | ) | (6,684 | ) | |||||||
RETAINED
EARNINGS
|
|||||||||||||
Balance
at beginning of year
|
- | - | 157,364 | ||||||||||
Net
income
|
570,418 | 516,000 | 606,839 | ||||||||||
Cash
dividends
|
(408,196 | ) | (488,158 | ) | (552,322 | ) | |||||||
Stock
dividends
|
(162,222 | ) | (27,842 | ) | (211,881 | ) | |||||||
Balance
at end of year
|
- | - | - | ||||||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
445,969 | 668,560 | 715,166 | ||||||||||
COMPREHENSIVE
INCOME
|
|||||||||||||
Net
income
|
570,418 | 516,000 | 606,839 | ||||||||||
Unrealised
(loss) gains from marketable securities
|
(595 | ) | 1,721 | (11,877 | ) | ||||||||
Foreign
currency translation
|
1,324 | 538 | (221 | ) | |||||||||
Other
comprehensive income
|
729 | 2,259 | (12,098 | ) | |||||||||
Comprehensive
income
|
571,147 | 518,259 | 594,741 |
1.
|
GENERAL
|
Frontline
Ltd. (the “Company” or “Frontline”) is a Bermuda based shipping company
engaged primarily in the ownership and operation of oil tankers, including
oil/bulk/ore (“OBO”) carriers. The Company operates tankers of two sizes:
very large crude carriers (“VLCCs”) which are between 200,000 and 320,000
deadweight tons (“dwt”), and Suezmaxes, which are vessels between 120,000
and 170,000 dwt. The Company operates primarily through subsidiaries
and partnerships located in Bermuda, Isle of Man, Liberia, Norway,
Singapore, Cayman Islands, the United Kingdom and the Bahamas. The Company
is also involved in the charter, purchase and sale of
vessels.
|
|
The
Company’s ordinary shares are listed on the New York Stock Exchange, the
Oslo Stock Exchange and the London Stock Exchange.
|
|
In
October 2003, the Company established Ship Finance International Limited
(“Ship Finance”) in Bermuda. Through transactions executed in
January 2004, the Company transferred to Ship Finance ownership of 46
vessel-owning entities each owning one vessel and its corresponding
financing, and one entity owning an option to acquire a VLCC. The Company
then leased these vessels back on long-term charters.
|
|
Since
May 2004, the Company has distributed its holding of Ship Finance to its
shareholders and in March 2007, the Company distributed the majority of
its remaining 11.1% shareholding to its shareholders. The Company still
holds 73,383 shares in Ship Finance which represents 0.01% of Ship
Finance’s total shares. Prior to the final distribution of shares in March
2007, the Company consolidated Ship Finance under the provisions of FASB
Interpretation No. 46 (revised December 2003)
Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51
(“FIN 46(R)”).
Subsequent to the distribution in March 2007, the Company no longer
consolidates Ship Finance. Refer to Note 4 for further
information.
|
|
In
January 2007, the Company’s wholly owned subsidiary Sealift Ltd
(“Sealift”) completed a private placement raising $180.0 million in
equity. The Company participated by investing $60.0 million and as a
result of the private placement, its shareholding was reduced to 33.3%.
The Company consequently began accounting for its investment under the
equity method. Sealift used the proceeds from the private placement along
with the proceeds from a $110.0 million bond facility, $120.0 million of a
$240.0 million term loan facility and short term sellers’ credit of $80
million from the Company, to acquire from the Company four single hull
vessels to be converted to heavy lift vessels and two Suezmax vessels. The
private placement discussed above was conditional on the acquisition of
the assets described above being effective and the sellers credit is
payable to the Company upon the completion and delivery of each of the
last two converted vessels with $40 million allocated to each vessel. In
May 2007, Sealift acquired Dockwise Ltd (“Dockwise”) and immediately
completed another private placement for 39.8 million shares, of which the
Company subscribed for five million shares. The Company’s investment was
reduced to 17.1% as a result of these transactions. In July 2007,
Sealift changed its name to Dockwise. In October 2007, the Company sold
its entire shareholding in Dockwise. Refer to Note 27 for further
information.
|
|
In
February 2007, the Company’s wholly owned subsidiary Sea Production Ltd
(“Sea Production”) completed a private placement raising $180.0 million in
equity and simultaneously acquired the Company’s floating production
activities. The Company subscribed for 28.3% of the shares and
consequently accounted for its investment under the equity
method. In June 2007, the Company disposed of its entire
shareholding in Sea Production. Refer to Note 27 for further
information.
|
|
2.
|
ACCOUNTING
POLICIES
|
Basis
of accounting
|
|
The
consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The
consolidated financial statements include the assets and liabilities of
the Company and its subsidiaries and certain variable interest entities in
which the Company is deemed to be the primary beneficiary. All
intercompany balances and transactions have been eliminated on
consolidation.
|
|
A
variable interest entity (“VIE”) is a legal entity where either (a) equity
interest holders as a group lack the characteristics of a controlling
financial interest, including: decision making ability and an interest in
the entity's residual risks and rewards or (b) the equity holders have not
provided sufficient equity investment to permit the entity to finance its
activities without additional subordinated financial support,
or where (c) the voting rights of some investors are not
proportional to their obligations to absorb the expected losses of the
entity, their rights to receive the expected residual returns of the
entity, or both and substantially all of the entity's activities either
involve or are conducted on behalf of an investor that has
disproportionately few voting rights. FIN 46(R) requires a variable
interest entity to be consolidated if any of its interest holders are
entitled to a majority of the entity's residual return or are exposed to a
majority of its expected losses.
|
|
Investments
in companies over which the Company exercises significant influence but
does not consolidate are accounted for using the equity method. The
Company records its investments in equity-method investees in the
consolidated balance sheets as “Investment in unconsolidated subsidiaries
and associated companies” and its share of the investees’ earnings or
losses in the consolidated statements of operations as “Share in results
of unconsolidated subsidiaries and associated companies”. The excess, if
any, of purchase price over book value of the Company’s investments in
equity method investees is included in the accompanying consolidated
balance sheets in “Investment in unconsolidated subsidiaries and
associated companies”.
|
|
Investments
in which the Company has a majority shareholding but which it does not
control, due to the participating rights of minority shareholders, are
accounted for using the equity method.
|
|
The
preparation of financial statements in accordance with generally accepted
accounting principles requires that management make estimates and
assumptions affecting the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
|
|
Cash
and cash equivalents
|
|
For
the purposes of the consolidated statements of cash flows, all demand and
time deposits and highly liquid, low risk investments with original
maturities of three months or less are considered equivalent to
cash.
|
|
Restricted
cash
|
|
Restricted
cash consists of bank deposits which may only be used to settle certain
pre-arranged loan or lease payments or minimum deposits which must be
maintained in accordance with contractual arrangements.
|
|
Marketable
securities
|
|
Marketable
equity securities held by the Company are considered to be
available-for-sale securities and as such are carried at fair value with
resulting unrealised gains and losses, net of deferred taxes if any,
recorded as a separate component of other comprehensive income in
stockholders’ equity.
|
|
Inventories
|
|
Inventories
comprise principally of fuel and lubricating oils and are stated at the
lower of cost and market value. Cost is determined on a first-in,
first-out basis.
|
Investment
in finance leases
|
|
Certain
vessels have been chartered under agreements that are classified as direct
financing leases. The minimum payments under the charter agreements are
recorded as the gross investment in the finance lease. The
difference between the gross investment in the finance lease and the cost
of the vessel is recorded as unearned income. Throughout the
term of the charter agreement, the Company records as revenue interest
income and unearned income. This unearned income is amortised to income
over the life of the charter agreement to produce a constant periodic rate
of return on the net investment in the finance lease.
|
|
Vessels
and equipment
|
|
The
cost of the vessels less estimated residual value is depreciated on a
straight-line basis over the vessels’ estimated remaining economic useful
lives. The estimated economic useful life of the Company’s double hull
vessels is 25 years and for single hull vessels is either 25 years or the
vessel’s anniversary date in 2015, whichever comes first. Other equipment
is depreciated over its estimated remaining useful life, which
approximates five years.
|
|
Vessels
and equipment under capital lease
|
|
The
Company charters in certain vessels under agreements that are classified
as capital leases. Depreciation of vessels under capital lease is included
within depreciation and amortisation expense in the consolidated statement
of operations. Vessels under capital lease are depreciated on a
straight-line basis over the vessels’ remaining economic useful lives or
on a straight-line basis over the term of the lease. The method applied is
determined by the criteria by which the lease has been assessed to be a
capital lease.
|
|
Newbuildings
|
|
The
carrying value of the vessels under construction (“Newbuildings”)
represents the accumulated costs to the balance sheet date which the
Company has had to pay by way of purchase instalments and other capital
expenditures together with capitalised interest and associated finance
costs. No charge for depreciation is made until the vessel is put into
operation.
|
|
Vessel
purchase options
|
|
Vessel
purchase options are capitalised at the time option contracts are acquired
or entered into. The Company reviews expected future cash flows, which
would result from the exercise of each option contract on a contract by
contract basis to determine whether the carrying value of the option is
recoverable. If the expected future cash flows are less than the carrying
value of the option plus further costs to delivery, a provision is made to
write down the carrying value of the option to the recoverable amount. The
carrying value of each option payment is written off as and when the
Company adopts a formal plan not to exercise the option. Purchase price
payments are capitalised and the total of the option payment, if any, and
purchase price payment is transferred to cost of vessels, upon exercise of
the option and delivery of the vessel to the Company.
|
|
Impairment
of long-lived assets
|
|
The
carrying value of long-lived assets that are held and used by the Company
are reviewed whenever events or changes in circumstances indicate that the
carrying amount of an asset may no longer be appropriate. The Company
assesses recoverability of the carrying value of the asset by estimating
the future net cash flows expected to result from the asset, including
eventual disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset’s carrying value and fair value. In
addition, long-lived assets to be disposed of are reported at the lower of
carrying amount and fair value less estimated costs to
sell.
|
|
Deferred
charges
|
|
Loan
costs, including debt arrangement fees, are capitalised and amortised on a
straight-line basis over the term of the relevant loan. The straight line
basis of amortisation approximates the effective interest method in the
Company’s consolidated statement of operations. Amortisation of loan costs
is included in interest expense. If a loan is repaid early, any
unamortised portion of the related deferred charges is charged against
income in the period in which the loan is
repaid.
|
Discount
on loans
|
|
Discount
on issue of certain of the Company’s long-term debt is being amortised
over the respective periods to maturity of the debt.
|
|
Trade
accounts receivable
|
|
Trade
and other receivables are presented net of allowances for doubtful
balances. If amounts become uncollectible, they are charged against income
when that determination is made.
|
|
Revenue
and expense recognition
|
|
Revenues
and expenses are recognised on the accruals basis. Revenues are generated
from freight billings, time charter and bareboat charter hires. Voyage
revenues and expenses are recognised ratably over the estimated length of
each voyage and, therefore, are allocated between reporting periods based
in the relative transit time in each period. The impact of recognising
voyage expenses ratably over the length of each voyage is not materially
different on a quarterly and annual basis from a method of recognising
such costs as incurred. Probable losses on voyages are provided for in
full at the time such losses can be estimated. Time charter and bareboat
charter revenues are recorded over the term of the charter as a service is
provided. The Company uses a discharge-to-discharge basis in determining
percentage of completion for all spot voyages and voyages servicing
contracts of affreightment whereby it recognises revenue rateably from
when product is discharged (unloaded) at the end of one voyage to when it
is discharged after the next voyage. The Company does not begin
recognising revenue until a charter has been agreed to by a customer and
the Company, even if the vessel has discharged its cargo and is sailing to
the anticipated load port on its next voyage.
|
|
Amounts
receivable or payable arising from profit sharing arrangements are accrued
based on amounts earned as of the reporting date. Profit share income
represents vessel earnings earned by the Company’s customers in excess of
market rates. Profit share expense represents amounts due to Ship Finance
based on 20% of the excess of vessel revenues earned by the
Company over the base hire paid to Ship Finance for chartering in the
vessels.
|
|
Revenues
and voyage expenses of the vessels operating in pool arrangements are
pooled and the resulting net pool revenues, calculated on a time charter
equivalent basis, are allocated to the pool participants according to an
agreed formula. Formulae used to allocate net pool revenues
vary among different pools but generally allocate revenues to pool
participants on the basis of the number of days a vessel operates in the
pool with weighting adjustments made to reflect vessels’ differing
capacities and performance capabilities. The same revenue and
expense principles stated above are applied in determining the pool’s net
pool revenues. Certain pools are responsible for paying voyage
expenses and distribute net pool revenues to the
participants. Certain pools require the participants to pay and
account for voyage expenses, and distribute gross pool revenues to the
participants such that the participants’ resulting net pool revenues are
equal to net pool revenues calculated according to the agreed
formula. The Company accounts for gross pool revenues allocated
by these pools as “pool revenues”
which are included in voyage
revenues
in its consolidated statements of
operations.
|
|
Gain
on sale of assets
|
|
Gain
on sale of assets includes gains from the sale of vessels, gains from the
termination of leases and gains from the sale of heavy lift conversion
projects. Gains from the sale of assets are recognised when the vessel has
been delivered and all risks have been transferred and is determined by
comparing the proceeds received with the carrying value of the vessel.
Gains from the termination of leases are recognised when the lease is
effectively terminated and the vessel has been redelivered to the owner.
Gains from sale of heavy lift conversion projects are recognised as each
converted vessel is delivered. The amount recognised is the
gain allocated to each vessel that is not contingent upon future
events. Deferred gains are recorded as Other Current
Liabilities.
|
|
Drydocking
|
|
Normal
vessel repair and maintenance costs are expensed when incurred. The
Company recognises the cost of a drydocking at the time the drydocking
takes place, that is, it applies the “expense as incurred”
method.
|
|
Derivatives
|
|
The
Company may enter into interest rate swap transactions to hedge a portion
of its exposure to floating interest rates. These transactions involve the
conversion of floating rates into fixed rates over the life of the
transactions without an exchange of underlying principal. The fair values
of the interest rate swap contracts are recognised as assets or
liabilities with changes in fair values recognised in the consolidated
statements of operations.
|
|
The
Company may enter into forward freight contracts and options in order to
hedge exposure to the spot market for certain trade routes and in some
cases, for speculative purposes. These transactions involve entering into
a contract to swap theoretical market index based voyage revenues for a
fixed daily rate. The fair values of the forward freight contracts are
recognised as assets or liabilities with changes in fair values recognised
in the consolidated statements of operations.
|
|
Financial
instruments
|
|
In
determining the fair value of its financial instruments, the Company uses
a variety of methods and assumptions that are based on market conditions
and risks existing at each balance sheet date. For the majority of
financial instruments, including most derivatives and long-term debt,
standard market conventions and techniques such as options pricing models
are used to determine fair value. All methods of assessing fair value
result in a general approximation of value, and such value may never
actually be realised.
|
|
Foreign
currencies
|
|
The
functional currency of the Company and the majority of its subsidiaries is
the U.S. dollar as the majority of revenues and expenditures are
denominated in U.S. dollars. The Company’s reporting currency is also U.S.
dollars. For subsidiaries that maintain their accounts in currencies other
than U.S. dollars, the Company uses the current method of translation
whereby the statements of operations are translated using the average
exchange rate and the assets and liabilities are translated using the year
end exchange rate. Foreign currency translation gains or losses are
recorded as a separate component of other comprehensive income in
stockholders’ equity.
|
|
Transactions
in foreign currencies during the year are translated into U.S. dollars at
the rates of exchange in effect at the date of the transaction. Foreign
currency monetary assets and liabilities are translated using rates of
exchange at the balance sheet date. Foreign currency non-monetary assets
and liabilities are translated using historical rates of exchange. Foreign
currency transaction gains or losses are included in the consolidated
statements of operations.
|
|
Share-based
payments
|
|
The
Company accounts for share based payments in accordance with SFAS 123(R)
Share-Based
Payment
s
(“FAS 123(R)”). Accordingly, the Company expenses the
fair value of stock options issued to employees over the period in which
the options vest.
|
|
Earnings
per share
|
|
Basic
earnings per share (“EPS”) is computed based on the income available to
common stockholders and the weighted average number of shares outstanding
for basic EPS. Diluted EPS includes the effect of the assumed conversion
of potentially dilutive instruments.
|
|
Issuance
of shares by a subsidiary/ associate
|
|
The
Company recognises a profit when its subsidiary or associate issues
stock to third parties at a price per share in excess of its carrying
amount if such profit is realisable. If such profit is not
realisable, it is recorded as an increase to contributed
surplus.
|
Reclassification
|
|
Effective
2007, the Company has elected to reclassify certain balances in its
consolidated financial statements. The Company has reclassified
commissions paid on some of the Company’s time charters which has resulted
in a decrease in ship operating expenses and an increase of voyage
expenses of $2.8 million in the year ended December 31, 2006. Effective
2007, the Company has elected to separately disclose related party
balances which were previously reported in other receivables and other
current liabilities and to separately disclose additional paid in capital
which was previously reported within contributed surplus. Prior period
comparatives have been reclassified to conform to the current year
presentation.
|
|
3.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard No. 157,
Fair Value Measurements
(“FAS 157”). FAS 157 establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands on
required disclosures about fair value measurement under other accounting
pronouncements that require or permit fair value measurements.
Accordingly, this statement does not require any new fair value
measurements. FAS 157 is effective for fiscal years beginning after
December 15, 2007 and interim periods within such years. In February
2008, the FASB issued a staff position that delays the effective date of
FAS 157 for all nonfinancial assets and liabilities except for those
recognised or disclosed at least annually with the revised effective date
being fiscal years beginning after November 15, 2008. Adoption of FAS 157
is not expected to have a material effect on the Company’s consolidated
financial statements.
|
|
In
February 2007, the FASB issued Statement of Financial Accounting Standard
No. 159,
The Fair
Value Option for Financial Assets and Financial Liabilities Including an
Amendment of FASB Statement No. 115
(“FAS 159”). FAS 159
allows entities to choose to measure many financial instruments
and certain other items at fair value, with unrealised gains and losses
related to these financial instruments being reported in earnings at each
subsequent reporting date. FAS 159 is effective for fiscal years beginning
after November 15, 2007. Adoption of FAS 159 on January 1, 2008 is
not expected to have a material effect on the Company’s consolidated
financial statements.
|
|
In
December 2007, the FASB issued Statement of Financial Accounting Standard
No. 141 (revised 2007),
Business Combinations
(“FAS 141(R)”). FAS 141(R) establishes the principles and requirements for
how an acquirer recognises and measures the identifiable assets acquired,
the liabilities assumed, the noncontrolling interest in the acquiree and
the goodwill acquired. FAS 141(R) requires the acquirer in a business
combination to:
|
·
|
recognise
100% of the fair values of acquired assets, including goodwill, and
assumed liabilities even if the acquirer has not acquired 100% of the
target entity
|
·
|
apply
fair value to contingent consideration arrangements at the acquisition
date
|
·
|
expense
transaction costs as incurred rather than including as part of the fair
value of an acquirer’s interest
|
·
|
fair
value certain pre-acquisition contingencies such as environmental or legal
issues
|
·
|
limit
the accrual of the costs for a restructuring plan in purchase
accounting
|
FAS
141(R) is effective prospectively to business combinations where the
acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. Early
adoption is not permitted. Adoption of FAS 141(R) is not expected to have
a material effect on the Company’s consolidated financial
statements.
|
|
In
December 2007, the FASB issued Statement of Financial Accounting
Standard No. 160,
Non controlling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51
(“FAS 160”). FAS 160 clarifies the classification of non controlling
interests (i.e. minority owners’ interests in subsidiaries) in
consolidated balance sheets and the accounting for and reporting of
transactions between the reporting entity and holders of such non
controlling interests. FAS 160 requires
that:
|
·
|
non
controlling interests are reported as an element of consolidated equity,
thereby removing the current practice of classifying minority interest
within the mezzanine section of the balance
sheet
|
·
|
reported
net income will consist of the total income of all consolidated
subsidiaries, with separate disclosure on the face of the income statement
of the split of that income between the controlling and non controlling
interests
|
·
|
movements
in the non controlling ownership interest amount will be accounted for as
equity transactions. If the controlling interest loses control and
deconsolidates a subsidiary, full gain or loss on the transition will be
recognised
|
SFAS
160 is effective prospectively for fiscal years beginning after
December 15, 2008. Early adoption is not permitted. The following
provisions are required to be adopted
retrospectively:
|
·
|
non
controlling interests are required to be reclassified from the mezzanine
section to equity in the consolidated balance sheet
|
·
|
consolidated
net income must be recast to include net income attributable to both
controlling and non controlling
interests.
|
Adoption
of FAS 160 will result in the Company reporting minority interest as a
component of equity in the balance sheet.
|
|
4.
|
DECONSOLIDATION
OF SHIP FINANCE
|
The
Company distributed the majority of its remaining shareholding of Ship
Finance in March 2007 and no longer consolidates Ship Finance as of March
31, 2007.
|
|
FIN
46(R) was applied to Ship Finance as a holding company and to each of its
subsidiaries. Ship Finance was determined to be the primary beneficiary of
its subsidiaries with the exception of the Front Shadow where Golden Ocean
Group Limited (“Golden Ocean”), as the lessee, was determined to be the
primary beneficiary. As a result, these subsidiaries are being
consolidated or accounted for under the equity method by Ship Finance as
appropriate. The Company was determined to be the primary beneficiary of
the holding company Ship Finance as a result of the variable interests
held by the Company and its related parties. Consequently, Ship Finance
and its subsidiaries were consolidated until Frontline distributed the
majority of its remaining shares in Ship Finance.
|
|
Under
FIN 46(R), the primary beneficiary should reconsider whether it is still
the primary beneficiary if it sells or otherwise disposes of its variable
interests to unrelated parties. As such, the Company’s distribution of
shares in March is a reconsideration event and it was determined that the
Company was no longer the primary beneficiary of Ship Finance.
Accordingly, the Company is no longer consolidating Ship Finance as of
March 31, 2007.
|
|
A
summary of the major changes to the financial statements of the Company is
as follows:
|
·
|
Vessels
leased from Ship Finance which were previously reported as vessels and
equipment are now reported as vessels under capital
lease
|
·
|
Capital
lease obligations with Ship Finance which were previously eliminated on
consolidation are reported as liabilities with related interest recorded
in the consolidated statement of
operations
|
·
|
Debt
incurred by Ship Finance, which was previously reported as debt of the
Company, is no longer reported
|
·
|
Derivative
instruments held by Ship Finance are no longer
reported
|
·
|
Minority
interest expense relating to Ship Finance is no longer
reported
|
·
|
Profit
share expense relating to amounts due to Ship Finance is now presented in
the consolidated statement of
operations
|
·
|
Results
from Ship Finance’s container ships and jack-up rigs are reported as
discontinued operations in the years ended December 31, 2007, 2006 and
2005
|
Prior
to the deconsolidation of Ship Finance, items of expenditure incurred by
Ship Finance which have been recorded in the Company’s consolidated
statement of cash flows for the year ended December 31, 2007
include:
|
·
|
Purchase
of the container ship Horizon Hawk for $56.8
million
|
·
|
Payments
totalling $126.5 million relating to Ship Finance’s second jack up rig
West Prospero
|
·
|
Cash
from debt
draw
downs totalling $127.2
million
|
·
|
Debt
repayments totalling $122.4 million
|
5. | SEGMENT INFORMATION |
The
Company and the chief operating decision maker (“CODM”) measure
performance based on the Company’s overall return to shareholders based on
consolidated net income. Consequently, the Company has only one reportable
segment: tankers The tankers segment includes crude oil
tanker vessels and OBO or oil/bulk/ore vessels. Both types of vessel are
managed as part of this one segment
.
|
|
The consolidated financial statements include the results of rigs and containerships as discontinued operations. | |
The Company’s management does not evaluate performance by geographical region as this information is not meaningful. |
The Company performs in two markets, the wet market whereby crude oil is transported, and the dry market whereby dry cargo is transported. An analysis of revenues from these services is as follows: |
(in thousands of $) | 2007 | 2006 | 2005 | ||||||||||
Total
operating revenues – wet market
|
1,171,000 | 1,461,901 | 1,387,009 | ||||||||||
Total
operating revenues – dry market
|
120,170 | 90,699 | 104,668 |
During
the year ended December 31, 2007, the Company reported total income from
one customer of $247.3 million which represented approximately 19% of
consolidated operating revenues (2006: one customer which represented
approximately 13% and 2005: one customer which represented approximately
10.4%). These revenues are reported under the tanker
segment.
|
6.
|
TAXATION
|
Bermuda
|
|
Under
current Bermuda law, the Company is not required to pay taxes in Bermuda
on either income or capital gains. The Company has received written
assurance from the Minister of Finance in Bermuda that, in the event of
any such taxes being imposed, the Company will be exempted from taxation
until the year 2016.
|
|
United
States
|
|
The
Company does not accrue U.S. income taxes as, in the opinion of U.S.
counsel, the Company is not engaged in a U.S. trade or business and is
exempted from a gross basis tax under Section 883 of the U.S. Internal
Revenue Code.
|
|
A
reconciliation between the income tax expense resulting from applying the
U.S. Federal statutory income tax rate and the reported income tax expense
has not been presented herein as it would not provide additional useful
information to users of the financial statements as the Company’s net
income is subject to neither Bermuda nor U.S. tax.
|
|
Other
Jurisdictions
|
|
Certain
of the Company’s subsidiaries in Singapore, Norway and the United
Kingdom are subject to taxation in their respective jurisdictions.
The tax paid by subsidiaries of the Company that are subject to taxation
is not material.
|
|
The
Company adopted FASB Interpretation No. 48
Accounting for Uncertainty in
Income Taxes
(“FIN 48”) on January 1, 2007. FIN 48 clarifies the
accounting for uncertainty in income taxes recognised in financial
statements in accordance with Statement of Financial Accounting Standard
109
Accounting for
Income Taxes.
FIN 48 requires companies to determine whether it is
more likely than not that a tax position taken or expected to be taken in
a tax return will be sustained upon examination. If a tax position meets
the more likely than not recognition threshold, it is measured to
determine the amount of benefit to recognise in the financial statements.
The Company has not recognised any additional liabilities or expenses on
adoption of FIN 48 and does not have any unrecognised tax benefits,
material accrued interest or penalties relating to income
taxes.
|
|
7.
|
EARNINGS
PER SHARE
|
The
computation of basic earnings per share (“EPS”) is based on the weighted
average number of shares outstanding during the year. The computation of
diluted EPS assumes the foregoing and the exercise of stock options using
the treasury stock method.
|
|
The
components of the numerator for the calculation of basic EPS and diluted
EPS for net income from continuing operations and net income are as
follows:
|
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Net
income from continuing operations
|
564,976 | 502,486 | 592,743 | |||||||||
Discontinued
operations
|
5,442 | 13,514 | 14,096 | |||||||||
Net
income available to stockholders
|
570,418 | 516,000 | 606,839 |
The
components of the denominator for the calculation of basic EPS and diluted
EPS are as follows:
|
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Basic
earnings per share:
|
||||||||||||
Weighted
average number of ordinary shares outstanding
|
74,825 | 74,825 | 74,825 | |||||||||
Diluted
earnings per share:
|
||||||||||||
Weighted
average number of ordinary shares outstanding
|
74,825 | 74,825 | 74,825 | |||||||||
Stock
options
|
42 | - | - | |||||||||
74,867 | 74,825 | 74,825 |
2007
|
2006
|
2005
|
||||||||||
Anti-dilutive
options
|
- | 100,000 | - |
The
Company has reclassified 2007 and prior years for discontinued operations
relating to container ships and rigs. The effect on EPS of this
reclassification is as follows:
|
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Discontinued
operations – containers and rigs
|
5,442 | 13,514 | 5,311 | |||||||||
Basic
and diluted EPS – containers and rigs
|
$ | 0.07 | $ | 0.18 | $ | 0.07 | ||||||
Discontinued
operations – drybulk
|
- | - | 8,785 | |||||||||
Basic
and diluted EPS – drybulk
|
- | - | $ | 0.12 |
8.
|
LEASES
|
As
of December 31, 2007, the Company leased in 56 vessels on long-term time
charters and bareboat charters from third parties and related
parties. Three of these leases are classified as operating
leases and 53 as capital leases. With the exception of
the Company’s long-term leases with Ship Finance, the Company’s long-term
leases of vessels generally contain optional renewal periods and purchase
and put options.
|
|
Rental
expense
|
|
Charter
hire payments to third parties for certain contracted-in vessels are
accounted for as operating leases. The Company is also committed to make
rental payments under operating leases for office premises. The future
minimum rental payments under the Company’s non-cancellable operating
leases are as follows:
|
(in
thousands of $)
|
||||
Year
ending December 31,
|
||||
2008
|
38,857 | |||
2009
|
35,786 | |||
2010
|
34,067 | |||
2011
|
27,845 | |||
2012
|
8,741 | |||
2013
and later
|
5,928 | |||
Total
minimum lease payments
|
151,224 |
Total
rental expense for operating leases was $59.0 million, $26.5 million and
$12.9 million for the years ended December 31, 2007, 2006 and 2005,
respectively.
|
The
following table discloses information about the terms of the Company’s
long term leases for vessels contracted in which are accounted for as
operating leases:
|
Vessel
Type
|
Expiry
of Mandatory Lease Period
|
Extended
Lease Periods at Lessor’s Option
|
Extended
Lease Periods at Company’s Option
|
Company’s
Purchase Option Periods
|
Lessor’s
Put Option Exercise Date
|
|||||||||
Front
Warrior (Suezmax)
|
2007
|
2008-2011 | 2010-2011 | 2007- 2011 |
2011
|
|||||||||
Hampstead
|
2012
|
none
|
none
|
none
|
none
|
|||||||||
Kensington
|
2011
|
none
|
none
|
none
|
none
|
The
lease for Front Warrior was extended for an additional two years at the
lessor’s option on January 1, 2008. The minimum lease payments for this
optional period have been included in the analysis
above.
|
|
A
liability for put options on vessels leased on operating leases is
recorded at such time that market conditions make it likely that a put
option will be exercised on the exercise date. A liability is
recognised based on the amount, if any, by which the put option price
exceeds the fair market value of the related vessel. As of December 31,
2007, no such liability had arisen.
|
|
Nine
of the vessels leased by the Company are leased from special purpose
lessor entities which were established and are owned by independent third
parties who provide financing through debt and equity participation. Each
entity owns one vessel, which is leased to the Company, and has no other
activities. Prior to the adoption of FIN 46(R), these special
purpose entities were not consolidated by Frontline. One of these leases
is accounted for as operating leases and eight of these leases are
accounted for as capital leases. The Company has determined
that due to the existence of certain put and call options over the leased
vessels, these entities are variable interest entities. The
determination of the primary beneficiary of a variable interest entity
requires knowledge of the participations in the equity of that entity by
individual and related equity holders. Our lease agreements
with the leasing entities do not give us any right to obtain this
information and the Company has been unable to obtain this information by
other means. Accordingly the Company is unable to determine the
primary beneficiary of these leasing entities. As of December 31, 2007,
the original cost to the lessor of the assets under such arrangements was
$618.5 million. As of December 31, 2007 and 2006, the Company's residual
value guarantees associated with these leases, which represent the maximum
exposure to loss, are $85.0 million.
|
|
The
following table discloses information about the Company’s activity with
these non-consolidated lessor entities in the three year period ended
December 31, 2007:
|
Year
ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Repayments
of principal obligations under capital leases
|
28,857 | 25,142 | 22,205 | |||||||||
Interest
expense for capital leases
|
32,605 | 34,867 | 36,850 | |||||||||
Charterhire
expense for operating leases
|
5,311 | 5,402 | 5,211 |
As
of December 31, 2007, the Company leased out 34 of its vessels to third
parties on time and bareboat charters with initial periods ranging between
three months and five years. All of those leases are classified as
operating leases.
|
|
Rental
income
|
|
The
minimum future revenues to be received on time and bareboat charters which
are accounted for as operating leases and other contractually committed
income as of December 31, 2007 are as
follows:
|
(in
thousands of $)
|
Total
|
|||
2008
|
362,982 | |||
2009
|
264,508 | |||
2010
|
109,095 | |||
2011
|
28,468 | |||
2012
|
15,627 | |||
2013
and later
|
- | |||
Total
minimum lease revenues
|
780,680 |
(in
thousands of $)
|
2007
|
2006
|
||||||
Cost
|
16,008 | 1,198 | ||||||
Net
unrealised (loss) gain
|
(324 | ) | 271 | |||||
Fair
value
|
15,684 | 1,469 |
The
net unrealised loss on marketable securities, including a component of
foreign currency translation, included in comprehensive income is $0.3
million – a decrease of $0.6 million for the year ended December 31,
2007 (2006 – net unrealised gain of $0.3 million). During the
year ended December 31, 2007, the net unrealised gain as of December 31,
2006 was released into the income statement as a result of the sale of the
shares held.
|
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Proceeds
from sale of available-for-sale securities
|
162,392 | 154,409 | 152,752 | |||||||||
Realised
gain (including amounts classified in discontinued
operations)
|
49,023 | 9,782 | 28,035 |
Realised
loss (including amounts classified in discontinued
operations)
|
(40 | ) | - | - |
The
cost of sale of available-for-sale marketable securities is calculated on
an average cost basis. Realised gains and losses are recorded as gain on
sale of securities in the consolidated statement of operations. Refer to
Note 27 for further information on gains recorded in gain on sale of
securities resulting from sales of assets not previously classified as
marketable securities.
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Agent
receivables
|
3,537 | 7,039 | ||||||
Claims
receivables
|
6,355 | 8,458 | ||||||
Receivable
from sale of assets
|
13,372 | 13,372 | ||||||
Other
receivables
|
5,300 | 8,466 | ||||||
28,564 | 37,335 |
Other
receivables are presented net of allowances for doubtful accounts
amounting to $nil as of December 31, 2007 and 2006.
|
|
12.
|
OTHER
CURRENT ASSETS
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Security
deposits on newbuildings
|
- | 11,222 | ||||||
Other
|
64 | 349 | ||||||
Other
current assets
|
64 | 11,571 |
Security
deposits on newbuildings relate to deposits paid plus related interest
accrued by Ship Finance in relation to containership newbuildings. The
Company stopped consolidating the results of Ship Finance with effect from
March 31, 2007.
|
|
13.
|
NEWBUILDINGS
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Newbuildings
|
160,298 | 166,851 |
The
carrying value of newbuildings represents the accumulated costs which the
Company has paid by way of purchase instalments and other capital
expenditures together with capitalised loan interest. Interest
capitalised in the cost of newbuildings amounted to $10.4 million in 2007
(2006: $3.6 million, 2005: $nil).
|
|
As
of December 31, 2007, there were seven newbuilding contracts representing
costs of $113.1 million (2006: six contracts representing costs of $71.0
million) and two conversion projects representing costs of $47.2 million
(2006: two projects representing costs of $95.9 million). The conversion
projects are for the conversion of two single hull Suezmax tankers into
heavy lift vessels which are already subject to a sales agreement as
discussed in Note 27.
|
|
The
conversion projects reported in 2006 were for the conversion of a single
hull Suezmax tanker into a heavy lift vessel which was sold to Dockwise in
March 2007 and the conversion of an Aframax tanker into a Floating
Production Storage and Offloading (“FPSO”) vessel which was sold to Sea
Production in February 2007.
|
14.
|
VESSELS
AND EQUIPMENT, NET
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Cost
|
273,399 | 3,567,607 | ||||||
Accumulated
depreciation
|
(64,883 | ) | (1,121,329 | ) | ||||
Net
book value at end of year
|
208,516 | 2,446,278 |
(in
thousands of $)
|
2007
|
2006
|
||||||
Cost
|
3,153,602 | 853,169 | ||||||
Accumulated
depreciation
|
(828,813 | ) | (226,795 | ) | ||||
Net
book value at end of year
|
2,324,789 | 626,374 |
Depreciation
expense for vessels under capital lease was $174.9 million, $46.2 million
and $46.2 million for the years ended December 31, 2007, 2006 and 2005,
respectively.
|
|
The
outstanding obligations under capital leases are payable as
follows:
|
(in
thousands of $)
|
||||
Year
ending December 31,
|
||||
2008
|
345,231 | |||
2009
|
427,108 | |||
2010
|
476,348 | |||
2011
|
343,333 | |||
2012
|
241,181 | |||
2013
and later
|
1,726,150 | |||
Minimum
lease payments
|
3,559,351 | |||
Less:
imputed interest
|
(1,060,953 | ) | ||
Present
value of obligations under capital leases
|
2,498,398 |
As
of December 31, 2007, the Company held 54 vessels under capital leases
(2006 – twelve), of which, 41 are leased from Ship Finance. These leases
are for terms that range from six to 24 years.
|
|
The
Company has purchase options over eight of these vessels at certain
specified dates and the lessor has options to put these vessels to the
Company at the end of the lease term. Gains arising from the sale and
leaseback transactions have been deferred and are being amortised over the
lease terms.
|
The
following table discloses information about the terms of the Company’s
capital leases for vessels excluding those leased from Ship
Finance:
|
Vessel
Type
|
Expiry
of Mandatory Lease Period
|
Extended
Lease Periods at Lessor’s Option
|
Extended
Lease Periods at Company’s Option
|
Company’s
Purchase Option Periods
|
Lessor’s
Put Option Exercise Date
|
||||||
Front
Crown (VLCC)
|
2009
|
2010-2014 | 2013-2014 |
2009
to 2014
|
2014
|
||||||
Front
Chief (VLCC)
|
2009
|
2010-2014 | 2013-2014 |
2009
to 2014
|
2014
|
||||||
Front
Commander (VLCC)
|
2009
|
2010-2014 | 2013-2014 |
2009
to 2014
|
2014
|
||||||
Front
Eagle (VLCC)
|
2010
|
2011-2015 | 2014-2015 |
2010
to 2015
|
2015
|
||||||
Front
Melody (Suezmax)
|
2011
|
2012-2015 | 2014-2015 |
2011
to 2015
|
2015
|
||||||
Front
Symphony (Suezmax)
|
2011
|
2012-2015 | 2014-2015 |
2011
to 2015
|
2015
|
||||||
Front
Tina (VLCC)
|
2011
|
2012-2015 | 2014-2015 |
2011
to 2015
|
2015
|
||||||
Front
Commodore (VLCC)
|
2011
|
2012-2015 | 2014-2015 |
2011
to 2015
|
2015
|
||||||
British
Pioneer (VLCC)
|
2024
|
none
|
Note
(2)
|
Note
(1)
|
none
|
||||||
British
Progress (VLCC)
|
2025
|
none
|
Note
(2)
|
Note
(1)
|
none
|
||||||
British
Purpose (VLCC)
|
2025
|
none
|
Note
(2)
|
Note
(1)
|
none
|
||||||
British
Pride (VLCC)
|
2025
|
none
|
Note
(2)
|
Note
(1)
|
none
|
Put
options on vessels leased under leases classified as capital leases are
recorded as part of the lease’s minimum lease payments. Lease
liabilities are amortised so that the remaining balance at the date the
put option becomes exercisable is equal to the put option
amount. An additional liability is recognised based on the
amount, if any, by which the put option price exceeds the fair market
value of the related vessel. As of December 31, 2007 no such additional
liability had arisen.
|
(1)
|
The
Company does not have options to purchase the vessel but it has first
refusal if the vessel’s owner offers the vessel for
sale.
|
(2)
|
The
Company has the right to terminate the lease at any time but only with
permission of the charterer.
|
The
Company’s capital leases for vessels leased from Ship Finance are
long-term, fixed rate leases which extend for various periods depending on
the age of the vessels The following table discloses information about the
terms of these leases:
|
Vessel
Type
|
Expiry
of Mandatory Lease Period
|
Company’s
Optional Termination Date
|
Company’s
Purchase Option Periods
|
Lessor’s
Put Option Exercise Date
|
|||
OBO
(8 vessels)
|
2015
|
none
|
none
|
none
|
|||
Non
double hull Suezmax and VLCC (9 vessels)
|
2013
|
2010
|
none
|
none
|
|||
Double
hull Suezmax (6 vessels)
|
2017-2021 |
none
|
none
|
none
|
|||
Double
hull VLCC (18 vessels)
|
2021-2027 |
none
|
none
|
none
|
2007
|
2006
|
|||||||
International
Maritime Exchange ASA
|
- | 24.49 | % | |||||
Front
Tobago Shipping Corporation
|
40.00 | % | 40.00 | % | ||||
Golden
Fountain Corporation
|
50.00 | % | 50.00 | % | ||||
Front
Shadow Inc
|
- | 100.00 | % | |||||
CalPetro
Tankers (Bahamas I) Limited
|
100.00 | % | 100.00 | % | ||||
CalPetro
Tankers (Bahamas II) Limited
|
100.00 | % | 100.00 | % |
CalPetro
Tankers (IOM) Limited
|
100.00 | % | 100.00 | % |
Summarised
balance sheet information of investees which the Company accounts for
under the equity method investees as of December 31, 2007 is as
follows:
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Current
assets
|
19,639 | 71,320 | ||||||
Non
current assets
|
64,558 | 139,983 | ||||||
Current
liabilities
|
11,313 | 27,267 | ||||||
Non
current liabilities
|
66,681 | 99,247 |
Summarised
statement of operations information of investees which the Company
accounts for under the equity method as of December 31, 2007 is as
follows:
|
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Net
operating revenues
|
35,020 | 28,876 | 27,377 | |||||||||
Net
operating (loss) income
|
5,197 | 10,461 | 27,545 | |||||||||
Net
(loss) income
|
5,232 | 3,691 | 20,312 |
Dividends
totalling $0.3 million were received from equity method investees in the
year ended December 31, 2007.
|
|
In
2007, the Company sold its entire investment in International Maritime
Exchange ASA (“IMAREX”) for net proceeds of $50.5 million resulting in a
gain on sale of $41.9 million which has been reported in gain from sale of
securities.
|
|
Front
Shadow is a wholly owned subsidiary of Ship Finance and
was incorporated during 2006 for the purpose of holding a single
capital asset and leasing that asset to a related party. Up until the
deconsolidation of Ship Finance, the entity was accounted for under the
equity method as it was determined that the entity was a VIE and that Ship
Finance was not the primary beneficiary under FIN 46(R). As a
result of deconsolidation of Ship Finance in March 2007, Front Shadow is
no longer reported by the Company.
|
|
The
Company has determined that under FIN 46(R), it is not the primary
beneficiary of the VIEs CalPetro Tankers (Bahamas I) Limited (“CalPetro
BI”), CalPetro Tankers (Bahamas II) Limited (“CalPetro BII”) and CalPetro
Tankers (IOM) Limited (“CalPetro IOM”) and as such, these entities are
being equity accounted for. These companies were incorporated in 1994 for
the purpose of acquiring three oil tankers from Chevron Transport
Corporation (“Chevron”) and concurrently charter these vessels back to
Chevron on long-term charter agreements. The companies were acquired by
Independent Tankers Corporation (“ITC”) which in turn is a wholly owned
subsidiary of the Company. In April 2006, Chevron cancelled its bareboat
contract with CalPetro Tankers (Bahamas III) Limited (“CalPetro BIII”).
Under FIN 46(R) this was considered to be a reconsideration event and the
Company began consolidating the VIE into its accounts from that date. The
Company does not guarantee the debt of these entities and the net assets
of the three entities that are not consolidated total $4.1
million.
|
|
In
January 2007, the Company had a 33.3% investment in Sealift and accounted
for this investment under the equity method. In May 2007, the Company’s
investment was reduced to 17.1% and as a result of the Company’s inability
to exercise significant influence, the investment was accounted for as
marketable securities from that date.
|
|
In
February 2007, the Company had a 28.3% investment in Sea Production and
accounted for this investment under the equity method until it sold its
entire shareholding in June 2007.
|
|
17.
|
INVESTMENT
IN FINANCE LEASES
|
Ship
Finance’s jack-up drilling rig was chartered on a long term fixed rate
bareboat charter to a subsidiary of Seadrill Limited (“Seadrill”). The
terms of the charter provide the charterer with various call options
throughout the charter period, which expires in 2021. Refer to Note 26 for
further information.
|
|
The
following schedule lists the components of the net investment in finance
lease:
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Total
minimum lease payments to be received
|
- | 297,277 | ||||||
Estimated
residual values of leased property (unguaranteed)
|
- | 60,000 | ||||||
Less :
Unearned income
|
- | (158,528 | ) | |||||
Net
investment in finance leases
|
- | 198,749 |
As
a result of deconsolidation of Ship Finance, the Company no longer reports
any investments in finance leases.
|
|
18.
|
DEFERRED
CHARGES
|
Deferred
charges represent debt arrangement fees that are
capitalised. If a loan is repaid early, any unamortised portion
of the related deferred charges is charged against income in the period in
which the loan is repaid. The deferred charges are comprised of the
following amounts:
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Debt
arrangement fees
|
384 | 24,102 | ||||||
Accumulated
amortisation
|
(335 | ) | (7,165 | ) | ||||
49 | 16,937 |
As
a result of the deconsolidation of Ship Finance, $16.8 million of deferred
charges previously reported in 2006 are no longer reported in the
Company’s results.
|
|
19.
|
ACCRUED
EXPENSES
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Voyage
expenses
|
22,707 | 22,064 | ||||||
Ship
operating expenses
|
21,385 | 22,748 | ||||||
Administrative
expenses
|
6,634 | 6,618 | ||||||
Interest
expense
|
31,335 | 37,627 | ||||||
Taxes
|
483 | 317 | ||||||
Accrued
conversion costs for heavy lift vessels
|
15,233 | - | ||||||
Other
|
3,351 | 942 | ||||||
101,128 | 90,316 |
20.
|
OTHER
CURRENT LIABILITIES
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Accrued
charterhire
|
708 | 681 | ||||||
Proceeds
from sale and conversion of vessels, deferred
|
124,597 | - | ||||||
Other
|
7,005 | 8,356 | ||||||
132,310 | 9,037 |
(in
thousands of $)
|
2007
|
2006
|
||||||
US
Dollar denominated floating rate debt (LIBOR + 0.50% ) due through
2008
|
80,000 | 1,602,920 | ||||||
8.5%
Senior Notes due 2013
|
- | 449,080 | ||||||
Serial
Notes (6.5% to 6.68%) due through 2010
|
17,100 | 30,800 | ||||||
Term
Loans (8.52%) due 2015
|
11,328 | 12,744 | ||||||
Term
Notes (7.84% to 8.04%) due through 2021
|
364,860 | 366,200 | ||||||
473,288 | 2,461,744 | |||||||
Credit
facilities
|
246 | 1,550 | ||||||
Total
debt
|
473,534 | 2,463,294 | ||||||
Less:
short-term and current portion of long-term debt
|
(96,811 | ) | (281,409 | ) | ||||
376,723 | 2,181,885 |
The
outstanding debt as of December 31, 2007 is repayable as
follows:
|
(in
thousands of $)
|
||||
Year
ending December 31,
|
||||
2008
|
96,811 | |||
2009
|
13,144 | |||
2010
|
13,045 | |||
2011
|
17,425 | |||
2012
|
22,120 | |||
2013
and later
|
310,989 | |||
473,534 |
The
weighted average interest rate for the floating rate debt denominated in
US dollars was 5.93% as of December 31, 2007 (2006 – 5.39%). The 2006
interest rate takes into consideration related interest rate swaps held by
Ship Finance.
|
|
As
a result of the deconsolidation of Ship Finance, $1,915.2 million of debt
as of December 31, 2006 is no longer reported in the Company’s
consolidated balance sheet.
|
|
US
DOLLAR DENOMINATED FLOATING RATE DEBT EXCLUDING SHIP
FINANCE
|
|
$20.0
million term loan facility
|
|
In
October 2004, the Company entered into a $20.0 million secured term loan
facility. The facility bore interest at LIBOR plus a margin. The loan was
repaid in full in February 2007.
|
|
$69.0
million term loan facility
|
|
In
December 2005, the Company entered into a $69.0 million loan facility with
DnB NOR Bank ASA. The facility bore interest at LIBOR plus a margin and
was secured by certain marketable securities and cash deposits. The
facility was repaid in full in August
2006.
|
$24.0
million term loan facility
|
|
In
September 2006, the Company entered into a $24.0 million secured term loan
facility. The facility bore interest at LIBOR plus a margin.
