As filed with the U.S. Securities and Exchange Commission on March 10, 2010.
Registration No. 333________________
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
AMENDMENT NO. 1 TO
FORM F-1
 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________________
 
SCORPIO TANKERS INC.
(Exact name of Registrant as specified in its charter)
 
Republic of The Marshall Islands
(State or other jurisdiction of
incorporation or organization)
4412
(Primary Standard Industrial
Classification Code Number)
N/A
(I.R.S. Employer
Identification No.)
9, Boulevard Charles III
Monaco 98000
+377-9798-5716
 
(Address and telephone number of
Registrant’s principal executive offices)
 
Seward & Kissel LLP
Attention: Lawrence Rutkowski, Esq.
One Battery Park Plaza
New York, New York 10004
(212) 574-1206
(Name, address and telephone
number of agent for service)
 
Copies to:
Lawrence Rutkowski, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
(212) 574-1206 (telephone number)
(212) 480-8421 (facsimile number)
 
Richard D. Truesdell, Jr., Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
212-450-4000 (telephone number)
212-701-5800 (facsimile number)
 
 
 
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
__________________________________________
 
If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.   ¨
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o
__________________________________________
 
CALCULATION OF REGISTRATION FEE
 
Title of Each Class of
Securities to be Registered
Amount to
be Registered (1)
Proposed Maximum
Offering Price
Per Security (1)
Proposed Maximum
Aggregate
Offering Price (1)(2)
Amount of
Registration Fee
Common Shares, $1.00 par value per share
                  
$            
$150,000,000
$10,695
 
 
 
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
 
 
(2)
Includes common shares that may be sold pursuant to the underwriters’ over-allotment option.
 
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 
 
 

 
PROSPECTUS (Subject to Completion)
 
 
Issued            , 2010
 
The information in this prospectus is not complete and may be changed.  We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
 
Shares
 
SCORPIO TANKERS INC.
 
 
COMMON STOCK
 
____________________________
 
Scorpio Tankers Inc. is offering                  shares of its common stock.  This is our initial public offering and no public market exists for our shares.  We anticipate that the initial public offering price will be between $        and $         per share.
____________________________
 
We anticipate listing the common stock on the New York Stock Exchange under the symbol “STNG”.
 
____________________________
 
Investing in the common stock involves risks.  See “Risk Factors” beginning on page 12.
 
____________________________
 
PRICE $                  A  SHARE
____________________________
 
 
   
Price to Public
   
Underwriting Discounts and Commissions
   
Proceeds to Company
 
Per Share
  $       $       $    
Total
  $       $       $    
 
 
We have granted the underwriters the right to purchase an additional           shares of common stock to cover over-allotments.
 
 
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
 
The underwriters expect to deliver the shares of common stock to purchasers on                  , 2010.
 
____________________________
 
     MORGAN STANLEY                                                      DAHLMAN ROSE & COMPANY
 
                  , 2010
 

 
 
 

You should rely only on information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to give any information or to make any representations other than those contained in this prospectus. Do not rely upon any information or representations made outside of this prospectus. This prospectus is not an offer to sell, and it is not soliciting an offer to buy, (1) any securities other than our common shares or (2) our common shares in any circumstances in which such an offer or solicitation is unlawful. The information contained in this prospectus may change after the date of this prospectus. Do not assume after the date of this prospectus that the information contained in this prospectus is still correct.
 
TABLE OF CONTENTS
 

PROSPECTUS SUMMARY
1
RISK FACTORS
13
FORWARD-LOOKING STATEMENTS
32
USE OF PROCEEDS
34
OUR DIVIDEND POLICY
35
CAPITALIZATION
36
DILUTION
37
SELECTED FINANCIAL AND OTHER DATA
38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
41
THE INTERNATIONAL TANKER INDUSTRY
56
BUSINESS
75
MANAGEMENT
90
PRINCIPAL SHAREHOLDERS
95
RELATED PARTY TRANSACTIONS
96
SHARES ELIGIBLE FOR FUTURE SALE
100
DESCRIPTION OF OUR CAPITAL STOCK
102
MARSHALL ISLANDS COMPANY CONSIDERATIONS
107
TAX CONSIDERATIONS
110
UNDERWRITING
118
LEGAL MATTERS
123
EXPERTS
123
WHERE YOU CAN FIND ADDITIONAL INFORMATION
123
TANKER INDUSTRY DATA
123
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
124
ENFORCEABILITY OF CIVIL LIABILITIES
124
GLOSSARY OF SHIPPING TERMS
125
INDEX TO FINANCIAL STATEMENTS
F-1
 