The facility was repaid in April 2007.
|
|
$20.0
million term loan facility
|
|
In
January 2005, the Company entered into a $20.0 million secured term loan
facility. The facility bore interest at LIBOR plus a margin. The facility
was repaid in full in July 2007.
|
|
$80.0
million term loan facility
|
|
In
June 2006, the Company entered into a $80.0 million secured term loan
facility. The facility bears interest at LIBOR plus a margin.
The facility is due June 2008 and is expected to be refinanced. The
facility contains a minimum value covenant and covenants that require the
Company to maintain a minimum level of free cash and positive working
capital.
|
|
TERM
AND SERIAL NOTES
|
|
ITC
is the holding company for three separate structures involved in financing
and leasing transactions. One of these structures has Serial Notes
maturing between 2007 and 2010 and two of these structures have Term Notes
maturing between 2019 and 2021. The Notes are collateralised by first
preferred mortgages on the vessels owned by the ITC subsidiaries. As of
December 31, 2007, the effective interest rate for the Term and Serial
Notes was 7.85% (2006 – 7.80%).
|
|
The
7.84% First Preferred Mortgage Term Notes due 2021 and the 8.04% First
Preferred Mortgage Term Notes due 2019 are each subject to redemption
through the operation of mandatory sinking funds according to the schedule
of sinking fund redemption payments set forth below. The
sinking fund redemption price is 100% of the principal amount of Term
Notes being redeemed, together with accrued and unpaid interest to the
date fixed for redemption.
|
(in
thousands of $)
|
||||
Year
ending December 31,
|
||||
2008
|
5,765 | |||
2009
|
7,600 | |||
2010
|
11,115 | |||
2011
|
16,635 | |||
2012
|
21,270 | |||
2013
and later
|
302,475 | |||
364,860 |
TERM
LOANS
|
|
Principal
is repayable on the 8.52% Term Loans due 2015 in accordance with a
remaining eight year sinking fund schedule. Of the four entities reporting
these term loans, only one entity, CalPetro BIII is consolidated as the
remaining three entities are accounted for under the equity method under
FIN 46(R). As discussed above, CalPetro BIII’s initial charter with
Chevron was terminated on April 1, 2006 and as such, the revised sinking
fund redemption amounts and final principal payment is as
follows:
|
Scheduled
payment date
|
Amount
$’000
|
|||
2008
|
- | |||
2009
|
444 | |||
2010
|
730 | |||
2011
|
790 | |||
2012
|
850 | |||
2013
and later
|
8,514 | |||
11,328 |
US
DOLLAR DENOMINATED FLOATING RATE DEBT INCURRED BY SHIP FINANCE AS OF
DECEMBER 31, 2006
|
|
$1,131.4
million secured term loan facility
|
|
In
February 2005, Ship Finance entered into a $1,131.4 million term loan
facility with a syndicate of banks. The proceeds from the
facility were used to repay the $1,058.0 million syndicated senior secured
credit facility and for general corporate purposes. The facility bears
interest at LIBOR plus a margin. The facility is repayable over a term of
six years.
|
|
In
September 2006, Ship Finance signed an agreement whereby the existing debt
facility, which had been partially repaid, was increased by $219.7 million
to the original amount of $1,131.4 million. The increase is
available on a revolving basis.
|
|
$350.0
million combined senior and junior secured term loan
facility
|
|
In
June 2005, Ship Finance entered into a combined $350.0 million senior and
junior secured term loan facility with a syndicate of
banks. The proceeds from the facility were used to fund the
acquisition of five new VLCCs. The facility bears interest at LIBOR plus a
margin. The facility is repayable over a term of seven
years.
|
|
$210.0
million secured term loan facility
|
|
In
April 2006, Ship Finance entered into a $210.0 million secured term loan
facility with a syndicate of banks to partly fund the acquisition of five
new container vessels. The facility bears interest at LIBOR
plus a margin and is repayable over a term of 12 years.
|
|
$165.0
million secured term loan facility
|
|
In
June 2006
,
Ship
Finance entered into a $165.0 million secured term loan facility with a
syndicate of banks. The proceeds of the facility were used to partly fund
the acquisition of the jack up drilling rig West Ceres. The facility
currently bears interest at LIBOR plus a margin and is repayable over a
term of six years.
|
8.5%
SENIOR NOTES DUE 2013
|
|
On
December 15, 2003, Ship Finance issued $580 million of senior notes.
Interest on the notes is payable in cash semi-annually in arrears on
June 15 and December 15. The notes are not redeemable prior to
December 15, 2008 except in certain circumstances. After that date, Ship
Finance may redeem notes at redemption prices which reduce from 104.25 per
cent in 2008 to 100 per cent in 2011 and thereafter.
|
|
In
February 2006, Ship Finance entered into a total return bond swap line
with a bank for a term of 12 months. The bond swap line has
been extended for a period up to August 2009. As of December 31, 2006,
Ship Finance held bonds with a principal amount of $52 million under this
agreement. In February 2007, Ship Finance entered into an
additional bond swap line with a second bank for a term of 12
months.
|
|
In
2006, Ship Finance bought back and cancelled notes with a principal amount
of $8.0 million. As of December 31, 2006, the outstanding amount of Notes
was $449.1 million.
|
(in
thousands of $)
|
2007
|
2006
|
||||||
Ship
mortgages
|
204,876 | 2,494,526 | ||||||
Restricted
bank deposits (excluding amounts held in charter service
reserve)
|
424,677 | 408,432 |
22.
|
SHARE
CAPITAL
|
Authorised
share capital:
|
(in
thousands of $, except share data)
|
2007
|
2006
|
||||||
125,000,000
ordinary shares of $2.50 each
|
312,500 | 312,500 |
Issued
and fully paid share capital:
|
(in
thousands of $, except share data)
|
2007
|
2006
|
||||||
74,825,169
ordinary shares of $2.50 each (2006: 74,825,169)
|
187,063 | 187,063 |
The
Company’s ordinary shares are listed on the New York Stock Exchange, the
Oslo Stock Exchange and the London Stock Exchange.
|
|
In
September 2007, the Company reduced its additional paid in capital account
by $480.8 million and the amount resulting from the reduction was credited
to the Company’s contributed surplus account.
|
|
23.
|
ACCUMULATED
OTHER COMPREHENSIVE INCOME
|
The
activity in Accumulated Other Comprehensive Income may be summarised as
follows:
|
Unrealised
investment gains (losses)
|
Translation
adjustments and other
|
Total
|
||||||||||
Balance
at December 31, 2004
|
10,427 | (5,013 | ) | 5,414 | ||||||||
Translation
adjustment for the year
|
- | (221 | ) | (221 | ) | |||||||
Net
unrealised gains and losses for the year
|
655 | - | 655 | |||||||||
Reclassification
adjustments for realised gains included in net income
|
(12,532 | ) | - | (12,532 | ) | |||||||
Balance
at December 31, 2005
|
(1,450 | ) | (5,234 | ) | (6,684 | ) | ||||||
Translation
adjustment for the year
|
- | 538 | 538 |
Unrealised
investment gains (losses)
|
Translation
adjustments and other
|
Total
|
||||||||||
Net
unrealised gains and losses for the year
|
295 | - | 295 | |||||||||
Reclassification
adjustments for realised gains included in net income
|
1,426 | - | 1,426 | |||||||||
Balance
at December 31, 2006
|
271 | (4,696 | ) | (4,425 | ) | |||||||
Translation
adjustment for the year
|
- | 1,324 | 1,324 | |||||||||
Net
unrealised gains and losses for the year
|
(324 | ) | - | (324 | ) | |||||||
Reclassification
adjustments for realised gains included in net income
|
(271 | ) | - | (271 | ) |
Balance
at December 31, 2007
|
(324 | ) | (3,372 | ) | (3,696 | ) |
24.
|
SHARE
OPTION PLANS
|
In
November 2006, the Company’s board of directors approved the Frontline Ltd
Share Option Scheme (the “Frontline Scheme”). The Frontline
Scheme permits the board of directors, at its discretion, to grant options
to acquire shares in the Company to employees and directors of the Company
or its subsidiaries and will expire in November 2016. The
subscription price for all options granted under the scheme will be
reduced by the amount of all dividends declared by the Company in the
period from the date of grant until the date the option is exercised,
provided the subscription price is never reduced below the par value of
the share. Options granted under the scheme will vest at a date
determined by the board at the date of the grant. The options
granted under the plan to date vest over a period of one to three
years. There is no maximum number of shares authorised for
awards of equity share options and authorised, unissued or treasury shares
of the Company may be used to satisfy exercised
options.
|
|
The
fair value of each option award is estimated on the date of the grant
using a Black Scholes option valuation model with the following
assumptions:
|
2006
|
||||
Risk
free interest rate
|
4.74 | % | ||
Expected
life
|
3.5
years
|
|||
Expected
volatility
|
44 | % | ||
Expected
dividend yield
|
0 | % |
The
risk-free interest rate was estimated using the interest rate on 3 year US
treasury zero coupon issues. The volatility was estimated using
historical share price data. The dividend yield has been
estimated at 0% as the exercise price is reduced by all dividends declared
by the company from the date of grant to the exercise
date. It is assumed that all options granted under the
plan will vest.
|
|
The
following summarises share option transactions related to the Frontline
Scheme:
|
(in
thousands except per share data)
|
Options
|
Exercise
Price
|
||||||
Options
outstanding as of December 31, 2005
|
- | - | ||||||
Granted
|
100 |
NOK
238.50
|
||||||
Exercised
|
- | - | ||||||
Cancelled
|
- | - | ||||||
Options
outstanding as of December 31, 2006
|
100 |
NOK
238.50
|
||||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
|
- | - | ||||||
Options
outstanding as of December 31, 2007
|
100 |
NOK
175.70
|
||||||
Exercisable
options
|
33.3 |
NOK
162.36
|
The
weighted average grant-date fair value of options granted during 2006 is
$15.23.
|
|
As
of December 31, 2007, there was $0.6 million in unrecognised compensation
cost related to non-vested options granted under the Frontline
Scheme. The compensation expense will be recognised over a
period of three years in accordance with vesting conditions. Compensation
expense recognised in the years ended December 31, 2007 and 2006 were $0.9
million and nil respectively.
|
|
25.
|
FINANCIAL
INSTRUMENTS
|
Interest
rate risk management
|
|
Interest
rate swaps
|
|
In
certain situations, the Company may enter into financial instruments to
reduce the risk associated with fluctuations in interest rates. Ship
Finance has a portfolio of swaps that swap floating rate interest to fixed
rate, which from a financial perspective hedge interest rate exposure. The
counterparties to such contracts are Credit Agricole Indosuez, Deutsche
Schiffsbank, DnB NOR ASA, Skandinaviska Enskilda Banken AB, Fortis Bank,
Scotia Bank, Nordea Bank Norge ASA, Citibank, HSH Nordbank, HBOS, and
NIBC. Credit risk exists to the extent that the counterparties are unable
to perform under the contracts.The Company no longer consolidates Ship
Finance and therefore no longer reports Ship Finance’s portfolio of
swaps.
|
|
The
Company does not hold or issue instruments for speculative or trading
purposes
|
|
The
Company managed its debt portfolio with interest rate swap agreements in
U.S. dollars to achieve an overall desired position of fixed and floating
interest rates. As of December 31, 2006, Ship Finance had entered into the
following interest rate swap transactions involving the payment of fixed
rates in exchange for LIBOR:
|
Principal
(in thousands of
$)
|
Inception
Date
|
Maturity
Date
|
Fixed
Interest Rate
|
|||||
$ | 50,000 |
February
2004
|
February
2009
|
3.49 | % | |||
$ | 100,000 |
February
2004
|
February
2009
|
3.49 | % | |||
$ | 50,000 |
February
2004
|
February
2009
|
3.35 | % | |||
$ | 50,000 |
February
2004
|
February
2009
|
3.49 | % | |||
$ | 50,000 |
February
2004
|
February
2009
|
3.35 | % | |||
$ | 50,000 |
February
2004
|
February
2009
|
3.35 | % | |||
$ | 50,000 |
February
2004
|
February
2009
|
3.37 | % | |||
$ | 25,000 |
February
2004
|
February
2009
|
3.32 | % | |||
$ | 25,000 |
February
2004
|
February
2009
|
3.32 | % | |||
$ | 25,000 |
February
2004
|
February
2009
|
3.33 | % | |||
$ | 25,000 |
February
2004
|
February
2009
|
3.32 | % | |||
$ | 41,588 |
April
2006
|
November
2018
|
5.64 | % | |||
$ | 41,588 |
April
2006
|
March
2019
|
5.64 | % | |||
$ | 41,588 |
April
2006
|
April
2019
|
5.64 | % | |||
$ | 41,588 |
April
2006
|
May
2019
|
5.64 | % | |||
$ | 41,588 |
April
2006
|
May
2019
|
5.64 | % | |||
$ | 14,849 |
February
2004
|
August
2008
|
6.24 | % | |||
$ | 15,919 |
February
2004
|
August
2008
|
6.24 | % |
As
of December 31, 2006, the notional principal amounts subject to such swap
agreements were $738.7 million.
|
|
Foreign
currency risk
|
|
The
majority of the Company’s transactions, assets and liabilities are
denominated in U.S. dollars, the functional currency of the Company.
Certain of the Company’s subsidiaries report in Sterling or Norwegian
kroner and risks of two kinds arise as a
result:
|
·
|
a
transaction risk, that is, the risk that currency fluctuations will have a
negative effect on the value of the Company’s cash
flows;
|
·
|
a
translation risk, that is, the impact of adverse currency fluctuations in
the translation of foreign operations and foreign assets and liabilities
into U.S. dollars for the Company’s consolidated financial
statements.
|
Accordingly,
such risk may have an adverse effect on the Company’s financial condition
and results of operations. The Company has not entered into
derivative contracts for either transaction or translation
risk.
|
|
Forward
freight contracts
|
|
The
Company may enter into forward freight contracts, futures and option
contracts in order to manage its exposure to the risk of movements in the
spot market for certain trade routes for speculative purposes. Market risk
exists to the extent that spot market fluctuations have a negative effect
on the Company’s cash flows and consolidated statements of operations. As
of December 31, 2007 and 2006, the Company had no such contracts
outstanding.
|
Fair
Values
|
|
The
carrying value and estimated fair value of the Company’s financial
instruments as of December 31, 2007 and 2006 are as
follows:
|
2007
|
2006
|
|||||||||||||||
(in
thousands of $)
|
Carrying
Value
|
Fair
Value
|
Carrying
Value
|
Fair
Value
|
||||||||||||
Non-Derivatives:
|
||||||||||||||||
Cash
and cash equivalents
|
168,432 | 168,432 | 197,181 | 197,181 | ||||||||||||
Restricted
cash
|
651,377 | 651,377 | 677,533 | 677,533 | ||||||||||||
Marketable
securities
|
15,684 | 15,684 | 1,469 | 1,469 | ||||||||||||
Floating
rate debt and credit facilities
|
80,246 | 80,246 | 1,604,470 | 1,604,470 | ||||||||||||
8.5%
Senior notes
|
- | - | 449,080 | 448,799 | ||||||||||||
Serial
Notes (6.5% to 6.68%) due through 2010
|
17,100 | 17,405 | 30,800 | 31,307 | ||||||||||||
8.52%
Term Loan, due 2015
|
11,328 | 12,169 | 12,744 | 13,588 | ||||||||||||
Term
Notes (7.84% to 8.04%) due through 2019
|
364,860 | 405,923 | 366,200 | 383,492 | ||||||||||||
Derivatives:
|
||||||||||||||||
Interest
rate swap transactions receivable
|
- | - | 17,807 | 17,807 | ||||||||||||
Interest
rate swap transactions payable
|
- | - | (8,743 | ) | (8,743 | ) | ||||||||||
Bond
swaps
|
- | - | 2,931 | 2,931 |
The
carrying value of cash and cash equivalents, which are highly liquid, is a
reasonable estimate of fair value.
|
|
The
estimated fair value of marketable securities is based on the quoted
market price of these or similar instruments.
|
|
The
estimated fair value for floating rate long-term debt is considered to be
equal to the carrying value since it bears variable interest rates, which
are reset on a quarterly basis. The estimated fair value for fixed rate
long-term senior notes is based on the quoted market price. The estimated
fair value for the remaining fixed rate long-term loans and notes is based
on the quoted market price of these or similar instruments when
available.
|
|
The
fair value of interest rate swaps is estimated by taking into account the
cost of entering into interest rate swaps to offset the Company’s
outstanding swaps.
|
|
In
February 2006, Ship Finance entered into a total return bond swap line
with Fortis Bank for a term of twelve months. This swap facilitated the
repurchase of Ship Finance’s 8.5% Senior Notes in the amount of $50.0
million. The fair value of the bond swap is estimated by taking into
account the cost of entering into the bond swap to offset Ship Finance’s
outstanding bond swap.
|
|
Concentrations
of risk
|
|
There
is a concentration of credit risk with respect to cash and cash
equivalents to the extent that substantially all of the amounts are
carried with Skandinaviska Enskilda Banken (“SEB”), The Bank of New York
and Nordea Bank Norge (“Nordea”). There is a concentration of credit risk
with respect to restricted cash to the extent that substantially all of
the amounts are carried with SEB, Nordea, Pacific Life, The Bank of New
York, HSBC Midland, CIBC World Markets and JP Morgan Chase. However, the
Company believes this risk is remote as these banks are high credit
quality financial institutions.
|
|
The
majority of the vessels’ gross earnings are receivable in U.S. dollars.
During the year ended December 31, 2007, one customer accounted for
more than 10% of our consolidated operating revenues (2006 and 2005: one
customer).
|
26.
|
RELATED
PARTY TRANSACTIONS
|
In
June 2006, Ship Finance purchased the jack-up rig
West Ceres
from a
subsidiary of Seadrill for a total consideration of $210.0 million. Upon
delivery to Ship Finance, the rig was immediately chartered back to the
subsidiary under a 15-year bareboat charter agreement, fully guaranteed by
Seadrill, who has options to buy back the rig after three, five, seven,
10, 12 and 15 years.
|
|
In
September 2006, Ship Finance acquired the Panamax
Golden Shadow
for $28.4
million from Golden Ocean. The vessel was chartered back to Golden Ocean
for a period of 10 years. As part of the agreement, Golden
Ocean provided an interest free and non-amortizing seller’s credit of $2.6
million. Golden Ocean has been granted fixed purchase options
after three, five, seven and 10 years. At the end of the
charter, Ship Finance has an option to sell the vessel back to Golden
Ocean at an agreed fixed price of $10.4 million, including the $2.6
million seller’s credit.
|
|
In
August 2007, the Company sold the single hull vessel Front Horizon to a
subsidiary of Farahead Holdings Limited for net proceeds of $28.0 million
resulting in a net gain of $6.2 million.
|
|
As
of March 31, 2007, the Company is no longer consolidating the results of
Ship Finance. The majority of the Company’s leased vessels are leased from
Ship Finance and under a Charter Ancillary Agreement, Ship Finance is
entitled to a share of the Company’s earnings on these leased vessels. A
summary of leasing transactions with Ship Finance during the year ended 31
December 2007 (excluding amounts prior to deconsolidation) is as
follows:
|
(in
thousands of $)
|
2007
|
|||
Charterhire
paid (principal and interest)
|
273,239 | |||
Payments
received for termination of leases
|
29,343 | |||
Profit
share expense
|
37,279 | |||
Remaining
lease obligation
|
1,767,758 |
A
summary of net amounts earned and balances with related parties excluding
charterhire is as follows:
|
Net
amounts earned from related parties
|
Year
ended December 31,
|
|||||||||||
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Seatankers
Management Co. Ltd
|
582 | 432 | 265 | |||||||||
Golar
LNG Limited
|
284 | 180 | 255 | |||||||||
Ship
Finance International Limited
|
1,525 | - | - | |||||||||
Norse
Energy Group ASA (formerly Northern Oil ASA)
|
- | - | 6 | |||||||||
Golden
Ocean Group Limited
|
2,099 | 597 | 362 | |||||||||
Individual
related to John Fredriksen
|
- | 12 | - | |||||||||
Aktiv
Kapital First Investment Ltd
|
- | - | 10 | |||||||||
Greenwich
Holdings Ltd
|
69 | - | - | |||||||||
Bryggegata
AS
|
(1,430 | ) | (1,021 | ) | (692 | ) | ||||||
Seadrill
Limited
|
(52 | ) | 545 | (24 | ) | |||||||
CalPetro
Tankers (Bahamas I) Limited
|
40 | 40 | 38 | |||||||||
CalPetro
Tankers (Bahamas II) Limited
|
40 | 40 | 38 | |||||||||
CalPetro
Tankers (Bahamas III) Limited
|
- | - | 38 | |||||||||
CalPetro
Tankers (IOM) Limited
|
40 | 40 | 38 |
Net
amounts earned from related parties comprise office rental income and
management, technical and commercial advisory, newbuilding supervision,
corporate and administrative service income. Net expenses paid to related
parties comprise primarily of rental for office
space.
|
Receivables
(payables) with related parties
|
As
of December 31,
|
|||||||
(in
thousands of $)
|
2007
|
2006
|
||||||
Ship
Finance International Limited
|
(36,718 | ) | - | |||||
Seatankers Management
Co. Ltd
|
(900 | ) | 275 | |||||
Golar
LNG Limited
|
93 | (553 | ) | |||||
Northern
Offshore Ltd
|
13 | 49 | ||||||
Golden
Ocean Group Limited
|
1,160 | 942 | ||||||
Seadrill
Limited
|
73 | 30 | ||||||
Greenwich
Holdings
|
51 | - | ||||||
CalPetro
Tankers (Bahamas I) Limited
|
13 | 10 | ||||||
CalPetro
Tankers (Bahamas II) Limited
|
13 | 10 | ||||||
CalPetro
Tankers (IOM) Limited
|
13 | 10 |
Receivables
and payables with related parties comprise unpaid management, technical
advisory, newbuilding supervision, administrative service and rental
charges. In addition, certain payables and receivables arise
when the Company pays an invoice on behalf of a related party and vice
versa. The payable with Ship Finance also includes unpaid
profit share due to Ship Finance. Receivables and payables with related
parties are generally settled quarterly in arrears with the exception of
profit share due to Ship Finance which is settled
annually.
|
|
Ship
Finance, Golar, Northern Offshore, Norse Energy, Aktiv Kapital, Seadrill,
Bryggegata AS, Golden Ocean, Greenwich, Farahead and Seatankers are each
subject to the significant influence or indirect control of John
Fredriksen. CalPetro BI, CalPetro BII, CalPetro BIII and
CalPetro IOM were all equity accounted until March 31, 2006 at which
point, the Company began consolidating CalPetro BIII.
|
|
During
the year ended December 31, 2007, the Company held investments in Sea
Production and Dockwise and earned income from these companies in the form
of rental income and income earned from the provision of accounting
services totalling $1.0 million. During the year, the Company disposed of
its entire investments in these companies and they are no longer
considered to be related parties. Refer to Note 27 for further
discussion on gains from disposal of assets relating to Sea Production and
Dockwise.
|
|
The
Company also entered into bareboat contracts with Dockwise for five of the
vessels sold with the charters expiring when the vessels entered the yard
for conversion. As of December 31, 2007, charters for the two Suezmax
vessels were still in place with termination expected in the second
quarter of 2008. The Company is not responsible for the conversion of
these two vessels. Charterhire paid to Dockwise in the year ended December
31, 2007 was $13.5 million.
|
|
27.
|
DISPOSAL
OF ASSETS
|
In
March 2007, the Company sold the single hull vessel Front Transporter for
a net gain of $21.3 million which is reported as a gain on sale of
assets.
|
As
of December 31, 2006, the Company’s wholly owned subsidiary Sea Production
held a 70% interest in Puffin Ltd (“Puffin”). Frontline FPSO Ltd
(“Frontline FPSO”), a wholly owned subsidiary of Puffin, owned the vessel
Front Puffin which was undergoing conversion into a FPSO vessel. In
January 2007, Sea Production changed its name to Frontline Floating
Production Ltd (“Frontline Floating Production”) and in February 2007, the
Company set up another wholly owned subsidiary named Sea Production Ltd
(“Sea Production”) with a view to spinning off its FPSO activities through
Sea Production. In February 2007, Frontline Floating Production sold all
its assets to Sea Production for a total consideration of $93.7 million.
Simultaneously, Sea Production completed a private placement raising
$180.0 million in equity. Frontline subscribed for 25.5 million shares for
a total consideration of $51.0 million resulting in a 28.33% investment in
Sea Production. A gain of $39.8 million has been recorded as a gain on
issuance of shares by associates. The Company accounted for its investment
in Sea Production under the equity method until the disposal of its entire
shareholding in Sea Production in June 2007 resulting in a net gain of
$31.2 million which has been recorded as gain on sale of
securities.
|
|
In
March 2007, Sealift acquired six single hull vessels, of which four were
to be converted to heavy lift vessels, for a total purchase price of
$476.0 million which was based on the estimated market value of the four
converted heavy lift vessels and the two single hull Suezmax vessels. The
purchase price includes $80.0 million short term seller’s credit from the
Company which has been allocated equally to each of the last two remaining
converted heavy lift vessels. This seller’s credit will be payable on
delivery of each vessel. The sale of vessels to Sealift included an
obligation on the Company to manage, supervise and pay the conversion
costs for the four heavy lift vessels. The gain on sale arising from this
transaction has been allocated to each vessel with $60.0 million of the
gain being accounted for as an adjustment against the Company’s
investment. The gain is recognised as each vessel is delivered. The two
Suezmax vessels and two converted vessels were successfully delivered to
Dockwise in 2007 resulting in a net gain of $60.7 million which has been
recorded as a gain on sale of assets. The remaining two converted vessels
are scheduled to be delivered in the second quarter of 2008 and conversion
costs are currently being recorded in newbuildings. As of December 31,
2007, total deferred proceeds of $124.6 million from the sale and
conversion of vessels are recorded in other current
liabilities.
|
|
The
Company accounted for its 33.3% investment in Sealift under the equity
method. In May 2007, Sealift issued 94.1 million shares to the
shareholders of Dockwise in exchange for all the shares and convertible
securities of the entities owned by Dockwise. Sealift also completed a
private placement for 39.8 million shares with the Company subscribing for
5 million shares. Sealift subsequently changed its name to Dockwise. A
gain of $43.7 million has been recorded as a gain on issuance of shares by
associates as a result. Subsequent to this transaction, the Company
accounted for its 17.1% investment in Dockwise as marketable securities.
In October 2007, the Company sold its entire investment in Dockwise for a
net gain of $48.7 million which has been recorded as gain on sale of
securities.
|
|
In
June 2007, Ship Finance sold the single hull vessel Front Vanadis to a
third party and as a result, terminated the Company’s long-term lease for
the vessel. The Company received a termination payment of $13.2 million
and recorded a net gain of $13.3 million as a gain on sale of
assets.
|
|
In
August 2007, the Company sold the single hull vessel Front Horizon for a
net gain of $6.2 million which has been recorded as again on sale of
assets.
|
|
In
November 2007, the Company sold its entire investment in International
Maritime Exchange ASA (“IMAREX”) for net proceeds of $50.5 million
resulting in a gain on sale of $41.9 million which has been reported in
gain from sale of securities.
|
|
In
December 2007, Ship Finance sold the single hull vessel Front Birch to a
third party and as a result, terminated the Company’s long-term lease for
the vessel. The Company received a termination payment of $16.2 million
and recorded a net gain of $16.6 million as a gain on sale of
assets.
|
28.
|
MINORITY
INTEREST AND DIVIDEND DISTRIBUTION TO SHAREHOLDERS
|
The
Company accounts for pro-rata distributions to owners in a spin-off at the
book value of shares distributed and accounts for non pro-rata
distributions to owners in a spin-off at the fair value of shares
distributed.
|
|
A
summary of pro-rata partial spin offs of Ship Finance by the Company are
as follows:
|
Distribution
Date
|
%
Frontline holding
Distributed
|
Distribution
Ratio (Ship Finance/ Frontline shares held)
|
Value
of dividend
$
millions
|
|||||||||
June
16, 2004
|
25.0 | % | 1/4 | $ | 142.5 | |||||||
September
24, 2004
|
9.9 | % | 1/10 | $ | 59.8 | |||||||
December
15, 2004
|
13.3 | % | 2/15 | $ | 85.7 | |||||||
February
18, 2005
|
25.0 | % | 1/4 | $ | 154.9 | |||||||
March
24, 2005
|
10.0 | % | 1/10 | $ | 57.0 | |||||||
March
20, 2006
|
5.14 | % | 1/20 | $ | 27.8 | |||||||
March
22, 2007
|
11.1 | % | 3/28 | $ | 162.2 |
The
value of the non-cash dividend is valued based on the book value of Ship
Finance at the date of distribution. As a result of the final distribution
on March 2007, the Company no longer consolidates Ship Finance and
therefore no longer reports any related minority
interest.
|
|
In
November 2006, 30% of shares in Puffin Ltd, a subsidiary of the Company,
were issued to a third party for $7.8 million as part of the proposed spin
off of the Company’s FPSO (Floating Production, Storage and Offloading)
operations. In February 2007, the Company sold its entire investment in
Puffin Ltd to Sea Production and no longer reports any related minority
interest.
|
|
29.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company insures the legal liability risks for its shipping activities with
Assuranceforeningen SKULD, Assuranceforeningen Gard Gjensidig and
Britannia Steam Ship Insurance Association Limited, all mutual protection
and indemnity associations. As a member of these mutual associations, the
Company is subject to calls payable to the associations based on the
Company’s claims record in addition to the claims records of all other
members of the associations. A contingent liability exists to the extent
that the claims records of the members of the associations in the
aggregate show significant deterioration, which result in additional calls
on the members.
|
|
As
of December 31, 2007, the Company had nine vessels that were sold by the
Company at various times during the period from November 1998 to December
31, 2003, and leased back on charters that range for periods of eight to
twelve and a half years with options on the lessors’ side to extend the
charters for periods that range up to five years. Eight of these charters
are accounted for as capital leases and one is accounted for as an
operating lease. The Company has purchase options at certain specified
dates and the lessor has options to put the vessels on the Company at the
end of the lease terms for all of these nine vessels. The total amount
that the Company would be required to pay under these put options with
respect to the operating lease is $9.5 million.
|
|
As
of December 31, 2007 Chevron charters three vessels on long-term bareboat
charters recorded as investments in finance leases. Chevron
holds options to purchase each vessel for $1 on April 1, 2015 provided no
earlier optional termination of the bareboat charter has occurred. The
Company has not received notice of Chevron’s intent to terminate any of
these charters.
|
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Dividends
in kind:
|
||||||||||||
Spin-off
of Ship Finance
|
162,222 | 27,841 | 211,881 | |||||||||
Purchase
of marketable securities:
|
||||||||||||
Forward
contract
|
- | - | 70,850 | |||||||||
Vessels:
|
||||||||||||
Reclassification
of vessel under conversion to newbuildings
|
- | (55,317 | ) | - | ||||||||
Vessel
addition on termination of capital lease
|
- | 13,502 | - | |||||||||
Additions
to vessels purchased from related party
|
- | - | 85,363 |
Equity
contribution from related party
|
- | - | (85,363 | ) |
31.
|
DISCONTINUED
OPERATIONS
|
In
2005, the Company’s last remaining dry bulk vessel was sold and in 2007,
due to the deconsolidation of Ship Finance in March 2007, the Company no
longer reports results of Ship Finance’s containerships or jack up
rigs.
|
|
The
operations that have been disposed of have been recorded as discontinued
operations in accordance with the requirements of FAS 144
Accounting for the Impairment
or Disposal of Long-Lived Assets
(“FAS 144”) as the operations and
cash flows of the operations have been eliminated from the ongoing
operations of the Company. The Company will not have any significant
continuing involvement in these dry bulk, containership or jack-up rig
operations in the future.
|
The
following table presents the information required by FAS 144 in respect of
discontinued operations:
|
(in
thousands of $)
|
2007
|
2006
|
2005
|
|||||||||
Carrying
amount of assets disposed of
|
524,961 | - | 12,875 | |||||||||
Carrying
amount of debt or lease retired
|
317,543 | - | 11,246 | |||||||||
Amounts
recorded in discontinued operations:
|
||||||||||||
Operating
revenues
|
11,465 | 25,494 | 9,865 | |||||||||
Net
income
|
5,442 | 13,514 | 14,096 | |||||||||
Gain
on disposal
|
- | 5,533 |
As
of December 31, 2004, the Company held
23,918,832 Golden Ocean shares representing 10.6% of the shares
outstanding. These were reported under Marketable Securities and in
February 2005, the Company sold these shares for a net gain of $12.8
million, of which $11.8 million was classified as discontinued operations
representing the difference between the cost of the shares sold and the
fair value of the shares at the date of the spin off of Golden
Ocean.
|
|
In
2005 the Company recognised an expense in discontinued operations of $10.2
million in connection with its guarantee of profit sharing payments for
the vessel Channel Alliance. The Company’s guarantee was issued
as part of the spin off of Golden Ocean in 2004.
|
|
32.
|
POOL
REVENUES
|
Voyage
charter revenues include pool revenues. Certain pools are responsible for
paying voyage expenses and distribute net pool revenues to the
participants while other pools require the participants to pay and account
for voyage expenses, and distribute gross pool revenues to the
participants such that the participants’ resulting net pool revenues are
equal to net pool revenues calculated according to the agreed formula. An
analysis of the Company’s pool revenues included within voyage revenues is
as follows:
|
2007
|
2006
|
2005
|
||||||||||
Pool
earnings allocated on gross basis
|
34,369 | 131,099 | 128,726 | |||||||||
Pool
earnings allocated on net basis
|
- | - | 25,015 | |||||||||
Total
pool earnings
|
34,369 | 131,099 | 153,741 |
33.
|
GAIN
ON ISSUANCE OF SHARES BY ASSOCIATE
|
The
Company had a 24.49% investment in IMAREX. IMAREX is an authorised
marketplace for the trading of freight derivatives in the global oil and
dry cargo shipping markets and was established in early 2000. On March 31,
2005, IMAREX announced that it had successfully concluded a share issue
prior to its listing on the Oslo Stock Exchange. A total of 432,098 shares
were sold for a price of NOK 81 per share (par value NOK 1) raising a
total of NOK 35 million. The Company did not participate in this share
issue and as a result, its holding changed from 26.56% to 24.84%. On July
14, 2005, IMAREX issued 98,750 shares pursuant to their employee share
option scheme and as a result, in 2005, the Company’s holding changed to
24.49%. A gain of $1.1 million was recorded in the statement of operations
in 2005 as a result of these share issues by IMAREX.
|
|
In
February 2007, the Company’s wholly owned subsidiary Sea Production
completed a private placement for 90.0 million shares at a price of $2 per
share, raising a total of $180.0 million. The Company subscribed for 25.5
million shares which represented a 28.3% investment. A gain of $39.8
million was recorded in the statement of operations as a result of the
issue of shares by Sea Production.
|
|
In
May 2007, Dockwise, which the Company accounted for under the equity
method, completed a private placement for 39.8 million shares at a price
of NOK 30 per share raising a total of NOK 1,194.0 million. The Company
subscribed for five million of these shares and as the subscription was
not sufficient to maintain the Company’s proportionate interest, the
Company’s shareholding was reduced from 33.3% to 17.1%. A gain of $43.8
million was recorded in the consolidated statement of operations as a
result. The Company subsequently accounted for its 17.1% investment as
marketable securities. In September 2007, Dockwise issued a further 0.5
million shares. The Company did not participate in this offering and its
shareholding was further reduced to 16.6%.
|
|
34.
|
SUBSEQUENT
EVENTS
|
In
January 2008, the Company’s lease with Ship Finance for the Front Maple
was terminated due to the sale of the vessel by Ship Finance. A
termination fee of $16.7 million was received from Ship
Finance.
|
|
In
January 2008, Golden President Shipping Corporation, a wholly owned
subsidiary of Golden Ocean, won a court case against Bocimar N.V.
regarding disputed profit share due on a time charter and was awarded
$14.7 million plus interest. Bocimar N.V. have subsequently appealed this
decision.The Company had previously guaranteed the profit share due to
Golden Ocean in connection with the spin off of Golden Ocean in 2004 and
Golden Ocean is due to repay the amount awarded to the Company when it is
received from Bocimar N.V.
|
|
In
February 2008, the Company’s Board of Directors declared a cash dividend
of $2.00 per share which was paid on March 10, 2008.
|
|
In
February 2008, the Company invested $20 million in Navig8 Limited
(“Navig8”) which represents a 15.8% investment in
Navig8.
|
|
In
February 2008, the Company announced the appointment of Ms. Katherine
Fredriksen as a director of the Company to fill a vacancy created by the
resignation of Mr. Tor Olav Troim.
|
|
In
February 2008, as part of the Company’s planned spin-off of its investment
in its Bermuda subsidiary Independent Tankers Corporation Limited (“ITCL”)
to the Company’s shareholders, the Company’s Board of Directors declared a
special dividend-in-kind of 20% of the Company’s investment in ITCL with
the distribution date being March 6, 2008. Eligible shareholders received
one share in ITCL for every five shares held in the Company. ITCL was
registered on the over-the-counter market in Oslo (“Oslo OTC”) on March 7,
2008. Certain of the Company’s U.S. shareholders were excluded from the
distribution with the estimated allotment of shares to these excluded
shareholders being sold by the Company on their behalf over the first five
days’ trading on the Oslo OTC market. The average share price determined
as a result of these sales was NOK 8.78, equivalent to $1.72 per ITCL
share. Accordingly, shareholders who were excluded from the distribution
received a cash payment in lieu of shares of $0.34 per Frontline
share.
|
|
In
February 2008, the Company’s Board of Directors approved a grant of
760,000 share options to the Board of Directors, senior management and
other employees in the Company under the terms of the Company’s existing
share option scheme. The strike price for the options is NOK 243 per share
and the options will vest over a period of three years.
|
|
In
March 2008, the Company entered into a forward contract for 1,366,600
shares in Overseas Shipholding Group, Inc (“OSG”) which represents 4.4% of
the total outstanding shares in OSG. The Company also announced that its
existing holding of shares in OSG together with shares held by companies
indirectly controlled by Mr. John Fredriksen corresponded to a 5.2%
ownership of OSG resulting in a total combined ownership of
9.6%.
|
|
In
April 2008, the Company entered into a contract for four VLCC newbuildings
for an aggregate cost of $540 million for delivery between June and
December 2011. The Company has also secured options for a further two
similar newbuildings at a fixed
price.
|
Adopted
September 28, 2007
|
1.
|
In
these Bye-Laws unless the context otherwise
requires-
|
|
·
|
“
Associate
”
means:
|
|
(a)
|
in
respect of an individual, such individual’s spouse, former spouse,
sibling, aunt, uncle, nephew, niece or lineal ancestor or descendant,
including any step-child and adopted child and their issue and step
parents and adoptive parents and their issue or lineal
ancestors;
|
|
(b)
|
in
respect of an individual, such individual’s partner and such partner’s
relatives (within the categories set out in (a)
above);
|
|
(c)
|
in
respect of an individual or body corporate, an employer or employee
(including, in relation to a body corporate, any of its directors or
officers);
|
|
(d)
|
in
respect of a body corporate, any person who controls such body corporate,
and any other body corporate if the same person has control of both or if
a person has control of one and persons who are his Associates, or such
person and persons who are his Associates, have control of the other, or
if a group of two or more persons has control of each body corporate, and
the groups either consist of the same persons or could be regarded as
consisting of the same persons by treating (in one or more cases) a member
of either group as replaced by a person of whom he is an
Associate. For the purposes of this paragraph, a person has
control of a body corporate if either (i) the directors of the body
corporate or of any other body corporate which has control of it (or any
of them) are accustomed to acting in accordance with his instructions or
(ii) he is entitled to exercise, or control the exercise of, one-third or
more of the votes attaching to all of the issued shares of the body
corporate or of another body corporate which has control of it (provided
that where two or more persons acting in concert satisfy either of the
above conditions, they are each to be taken as having control of the body
corporate);
|
|
·
|
“
Bermuda
” means the
Islands of Bermuda;
|
|
·
|
“
Board
” means the Board
of Directors of the Company or the Directors present at a meeting of
Directors at which there is a
quorum;
|
|
·
|
“
Business Day
” means a
day on which banks are open for the transaction of general banking
business in each of Oslo, Norway, London, UK, New York, USA and Hamilton,
Bermuda;
|
|
·
|
“
Company
” means the
company incorporated in Bermuda under the name of London & Overseas
Freighters Limited on the 12
th
day of June, 1992;
|
|
·
|
“
Companies Acts
” means
every Bermuda statute from time to time in force concerning companies
insofar as the same applies to the
Company;
|
|
·
|
“
employees share scheme
”
means a scheme for encouraging or facilitating the holding of shares or
debentures in the Company by or for the benefit of:
-
|
|
(a)
|
the
bona fide employees or former employees of the Company or any subsidiary
of the Company; or
|
|
(b)
|
the
wives, husbands, widows, widowers or children or step-children under the
age of 18 of such employees or former
employees;
|
|
·
|
“
Electronic Record
” means
a record created, stored, generated, received or communicated by
electronic means and includes any electronic code or device necessary to
decrypt or interpret such a record;
|
|
·
|
“
Extraordinary
Resolution
” means a resolution passed by a majority of not less
than two-thirds of the votes cast at a general meeting of the
Company;
|
|
·
|
“
Listing Exchange
” means
any stock exchange or quotation system upon which any of the shares of the
Company are listed from time to
time;
|
|
·
|
“
London Stock Exchange
”
means London Stock Exchange
Limited;
|
|
·
|
“
New York Stock Exchange
”
means the New York Stock Exchange;
|
|
·
|
“
Ordinary Resolution
”
means a resolution passed by a simple majority of votes cast at a general
meeting of the Company;
|
|
·
|
“
Oslo Stock Exchange
”
means the Oslo Stock Exchange;
|
|
·
|
“
paid up
” means paid up
or credited as paid up;
|
|
·
|
“
Principal Act
” means The
Companies Act, 1981 (Bermuda) as amended, restated or re-enacted from time
to time;
|
|
·
|
“
Register
” means the
Register of Shareholders of the Company and includes any branch
Register;
|
|
·
|
“
Registered Office
” means
the registered office for the time being of the
Company;
|
|
·
|
“
Registrar
” means such
person or body corporate as may, from time to time, be appointed by the
Board as Registrar;
|
|
·
|
“
Registration Office
”
means the place where the Board may from time to time determine to keep a
branch Register of Shareholders and where (except in cases where the Board
otherwise directs) the transfer and documents of title are to be lodged
for registration;
|
|
·
|
“
Resident Representative
”
means any person appointed to act as the resident representative of the
Company and includes any deputy or assistant resident
representatives;
|
|
·
|
“
Seal
” means the common
seal of the Company and includes any duplicate
thereof;
|
|
·
|
“
Secretary
” includes a
temporary or assistant Secretary and any person appointed by the Board to
perform any of the duties of the
Secretary;
|
|
·
|
“
Shareholder
” means a
shareholder of the Company;
|
|
·
|
“
these Bye-Laws
” means
these Bye-Laws in their present form or as from time to time
amended;
|
|
·
|
“
Treasury Shares
” means
any share of the Company that was acquired and held by the Company, or as
treated as having been acquired and held by the Company which has been
hold continuously by the Company since it was acquired and which has not
been cancelled;
|
|
·
|
“
VPS
” means the
Verdipapirsentralen, the computerized central share registry maintained in
Oslo, Norway, for bodies corporate whose shares are listed for trading on
the Oslo Stock Exchange, and includes any successor
registry;
|
|
·
|
for
the purpose of these Bye-Laws a body corporate shall be deemed to be
present in person if its representative duly authorized pursuant to the
Companies Acts is present;
|
|
·
|
words
importing the singular number also include the plural number and vice
versa;
|
|
·
|
words
importing the masculine gender also include the feminine and neuter
genders respectively;
|
|
·
|
words
importing persons also include companies and associations or bodies of
persons, whether corporate or
unincorporated;
|
|
·
|
references
to writing shall include typewriting, printing, lithography, facsimile,
photography and other modes of reproducing or reproducing words in a
legible and non-transitory form;
|
|
·
|
unless
otherwise defined herein, any words or expressions defined in the
Principal Act in force on the date when these Bye-Laws or any part thereof
are adopted shall bear the same meaning in these Bye-Laws or such part (as
the case may be); and
|
|
·
|
any
reference in these Bye-Laws to any statute or section thereof shall,
unless expressly stated, be deemed to be a reference to such statute or
section as amended, restated or re-enacted from time to
time;
|
|
·
|
headings
in these Bye-Laws are inserted for convenience of reference only and shall
not affect the construction
thereof.
|
2.
|
The
Registered Office shall be at such place in Bermuda as the Board shall
from time to time appoint.
|
3.
|
Subject
to the Companies Acts and any special rights conferred on the holders of
any other share of class of shares, any share in the Company may be issued
with or have attached thereto such preferred, deferred, qualified or other
special rights or such restrictions, whether in regard to dividend,
voting, return of capital or otherwise, as the Company may by Ordinary
Resolution determine.
|
4.
|
Subject
to the Companies Acts, any preference shares may, with the sanction of an
Ordinary Resolution, be issued on
terms:
|
|
(a)
|
that
they are to be redeemed on the happening of a specified event or on a
given date; and/or
|
|
(b)
|
that
they are liable to be redeemed at the option of the Company;
and/or
|
|
(c)
|
if
authorized by the memorandum of association or incorporating Act of the
Company, that they are liable to be redeemed at the option of the
holder.
|
5.
|
At
any time that the Company holds Treasury Shares, all of the rights
attaching to the Treasury Shares shall be suspended and shall not be
exercised by the Company. Without limiting the generality of
the foregoing, if the Company holds Treasury Shares, the Company shall not
have any right to attend and vote at a general meeting or sign written
resolutions and any purported exercise of such a right is
void.
|
6.
|
Except
where required by the Principal Act, Treasury Shares shall be excluded
from the calculation of any percentage or fraction of the share capital or
shares of the Company.
|
|
MODIFICATION
OF RIGHTS
|
7.
|
Subject
to the Companies Acts, all or any of the rights for the time being
attached to any class of shares for the time being issued may from time to
time (whether or not the Company is being wound up) be altered or
abrogated with the consent in writing of the holders of not less than
seventy-five percent in nominal value of the issued shares of that class
or with the sanction of a resolution passed by a majority of seventy-five
percent of the votes cast at a separate general meeting of the holders of
such shares voting in person or by proxy. To any such separate
general meeting, all the provisions of these Bye-Laws as to general
meetings of the Company shall mutatis mutandis apply, but so
that:
|
|
(a)
|
the
necessary quorum at any such meeting shall be two or more persons (or in
the event that there is only one holder of the shares of the relevant
class, one person) holding or representing by proxy in the aggregate at
least one third in nominal value of the shares of the relevant
class;
|
|
(b)
|
every
holder of shares of the relevant class present in person or by proxy shall
be entitled on a poll to one vote for every such share held by him;
and
|
|
(c)
|
any
holder of shares of the relevant class present in person or by proxy may
demand a poll.
|
8.
|
The
rights conferred upon the holders of any shares or class of shares shall
not, unless otherwise expressly provided in the rights attaching to or the
terms of issue of such shares, be deemed to be altered by the creation or
issue of further shares ranking pari passu
therewith.
|
9.
|
The
Company shall have the power to purchase its own shares for
cancellation.
|
10.
|
The
Company shall have the power to acquire its own shares to be held as
Treasury Shares.
|
11.
|
The
Board may exercise all of the powers of the Company to purchase or acquire
its own shares, whether for cancellation or to be held as Treasury Shares
in accordance with the Principal
Act.
|
12.
|
Subject
to the provisions of these Bye-Laws, the unissued shares of the Company
(whether forming part of the original capital or any increased capital)
shall be at the disposal of the Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons at such times
and for such consideration and upon such terms and conditions as the Board
may determine.
|
13.
|
The
Board may in connection with the issue of any shares exercise all powers
of paying commission and brokerage conferred or permitted by
law.
|
14.
|
Except
as ordered by a court of competent jurisdiction, as required by law or as
otherwise provided in these Bye-Laws, no person shall be recognized by the
Company as holding any share upon trust and the Company shall not be bound
by or required in any way to recognize (even when having notice thereon)
any equitable, contingent, future or partial interest in any share or any
interest in any fractional part of a share or any other right in respect
of any share except an absolute right to the entirety thereof in the
registered holder.
|
15.
|
No
shares shall be issued until they are fully paid except as may be
prescribed by an Ordinary
Resolution.
|
16.
|
The
preparation, issue and delivery of certificates shall be governed by the
Companies Acts. A person whose name is entered in the Register
as the holder of any shares shall be entitled to receive within two months
of a demand for same a certificate for such shares under the Seal of the
Company as prima facie evidence of title of such person to such
shares. In the case of a share held jointly by several persons,
delivery of a certificate for such share to one of several joint holders
shall be sufficient delivery to
all.
|
17.
|
If
a share certificate is defaced, lost or destroyed it may be replaced
without fee but on such terms (if any) as to evidence, indemnity and
payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board may
think fit and, in case of defacement, on delivery of the old certificate
to the Company.
|
18.
|
All
certificates for share or loan capital or other securities of the Company
(other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for
the time being relating thereto otherwise provide, be issued under the
Seal. The Board may by resolution determine, either generally
or in any particular case, that any signatures on any such certificates
need not be autographic but may be affixed to such certificates by
mechanical means or may be printed thereon or that such certificates need
not be signed by any persons.
|
19.
|
The
Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys, whether presently payable or not, called
or payable, at a date fixed by or in accordance with the terms of issue of
such share in respect of such share, and the Company shall also have a
first and paramount lien on every share (other than a fully paid share)
standing registered in the name of a Shareholder, whether singly or
jointly with any other person, for all the debts and liabilities of such
Shareholder or his estate to the Company, whether the same shall have been
incurred before or after notice to the Company of any interest of any
person other than such Shareholder, and whether the time for the payment
or discharge of the same shall have actually arrived or not, and
notwithstanding
that the same are joint debts or liabilities of such Shareholder or his
estate and any other person, whether a Shareholder or not. The
Company’s lien on a share shall extend to all dividends payable
thereon. The Board may at any time, either generally or in any
particular case, waive any lien that has arisen or declare any share to be
wholly or in part exempt from the provisions of this
Bye-Law.
|
20.
|
The
Company may sell, in such manner as the Board may think fit, any share on
which the Company has a lien, but no sale shall be made unless some sum in
respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment has been served on the holder
for the time being of the share.
|
21.
|
The
net proceeds of sale by the Company of any shares on which it has a lien
shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is
presently payable, and any residue shall (subject to a like lien for debts
or liabilities not presently payable as existed upon the share prior to
the sale) be paid to the holder of the share immediately before such
sale. For giving effect to any such sale the Board may
authorize some person to transfer the share sold to the purchaser
thereof. The purchaser shall be registered as the holder of the
share and he shall not be bound to see to the application of the purchase
money nor shall his title to the share be affected by any irregularity or
invalidity in the proceedings relating to the
sale.
|
22.
|
The
Board may from time to time make calls upon the Shareholders in respect of
any moneys unpaid on their shares (whether on account of the par value of
the shares or by way of premium) and not by the terms of issue thereof
made payable at a date fixed by or in accordance with such terms of issue,
and each Shareholder shall (subject to the Company serving upon him at
least seven days notice specifying the time or times and place of payment)
pay to the Company at the time or times and place so specified the amount
called on his shares. A call may be revoked or postponed as the
Board may determine.
|
23.
|
A
call may be made payable by installments and shall be deemed to have been
made at the time when the resolution of the Board authorizing the call was
passed.
|
24.
|
The
joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
|
25.
|
If
a sum called in respect of the share shall not be paid before or on the
day appointed for payment thereof, the person from whom the sum is due
shall pay interest on the sum from the day appointed for the payment
thereof to the time of actual payment at such rate as the Board may
determine, but the Board shall be at liberty to waive payment of such
interest wholly or in part.
|
26.
|
Any
sum which, by the terms of issue of a share, becomes payable on allotment
or at any date fixed by or in accordance with such terms of issue, whether
on account of the
nominal
amount of the share or by way of premium, shall for all the purposes of
these Bye-Laws be deemed to be a call duly made, notified and payable on
the date on which, by the terms of issue, the same becomes payable and, in
case of non-payment, all the relevant provisions of these Bye-Laws as to
payment of interest, forfeiture or otherwise shall apply as if such sum
had become payable by virtue of a call duly made and
notified.
|
27.
|
The
Board may on the issue of shares differentiate between the allottees or
holders as to the amount of calls to be paid and the times of
payment.
|
28.
|
If
a Shareholder fails to pay any call or installment of a call on the day
appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or installment remains unpaid serve a
notice on him requiring payment of so much of the call or installment as
is unpaid, together with any interest which may have
accrued.
|
29.
|
The
notice shall name a further day (not being less than fourteen days from
the date of the notice) on or before which, and the place where, the
payment required by the notice is to be made and shall state that, in the
event of non-payment on or before the day and at the place appointed, the
shares in respect of which such call is made or installment is payable
will be liable to be forfeited. The Board may accept the
surrender of any share liable to be forfeited hereunder and, in such case,
reference in these Bye-Laws to forfeiture shall include
surrender.
|
30.
|
If
the requirements of any such notice as aforesaid are not compiled with,
any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or installments and interest due
in respect thereof has been made, be forfeited by a resolution of the
Board to that effect. Such forfeiture shall include all
dividends declared in respect of the forfeited shares and not actually
paid before the forfeiture.
|
31.
|
When
any share has been forfeited, notice of the forfeiture shall be served
upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect
to give such notice as aforesaid.
|
32.
|
A
forfeited share shall be deemed to be the property of the Company and may
be sold, re-offered or otherwise disposed of either to the person who was,
before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit,
and, at any time before a sale, re-allotment or disposition, the
forfeiture may be canceled on such terms as the Board may think
fit.
|
33.
|
A
person whose shares have been forfeited shall thereupon cease to be a
Shareholder in respect of the forfeited shares, but shall, notwithstanding
the forfeiture, remain liable to pay to the Company all moneys which at
the date of forfeiture were presently payable by him to the Company in
respect of the shares with interest thereon at such rate as the Board may
determine from the date of forfeiture until payment, and the Company may
enforce payment without being under any obligation to make any allowance
for the value of the shares
forfeited.
|
34.
|
An
affidavit in writing that the deponent is a Director or the Secretary and
that a share has been duly forfeited on the date stated in the affidavit
shall be conclusive evidence of the facts therein stated as against all
persons claiming to be entitled to the share. The Company may
receive the consideration (if any) given for the share on the sale,
re-allotment or disposition thereof and the Board may authorize some
person to transfer the share to the person to whom the same is sold,
re-allotted or disposed of, and he shall thereupon be registered as the
holder of the share and shall not be bound to see to the application of
the purchase money (if any) nor shall his title to the share be affected
by any irregularity or invalidity in the proceedings relating to the
forfeiture, sale, re-allotment or disposal of the
share.
|
35.
|
The
Secretary shall establish and maintain the Register of Shareholders at the
Registered Office in the manner prescribed by the Companies
Acts. Unless the Board otherwise determines, the Register of
Shareholders shall be open to inspection in the manner prescribed by the
Companies Acts between 10:00 a.m. and 12:00 noon on every working
day. Unless the Board so determines, no Shareholder or
intending Shareholder shall be entitled to have entered in the Register
any indication of any trust or any equitable, contingent, future or
partial interest in any share or any interest in any fractional part of a
share and if any such entry exists or is permitted by the Board it shall
not be deemed to abrogate any of the provisions of
Bye-Law 14.
|
36.
|
Subject
to the Companies Act, the Company may keep a branch Register of
Shareholders in any place, and the Board may make and vary such
regulations as it determines in respect of the keeping of any such
Register and maintaining a Registration Office in connection
therewith.
|
37.
|
The
Secretary shall establish and maintain a register of the Directors and
Officers of the Company as required by the Companies Acts. The
register of Directors and Officers shall be open to inspection in the
manner prescribed by the Companies Acts between 10:00 a.m. and 12:00
noon on every working day.
|
38.
|
Subject
to the Companies Acts and to such of the restrictions contained in these
Bye-Laws as may be applicable and to the provisions of any applicable
United States securities laws including without limitation the United
States Securities Act, 1933, as amended, and the rules promulgated
thereunder, any Shareholder may transfer all or any of his shares by an
instrument of transfer in the usual common form or in any other form which
the Board may approve.
|
39.
|
The
instrument of transfer of a share shall be signed by or on behalf of the
transferor and, where any share is not fully-paid, the
transferee. The transferor shall be deemed to remain the holder
of the share until the name of the transferee is entered in the Register
in respect thereof. Should the Company be permitted to do so
under the laws of Bermuda,
the
Board may, either generally or in any particular case, upon request by the
transferor or the transferee, accept mechanically or electronically
(including a transfer by a London Stock Exchange nominee to whom no
certificate was issued) executed transfer and may also make such
regulations with respect to transfer in addition to the provisions of
these Bye-Laws as it considers appropriate. The Board may, in
its absolute discretion, decline to register any transfer of any share
which is not a fully-paid
share.
|
|
·
|
The
Board shall decline to register the transfer of any share, and shall
direct the Registrar to decline (and the Registrar shall decline) to
register the transfer of any interest in any share held through the VPS,
to a person where the Board is of the opinion that such transfer might
breach any law or requirement of any authority or any Listing Exchange
until it has received such evidence as it may require to satisfy itself
that no such breach would occur.
|
|
·
|
The
Board may decline to register the transfer of any share, and may direct
the Registrar to decline (and the Registrar shall decline if so requested)
to register the transfer of any interest in any share held through the
VPS, if the registration of such transfer would be likely, in the opinion
of the Board, to result in fifty percent or more of the aggregate issued
share capital of the Company or shares of the Company to which are
attached fifty percent or more of the votes attached to all outstanding
shares of the Company being held or owned directly or indirectly,
(including, without limitation, through the VPS) by a person or persons
resident for tax purposes in Norway (or such other jurisdiction as the
Board may nominate from time to time), provided that this provision shall
not apply to the registration of shares in the name of the Registrar as
nominee of persons whose interests in such shares are reflected in the
VPS, but shall apply, mutatis mutandis, to interests in shares of the
Company held by persons through the
VPS.
|
|
·
|
For
the purposes of this Bye-Law, each Shareholder (other than the Registrar
in respect of those shares registered in its name in the Register as
nominee of persons whose interests in such shares are reflected in the
VPS) shall be deemed to be resident for tax purposes in the jurisdiction
specified in the address shown in the Register for such Shareholder, and
each person whose interests in shares are reflected in the VPS shall be
deemed to be resident for tax purposes in the jurisdiction specified in
the address shown in the VPS for such person. If such
Shareholder or person is not resident for tax purpose in such jurisdiction
or if there is a subsequent change in his residence for tax purposes, such
Shareholder shall notify the Company immediately of his residence for tax
purposes.
|
|
·
|
Where
any Shareholder or person whose interests in shares are reflected in the
VPS fails to notify the Company in accordance with the foregoing, the
Board and the Registrar may suspend sine die such Shareholder’s or
person’s entitlement to vote or otherwise exercise any rights attaching to
the shares or interests therein and to receive payments of income or
capital which become due or payable in respect of such shares or interests
and the Company shall have no liability to such Shareholder or person
arising out of the late payment or non-payment of such sums and the
Company may retain such sums for its own use and
benefit. In
addition
to the foregoing the Board and the Registrar may dispose of the shares in
the Company or interests herein of such Shareholder or person at the best
price reasonably obtainable in all the circumstances. Where a
notice informing such Shareholder or person of the proposed disposal of
his shares or interests therein has been served, his shares or interest
therein may not be transferred otherwise than in accordance with this
Bye-Law 39 and any other purported transfer of such shares or interests
therein shall not be registered in the books of the Company or the VPS and
shall be null and void.
|
|
·
|
The
provision of these Bye-Laws relating to the protection of purchaser of
shares sold under lien or upon forfeiture shall apply mutatis mutandis to
a disposal of shares or interests therein by the Company or the Registrar
in accordance with this Bye-Law.
|
|
·
|
Without
limiting the generality of the foregoing, the Board may also decline to
register any transfer unless:-
|
|
(i)
|
the
instrument of transfer is duly stamped and lodged with the Company
accompanied by the certificate for the shares to which it relates if any
and such other evidence as the Board may reasonably require to show the
right of the transferor to make the
transfer;
|
|
(ii)
|
the
instrument of transfer is in respect of only one class of share;
and
|
|
(iii)
|
where
applicable, the permission of the Bermuda Monetary Authority with respect
thereto has been obtained.
|
|
·
|
Subject
to any directions of the Board from time to time in force the Secretary
may exercise the powers and discretion of the Board under this Bye-Law and
Bye-Laws 38 and 40.
|
|
·
|
If
fifty percent or more of the aggregate issued share capital of the Company
or shares to which are attached fifty percent or more of the votes
attached to all outstanding shares of the Company are found to be held or
owned directly or indirectly (including, without limitation, through the
VPS) by a person or persons resident for tax purposes in Norway (or such
other jurisdiction as the Board may nominate from time to time), other
than the Registrar in respect of those shares registered in its name in
the Register as nominee of persons whose interests in such shares are
reflected in the VPS, the Board shall make an announcement to such effect
through the Oslo Stock Exchange, and the Board and the Registrar shall
thereafter be entitled and required to dispose of such number of shares of
the Company or interests therein held or owned by such persons as will
result in the percentage of the aggregate issued share capital of the
Company held or owned as aforesaid being less than fifty percent, and, for
these purposes, the Board and the Registrar shall in such case dispose of
shares or interests therein owned by persons resident for tax purposes in
the relevant jurisdiction in question on the
basis
that the shares or interests therein most recently acquired shall be the
first to be disposed of (i.e. on the basis of last acquired first sold)
save where there is a breach of the obligation to notify tax residency
pursuant to the foregoing, in which event the shares or interests therein
of the person in breach thereof shall be sold
first. Shareholders shall not be entitled to raise any
objection to the disposal of their shares, but the provisions of these
Bye-Laws relating to the protection of purchasers of shares sold under
lien or upon forfeiture shall apply mutatis mutandis to any disposal of
shares or interests therein made in accordance with this
Bye-Law.
|
40.
|
If
the Board declines to register a transfer it shall, within sixty days
after the date on which the instrument of transfer was lodged, send to the
transferee notice of such refusal.
|
41.
|
No
fee shall be charged by the Company for registering any transfer, probate,
letters of administration, certificate of death or marriage, power of
attorney, distringas or stop notice, order of court or other instrument
relating to or affecting the title to any share, or otherwise making an
entry in the Register relating to any
share.
|
42.
|
The
Company may dispose of or transfer Treasury Shares for cash or other
consideration.
|
43.
|
In
the case of the death of a Shareholder, the survivor or survivors, where
the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognized by the Company as
having any title to his shares; but nothing herein contained shall release
the estate of a deceased holder (whether sole or joint) from any liability
in respect of any share held by him solely or jointly with other
persons. For the purpose of this Bye-Law, estate representative
means the person to whom probate or letters of administration has or have
been granted in Bermuda or, failing any such person, such other person as
the Board may in its absolute discretion determine to be the person
recognized by the Company for the purpose of this
Bye-Law.
|
44.
|
Any
person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time
to time be required by the Board as to his entitlement, either be
registered himself as the holder of the share or elect to have some person
nominated by him registered as the transferee thereof. If the
person so becoming entitled elects to be registered himself, he shall
deliver or send to the Company a notice in writing signed by him stating
that he so elects. If he shall elect to have another person
registered, he shall signify his election by signing an instrument of
transfer of such share in favor of that other person. All the
limitations, restrictions and provisions of these Bye-Laws relating to the
right to transfer and the registration of transfer of shares shall be
applicable to any such notice or instrument of transfer as aforesaid as if
the death of the Shareholder or other event giving rise to the
transmission had not occurred and the notice or instrument of transfer was
an instrument of transfer shared by such
Shareholder.
|
45.
|
A
person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board
as to his entitlement) be entitled to receive and may give a discharge for
any dividends or other moneys payable in respect of the share, but he
shall not be entitled in respect of the share to receive notices of or to
attend or vote at general meetings of the Company or, save as aforesaid,
to exercise in respect of the share any of the rights or privileges of a
Shareholder until he shall have become registered as the holder
thereof. The Board may at any time give notice requiring such
person to elect either to be registered himself or to transfer the share
and if the notice is not complied with within sixty days the Board may
thereafter withhold payment of all dividends and other moneys payable in
respect of the shares until the requirements of the notice have been
complied with.
|
46.
|
Subject
to any directions of the Board from time to time in force, the Secretary
may exercise the powers and discretions of the Board under
Bye-Laws 43, 44 and 45.
|
|
47.
|
(a)
|
Any
person (other than the Registrar in respect of those shares registered in
its name in the Register as the nominee of persons whose interests in such
shares are reflected in the VPS) who acquires or disposes of an interest
in shares to the effect that the requirements of the Oslo Stock Exchange
in effect from time to time concerning the duty to flag changes in a
person’s interest in shares require such changes to be notified shall
notify the Registrar immediately of such acquisition or disposal and the
resulting interest of that person in
shares.
|
|
(b)
|
For
the purposes of this Bye-Law, a person shall be deemed to have an interest
in shares:
|
|
(i)
|
owned
by such person’s spouse, minor child or
cohabitant;
|
|
(ii)
|
owned
by any body corporate in which such person owns shares representing the
majority of the votes attaching to all of the issued and outstanding
shares of such body corporate or over which he has as owner of shares in
such body corporate or by virtue of an agreement a determining influence
and a substantial participation (as those terms are interpreted by the
Norwegian courts from time to time) in the results of such body
corporate’s operations;
|
|
(iii)
|
owned
by any person with whom such person acts in concert (as such term is
interpreted from time to time by the Oslo Stock Exchange), by virtue of
any agreement or otherwise;
|
|
(iv)
|
registered
in the name of the Registrar in the Register as nominee of such person or
of any person referred to in clause (i), (ii), or (iii) in relation
to such person;
|
|
(v)
|
which
are issuable on the exercise of any options, convertible bonds,
subscription rights or any other rights to acquire shares in which such
person has an interest;
|
|
(vi)
|
subject
to a lien or other security interest in favor of such
person;
|
|
(vii)
|
which
are issuable on the exercise of purchase rights, preemption rights, or
other rights related thereto in which such person has an interest and
which are activated by the acquisition, disposal or conversion of
shares;
|
|
(viii)
|
subject
of any other agreed restriction on a Shareholder’s right to dispose of
same or to exercise such Shareholder’s rights as a Shareholder, in favor
of such person, except agreements to separate the dividend right from the
ownership right of a share;
|
|
(ix)
|
in
connection with the acquisition of which there was given guarantee of
their purchase price by such person or such person otherwise undertook a
risk with respect to the value thereof and which guarantee or risk remains
outstanding.
|
|
(c)
|
The
Registrar shall promptly report any such notification of interest to the
Oslo Stock Exchange and the
Company.
|
|
(d)
|
If
a person fails to give notification of a change in his interest in shares
in accordance with this Bye-Law 47 and the Board believes that such person
has acquired or disposed of an interest in shares in circumstances in
which he would be subject to the notification requirements of this
Bye-Law 47, the Board shall require the Registrar to serve upon that
person a notice:
|
|
(i)
|
requiring
him to comply with the notification requirements in relation to the change
in his interest in shares; and
|
|
(ii)
|
informing
him that, pending compliance with the notification requirements, the
registered holder or holders of the shares in which that person is
interested shall not be entitled to vote or otherwise exercise any rights
attaching to the shares to which the notice relates nor shall such
registered holder or holders be entitled to receive payments of income or
capital which become due or payable in respect of such
shares. The registered holder’s or holders’ entitlement to such
payments shall be suspended pending compliance with the notification
requirements without any liability of the Company to such holder or
holders arising for late payment or nonpayment and the Company may retain
such sums for its own use and benefit during such period of
suspension.
|
|
(e)
|
The
provisions of these Bye-Laws relating to the protection of purchasers of
shares sold under a lien or upon forfeiture shall apply mutatis mutandis
to disposals under this
Bye-Law 47.
|
48.
|
The
Company may from time to time increase its capital by such sum to be
divided into shares of such par value as the Company by Ordinary
Resolution shall prescribe.
|
49.
|
The
Company may, by the Ordinary Resolution increasing the capital, direct
that the new shares or any of them shall be offered in the first instance
either at par or at a premium or (subject to the provisions of the
Companies Act) at a discount to all the holders for the time being of
shares of any class or classes in proportion to the number of such shares
held by them respectively or make any other provision as to the issue of
the new shares.
|
50.
|
The
new shares shall be subject to all the provisions of these Bye-Laws with
reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
|
51.
|
The
Company may from time to time by Ordinary
Resolution:
|
|
(a)
|
increase
its capital as provided by Bye-Law
48;
|
|
(b)
|
divide
its shares into several classes and attach thereto respectively any
preferential, deferred, qualified or special rights, privileges or
conditions;
|
|
(c)
|
consolidate
and divide all or any of its share capital into shares of larger par value
than its existing shares;
|
|
(d)
|
sub-divide
its shares or any of them into shares of smaller amount than is fixed by
its memorandum, so, however, that in the sub-division the proportion
between the amount paid and the amount, if any, unpaid on each reduced
share shall be the same as it was in the case of the share from which the
reduced share is derived;
|
|
(e)
|
make
provision for the issue and allotment of shares which do not carry any
voting rights;
|
|
(f)
|
cancel
shares which at the date of the passing of the resolution in that behalf
have not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so
cancelled;
|
|
(g)
|
change
the currency denomination of its share
capital.
|
52.
|
Subject
to the provisions of the Companies Act and to any confirmation or consent
required by law or these Bye-Laws, the Company may by Ordinary Resolution
from time to time convert any preference shares into redeemable preference
shares.
|
53.
|
The
Company may from time to time purchase its own shares on such terms and in
such manner as may be authorized by the Board of Directors, subject to the
rules, if applicable, of the London Stock Exchange, the New York Stock
Exchange and the Oslo Stock Exchange. In the event the Company conducts a
tender offer for its shares, any such offer which is made through the
facilities of the Oslo Stock Exchange shall be expressed as being
conditional upon no Shareholders or persons resident for tax purposes in
Norway (or such other jurisdiction as the Board may nominate from time to
time) owning or controlling fifty percent or more of the issued share
capital or the votes attaching to the issued and outstanding share capital
of the Company following such
purchase.
|
54.
|
Subject
to the Companies Act, the Company shall have the option, but not the
obligation, to repurchase from any Shareholder or Shareholders all
fractions of shares, and all holdings of fewer than 100 shares, registered
in the name of said Shareholder or Shareholders. Such
repurchase shall be on such terms and conditions as the Board may
determine, provided that in any event, the repurchase price shall be not
less than the closing market price per share quoted on the New York Stock
Exchange or the Oslo Stock Exchange on the effective date of the
repurchase. Each Shareholder shall be bound by the determination of the
Company to repurchase such shares or fractions thereof. If the
Company determines to repurchase any such shares or fractions, the Company
shall give written notice to each Shareholder concerned accompanied by a
cheque or warrant for the repurchase price and the relevant shares,
fractions and certificates in respect thereof shall thereupon be
cancelled.
|
55.
|
Subject
to the Companies Acts, its memorandum and any confirmation or consent
required by law or these Bye-Laws, the Company may from time to time by
Ordinary Resolution authorize the reduction of its issued share capital or
any capital redemption reserve fund or any share premium or contributed
surplus account in any manner.
|
56.
|
In
relation to any such reduction the Company may by Ordinary Resolution
determine the terms upon which such reduction is to be effected,
including, in the case of a reduction of part only of a class of shares,
those shares to be affected.
|
|
57.
|
(a)
|
The
Board shall convene and the Company shall hold general meetings as Annual
General Meetings in accordance with the requirements of the Companies Acts
at such times and places subject to the limitation set out below as the
Board shall appoint. The Board may whenever it thinks fit, and
shall when required by the Companies Acts, convene general meetings other
than Annual General Meetings which shall be called Special General
Meetings. Any such Annual or Special General Meeting shall be
held at any place other than
Norway.
|
|
(b)
|
Except
in the case of the removal of auditors and directors, anything which may
be done by resolution of the Company in general meeting or by resolution
of a meeting of any class of the shareholders of the Company may, without
a meeting and without any previous notice being required, be done by
resolution in writing, signed by a simple majority of all of the
Shareholders (or such greater majority as is required by the Companies
Acts or these Bye-Laws) or their proxies, or in the case of a shareholder
that is a corporation (whether or not a company within the meaning of the
Companies Acts) on behalf of such Shareholder, being all of the
Shareholders of the Company who at the date of the resolution in writing
would be entitled to attend a meeting and vote on the
resolution. Such resolution in writing may be signed by, or in
the case of a shareholder that is a corporation (whether or not a company
within the meaning of the Companies Acts), on behalf of, all the
Shareholders of the Company, or any class thereof, in as many counterparts
as may be necessary.
|
|
(c)
|
A
resolution in writing is passed when the resolution is signed by, or in
the case of a Shareholder that is a corporation (whether or not a company
within the meaning of the Companies Acts), on behalf of, such number of
the Shareholders of the Company who at the date of the notice represent
such majority of votes as would be required if the resolution had been
voted on at a meeting of the
Shareholders.
|
|
(d)
|
A
resolution in writing made in accordance with this Bye-Law is as valid as
if it had been passed by the Company in general meeting or, if applicable,
by a meeting of the relevant class of shareholders of the Company, as the
case may be. A resolution in writing made in accordance with
this Bye-Law shall constitute minutes for the purposes of the Companies
Acts and these Bye-Laws.
|
|
(e)
|
Notice
of any resolution to be made pursuant to Bye-Law 57 (b) shall be given,
and a copy of the resolution shall be circulated, to all Shareholders who
would be entitled to attend a meeting and vote on the resolution in the
same manner as that required for a notice of a meeting of the Shareholders
at which the resolution could have been considered except that any
requirement in the Companies Acts or these Bye-Laws as to the length of
the period of notice shall not
apply.
|
58.
|
An
Annual General Meeting shall be called by not less than seven days notice
in writing and a Special General Meeting shall be called by not less than
seven days notice in writing. The notice period shall be
exclusive of the day on which the notice is served or deemed to be served
and of the day on which the meeting to which it relates is to be held and
shall specify the place, day and time of the meeting, and in the case of a
Special General Meeting, the general nature of the business to be
considered. Notice of every general meeting shall be given in
any manner permitted by these Bye-Laws to all Shareholders other than
such as, under the provisions of these Bye-Laws or the terms of issue of
the shares they hold, are not entitled to receive such notice from the
Company. Notwithstanding that a meeting of the Company is
called by shorter notice than that specified in this Bye-Law, it shall be
deemed to have been duly called if it is so
agreed:
|
|
(a)
|
in
the case of a meeting called as an Annual General Meeting by all the
Shareholders entitled to attend and vote
thereat;
|
|
(b)
|
in
the case of any other meeting by a majority in number of the Shareholders
having the right to attend and vote at the meeting, being a
majority together holding not less than ninety-five percent in nominal
value of the shares giving that
right;
|
59.
|
The
accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission
to send such instrument of proxy to or the non-receipt of notice of a
meeting or such instrument of proxy by any person entitled to receive such
notice shall not invalidate the proceedings at that
meeting.
|
60.
|
The
Board may convene a Special General Meeting whenever it thinks
fit. A Special General Meeting shall also be convened by the
Board on the written requisition of Shareholders holding at the date of
the deposit of the requisition not less than one tenth in nominal value of
the paid-up capital of the Company which as at the date of the deposit
carries
the right to vote at a general meeting of the Company. The
requisition must state the purposes of the meeting and must be signed by
the requisitionists and deposited at the registered office of the Company,
and may consist of several documents in like form each signed by one or
more of the requisitionists.
|
61.
|
No
business shall be transacted at any general meeting unless the requisite
quorum is present when the meeting proceeds to business, but the absence
of a quorum shall not preclude the appointment, choice or election of a
chairman which shall not be treated as part of the business of the
meeting. Save as otherwise provided by these Bye-Laws, the
quorum at any general meeting shall be constituted by one or more
shareholders, either present in person or represented by proxy, holding in
the aggregate shares carrying 33 1/3% of the voting rights entitled to be
exercised at such meeting.
|
62.
|
If
within five minutes (or such longer time as the chairman of the meeting
may determine to wait) after the time appointed for the meeting, a quorum
is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall
stand adjourned to such other day and such other time and place as the
chairman of the meeting may determine and at such adjourned meeting two
Shareholders or, in the event that there is only one Shareholder, one
Shareholder, present in person or by proxy (whatever the number of shares
held by them) shall be a quorum. The Company shall give not
less than five days notice of any meeting adjourned through want of a
quorum and such notice shall state that two Shareholders or, in the event
that there is only one Shareholder, one Shareholder, present in person or
by proxy (whatever the number of shares held by them) shall be a
quorum.
|
63.
|
A
meeting of the Shareholders or any class thereof may be held by means of
such telephone, electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such meeting shall
constitute presence in person at such
meeting.
|
64.
|
Each
Director and the Company’s auditor and Secretary shall be entitled to
attend and speak at any general meeting of the
Company.
|
65.
|
The
Chairman (if any) of the Board or, in his absence, the President shall
preside as chairman at every general meeting. If there is no
such Chairman or President, or if at any meeting neither the Chairman nor
the President is present within five minutes after the time appointed for
holding the meeting, or if neither of them is willing to act as chairman,
the Directors present shall choose one of their number to act or if one
Director only is present he shall preside as chairman if willing to
act. If no Director is present or if each of the Directors
present declines to take the chair, the persons present and entitled to
vote on a poll shall elect one of their number to be
chairman.
|
66.
|
The
chairman of the meeting may, with the consent of those present at any
meeting at which a quorum is present (and shall if so directed by the
meeting), adjourn the meeting from time to time and from place to place
but no business shall be transacted at any
adjourned
meeting except business which might lawfully have been transacted at the
meeting from which the adjournment took place. When a meeting
is adjourned for thirty days or more, notice of the adjourned meeting
shall be given as in the case of an original
meeting.
|
67.
|
Save
as expressly provided by these Bye-Laws, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an
adjourned meeting.
|
68.
|
Save
where a greater majority is required by the Companies Acts or these
Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by Ordinary
Resolution.
|
69.
|
The
Board may, with the sanction of an Ordinary Resolution, amalgamate the
Company with another company (whether or not the Company is the surviving
company and whether or not such an amalgamation involves a change in the
jurisdiction of the Company).
|
70.
|
At
any general meeting, a resolution put to the vote of the meeting shall be
decided on a show of hands or by a count of votes received in the form of
electronic records unless (before or on the declaration of the result of
the show of hands or on the withdrawal of any other demand for a poll) a
poll is demanded by:
|
|
(a)
|
the
chairman of the meeting; or
|
|
(b)
|
at
least three shareholders present in person or represented by proxy;
or
|
|
(c)
|
any
shareholder or shareholders present in person or represented by proxy and
holding between them not less than one tenth of the total voting rights of
all the shareholders having the right to vote at such meeting;
or
|
|
(d)
|
a
shareholder or shareholders present in person or represented by proxy
holding shares conferring the right to vote at such meeting, being shares
on which an aggregate sum has been paid up equal to at least one-tenth of
the total sum paid up on all such shares conferring such
right.
|
71.
|
A
poll demanded on the election of a chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any
other question shall be taken in such manner and either forthwith or at
such time (being not later than three months after the date of the demand)
and place as the chairman shall direct. It shall not be
necessary (unless the chairman otherwise directs) for notice to be given
of a poll.
|
72.
|
The
demand for a poll shall not prevent the continuance of a meeting for the
transaction of any business other than the question on which the poll has
been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll whichever is the
earlier.
|
73.
|
On
a poll, votes may be cast either personally or by
proxy.
|
74.
|
A
person entitled to more than one vote on a poll need not use all his votes
or cast all the votes he uses in the same
way.
|
75.
|
If
a poll is duly demanded, the result of the poll shall be deemed to be the
resolution of the meeting at which the poll is
demanded.
|
76.
|
In
the case of any equality of votes at a general meeting, whether on a show
of hands, a count of votes received in the form of electronic records or
on a poll, the chairman of such meeting shall not be entitled to a second
or casting vote.
|
77.
|
Subject
to the provisions of these Bye-Laws and to any special rights or
restrictions as to voting for the time being attached to any shares, every
Shareholder who is present in person or by proxy or proxies shall have one
vote for every share of which he is the
holder.
|
78.
|
In
the case of joint holders of a share, the vote of the senior joint holder
who tenders a vote, whether in person or by proxy, shall be accepted to
the exclusion of the votes of the other joint holders, and for this
purpose seniority shall be determined by the order in which the names
stand in the Register in respect of the joint
holding.
|
79.
|
A
Shareholder who is a patient for any purpose of any statute or applicable
law relating to mental health or in respect of whom an order has been made
by any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote by his
receiver, committee, curator bonis or other person in the nature of a
receiver, committee or curator bonis appointed by such Court and such
receiver, committee, curator bonis or other person may vote by proxy, and
may otherwise act and be treated as such Shareholder for the purpose of
general meetings.
|
80.
|
No
Shareholder shall, unless the Board otherwise determines, be entitled to
vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been
paid.
|
81.
|
If
(i) any objection shall be raised to the qualification of any voter or
(ii) any votes have been counted which ought not to have been counted or
which might have been rejected or (iii) any votes are not counted which
ought to have been counted, the objection or error shall not vitiate the
decision of the meeting or adjourned meeting on any resolution unless the
same is raised or pointed out at the meeting or, as the case may be, the
adjourned meeting at which the vote objected to is given or tendered or at
which the error occurs. Any objection or error shall be
referred to the chairman of the meeting and shall only vitiate the
decision of the meeting on any resolution if the chairman decides that the
same
may
have affected the decision of the meeting. The decision of the
chairman on such matters shall be final and
conclusive.
|
82.
|
A
Shareholder may appoint one or more proxies to attend at a general meeting
of the Company and to vote on his behalf and proxies appointed by a single
Shareholder need not all exercise their vote in the same
manner. The instrument appointing a proxy shall be in writing
under the hand of the appointor or of his attorney authorized by him in
writing or, if the appointor is a body corporate, either under its seal or
under the hand of an officer, attorney or other person authorized to sign
the same.
|
83.
|
Any
Shareholder may appoint a standing proxy or (if a body corporate)
representative by depositing at the Registered Office a proxy or (if a
body corporate) an authorization and such proxy or authorization shall be
valid for all general meetings and adjournments thereof or, resolutions in
writing, as the case may be, until notice of revocation is received at the
Registered Office which, if permitted by the Principal Act, may be in the
form of an electronic record. Where a standing proxy or
authorization exists, its operation shall be deemed to have been suspended
at any general meeting or adjournment thereof at which the Shareholder is
present or in respect of which the Shareholder has specially appointed a
proxy or representative. The Board may from time to time
require such evidence as it shall deem necessary as to the due execution
and continuing validity of any such standing proxy or authorization and
the operation of any such standing proxy or authorization shall be deemed
to be suspended until such time as the Board determines that it has
received the requested evidence or other evidence satisfactory to
it.
|
84.
|
Subject
to Bye-Law 83, the instrument appointing a proxy together with such other
evidence as to its due execution as the Board may from time to time
require, shall be delivered at the Registered Office which, if permitted
by the Principal Act may be in the form of an electronic record, at the
place of the meeting, or at such place as may be specified in the notice
convening the meeting or in any notice of any adjournment, or, in either
case, or the case of a written resolution, in any document sent therewith,
prior to the holding of the meeting or adjourned meeting at which the
person named in the instrument proposes to vote or, in the case of a poll
taken subsequent to the date of a meeting or adjourned meeting, before the
time appointed for the taking of the poll or, in the case of a written
resolution, prior to the effective date of the written resolution and in
default the instrument of proxy shall not be treated as
valid.
|
85.
|
Instruments
of proxy shall be in any common form or in such other form as the Board
may approve and the Board may, if it thinks fit, send out with the notice
of any meeting or any written resolution, forms of instruments of proxy
for use at that meeting or in connection with that written
resolution. The instrument of proxy shall be deemed to confer
authority to demand or join in demanding a poll and to vote on any
amendment of a written resolution or amendment of a resolution put to the
meeting for which it is given as the proxy thinks fit. The instrument of
proxy shall unless the contrary is stated therein be valid as well for any
adjournment of the meeting as for the meeting to which it
relates.
|
86.
|
A
vote given in accordance with the terms of an instrument of proxy shall be
valid notwithstanding the previous death or insanity of the principal or
revocation of the instrument of proxy or of the authority under which it
was executed, provided that no intimation in writing of such death,
insanity or revocation shall have been received by the Company at the
Registered Office which, if permitted by the Principal Act may be in the
form of an electronic record, the place of the meeting or such other place
as may be specified for the delivery of instruments of proxy in the notice
convening the meeting or other documents sent therewith before the
commencement of the meeting or adjourned meeting, or the taking of the
poll, at which the instrument of proxy is
used.
|
87.
|
Subject
to the Companies Acts, the Board may at its discretion waive any of the
provisions of these Bye-Laws related to proxies or authorizations and, in
particular, may accept such verbal or other assurances as it thinks fit as
to the right of any person to attend and vote on behalf of any Shareholder
at general meetings.
|
88.
|
Notwithstanding
any other provision of these Bye-Laws, any Shareholder may appoint an
irrevocable proxy by depositing at the Registered Office an irrevocable
proxy and such irrevocable proxy shall be valid for all general meetings
and adjournments thereof, or resolutions in writing, as the case may be,
until terminated in accordance with its own terms, or until written notice
of termination is received at the Registered Office signed by the
proxy. The instrument creating the irrevocable proxy shall
recite that it is constituted as such and shall confirm that it is granted
with an interest. The operation of an irrevocable proxy shall
not be suspended at any general meeting or adjournment thereof at which
the Shareholder who has appointed such proxy is present and the
Shareholder may not specially appoint another proxy to vote himself in
respect of any shares which are the subject of the irrevocable
proxy.
|
|
89.
|
(a)
|
Subject
to paragraph (e) below, where any transaction with a Principal Shareholder
is proposed, a circular must be sent to each
Shareholder.
|
|
(b)
|
For
the purposes of this Bye-Law:
|
|
(i)
|
“transaction
with a Principal Shareholder” means a transaction (other than a
transaction of a revenue nature in the ordinary course of business)
between the Company, or any of its subsidiaries, and a Principal
Shareholder or an Associate of a Principal Shareholder;
and
|
|
(ii)
|
“Principal
Shareholder” means any person (excluding the Registrar in respect of those
shares registered in its name on the Register as nominee of persons whose
interests in such shares are reflected in the VPS and any bare trustee)
who is, or was within the twelve months preceding the date of the
transaction, entitled to exercise, or to control the exercise of, whether
directly or indirectly (including through interests in shares registered
in the name of the
Registrar
on the Register as nominee of such person whose interests in such shares
are reflected in the VPS), twenty percent or more of the votes attaching
to all of the issued shares.
|
|
(c)
|
Any
circular sent to Shareholders in accordance with paragraph (a) above shall
provide sufficient information to enable each Shareholder to evaluate the
effects of the transaction on the Company or the relevant
subsidiary.
|
|
(d)
|
The
provisions of paragraph (a) of this Bye-Law shall apply mutatis mutandis
to any variation or novation of an existing agreement between the Company
(or any of its subsidiaries) and a Principal Shareholder (or Associate of
a Principal Shareholder) whether or not at the time that the original
agreement was entered into the latter party was a Principal Shareholder
(or Associate of a Principal
Shareholder).
|
|
(e)
|
Notwithstanding
the foregoing, the provisions of this Bye-Law shall not apply to any of
the following transactions:
|
|
(i)
|
an
issue of new shares for cash by the Company (or any of its subsidiaries);
or
|
|
(ii)
|
the
issue of shares of the Company (or of any of its subsidiaries) pursuant to
an employee share scheme of the Company (or such subsidiary);
or
|
|
(iii)
|
an
underwriting of all or part of an issue of shares by the Company (or any
of its subsidiaries) where the consideration paid by the Company (or such
subsidiary) in respect of such underwriting is no more than the usual
commercial underwriting consideration and is determined on the same basis
as the consideration to be paid to the other underwriters (if any);
or
|
|
(iv)
|
a
transaction that is not material. For the purposes of this
Bye-Law a transaction shall be material where the market value of the
assets which are the subject of the transaction (ignoring for these
purposes any related indebtedness) is greater than or equal to five
percent of the net assets of the Company as set out in the latest audited
accounts of the Company then available (or, if there are none, in the
latest consolidated balance sheet reported on by the auditors of the
Company) or, if less, U.S.$20,000,000;
or
|
|
(v)
|
a
transaction in which a Principal Shareholder participates solely by virtue
of his shareholding in, or interests in shares of, the Company and on a
pro-rata basis with the other holders of shares or interests in shares of
the relevant class of the Company, including, without limitation, the
declaration of a dividend by the Company or other distribution of assets
of the Company.