Through and including              , (the 25th date after the date of this prospectus) federal securities law may require all dealers that effect transactions in these securities, whether or not participating in this offering, to deliver a prospectus.  This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
 
 
(i)
 
 
 

 
 
PROSPECTUS SUMMARY
 
This section summarizes some of the key information that appears later in this prospectus.  It may not contain all of the information that may be important to you.  You should review carefully the risk factors and the more detailed information and financial statements included in this prospectus before making an investment decision.  Unless the context otherwise requires, when used in this prospectus, the terms “Scorpio Tankers,” the “Company,” “we,” “our” and “us” refer to Scorpio Tankers Inc. and the three vessel-owning subsidiaries owned by Scorpio Tankers.  The financial information included in this prospectus represents our financial information and the operations of our three vessel-owning subsidiaries.  Unless otherwise indicated, all references to currency amounts in this prospectus are in U.S. dollars.  See the “Glossary of shipping terms” included in this prospectus for definitions of certain terms used in this prospectus that are commonly used in the shipping industry.
 
Our Company
 
We are Scorpio Tankers Inc., a company incorporated in the Republic of The Marshall Islands.  We provide seaborne transportation of crude oil and other petroleum products worldwide.  We believe that recent downward pressure on tanker values will present attractive opportunities for ship operators that have the necessary capital resources.  Following the completion of this offering, we expect to have approximately $       million of available cash from the net proceeds of this offering, based on an assumed offering price of $       per share, which represents the midpoint of the price range set forth on the cover of this prospectus.  We have also obtained a commitment letter for a new $150,000,000 senior secured credit facility that we expect to enter into after the closing of this offering.  The proceeds of this offering together with the amounts we expect to be available under our new credit facility will be available to fund additional acquisitions.  We intend to use these funds to purchase additional modern tankers ranging in size from approximately 35,000 deadweight tons, or dwt, to approximately 200,000 dwt, and that generally are not more than five years old.  We may purchase secondhand vessels that meet our specifications or newbuilding vessels, either directly from shipyards or from the current owners with shipyard contracts.  The timing of these acquisitions will depend on our ability to identify suitable vessels on attractive purchase terms.
 
Our founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, is a member of the Lolli-Ghetti family, which has been involved in shipping since the early 1950s through the Italian company Navigazione Alta Italia, or NAI.  The Lolli-Ghetti family owns and controls the Scorpio Group, which includes Simon Financial Limited, or Simon, which prior to this offering was our ultimate parent company and controlling party; Scorpio Ship Management S.A.M., or SSM; and Scorpio Commercial Management S.A.M., or SCM; which provide us and third parties with technical and commercial management services, respectively; Liberty Holding Company Ltd., or Liberty, which provides us with administrative services; and other affiliated entities.  Our President, Mr. Robert Bugbee, also has a senior management position at Scorpio Group, and was formerly the President and Chief Operating Officer of OMI Corporation, or OMI, which was a publicly traded shipping company.
 
Our Initial Fleet
 
We own and operate three Panamax tanker vessels, which we refer to as our initial fleet, that have an average age of 6.5 years as of January 1, 2010.  Two of these tankers, Noemi and Senatore , are employed under fixed-rate long-term time charters that, as of January 1, 2010, have remaining durations of approximately 24 and nine months, respectively, and have aggregate remaining contracted revenue of approximately $25.6 million.   Venice is currently participating in the Scorpio Panamax Tanker Pool (see description in “Business – Management of our Fleet – Scorpio Panamax Tanker Pool).  We acquired the vessels in our initial fleet from entities affiliated with our founder, Chairman and Chief Executive Officer and other members of the Lolli-Ghetti family in exchange for all of our common shares.
 
Our chartering policy is to employ our vessels on a variety of time charters and in the spot charter market. Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel’s size class.  We believe this policy allows us to obtain attractive charterhire rates for our vessels while managing our exposure to short-term fluctuations in the tanker chartering market.
 