|
APPOINTMENT
AND REMOVAL OF DIRECTORS
|
90.
|
The
number of Directors shall be such number not less than two as the Company
by Ordinary Resolution may from time to time determine and each Director
shall, subject to the Companies Acts and these Bye-Laws, hold office until
the next annual general meeting following his election or until his
successor is elected.
|
91.
|
The
Company shall at the Annual General Meeting and may in a general meeting
by Ordinary Resolution determine the minimum and the maximum number of
Directors and may by Ordinary Resolution determine that one or more
vacancies in the Board shall be deemed casual vacancies for the purposes
of these Bye-Laws. Without prejudice to the power of the
Company in any general meeting in pursuance of any of the provisions of
these Bye-Laws to appoint any person to be a Director, the Board, so long
as a quorum of Directors remains in office, shall have power at any time
and from time to time to appoint any individual to be a Director so as to
fill a casual vacancy.
|
92.
|
The
Company may in a Special General Meeting called for that purpose remove a
Director provided notice of any such meeting shall be served upon the
Director concerned not less than fourteen days before the meeting and he
shall be entitled to be heard at that meeting. Any vacancy
created by the removal of a Director at a Special General Meeting may be
filled at the Meeting by the election of another person as Director in his
place or, in the absence of any such election, by the
Board.
|
93.
|
The
office of a Director shall be vacated upon the happening of any of the
following events:
|
|
(a)
|
if
he resigns his office by notice in writing delivered to the Registered
Office or tendered at a meeting of the
Board;
|
|
(b)
|
if
he becomes of unsound mind or a patient for any purpose of any statute or
applicable law relating to mental health and the Board resolves that he
shall be removed from office;
|
|
(c)
|
if
he becomes bankrupt or compounds with his
creditors;
|
|
(d)
|
if
he is prohibited by law from being a Director;
or
|
|
(e)
|
if
he ceases to be a Director by virtue of the Companies Acts or is removed
from office pursuant to these
Bye-Laws.
|
|
94.
|
(a)
|
The
Company may by Ordinary Resolution elect a person or persons qualified to
be Directors to act as Directors in the alternative to any of the
Directors of the Company or may authorize the Board to appoint such
Alternate Directors and a Director may appoint and remove his own
Alternate
Director. Any appointment or removal of an Alternate Director by a
Director shall be effected by depositing a notice of appointment or
removal with the Secretary at the Registered Office which, if permitted by
the Principal Act may be in the form of an electronic record, signed by
such Director, and such appointment or removal shall become effective on
the date of receipt by the Secretary. Any Alternate Director may be
removed by Ordinary Resolution of the Company and, if appointed by the
Board, may be removed by the Board. Subject as aforesaid, the
office of Alternate Director shall continue until the next annual election
of Directors or, if earlier, the date on which the relevant Director
ceases to be a Director. An Alternate Director may also be a
Director in his own right and may act as alternate to more than one
Director.
|
|
(b)
|
A
Director may at any time, by notice in writing signed by him delivered to
the Registered Office of the Company or at a meeting of the Board, appoint
any person (including another Director) to act as Alternate Director in
his place during his absence and may in like manner at any time determine
such appointment. If such person is not another Director such
appointment unless previously approved by the Board shall have effect only
upon and subject to being so approved. The appointment of an
Alternate Director shall determine on the happening of any event which,
were he a Director, would cause him to vacate such office or if his
appointor ceases to be a Director.
|
95.
|
The
amount, if any, of Directors’ fees shall from time to time be determined
by the Company by Ordinary Resolution and in the absence of a
determination to the contrary in general meeting, such fees shall be
deemed to accrue from day to day. Each Director may be paid his
reasonable traveling, hotel and incidental expenses properly incurred in
attending and returning from meetings of the Board or committees
constituted pursuant to these Bye-Laws or general meetings and shall be
paid all expenses properly and reasonably incurred by him in the conduct
of the Company’s business or in the discharge of his duties as a
Director. Any Director who, by request, goes or resides abroad
for any purposes of the Company or who performs services which in the
opinion of the Board go beyond the ordinary duties of a Director may be
paid such extra remuneration (whether by way of salary, commission,
participation in profits or otherwise) as the Board may determine, and
such extra remuneration shall be in addition to any remuneration provided
for by or pursuant to any other
Bye-Law.
|
|
96.
|
(a)
|
A
Director may hold any other office or place of profit with the Company
(except that of auditor) in conjunction with his office of Director for
such period and upon such terms as the Board may determine and may be paid
such extra remuneration therefor (whether by way of salary, commission,
participation in profits or otherwise) as the Board may determine, and
such
extra remuneration shall be in addition to any remuneration provided for
by or pursuant to any other
Bye-Law.
|
|
(b)
|
A
Director may act by himself or his firm in a professional capacity for the
Company (otherwise than as auditor) and he or his firm shall be entitled
to remuneration for professional services as if he were not a
Director.
|
|
(c)
|
Subject
to the provisions of the Companies Acts, a Director may notwithstanding
his office be a party to or otherwise interested in any transaction or
arrangement with the Company or in which the Company is otherwise
interested and may be a director or other officer of, employed by, a party
to any transaction or arrangement with, or otherwise interested in any
body corporate promoted by the Company or in which the Company is
interested. The Board may also cause the voting power conferred
by the shares in any other body corporate held or owned by the Company to
be exercised in such manner in all respects as it thinks fit, including
the exercise thereof in favor of any resolution appointing the Directors
or any of them to be directors or officers of such other body corporate,
or voting or providing for the payment of remuneration to the directors or
officers of such other body
corporate.
|
|
(d)
|
So
long as, where it is necessary, he declares the nature of his interest at
the first opportunity at a meeting of the Board or by writing to the
Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefit which
he derives from any office or employment to which these Bye-Laws allow him
to be appointed or from any transaction or arrangement in which these
Bye-Laws allow him to be interested, and no such transaction or
arrangement shall be liable to be avoided on the ground of any interest or
benefit.
|
|
(e)
|
Subject
to the Companies Acts and any further disclosure required thereby, a
general notice to the Directors by a Director or officer declaring that he
is a director or officer or has an interest in a person and is to be
regarded as interested in any transaction or arrangement made with that
person, shall be a sufficient declaration of interest in relation to any
transaction or arrangement so made.
|
97.
|
Subject
to the provisions of the Companies Acts and these Bye-Laws and to any
directions given by the Company in general meeting, the Board shall manage
the business of the Company and may pay all expenses incurred in promoting
and incorporating the Company and may exercise all the powers of the
Company. No alteration of these Bye-Laws and no such direction
shall invalidate any prior act of the Board which would have been valid if
that alteration had not been made or that direction had not been
given. The powers given by this Bye-Law shall not be limited by
any special power given to the
Board
by these Bye-Laws and a meeting of the Board at which a quorum is present
shall be competent to exercise all the powers, authorities and discretions
of the Company for the time being vested in or exercisable by the
Board. To the extent permitted by the Companies Acts, the Board
may agree that the Company shall not exercise, in whole or in part, any of
the powers in the Companies Acts that are reserved to
Shareholders.
|
98.
|
The
Board may exercise all the powers of the Company to borrow money and to
mortgage or charge all or any part of the undertaking property and assets
(present and future) and uncalled capital of the Company and to issue
debentures and other securities, whether outright or as collateral
security for any debt, liability or obligation of the Company or of any
other persons.
|
99.
|
All
checks, promissory notes, drafts, bills of exchange and other instruments,
whether negotiable or transferable or not, and all receipts for money paid
to the Company shall be signed, drawn, accepted, endorsed or otherwise
executed, as the case may be, in such manner as the Board shall from time
to time by resolution determine.
|
100.
|
The
Board on behalf of the Company may provide benefits, whether by the
payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has
been a subsidiary or affiliate of the Company or a predecessor in the
business of the Company or of any such subsidiary or affiliate, and to any
member of his family or any person who is or was dependent on him, and may
contribute to any fund and pay premiums for the purchase or provision of
any such gratuity, pension or other benefit, or for the insurance of any
such person in connection with the provision of pensions. The
Board may also establish and maintain any employees’ share scheme, share
option or share incentive scheme approved by Ordinary Resolution whereby
selected employees of the Company or of any company which is a subsidiary
of the Company are given the opportunity of acquiring shares in the
capital of the Company on the terms and subject to the conditions set out
in such scheme and establish and (if any such scheme so provides)
contribute to any scheme for the purchase by or transfer, allotment or
issue to trustees of shares in the Company to be held for the benefit of
employees (including Directors and officers) of the Company and subject to
the Companies Act lend money to such trustees or employees to enable the
purchase of such shares.
|
101.
|
The
Board may from time to time appoint one or more of its body to be a
managing director, joint managing director or an assistant managing
director or to hold any other employment or executive office with the
Company for such period and upon such terms as the Board may determine and
may revoke or terminate any such appointments. Any such
revocation or termination as aforesaid shall be without prejudice to any
claim for damages that such Director may have against the Company or the
Company may have against such Director for any breach of any contract of
service between him and the Company which may be involved in such
revocation or termination. Any person so appointed shall
receive such remuneration (if any, whether by way of salary, commission,
participation in profits or otherwise) as the Board may determine, and
either in addition to or in lieu of his remuneration as a
Director.
|
DELEGATION
OF THE BOARD’S POWERS
|
102.
|
The
Board may by power of attorney appoint any company, firm or person or any
fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or attorneys of the Company for such
purposes and with such power, authorities and discretions (not exceeding
those vested in or exercisable by the Board under these Bye-Laws) and for
such period and subject to such conditions as it may think fit, and any
such power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney and of such attorney
as the Board may think fit, and may also authorize any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested
in him. The Board may revoke or vary any such delegation of
power, but no person dealing in good faith with such delegate without
notice of such revocation or variation shall be affected by such
revocation or variation.
|
103.
|
The
Board may entrust to and confer upon any Director or officer or, without
prejudice to the provisions of Bye-Law 104, other individual any of the
powers exercisable by it upon such terms and conditions with such
restrictions as it thinks fit, and either collaterally with, or to the
exclusion of its own powers, and may from time to time revoke or vary all
or any of such powers but no person dealing in good faith and without
notice of such revocation or variation shall be affected
thereby.
|
104.
|
The
Board may delegate any of its powers, authorities or discretions to
committees, consisting of such person or persons (whether a member or
members of its body or not) as it thinks fit. Any committee so
formed shall, in the exercise of the powers, authorities and discretions
so delegated, conform to any regulations which may be imposed upon it by
the Board. The Board may revoke or vary any such delegation of
its powers, authorities and discretions, but no person dealing in good
faith and without notice of such revocation or variation shall be affected
thereby.
|
105.
|
The
Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit, provided that Board meetings are
to be held outside Norway and the United Kingdom. Questions
arising at any meeting shall be determined by a majority of votes
cast. In the case of an equality of votes the motion shall be
deemed to have been lost. A Director may, and the Secretary on
the requisition of a Director shall, at any time summon a Board
meeting.
|
106.
|
Notice
of a Board meeting shall be deemed to be duly given to a Director if it is
given to him personally or by word of mouth or sent to him by post, cable,
telex, telecopier or other mode of representing or reproducing words in a
legible and non-transitory form at his last known address or any other
address given by him to the Company for this purpose. A
Director may waive notice of any meeting either prospectively or
retrospectively.
|
|
107.
|
(a)
|
The
quorum necessary for the transaction of the business of the Board may be
fixed by the Board and, unless so fixed at any other number, shall
be
a majority of the Board present in person or by proxy, provided that a
quorum shall not be present unless a majority of the Directors present are
not resident in Norway. Any Director who ceases to be a
Director at a Board meeting may continue to be present and to act as a
Director and be counted in the quorum until the termination of the Board
meeting if no other Director objects and if otherwise a quorum of
Directors would not be
present.
|
|
(b)
|
Subject
to the provisions of Bye-Law 96 a Director who to his knowledge is in any
way, whether directly or indirectly, interested in a contract or proposed
contract, transaction or arrangement with the Company and has complied
with the provisions of the Companies Acts and these Bye-Laws with regard
to disclosure of his interest shall be entitled to vote in respect of any
contract, transaction or arrangement in which he is so interested and if
he shall do so his vote shall be counted, and he shall be taken into
account in ascertaining whether a quorum is
present.
|
108.
|
So
long as a quorum of Directors remains in office, the continuing Directors
may act notwithstanding any vacancy in the Board but, if no such quorum
remains, the continuing Directors or a sole continuing Director may act
only for the purpose of calling a general
meeting.
|
109.
|
The
Chairman (if any) of the Board or, in his absence, the President shall
preside as chairman at every meeting of the Board. If there is
no such Chairman or President, or if at any meeting neither the Chairman
nor the President is present within five minutes after the time appointed
for holding the meeting, or if neither of them is willing to act as
chairman, the Directors present may choose one of their number to be
chairman of the meeting.
|
110.
|
The
meetings and proceedings of any committee consisting of two or more
members shall be governed by the provisions contained in these Bye-Laws
for regulating the meetings and proceedings of the Board so far as the
same are applicable and are not superseded by any regulations imposed by
the Board.
|
111.
|
A
resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the members
of a committee for the time being shall be as valid and effectual as a
resolution passed at a meeting of the Board or, as the case may be, of
such committee duly called and constituted. Such resolution may
be contained in one document or in several documents in the like form each
signed by one or more of the Directors or members of the committee
concerned.
|
112.
|
A
meeting of the Board or a committee appointed by the Board may be held by
means of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with each
other simultaneously and instantaneously and participation in such a
meeting shall constitute presence in person at such meeting. A
meeting of the Board or committee appointed by the Board held in the
foregoing manner shall be deemed to take place at the place where the
largest group of participating Directors or committee members has
assembled or, if no such group exists,
at
the place where the chairman of the meeting participates. The
Board or relevant committee shall use its best endeavours to ensure that
any such meeting is not deemed to have been held in Norway or the United
Kingdom, and the fact that one or more Directors may be present at such
teleconference by virtue of his being physically in Norway or the United
Kingdom shall not deem such meeting to have taken place in Norway or the
United Kingdom.
|
113.
|
All
acts done by the Board or by any committee or by any person acting as a
Director or member of a committee or any person duly authorized by the
Board or any committee, shall, notwithstanding that it is afterwards
discovered that there was some defect in the appointment of any member of
the Board or such committee or person acting as aforesaid or that they or
any of them were disqualified or had vacated their office, be as valid as
if every such person had been duly appointed and was qualified and had
continued to be a Director, member of such committee or person so
authorized.
|
114.
|
The
Board may appoint any person whether or not he is a Director to hold such
other office as the Board may from time to time determine. Any
person elected or appointed pursuant to this Bye-Law shall hold office for
such period and upon such terms as the Board may determine and the Board
may revoke or terminate any such election or appointment. Any
such revocation or termination shall be without prejudice to any claim for
damages that such officer may have against the Company or the Company may
have against such officer for any breach of any contract of service
between him and the Company which may be involved in such revocation or
termination. Save as provided in the Companies Acts or these
Bye-Laws, the powers and duties of the officers of the Company shall be
such (if any) as are determined from time to time by the
Board.
|
115.
|
The
Directors shall cause minutes to be made and books kept for the purpose of
recording:
|
|
(a)
|
all
appointments of officers made by the
Directors;
|
|
(b)
|
the
names of the Directors and other persons (if any) present at each meeting
of Directors and of any committee;
|
|
(c)
|
all
proceedings at meetings of the Company, of the holders of any class of
shares in the Company, and of committees;
and
|
|
(d)
|
all
proceedings of managers (if any).
|
116.
|
The
Secretary and Resident Representative shall be appointed by the Board at
such remuneration (if any) and upon such terms as it may think fit and any
Secretary and Resident Representative so appointed may be removed by the
Board.
The
duties of the Secretary and Resident Representative shall be those
prescribed by the Companies Acts together with such other duties as shall
from time to time be prescribed by the
Board.
|
117.
|
A
provision of the Companies Acts or these Bye-Laws requiring or authorizing
a thing to be done by or to a Director and the Secretary shall not be
satisfied by its being done by or to the same person acting both as
Director and as, or in the place of, the
Secretary.
|
118.
|
The
Company may, but need not, have a Seal and one or more duplicate Seals for
use in any place outside of
Bermuda.
|
119.
|
If
the Company has a Seal:
|
|
(A)
|
The
Seal shall consist of a circular metal device with the name of the Company
around the outer margin thereof and “Bermuda 1992” across the centre
thereof. Should the Seal not have been received at the
Registered Office in such form at the date of adoption of this Bye-Law
then, pending such receipt, any document requiring to be sealed with the
Seal shall be sealed by affixing a red wafer seal to the document with the
name of the Company, and “Bermuda 1992” typewritten across the centre
thereof.
|
|
(B)
|
The
Board shall provide for the custody of every Seal. A Seal shall
only be used by authority of the Board or of a committee constituted by
the Board. Subject to these Bye-Laws, any instrument to which
the Seal is affixed shall be signed by at least one Director or the
Secretary, or by any person (whether or not a Director of the Secretary)
who has been authorized either generally or specifically to attest to the
use of a Seal;
|
|
(C)
|
The
Company may have a duplicate Seal for use abroad where and as the
Directors shall determine and the Company may by writing under the Seal
appoint any agents or agent or committee abroad to be the duly authorized
agent of the Company for the purpose of affixing and using such duplicate
Seal and they may impose such restrictions on the use thereof as may be
thought fit. Wherever in the Bye-Laws reference is made to the
Seal, the reference shall, when and so far as may be applicable, be deemed
to include any such duplicate seal as
aforesaid.
|
120.
|
The
Secretary, a Director or the Resident Representative may affix a Seal
attested with his signature to certify the authenticity of any copies of
documents.
|
121.
|
The
Board may from time to time declare cash dividends or distributions out of
contributed surplus to be paid to the Shareholders according to their
rights and interests including interim dividends as appear to the Board to
be justified by the position of the Company. The Board may also
pay any fixed cash dividend which is payable on any
shares
of the Company half yearly or on such other dates, whenever the position
of the Company in the opinion of the Board, justifies such
payment.
|
122.
|
Except
insofar as the rights attaching to, or the terms of issue of, any share
otherwise provide:
|
|
(a)
|
all
dividends or distributions out of contributed surplus may be declared and
paid according to the amounts paid up on the shares in respect of which
the dividend or distribution is paid and an amount paid up on a share in
advance of calls may be treated for the purpose of this Bye-Law as paid-up
on the share;
|
|
(b)
|
dividends
or distributions out of contributed surplus may be apportioned and paid
pro rata according to the amounts paid up on the shares during any portion
or portions of the period in respect of which the dividend or distribution
is paid.
|
123.
|
The
Board may deduct from any dividend, distribution or other moneys payable
to a Shareholder by the Company on or in respect of any share all sums of
money (if any) presently payable by him to the Company on account of calls
or otherwise in respect of shares of the
Company.
|
124.
|
No
dividend, distribution or other moneys payable by the Company on or in
respect of any share shall bear interest against the Company unless
otherwise provided by the rights attached to such
share.
|
125.
|
Any
dividend distribution, interest or other sum payable in cash to the holder
of shares may be paid by check or warrant sent through the mail addressed
to the holder at his address in the Register or, in the case of joint
holders, addressed to the holder whose name stands first in the Register
in respect of the shares at his registered address as appearing in the
Register or addressed to such person at such address as the holder or
joint holders may in writing direct. Every such check or
warrant shall, unless the holder or joint holders otherwise direct, be
made payable to the order of the holder or, in the case of joint holders,
to the order of the holder whose name stands first in the Register in
respect of such shares, and shall be sent at his or their risk, and
payment of the check or warrant by the bank on which it is drawn shall
constitute a good discharge to the Company. Any one of two or
more joint holders may give effectual receipts for any dividends,
distributions or other moneys payable or property distributable in respect
of the shares held by such joint
holders.
|
126.
|
Any
dividend or proceeds of share repurchase or distribution out of
contributed surplus unclaimed for a period of six years from the date of
declaration of such dividend or proceeds of share repurchase or
distribution shall be forfeited and shall revert to the Company, and the
payment by the Board of any unclaimed dividend, distribution, interest or
proceeds of share repurchase or other sum payable on or in respect of the
share into a separate account shall not constitute the Company a trustee
in respect thereof.
|
127.
|
The
Board may direct payment or satisfaction of any dividend or distribution
out of contributed surplus wholly or in part by the distribution of
specific assets and, in particular, of paid up shares or debentures of any
other body corporate, and where any difficulty arises in regard to such
distribution or dividend the Board may settle it as it thinks expedient
and, in particular, may authorize any person to sell and transfer any
fractions or may ignore fractions altogether and may fix the value for
distribution or dividend purposes of any such specific assets and may
determine that cash payments shall be made to any Shareholders upon the
basis of the value so fixed in order to secure equality of distribution
and may vest any such specific assets in trustees as may seem expedient to
the Board.
|
128.
|
The
Board may, before recommending or declaring any dividend or distribution
out of contributed surplus, set aside such sums as it thinks proper as
reserves which shall, at the discretion of the Board, be applicable for
any purpose of the Company and pending such application may, also at such
discretion, either be employed in the business of the Company or be
invested in such investments as the Board may from time to time think
fit. The Board may also without placing the same to reserve
carry forward any sums which it may think it prudent not to
distribute.
|
129.
|
The
Company may, upon the recommendation of the Board, at any time and from
time to time resolve by Ordinary Resolution to the effect that it is
desirable to capitalize all or any part of any amount for the time being
standing to the credit of any reserve or fund which is available for
distribution or to the credit of any share premium account or any capital
redemption reserve fund and accordingly that such amount be set free for
distribution amongst the Shareholders or any class of Shareholders who
would be entitled thereto if distributed by way of dividend and in the
same proportions, provided that the same be not paid in cash but be
applied either in or towards paying up amounts for the time being unpaid
on any shares in the Company held by such Shareholders respectively or in
payment up in full of unissued shares, debentures or other obligations of
the Company, to be allotted, distributed and credited as fully paid among
such Shareholders, or partly in one way or partly in the other, and the
Board shall give effect to such resolution, provided that for the purpose
of this Bye-Law, a share premium account and a capital redemption reserve
fund may be applied only in paying up of unissued shares to be issued to
such Shareholders credited as fully paid and provided further that any sum
standing to the credit of a share premium account may only be applied in
crediting as fully paid shares of the same class as that from which the
relevant share premium was derived.
|
130.
|
Where
any difficulty arises in regard to any distribution under the last
preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorize any person to sell and transfer any
fractions, may resolve that the distribution should be as nearly as may be
practicable in the correct proportion but not exactly so, or may ignore
fractions altogether, and may determine that cash payments should be made
to
any Shareholders in order to adjust the rights of all parties, as may seem
expedient to the Board. The Board may appoint any person to
sign on behalf of the persons entitled to participate in the distribution
any contract necessary or desirable for giving effect thereto and such
appointment shall be effective and binding upon the
Shareholders.
|
131.
|
Notwithstanding
any other provision of these Bye-Laws the Directors may fix any date as
the record date for:
|
|
(a)
|
determining
the Members entitled to receive any dividend or other distribution and
such record date may be on, or not more than 30 days before or after, any
date on which such dividend or distribution is
declared;
|
|
(b)
|
determining
the Members entitled to receive notice of and to vote at any general
meeting of the Company.
|
132.
|
The
Board shall cause to be kept accounting records sufficient to give a fair
presentation in all material respects of the state of the Company’s
affairs and to show and explain its transactions in accordance with the
Companies Acts.
|
133.
|
The
records of account shall be kept at the Registered Office or at such other
place or places as the Board thinks fit and shall at all times be open to
inspection by the Directors; PROVIDED that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of
the Company in Bermuda such records as will enable the Director to
ascertain with reasonable accuracy the financial position of the Company
at the end of each three-month period. No Shareholder (other
than an officer of the Company) shall have any right to inspect any
accounting record or book or document of the Company except as required by
any Listing Exchange, by law, by regulations or as authorized by the Board
or by Ordinary Resolution.
|
134.
|
A
copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is
to be laid before the Company in general meeting, together with a copy of
the auditor’s report, shall be sent to each person entitled thereto in
accordance with the requirements of the Companies Acts and (without
prejudice to the generality of Bye-Law 139) upon the coming into force of
Section 2A of the Principal Act, the requirements of this Bye-Law shall be
met by the publication of the relevant document as an electronic record on
a website designated for the purpose by the
Company.
|
135.
|
Save
and to the extent that an audit is waived in the manner permitted by the
Companies Acts, auditors shall be appointed and their duties regulated in
accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with
|
|
the
Companies Acts as the Board may from time to time determine, save that the
fees of the auditor shall be determined by Ordinary
Resolution.
|
136.
|
Any
notice or other document (including a share certificate) shall be in
writing (except where otherwise expressly stated) and may be served on or
delivered to any Shareholder by the Company either personally or by
sending it through the mail (by airmail where applicable) in a prepaid
letter addressed to such Shareholder at his address as appearing in the
Register or by delivering it to or leaving it at such registered
address. In the case of joint holders of a share, service or
delivery of any notice or other document on or to one of the joint holders
shall for all purposes be deemed as sufficient service on or delivery to
all the joint holders. Any notice or other document if sent by
mail shall be deemed to have been served or delivered two Business Days
after it was put in the mail; and, in proving such service or delivery, it
shall be sufficient to prove that the notice or document was properly
addressed, stamped and put in the
mail.
|
137.
|
Any
notice of a general meeting of the Company shall be deemed to be duly
given to a Shareholder if it is sent to him by cable, telex, telecopier or
other mode of representing or reproducing words in a legible and
non-transitory form at his address as appearing in the Register or any
other address given by him to the Company for this purpose. Any
such notice shall be deemed to have been served two Business Days after
its dispatch.
|
138.
|
Any
notice or other document delivered, sent or given to a Shareholder in any
manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred,
and whether or not the Company has received notice of the death or
bankruptcy or other event, be deemed to have been duly served or delivered
in respect of any share registered in the name of such Shareholder as sole
or joint holder unless his name shall, at the time of the service or
delivery of the notice or document, have been removed from the Register as
the holder of the share, and such service or delivery shall for all
purposes be deemed as sufficient service or delivery of such notice or
document on all persons interested (whether jointly with or as claiming
through or under him) in the share.
|
139.
|
Upon
Section 2A of the Principal Act coming into force, any notice or other
document shall be deemed to be duly given to a Shareholder if it is
delivered to such Shareholder by means of an electronic record in
accordance with Section 2A of the Principal
Act.
|
140.
|
Notwithstanding
any other provisions of these
Bye-Laws:
|
|
(a)
|
where
there is a requirement under the Companies Acts or these Bye-Laws that the
Company may provide a document to a person, or for the document to
accompany another document, the requirement may be met by the delivery, or
deemed delivery, of an electronic record of the document in accordance
with this Bye-Law;
|
|
(b)
|
where
there is a requirement under the Companies Acts or these Bye-Laws that a
Shareholder provide a document to the Company, or for a document
to
accompany another document, the requirement may be met by the Shareholder
by the delivery, or deemed delivery, of an electronic record of the
document in accordance with this
Bye-Law;
|
|
(c)
|
for
the purposes of this Bye-Law, “to provide” includes to sent, forward,
give, deliver, submit, file, deposit, furnish, issue, leave at, serve,
circulate, lay, make available or
lodge;
|
|
(d)
|
an
electronic record of a document may be delivered to a person by
communicating it by electronic means to the person at the address or
number that has been notified by the person for the purposes of
communication by electronic means;
|
|
(e)
|
an
electronic record of a document is deemed to have been delivered to a
person if it is published on a website
and:
|
|
(i)
|
the
person to whom the document is provided has agreed to have documents of
that type provided by way of accessing them on a website instead of them
being provided by other means;
|
|
(ii)
|
the
document is a document of the type to which the agreement applies;
and
|
|
(iii)
|
the
person is notified in accordance with the agreement of the publication of
the document on the website, the address of the website, the place on the
website where the document may be found, and how the document may be
accessed on the website.
|
|
(f)
|
Nothing
in the foregoing shall invalidate the deemed delivery of an electronic
copy of a document if:
|
|
(i)
|
the
document is published for at least part of the period;
and
|
|
(ii)
|
the
failure to publish it throughout the whole of the period is wholly
attributable to circumstances that the Company could not reasonably have
been expected to prevent or avoid.
|
141.
|
If
the Company shall be wound up, the liquidator may, with the sanction of an
Extraordinary Resolution and any other sanction required by the Companies
Acts, divide among the Shareholders in specie or kind the whole or any
part of the assets of the
Company
(whether they shall consist of property of the same kind or not) and may
for such purposes set such values as he deems fair upon any property to be
divided as aforesaid and may determine how such division shall be carried
out as between the Shareholders or different classes of
Shareholders. The liquidator may, with the like sanction, vest
the whole or any part of such assets in trustees upon such trust for the
benefit of the contributors as the liquidator, with the like sanction,
shall think fit, but so that no Shareholder shall be compelled to accept
any shares or other assets upon which there is any
liability.
|
142.
|
No
Director, Alternate Director, Officer, member of a committee authorised
under Bye-law 104, Resident Representative of the Company or their
respective heirs, executors or administrators shall be liable for the
acts, receipts, neglects, or defaults of any other such person or any
person involved in the formation of the Company, or for any loss or
expense incurred by the Company through the insufficiency or deficiency of
title to any property acquired by the Company, or for the insufficiency of
deficiency of any security in or upon which any of the monies of the
Company shall be invested, or for any loss or damage arising from the
bankruptcy, insolvency, or tortious act of any person with whom any
monies, securities, or effects shall be deposited, or for any loss
occasioned by any error of judgment, omission, default, or oversight on
his part, or for any other loss, damage or misfortune whatever which shall
happen in relation to the execution of his duties, or supposed duties, to
the Company or otherwise in relation
thereto.
|
143.
|
Every
Director, Alternate Director, Officer, member of a committee constituted
under Bye-Law 104, Resident Representative of the Company or their
respective heirs, executors or administrators shall be indemnified and
held harmless out of the funds of the Company to the fullest extent
permitted by Bermuda law against all liabilities loss damage or expense
(including but not limited to liabilities under contract, tort and statute
or any applicable foreign law or regulation and all reasonable legal and
other costs and expenses properly payable) incurred or suffered by him as
such Director, Alternate Director, Officer, committee member or Resident
Representative and the indemnity contained in this Bye-Law shall extend to
any person acting as such Director, Alternate Director, Officer, committee
member or Resident Representative in the reasonable belief that he has
been so appointed or elected notwithstanding any defect in such
appointment or election.
|
144.
|
Every
Director, Alternate Director, Officer, member of a committee constituted
under Bye-Law 104, Resident Representative of the Company and their
respective heirs, executors or administrators shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director, Alternate Director, Officer, member of a committee constituted
under Bye-Law 104, Resident Representative in defending any proceedings,
whether civil or criminal, in which judgment is given in his favour, or in
which he is acquitted, or in connection with any application under the
Companies Acts in which relief from liability is granted to him by the
court.
|
145.
|
To
the extent that any Director, Alternate Director, Officer, member of a
committee constituted under Bye-Law 104, Resident Representative of the
Company or any of their respective heirs, executors or administrators is
entitled to claim an indemnity pursuant to these Bye-Laws in respect of
amounts paid or discharged by him, the relative indemnity shall take
effect as an obligation of the Company to reimburse the person making such
payment or effecting such
discharge.
|
146.
|
The
Board may arrange for the Company to be insured in respect of all or any
part of its liability under the provision of these Bye-laws and may also
purchase and maintain insurance for the benefit of any Directors,
Alternate Directors, Officers, person or member of a committee authorised
under Bye-law 104, employees or Resident Representatives of the Company in
respect of any liability that may be incurred by them or any of them
howsoever arising in connection with their respective duties or supposed
duties to the Company. This Bye-law shall not be construed as limiting the
powers of the Board to effect such other insurance on behalf of the
Company as it may deem appropriate.
|
147.
|
Notwithstanding
anything contained in the Principal Act, the Company may advance moneys to
an Officer or Director for the costs, charges and expenses incurred by the
Officer or Director in defending any civil or criminal proceedings against
them on the condition that the Director or Officer shall repay the advance
if any allegation of fraud or dishonesty is proved against
them.
|
148.
|
Each
Member agrees to waive any claim or right of action he might have, whether
individually or by or in the right of the Company, against any Director,
Alternate Director, Officer of the Company, person or member of a
committee authorised under Bye-law 105, Resident Representative of the
Company or any of their respective heirs, executors or administrators on
account of any action taken by any such person, or the failure of any such
person to take any action in the performance of his duties, or supposed
duties, to the Company or otherwise in relation
thereto.
|
149.
|
The
restrictions on liability, indemnities and waivers provided for in
Bye-laws 142 to 150 inclusive shall not extend to any matter which would
render the same void pursuant to the Companies
Acts.
|
150.
|
The
restrictions on liability, indemnities and waivers contained in Bye-laws
142 to 150 inclusive shall be in addition to any rights which any person
concerned may otherwise be entitled by contract or as a matter of
applicable Bermuda law.
|
151.
|
These
Bye-Laws may be amended from time to time in the manner provided for in
the Companies Acts, provided that any such amendment shall only become
operative to the extent that it has been confirmed by Ordinary
Resolution.
|
Ship
Finance International Limited
Par-La-Ville
Place
14
Par-La-Ville Road
Hamilton,
Bermuda HM 08
Attention:
Finance Department
Facsimile:
+1 (441) 295-3494
|
Frontline
Ltd.
Par-La-Ville
Place
14
Par-La-Ville Road
Hamilton,
Bermuda HM 08
Attention:
Finance Department
Facsimile:
+1 (441) 295-3494
|
SHIP
FINANCE INTERNATIONAL LIMITED
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GRANITE
SHIPPING CO. LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
CURRENT LIMITED
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
BONFIELD
SHIPPING LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FOURWAYS
MARINE LIMITED
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
ARDENNE INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
BRABANT INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
FALCON INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
GLORY SHIPPING INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
PRIDE SHIPPING INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
SAGA INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
SERENADE INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
SPLENDOUR SHIPPING INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
STRATUS INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
BAYSHORE SHIPPING CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
ESTUARY CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
FJORD CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
SEAWAY CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
SOUND CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
GOLDEN
TIDE CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
KATONG
INVESTMENTS LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
LANGKAWI
SHIPPING LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
PATRIO
SHIPPING LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
RAKIS
MARITIME S.A.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
SEA
ACE CORPORATION
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
SIBU
SHIPPING LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
SOUTHWEST
TANKERS INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
WEST
TANKERS INC.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
PUERTO
REINOSA SHIPPING CO S.A.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
ASPINALL
PTD LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
BLIZANA
PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
BOLZANO
PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
CIREBON
SHIPPING PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FOX
MARITIME PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
DUA PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
EMPAT PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
ENAM PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
LAPAN PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
LIMA PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
TIGA PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
TUJUH PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONT
SEMBILAN PTD LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
RETTIE
PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
TRANSCORP
PTE LTD.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
EDINBURGH
NAVIGATION S.A.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
ARIAKE
TRANSPORT CORP.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
HITATCHI
HULL # 4983 CORP.
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
OSCILLA
SHIPPING LIMITED
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONTLINE
SHIPPING LIMITED
|
||
By:
|
/s/
Matthew R. Cooley
|
|
Name:
Matthew R. Cooley
|
||
Title:
Attorney-in-Fact
|
||
FRONTLINE
LTD.
|
||
By:
|
/s/
Gary J. Wolfe
|
|
Name:
Gary J. Wolfe
|
||
Title:
Attorney-in-Fact
|
||
[NAME
OF SUBSTITUTE OWNER]
|
||
By:
|
||
Name:
|
||
Title:
|
||
Owner
|
Vessel
|
||
Granite
Shipping Co. Ltd.
|
Front
Granite
|
||
Golden
Current Limited
|
Opalia
|
||
Bonfield
Shipping Ltd.
|
Front
Driver
|
||
Fourways
Marine Limited
|
Front
Spirit
|
||
Front
Ardenne Inc.
|
Front
Ardenne
|
||
Front
Brabant Inc.
|
Front
Brabant
|
||
Front
Falcon Inc.
|
Front
Falcon
|
||
Front
Glory Shipping Inc.
|
Front
Glory
|
||
Front
Pride Shipping Inc.
|
Front
Pride
|
||
Front
Saga Inc.
|
Front
Page
|
||
Front
Serenade Inc.
|
Front
Serenade
|
||
Front
Splendour Shipping Inc.
|
Front
Splendour
|
||
Front
Stratus Inc.
|
Front
Stratus
|
||
Golden
Bayshore Shipping Corporation
|
Navix
Astral
|
||
Golden
Estuary Corporation
|
Front
Comanche
|
||
Golden
Fjord Corporation
|
Front
Commerce
|
||
Golden
Seaway Corporation
|
New
Vanguard
|
||
Golden
Sound Corporation
|
New
Vista
|
||
Golden
Tide Corporation
|
New
Circassia
|
||
Katong
Investments Ltd.
|
Front
Breaker
|
||
Langkawi
Shipping Ltd.
|
Front
Birch
|
||
Patrio
Shipping Ltd.
|
Front
Hunter
|
||
Rakis
Maritime S.A.
|
Front
Fighter
|
||
Sea
Ace Corporation
|
Front
Ace
|
||
Sibu
Shipping Ltd.
|
Front
Maple
|
||
Southwest
Tankers Inc.
|
Front
Sunda
|
||
West
Tankers Inc.
|
Front
Comor
|
||
Puerto
Reinosa Shipping Co. S.A.
|
Front
Lillo
|
||
Aspinall
Ptd Ltd.
|
Front
Viewer
|
||
Blizana
Pte Ltd.
|
Front
Rider
|
||
Bolzano
Pte Ltd.
|
Mindanao
|
||
Cirebon
Shipping Pte Ltd.
|
Front
Vanadis
|
||
Fox
Maritime Pte Ltd.
|
Front
Sabang
|
||
Front
Dua Pte Ltd.
|
Front
Duchess
|
||
Front
Empat Pte Ltd.
|
Front
Highness
|
||
Front
Enam Pte Ltd.
|
Front
Lord
|
||
Front
Lapan Pte Ltd.
|
Front
Climber
|
||
Front
Lima Pte Ltd.
|
Front
Lady
|
||
Front
Tiga Pte Ltd.
|
Front
Duke
|
||
Front
Tujuh Pte Ltd.
|
Front
Emperor
|
||
Front
Sembilan Ptd Ltd.
|
Front
Leader
|
||
Rettie
Pte Ltd.
|
Front
Striver
|
||
Transcorp
Pte Ltd.
|
Front
Guider
|
||
Edinburgh
Navigation S.A.
|
Edinburgh
|
||
Oscilla
Shipping Limited
|
Oscilla
|
||
Ariake
Transport Corp.
|
Ariake
|
||
Hitachi
Hull # 4983 Corp.
|
Hakata
|
1.
|
SEALIFT LTD.
(“
Sealift
”);
|
2.
|
SOUTHWEST TANKERS INC.
(“
Southwest
”);
|
3.
|
FRONT TARGET INC.
(“
Front
Target
”);
|
4.
|
FRONT TRAVELLER INC.
(“
Front
Traveller
”);
|
5.
|
WEST TANKERS INC.
(“
West
”);
|
6.
|
GRANITE SHIPPING COMPANY LTD.
(“
Granite
”);
|
7.
|
QUADRANT MARINE INC.
(“
Quadrant
”
)
|
8.
|
FRONTLINE LTD.
(“
Frontline
”
)
|
(A)
|
On
30 January, 2007, Frontline and Sealift entered into a purchase agreement
setting forth the terms and conditions upon and subject to which Sealift
acquired,
inter alia,
all of the shares in the Owners from Frontline (the “
Original Purchase
Agreement
”);
|
1.
|
Terms
defined in the Purchase Agreement shall, when used herein in capitalised
form, have the same meaning as attributed to them in the Purchase
Agreement.
|
2.
|
Clause
8.1.6 of the Original Purchase Agreement shall be supplemented for the
avoidance of doubt so that:
|
|
(i)
|
notwithstanding
any of the terms in said Clause 8.1.6 or elsewhere in the Purchase
Agreement, Frontline shall indemnify each Owner against all costs incurred
by such Owner as a result of Frontline not paying any claim which such
Owner is obliged to pay under the terms of the relevant Conversion
Contract or any repair contract entered into by such Owner with
Cosco;
|
|
(ii)
|
Frontline
shall be responsible for the repair costs of each Conversion Vessel and in
Clause 8.1.6 all references to “conversion costs” shall be construed so
that this term includes such costs incurred as a result of a repair
contract being entered into by Frontline (on behalf of the relevant Owner)
with the relevant Yard pursuant to Clause 10.8 of such Conversion
Contract.
|
3.
|
Clause
8.1.5 of the Original Purchase Agreement shall be amended so that the
final sentence is deleted and the clause is supplemented by the
following:
|
|
(i)
|
Sealift
shall have the right to assign two representatives to the supervision team
for Front Sunda, Front Target, Front Traveller and Front Comor, one of
which shall have engine room expertise and the other deck
expertise;
|
|
(ii)
|
the
Sealift representatives shall have full access to information and
documentation provided by Cosco to the supervision teams, as well as all
documentation related to the Conversion Vessels as is being prepared by
the supervision teams or circulated among its
members;
|
|
(iii)
|
the
Sealift representatives shall have the right to attend all inspections,
testing of equipment, sea trials and review of sea trial
documentation;
|
|
(iv)
|
the
Sealift representatives shall work with the other members of the
supervision team with the objective of resolving all technical issues in
the best interests of the Owners and in the case of disagreement between
the Sealift representatives and the other members of the supervision team,
the views of the Sealift representatives shall be given in writing to the
leader of the supervision team; and
|
4.
|
Clause
8.1.9 of the Original Purchase Agreement and Clause 2 of the Supplemental
Agreement shall be amended so that the agreed redelivery dates are as
follows:
|
Front
Sunda:
|
30
April 2007
|
Front
Target:
|
30
September 2007
|
Front
Traveller:
|
31
January 2008
|
Front
Comor:
|
31
May 2008
|
5.
|
This
Agreement shall become effective immediately upon Merger
Completion.
|
6.
|
This
Agreement shall be considered null and void if Merger Completion has not
occurred prior to 12 May 2007.
|
7.
|
The
Parties agree that the provisions of Clauses 14 and 17 of the Original
Purchase Agreement shall apply to this Agreement as
well.
|
For
and on behalf of
|
For
and on behalf of
|
|
SEALIFT
LTD.
|
SOUTHWEST
TANKERS INC.
|
|
For
and on behalf of
|
For
and on behalf of
|
|
FRONT
TARGET INC.
|
FRONT
TRAVELLER INC.
|
|
For
and on behalf of
|
For
and on behalf of
|
|
WEST
TANKER INC.
|
GRANITE
SHIPPING COMPANY LTD.
|
|
For
and on behalf of
|
For
and on behalf of
|
|
QUADRANT
MARINE INC.
|
FRONTLINE
LTD.
|
|
C
L I F F O R D
C
H A N C E
|
CLIFFORD
CHANCE LLP
ADVOCATEN
SOLICITORS NOTARIS BELASTINGADVISEURS
|
|
EXECUTION
COPY
|
SHAREHOLDERS’
AGREEMENT
RELATING
TO SEATLIFT LTD
|
DATED
27 APRIL 2007
|
1. Interpretation
|
2. The
Shares
|
3. Condition
Precedent; Completion
|
4. Erisa
|
5. The
Board And Its Proceedings
|
6. Proceedings
Of The General Meeting
|
7. Conduct
Of Business And Reporting
|
8, Target
Warranties And Indemnities
|
9.
Business Plan And Financial Year
|
10. Transfers
|
11. Exit
|
12. Tag
Along Rights
|
13. Termination
Of Agreement
|
14. 3i
Investors’ Rights
|
15. Bye-Laws
|
16. General
|
17. Applicable
Law And Dispute Resolution
|
Schedule
1: Interpretation
|
Schedule
2: Shareholdings
|
Schedule
3: Reserved Matters
|
Schedule
4: Form Of Deed Of Adherence
|
Schedule
5: Continuing Obligations
|
Schedule
6: Completion Certificate
|
Agreed
Form Documents
|
(1) Bye-Laws
of the Company
|
(2) Electronic
Financial Report
|
(3) Sample
Management Accounts
|
(1)
|
3i EUROPARTNERS Va
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011419), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Europartners Va
”),
acting by its
manager, 3i Investments plc (registered number 3975789), with its
registered office at 16 Palace Street, London SW1E 5JD, England (“
3i Investments
”)
;
|
(2)
|
3i EUROPARTNERS Vb
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011420), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Europartners Vb
”),
acting by its
manager, 3i Investments;
|
(3)
|
3i PAN EUROPEAN BUY-OUTS
2006-08A L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011276), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan European A
”),
acting by its
manager, 3i Investments;
|
(4)
|
3i PAN EUROPEAN BUY-OUTS
2006-08B L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011277), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan European B
”),
acting by its
manager, 3i Investments;
|
(5)
|
3i PAN EUROPEAN BUY-OUTS
2006-08C L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011278), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan European C
”),
acting by its
manager, 3i Investments;
|
(6)
|
3i GLOBAL GROWTH 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011318), with its registered office at 16 Palace Street, London
SW1E
5JD,
England (“
3i Global
Growth
”),
acting by its
manager, 3i Investments;
|
(7)
|
3i PAN-EUROPEAN GROWTH 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011320), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan-European Growth
”),
acting by its
manager, 3i Investments;
|
(8)
|
PAN-EUROPEAN BUYOUTS CO-INVEST
2006-08 L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011279), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
Pan-European
Co-invest
”),
acting by its
manager, 3i Investments;
|
(9)
|
PAN-EUROPEAN BUYOUTS CO-INVEST
2006-08 FCPR
,
a
fonds communs de placement à
risqué
formed under the laws of France, with its registered office
at 3, rue Paul Cézanne, 75008 Paris, France (“
Pan-European Co-invest
France
”),
acting by its
manager, 3i Gestion S.A.;
|
(10)
|
PAN-EUROPEAN BUYOUTS
(
NORDIC
)
CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011553), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
Pan-European
(
Nordic
)
Co-invest
”),
acting by its
manager, 3i Investments;
|
(11)
|
PAN EUROPEAN BUYOUTS
(
DUTCH
)
A CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907, with
registered number LP011874, and having its registered office at 16 Palace
Street, London, SW1E 5JD, United Kingdom (“
Pan-European
(
Dutch
)
Co-Invest
”),
acting by its
manager, 3i Investments;
|
(12)
|
GLOBAL GROWTH CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the laws of Jersey (registered number LP760),
with its registered office at 22 Grenville Street, St. Helier, Jersey
(“
Global Growth
Co-invest
”),
acting by its
manager, 3i Investments;
|
(13)
|
OIL
,
GAS
&
POWER CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011321), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
Oil
,
Gas
&
Power Co-invest
”),
acting by its
manager, 3i Investments;
|
(14)
|
STICHTING MANAGEMENT
SEAL
,
a foundation
(stichting)
incorporated under the laws of The Netherlands, with its registered
office at Lage Mosten 15, 4822 NJ Breda, The Netherlands, and being
registered with the commercial register in West-Brabant, The Netherlands
(the “
Stichting
”)
;
|
(15)
|
FRONTLINE LTD
,
a company
incorporated under the laws of Bermuda, with its registered office at PO
Box HM 1593, Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08,
Bermuda, Company No. 17460 and being listed on the Oslo Stock Exchange and
the New York Stock Exchange (“
Frontline
”)
;
and
|
(16)
|
SEALIFT LTD
,
a company
incorporated under the laws of Bermuda, with its registered office at PO
Box HM 1593, Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08,
Bermuda, Company No. 39466 (the “
Company
”).
|
(A)
|
As
at the date hereof, Frontline holds 33,3% of the shares in the capital of
the Company;
|
(B)
|
On
or around the date hereof, certain of the Parties and certain other
persons entered into a merger agreement (the “
Merger Agreement
”)
and a sale and
purchase agreement (the “
SPA
”) pursuant to which
inter alia
the 3i
Investors will sell their shares and convertible bonds issued by Delphi to
the Company in consideration for the issue by the Company of shares in its
capital to the 3i Investors in the capacity as sellers under the
SPA;
|
(C)
|
The
Parties wish to enter into this Agreement for the purposes of regulating
certain aspects of the affairs of the Company, on the terms and under the
conditions set forth in this
Agreement.
|
|
IT IS AGREED
as
follows:
|
1.1
|
In
addition to terms defined elsewhere in this Agreement, the definitions and
other provisions in Schedule 1
(Interpretation)
apply
throughout this Agreement unless the contrary intention
appears.
|
1.2
|
In
this Agreement, unless the contrary intention appears, a reference to a
recital, clause, Schedule or Annex is a reference to a recital, clause,
schedule or annex of this Agreement. The Schedules or Annexes
are an integral part of this
Agreement.
|
1.3
|
The
headings in this Agreement do not affect its
interpretation.
|
2.1
|
Upon
completion of the Private Placement and the Merger Completion (both as
defined in the Merger Agreement) having taken place, the Shares held by
the Parties shall be as set out in Schedule 2
(Shareholdings). The remaining Shares are held by third party
shareholders not party to this
Agreement.
|
2.2
|
The
Parties other than the Company, as the holders of Shares, will have all
voting and other rights attaching to the Shares as set out in this
Agreement, the Bye-Laws and under the laws and regulations governing the
Company and the Shares.
|
2.3
|
The
Parties acknowledge and agree that if the Board or the General Meeting
(whichever is authorised to so resolve) resolves to issue additional
Shares or other equity or debt instruments to finance additional capital
requirements of the Group, to make add-on investments or for other
reasons, then each Shareholder shall be entitled to participate in such
additional issuance (the “
Issuance
”)
in the same
proportion as the Shareholders hold Shares at the time of the
Issuance. For the avoidance of doubt, the Shareholders shall
only be entitled to participate in all of the instruments issued at the
time of the Issuance and not in part thereof, regardless of whether they
held these instruments prior to the date of the Issuance. Each
Shareholder hereby acknowledges and agrees that it will be diluted if it
resolves not to participate in the Issuance and that its above and
statutory pre-emptive rights (if any) may be excluded if it resolves not
to participate.
|
3.1
|
Except
for the provisions of clause 1
(Interpretation),
this
clause 3 and clauses 16
(General)
and 17
(Applicable Law and Dispute
Resolution),
as well as the provisions of Schedule 1
(Interpretation),
which
are of immediate effect, the provisions of and transactions contemplated
in this Agreement are subject to and conditional on receipt by each Party
of a duly executed Completion Certificate (the “
Condition
”).
|
3.2
|
If
the Condition is fulfilled or waived on the Merger Completion Date, the
Parties shall procure that the composition of the Board shall be changed,
such that its composition shall be in accordance with clause 5.2 on that
date.
|
3.3
|
If
the Condition is not fulfilled or waived on or before that date, except
for the provisions of clause 1
(Interpretation),
this
clause 3 and clauses 16
(General)
and 17
(Applicable Law and Dispute
Resolution),
as well as the provisions of Schedule 1
(Interpretation),
all
the other clauses of this Agreement shall lapse and cease to have effect;
but
|
|
3.3.1
|
the
lapsing of those provisions shall not affect any rights or liabilities of
any Party in respect of damages for non-performance of any obligation
under this agreement falling due for performance prior to such lapse;
and
|
|
3.3.2
|
no
Party shall make (or permit any person to make) any announcement
concerning this Agreement or any ancillary matter without the prior
written consent of the 3i Investors and
Frontline.
|
4.1
|
The
Parties acknowledge that each of the ER1SA Funds (at the date of this
Agreement being 3i Europartners Va and 3i Europarters Vb) has limited
partners which are entities governed in the United States of America by
ERISA. In order to permit each ERISA Fund to treat the Company
as a “venture capital operating company” (“VCOC”) for the purposes of
ERISA, for so long as any ERISA Fund or its nominee holds any Shares in
the capital of the Company:
|
|
4.1.1
|
that
ERISA Fund may at any time by notice to the Company (i) nominate for
appointment and removal any person to be a Director and (ii) appoint any
person to be an Observer, and may similarly remove from office any such
person and appoint another in his place, all in accordance with clause 5
and the Bye-Laws, and the Parties shall use their respective best
endeavours to procure that the members of the Board co-opt such nominees
in such capacity and the Shareholders shall vote their Shares at the next
General Meeting to confirm the
same;
|
|
4.1.2
|
none
of the decisions set out in Part 1 of Schedule 3
(Reserved Matters)
can
be taken without the approval of the Director appointed by that ERISA
Fund;
|
|
4.1.3
|
none
of the decisions set out in Part 2 of Schedule 3
(Reserved Matters)
can
be taken without the approval of that ERISA Fund;
and
|
|
4.1.4
|
that
ERISA Fund shall have the right to (i) receive upon reasonable written
request to the Company the information set forth in clause 7.2 and
Schedule 5
(Continuing
Obligations),
(ii) meet with such management or personnel of the
Group as may reasonably be designated by it, upon reasonable notice to the
Company, for the purpose of consulting with and advising and influencing
management, obtaining information regarding the business and prospects of
the Group or expressing the views of that ERISA Fund on such matters, and
(iii) visit and inspect any of the offices and properties of any member of
the Group and inspect and copy the books and records of that member of the
Group, upon reasonable notice to the
Company.
|
4.2
|
The
Parties shall not permit anything to be done that may prejudice the
treatment by any ERISA Fund of the Company as a
VCOC.
|
4.3
|
If
any ERISA Fund notifies the Company (supported by a copy of legal advice
to that effect received from appropriately qualified lawyers) that the
provisions of clause 4.1 should be amended to preserve the qualification
of that ERISA Fund as a VCOC, or otherwise to ensure that the assets of
that ERISA Fund are not considered “plan assets” of the ERISA Fund for the
purposes of ERISA, the Parties will agree and make any necessary
amendments to the Agreement provided that the amendments do not result in
a material adverse effect on the operations, business and prospects of any
member of the Group, materially change the rights, liabilities or
obligations of any of the Parties or materially affect the value of the
Shares.
|
5.1
|
The
Company shall have a Board, which is responsible for the management of the
business of the Company and attending to all other matters entrusted to
the Board in the Bye-Laws or by operation of law. The members
of the Board shall at all times act in the interest of the
Company. In performing its task, the Board may exercise all the
powers of the Company save to the extent specifically provided as
otherwise provided in this Agreement, the Bye-Laws or the Bermuda
Companies Act.
|
5.2
|
The
Shareholders shall exercise their voting powers such that the members of
the Board shall be appointed and removed from office by the Board and/or
General Meeting (as applicable according to the Bye-Laws) as
follows:
|
|
5.2.1
|
the
CEO and CFO from time to time shall each be a
Director;
|
|
5.2.2
|
the
3i Investors (by majority vote) shall be entitled by notice in writing to
the Company to present candidates for the appointment or replacement of up
to two (2) Directors;
|
|
5.2.3
|
Frontline
shall be entitled by notice in writing to the Company to present
candidates for the appointment or replacement of one (1) Director;
and
|
|
5.2.4
|
each
ERISA Fund shall be entitled by notice in writing to the Company to
present candidates for the appointment or replacement of one (1)
Director.
|
5.3
|
The
3i Investors and Frontline agree that the Board shall be expanded with two
(2) as yet unknown independent directors whose identity, qualifications
and experience is mutually acceptable to the 3i Investors and
Frontline.
|
5.4
|
The
members of the Board shall, from amongst their midst, appoint the
Chairman.
|
5.5
|
The
Board may represent the Company; in addition, any two (2) Directors shall
be jointly authorised to represent the Company towards third parties,
provided that such two (2) Directors may not both have been appointed
pursuant to clause 5.2.1, 5.2.2 or 5.2.4 (as the case may
be).
|
5.6
|
With
respect to the appointments and removals from office referred to in clause
5.2, the Shareholders agree to vote in favour of one (1) of the candidates
nominated by the Party or Parties entitled to make a nomination pursuant
to that clause.
|
5.7
|
The
Directors appointed pursuant to clauses 5.2.2, 5.2.3 and, if the Board so
decides also the Directors appointed pursuant to clause 5.2.4, shall be
entitled to an annual compensation that is customary for a group
controlled by private equity investors that is of similar type and size of
the Group, and to reimbursement of reasonable out of pocket
expenses.
|
5.8
|
The
Board shall meet as often as necessary, and shall also meet at the request
of any individual Director.
|
5.9
|
At
least five (5) Business Days’ notice, or such shorter period as the
Chairman may agree to in writing, of each meeting of the Board shall be
given to each Director and each Observer (if any). The notice
shall be accompanied by an agenda setting out in such reasonable detail as
may be practicable the business to be transacted at the
meeting. A breach of this clause shall not affect the validity
of any meeting of the Board that has otherwise been validly convened
provided that all Directors entitled to attend were present or
represented.
|
5.10
|
Meetings
of the Board must as a general rule be held in the country where the
Company is at that time resident.
|
5.11
|
A
person to be designated for that purpose by the Chairman shall keep
minutes of the meetings of the Board. All minutes shall be in
the English language. The minutes shall be adopted by the
Chairman of the Board and shall be signed by him as evidence
thereof.
|
5.12
|
The
quorum at meetings of the Board shall be met when at least half of the
members of the Board are present or represented, including at least the
Chairman. If the quorum is not present or represented at a
meeting of the Board at the time when any business is considered no
resolutions may be validly adopted. Any member of the Board may
require that the meeting be reconvened. In a reconvened meeting
of the Board, the quorum shall be met when at least half of the members of
the Board are present or
represented.
|
5.13
|
Unless
otherwise agreed in this Agreement and subject to the requirements of the
Bermuda Companies Act, all resolutions of the Board shall require a simple
majority of the members of such Board present at the meeting in which the
quorum requirements set forth in clause 5.12 are
met.
|
5.14
|
In
case of a tied vote the Chairman shall have a casting
vote.
|
5.15
|
A
resolution in writing signed by all members of the Board shall be valid
and have effect as if it had been passed at a meeting of the Board duly
convened and held. Such resolution may be contained in one
document or in several documents, each stating the terms of the resolution
accurately and signed by one or more of the
Directors.
|
5.16
|
A
meeting of the Board may be held by means of such telephone, electronic or
other communication facilities as permit all Directors or their
representatives (some or all of whom may be in different places)
participating in the meeting to communicate with each other simultaneously
and instantaneously and participation in such meeting shall constitute
presence in person at such meeting, provided that at the time of that
meeting a majority of the Directors is in the country where the Company is
at that time resident.
|
5.17
|
A
Director or his representative may vote as a Director on any resolution
concerning any matter in which he has, directly or indirectly, a financial
or commercial interest, provided that he has disclosed to the other
members of the Board the nature and extent of such interest, and, if he
votes, his vote shall be counted and he shall be counted in the quorum
when that resolution or matter is under
consideration.
|
5.18
|
The
Shareholders shall use their respective reasonable efforts to ensure that
the Board shall not undertake:
|
|
5.18.1
|
any
of the Reserved Matters as set forth in Part 1 of Schedule 3
(Reserved Matters),
without the Board having resolved upon such matter by Qualified
Resolution; and
|
|
5.18.2
|
any
of the Reserved Matters as set forth in Part 2 of Schedule 3
(Reserved Matters),
without the prior approval of the General Meeting by Qualified
Resolution.
|
5.19
|
The
Parties agree and the Company shall procure that no member of the Group
shall adopt any resolution or take any action which is a Reserved Matter
as set forth in Schedule 3
(Reserved Matters)
(or
a resolution which is analogous to or has a substantially similar effect
to any of the Reserved Matters) without the prior written approval of the
Board as its (ultimate) shareholder. Clause 5.18 applies
mutatis mutandis
to
such approval of the Board.
|
5.20
|
Where
a matter that would otherwise require a Qualified Resolution of the Board
or the prior approval of the General Meeting under this clause has been
expressly included in the Business Plan (or any budget) adopted in
accordance with this Agreement, no further approval shall be required
under this clause 5.
|
5.21
|
Each
Director shall be authorised to appoint and remove his own alternate
director (an “
Alternate
Director
”)
by written notice
to the Company. In addition, a Director may at any time by
written notice to the Company or at a Board meeting appoint any person
(who need not be a Director) to act as his Alternate Director in his place
during his absence. If such person is not a Director the
approval of the Board shall be required for such
appointment.
|
5.22
|
Each
ERISA Fund shall be entitled to appoint an observer to the Board (an
“
Observer
”)
by written notice
to the Company. Each Party shall use its reasonable endeavours
to procure that any Observer shall be allowed to attend all meetings of
the Board, and shall receive any and all information that the members of
the Board receive, simultaneously with the members of the
Board. An Observer shall not be entitled to vote on any such
meetings, but shall be allowed to speak and place items on the agenda for
discussion. Each ERISA Fund may remove the Observer appointed
by it and appoint another person in its place. Any Observer
shall be reimbursed for its reasonable out-of-pocket
expenses.
|
6.1
|
The
annual General Meeting shall be held annually within six (6) months of the
end of each Financial Year.
|
6.2
|
Special
General Meetings shall be held as often as the Board or one or more
Shareholders together holding at least 10% of the issued share capital of
the Company deem necessary.
|
6.3
|
The
agenda for the annual General Meeting shall in any event contain the
following matters:
|
|
6.3.1
|
the
annual report for the previous Financial
Year;
|
|
6.3.2
|
adoption
of the Annual Accounts of the previous Financial Year and the allocation
of the dividends and other distributions (if
any);
|
|
6.3.3
|
discharge
of the Directors for their management of the Company during the previous
Financial Year;
|
|
6.3.4
|
appointments
to any vacancies on the Board; and
|
|
6.3.5
|
any
other proposals put forward for discussion by the
Board.
|
6.4
|
General
Meetings shall as a general rule be held in the country where the Company
is at that time resident, but may not be held in Norway, Luxembourg, The
Netherlands or the United Kingdom (unless the Company is at that time
resident there). Notwithstanding the foregoing sentence, a
General Meeting may be held by means of such telephone, electronic or
other communication facilities as permit all persons participating in the
meeting to communicate with each other simultaneously and instantaneously
and participation in such meeting shall constitute presence in person at
such meeting, provided that during such meeting the majority of
Shareholders may not be in Norway, Luxembourg, The Netherlands or the
United Kingdom.
|
6.5
|
General
Meetings shall be convened by the Board. The convening shall
take place no later than the eighth day prior to the date of the
meeting. The notice of the meeting shall state the subject to
be dealt with, without prejudice to the provisions of the
Bye-Laws.
|
6.6
|
General
Meetings shall be chaired by the Chairman. In his absence, the
Directors present shall choose a chairman from amongst their midst; if no
Director is present or willing to act as chairman the General Meeting
shall appoint its chairman.
|
6.7
|
Minutes
shall be kept of the proceedings at every General Meeting by a secretary
to be designated by the Chairman. All minutes shall be in the
English language. The minutes shall be adopted by the Chairman
and shall be signed by him as evidence
thereof.
|
6.8
|
Save
as otherwise provided in this Agreement or the Bye-Laws, the quorum at any
General Meeting shall be constituted by the presence of Shareholders (or
of their duly appointed agents or attorneys) together holding at least 33
1/3 % of the voting rights entitled to be exercised at such
meeting. The said quorum shall be required at all General
Meetings. If a quorum is not present at a General Meeting at
the time when any business is considered no resolutions shall be
adopted. Any Shareholder may require that the meeting be
reconvened. At least five (5) calendar days’ notice of the
reconvened meeting shall be given. The quorum for such
reconvened meeting is met when Shareholders (or their duly appointed
agents or attorneys) together holding at least 10% of the voting rights
entitled to be exercised at such meeting are present or
represented.
|
6.9
|
Unless
agreed otherwise in this Agreement or in the Bye-Laws, or prescribed by
mandatory law, all resolutions of the General Meeting shall require a
simple majority of the Shareholders that are present at the meeting in
which the quorum requirements set forth in clause 6.8 are
met.
|
6.10
|
The
Shareholders agree that they shall always exercise their vote in
accordance with the provisions of this
Agreement.
|
7.1
|
The
Company undertakes to each of the 3i Investors and Frontline to comply
with all the obligations set out in Schedule 5
(Continuing
Obligations).
|
7.2
|
The
Company shall procure that
Dockwise:
|
|
7.2.1
|
provides
to the Board the information set out in Schedule 5
(Continuing
Obligations);
|
|
7.2.2
|
keeps
the Board informed of material matters relating to the progress of the
business of the Group, to such extent and in such form and detail as the
Board may from time to time reasonably
require;
|
|
7.2.3
|
supplies
to the Board such written particulars of any matters concerned with and
arising out of the activities of the Group as the Board may from time to
time reasonably require; and
|
|
7.2.4
|
responds
promptly to such enquiries for information as shall be reasonably made by
the Board.
|
7.3
|
The
Company shall procure that each member of the Group shall give prompt
written notice to the Board upon becoming aware
of:
|
|
7.3.1
|
any
occurrence (including, without limitation, any third party claim or
liability, any litigation, arbitration or administrative proceedings)
which would or would be likely either have a material adverse effect on
the financial condition of the Group or affect adversely any Group
member’s ability to perform its obligations under this Agreement, the
Finance Documents or any other agreement related to this Agreement;
or
|
|
7.3.2
|
any
breach or likely breach of the covenants by any Group member under this
Agreement, the Finance Documents or any other agreement related to this
Agreement; or
|
|
7.3.3
|
the
realized (year to date) EBITDA and cash flow of the Group for the relevant
current accounting period shown in the Management Accounts at any time
being less than ninety percent (90%) of the budget EBITDA amount or cash
flow as shown in the same Management
Accounts.
|
8.1
|
The
Company undertakes and agrees with each 3i Investor and Frontline
that:
|
|
8.1.1
|
BidCo
shall, and shall procure that any member of the Group shall, enforce or
procure to be enforced to their full extent the obligations of the Sellers
to BidCo under the Target Warranties and
Indemnities;
|
|
8.1.2
|
BidCo
shall, and shall procure that any member of the Group shall, notify the
Board in writing promptly upon its becoming aware of any material breach
or potential material breach of the Target Warranties and
Indemnities;
|
|
8.1.3
|
no
Acquisition Claim will be commenced, waived, compromised or settled
without the prior written consent of the
Board;
|
|
8.1.4
|
BidCo
shall take, or shall procure that any member of the Group shall take, such
action as the Board may reasonably require to be taken to investigate,
conduct, pursue and enforce any actual or potential Acquisition
Claim;
|
|
8.1.5
|
BidCo
shall procure, at its own cost, the appointment of such legal and other
professional advisers as the Board may from time to time require to act on
BidCo’s behalf in the conduct and handling of any Acquisition
Claim;
|
|
8.1.6
|
BidCo
shall keep the Board informed of all material matters relating to the
progress of any Acquisition Claim to such extent and in such form and
detail as the Board may from time to time reasonably require;
and
|
|
8.1.7
|
BidCo
shall supply to the Board such written particulars of any matters
concerned with or arising out of any actual or potential Acquisition Claim
and the conduct thereof, as the Board may from time to time reasonably
require.
|
8.2
|
If
the Board so decides, the Company shall procure that BidCo shall at its
own cost allow a person nominated by the Board, the exclusive conduct of
any Acquisition Claim in BidCo’s own name and on its behalf and in such
manner as that person sees fit.
|
8.3
|
If
the Company or BidCo fails to comply with any of its obligations under
this clause, either the 3i Investors or Frontline (whomever does so first)
shall be entitled to instruct a legal or other professional adviser to
prepare and submit to the Board, at the cost of the Company or BidCo (as
the case may be), the information that should have been supplied to the
Board pursuant to this clause. The Company shall (and shall
procure that all members of the Group shall) give such legal or other
professional advisers all reasonable access to its books, records,
correspondence and premises and all reasonable assistance as the legal or
other professional advisers may request for this purpose and in particular
(without prejudice to the generality of the foregoing) permit them to take
extracts from and make copies of any documents and to discuss any matters
with any of the Group’s personnel, officers and
advisers.
|
9.1
|
The
Company shall procure that Dockwise prepares and delivers to the Board a
Business Plan at such time and in such manner that it is ready for
adoption not less than thirty (30) days before the first day of each
Financial Year. Adoption of any Business Plan shall require a
resolution of the Board. Each subsequent Business Plan shall be
prepared in conformity with the initial Business
Plan.
|
9.2
|
Each
Business Plan shall include:
|
|
9.2.1
|
a
business forecast with respect to the current Financial
Year;
|
|
9.2.2
|
the
proposed strategy (including the acquisition strategy with details on the
possible acquisition target, the synergy options and the effect on the
Business Plan of these potential
acquisitions);
|
|
9.2.3
|
details
of the assumptions used for the matters referred to in clauses 9.2.1 and
9.2.2;
|
|
9.2.4
|
a
report on the Company’s performance during the current Financial Year,
which is to include all members of the
Group;
|
|
9.2.5
|
an
annual budget for the first Financial Year following the current year of
the (actual) Business Plan,
including:
|
|
(a)
|
a
breakdown of monthly consolidated revenues, operating expenses, operating
results, net interest expenses and Net Profits broken down per country of
operation, Subsidiary and product
group;
|
|
(b)
|
a
breakdown of monthly capital expenditures and cash
flow;
|
|
(c)
|
a
breakdown of a projected consolidated balance sheet as at the end of the
Financial Year and projected profit and loss account for the Financial
Year;
|
|
(d)
|
a
breakdown of expected funding requirements and the proposed methods of
meeting those requirements; and
|
|
(e)
|
a
set of key performance indicators (“
KPIs
”), to be agreed
with the Board.
|
|
9.2.6
|
a
summary annual budget, consisting of at least a balance sheet, profit and
loss account, cash flow statement and capital expenditures, for each of
the second, third and fourth Financial Year following the Financial Year
of the (actual) Business Plan.
|
9.3
|
The
Company shall procure that Dockwise will, save to the extent the Board may
during the current year of the (actual) Business Plan agree otherwise,
implement and execute the Business
Plan.
|
9.4
|
For
the purposes of this Agreement, the first Financial Year of the Company
shall end on 31 December 2007. After the first Financial Year,
all Financial Years of the Company will commence on 1 January and end on
31 December. The financial years of the members of the Group
may end on different dates. This will not affect the reporting
dates set out in this clause.
|
9.5
|
After
the end of each Financial Year, the Annual Accounts shall be
audited. The consolidated audit of the Group shall be carried
out by the Auditors.
|
9.6
|
Any
Business Plan, the Annual Accounts and the Management Accounts shall at
all times be expressed in US
Dollars.
|
9.7
|
All
financial information, as described in this clause, shall be in the
English language unless the Board decides
otherwise.
|
10.1
|
Except
for Permitted Transfers, each Shareholder agrees it shall not Transfer any
Shares until the earlier of (i) 30 September 2007 and (ii) the completion
of a Listing, except with the prior written consent of the 3i Investors
and Frontline.
|
10.2
|
The
Parties agree to co-operate and the Shareholders agree to vote in favour
of:
|
|
10.2.1
|
any
Transfer by any 3i Investor to and from any entity of the 3i Group or any
3i Fund; or
|
|
10.2.2
|
any
Transfer to and from a nominee of any 3i
Investor;
|
10.3
|
It
shall be a condition of any Permitted Transfer
that:
|
|
10.3.1
|
The
shareholding by the Permitted Transferee is authorised by the Bermuda
Registrar of Companies and/or the Bermuda Monetary Authority or is subject
to an exemption or direction from the Bermuda Registrar of Companies
and/or the Bermuda Monetary
Authority;
|
|
10.3.2
|
the
Permitted Transferee, if not already a Party, enters into an undertaking
to observe and perform all of the provisions and obligations of this
Agreement in accordance with the Deed of Adherence set out in Schedule 4
(Form of Deed of
Adherence),
in which case this clause shall apply to that Permitted
Transferee; and
|
|
10.3.3
|
all
Shares transferred under this clause shall be free from all liens, charges
and encumbrances and shall carry all rights, benefits and advantages
attached to them except the right to any dividend declared but not paid
prior to the date of registration of such Permitted
Transfer.
|
10.4
|
The
Company is hereby irrevocably authorised to sign the relevant Deed of
Adherence referred to in clause 10.3.12 on behalf of all other
Parties. The Company shall inform all other Parties in writing
of any deed so executed. This clause 10.4 is without prejudice
to the continuation of the rights and obligations of the original Parties
to this Agreement and to any other persons who have signed a Deed of
Adherence.
|
10.5
|
Without
prejudice to clauses 10.1 and 10.2, in case a third party (not being a 3i
Related Party or nominee of any 3i Investor) makes a bonafide offer for
Shares held by Frontline or any of the 3i Investors and Frontline or the
relevant 3i Investor is willing to accept that offer, then, regardless of
whether the third party or the relevant Shareholder initiated the offer,
each 3i Investor (in the case of the offer being made to Frontline) or
Frontline (in the case of the offer being made to any 3i Investor) shall
be given the right to acquire those Shares for the same price and terms
and conditions as are offered by that third
party.
|
10.6
|
To
the fullest extent possible under applicable law, the Shareholders hereby
consent to and waive any right of first refusal in respect of any
Permitted Transfer as required by the relevant provisions of the
Bye-Laws. To the extent necessary, the Parties shall take all
actions and adopt all resolutions reasonably required to give effect to a
Permitted Transfer or to clause
10.5.
|
11.1
|
The
Parties acknowledge that the Board, on 27 April 2007, has resolved to
apply for the Listing of the Company with Q3 of 2007 as the target date
for the first date of trading.
|
11.2
|
After
the filing of the application, the Parties do not express any view or
accept any instruction or obligation as to whether the Company shall
proceed with, cease or withdraw its application to list its Shares on the
Oslo Stock Exchange.
|
11.3
|
The
Company will, if the Board so
decides:
|
|
11.3.1
|
appoint,
on terms acceptable to the 3i Investors and Frontline, an independent
financial adviser nominated by the 3i Investors and Frontline jointly to
advise the Company and its Shareholders or have the 3i Investors perform
this role;
|
|
11.3.2
|
assist
in the preparation of any information memoranda or prospectus necessary or
desirable to achieve an Exit.
|
11.4
|
The
Parties acknowledge and agree that:
|
|
11.4.1
|
on
any disposal of Shares in a Listing or a Sale, neither any of the 3i
Investors nor Frontline shall give or be required to give any warranty or
indemnity to any party, except for a warranty as to full legal and
beneficial title to its Shares;
|
|
11.4.2
|
on
any disposal of Shares in a Listing, or a Sale, they will use their
respective best endeavours to ensure that the members of senior management
of the Group (including in any event the CEO and CFO at that time) shall
give customary warranties and indemnities subject to customary limitations
if the 3i investors so require;
|
|
11.4.3
|
the
Shareholders and the Company shall do all things required or appropriate
to effect the Listing or the Sale in accordance with the relevant
resolution of the Board and, with respect to a Listing, in accordance with
the rules of the Oslo Stock Exchange and the requirements of the relevant
Sponsor(s) engaged in relation thereto, or, with respect to a Sale, in
accordance with the relevant sale and purchase agreement and related
agreements entered into in connection with such Sale, or with respect to a
Refinancing, in accordance with the relevant equity and debt documentation
entered into in connection with such
Refinancing.
|
11.5
|
The
Parties will co-operate and shall do all things required or appropriate to
procure that the Bye-Laws are amended as necessary or reasonably desirable
for the purpose of achieving a Listing, including make such amendments
that the share capital of the member of the Group that is to be listed
shall be organised so that all its issued shares are of the same class,
with rights typical of shares in listed companies and that the financing
of the relevant company is organised in such way as advised by the
relevant Sponsor(s) engaged in relation to the
Listing.
|
12.1
|
Without
prejudice to clause 10.2, if at any time prior to expiry of the period
referred to in clause 10.1 the 3i Investors (together the “
Tagged
Shareholders
”)
or Frontline (the
“
Tagged
Shareholder
”)
intend to Transfer
of any of their Shares to a third party and Frontline or the 3i Investors
(as the case may be) consent to such Transfer, the other Shareholders
(together, the “
Tagging
Shareholders
”)
are entitled to
Transfer a proportional part (pro rata parte the Shares to be Transferred
by the Tagged Shareholder(s)) of their Shares at the same rice per Share
and otherwise on the same terms (but subject to clause 11.3) as the
Transfer by the Tagged
Shareholder(s).
|
12.2
|
The
Tagged Shareholder(s) shall give notice in writing (a “
Tag Notice
”)
to the Tagging
Shareholders, specifying:
|
|
12.2.1
|
the
number of Shares which it intends to Transfer (the “
Relevant Shares
”)
;
|
|
12.2.2
|
the
name(s) of the proposed transferee(s) of the Relevant Shares and any
person controlling the transferee;
|
|
12.2.3
|
the
main terms of the contemplated Transfer;
and
|
|
12.2.4
|
the
proposed date of the Transfer.
|
12.3
|
Any
Tagging Shareholder who wishes to dispose of a pro rata parte of its
Shares on the same terms as specified in the Tag Notice shall within
twenty (20) Business Days of the date of the Tag Notice notify the Tagged
Shareholder(s) in writing.
|
12.4
|
The
Tagged Shareholder(s) shall not dispose of the Relevant Shares unless it
has:
|
|
12.4.1
|
given
a Tag Notice in accordance with clause 12.2 not less than twenty (20)
Business Days before the proposed disposal;
and
|
|
12.4.2
|
procured,
on the same terms as contained in the Tag Notice, the disposal of (at the
discretion of the Tagging Shareholders) a
pro rata
part of the
Shares of all Tagging Shareholders who have given due notice under this
clause 12.
|
|
13.1.1
|
in
respect of all Parties, upon a Listing or
Liquidation;
|
|
13.1.2
|
in
respect of a Shareholder, upon that Shareholder ceasing to hold any
Shares, provided that such Shareholder shall remain bound by the
provisions in clauses 1
(Interpretation),
16
(General)
and 17
(Applicable Law and
Dispute Resolution),
as well as the provisions of Schedule 1
(Interpretation);
|
14.1
|
Save
as provided otherwise, each 3i Investor may vote and/or exercise any of
its rights under this Agreement as it may see fit and in its own
interest.
|
14.2
|
Each
3i Investor may enforce the covenants, warranties and other obligations
given to it by the Company in this Agreement
independently. However, each of the 3i Investors will inform
the other 3i Investors of its intention to enforce the covenants,
warranties and other obligations and the manner in which these will be
enforced.
|
15.1
|
The
Shareholders agree that they shall ensure and vote in favour of the
inclusion in the Bye-Laws of a provision reflecting that any person who,
whether alone or jointly with others, acquires 40% or more of the Shares,
shall be obliged to make an offer for 100% of the issued and outstanding
share capital of the Company.
|
15.2
|
The
Shareholders agree that the Bye-Laws, including their respective rights
and obligations thereunder, shall as between them at any time be
interpreted and construed in accordance with the provisions of this
Agreement. If there is a conflict between a provision of this
Agreement and a provision of the Bye-Laws, the Parties agree, to the
extent permitted under Bermuda law, to observe the provisions of this
Agreement and shall in such event, at the first request of any Party
(other than the Company), amend the Bye-Laws as necessary to effect the
full implementation of the Agreement in all
respects.
|
16.1
|
Clauses
14 (
Confidentiality
), 15
(
No Recission
),
16 (
Whole
Agreement
), 17 (
Language
), 19 (
Assignments
), 20 (
Notices
), 21 (
Costs
), 22 (
General
), with the
exception of clause 22.7, 24 (
Governing Law;
Jurisdiction
), with the exception of clause 24.1, and 25 (
Counterparts
) of the
Merger Agreement apply mutatis mutandis to this Agreement as if set out in
full herein and as if reference therein to “Merger Agreement” is reference
to “this Agreement” and are to be considered an integral part
hereof.
|
16.2
|
The
Parties undertake to each other to execute and perform all such deeds,
documents, assurances, acts and things and to exercise all powers and
rights available to them, including the convening of all meetings and the
giving of all waivers and consents and the passing of all resolutions
reasonably required to ensure that the Company, the Shareholders and the
Directors and their representatives (if any) and the Company and all
members of the Group give effect to the provisions of this
Agreement.
|
16.3
|
A
person who is not a Party (for the sake of clarity, all Parties are
mentioned under the header of this Agreement or may have become a Party
pursuant to clause 10), other than 3i Investments and 3i Group which will
be deemed a Party for the purposes of this clause, may not enforce any
rights under this Agreement.
|
16.4
|
Any
Director, Alternate Director and Observer appointed by (or upon the
nomination of) the 3i Investors or Frontline (as the case may be)
may:
|
|
16.4.1
|
report
to the 3i Investors or Frontline (as the case may be) on the affairs of
the Group; and
|
|
16.4.2
|
disclose
Confidential Information as he shall reasonably consider appropriate to
the 3i Investors or Frontline (as the case may
be).
|
16.5
|
In
the ordinary course of the business of the 3i Group, it reviews existing
investments and new investment proposals and conducts other investments
and investment management activities. Each 3i Related Party may
disclose to and use Confidential Information for these purposes in all
cases with any other 3i Related
Party.
|
16.6
|
The
Company consents to each 3i Investor and Frontline publicising (including,
without limitation, on 3i’s or Frontline’s (as the case may be)
website):
|
|
16.6.1
|
the
fact that the 3i Investors or Frontline (as the case may be) are
Shareholders of the Company; and
|
|
16.6.2
|
any
other information about the Company which is already in the public domain
(unless the information is in the public domain as a result of a breach of
this Agreement by a 3i Investor or Frontline (as the case may
be)).
|
16.7
|
The
Parties other than the 3i Investors undertake with each 3i Investor that
they shall not use the name of any member of the 3i Group or any 3i Fund
in any context whatsoever (except as required by law) or hold itself,
himself or themselves (as the case may be) out as being connected or
associated with any member of the 3i Group or any 3i Fund (other than as
regards the 3i Investors being Shareholders of the Company) in any manner
whatsoever without the prior written consent of the relevant 3i
Investor.
|
16.8
|
Nothing
in this Agreement shall be deemed to constitute a partnership between the
Parties.
|
17.1
|
This
Agreement is governed by and shall be construed in accordance with the
laws of England and Wales.
|
3i
EUROPARTNERS Va L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
EUROPARTNERS Vb L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
PAN EUROPEAN BUY-OUTS 2006-08A L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
PAN EUROPEAN BUY-OUTS 2006-08B L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
PAN EUROPEAN BUY-OUTS 2006-08C L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
EUROPARTNERS Va L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
GLOBAL GROWTH 2006-08 L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
3i
PAN-EUROPEAN GROWTH 2006-08 L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
PAN-EUROPEAN
BUYOUTS CO-INVEST 2006-08 L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
PAN-EUROPEAN
BYOUTS CO-INVEST 2006-08 FCPR
|
||
Acting
by its manager, 3i Gestation S.A.
|
||
By:
|
||
Title:
|
||
PAN-EUROPEAN BUYOUTS
(
NORDIC
)
CO-INVEST 2006-08
L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
PAN EUROPEAN BUYOUTS
(
DUTCH
)
A CO-INVEST 2006-08
LP
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
GLOBAL
GROWTH CO-INVEST 2006-08 L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
OIL
,
GAS & POWER CO-INVEST
2006-08 L.P.
|
||
Acting
by its manager, 3i Investments plc
|
||
By:
|
||
Title:
|
||
STICHTING
MANAGEMENT SEAL
|
||
By:
|
||
Title:
|
||
FRONTLINE
LTD.
|
||
By:
|
||
Title:
|
||
SEALIFT
LTD.
|
||
By:
|
||
Title:
|
||
2.1
|
In
this Agreement, unless otherwise specified, a reference
to:
|
|
2.1.1
|
a
person shall be construed so as to include any individual, firm, company,
corporation, body corporate, government, governmental authority, tax
inspector, state or agency of a state
or
any joint venture, association or partnership (whether or not having a
separate legal personality);
|
SCHEDULE
2:
|
SHAREHOLDINGS
|
Name
Shareholder
|
Number
of Shares
|
3i
Europartners Va
|
12.562.367
|
3i
Europartners Vb
|
13.924.912
|
3i
Pan-European A
|
20.052.872
|
3i
Pan-European B
|
1.522.131
|
3i
Pan-European C
|
3.301.554
|
3i
Global Growth
|
5.528.126
|
3i
Pan-European Growth
|
2.764.066
|
Pan-European
Co-invest
|
347.088
|
Pan-European
Co-invest France
|
38.953
|
Pan-European
(Nordic) Co-invest
|
42.665
|
Pan-European
(Dutch) Co-invest
|
23.245
|
Global
Growth Co-invest
|
13.530
|
Oil,
Gas & Power Co-invest
|
137.117
|
Stichting
|
12,050,229
|
Frontline
1
|
34,976,500
|
Total
|
107.285.355
|
|
2.1.2
|
a
company shall be construed so as to include any company, corporation or
other body corporate or other legal entity, wherever and however
incorporated or established, and including any legal entity or entities
into which such company may be merged by means of a statutory merger or
into which it may be split up or demerged, by means of a statutory
split-up or demerger;
|
|
2.1.3
|
a
particular agreement or document is (unless the context otherwise
requires) a reference to the version of such agreement or document which
is binding and enforceable on the date hereof, as such agreement or
document may be novated, assigned, amended or supplemented from time to
time;
|
|
2.1.4
|
a
communication in writing shall be construed so as to include any
communication in the written form, letter, fax or
e-mail;
|
|
2.1.5
|
times
of day are to the local time in the relevant jurisdiction unless otherwise
stated;
|
|
2.1.6
|
the
singular includes a reference to the plural and
vice
versa
;
|
|
2.1.7
|
the
masculine includes a reference to the feminine and neuter and
vice
versa
;
|
|
2.1.8
|
clauses,
Schedules and Annexes are references to clauses of and schedules and
annexes to this Agreement.
|
2.2
|
Where
any provision is qualified or phrased by reference to an arm’s length
basis or principle, such qualification or reference shall mean the
conditions which would have been obtained between comparable, independent
persons in comparable transactions (taking into account the assets used,
the responsibilities and risks assumed and the division of benefits
between the parties) and comparable circumstances (taking into account the
times and places of performance and the parties’ business strategies),
thereby providing the closest approximation of the workings of the open
market.
|
2.3
|
Where
any obligation is characterised as several, such characterisation shall
mean that said obligation is separate and individual for each of the
obligees of such obligation.
|
2.4
|
The
Schedules and Annexes are an integral part of this Agreement and
references to this Agreement shall include its Schedules, Appendices and
Annexes.
|
Name
Shareholder
|
Number
of Shares
|
3i
Europartners Va
|
12.562.367
|
3i
Europartners Vb
|
13.924.912
|
3i
Pan-European A
|
20.052.872
|
3i
Pan-European B
|
1.522.131
|
3i
Pan-European C
|
3.301.554
|
3i
Global Growth
|
5.528.126
|
3i
Pan-European Growth
|
2.764.066
|
Pan-European
Co-invest
|
347.088
|
Pan-European
Co-invest France
|
38.953
|
Pan-European
(Nordic) Co-invest
|
42.665
|
Pan-European
(Dutch) Co-invest
|
23.245
|
Global
Growth Co-invest
|
13.530
|
Oil,
Gas & Power Co-invest
|
137.117
|
Stichting
|
12,050,229
|
Frontline
2
|
34,976,500
|
Total
|
107.285.355
|
Business
Plan
|
adopting
or amending any Business Plan or budget (to the extent not included in the
Business Plan), or taking any action materially inconsistent with such
business plan or budget.
|
Accounting
Policies
|
any
modification of the Accounting Standards, their application by the Group
and/or the format of the Annual Accounts, unless such change is required
by law or by virtue of a new standard of generally accepted accounting
policies or practices.
|
Alternation
to Business
|
making
any material change in the nature of the Group’s businesses, including
entering in new lines of business or in new geographic areas within
existing business units.
|
Liquidation
|
the
passing of any resolution for the Liquidation of the Company or to
technically liquidate any member of the Group by disposal of all or
substantially all of the assets of such member of the
Group.
|
Bankruptcy
|
any
application for a member of the Group to be declared bankrupt or for a
suspension of payments of a member of the
Group.
|
Directors
Compensation
|
granting
or modifying the remuneration or other terms of engagement of management a
director of the Group earning in excess of USD 100,000
annually.
|
Related
Party Transactions
|
entering
into any transaction, agreement or arrangement with or for the benefit of
any Shareholder or other related party or Affiliate
thereof.
|
Listing
|
the
application for a Listing, and the appointment of professional advisers in
connection therewith.
|
Equity
Transactions
|
acquiring
or disposing of any interest in the share capital or instruments
convertible into or exchangeable for share capital of any other company or
body corporate for a consideration in excess of USD 1
million.
|
Asset
Transactions
|
the
sale, transfer, leasing, licensing or disposal by a member of the Group
(other than in the ordinary course of trading) of all or a substantial
part of its business, undertaking or assets whether by a single
transaction or series of transactions, related or not acquiring or
disposing of any asset of the Group in excess of USD 1
million.
|
Joint
Ventures
|
forming,
entering into, terminating or withdrawing from any partnership,
consortium, joint venture or any other unincorporated association carrying
on a trade or business or any other similar arrangement, whether or not
with a view to making a profit.
|
Material
Contracts
|
entering
into any agreement or series of connected agreements under which the
consideration payable is more than USD 2 million or the receivable
represents more than USD 15 million.
|
Finance
Documents
|
effecting
or permitting to be effected any variations or amendments to, or waivers
or compromises or releases under or in connection with, or entering into
any agreement inconsistent with, any of the Finance
Documents.
|
Refinancing
|
(the
making by any member of the Group of any application or submission of any
business plan to any person with a view to) attracting additional or
substitute financing for the Group or any part of it other than under the
Finance Documents.
|
Constitutional
Documents
|
any
amendment of the Bye-Laws (including changes to the name and financial
year of the Company).
|
Auditor
|
the
appointment or dismissal of the
Auditor.
|
Legal
Mergers
|
any
merger or demerger involving the Company, other than in relation to an
expansion of the business of the Group by acquisition or
otherwise.
|
(3)
|
SEALIFT LTD
,
a company
incorporated under the laws of Bermuda, with its registered office at PO
Box HM 1593, Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08,
Bermuda, Company No. 39466 (the “
Company
”,
for itself and on
behalf of the “
Continuing
Shareholders
”);
|
(A)
(B)
|
The
Original Shareholder and the Continuing Shareholders are parties to a
shareholders’ agreement dated [DATE] 2007 (the “
Agreement’
);
The New Shareholder proposes to
purchase/subscribe for [ ]
Shares
of
[ ] each in the capital of the Company from the
Original Shareholder;
|
(C)
(D)
|
The
shareholding by the New Shareholder is authorised by the Bermuda Registrar
of Companies and/or the Bermuda Monetary Authority or is subject to an
exemption or direction from the Bermuda Registrar of Companies and/or the
Bermuda Monetary Authority;
This Deed is made by the New Shareholder
in compliance with the Agreement.
|
1.
|
The
New Shareholder confirms that it has been supplied with a copy of the
Agreement.
|
2.