 
1
 
The following table summarizes key information about Venice , Noemi and Senatore and their associated charters or pool agreement as of the date of this prospectus:
 
 
Vessel
Vessel
Year
Charterer
Time
Charter Rate
Vessel Delivery
Re-Delivery from
Charterer
Name
Type
Built
Name
($ per day )(1)
Date
 
Venice (2)
Panamax
2001
Scorpio Panamax Tanker Pool
Pool earnings
April 2004
N/A
Noemi (3)
Panamax
2004
King Dustin
24,500
Jan 2007
Jan 2012
Senatore (4)
Panamax
2004
BP Shipping
26,000
Oct 2007
Oct 2010
 
(1)
This table shows gross charter rates and does not reflect commissions payable by us to third party and affiliated chartering brokers ranging from 2.5% to 3.75%, which includes the 1.25% payable to SCM .
 
(2)
Venice participates in the Scorpio Panamax Tanker Pool operated by our commercial manager, within which it is currently employed on spot charter with Marathon Oil. The vessel is allocated a pro-rata share of aggregated earnings of all the tankers in the pool, weighted by attributes such as size, fuel consumption, class notation and other capabilities. Based on the 18 current vessels in the Scorpio Panamax Tanker Pool, the Venice ’s specifications currently result in the vessel earning approximately 6.16% of all net pool revenues, assuming all pool participant vessels are operating for the full year, which is a greater pro-rata share of the pool earnings than most of the other vessels in the pool. This percentage may not be reflective of future earnings in the pool. The vessel can be withdrawn from the pool upon 90 days notice or after the vessel is free from any commitment, whichever is later. Please see “Business – Our Managers – Scorpio Panamax Tanker Pool” for additional information comparing the Venice with other ships in the Scorpio Panamax Tanker Pool.
 
(3)
Noemi ’s redelivery from King Dustin is in January 2012, plus or minus 30 days at the charterer’s option.  King Dustin currently time charters-out Noemi to ST Shipping, a wholly owned subsidiary of Glencore S.A. of Zug, Switzerland. Please see “Related Party Transactions – King Dustin” for additional information.
 
(4)
Senatore ’s redelivery from BP Shipping is in October 2010, plus or minus 30 days at the charterer’s option.
 
Please see “Business—Our Initial Fleet” and “Our Customers” for additional information about the vessels in our fleet and our chartering arrangements.
 
Our Managers
 
As our commercial and technical managers, SCM and SSM provide us with commercial and technical services pursuant to their respective commercial and technical management agreements with us. Commercial services primarily involve vessel chartering. Technical services primarily include vessel operation, maintenance and crewing. We pay our managers fees for these services and reimburse our managers for the reasonable direct or indirect expenses they incur in providing us with these services.
 
We believe that Scorpio Group has established a reputation in the shipping industry as a leading independent provider of seaborne petroleum transportation services to major oil companies, national oil companies and oil traders in the Aframax, Panamax and Handymax tanker markets. Scorpio Group, headquartered in Monaco, was formed in 1971 and currently provides full technical management services through SSM to its own fleet as well as third party vessels and provides commercial management services through SCM to its own fleet as well as third party vessels. Scorpio Group is wholly-owned and controlled by the Lolli-Ghetti family, which has been involved in the shipping business since the early 1950s through NAI. Emanuele A. Lauro has served in a senior management position at Scorpio Group since 2004.
 
Scorpio Group has experienced significant growth since 2003 when it controlled a fleet of four vessels.  Today Scorpio Group, through SSM and SCM, manages a fleet of approximately 63 vessels, including the three vessels in our initial fleet, two drybulk vessels owned directly by affiliates within Scorpio Group, and approximately 58 vessels owned by third parties operated through one of three tanker pools that Scorpio Group operates. In addition to two minority investments in logistics businesses, Scorpio Group also maintains offices in London, Mumbai, New York, Singapore, and Jakarta with approximately 80 shore-based employees globally.
 
 
2
 
SSM, which was formed in New York in 1971 and has been based in Monaco since 1984, is a technical ship management company and currently manages a fleet of 13 vessels, including the three vessels in our initial fleet, two drybulk vessels owned by affiliates of SSM and eight vessels owned by third parties.  SCM, also based in Monaco, was formed in 2004 as a commercial management company and currently manages a fleet of 57 vessels, including the three vessels in our initial fleet, two drybulk vessels owned by affiliates of SCM and 52 vessels owned by third parties, of which all but one operate in the Scorpio Panamax Tanker Pool, the Scorpio Handymax Tanker Pool or the Scorpio Aframax Tanker Pool.  Our vessel Venice participates in the Scorpio Panamax Tanker Pool.  The Scorpio Panamax Tanker Pool employs vessels on time charters, contracts of affreightment, and in the spot market.  Although the Scorpio Panamax Tanker Pool has secured approximately 30% of the estimated operating days in 2010 for the vessels in the pool on time charter contracts, the remaining 70% of the estimated operating days in 2010 for the vessels in the pool will be from the spot market.  Given the historical volatility of spot market returns, we cannot provide a reasonable estimate of the Venice 's future daily charter rate for the duration of her participation in the pool.
 
Liberty Holding Company Ltd., which we refer to as our Administrator, is a Scorpio Group affiliate which provides us with administrative services pursuant to an administrative services agreement.  The administrative services provided under the agreement primarily include accounting, legal compliance, financial, information technology services, and the provision of administrative staff and office space. Our Administrator will also arrange vessel sales and purchases for us.  We expect that our Administrator will sub-contract many of its responsibilities to other entities within the Scorpio Group.
 
Our Competitive Strengths
 
We believe that we possess a number of competitive strengths in our industry, including:
 
·  
Experienced management team with an established track record in the public market. Since 2003, under the leadership of Mr. Emanuele Lauro, our Chairman and Chief Executive Officer, Scorpio Group has grown from an owner of three vessels in 2003 to an owner of five vessels, and an operator or manager of approximately 60 vessels in 2008. Over the course of the last six years, Mr. Lauro has founded and developed the Scorpio Aframax Tanker Pool, Scorpio Panamax Tanker Pool and the Scorpio Handymax Tanker Pool which employ 10, 20 and 27 vessels, respectively, from Scorpio Group and third party participants. Our President, Mr. Robert Bugbee, who also holds a senior management position within the Scorpio Group, has more than 25 years of experience in the shipping industry and was formerly the President and Chief Operating Officer of OMI Corporation, or OMI, a NYSE-listed tanker company that was sold in 2007. As a key member of management, Mr. Bugbee assisted in growing OMI from 26 vessels in 1998 with an average age of approximately 15.1 years to 45 vessels with an average age of approximately 4.3 years when it was sold in 2007. Mr. Bugbee is supported by Brian Lee, our Chief Financial Officer, and Cameron Mackey, our Chief Operating Officer, both of whom also served as members of the management team responsible for the growth of OMI. Our General Counsel, Luca Forgione, has experience in the shipping and commodity trade industry, where he acquired knowledge of the relevant regulatory and compliance regimes. Our Vice President of Vessel Operations, Sergio Gianfranchi, serves as the Pool Fleet Manager of SCM and has assisted in the launch and operation of the Scorpio Group’s Panamax, Handymax and Aframax pools. Messrs. Lee, Mackey, Forgione and Gianfranchi serve in similar positions in Scorpio Group and have 11, 17, six and 47 years of experience, respectively, in the shipping industry, and, with Mr. Bugbee, collectively have over 106 years of combined shipping experience and have developed tanker industry relationships with charterers, lenders, shipbuilders, insurers and other industry participants.
 
·  
Significant available liquidity to pursue acquisition and expansion opportunities.   Immediately following this offering and the repayment of our 2005 Credit Facility identified below under “Our Credit Facilities”, we expect to have $       million of liquidity, which includes $       million of cash, based on an assumed offering price of $       per share, which represents the midpoint of the price range set forth on the cover of this prospectus.  We have also obtained a commitment letter for a new $150,000,000 senior secured credit facility that we expect to enter into after the closing of this offering.  We intend to use our available cash and borrowing capacity to pursue vessel acquisitions consistent with our business strategy. We believe that our strong balance sheet, financing capacity and future access to capital will allow us to make opportunistic acquisitions at attractive prices.
 