|
The
New Shareholder hereby subscribes for [NUMBER] Shares with a nominal value
of [•] each in the capital of the Company at a subscription price of USD
[AMOUNT] per share and agrees to hold the Shares subject to the Bye-Laws
of the Company.] In consideration of the sum of USD [AMOUNT] paid on the
date hereof, the Original Shareholder(s) shall forthwith transfer to the
New Shareholder [NUMBER] Shares together with the right to receive all
dividends accrued thereon as at the date of transfer subject to the
Bye-Laws of the Company. Upon execution of the
[issue][transfer] instrument, the Company shall register the New
Shareholder in the shareholders’ register as the holder of [NUMBER]
Shares.
|
3.
|
The
New Shareholder undertakes to the Continuing Shareholders to be bound by
the Agreement in all respects as if the New Shareholder was a Party to the
Agreement and named in it as a Shareholder and to observe and perform all
the provisions and obligations of the Agreement applicable to or binding
on a Shareholder under the Agreement insofar as they fall to be observed
or performed on or after the date of this
Deed.
|
4.
|
The
Continuing Shareholders undertakes to the New Shareholder to observe and
perform all the provisions and obligations of the Agreement applicable to
or binding on a “Shareholder” or a “Party” under the Agreement and
acknowledges that the New Shareholder shall be entitled to the rights and
benefits of the Agreement as if the New Shareholder were named in the
Agreement as a Shareholder or a Party with effect from the date of this
Deed.
|
5.
|
This
Deed is made for the benefit of (a) the Parties to the Agreement as at the
date hereof and (b) every other person who after the date of the Agreement
(and whether before or after the execution of this Deed) assumes any
rights or obligations under the Agreement or who adheres to
it.
|
6.
|
The
address and fax number of the New Shareholder for the purposes of clause
17 of the Agreement is as follows:
|
Attn:
|
||
Fax:
|
||
Address:
|
By:
|
|
Title:
|
By:
|
|
Title:
|
By:
|
|
Title:
|
2.1
|
The
Company shall, and shall procure that each member of the Group
shall:
|
|
2.1.1
|
keep
proper accounting records and in them make true and complete entries of
all its dealings and transactions in relation to its business;
and
|
|
2.1.2
|
comply
with all statutory requirements as to the preparation and audit of annual
accounts.
|
2.2
|
Dockwise
shall prepare:
|
|
2.2.1
|
unaudited
monthly Management Accounts of the Group, such
accounts:
|
|
(a)
|
to
include a consolidated profit and loss account, balance sheet and cash
flow statement for the Group broken down according to the principal
divisions of the Group from time to
time;
|
|
(b)
|
to
refer to any material matter occurring in or relating to the period in
question;
|
|
(c)
|
to
include a comparison of all such information with the projections and
forecasts in the relevant operating budget included in the Business Plan
and with the corresponding information for the same period in the
preceding year and a statement of any material variation from the relevant
operating budget;
|
|
(d)
|
to
itemise all material transactions referred to in the statement of
projected capital expenditure included in the relevant operating budget
and entered into by the Group during that
period;
|
|
(e)
|
to
set out in a separate schedule (in sufficient detail to demonstrate the
same) the Group’s actual performance against the limits set out in the
Finance Documents;
|
|
(f)
|
to
have been approved by the CFO and one other director of the relevant
company as evidenced by their signature of the
accounts;
|
|
(g)
|
to
include a commentary by the management board of Dockwise on the state of
the business of the Company;
|
|
(h)
|
to
be substantially in the form of the sample Management Accounts in the
Agreed Form;
|
|
(i)
|
to
include project cash flows for the period up to the end of a Financial
Year; and
|
|
(j)
|
to
include projected profit and loss account for the remainder of the then
current financial period;
|
|
2.2.2
|
a
report by the management board of Dockwise (which in relation to each
12-month period ending on the accounting reference date each year, shall
include a reconciliation of the Group’s actual performance to any Business
Plan showing variances and giving narrative explanation of those
variances);
|
|
2.2.3
|
the
Electronic Financial Report;
|
|
2.2.4
|
the
Merger Chart; and
|
|
2.2.5
|
such
other reports as the Board may from time to time reasonably require as to
any matter relating to the businesses or affairs of the Group or to its
financial position or assets.
|
2.3
|
Dockwise
shall ensure that:
|
|
2.3.1
|
the
Annual Accounts and each set of Management Accounts referred to in
paragraph 2.2 above are prepared, so far as applicable, on the same basis
as that used in the preparation of the Business Plan and in accordance
with the Accounting Standards, consistently
applied;
|
|
2.3.2
|
each
report prepared under paragraphs 2.2.1, 2.2.2 and 2.2.3 above is delivered
to the Board within 14 days of the end of each calendar month in such
format as may be required by the
Board;
|
|
2.3.3
|
the
Annual Accounts are delivered to the Board within four months of the end
of the Financial Year; and
|
|
2.3.4
|
the
Merger Chart prepared under paragraph 2.2.4 above is delivered to 3i Group
plc at such time as the Annual Accounts are
delivered.
|
5.1
|
The
Company shall, and shall procure that each other member of the Group shall
at all times keep insured with a reputable insurance
office:
|
|
5.1.1
|
all
its assets against such risks and in such manner and to such extent as
accords with good commercial practice with regard to assets of the same
kind in comparable circumstances;
|
|
5.1.2
|
itself
in respect of any accident, damage, injury, third party loss, loss of
profits and other risks and to such an extent as accords with good
commercial practice with regard to a business of the same kind as that of
the relevant member of the Group;
and
|
|
5.1.3
|
its
directors against any liability incurred by them in the lawful performance
of their duties and, if the CEO and CFO so request, against the permanent
disability and demise risks of the
directors.
|
5.2
|
Dockwise
shall procure that the Group’s insurance and assurance policies are
reviewed by its insurance brokers at least once every year and that all
reasonable recommendations made by its brokers in relation to such
policies are complied with.
|
11.1
|
Dockwise
shall, and shall procure that the other members of the Group shall, (i)
comply with all applicable environmental laws, regulations or directives
(“
Environmental
Law
”),
(ii) maintain all
consents, permits and licenses required under Environmental Law and (iii)
notify each Investor as soon as possible if any member of the Group any
such consents, permits or licenses (whether because they expire, are
revoked or terminated or
otherwise).
|
11.2
|
Dockwise
shall, and shall procure that the other members of the Group shall, comply
with (i) all applicable laws, regulations or directives relating to the
relationship between the relevant member of the Group and its employees,
potential employees, trade unions and employee representative body and/or
the health and safety of its employees and (ii) any arrangements between
the relevant member of the Group and its employees, trade unions and/or
employee representative bodies.
|
Name:
|
|
Date:
|
MERGER
AGREEMENT
DOCKWISE
AND SEALIFT
|
Clause
|
Page
|
|
1.
|
Definitions
|
|
2.
|
Sale
And Purchase Agreement
|
|
3.
|
Shareholders
Agreement
|
|
4.
|
The
Debt Restructuring
|
|
5.
|
Vessels,
Conversion, Shipco’s Transfer Transaction
|
|
6.
|
Private
Placement
|
|
7.
|
Interconditionality
And Announcement
|
|
8.
|
Conditions
To Completion
|
|
9.
|
Pre-Completion
Conduct
|
|
10.
|
Completion
|
|
11.
|
Due
Diligence
|
|
12.
|
Warranties
|
|
13.
|
Ancillary
Restraints & Undertakings
|
|
14
|
Confidentiality
|
|
15.
|
No
Rescission
|
|
16.
|
Whole
Agreement
|
|
17.
|
Language
|
|
18.
|
Further
Assurances; Post-Completion Actions
|
|
19.
|
Assignment
|
|
20.
|
Notices
|
|
21.
|
Costs
|
|
22.
|
General
|
|
23.
|
Interpretation
|
|
24.
|
Governing
Law; Jurisdiction
|
|
25.
|
Counterparts
|
|
The
investment funds listed in SCHEDULE 1 (3i Investors) to this Merger
Agreement (the “
3i
Investors
”);
|
|
FRONTLINE LTD
,
a company
incorporated under the laws of Bermuda with its registration number 17460
and its registered office at Par la Ville Place, 14 Par la Ville Road,
Hamilton, Bermuda and listed on the Oslo Stock Exchange (“
Frontline
”);
|
|
SEALIFT LTD
a company
incorporated under the laws of Bermuda with the registration number 39466
and its registered office at Par la Ville Place, 14 Par la Ville Road,
Hamilton, Bermuda, (“
Sealift
”
or the “
Company
”);
|
|
STICHTING MANAGEMENT
DELPHI
,
a foundation
(stichting)
incorporated under the laws of The Netherlands, having its
registered offices at Lage Mosten 15, 4822 NJ Breda, the Netherlands,
registered with the Commercial Register in West-Brabant, The Netherlands,
under file number 34260899 (the “
Delphi
Foundation
”);
|
|
STICHTING MANAGEMENT
SEALIFT
,
a foundation
(stichting)
incorporated under the laws of The Netherlands, having its
registered offices at Breda, The Netherlands, and its principal place of
business at Lage Mosten 15, 4822 NJ Breda, the Netherlands, registered
with the Commercial Register in West-Brabant, The Netherlands (the “
MPP
Foundation
”);
|
|
NEPTUN HEAVY LIFT AS
, a
company incorporated under the laws of Norway, with its registered office
at Ruselokkveien 26, 0117 Oslo, Norway and registered with the corporate
register in Norway under number 935 302 110 (“
Neptun
”);
|
|
CAPRICORN INVESTMENT
AS,
a company incorporated under the laws of Norway, with its registered
office at Dalsveien 57, 0775 Oslo, Norway and registered with the
corporate register in Norway under number 989 048 945 (“
Capricorn
”);
and
|
|
SJØKONSULT AS
, a company
incorporated under the laws of Norway, with its registered office at
Bjerkebakken 65 A, 0757 Oslo, Norway and registered with the corporate
register in Norway under number 989 382 810 (“
Sjøkonsult
”);
|
(A)
|
The
3i Investors, the Delphi Foundation (which has or will transfer all its
interests in Delphi to the MPP Foundation), Neptun, Capricorn and
SJØKONSULT (collectively the “
Delphi
Shareholders
”)
together hold 100%
of the issued share capital of Delphi Acquisition Holding S.A., a limited
liability company
(société anonyme)
incorporated under the laws of Luxembourg, with its registered
office at 20, rue de la Poste, L-2346 Luxembourg, Grand Duchy of
Luxembourg and registered with the Luxembourg Trade and Companies Register
under number B122.411 (“
Delphi
”);
|
(B)
|
Delphi
is the holding company for a group of companies active in the offshore
industry operating a fleet of large heavy lift transport vessels (the
“Delphi Business”). Delphi acquired the group of companies operating the
Delphi Business on 12 January 2007;
|
(C)
|
Sealift
is the holding company for a group of, inter alia, six companies (the
“ShipCo’s”) each of which owns a single hull Suez max vessel (collectively
the “Sealift Vessels”). Four Sealift Vessels are being, or are scheduled
to be, converted at a Cosco shipyard in China into float-over heavy lift
transport vessels. Sealift has the option to also convert the remaining
two Sealift Vessels into float-over heavy lift transport vessels. Pursuant
to the purchase agreement(s) dated 31 January 2007 as supplemented on 15th
March 2007, the costs of conversion of the first four of the Sealift
Vessels are for the account of Frontline. The costs of conversion of the
further two Sealift Vessels are for the account of
Sealift;
|
(D)
|
The
shares of Sealift are traded in Norway on the over the counter system
(“OTC”) administrated by the Norwegian Stockbrokers Association. Frontline
is a substantial minority shareholder of Sealift holding 33.33% of the
entire issued share capital of
Sealift;
|
(E)
|
The
Parties have discussed the possibility of merging the Delphi Business and
the Sealift Business (as defined herein) (the “Merger”) and have on 3
April 2007 entered into a nonbinding merger term sheet and a
confidentiality and exclusivity
agreement;
|
(F)
|
The
Merger will be effected by (i) the sale by the Delphi Shareholders of the
entire issued share capital of Delphi to Sealift in consideration for the
issue by Sealift of the Consideration Shares (as defined herein) such
shares to be admitted for trading on the OTC, and (ii) the sale by Sealift
of the shares of the ShipCo’s to Dockwise Transport B.V. (the “ShipCo
Transfer Transaction”);
|
(G)
|
The
Parties wish (i) to procure the Private Placement (as defined herein) of
shares in the capital of Sealift (which will be tradable on the OTC), and
(ii) to restructure the debt financing of both Sealift, Delphi and their
respective subsidiaries (the “Debt Restructuring”). (The Merger, the
ShipCo Transfer Transaction, the Private Placement, and the Debt
Restructuring, are collectively referred to as the
“Transaction”);
|
(H)
|
Sealift’s
board has, without prejudice to the provisions of the Shareholders
Agreement, in a resolution on 27 April 2007, resolved to seek a listing of
its shares on the Oslo Stock Exchange with Q3/07 as the targeted period
for the first date of trading (the “Proposed
Listing”);
|
(I)
|
Sealift
and Delphi have complied or procured compliance with the provisions of the
Dutch Social Economic Council Merger Regulations for the protection of
employees (SER-Besluit Fusiegedragsregels 2000 ter bescherming van de
belangen van werknemers) and the works council of Dockwise B.V. has
rendered an unconditional positive advice in relation to the Transaction;
and
|
(J)
|
The
Parties now wish to proceed with the Transaction on the terms and
conditions set out in this Merger
Agreement.
|
1.
|
DEFINITIONS
|
1.1
|
In
this Merger Agreement capitalised terms have the meaning ascribed thereto
in SCHEDULE 2 (Definitions).
|
2.
|
SALE AND PURCHASE
AGREEMENT
|
2.1
|
Sealift,
the Delphi Shareholders, the Delphi Foundation, Neptun, Capricorn and
Sjøkonsult shall on the date hereof enter into the Delphi SPA in the
Agreed Form.
|
3.
|
SHAREHOLDERS
AGREEMENT
|
3.1
|
Frontline,
certain of the Delphi Shareholders and Sealift shall on the date hereof
enter into the Sealift Shareholders Agreement in the Agreed
Form.
|
4.
|
THE DEBT
RESTRUCTURING
|
4.1
|
The
Parties shall procure the implementation of the Debt Restructuring in
accordance with the provisions of SCHEDULE 5 (Debt
Restructuring).
|
5.
|
VESSELS
,
CONVERSION
,
SHIPCO’S TRANSFER
TRANSACTION
|
5.1
|
Frontline
shall, and Sealift shall procure that the ShipCo’s shall, on the date
hereof enter into the Second Supplemental Purchase
Agreement.
|
5.2
|
Sealift
shall, and the Delphi Shareholders shall procure that Dockwise Transport
B.V. shall, on the date hereof enter into the ShipCo SPA and shall on the
Merger Completion Date complete the ShipCo Transfer Transaction in
accordance with SCHEDULE 6 (ShipCo Transfer
Transaction).
|
6.
|
PRIVATE
PLACEMENT
|
6.1
|
The
Parties wish to pursue a private placement to professional investors
(“
New
Investors
”)
of shares in the
capital of Sealift (the “
Offering Shares
”)
to be admitted to
trading on the OTC (the “
Private
Placement
”).
|
6.2
|
Part
of the Offering Shares shall be issued by Sealift directly to New
Investors in which case the proceeds shall be for the account of Sealift
(the “
Primary Offering
Shares
”)
and part of the
Offering Shares shall be Consideration Shares to be sold to New Investors
by certain of the Delphi Shareholders in which case the proceeds shall be
for the account of the selling Delphi Shareholders (the “
Secondary Offering
Shares
”),
all in accordance
with the provisions of SCHEDULE 3 (Private Placement) and the Subscription
Agreement.
|
6.3
|
Sealift
has mandated Pareto Securities ASA and Carnegie ASA as managers in
connection with the Private Placement (the “
Placement
Managers
”)
.
|
6.4
|
The
final offer price for the Offering Share shall be NOK 30 per Offering
Share (the “
Offer
Price
”).
The total number
of Offering Shares, the number of Primary Offering Shares and Secondary
Offering Shares and the allotment of Offering Shares to New Investors
shall be determined in accordance with SCHEDULE 3 (Private Placement) and
the Subscription Agreement.
|
6.5
|
Sealift
and Frontline shall procure that the Private Placement shall take place in
accordance with all applicable laws and regulations affecting Sealift in
Bermuda and all applicable rules and regulations and market practice
relating to private placements on the
OTC.
|
7.
|
INTERCONDITIONALITY AND
ANNOUNCEMENT
|
7.1
|
The
obligations of each of the Parties is conditional on each of the
Transaction Documents having been duly signed by the appropriate parties
thereto (“
Signing
”).
|
7.2
|
Immediately
following Signing Sealift and Frontline shall announce the Transaction by
issuing the Sealift Press Release and the Frontline Press
Release.
|
8.
|
CONDITIONS TO
COMPLETION
|
8.1
|
Completion
of the Transaction is conditional on the Completion Conditions set out in
clause 8.2 being fulfilled or waived in accordance with clause
8.3.
|
8.2
|
The
Completion Conditions are:
|
|
8.2.1
|
receipt
of all required licences and consents required from the Bermuda Monetary
Authority or the Bermuda Registration of Companies or any other
governmental authority having jurisdiction in relation to the issue of the
Consideration Shares and the placement of the Offering Shares;
and
|
|
8.2.2
|
receipt
by the 3i Investors and Sealift of a confirmation from the Placement
Managers that they have received irrevocable commitments from New
Investors in relation to the subscription for Offering Shares for an
aggregate amount of at least 39,800,000 Offering Shares at a price equal
to the Offer Price and the allotment of the Offering Shares and the
satisfaction or waiver of all the Conditions of the Offering, all as
defined and in accordance with the provisions of the Subscription
Agreement.
|
8.3
|
The
Completion Condition set out in clause 8.2.2 is for the benefit of the 3i
Investors and may be waived by the 3i Investors (either in whole or in
part) at any time by notice to the other Parties. The Completion Condition
in Clause 8.2.1 is for the benefit of all the Parties. All Parties shall
(to the extent within their power) use reasonable endeavours to procure
that the Completion Conditions are satisfied on or before the Merger
Completion Date.
|
8.4
|
If
the Completion Conditions have not all been fulfilled or waived in
accordance with clause 8.3 on or before 23h59m CET on 11 May 2007 (the
“
Stop Date
”)
but subject to the
Parties having complied with their obligations under this Merger
Agreement, the 3i Investors and Sealift may each terminate this Merger
Agreement by notice in writing to the other Parties without liability of
any Party to any other Party and without any obligation on any Party to
compensate any other Party for any damages or cost incurred as a result
thereof. Following such
termination:
|
|
8.4.1
|
except
for this clause 8 (Conditions), clauses 1 (Definitions), 16 (Whole
Agreement), 17 (Language), 20 (Notices), 23 (Interpretation), 24
(Governing Law; Jurisdiction) and 25 (Counterparts), all the other clauses
of this Merger Agreement and the offer Transaction Documents shall lapse
and cease to have effect; but
|
|
8.4.2
|
the
lapsing of those provisions and agreements shall not affect any rights or
liabilities of any Party in respect of damages for non-performance of any
obligation under the Transaction Documents falling due for performance
prior to such lapse; and
|
|
8.4.3
|
except
as required by statutory or contractual obligations to a stock exchange or
other market on which the shares of any Party are traded, no Party shall
make (or permit any person to make) any announcement concerning the
termination of this Merger Agreement or any ancillary matter without the
prior written consent of the 3i Investors, Frontline and Sealift (not to
be unreasonably withheld or
delayed).
|
8.5
|
Upon
fulfilment or waiver (as the case may be) of the Completion Conditions,
(i) each of Sealift and the 3i Investors may issue the Completion
Certificate and (ii) the Parties must proceed to completion of the Merger
in accordance with clause 10, the Delphi SPA and the ShipCo SPA (“
Merger
Completion
”).
|
8.6
|
Completion
of the Private Placement shall occur immediately after Merger Completion
having occurred.
|
9.
|
PRE-COMPLETION
CONDUCT
|
9.1
|
Pending
Merger Completion each of Frontline and Sealift shall procure
that:
|
|
9.1.1
|
the
Delphi Shareholders, their representatives and advisers are given
reasonable access to the management and to the books and records of the
Sealift Group Companies;
|
|
9.1.2
|
the
Delphi Shareholders, their representatives and advisers are provided
information regarding the business and affairs of the Sealift Group
Companies they reasonably require for the purposes of the Transaction;
and
|
|
9.1.3
|
each
of the Sealift Group Companies, if required by the Delphi Shareholders,
shall provide all co-operation reasonably necessary in connection with the
Debt Restructuring.
|
9.2
|
Pending
Merger Completion each of Frontline (to the extent within its power) and
Sealift shall use their reasonable endeavours so as to procure that,
except with the written consent of the Delphi Shareholders (which shall
not be unreasonably withheld or delayed and shall in any event be deemed
to be given if no response is received within 3 (three) days of a written
request by Frontline and Sealift) the business of the Sealift Group
Companies shall be run in the ordinary course and in accordance with
consistent past practice.
|
10.
|
COMPLETION
|
10.1
|
Merger
Completion shall take place on the Merger Completion Date at the offices
of Clifford Chance LLP in Amsterdam in accordance with the terms of the
Delphi SPA and each of the Parties shall comply with its obligations set
out therein.
|
10.2
|
Completion
of the Debt Restructuring shall take place at the offices of Clifford
Chance LLP in Amsterdam on the Merger Completion Date in accordance with
the provisions of SCHEDULE 5 (Debt Restructuring) and each of the Parties
shall comply with its obligations set out
therein.
|
10.3
|
Completion
of the ShipCo Transfer Transaction shall take place at the offices of
Clifford Chance LLP in Amsterdam on the Merger Completion Date in
accordance with the provisions of SCHEDULE 6 (ShipCo Transfer Transaction)
and each of the Parties shall comply with its obligations set out
therein.
|
10.4
|
Completion
of the Private Placement shall take place on the Private Placement
Completion Date in accordance with the Subscription Agreement and the
provisions of SCHEDULE 3 (Private Placement) and to the extent the same
relates to them, each of the Parties shall comply with the provisions
thereof.
|
11.
|
DUE
DILIGENCE
|
11.1
|
The
Delphi Shareholders acknowledge and agree
that:
|
|
11.1.1
|
they
have performed, with the assistance of professional advisors, a due
diligence investigation with respect to Sealift, the Sealift Group
Companies and the Sealift Business during the period from 5 April 2007 to
the date hereof (the “
Sealift Due Diligence
Investigation
”);
|
|
11.1.2
|
for
the purposes of the Sealift Due Diligence Investigation the Delphi
Shareholders have had (and their advisors have had) sufficient opportunity
to review any and all information made available to the Delphi
Shareholders and its advisors, amongst others, (i) by having received
verbal and written information regarding the Sealift Group Companies and
the Sealift Business from Frontline, Sealift, and/or their
representatives, (ii) by having had access to the financial, legal, tax,
commercial and other information listed on the index attached as SCHEDULE
7 (Disclosed Information), (iii) by having had the opportunity to submit
questions to and receive answers from Frontline and from Sealift on any
matter that they deemed proper and necessary for the purpose of entering
into this Merger Agreement, and (iv) by having had access to senior
management of the Company (including meeting with the Company’s management
group) (together with information cross-referred therein collectively the
“
Disclosed Sealift
Information
”);
and
|
|
11.1.3
|
the
Delphi Shareholders have to the best of their knowledge raised with
Frontline and Sealift all specific issues which they considered relevant
in connection with the transactions contemplated hereby and taking into
account the information available to the Delphi Shareholders at that
time.
|
11.2
|
Frontline
and Sealift acknowledge and agree
that:
|
|
11.2.1
|
they
have been offered the opportunity to perform, with the assistance of
professional advisors, a due diligence investigation with respect to the
Shares, Convertible Bonds, Loan Notes (all as defined in the Delphi SPA),
the Delphi Group Companies and their business during the period from 30
March 2007 to the date hereof (the “
Dockwise Due Diligence
Investigation
”);
|
|
11.2.2
|
for
the purposes of the Due Diligence Investigation Frontline and Sealift have
had (and its advisors have had) sufficient opportunity to review any and
all information made available to Frontline, Sealift and their advisors,
amongst others, (i) by having received information regarding the Delphi
Group Companies and its business from the Delphi Shareholders, Delphi
and/or their representatives (ii) by having had access to the Disclosed
Dockwise Information, (iii) by having had the opportunity to submit
questions to and receive answers from the Delphi Shareholders and from
Delphi on any matter that it deemed proper and necessary for the purpose
of entering into this Merger Agreement, and (iv) by having had access to
senior management of Delphi (including meeting with the Delphi management
group) (together with information cross-referred therein collectively the
“
Disclosed Dockwise
Information
”); and
|
|
11.2.3
|
Frontline
and Sealift have to the best of their knowledge raised with the Delphi
Shareholders all specific issues which they considered relevant in
connection with the transactions contemplated hereby and taking into
account the information available to Frontline and Sealift at that
time.
|
12.
|
WARRANTIES
|
12.1
|
Each
of Frontline and Sealift represents and warrants to the Delphi
Shareholders that each of the statements set out in SCHEDULE 8
(Warranties) is true, accurate in all material respects and not misleading
in any material respect at the date hereof and will be true, accurate in
all material respects and not misleading in any material respect at Merger
Completion.
|
12.2
|
In
the event that any of the Warranties is not true or accurate or is
misleading or in the event of any other breach of this Merger Agreement
(any of the foregoing a “
Breach
”)
Frontline and
Sealift shall be jointly and severally liable for all damages incurred by
the Delphi Shareholders directly resulting from such Breach and, subject
to the provisions of this Merger Agreement, compensate the Delphi
Shareholders (or at their direction any Sealift Group Company or Delphi
Group Company) for these damages, provided however, that neither Frontline
nor Sealift shall be liable for any consequential damages, losses or
liabilities or loss of profit.
|
12.3
|
If
the Delphi Shareholders become aware of a Breach, they shall notify
Frontline and Sealift thereof, describing in reasonable detail the facts
or circumstances giving rise thereto, and, if reasonably possible, the
amount of the claim (the “
Claim
”)
.
|
12.4
|
Sealift’s
aggregate liability with respect to any claim for breach of Warranties is
limited to USD 37.5 million. Frontline’s aggregate liability with respect
to any claim for breach of Warranties is limited to USD 37.5 million and
Sealift and Frontline shall not be liable to indemnify the Delphi
Shareholders unless and until the amount of the aggregated claims for
which Frontline and Sealift (as the case may be) are liable exceeds USD 10
million in which event Frontline and Sealift shall - subject to the
limitation above - be liable for the full amount of such claim if such
claims are justified hereunder. Any individual claim shall only be taken
into account (including for the purposes of determining if the above
threshold has been met) if it exceeds five hundred thousand US Dollars
(USD 500,000).
|
12.5
|
Frontline
and Sealift are not liable in respect of a claim for any breach of
Warranties unless the Delphi Shareholders have given Frontline and Sealift
written notice of the claim within 12 months of the Merger Completion
Date.
|
12.6
|
Frontline’s
and Sealift’s liability for any Breach is limited by (i) matters disclosed
in the Disclosed Sealift Information, (ii) any matter which has been
fairly disclosed, or excepted, in the Warranties themselves and/or
otherwise in this Merger Agreement and/or in the Schedules hereto and
(iii) any matter of which the Delphi Shareholders are or should have been
aware of at the time of entering into this Merger Agreement whether on the
basis of information available from Sealift, Frontline or its advisers,
from any public register or
otherwise.
|
13.
|
ANCILLARY RESTRAINTS &
UNDERTAKINGS
|
13.1
|
Frontline
undertakes to the Delphi Shareholders, the MPP Foundation, Sealift and
each of the Sealift Group Companies from time to time that it will not,
and that it will ensure that each member of the Frontline Group will not,
either alone or jointly with others, directly or indirectly whether for
the account of Frontline, any other Frontline Group Company or otherwise
and in any capacity including as owner, officer, director, partner,
shareholder, agent, consultant, advisor, developer, or in any other
capacity do any of the following without the prior written consent of
Sealift:
|
|
13.1.1
|
at
any time before the expiry of 36 months after the date of termination or
expiry of the Sealift Shareholders Agreement (the “
Non-Compete
Period
”)
directly or
indirectly incorporate, establish, own, operate, manage, control or engage
in any Competing Business;
|
|
13.1.2
|
at
any time before the expiry of the Non-Compete Period acquire or hold an
interest (financial or otherwise) in any company or business that,
directly or through any company or business directly or indirectly
controlled by it, is engaged in any Competing
Business;
|
|
13.1.3
|
at
any time before the expiry of the Non-Compete Period participate in a
joint venture or other co-operative arrangement aimed directly or
indirectly at generating Competing
Business;
|
|
13.1.4
|
disclose
any confidential information relating to the Delphi Shareholders, the MPP
Foundation, Sealift, or any of the Sealift Group Companies, the Delphi
Group Companies or the businesses that they operate except as permitted in
accordance with this clause 13;
|
|
13.1.5
|
at
any time before the expiry of 24 months after the date of termination or
expiry of the Sealift Shareholders Agreement, employ, enter into a
consulting agreement with or solicit, encourage or induce to terminate an
existing employment or consulting relationship with any person earning an
annual salary of more than one hundred thousand United States Dollars (USD
100,000) who is on the date of this Merger Agreement or has during the
three (3) months before the date of this Merger Agreement been an employee
of or consultant to Sealift, any Sealift Group Company or any Delphi Group
Companies;
|
|
13.1.6
|
at
any time before the expiry of the Non-Compete Period solicit or entice
away any customer of the Combined Business;
or
|
|
13.1.7
|
at
any time after Merger Completion use the trade names Sealift or Dockwise
or any of their logo’s or any other name or logo likely to be confused
with such trade name or logo.
|
13.2
|
Frontline
shall not, and shall procure that any person directly or indirectly
controlled by it shall not at any time during the Non-Compete
Period:
|
|
13.2.1
|
sell,
transfer, finance, lease or otherwise make available directly or
indirectly to any Competitor any Competing Vessel or any vessel capable of
being converted into a Competing Vessel;
and
|
|
13.2.2
|
convert
or broker, contract for or otherwise facilitate or assist in the
conversion of any vessel into a Competing
Vessel.
|
13.3
|
Each
undertaking in clauses 13.1 and 13.2 must be interpreted as a separate
undertaking, severable from the remainder of this Merger Agreement, so
that if one or more parts of the undertakings are held to be unlawful or
against the public interest or in any way an unreasonable restraint of
trade, and then to that extent only, it must be disregarded and the
remaining undertakings (and, if it applies, the remainder of the
undertaking in question) will continue to bind
Frontline.
|
13.4
|
Each
undertaking in clauses 13.1 and 13.2 shall confer a benefit on each Delphi
Shareholder, each member of their respective groups of companies, the MPP
Foundation and each Sealift Group Company. Each beneficiary (but no other
person who is not a party to this Merger Agreement) shall be entitled to
enforce such undertakings subject to and in accordance with the provisions
of the contracts (Rights of Third Parties) Act 1999 (the “
1999 Act
”)
provided that it
shall only be entitled to enforce such undertakings whilst it is a member
of the relevant group, or a Sealift Group Company or if no longer a member
of the relevant group or a Sealift Group Company where the same is the
result of an Exit Event involving (i) all or substantially all of the
Sealift Group Companies (or their assets), or (ii) all or substantially
all of those Sealift Group Companies (or their assets) which together form
a separate business, business unit or
division.
|
13.5
|
Nothing
contained in clause 13.1 or 13.2 shall preclude or restrict Frontline or
any other member of the Frontline Group from holding (i) as a passive
investment not more than three per cent (3%) of the issued share capital
of any company engaged in Competing Business whose shares are listed on a
recognised stock exchange, the OTC or any similar trading platform, and
(ii) for the avoidance of doubt, shares in the capital of
Sealift.
|
14.
|
CONFIDENTIALITY
|
14.1
|
Subject
to clauses 14.3 and 14.4, neither Party shall make (or permit any member
of its group of companies, to make) any announcement concerning the
Transaction, the Proposed Listing or any ancillary matter before, on or
after Merger Completion except as specifically provided in this Merger
Agreement.
|
14.2
|
Subject
to clauses 14.3 and 14.4, each Party shall keep confidential, and shall
procure that each member of their respective group of companies from time
to time shall keep confidential, all information provided to it by or on
behalf of any other Party or otherwise obtained by or in connection with
this Merger Agreement and which relates to the other
Party.
|
14.3
|
Nothing
in this clause 14 prevents any announcement being made or any confidential
information being disclosed:
|
|
14.3.1
|
with
the written approval of the other Parties, which in the case of any
announcement shall not be unreasonably withheld or delayed;
or
|
|
14.3.2
|
to
the extent required by law or any stock exchange or other competent
regulatory body or by any contractual obligation in relation to the market
on which the shares of a Party are traded,
provided
that a Party
required to disclose any confidential information shall promptly notify
the other Parties, where practicable and lawful to do so, before
disclosing any relevant
information;
|
14.4
|
Nothing
in this clause 14 prevents disclosure of confidential information by any
Party:
|
14.4.1
|
to
the extent that the information is in or comes into the public domain
other than as a result of a breach of any undertaking or duty of
confidentiality by any person;
|
|
14.4.2
|
to
that Party’s professional advisers, auditors or bankers,
provided
that before
any disclosure to any such person is made the relevant party shall procure
that he is made aware of the terms of this clause and that the disclosing
party shall use its best endeavours to procure that each such person
adheres to those terms as if he were bound by the provisions of this
clause 14.
|
14.5
|
The
3i Investors and Frontline may disclose the terms of this Merger Agreement
and any information concerning Sealift (a) to any 3i Related Party, (b) to
a director, officer or employee of any 3i Related Party, Frontline or
their professional advisers, (c) in an information memorandum, prospectus
or similar document or otherwise in connection with any debt or equity
fundraising by a 3i Related Party or any Frontline Group Company or in
connection with the direct or indirect sale of any debt or equity
interests in any 3i Related Party or any Frontline Group
Company.
|
15.
|
NO
RESCISSION
|
16.
|
WHOLE
AGREEMENT
|
17.
|
LANGUAGE
|
18.
|
FURTHER ASSURANCES;
POST-COMPLETION ACTIONS
|
18.1
|
On
or after the date hereof each Party shall, at its own cost and expense,
execute and do (or procure to be executed and done by any other necessary
person) all such deeds, documents, acts and things as any other Party may
from time to time reasonably require in order give full effect to this
Merger Agreement.
|
18.2
|
In
relation to each Sealift Group Company, Sealift shall procure the
convening of all meetings, the giving of all waivers and consents and the
passing of all resolutions as are necessary under their respective
constitutions or any agreement or obligation affecting it to give effect
to this Merger Agreement.
|
18.3
|
In
relation to each Delphi Group Company, the Delphi Shareholders shall
procure the convening of all meetings, the giving of all waivers and
consents and the passing of all resolutions as are necessary under their
respective constitutions or any agreement or obligation affecting it to
give effect to this Merger
Agreement.
|
18.4
|
Sealift
and Frontline acknowledge that upon advise from Delphi’s counsel a general
meeting of shareholders of Delphi will be held before a Luxembourg notary
to resolve (i) to convert Delphi from of a public company
(societe anonyme)
into
a private company
(société à responsabilite
limitée)
and (ii) to amend the articles of association of Delphi in
accordance with the provisions recommended by counsel to
Delphi.
|
18.5
|
Sealift
shall make any US check-the-box election of Delphi Sàrl and other Seal or
Delphi Group Companies as advised by counsel to
Delphi.
|
19.
|
ASSIGNMENT
|
20.
|
NOTICES
|
20.1
|
If
to 3i Europartners Va, 3i Europartners Vb, 3i Pan European A, 3i Pan
European B, 3i Pan European C, 3i Global Growth, 3i Pan-European Growth,
Pan-European Co-invest, Pan-European Co-invest France, Pan-European
(Nordic) Co-invest, Pan-European (Dutch) Co-invest, Global Growth
Co-invest or Oil, Gas & Power Co-invest (jointly or
individually):
|
Attn.:
|
Investment
Operations (reference “Seal”)
|
Fax:
|
+44
207 928 0058
|
Address:
|
16
Palace Street
London
SW1E 5JD
United
Kingdom
|
c.c.:
|
3i
Investments plc - (attn. Mr. Mark Dickinson)
|
Fax:
|
+44
207 928 0058
|
Address:
|
16
Palace Street
London
SW1E 5JD
United
Kingdom
|
c.c.:
|
3i
Europe plc - Benelux (attn. Mr. Guus Overdijkink)
|
Fax:
|
+31
20 305 7455
|
Address:
|
Cornelis
Schuytstraat 72
1071
JL Amsterdam
The
Netherlands
|
20.2
|
If
to Stichting Management Seal or Stichting Management
Delphi
|
Attn.:
|
The
Board
|
Fax:
|
+31
76 548 4290
|
Address:
|
Lage
Mosten 17
4822
NJ Breda
United
Kingdom
The
Netherlands
|
20.3
|
If
to Neptun:
|
Attn.:
|
John
A. Nielsen
|
Fax:
|
+47
23 11 6351
|
Address:
|
Ruselokkveien
26
0117
Oslo
Norway
|
20.4
|
If
to Capricorn:
|
Attn.:
|
Frederik
Steenbuch
|
Fax:
|
+47
22 14 5970
|
Address:
|
Dalsveien
57
0775
Oslo
Norway
|
20.5
|
If
to Sjøkonsult:
|
Attn.:
|
Svein
K. Johnsen
|
Fax:
|
+47
23 11 6351
|
Address:
|
Bjerkebakken
65 A
0757
Oslo
Norway
|
20.6
|
If
to Frontline:
|
Attn.:
|
Tor
Olav Troim
|
Fax:
|
+44
207 824 5530
|
Address:
|
c/o
Frontline Management (UK) Limited
15
Sloane Square
London
SW1W 8ER
United
Kingdom
|
20.7
|
If
to Sealift:
|
Attn.:
|
The
Board
|
Fax:
|
+31
76 548 4299 (after Merger Completion)
+44
207 824 5530 (pre-Merger Completion)
|
Address:
|
c/o
Frontline Management (UK) Limited
15
Sloane Square
London
SW1W 8ER
United
Kingdom
|
21.
|
COSTS
|
21.1
|
Save
as otherwise provided in this Merger Agreement, or as otherwise
specifically agreed in writing by the Parties after the date of this
Merger Agreement, all costs, fees and expenses incurred by them in
connection with the entering into, and completion of, this Merger
Agreement and the other Transaction Documents, including without
limitation in respect of their obligations in satisfying the Completion
Conditions and the other requirements for implementing the Transaction,
will be paid by Sealift except those fees incurred in connection with the
sale to New Investors of Secondary Offering Shares which shall be borne
fully by the Delphi Shareholders.
|
22.
|
GENERAL
|
22.1
|
A
variation of this Merger Agreement is valid only if it is in writing and
signed by or on behalf of each
Party.
|
22.2
|
The
failure to exercise or delay in exercising a right or remedy provided by
this Merger Agreement or by law does not impair or constitute a waiver of
the right or remedy or an impairment of or a waiver of other rights or
remedies. No single or partial exercise of a right or remedy provided by
this Merger Agreement or by law prevents further exercise of the right or
remedy or the exercise of another right or
remedy.
|
22.3
|
The
Parties’ rights and remedies contained in this Merger Agreement are
cumulative and not exclusive of rights or remedies provided by
law.
|
22.4
|
Except
to the extent that they have been performed and except where this Merger
Agreement provides otherwise, the obligations contained in this Merger
Agreement remain in force after Merger
Completion.
|
22.5
|
Save
as otherwise provided herein, any payment to be made by any Party under
this Merger Agreement shall be made in full without any set-off,
restriction, condition or deduction for or on account of any
counterclaim.
|
22.6
|
If
at any time any provision of this Merger Agreement is or becomes illegal,
invalid or unenforceable under the laws of any jurisdiction, that shall
not affect:
|
|
22.6.1
|
the
legality, validity or enforceability in that jurisdiction of any other
provision of this Merger Agreement;
or
|
|
22.6.2
|
the
legality, validity or enforceability under the laws of any other
jurisdiction of that or another provision of this Merger
Agreement;
|
|
22.6.3
|
the
Parties shall commit themselves to replacing the non-binding and/or
non-enforceable provisions by provisions which are binding and enforceable
and which differ as little as possible - taking into account the object
and purpose of this Agreement - from the non-binding and/or
non-enforceable provisions.
|
22.7
|
The
undertakings in this Merger Agreement shall confer a benefit on each
Delphi Shareholder, each Delphi Group Company and each employee, director,
agent, officer or adviser of each Delphi Shareholder or each Delphi Group
Company with respect to undertakings made by Frontline and shall confer a
benefit on Frontline and each employee, director, agent, officer or
adviser of Frontline with respect to undertakings made by any Delphi
Shareholders and each such beneficiary (but no other person who is not a
party to this Merger Agreement) shall be entitled to enforce such
undertakings subject to and in accordance with the provisions of the 1999
Act.
|
22.8
|
The
Parties other than the 3i Investors each acknowledge and agree that no 3i
Related Party is acting for them or advising them. For example, 3i
Investments, which is regulated by the UK Financial Services Authority
(“
FSA
”), does not
have to provide the protection that it would give to a client (as defined
in the glossary to the FSA handbook of rules and guidance) to any person
other than 3i Related Parties. In addition, each Party other than the 3i
Investors acknowledges and agrees that in connection with its decisions
concerning a (possible) investment in any Sealift or Delphi Group
Company:
|
|
22.8.1
|
it
has not relied on any appraisal, recommendation, advice or information
given by, carried out or effected by, or on behalf of, any 3i Related
Party or its advisers;
|
|
22.8.2
|
it
has made its own investigations into, and appraisals and assessment of,
each Sealift or Delphi Group Company and its prospects, and will continue
to do so for so long as it is the holder of, or otherwise interested in,
equity in any Sealift or Delphi Group
Company;
|
|
22.8.3
|
no
3i Related Party shall have any liability to it from any cause of
action;
|
|
22.8.4
|
it
is owed no duty of care or other obligation by any 3i Related Party or its
advisers in connection with its decision to invest or not invest in the
equity of Sealift or Delphi Group Company;
and
|
|
22.8.5
|
where
appropriate, it has sought independent expert advice (whether alone or
jointly with other Parties).
|
22.9
|
Nothing
in this Merger Agreement shall be deemed to constitute a partnership
between any of the Parties.
|
22.10
|
The
Parties other than the 3i Investors undertakes with each 3i Investor that
they shall not use the name of any 3i Related Party in any context
whatsoever (except as required by law) or hold itself, himself or
themselves (as the case may be) out as being connected or associated with
any 3i Related Party (other than as regards the 3i Investors being a
shareholders of Sealift) in any manner whatsoever without the prior
written consent of the relevant 3i
Investor.
|
23.
|
INTERPRETATION
|
23.1
|
In
this Merger Agreement:
|
|
23.1.1
|
a
reference to a company or other legal entity shall be construed so as to
include any legal entity or entities into which such company may be merged
by means of a statutory merger or into which it may be split up or
demerged, by means of a statutory split-up or
demerger.
|
|
23.1.2
|
a
reference to a “person” includes a reference to any individual, firm,
company, corporation, partnership, association, body corporate, and any
other entity (whether or not having separate legal personality) and
includes such person’s legal representatives, successors and permitted
assigns.
|
|
23.1.3
|
the
term “subsidiary” of a company shall mean a legal entity with respect to
which that company is able to direct or control, immediately or through
one or more subsidiaries through:
|
|
(a)
|
the
exercise of more than half of the votes at a general meeting of
shareholders;
|
|
(b)
|
the
appointment of more than half of the members of the management board (or
local law equivalent); or
|
|
(c)
|
the
appointment of more than half of the members of the supervisory board (if
any),
|
|
23.1.4
|
the
term “control” or “controlled” means, in relation to any
person:
|
|
(a)
|
being
legally entitled, directly or indirectly, to exercise more than fifty per
cent. (50%) of the votes capable of being cast in general meetings of that
person; or
|
|
(b)
|
having
the legal right, directly or indirectly, to appoint or replace the
majority of the board of directors, supervisory directors or any similar
body, or otherwise control the votes at meetings of such boards or similar
body, whether through ownership of voting rights, through agreement or
otherwise;
|
|
23.1.5
|
a
reference to a particular agreement or document is (unless the context
otherwise requires) a reference to the version of such agreement or
document which is binding and enforceable on the date hereof, as such
agreement or document may be novated, assigned, amended or supplemented
from time to time;
|
|
23.1.6
|
a
reference to the singular includes a reference to the plural and vice
versa;
|
|
23.1.7
|
a
reference to the masculine includes a reference to the feminine and neuter
and vice versa;
|
|
23.1.8
|
unless
the contrary is specifically stated, the words “include” or “including”
are used to indicate that the matters are not a complete enumeration of
all matters covered;
|
|
23.1.9
|
unless
the context clearly indicates a contrary intention, when any number of
days is prescribed, it must be calculated exclusively of the first and
inclusively of the last day unless the last day falls on a day other than
a Business Day, in which case the last day will be the next succeeding day
which is a Business Day.
|
23.2
|
The
recitals and schedules form an integral part of this Merger Agreement, and
a reference to a Recital, Schedule or clause means a recital, schedule or
clause of this Merger Agreement unless stated
otherwise.
|
23.3
|
The
headings in this Merger Agreement are inserted for convenience and
reference purposes only and do not affect its
interpretation.
|
24.
|
GOVERNING LAW;
JURISDICTION
|
24.1
|
This
Merger Agreement is governed by and shall be construed in accordance with
English law.
|
24.2
|
Any
dispute (a
“Dispute
”) arising from
or connected with this Merger Agreement (including a dispute regarding the
existence, validity or termination of this Merger Agreement or the
consequences of its nullity), shall be referred to and finally resolved by
arbitration under the Arbitration Rules of the London Court of
International Arbitration (“
LCIA
”)
(the “
Rules
”).
|
24.3
|
The
tribunal shall consist of three arbitrators, two of whom shall be
nominated by the respective parties” who shall each be an English lawyer
of not less than 10 years standing. The seat of the arbitration and the
venue of all hearings shall be London, England, and the language of the
arbitration shall be English.
|
24.4
|
The
Parties agree that the arbitral tribunal shall have power to award on a
provisional basis any relief which it would have power to grant on a final
award.
|
24.5
|
Without
prejudice to the powers of the arbitrator provided by the Rules, statute
or otherwise, the arbitrator shall have power at any time, on the basis of
affidavit evidence and the submissions of the parties alone, to make an
award in favour of the claimant (or the respondent if a counterclaim) in
respect of any claims (or counterclaims) to which there is no reasonably
arguable defence, either at all or except as to the amount of any damages
or other sum to be awarded.
|
24.6
|
The
Parties exclude any rights to refer points of law or to appeal to the
courts, to the extent that they can validly waive these
rights.
|
25.
|
COUNTERPARTS
|
FRONTLINE
LTD
|
|
By:
|
|
Title:
|
SEALIFT
LTD
|
|
By:
|
|
Title:
|
3i
EUROPARTNERS Va L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
3i
EUROPARTNERS Vb L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
3i
PAN EUROPEAN BUY-OUTS 2006-08A L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
3i
PAN EUROPEAN BUY-OUTS 2006-08B L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
3i
PAN EUROPEAN BUY-OUTS 2006-08C L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
3i
GLOBAL GROWTH 2006-08 L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
3i
PAN-EUROPEAN GROWTH 2006-08 L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
PAN-EUROPEAN
BUYOUTS CO-INVEST 2006-08 L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
PAN-EUROPEAN
BUYOUTS CO-INVEST 2006-08 FCPR
|
|
Acting
by its manager, 3i Gestion S.A.
By:
|
|
Title:
|
PAN-EUROPEAN BUYOUTS
(
NORDIC
)
CO-INVEST 2006-08
L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
PAN-EUROPEAN BUYOUTS
(
DUTCH
)
A CO-INVEST 2006-08
L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
GLOBAL
GROWTH CO-INVEST 2006-08 L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
OIL
,
GAS & POWER CO-INVEST
2006-08 L.P.
|
|
Acting
by its manager, 3i Investments plc
By:
|
|
Title:
|
STICHTING
MANAGEMENT SEALIFT
|
||
By:
|
By:
|
|
Title:
|
Title:
|
STICHTING
SHAREHOLDERS DELPHI
|
||
By:
|
By:
|
|
Title:
|
Title:
|
NEPTUN
HEAVY LIFT AS
|
|
By:
|
|
Title:
|
CAPRICORN
INVESTMENT AS
|
|
By:
|
|
Title:
|
SJØKONSULT
AS
|
|
By:
|
|
Title:
|
(1)
|
3i EUROPARTNERS Va
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011419), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Europartners Va
”),
acting by its
manager, 3i Investments plc (registered number 3975789), with its
registered office at 16 Palace Street, London SW1E 5JD, England (“
3i
Investments
”);
|
(2)
|
3i EUROPARTNERS Vb
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011420), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Europartners Vb
”),
acting by its
manager, 3i Investments;
|
(3)
|
3i PAN EUROPEAN BUY-OUTS
2006-08A L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011276), with its registered office at 16 Palace Street, London
SW1E
5JD,
England (“
3i Pan European
A
”),
acting by its
manager, 3i Investments;
|
(4)
|
3i PAN EUROPEAN BUY-OUTS
2006-08B L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011277), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan European B
”),
acting by its
manager, 3i Investments;
|
(5)
|
3i PAN EUROPEAN BUY-OUTS
2006-08C L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011278), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan European C
”),
acting by its
manager, 3i Investments;
|
(6)
|
3i GLOBAL GROWTH 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011318), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Global Growth
”),
acting by its
manager, 3i Investments;
|
(7)
|
3i PAN-EUROPEAN GROWTH 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011320), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
3i
Pan-European Growth
”),
acting by its
manager, 3i Investments;
|
(8)
|
PAN-EUROPEAN BUYOUTS CO-INVEST
2006-08 L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011279), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
Pan-European
Co-invest
”),
acting by its
manager, 3i Investments;
|
(9)
|
PAN-EUROPEAN BUYOUTS CO-INVEST
2006-08 FCPR
,
a
fonds communs de placement à
risqué
formed under the laws of France, with its registered office
at 3, rue Paul Cezanne, 75008 Paris, France (“
Pan-European Co-invest
France
”),
acting by its
manager, 3i Gestion S.A.;
|
(10)
|
PAN-EUROPEAN BUYOUTS
(
NORDIC
)
CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011553), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
Pan-European
(
Nordic
)
Co-invest
”),
acting by its
manager, 3i Investments;
|
(11)
|
PAN EUROPEAN BUYOUTS
(
DUTCH
)
A CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907, with
registered number LP011874, and having its registered office at 16 Palace
Street, London, SW1E 5JD, United Kingdom (“
Pan-European
(
Dutch
)
Co-Invest
”),
acting by its
manager, 3i Investments;
|
(12)
|
GLOBAL GROWTH CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the laws of Jersey (registered number LP760),
with its registered office at 22 Grenville Street, St. Helier, Jersey
(“
Global Growth
Co-invest
”),
acting by its
manager, 3i Investments; and
|
(13)
|
OIL
,
GAS
&
POWER CO-INVEST 2006-08
L.P.
,
a limited
partnership registered under the Limited Partnerships Act 1907 (registered
number LP011321), with its registered office at 16 Palace Street, London
SW1E 5JD, England (“
Oil
,
Gas
&
Power Co-invest
”),
acting by its
manager, 3i Investments.
|
3i
Investments
|
has
the meaning given to it in paragraph (1) of SCHEDULE 1 (3i
Investors);
|
3i
Investors
|
means
the parties listed in SCHEDULE 1 (3i Investors);
|
3i
Related Party
|
means
(i) any entity of the 3i Group, (ii) any 3i Investor and any other fund,
partnership, investment vehicle or other entity which is managed or
advised by an entity in the 3i Group or its nominees or by other parties
selected by 3i Group, or in which any entity in the 3i Group has a
majority economic interest (a “
3i Fund
”)
and (iii) any
investor in any 3i Fund;
|
Affiliate
|
means
in relation to any entity or person, any subsidiary, subsidiary
undertaking, parent company, parent undertaking or other entity or person
that directly or indirectly through one or more intermediaries, controls,
is controlled by or is under common control with such entity or person, or
any entity for which such entity or person serves as investment adviser,
discretionary investment manager or in a similar capacity, and all mutual
funds or other pooled or collective investment vehicles advised or managed
by such entity or person;
|
Agreed
Form
|
shall
mean the document in its final form as approved and initialled by
Frontline, Sealift and the 3i Investors as appropriate;
|
Bareboat
Charters
|
means
the bareboat charters forming part of the Shipping Documents as described
in the Disclosed Information;
|
Bermuda
Monetary
Authority
|
means
the Bermuda Monetary Authority established in terms of the Bermuda
Monetary Authority Act 1969 as a body corporate having perpetual
succession, to act as an independent licensing, supervisory and regulatory
body;
|
Board
Resolution
|
means
the resolution of the Board of Sealift in the form of SCHEDULE 4 (Board
Resolution);
|
BidCo
|
means
Delphi Acquisition Holding I B.V., a company incorporated under the laws
of The Netherlands with its registered office in Breda, The
Netherlands;
|
MPP
Foundation
|
has
the meaning given to it in the introduction to this Merger Agreement,
paragraph 1.5;
|
Neptun
|
has
the meaning given to it in the introduction to this Merger Agreement,
paragraph 1.6;
|
New
Investors
|
has
the meaning given to it in clause 6.1 of this Merger
Agreement;
|
Non-Compete
Period
|
has
the meaning given to it in clause 13.1.1 of this Merger
Agreement;
|
Norwegian
Stockbrokers
Association
|
means
the Norwegian Securities Dealers Association and its subsidiary, the
Norwegian Stockbrokers Information services (FINFO), which operates a
trading support system for unlisted shares (The OTC-system) for the
benefit of its members;
|
Notary
|
Means
Mr. T.P. van Duuren, civil law notary at Clifford Chance LLP in
Amsterdam;
|
Notary
Account
|
means
the third party account set out in the Notary Letter;
|
Notary
Letter
|
means
the letter detailing the (re-)pay went investors to the
Notary;
|
Offering
Shares
|
has
the meaning given to it in clause 4.1 of this Merger
Agreement;
|
OTC
|
has
the meaning given to it in recital (D) of this Merger
Agreement;
|
Parties
|
has
the meaning given to it in the introduction to this Merger Agreement and a
Party means any of them;
|
PIK
Facility Agreement
|
means
USD 65 million Pik facility agreement between, amongst others, Lehman
Brothers and PIKCo dated on or about the date hereof;
|
PIK
Lenders
|
means
the financial institutions which are from time to time a party to the PIK
Facility Agreement as a Lender (as defined
therein);
|
PIK
Loan
|
means
the PIK Facility Agreement between PIKCo, Bayerische Hypo- und Vereinsbank
AG, London Branch, Lehman Brothers International (Europe) as arrangers and
bookrunners, Lehman Brothers International (Europe) as Agent, Lehman
Brothers International (Europe) as Security Agent and the Original Lenders
as listed therein;
|
PIKCo
|
means
Delphi Acquisition Holding B.V., a private company with limited liability
(besloten vennootschap
met beperkte aansprakelijkheid)
incorporated under the laws of The
Netherlands, having its registered office at Lage Mosten 15, 4822 NJ
Breda, The Netherlands, and being registered with the Chamber of Commerce
in Amsterdam, The Netherlands, under file number 20131044;
|
Placement
Managers
|
has
the meaning given to it in clause 6.3 of this Merger
Agreement;
|
Primary
Offering Shares
|
has
the meaning given to it in clause 6.2 of this Merger
Agreement;
|
Private
Placement
|
has
the meaning given to it in clause 4.1 of this Merger
Agreement;
|
Private
Placement
Completion
Date
|
has
the meaning given to it in SCHEDULE 3 (Private
Placement);
|
Proposed
Listing
|
has
the meaning given to it in recital (H) of this Merger
Agreement;
|
Consideration
Shares
|
has
the meaning given to it in the Delphi SPA;
|
Refund
Guarantees
|
means
the guarantees issued to the ShipCo’s in relation to refund of instalments
paid under the Conversion Contracts;
|
Sealift
|
has
the meaning given to it in the introduction to this Merger Agreement,
paragraph 1.3;
|
Sealift
Bonds
|
means
the FRN Sealift Ltd. Senior Secured Callable Bonds issued by Sealift under
a loan agreement dated 8 February 2007;
|
Sealift
Business
|
Means
the business as conducted by Sealift including the ShipCo’s and the
Shipping Assets;
|
Shipping
Assets
|
means
the legal and beneficial interests the Owners have in each of the Sealift
Vessels and the Shipping Documents as set out in SCHEDULE 10 (Shipping
Assets);
|
Shipping
Document
|
means
the Conversion Contracts, the Conversion Options, the Bareboat Charters,
the Management Agreements and the Refund Guarantees;
|
Signing
|
has
the meaning given to it in clause 7.1;
|
Sjøkonsult
|
has
the meaning given to it in the introduction to this Merger Agreement,
paragraph 1.8;
|
Stop
Date
|
has
the meaning given to it in clause 8.4 of this Merger
Agreement;
|
Subscription
Agreement
|
means
the Agreed Form subscription agreement issued in
connection
with the Private Placement;
|
Subsidiaries
|
has
the meaning given to it in clause 1 of the Delphi SPA;
|
Transaction
|
has
the meaning given to it in recital (G);
|
Transaction
Documents
|
means
the Merger Agreement, the Delphi SPA, the Commitment Letter, the Notary
Letter, the Frederiksen Non-Compete Undertaking, the Sealift Shareholders
Agreement, the ShipCo SPA and the Board Resolution; and
|
Warranties
|
means
the warranties given by Frontline and Sealift to the Delphi Shareholders
set out in SCHEDULE 8 (Warranties) of this Merger
Agreement.
|
1.
|
Frontline
will issue the Frontline Press
Release.
|
2.
|
Sealift
will issue the Sealift Press
Release.
|
3.
|
Within
48 hours of the date hereof, the Placement Managers will have informed the
Parties of the number of Offering Shares the Placement Managers are able
to place with New Investors (subject to Merger
Completion).
|
4.
|
Upon
receipt of the information referred to in 3 above, the allotment decisions
will be made in accordance with the provisions of the Subscription
Agreement.
|
5.
|
Completion
of the Private Placement shall take place no later than on 11 May 2007
(the “
Private Placement
Completion Date
”).
|
1.
|
Election and Appointment of
Officers and Resident
Representative
|
2.
|
The Transaction
Documents
|
1.
|
Bidco
has notified Lehman Brothers International (Europe) in accordance with the
terms of the Commitment Letter, that signing of the Facility Agreement is
required to take place on the date of Completion on terms approved as of
the date hereof.
|
2.
|
The
Bond Trustee has notified Sealift in writing that the ShipCo Transfer
Transactions constitutes a mandatory prepayment event in accordance with
the terms of the Sealift Bonds.
|
3.
|
On
the date hereof:
|
3.1
|
Sealift
shall notify Nordea Bank Norge ASA (“
Nordea
”) as agent under
the Senior Sealift Loan Agreement that the Senior Sealift Loan will
voluntarily be repaid by Sealift on Merger
Completion.
|
3.2
|
BidCo
shall notify Fortis Bank S.A. / N.V. (UK Brands) as agent under the
Existing Facility Agreements that the Existing Facilities will voluntarily
be prepaid by BidCo on Merger
Completion.
|
4.
|
Prior
to the Merger Completion Date the appropriate parties shall enter into the
and Notary Letter.
|
5.
|
On
the Merger Completion Date:
|
5.1
|
Bidco,
PIKCo and Lehman Brothers as the Agent will enter into the Facilities
Agreements.
|
5.2
|
The
lenders under the Facilities Agreements will make the funding available to
the Notary Account for release in accordance with the terms of the Notary
Letter upon prepayment of the conditions precedent as agreed
therein.
|
5.3
|
Sealift
will issue to the Bond Trustee the Mandatory Prepayment
Notice.
|
6.
|
Within
3 Business Days of Merger Completion Sealift will repay the Sealift Senior
Facility and procure the release of first lien security by Nordea as
security agent under the Senior Sealift Loan
Agreement.
|
7.
|
On
the Mandatory Bond Prepayment Date, Sealift will repay the Sealift Bonds
together with the mandatory prepayment
amount.
|
8.
|
Following
Merger Completion, BidCo, PIKCo and the ShipCo’s will enter into the
relevant further security documents in accordance with the terms of the
Facility Agreements.
|
1.
|
On
the Merger Completion Date:
|
1.1
|
Sealift
and Dockwise Transport B.V. shall procure the transfer of the ShipCo’s in
accordance with the ShipCo SPA.
|
1.2
|
Frontline
agrees to the assignment by Sealift or ShipCo of any and all rights and
the transfer of any and all obligations under any Shipping Document to any
other direct or indirect wholly owned subsidiary of
Sealift.
|
1.3
|
The
time charter contracts in relation to the Granite and Marble will be
replaced by bareboat charter contracts in the Agreed
Form:
|
1.4
|
Frontline
confirms that prior to the Merger Completion Date the ShipCo Transfer
Transaction has been disclosed to the insurers and the lead underwriters
have confirmed that all the insurance policies disclosed as part of the
Disclosed Information will continue in full force and effect and on the
same terms and conditions following the completion of the ShipCo Transfer
Transaction. Frontline confirms that with effect from the date hereof it
will continue to maintain in full force and effect each of the insurance
policies disclosed as part of the Disclosed Information until the earlier
of 15 January 2008 and such time as the Company gives written notice that
it has replaced such policies on terms and conditions satisfactory to the
Company; it being understood that the relevant premiums, to the extent
they relate to the relevant Shipco Vessels, will be recharged at cost to
the relevant Shipco in accordance with consistent past
practice.
|
1.5
|
Frontline
confirms that each ShipCo is and will remain the sole loss payee in
relation to any insurance policies relating to the relevant Sealift Vessel
owned by it.
|
1.1
|
Purchase
Agreement between Frontline and Sealift dated 30 January 2007, governed by
Norwegian Law
|
1.2
|
Supplemental
Agreement to the Purchase Agreement, between Sealift, the Owners and
Frontline dated 15 March 2007, governed by Norwegian
Law
|
1.3
|
Certificates
of Ownership for each Vessel
|
2.
|
CHARTERS
|
2.1
|
Bareboat
Charter re “Front Target” between Front Target Inc. and Key Chartering
Corp. dated 21 March 2007, governed by English
Law
|
2.2
|
Bareboat
Charter re “Front Traveller” between Front Traveller Inc. and Key
Chartering Corp. dated 21 March 2007, governed by English
Law
|
2.3
|
Bareboat
Charter re “Front Comor” between West Tankers Inc. and Key Chartering
Corp. dated 21 March 2007, governed by English
Law
|
2.4
|
Letter
of Intent to Contract Heavy Lift Vessel dated 23 March
2007
|
3.
|
MANAGEMENT
OF VESSELS
|
3.1
|
Addendum
1 to the Administrative Services Agreement, between Sealift, Frontline
Management and the Owners dated 21 March 2007, governed by Norwegian
Law
|
3.2
|
Technical
Ship Management Contract between Granite Shipping Company Ltd. and
Frontline Management dated 21 March 2007, governed by English
Law
|
3.3
|
Technical
Ship Management Contract between Quadrant Marine Inc. and Frontline
Management dated 21 March 2007, governed by English
Law
|
3.4
|
Administrative
Services Agreement between Sealift and Frontline dated 27 February 2007,
governed by Norwegian Law
|
3.5
|
Commercial
Management Agreement between Quadrant Marine Inc. and Frontline Management
dated 21 March 2007, governed by English
Law
|
3.6
|
Commercial
Management Agreement between Granite Shipping Company Limited and
Frontline Management dated 21 March 2007, governed by English
Law
|
4.
|
CONVERSION
|
4.1
|
Heavylift
Conversion Schedule dated 22 March
2007
|
4.2
|
Conversion
Contract re “Front Target” between Front Target Inc. and Cosco (Nantong)
Shipyard Co. Ltd. dated 11 December 2006, governed by English
Law
|
4.3
|
Conversion
Contract re “Front Traveller” between Front Traveller Inc. and Cosco
(Zhoushan) Shipyard Co. Ltd. dated 18 January 2007, governed by English
Law
|
4.4
|
Conversion
Contract re “Front Transporter” between Front Transporter Inc. and Cosco
(Nantong) Shipyard Co. Ltd. 1 June 2006, governed by English
Law
|
4.5
|
Conversion
Contract re “Front Comor” between West Tankers Inc. and Cosco (Nantong)
Shipyard Co. Ltd. dated 18 January 2007, governed by English
Law
|
4.6
|
Novation
Agreement between Front Transporter Inc., Southwest Tankers Inc. and Cosco
(Nantong) Shipyard Co. Ltd. dated 20 January 2007, governed by English
Law
|
4.7
|
Heads
of Agreement of Conversion between Ship Finance International Ltd. and
Cosco Shipyard group Co. Ltd dated 22 February 2006, governed by English
Law
|
4.8
|
Novation
of Option Agreement between Cosco Shipyard group Co. Ltd., Ship Finance
International Ltd and Sealift dated 18 January 2007, governed by English
Law
|
4.9
|
Option
Agreement between Cosco Shipyard group Co. Ltd. and Ship Finance
International Ltd. dated 1 June 2006, governed by English
Law
|
4.10
|
Draft
conversion contract to be agreed between Granite Shipping Company Limited
and Cosco (Zhoushan) Shipyard Co. Ltd for the conversion of “Front
Granite” (although the draft refers to ‘Front Traveller Inc.’ and “Front
Traveller” it was disclosed as relating to “Front
Granite”
|
4.11
|
Draft
conversion contract to be agreed between Quadrant Marine Inc. and Cosco
(Guangzhou) Shipyard Co. Ltd for the conversion of “Marble” (although the
draft refers to ‘Front Traveller Inc.’ and “Front Traveller” it was
disclosed as relating to “Marble”
|
5.
|
CLASSIFICATION
|
6.
|
CORPORATE
|
6.1
|
Sealift
|
6.2
|
Sealift
Bye-Laws, dated 15 January 2007
|
6.3
|
Sealift
Equity Offering Presentation dated January
2007
|
6.4
|
Sealift
Certificate of Incorporation, dated 11 January
2007
|
6.5
|
Incorporation
of Sealift - SGM minutes dated 15 January
2007
|
6.6
|
Board
minutes and resolutions Sealift dated 15 January
2007
|
6.7
|
Board
minutes Sealift dated 24 January
2007
|
6.8
|
Board
minutes Sealift dated 12 February
2007
|
6.9
|
Board
minutes Sealift dated 14 February
2007(1)
|
6.10
|
Board
minutes Sealift dated 14 February
2007(2)
|
6.11
|
Board
minutes Sealift dated 21 March 2007
|
6.12
|
Shareholders
written resolution dated 24 January
2007
|
6.13
|
Subsidiaries
|
6.14
|
Incorporation
documentation, dated 23 December 2002 - Front Target
Inc.
|
6.15
|
Incorporation
documentation, dated 23 December 2002 - Front Traveller
Inc.
|
6.16
|
Incorporation
documentation, dated 29 May 1991 - Granite Shipping Company
Limited.
|
6.17
|
Incorporation
documentation, dated 2 December 1991 - Quadrant Marine
Inc.
|
6.18
|
Incorporation
documentation, dated 23 February 1989 - Southwest Tankers
Inc.
|
6.19
|
Incorporation
documentation, dated 23 February 1989 - West Tankers
Inc.
|
6.20
|
Board
resolutions re Security, dated 14 February 2007 - Granite Shipping Company
Limited
|
6.21
|
Board
resolutions re Corporate matters and Documentation, dated 14 February 2007
- Granite Shipping Company Limited.
|
6.22
|
Board
resolutions re Security, dated 14 February 2007 - Southwest Tankers
Inc.
|
6.23
|
Board
resolutions re Corporate matters and Documentation, dated 14 February 2007
- Southwest Tankers Inc.
|
6.24
|
Board
resolutions re Security, dated 14 February 2007 - Front Target
Inc.
|
6.25
|
Board
resolutions re Corporate matters and Documentation, dated 14 February 2007
- Front Target Inc.
|
6.26
|
Board
resolutions re Security, dated 14 February 2007 - West Tankers
Inc.
|
6.27
|
Board
resolutions re Corporate matters and Documentation, dated 14 February 2007
- West Tankers Inc.
|
6.28
|
Board
resolutions re Security, dated 14 February 2007 - Quadrant Marine
Inc.
|
6.29
|
Board
resolutions re Corporate matters and Documentation, dated 14 February 2007
- Quadrant Marine Inc.
|
6.30
|
Board
resolutions re Security, dated 14 February 2007 - Front Traveller
Inc.
|
6.31
|
Board
resolutions re Corporate matters and Documentation, dated 14 February 2007
- Front Traveller Inc.
|
6.32
|
Board
resolutions and POAs re the financing, dated 16 March 2007 - Front Target
Inc., Quadrant Marine Inc. and Granite Shipping Company
Limited
|
6.33
|
Board
resolutions and POAs re the financing, dated 16 March 2007 - West Tankers
Inc, Front Target Inc. and Southwest Tankers
Inc.
|
6.34
|
Written
resolutions of the Shareholders of the Owners dated 19 March
2007
|
6.35
|
Written
resolutions of the Shareholders of the Owners dated 15 February
2007
|
6.36
|
Board
minutes of the Owners dated 18 April
2007
|
6.37
|
Board
minutes - incomplete
|
6.38
|
Commercial
register extract dated 21 March 2007 - Sealift Management
B.V.
|
6.39
|
Articles
of Sealift Management B.V. dated 20 February
2007
|
6.40
|
Share
register of Sealift Management B.V. dated 20 February
2007
|
6.41
|
Share
certificates of the Owners dated 21 March
2007
|
6.42
|
List
of Directors and Officers of the Owners,
undated
|
6.43
|
Register
of members of the Owners, last updated 21 March
2007
|
6.44
|
OTC
|
6.45
|
Registrar
Agreement between Nordea and Sealift, governed by Norwegian
Law
|
6.46
|
Confirmation
letter from Norwegian Stockbrokers Association dated 30 January
2007
|
6.47
|
Agreement
on Distribution of Price Sensitive Information between Sealift and
Norwegian Stockbrokers’ Association dated 24 January 2007, governed by
Norwegian Law
|
6.48
|
Branch
Register Agreement between Sealift and Nordea dated 24 January 2007,
governed by Norwegian Law
|
6.49
|
Permits
|
6.50
|
Correspondence
with Bermuda Monetary Authority
|
6.51
|
Exemption
from the Companies Act dated 19 January
2007
|
6.52
|
Ministry
of Finance - exemption under the 1966 Act dated 16 January
2007
|
7.
|
INSURANCES
|
7.1
|
Company
Liability Insurance
|
7.1.1
|
Frontline
- Directors and Officers, Company Liability and Securities Claims Entity
Insurance, governed by Norwegian
Law
|
7.1.2
|
Endorsement
no. 7 - Endorsement of Sealift as Additional Named Company under Frontline
- Company Liability and Securities Claims Entity
Insurance
|
7.1.3
|
Frontline
- Directors and Officers, Company Liability and Securities Claims Entity
Insurance - Excess Policy, governed by Norwegian
Law
|
7.2
|
Insurance
of Vessels
|
7.2.1
|
Assured
Mortgagees Sealift
|
7.2.2
|
Hull
and Machinery Insurance document dated 2 January
2006
|
7.2.3
|
Schedule
of Insurances per Vessel dated 20 February
2007
|
7.2.4
|
Schedule
of Insurance claims dated 16 February
2007
|
7.2.5
|
Certificate
of Entry - “Front Target” - effective date 20 February
2007
|
7.2.6
|
Certificate
of Entry - “Front Traveller” - effective date 20 February
2007
|
7.2.7
|
Certificate
of Entry - “Front Granite” - effective date 20 February
2007
|
7.2.8
|
Certificate
of Entry - “Marble” - effective date 20 February
2007
|
7.2.9
|
Certificate
of Entry - “Front Sunda”- effective date 20 February
2007
|
7.2.10
|
Certificate
of Entry - “Front Comor” - effective date 20 February
2007
|
8.
|
LOAN
DOCUMENTS AND SECURITY
|
8.1
|
Loan
Agreements & Guarantees
|
8.2
|
Commitment
Letter from Nordea and DNB Nor to Sealift dated 7 February
2007
|
8.3
|
Coordination
Agreement between Nordea, Norsk Tillitsmann and Sealift dated 15 March
2007, governed by Norwegian Law
|
8.4
|
$240m
Delayed Draw Term Loan Facility Agreement between Sealift, the Owners and
Nordea and DNB Nor dated 15 March 2007, governed by Norwegian Law (the
$240m Loan”)
|
8.5
|
Postponement
of Payment of Obligations Agreement between Sealift and Frontline dated 21
March 2007
|
8.6
|
Letter
Agreement Between Nordea and Sealift dated 21 March 2007, governed by
Norwegian Law
|
8.7
|
Frontline
Guarantee for obligations of Sealift in favour of Nordea dated 21 March
2007, governed by Norwegian Law
|
8.8
|
Guarantee
by Frontline in favour of Target, Traveller and West Tankers dated 21
March 2007, governed by Norwegian
Law
|
8.9
|
Loan
Trustee Fees between Sealift and Norsk Tillitsmann dated 9 February
2007
|
8.10
|
Sealift
Bond Presentation re Bond Issue dated January
2007
|
8.11
|
Bond
Loan Agreement between Sealift and Norsk Tillitsmann dated 8 February
2007, governed by Norwegian Law (the “Bond
Loan”)
|
8.12
|
Letter
from Nordea confirming a drawdown under the MUSD 240 facility and a fax
confirmation from the Loan Trustee stating the interest of the bond loan
for the first interest period
|
8.13
|
Security
|
8.14
|
First
Preferred Mortgage issued by Front Target Inc. to Nordea in respect of
"Front Target" dated 20 March 2007, governed by the Laws of the Republic
of the Marshall Islands
|
8.15
|
First
Preferred Mortgage issued by Front Traveller Inc. to Nordea in respect of
“Front Traveller” dated 20 March 2007, governed by the Laws of the
Republic of the Marshall Islands
|
8.16
|
First
Preferred Mortgage issued by Granite Shipping Company Limited to Nordea in
respect of “Front Granite” dated 20 March 2007, governed by the Laws of
the Republic of the Marshall
Islands
|
8.17
|
First
Preferred Mortgage issued by Southwest Tankers Inc. to Nordea in respect
of “Front Sunda” dated 20 March 2007, governed by the Laws of the Republic
of the Marshall Islands
|
8.18
|
First
Preferred Mortgage issued by West Tankers Inc. to Nordea in respect of
“Front Comor” dated 20 March 2007, governed by the Laws of the Republic of
the Marshall Islands
|
8.19
|
Registration
of Mortgage - “Marble”, dated 21 March
2007
|
8.20
|
Second
Preferred Mortgage issued by Front Target Inc. to Norsk Tillitsmann in
respect of “Front Target” dated 20 March 2007, governed by the Laws of the
Republic of the Marshall Islands
|
8.21
|
Second
Preferred Mortgage issued by Front Traveller Inc. to Norsk Tillitsmann in
respect of “Front Traveller” dated 20 March 2007, governed by the Laws of
the Republic of the Marshall
Islands
|
8.22
|
Second
Preferred Mortgage issued by Granite Shipping Company Limited to Norsk
Tillitsmann in respect of “Front Granite” dated 20 March 2007, governed by
the Laws of the Republic of the Marshall
Islands
|
8.23
|
Second
Preferred Mortgage issued by Southwest Tankers Inc. to Norsk Tillitsmann
in respect of “Front Sunda” dated 20 March 2007, governed by the Laws of
the Republic of the Marshall
Islands
|
8.24
|
Second
Preferred Mortgage issued by West Tankers Inc. to Norsk Tillitsmann in
respect of “Front Comor” dated 20 March 2007 governed, by the Laws of the
Republic of the Marshall Islands
|
8.25
|
Mortgage
Deed of Covenant between Quadrant Marine Inc. and Norsk Tillitsmann dated
21 March 2007, governed by Bahamian
Law
|
8.26
|
Second
Priority Assignment of Insurances between Front Target Inc. and Norsk
Tillitsmann dated 19 March 2007, governed by Norwegian
Law
|
8.27
|
Second
Priority Assignment of Insurances between Front Traveller Inc. and Norsk
Tillitsmann dated 19 March 2007, governed by Norwegian
Law
|
8.28
|
Second
Priority Assignment of Insurances between Granite Shipping Company Limited
and Norsk Tillitsmann dated 19 March 2007, governed by Norwegian
Law
|
8.29
|
Second
Priority Assignment of Insurances between Quadrant Marine Inc. and Norsk
Tillitsmann dated 19 March 2007, governed by Norwegian
Law
|
8.30
|
Second
Priority Assignment of Insurances between Southwest Tankers Inc. and Norsk
Tillitsmann dated 19 March 2007, governed by Norwegian
Law
|
8.31
|
Second
Priority Assignment of Insurances between West Tankers Inc. and Norsk
Tillitsmann dated 19 March 2007, governed by Norwegian
Law
|
8.32
|
Pledge
of Shares between Sealift and Norsk Tillitsmann dated 19 March 2007,
governed by Norwegian Law
|
8.33
|
Refund
guarantees in favour of Southwest Tankers Inc. (third installment), Front
Transporter Inc. (second and third installment) and Front Target Inc.
(first installment)
|
8.34
|
Guarantee
between Front Target Inc. and Norsk Tillitsmann dated 19 March 2007,
governed by Norwegian Law
|
8.35
|
Guarantee
between Front Traveller Inc. and Norsk Tillitsmann dated 19 March 2007,
governed by Norwegian Law
|
8.36
|
Guarantee
between Quadrant Marine Inc. and Norsk Tillitsmann dated 19 March 2007,
governed by Norwegian Law
|
8.37
|
Guarantee
between Southwest Tankers Inc. and Norsk Tillitsmann dated 19 March 2007,
governed by Norwegian Law
|
8.38
|
Guarantee
between West Tankers Inc. and Norsk Tillitsmann dated 19 March 2007,
governed by Norwegian Law
|
8.39
|
Guarantee
between Granite Shipping Company Ltd. and Norsk Tillitsmann dated 19 March
2007
|
8.40
|
Second
Priority Assignment Deed of Purchase Agreement, between Sealift and Norsk
Tillitsmann dated 21 March 2007, governed by English
Law
|
8.41
|
Account
Charge between Front Target Inc. and Nordea dated 21 March 2007, governed
by Norwegian Law
|
8.42
|
Account
Charge between Front Traveller Inc. and Nordea dated 21 March 2007,
governed by Norwegian Law
|
8.43
|
Account
Charge between Granite Shipping Company Limited and Nordea dated 21 March
2007, governed by Norwegian Law
|
8.44
|
Account
Charge between Quadrant Marine Inc. and Nordea dated 21 March 2007,
governed by Norwegian Law
|
8.45
|
Account
Charge between Southwest Tankers Inc. and Nordea dated 21 March 2007,
governed by Norwegian Law
|
8.46
|
Account
Charge between West Tankers Inc. and Nordea dated 21 March 2007, governed
by Norwegian Law
|
8.47
|
General
Assignment of Earning and Insurances between Front Target Inc. and Nordea
dated 21 March 2007, governed by Norwegian
Law
|
8.48
|
General
Assignment of Earning and Insurances between Front Traveller Inc. and
Nordea dated 21 March 2007, governed by Norwegian
Law
|
8.49
|
General
Assignment of Earning and Insurances between Granite Shipping Company
Limited and Nordea dated 21 March 2007, governed by Norwegian
Law
|
8.50
|
General
Assignment of Earning and Insurances between Quadrant Marine Inc. and
Nordea dated 21 March 2007, governed by Norwegian
Law
|
8.51
|
General
Assignment of Earning and Insurances between Southwest Tankers Inc. and
Nordea dated 21 March 2007, governed by Norwegian
Law
|
8.52
|
General
Assignment of Earning and Insurances between West Tankers Inc. and Nordea
dated 21 March 2007, governed by Norwegian
Law
|
8.53
|
Assignment
of Conversion Contract and Refund Guarantees – “Front Target”- between
Front Target Inc. and Nordea, governed by English
Law
|
8.54
|
Assignment
of Conversion Contract and Refund Guarantees – “Front Traveller”- between
Front Traveller Inc. and Nordea, governed by English
Law
|
8.55
|
Assignment
of Conversion Contract and Refund Guarantees – “Front Sunda”- between
Southwest Tankers Inc. and Nordea, governed by English
Law
|
8.56
|
Assignment
of Conversion Contract and Refund Guarantees – “Front Comor”- between West
Tankers Inc. and Nordea, governed by English
Law
|
8.57
|
Assignment
Deed - Bareboat re “Front Target”- between Front Target Inc. and Nordea
dated 21 March 2007, governed by English
Law
|
8.58
|
Assignment
Deed - Bareboat re “Front Traveller”- between Front Traveller Inc. and
Nordea dated 21 March 2007, governed by English
Law
|
8.59
|
Assignment
Deed - Bareboat re “Front Comor”- between West Tankers Inc. and Nordea
dated 21 March 2007, governed by English
Law
|
8.60
|
Assignment
Deed - Purchase Agreement - between Sealift and Nordea dated 21 March
2007, governed by English Law
|
8.61
|
Assignment
Deed - Option Agreement - between Sealift and Nordea dated 21 March 2007,
governed by English Law
|
8.62
|
Pledge
of Shares between Sealift and Nordea dated 21 March 2007, governed by
Norwegian Law
|
8.63
|
Mortgage
Deed of Covenant between Quadrant Marine Inc. and Nordea dated 21 March
2007
|
8.64
|
Account
Charge between Sealift and Nordea dated 21 March 2007, governed by
Norwegian Law
|
9.
|
FINANCIAL
INFORMATION
|
9.1
|
Payment
Schedule under the $240m Loan
|
9.2
|
Payment
Schedule under the Bond Loan
|
9.3
|
Unaudited
Consolidated First Quarter Report and Accounts for
Sealift
|
9.4
|
Sealift
Cashflow scenarios
|
|
The
Refund Guarantees in relation to the first, second and third installments
relating to the Front Sunda will be replaced and until then the next set
of installments due to Cosco will not be paid by
Frontline.
|
1.
|
Power
and Authority
|
1.1
|
Frontline
and Sealift each have the requisite capacity, power and authority to enter
into and to perform this Merger
Agreement.
|
1.2
|
The
signature of and the compliance with the terms of this Merger Agreement
does not and will not conflict with or constitute a default under any
provision of:
|
2.
|
The
Existing Shares
|
2.1
|
The
Existing Shares comprise all of the issued shares of Sealift and are fully
paid up, free of further capital contribution
obligations.
|
2.2
|
Frontline
is the sole legal and beneficial owner of 30 million of the 90 million the
Existing Shares.
|
2.3
|
There
is no Encumbrance, and there is no agreement, arrangement or obligation to
create or give an Encumbrance, in relation to any of the unissued shares
in the capital of Sealift.
|
2.4
|
Other
than this Merger Agreement, there is no agreement, arrangement or
obligation requiring the issue, transfer, repurchase, redemption or
repayment of, or the grant to a person of the right (conditional or not)
to require the issue, transfer, redemption or repayment of, a share in the
capital of Sealift (including, without limitation, an option or right of
pre-emption or conversion).
|
3.
|
Shipping
|
3.1
|
Binding
Agreements
|
3.1.1
|
The
obligations of each ShipCo under each Shipping Document are, or when the
relevant document is executed will be, enforceable in accordance with
their terms.
|
3.2
|
Shipping
Assets
|
3.2.1
|
Each
of the Shipping Assets is owned both legally and beneficially by the
relevant ShipCo as set out in SCHEDULE 10 (Shipping Assets) and each of
those Shipping Assets capable of possession is in the possession or under
the control of the relevant ShipCo.
|
3.2.2
|
Except
for statutory maritime liens arising in the ordinary course of business
and subject to the due repayment of the Senior Sealift Loan and the
Sealift Bonds there is no Encumbrance over or affecting all or part of the
Shipping Assets which will subsist after completion of the Debt
Restructuring and no ShipCo is a party to any agreement or commitment to
give or create any and so far as Frontline and Sealift are aware, no claim
has been made by any person to be entitled to
any.
|
3.3
|
Conversion
Contracts, Options and Refund
Guarantees
|
3.3.1
|
Complete
and accurate copies of all Conversion Contracts, Conversion Options and
Refund Guarantees have been disclosed as part of the Disclosed
Information.
|
3.3.2
|
Each
of the Conversion Contracts and Conversion Options was properly executed
by the relevant ShipCo and, so far as Frontline and Sealift are aware, by
the respective counterparties, and has not been terminated and neither
Frontline nor Sealift are aware of any breach, invalidity, or grounds for
determination, rescission, avoidance or repudiation of any Conversion
Contract or Conversion Option.
|
3.3.3
|
Subject
to the due repayment of the Senior Sealift Loan and the Sealift Bonds,
there is no Encumbrance over or affecting all or part of the ShipCos’
rights under the Conversion Contracts or the Conversion Options which will
subsist after Completion and no ShipCo is a party to any agreement or
commitment to give or create any and, so far as Frontline and Sealift are
aware, no claim has been made by any person to be entitled to
any.
|
3.3.4
|
So
far as Frontline and Sealift are aware, each of the Refund Guarantees was
properly executed by the Refund Guarantor, and has not been terminated and
neither Frontline nor Sealift are aware of any breach, invalidity, or
grounds for determination, rescission, avoidance or repudiation of any
Refund Guarantee provided, however, that the Refund Guarantees received
will be reissued to take into account the novation of the Conversion
Contract relevant to M/T “Front Sunda” having been novated to Southwest
Tankers Inc. from Front Transporter Inc. and the revised text thereof
agreed with Nordea as agent for the lenders to the Senior Sealift
Loan.
|
3.3.5
|
There
is no Encumbrance over or affecting all or part of the ShipCos’ rights
under the Refund Guarantee which will subsist after Completion and no
ShipCo is a party to any agreement or commitment to give or create any
and, so far as Frontline and Sealift are aware, no claim has been made by
any person to be entitled to any.
|
3.3.6
|
The
agreed schedule for delivery of the first four Sealift Vessels to Cosco
for the conversion works to be undertaken pursuant to the Conversion
Contracts and for the redelivery of each such Sealift Vessel to the
relevant ShipCo following completion of such works is as included in the
Disclosed Information.
|
3.4
|
The
Sealift Vessels
|
|
3.4
1
|
So
far as Frontline and Sealift are aware, each of the Sealift Vessels
currently holds all material certificates, licences or authorisations
required to enable such Sealift Vessel to carry out its operations in the
jurisdiction in which it is registered and all jurisdictions in which it
currently trades subject only to such certificates lapsing during actual
conversion of a Sealift Vessel pursuant to the Conversion
Contracts.
|
3.4.2
|
So
far as Frontline and Sealift are aware, each of the Sealift Vessels is
presently permanently registered at its place of registry and all fees of
such registry have been paid.
|
3.4.3
|
Neither
Frontline or Sealift has received any notice that any Sealift Vessel is or
is likely to be subject to any claim, to forfeiture, arrest, other
detention, seizure, confiscation or other requisition and neither
Frontline nor Sealift are aware of any circumstances which might give rise
to any such claim, forfeiture, arrest, other detention, seizure,
confiscation or other requisition.
|
4.
|
Insurances
|
4.1
|
All
premiums, calls or other sums payable in respect of the insurances for the
Sealift Vessels have been paid.
|
4.2
|
All
material facts disclosable to insurers have been disclosed, including the
planned conversion of each of the Sealift
Vessels.
|
5.
|
General
|
5.1
|
The
Disclosed Information contains all information relating to (i) the
business and affairs of Sealift and each Sealift Group Company and that is
material in the context of the Transaction and (ii) any arrangement
between Frontline, any director or shareholder of Frontline and Sealift
has been disclosed to the Delphi
Shareholders.
|
5.2
|
Sealift
has obtained all necessary consents and complied with all requirements in
relation to all statutes and regulations including but not limited to the
Bermuda Monetary Authority, exchange control and foreign currency
regulations. Sealift and each Sealift Group Company has at all times
complied and continues to comply with such statutes and regulations
governing each company in the country of its incorporation. Sealift or any
Sealift Group Company is not under any obligation, contractual or
otherwise, to request or obtain the consent of any person, and no permits,
licenses, certifications, authorisations or approvals of or notifications
to, any government or governmental agency, board, commission or authority
are required to be obtained by Sealift or any Sealift Group Company in
connection with the execution, delivery or performance by Sealift of this
Merger Agreement or the completion of the
Transaction.
|
|
SCHEDULE
9
|
A.
|
VESSELS
|
|
1.
|
Name
of Vessel:
|
MARBLE
|
Sealift
ShipCo of Vessel:
|
Quadrant
Marine Inc
|
|
Flag
of Vessel:
|
Bahamas
|
|
2.
|
Name
of Vessel:
|
FRONT
GRANITE
|
Sealift
ShipCo of Vessel:
|
Granite
Shipping Company Limited
|
|
Flag
of Vessel:
|
Marshall
Islands
|
|
3.
|
Name
of Vessel:
|
FRONT
TARGET
|
Sealift
ShipCo of Vessel:
|
Front
Target Inc.
|
|
Flag
of Vessel:
|
Marshall
Islands
|
|
4.
|
Name
of Vessel:
|
FRONT
SUNDA
|
3.
|
Bareboat
Charters
|
|
4.
|
Management
Agreements
|
|
5.
|
Refund
Guarantees
|
|
6.
|
Post-Redelivery
Shipping Documents
|
|
1.
|
SEALIFT LTD.
(“
Sealift
”);
|
2.
|
SOUTHWEST TANKERS INC.
(“
Southwest
”);
|
3.
|
FRONT TARGET INC.
(“
Front
Target
”);
|
4.
|
FRONT TRAVELLER INC.
(“
Front
Traveller
”);
|
5.
|
WEST TANKERS INC.
(“
West
”);
|
6.
|
GRANITE SHIPPING COMPANY LTD.
(“
Granite
”);
|
7.
|
QUADRANT MARINE INC.
(“
Quadrant
”)
|
8.
|
FRONTLINE LTD.
(“
Frontline
”)
|
(A)
|
On
30 January, 2007, Frontline and Sealift entered into a purchase agreement
setting forth the terms and conditions upon and subject to which Sealift
acquired,
inter alia,
all of the shares in the Owners from Frontline (the “
Original Purchase
Agreement
”);
|
|
On
15 March 2007 the Parties entered into a supplemental agreement
supplementing certain terms of the Original Purchase Agreement (the “
Supplemental
Agreement
”)
(together with the
Original Purchase Agreement, referred to as the “
Purchase
Agreement
”);
and
|
|
The
Parties wish to supplement the terms of the Purchase Agreement in respect
of a number of issues.
|
1.
|
Terms
defined in the Purchase Agreement shall, when used herein in capitalised
form, have the same meaning as attributed to them in the Purchase
Agreement.
|
2.
|
Clause
8.1.6 of the Original Purchase Agreement shall be supplemented for the
avoidance of doubt so that:
|
|
(i)
|
notwithstanding
any of the terms in said Clause 8.1.6 or elsewhere in the Purchase
Agreement, Frontline shall indemnify each Owner against all costs incurred
by such Owner as a result of Frontline not paying any claim which such
Owner is obliged to pay under the terms of the relevant Conversion
Contract or any repair contract entered into by such Owner with
Cosco;
|
|
(ii)
|
Frontline
shall be responsible for the repair costs of each Conversion Vessel and in
Clause 8.1.6 all references to “conversion costs” shall be construed so
that this term includes such costs incurred as a result of a repair
contract being entered into by Frontline (on behalf of the relevant Owner)
with the relevant Yard pursuant to Clause 10.8 of such Conversion
Contract.
|
3.
|
Clause
8.1.5 of the Original Purchase Agreement shall be amended so that the
final sentence is deleted and the clause is supplemented by the
following:
|
|
(i)
|
Sealift
shall have the right to assign two representatives to the supervision team
for Front Sunda, Front Target, Front Traveller and Front Comor, one of
which shall have engine room expertise and the other deck
expertise;
|
|
(ii)
|
the
Sealift representatives shall have full access to information and
documentation provided by Cosco to the supervision teams, as well as all
documentation related to the Conversion Vessels as is being prepared by
the supervision teams or circulated among its
members;
|
|
(iii)
|
the
Sealift representatives shall have the right to attend all inspections,
testing of equipment, sea trials and review of sea trial
documentation;
|
|
(iv)
|
the
Sealift representatives shall work with the other members of the
supervision team with the objective of resolving all technical issues in
the best interests of the Owners and in the case of disagreement between
the Sealift representatives and the other members of the supervision team,
the views of the Sealift representatives shall be given in writing to the
leader of the supervision team; and
|
4.
|
Clause
8.1.9 of the Original Purchase Agreement and Clause 2 of the Supplemental
Agreement shall be amended so that the agreed redelivery dates are as
follows:
|
6.
|
This
Agreement shall be considered null and void if Merger Completion has not
occurred prior to 12 May 2007.
|
7.
|
The
Parties agree that the provisions of Clauses 14 and 17 of the Original
Purchase Agreement shall apply to this Agreement as
well.
|
For
and on behalf of
|
For
and on behalf of
|
SEALIFT
LTD.
|
SOUTHWEST
TANKERS INC.
|
For
and on behalf of
FRONT
TARGET INC.
|
For
and on behalf of
FRONT
TRAVELLER INC.
|
For
and on behalf of
WEST
TANKER INC.
|
For
and on behalf of
GRANITE
SHIPPING COMPANY LTD.
|
For
and on behalf of
QUADRANT
MARINE INC.
|
For
and on behalf of
FRONTLINE
LTD.
|
1.
|
DEFINITIONS
|
1.1
|
In
this Scheme the following words and expressions shall, where the context
so permits, have the following
meanings:
|
1.2
|
In
this Scheme except in so far as the context otherwise
requires:
|
a.
|
words
denoting the singular number shall include the plural number and words
denoting the masculine gender shall include the feminine
gender;
|
b.
|
any
reference herein to any enactment or statutory provision shall be
construed as a reference to that Bermudian enactment or provision as from
time to time amended extended or re-enacted;
and
|
c.
|
references
to the exercise of an Option shall include the exercise of an Option in
part.
|
2.
|
GRANT
OF OPTION
|
2.1
|
At
any time after the Adoption Date, and not later than the tenth anniversary
thereof, the Board may, in its absolute discretion, resolve to grant an
Option or Options to an Eligible Person or to Eligible Persons on the
terms and conditions set out in the Rules and in its
resolution.
|
2.2
|
Immediately
following the Date of Grant the Board shall notify the relevant Eligible
Persons that they have been granted
Options.
|
2.3
|
The
notice given by the Board pursuant to Clause 2.2 shall be in such form,
not inconsistent with these Rules, as the Board may determine and shall
specify the number of Shares comprised in the Option, any terms applicable
thereto other than as set out herein, the Date of Grant and the
Subscription Price.
|
2.4
|
Not
later than twelve weeks following the Date of Grant, the Option Holder
may, by a notice given in writing, renounce his rights to any Option
granted pursuant to Clause 2.1 in which event such Option shall be deemed
for all purposes never to have been
granted.
|
2.5
|
As
soon as possible after the expiry of the twelve week notice period
referred to in Clause 2.4, the Board shall issue an Option Certificate in
respect of each Option in such form, not inconsistent with these Rules, as
the Board may determine.
|
3.
|
LIMITATIONS
|
3.1
|
No
Option shall be granted after the tenth anniversary of the Adoption
Date.
|
3.2
|
No
Option shall be granted to any person unless he is, at the Date of Grant,
an Eligible Person.
|
4.
|
MAIN
TERMS
|
4.1
|
No
consideration shall be payable to the Company for the grant of an
Option.
|
4.2
|
The
Option shall entitle the Option Holder to subscribe for Shares at a price
per Share equal to the Subscription Price at the date the Option is
exercised.
|
4.3
|
Any
Option which has not lapsed may be exercised in whole or in part at any
time provided the earliest of the following events has
occurred:
|
a.
|
the
Vesting Date;
|
b.
|
the
death of the Option Holder;
|
c.
|
a
Change of Control.
|
4.4
|
An
Option which has vested, shall lapse on the earliest of the following
events:
|
a.
|
such
date as the Board in its discretion may prescribe at the date the Option
is granted, provided that such date cannot be later than the tenth
anniversary of the Date of Grant;
|
b.
|
the
first anniversary of the Option Holder’s
death;
|
c.
|
the
first anniversary of the Option Holder’s
retirement;
|
d.
|
three
months following the Option Holder’s ceasing to be an Eligible Person,
other than by reason of his death or
retirement;
|
e.
|
six
months after the Option has become exercisable in accordance with Clause
7.1;
|
4.5
|
An
Option which has not vested, shall lapse on the earliest of the following
events:
|
a.
|
the
date of an Option Holder’s retirement;
and
|
b.
|
the
date an Option Holder ceasing to be an Eligible Person other than by
reason of his death or retirement.
|
5.
|
EXERCISE
OF OPTIONS
|
5.1
|
Exercise
of an Option shall be effected by the Option Holder giving notice in
writing to the Company specifying the number of Option Shares (not being
less than 500 Shares, and being a multiple of 100 Shares, except in the
case of final exercise of all outstanding rights under the Option) in
respect of which the Option is being exercised on that occasion and
accompanied by the relevant Option Certificate and otherwise in such form
and manner as the Board in its discretion may prescribe from time to time,
provided that such notice shall be deemed to have been exercised and to
take effect on the date on which payment of the Subscription Cost is
received by the Company.
|
5.2
|
Subject
to any necessary consents under regulations or enactments for the time
being in force, compliance by the Option Holder with the Rules and receipt
by the Company of the Subscription Cost, the Company shall, not later than
thirty days after receipt of the notice referred to in Clause 5.1 above,
allot and issue to the Option Holder the number of Shares specified in the
notice. If the number of Shares over which the Option is exercised is less
than that specified in the relevant Option Certificate then the Company
will issue a balance Option Certificate in respect of the remainder of
such Shares over which the Option is still capable of
exercise.
|
5.3
|
Notwithstanding
the provisions of Clause 5.1 and Clause 5.2, the Company reserves the
right upon receipt of a notice of exercise of an Option to make a cash
payment in lieu of issuing Shares that would be due on the exercise of the
Option. The cash payment will be calculated as the positive
difference between the highest market price of the Shares on the New York
Stock Exchange (or any other stock exchange on which the Shares are
traded, chosen by the Board), and the Subscription Price on the date the
Company receives the notice of exercise of an
Option.
|
5.4
|
Shares
allotted under the Scheme in pursuance of the exercise of an Option shall
rank pari passu in all respects with the Shares for the time being in
issue save as regards any rights attaching by reference to a record date
prior to the date on which the Option is
exercised.
|
6.
|
ADJUSTMENTS
TO OPTION RIGHTS
|
6.1
|
In
the event of any capitalisation or rights issue, any sub-division,
consolidation or a reduction of the capital of the Company, the Board
shall make appropriate adjustments with regard
to:
|
a.
|
the
aggregate number of Shares subject to any
Option;
|
b.
|
the
Subscription Price subject to any Option;
or
|
c.
|
the
terms of any Option.
|
|
PROVIDED
THAT
:
|
d.
|
any
such adjustment has been confirmed in writing by an Independent Expert to
be in their opinion fair and reasonable;
and
|
e.
|
the
aggregate Subscription Cost payable by an Option Holder on the exercise of
all his Options is not increased;
and
|
f.
|
the
amount payable to subscribe for any Share subject to any Option shall not
be reduced below its nominal value.
|
6.2
|
The
Board shall give notice in writing to each Option Holder affected by any
adjustment made pursuant to Clause 6.1 and may, at its discretion, deliver
to him a revised Option Certificate in respect of his
Option.
|
7.
|
WINDING-UP
|
7.1
|
If
notice is given by the Board to the shareholders in the Company of a
members’ resolution for the voluntary winding-up of the Company, notice of
the same shall forthwith be given by the Board to the Option
Holders.
|
7.2
|
Option
rights shall lapse immediately in the event of the Company being wound-up
otherwise than in the event of a voluntary
winding-up.
|
8.
|
VARIATION
OF THE SCHEME
|
8.1
|
Subject
to Clause 9.2 the Board may at any time alter or add to the Rules in any
respect, provided that:
|
a.
|
the
Board may not cancel an Option except where (i) the Option Holder has
breached the provisions of Clause 9.5 or (ii) the Option Holder has
previously agreed; and
|
b.
|
(subject
as herein provided) the Board may not modify the terms of an Option
already granted otherwise than with the consent of the Option
Holder.
|
8.2
|
Notwithstanding
the provisions of Clause 8.1, no amendment may be made which would make
the terms on which Options may be or have been granted materially more
generous without the prior approval of the Company in a general
meeting.
|
8.3
|
The
Board shall give notice in writing to each Option Holder of any alteration
or addition made pursuant to this Clause 8 and may, at its discretion,
deliver to each Option Holder a revised Option Certificate in respect of
his Option.
|
9.
|
GENERAL
PROVISIONS
|
9.1
|
The
Company shall at all times keep available sufficient authorised but
unissued Shares to satisfy the exercise in full of all Options for the
time being capable of being
exercised.
|
9.2
|
The
Board may from time to time make and vary such regulations and establish
such procedures for the administration and implementation of the Scheme as
it thinks fit. In the event of any dispute or disagreement as
to the interpretation of the Rules or as to the question of rights arising
from or related to the Scheme, the decision of the Board shall (except as
regards any matter required to be determined by the Auditors hereunder) be
final and binding upon all persons.
|
9.3
|
The
cost of the administration and implementation of the Scheme shall be borne
by the Company.
|
9.4
|
The
rights and obligations of an Eligible Person under the terms on which the
Eligible Person holds his office or employment with a Participating
Company shall not be affected by his participation in the Scheme or by any
right he may have to participate therein, and the Scheme shall afford an
Eligible Person no rights to compensation or damages in connection with
the termination of such office or employment for any reason
whatsoever.
|
9.5
|
The
rights and obligations of an Option Holder shall be personal to the Option
Holder and no Option nor the benefit thereof may be transferred, assigned,
charged or otherwise alienated save that nothing in this sub-clause shall
prohibit the transmission of an Option or the benefit thereof by operation
of law.
|
9.6
|
For
so long as the Shares are listed on the New York Stock Exchange or any
other stock exchange, the Company shall apply to the appropriate
authorities of such stock exchange(s) for all Shares subscribed for under
the Scheme to be admitted for trading thereon on par with the other
Shares.
|
9.7
|
Any
notice or other document to be served by the Company under the Scheme on
an Eligible Person or Option Holder may be served personally or by e-mail
or by sending it through the post in a prepaid letter addressed to him at
his address as last known to the
Company.
|
9.8
|
The
Insider Trading Regulations of the Company are applicable to the Shares
received as a consequence of the exercise of
Options.
|
10.
|
TERMINATION
OF THE SCHEME
|
10.1
|
The
Scheme shall terminate on the earlier of the following
dates:
|
a.
|
the
date (if any) determined by the Board to be the date of termination of the
Scheme; and
|
b.
|
the
tenth anniversary of the Adoption
Date.
|
10.2
|
Following
termination of the Scheme pursuant to Clause 10.1 above, no further
Options shall be granted but the subsisting rights and obligations of
existing Option Holders will continue in force as if the Scheme had not
terminated.
|
MANAGEMENT
AGREEMENT
|
Clause
|
Page
|
|
1.
|
APPOINTMENT
|
4
|
2.
|
THE
SFIL GROUP’S MANAGEMENT FUNCTIONS
|
4
|
3.
|
THE
SUBSIDIARIES
|
4
|
4.
|
SERVICES
|
5
|
5.
|
GENERAL
CONDITIONS
|
7
|
6.
|
MANAGEMENT
FEE — REIMBURSEMENT OF COSTS
|
7
|
7.
|
AUTHORITY
|
8
|
8.
|
INDEMNITY
|
8
|
9.
|
CONFIDENTIALITY
|
9
|
10.
|
TERMINATION
|
9
|
11.
|
DEFAULT
|
10
|
12.
|
FORCE
MAJEURE
|
10
|
13.
|
NOTICES
|
10
|
14.
|
MISCELLANEOUS
|
11
|
15.
|
GOVERNING
LAW AND ARBITRATION
|
11
|
(1)
|
SHIP FINANCE INTERNATIONAL
LIMITED
of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HMGX,
Bermuda (the
“
Company
”);
|
(2)
|
THE SUBSIDIARIES OF THE
COMPANY, LISTED IN SCHEDULE 1 HERETO
(the “
Subsidiaries
”)
|
(3)
|
FRONTLINE MANAGEMENT
(BERMUDA
)
LTD.
of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HMGX, Bermuda
(the “
Manager
”)
|
(A)
|
The
Company is a limited company organised under the laws of Bermuda, having
its registered office at the address stated
above.
|
(B)
|
The
Company’s shares are listed on the New York Stock
Exchange.
|
(C)
|
The
Company is, through the Subsidiaries, the owner of a number of tanker, dry
bulk and other vessels, offshore drilling rigs and other
assets.
|
(D)
|
It
is the Company’s policy to outsource its and the Subsidiaries’
administrative needs to other corporate entities, either owned or
controlled by itself or by third
parties.
|
(E)
|
The
Company was, during the period from its incorporation until 31 December
2006, provided with such management services as its board required to
carry out the day-to-day management of the Company and its assets by the
Manager under the terms of (i) an administrative services agreement with,
inter alia, the Manager dated 1 January 2004, (ii) an administrative
management agreement with, inter alia, the Manager dated 20 June 2005,
(iii) an administrative management agreement with, inter alia, the Manager
dated 17 January 2006 and (iv) an administrative management agreement
with, inter alia, the Manager dated 1 October 2006 (collectively, the
“
Admin
Agreements
”).
|
(F)
|
The
Company’s subsidiaries (including but not limited to the Subsidiaries)
were, during the period from the Company’s incorporation until 31 December
2006, provided with such general management services as their respective
boards required to carry out the day-to-day management of their activities
by the Manager under the terms of the Admin
Agreements.
|
(G)
|
The
Manager has, in the period referred to in Recital (E) above, subcontracted
parts of the services provided to the Company to its affiliates, Frontline
Management AS
(
“
FrontMan AS
”)
and Frontline
Corporate Services Ltd
(
“
FrontCorp
”).
|
(H)
|
The
Company decided, in the first quarter of 2006, to establish a wholly owned
subsidiary, Ship Finance Management AS
(
“
SFManagement
”)
,
for the purpose of
establishing a proprietary management team which, on market terms, would
provide the Company and the Subsidiaries
with the majority of the
management services required by
them.
|
(I)
|
SFManagement
became operational on 1 May 2006 and assumed, gradually throughout the
remainder of 2006, responsibility for the provision of the management
services required by the Company and the Subsidiaries on terms orally
agreed with the board of the
Company.
|
(J)
|
The
scope and terms of the administrative services provided by SF Management
were to the Company effective from 1 January 2007 have today been
documented in a written management agreement between SFManagement and the
Company (the “
General
Management Agreement
”).
|
(K)
|
The
Parties have agreed to enter into this Agreement in order to document the
terms upon which the Manager, with effect from 1 January 2007, has
provided and shall continue to provide certain management services to the
Company and the Subsidiaries and, as part of such agreement, to document
the agreed cancellation of the Admin Agreements in relation to the Company
and the Subsidiaries with effect from such
date.
|
1.
|
APPOINTMENT
|
1.1
|
The
Company and the Subsidiaries (the “
SFIL Group
”)
hereby confirm the
appointment of the Manager, effective from 1 January 2007, as responsible
for those of their respective management functions that are described
herein on the terms and conditions set forth in the
following.
|
1.2
|
The
Parties hereby confirm their agreement that the Admin Agreements were
terminated in respect of the Company and the Subsidiaries, effective on 31
December 2006.
|
2.
|
THE
SFIL GROUP’S MANAGEMENT FUNCTIONS
|
2.1
|
Ultimate
responsibility for the administration of the Company and the Subsidiaries
lies with the Company’s board of directors of the Company (the “
Board
”).
|
2.2
|
The
Manager confirms its understanding that the services provided hereunder
shall supplement the services provided by SFManagement under the General
Management Agreement and that SFManagement thus has the overall
responsibility for providing the Company with the management services the
Company requires from time to time.
|
2.3
|
The
Manager further agrees to and accepts that it shall report to SFManagement
in respect of the services to be provided by it hereunder. Further, the
Manager confirms that it will ensure that its subcontractors in providing
the services shall report to SFManagement
too.
|
3.
|
THE
SUBSIDIARIES
|
3.1
|
The
Company’s assets are, generally, held through wholly owned
subsidiaries.
|
3.2
|
The
Company’s subsidiaries as of the date hereof are listed in Schedule 1
hereto and are parties to the
Agreement.
|
3.3
|
The
Manager shall, on matters of particular importance to a Subsidiary, keep
such Subsidiary’s board of directors informed (while reporting to the
Board). Final decisions in such matters shall be taken by the board of
directors of such Subsidiary.
|
4.
|
SERVICES
|
4.1
|
The
Manager shall, throughout the term of this Agreement, make the following
services
|
|
available
to the SFIL Group:
|
4.1.1
|
Corporate
Governance Services
|
|
(a)
|
The
Manager shall assist SFManagement with all aspects of the Company’s
corporate governance which relates to Bermuda law and shall, in
particular, assist with the conveying of board and shareholders meetings
in Bermuda.
|
|
(b)
|
The
Manager shall prepare all documentation of written resolutions passed by
the Board and the board of directors of the Subsidiaries and the
shareholder(s) of the Company and the Subsidiaries along with minutes from
their respective meetings and shall, furthermore, be responsible for the
same being signed and safely filed. SFManagement shall be provided with
copies thereof.
|
|
(c)
|
The
Manager shall assist the Company’s company secretary in preparing and
implementing all aspects of the Company’s employee share option plan from
time to time.
|
|
(d)
|
The
Manager shall be responsible for the operation of the Company’s
shareholder register.
|
|
(e)
|
The
Manager shall be responsible for the corporate books and records of the
Subsidiaries.
|
4.1.2
|
Accounting
– Corporate Governance - Auditing -
Reports
|
|
(a)
|
The
Manager shall be responsible for the SFIL Group’s accounting
functions.
|
|
(b)
|
The
SFIL Group’s accounting shall be based on US GAAP and such accounting
principles as the Board from time to time shall have
approved.
|
|
(c)
|
The
Manager shall maintain all financial records and books of account of all
transactions of the Company and the Subsidiaries in accordance with
applicable laws and proper accounting
practice.
|
|
(d)
|
The
Manager shall be responsible for the preparation of the Company’s and the
SFIL Group’s interim and annual closing of
accounts.
|
|
(e)
|
The
Manager shall, by way of designing and implementing necessary procedure
assist the Board in ensuring that the SFIL Group meets all relevant
corporate governance principles (including but not limited to the
Sarbanes-Oxley Act).
|
|
(f)
|
The
Manager shall assist the SFIL Group’s auditors in the continuous and
annual audit of the Company’s and the Subsidiaries’
accounts.
|
|
(g)
|
The
Manager shall prepare such interim reports in respect of the performance
of the Company and the SFIL Group as SFManagement shall require from time
to time.
|
4.1.3
|
Company
Records
|
|
(a)
|
The
Manager shall be responsible for the safekeeping and professional filing
of all the SFIL Group’s original corporate documents, such archive being
physically located in Bermuda.
|
|
(b)
|
The
Manager shall establish and maintain an adequate and accessible archive,
either or both in electronic and physical form, over all documents
relevant to the SFIL Group’s
business.
|
|
(c)
|
The
Manager shall ensure that SFManagement has full access to such archive and
shall assist SFManagement in the maintenance of a copy-set of such
documents in SFManagement’s office.
|
4.1.4
|
Government
Relations - Taxes
|
4.1.5
|
Insurances
|
4.1.6
|
Accidents
- Contingency Plans
|
4.1.7
|
Sale
and Purchase of Assets
|
4.2
|
The
Manager may, at its discretion, sub-contract any of the Services to its
affiliates FrontMan AS and FrontCorp, always provided that the Manager
shall remain responsible for the overall performance of the Services
notwithstanding any such subcontracting or
delegation.
|
5.
|
GENERAL
CONDITIONS
|
5.1
|
The
Manager shall, in performing its duties hereunder, effectively and
faithfully serve the Company and the Subsidiaries. In exercising the
powers and authorities hereby conferred on it, the Manager
shall:
|
|
(a)
|
always
use its best endeavours to protect and promote the Company’s and the
Subsidiaries’ interests;
|
|
(b)
|
observe
all applicable laws and regulations relevant to the Company’s and the
Subsidiaries’ activities; and
|
|
(c)
|
always
act in accordance with good and professional management
practice.
|
5.2
|
The
Manager shall be entitled to provide management services to other
companies or entities, provided that the provision of such services is not
deemed detrimental to the interests of the SFIL
Group.
|
5.3
|
The
Manager shall not afford preference to any vessel or company under its
management but shall, so far as practicable, ensure a fair distribution of
service to all such vessels and companies from time to
time.
|
5.4
|
All
discounts, commissions and other benefits received by the Manager and/or
its employees from third parties as a consequence of the provision of the
Services shall be disclosed to the Board and, unless otherwise agreed,
placed at the Company’s or, as the case may be, the relevant Subsidiary’s
disposal.
|
5.5
|
The
Company shall, at all times, be allowed full access to the accounts and
records of the
|
|
Manager
which are relevant to the performance of the
Services.
|
5.6
|
The
Manager shall, upon request, provide the Company with copies of all
documents relevant to the Company or a Subsidiary in its possession and
otherwise compile such facts and records on the basis of such documents as
shall, from time to time be requested by the
Board.
|
6.
|
MANAGEMENT
FEE – REIMBURSEMENT OF COSTS
|
6.1
|
The
Company shall pay the manager a fee (the “
Management Fee
”)
as consideration
for the Manager’s provision of the
Services.
|
6.2
|
The
Management Fee shall, in relation to each calendar year, be detailed in a
fee letter to be submitted by the Manager to the Company no later than 1
December in the preceding year.
|
6.3
|
The
Company shall make on account payments of the Management Fee throughout
the year
|
|
in
accordance with the terms of the annual fee
letter.
|
6.4
|
The
Management Fee shall be based on the market price for administrative
services
|
|
similar
to the Services covered by it.
|
6.5
|
Both
the Manager and the Company may, if it can be documented that the scope of
the Services changes materially during a year, demand that the Management
Fee or a specified element therein for such year is revised with effect
for the remainder of the relevant year. The Manager shall have the same
right if the Manager’s cost base increases materially during a
year.
|
6.6
|
The
Company shall reimburse the Manager for all out-of-pocket expenses
incurred by the
|
|
Manager
in relation to third parties in connection with the provision of the
Services.
|
7.
|
AUTHORITY
|
7.1
|
The
Manager is, within the scope of the Services and subject to the
limitations set forth below, authorised to act on the Company’s and each
Subsidiary’s behalf and shall obligate the Company by its
signature.
|
|
(i)
|
The
Manager shall not, unless specifically authorised by the Company or a
Subsidiary, be authorised to act for the Company or such Subsidiary
outside the scope of the Services;
|
|
(ii)
|
The
Manager’s general authority shall always be limited by applicable laws
(including, but not limited to, Bermuda law) and the Company’s and each
Subsidiary’s bye-laws or similar constitutional documentation and the
specific limitations set forth
herein;
|
|
(iii)
|
The
Manager’s general authority shall always exclude matters of an irregular
nature or special importance (always including the chartering or lease out
of material assets) unless specifically authorised by the Board or the
board of directors of a Subsidiary (whether in general or for a limited
period or within set limits without time limitation or specifically in
relation to a particular
transaction).
|
7.2
|
The
Company and the Subsidiaries hereby ratify, confirm and undertake, at all
times, to allow, ratify and confirm all actions the Manager and its
employees shall lawfully take or cause to be taken on the Company’s or a
Subsidiary’s behalf in the bona fide performance of the
Services.
|
8.
|
INDEMNITY
|
8.1
|
The
Manager shall be under no responsibility or liability for any loss or
damage, whether as a loss of profits or otherwise, to the Company or a
Subsidiary arising out of any act or omission involving any error of
judgment or any negligence on the part of the Manager or any of its
officers or employees in connection with the performance of the Services,
unless the acts or omissions leading to a loss or damage are caused by
gross negligence or wilful misconduct on the part of the Manager, its
officers or employees.
|
8.2
|
The
Company agrees to indemnify and keep the Manager and its officers and
employees together with its subcontractors and such subcontractors’
employees and officers indemnified against any and all liabilities, costs,
claims, demands, proceedings, charges, actions, suits or expenses of
whatsoever kind or character that may be incurred or suffered by any of
them howsoever arising (other than by reason of fraud or dishonesty on
their part) in connection with the provisions of the Services to both the
Company and the Subsidiaries.
|
8.3
|
The
indemnities provided by the Company hereunder shall cover all reasonable
costs and expenses payable by the Manager in connection with any claims to
which the indemnity obligation of the Company
applies.
|
8.4
|
The
indemnification provided by the Company pursuant to this Clause 8 shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, agreement, the bye-laws
of the Company or otherwise, and shall continue after the termination of
this Agreement.
|
9.
|
CONFIDENTIALITY
|
9.1
|
All
Confidential Information furnished to the Manager, its subcontractors or
any of their respective employees or directors pursuant to this Agreement
shall be and remain the property of the Company or the relevant
Subsidiary, and shall be kept confidential by the
Manager.
|
|
(i)
|
required
to be disclosed by law or court order;
or
|
|
(ii)
|
becomes
public knowledge otherwise than as a result of the conduct of the
Manager.
|
10.
|
TERMINATION
|
10.1
|
Each
of the Company and the Manager may terminate this Agreement following no
less than 3 month’s prior written notice to the other
Party.
|
10.2
|
Termination
shall be without prejudice to any rights or liabilities of the Parties
arising
|
|
prior
to or in respect of any act or omission occurring prior to
termination.
|
10.3
|
In
the event of termination, the Management Fee shall be pro ratal to the
date of termination (after taking into account such additional amounts, if
any, as time spent and the responsibility undertaken by the Manager during
the relevant period immediately prior to termination
justify).
|
10.4
|
In
the event of termination of the Agreement, the Manager shall procure that
all such acts are done as may be necessary to give effect to such
termination and the Company shall secure and the Manager, subject to
payment of all amounts due to it hereunder, shall cooperate in the
appointment of a substitute manager as circumstances may
require.
|
10.5
|
Upon
the termination of this Agreement, the Manager shall hand over to the
Company all books of account, correspondence and records relating to the
affairs of the Company and the Subsidiaries which are the property of the
Company and the Subsidiaries and which are in its or its sub-contractors’
possession.
|
11.
|
DEFAULT
|
11.1
|
If
the Manager shall, by any act or omission, be in breach of any material
obligation under this Agreement and such breach shall continue for a
period of fourteen (14) days after written notice thereof has been given
by the Company to the Manager, the Company shall have the right to
terminate this Agreement with immediate effect by notice to the
Manager.
|
11.2
|
Each
of the Manager and the Company (but not a Subsidiary) may forthwith by
notice in writing to the other Party terminate this Agreement if an order
be made or a resolution be passed for the winding up of the other Party or
if a receiver be appointed of the business or property of the other Party,
or if the other Party shall cease to carry on its business or make special
arrangement or composition with its creditors or if any event analogous
with any of the foregoing occurs under any applicable law with relevance
to the other Party.
|
12.
|
FORCE
MAJEURE
|
13.
|
NOTICES
|
13.1
|
All
correspondence or notices required or permitted to be given under this
Agreement shall be given in English and sent by mail, telefax, email or
delivered by hand at the following
addresses:
|
14.
|
MISCELLANEOUS
|
14.1
|
None
of the Parties shall be entitled to assign its rights and/or obligations
under this Agreement unless the prior written consents of the other
Parties hereto have been obtained. This principle shall not apply to the
subcontracting by the Manager of the provision of parts of the Services
pursuant to Clause 4.2.
|
14.2
|
Nothing
in this Agreement shall be deemed to constitute a partnership between the
Parties.
|
14.3
|
No
term of this Agreement is enforceable by a person who is not a party to
it.
|
14.4
|
This
Agreement shall not be amended, supplemented or modified save by written
agreement signed by or on behalf of the
Parties.
|
15.
|
GOVERNING
LAW AND ARBITRATION
|
15.1
|
This
Agreement shall be governed by Norwegian
law.
|
15.2
|
Any
dispute, controversy or claim arising out of or relating to this Agreement
(including the breach, termination or invalidity thereof), shall be
settled by arbitration in accordance with the provisions of the Norwegian
Arbitration Act 2004.
|
Vessel
Owning Subsidiaries
|
||
Name
of Company
|
Registered
|
Name
of Vessel
|
Ariake
Transport Corporation
|
Liberia
|
Oliva
|
Aspinall
Pte Ltd
|
Singapore
|
Front
Viewer
|
Benmore
Shipping Inc
|
Cyprus
|
Sea
Alfa
|
Blizana
Pte Ltd
|
Singapore
|
Front
Rider
|
Bolzano
Pte Ltd
|
Singapore
|
Mindanao
|
Bonfield
Shipping Ltd
|
Liberia
|
Front
Driver
|
Cirebon
Shipping Pte Ltd
|
Singapore
|
Front
Vanadis
|
Edinburgh
Navigation S.A.
|
Liberia
|
Edinburgh
|
Fox
Maritime Pte Ltd
|
Singapore
|
Front
Sabang
|
Front
Ardenne Inc.
|
Liberia
|
Front
Ardenne
|
Front
Brabant Inc.
|
Liberia
|
Front
Brabant
|
Front
Dua Pte Ltd
|
Singapore
|
Front
Duchess
|
Front
Empat Pte Ltd
|
Singapore
|
Front
Highness
|
Front
Enam Pte Ltd
|
Singapore
|
Hebei
River
|
Front
Falcon Inc.
|
Liberia
|
Front
Falcon
|
Front
Glory Shipping Inc.
|
Liberia
|
Front
Glory
|
Front
Lapan Pte Ltd
|
Singapore
|
Front
Climber
|
Front
Lima Pte Ltd
|
Singapore
|
Front
Lady
|
Front
Opalia Inc
|
Liberia
|
Front
Opalia
|
Front
Pride Shipping Inc.
|
Liberia
|
Front
Pride
|
Front
Saga Inc.
|
Liberia
|
Front
Page
|
Front
Scilla Inc.
|
Liberia
|
Front
Scilla
|
Front
Sembilan Pte Ltd
|
Singapore
|
Front
Leader
|
Front
Serenade Inc.
|
Liberia
|
Front
Serenade
|
Front
Shadow Inc
|
Liberia
|
Golden
Shadow
|
Front
Splendour Shipping Inc.
|
Liberia
|
Front
Splendour
|
Front
Stratus Inc.
|
Liberia
|
Ondina
|
Front
Tiga Pte Ltd
|
Singapore
|
Front
Duke
|
Golden
Estuary Corporation
|
Liberia
|
Front
Comanche
|
Golden
Fjord Corporation
|
Liberia
|
Ocana
|
Golden
Narrow Corporation
|
Liberia
|
Golden
Victory
|
Golden
Seaway Corporation
|
Liberia
|
Front
Vanguard
|
Golden
Sound Corporation
|
Liberia
|
Front
Vista
|
Golden
Tide Corporation
|
Liberia
|
Front
Circassia
|
Hitachi
Hull 4983 Corporation
|
Liberia
|
Otina
|
Hudson
Bay Marine Company Limited
|
Cyprus
|
Front
Force
|
Jaymont
Shipping Inc
|
Cyprus
|
Sea
Beta
|
Katong
Investments Ltd
|
Liberia
|
Front
Breaker
|
Langkawi
Shipping Ltd.
|
Liberia
|
Front
Birch
|
Millcroft
Maritime SA
|
Liberia
|
Front
Champion
|
Newbond
Shipping Company Limited
|
Cyprus
|
Front
Energy
|
Rettie
Pte Ltd
|
Singapore
|
Front
Striver
|
Rig
Finance
|
Bermuda
|
West
Ceres
|
Rig
Finance II Limited
|
Bermuda
|
West
Prospero
|
Sea
Ace Corporation
|
Liberia
|
Front
Ace
|
Sibu
Shipping Ltd.
|
Liberia
|
Front
Maple
|
(1
)
|
SHIP FINANCE INTERNATIONAL
LIMITED
(the “
Company
”);
|
(2
)
|
THE VESSEL OWNING SUBSIDIARIES
OF THE COMPANY
named in Schedule 1 hereto (the “
Owners
”);
|
(3
)
|
FRONTLINE LTD.
(“
Frontline
”);
|
(4
)
|
FRONTLINE SHIPPING LTD.
(the “
Charterer
”)
|
1.
|
Terms
defined in the Charter Agreement shall have the same meaning as set out
therein when used in the following.
|
2.
|
The
term “
Agreement
”
shall, when used
in the Charter Agreement, hereafter mean the Charter Agreement as amended
by this Amendment.
|
3.
|
Clause
4.1 shall be amended by deleting the
words:
|
4.
|
Clause
4.2 of the Charter Agreement shall be substituted with the following
wording:
|
|
“4.2
|
Preparation and Delivery of
Bonus Payment Schedules
|
|
(a)
|
The
period upon which each Bonus Amount shall be determined shall be three
calendar months and shall coincide with the calendar quarters of each
calendar year.
|
|
(b)
|
No
later than on the last Business Day in the calendar month following the
end of each calendar quarter, the Charterer shall prepare or cause to be
prepared, and shall deliver to the Company, a Bonus Payment Schedule with
respect to the preceding quarter. Each Bonus Payment Schedule shall set
forth, in each case with respect to the preceding quarter, (i) the TCE
revenues of the VLCCs, (ii) the TCE revenues of the Suezmaxes and (iii)
the Charterer’s calculation of the VLCC Bonus Amount, the Suezmax Bonus
Amount and the aggregate thereof on a year to date basis less any agreed
Bonus Amount(s) for the preceding quarters in the relevant calendar year
(the “
Bonus
Amount
”).
The Charterer
shall, at the same time, provide to the Company such supporting work
papers or other supporting information as may be reasonably requested by
the Company in order to verify the calculation of the Bonus Amount for the
preceding quarter. Such Bonus Payment Schedule shall be prepared in
accordance with GAAP, consistent with the preparation of Frontline’s
accounts, and shall be certified by the Chief Financial Officer of the
Charterer and, if requested by the Company, by the Charterer’s independent
accountants.
|
|
(c)
|
It
is agreed and understood between the Parties that a Bonus Amount
pertaining to a quarter can be positive or
negative.
|
5.
|
The
wording of Clause 4.3 (a) of the Charter Agreement shall be substituted
with the following wording:
|
6.
|
The
Parties agree that the VLCC Bonus Amount and the Suezmax Bonus Amount
pertaining to the 1
st
quarter of 2007, when calculated in January 2008, shall be included in the
aggregate Bonus Amount for 2007 and paid
accordingly.
|
7.
|
Except
as expressly amended by this Amendment, the Charter Agreement shall be and
remain in full force and effect.
|
8.
|
This
Agreement shall be governed by and construed in accordance with the laws
of England.
|
For
and on behalf of
SHIP
FINANCE INTERNATIONAL LIMITED
|
For
and on behalf of
FRONTLINE
LIMITED
|
|
_______________________________________
Lars
Solbakken
As
per special authority
|
________________________________
Bjørn
Sjaastad
As
per special authority
|
|
For
and on behalf of
FRONTLINE
SHIPPING LIMITED
|
For
and on behalf of
THE
OWNERS LISTED IN SCHEDULE 1
|
|
______________________________________
Bjørn
Sjaastad
As
per special authority
|
________________________________
Lars
Solbakken
Director
|
Vessel
Owner
|
Vessel
Name
|
Ariake
Transport Corporation
|
“Ariake”
|
Aspinall
Pte. Ltd.
|
“Front
Viewer”
|
Blizana
Pte. Ltd.
|
“Front
Rider”
|
Bolzano
Pte. Ltd.
|
“Mindanao”
|
Bonfield
Shipping Ltd.
|
“Front
Driver”
|
Edinburgh
Navigation S.A.
|
“Edinburgh”
|
Fox
Maritime Pte. Ltd.
|
“Front
Sabang”
|
Front
Ardenne Inc.
|
“Front
Ardenne”
|
Front
Brabant Inc.
|
“Front
Brabant”
|
Front
Dua Pte. Ltd.
|
“Front
Duchess”
|
Front
Empat Pte. Ltd.
|
“Front
Highness”
|
Front
Enam Pte. Ltd.
|
“Front
Lord”
|
Front
Falcon Inc.
|
“Front
Falcon”
|
Front
Glory Shipping Inc.
|
“Front
Glory”
|
Front
Lapan Pte. Ltd.
|
“Front
Climber”
|
Front
Lima Pte. Ltd.
|
“Front
Lady”
|
Front
Opalia Inc.
|
“Opalia”
|
Front
Pride Shipping Inc.
|
“Front
Pride”
|
Front
Saga Inc.
|
“Front
Page”
|
Front
Scilla Inc.
|
“Front
Scilla”
|
Front
Sembilan Pte. Ltd.
|
“Front
Leader”
|
Front
Serenade Inc.
|
“Front
Serenade”
|
Front
Splendour Shipping Inc.
|
“Front
Splendour”
|
Front
Stratus Inc.
|
“Front
Stratus”
|
Front
Tiga Pte. Ltd.
|
“Front
Duke”
|
Golden
Estuary Corporation
|
“Front
Comanche”
|
Golden
Fjord Corporation
|
“Ocana”
|
Golden
Seaway Corporation
|
“Front
Vanguard”
|
Golden
Sound Corporation
|
“Front
Vista”
|
Golden
Tide Corporation
|
“Front
Circassia”
|
Hitachi
Hull 4983 Corporation
|
“Otina”
|
Katong
Investments Ltd.
|
“Front
Breaker”
|
Langkawi
Shipping Ltd.
|
“Front
Birch”
|
Rettie
Pte. Ltd.
|
“Front
Striver”
|
Sea
Ace Corporation
|
“Front
Ace”
|
Sibu
Shipping Ltd.
|
“Front
Maple”
|
Transcorp
Pte. Ltd.
|
“Front
Guider”
|
(1)
|
SHIP FINANCE INTERNATIONAL
LIMITED (the
“
Company
”);
|
(2)
|
THE VESSEL OWNING SUBSIDIARIES
OF THE COMPANY
named in Schedule 1 hereto (the “
Owners
”);
|
(3)
|
FRONTLINE LTD.
(“
Frontline
”);
|
(4)
|
FRONTLINE SHIPPING II LTD.
(the “
Charterer
”)
|
1.
|
Terms
defined in the Charter Agreement shall have the same meaning as set out
therein when used in the following.
|
2.
|
The
term “
Agreement
”
shall, when used
in the Charter Agreement, hereafter mean the Charter Agreement as amended
by this Amendment.
|
3.
|
Clause
3.1 shall be amended by deleting the
words:
|
|
“...
(provided, however, that in no event shall such Bonus Payment be less than
$0), ...”.
|
4.
|
Clause
3.2 of the Charter Agreement shall be substituted with the following
wording:
|
|
“3.2
|
Preparation and Delivery of
Bonus Payment Schedules
|
|
(a)
|
The
period upon which each Bonus Amount shall be determined shall be three
calendar months and shall coincide with the calendar quarters of each
calendar year.
|
|
(b)
|
No
later than on the last Business Day in the calendar month following the
end of each calendar quarter, the Charterer shall prepare or cause to be
prepared, and shall deliver to the Company, a Bonus Payment Schedule with
respect to the preceding quarter. Each Bonus Payment Schedule shall set
forth, in each case with respect to the preceding quarter, the TCE
revenues of each Vessel and the Charterer’s calculation of the Bonus
Amount on a year to date basis less any agreed Bonus Amount(s) for the
preceding quarters in the relevant calendar year. The Charterer shall, at
the same time, provide to the Company such supporting work papers or other
supporting information as may be reasonably requested by the Company in
order to verify the calculation of the Bonus Amount for the preceding
quarter. Such Bonus Payment Schedule shall be prepared in accordance with
GAAP, consistent with the preparation of Frontline’s accounts, and shall
be certified by the chief financial officer of the Charterer and, if
requested by the Company, by the Charterer’s independent
accountants.
|
|
(c)
|
It
is agreed and understood between the Parties that a Bonus Payment
pertaining to a quarter can be positive or
negative.
|
5.
|
The
wording of Clause 3.3 (a) of the Charter Agreement shall be substituted
with the
|
|
following
wording:
|
6.
|
The
Parties agree that the Bonus Amount pertaining to the 1
st
quarter of 2007, when calculated in January 2008, shall be included
in the aggregate Bonus Amount for 2007 and paid
accordingly.
|
7.
|
Except
as expressly amended by this Amendment, the Charter Agreement shall be and
remain in full force and effect.
|
8.
|
This
Agreement shall be governed by and construed in accordance with the laws
of England.
|
For
and on behalf of
SHIP
FINANCE INTERNATIONAL LIMITED
|
For
and on behalf of
FRONTLINE
LIMITED
|
|
_______________________________________
Lars
Solbakken
As
per special authority
|
________________________________
Bjørn
Sjaastad
As
per special authority
|
|
For
and on behalf of
FRONTLINE
SHIPPING LIMITED
|
For
and on behalf of
THE
OWNERS LISTED IN SCHEDULE 1
|
|
______________________________________
Bjørn
Sjaastad
As
per special authority
|
________________________________
Lars
Solbakken
Director
|
Vessel
Owner
|
Vessel
Name
|
Ultimate
Shipping Ltd.
Millcroft
Maritime SA
Golden
Narrow Corporation
Hudson
Bay Marine Company Limited
Newbond
Shipping Company Limited
|
“Front
Century”
“Front
Champion”
“Golden
Victory”
“Front
Force”
“Front
Energy”
|
Name
|
Country of
Incorporation
|
Ownership
and
Voting Percentage
|
Frontline
Shipping Limited
|
Bermuda
|
100%
|
Frontline
Shipping II Limited
|
Bermuda
|
100%
|
Key
Chartering Inc
|
Liberia
|
100%
|
Frontline
Management (Bermuda) Ltd
|
Bermuda
|
100%
|
ICB
Shipping (Bermuda) Limited
|
Bermuda
|
100%
|
Frontline
Tankers Limited
|
Bermuda
|
100%
|
Frontline
Corporate Services Ltd
|
United
Kingdom
|
100%
|
Independent
Tankers Corporation Limited
|
Bermuda
|
82.5%
|
Independent
Tankers Corporation
|
Cayman
Islands
|
100%
|
Buckingham
Shipping Plc
|
Isle
of Man
|
100%
|
Caernarfon
Shipping Plc
|
Isle
of Man
|
100%
|
CalPetro
Tankers (IOM) Ltd
|
Isle
of Man
|
100%
|
CalPetro
Tankers (Bahamas I) Ltd
|
Bahamas
|
100%
|
CalPetro
Tankers (Bahamas II) Ltd
|
Bahamas
|
100%
|
CalPetro
Tankers (Bahamas III) Ltd
|
Bahamas
|
100%
|
Golden State
Petro (IOM 1-A) Plc
|
Isle
of Man
|
100%
|
Golden
State Petro (IOM 1-B) Plc
|
Isle
of Man
|
100%
|
Holyrood
Shipping Plc
|
Isle
of Man
|
100%
|
Sandringham
Shipping Plc
|
Isle
of Man
|
100%
|
Front
Eagle Corporation
|
Liberia
|
100%
|
Golden
Channel Corporation
|
Liberia
|
100%
|
Kea
Navigation Ltd
|
Liberia
|
100%
|
Otina
Inc.
|
Liberia
|
100%
|
Optimal
Shipping SA
|
Liberia
|
100%
|
Pablo
Navigation SA
|
Liberia
|
100%
|
Ryan
Shipping Corporation
|
Liberia
|
100%
|
Saffron
Rose Shipping Limited
|
Liberia
|
100%
|
Tidebrook
Maritime Corporation
|
Liberia
|
100%
|
Bandama
Investment Ltd
|
Liberia
|
100%
|
Frontline
Management AS
|
Norway
|
100%
|
/s/
Bjorn Sjaastad
|
||
Bjorn
Sjaastad
|
||
Principal
Executive Officer
|
/s/
Inger M. Klemp
|
||
Inger
M. Klemp
|
||
Principal
Financial Officer
|
/s/
Bjorn Sjaastad
|
||
Bjorn
Sjaastad
|
||
Principal
Executive Officer
|
/s/
Inger M. Klemp
|
||
Inger
M. Klemp
|
||
Principal
Financial Officer
|