 
3
 
·  
Attractive Initial Fleet. Our initial fleet of three high-quality, modern Panamax tankers has an average age of 6.5 years compared to a current global Panamax tanker industry average of 9.4 years, both as of January 1, 2010.  We believe that owning a young, well-maintained fleet reduces operating costs, improves the quality of service we deliver and provides us with a competitive advantage in securing favorable time and spot charters with high-quality counterparties.  In addition, our initial fleet provides us with strong and visible cash flows through their existing charters.
 
Our Business Strategy
 
Our primary objectives are to profitably grow our business and emerge as a major operator of medium-sized tanker vessels. The key elements of our strategy are:
 
·  
Expanding our fleet through opportunistic acquisitions of high-quality vessels at attractive prices. We intend to acquire modern, high-quality tankers through timely and selective acquisitions. We currently view Suezmax, Aframax, Panamax and Handymax vessel classes as providing attractive return characteristics, and our management team has significant experience with these classes of vessels from their tenure at OMI and at Scorpio Group. A key element to our acquisition strategy will be to purchase high-quality vessels at attractive prices. When evaluating acquisitions, we will consider and analyze our expectation of fundamental developments in the particular industry sector, the level of liquidity in the resale and charter market, the cash flow earned by the vessel in relation to its value, its condition and technical specifications, expected remaining useful life, the credit quality of the charterer and duration and terms of charter contracts for vessels acquired with charters attached, as well as the overall diversification of our fleet and customers. In the current market, asset values in the tanker industry are significantly below the last five and 10 year trailing averages, and as a result of a weak spot market we believe these values may continue to deteriorate over the near term. We believe that these circumstances combined with our management’s knowledge of the shipping industry present an opportunity for us to grow our fleet at favorable prices.
 
·  
Optimizing vessel revenues through a mix of time charter contracts and spot market exposure. We intend to employ a chartering strategy to capture upside opportunities in the spot market while using fixed-rate time charters to reduce downside risks.  As it relates to spot market exposure, through our participation in tanker pools managed by the Scorpio Group, we believe that the revenues of our vessels will exceed the rate we would otherwise achieve by operating these vessels outside of the pools.
 
·  
Focusing on tankers based on our experience and expertise in the segment.   We believe that energy companies seek transportation partners that are financially stable and have a reputation for reliability, safety, and high environmental and quality standards.  We intend to leverage the operational expertise and customer base of Scorpio Group and of the former members of OMI’s management team in order to further expand these relationships with consistent delivery of superior customer service.
 
·  
Minimizing operating and corporate expenses. Under the management agreements with SSM and SCM that we have entered into for Venice , Noemi and Senatore , and that we plan to enter into for any vessels that we acquire in the future, these two managers will coordinate and oversee the technical and commercial management, respectively, of our fleet. We believe that SSM and SCM will be able to do so at a cost to us that would be lower than what could be achieved by performing the functions in-house.
 
Tanker Industry Trends
 
Based on information provided by Fearnley Fonds ASA, or Fearnley, we believe that the following industry trends create growth opportunities for us as owners and operators of shipping vessels:
 
·  
the global economic downturn and limited available vessel financing, among other things, have resulted in historically low tanker values;
 
 
4
 
·  
recovery of global economic activity and industrial production, which continues to rely heavily upon oil and refined petroleum product consumption;
 
·  
increased aggregate seaborne transportation distances due in large part to growing economies in China and India, and limitations on refinery capacity in developed countries coupled with lower cost refinery capacity becoming increasingly located in developing countries further from end consumers;
 
·  
International Maritime Organization (IMO) regulations mandating a phase-out by 2010, or 2015 by exemption of a tanker’s flag state under certain conditions, of conventional, single-hull tankers, which make up 15% of the world’s tanker supply as of end February 2010; and
 
·  
charterers’ concerns about environmental and safety standards have shifted their preference toward modern tankers operated by reputable ship operators.
 
Corporate Structure
 
We were incorporated under the laws of the Republic of The Marshall Islands on July 1, 2009.  We currently maintain our principal executive offices at 9, Boulevard Charles III, Monaco 98000.  Our telephone at this address is +377-9798-5716.  We also maintain an office in the United States at 150 East 58th Street, New York, NY 10155. The telephone number at our New York office is 212-542-1616.  We own each of the vessels in our initial fleet, and expect to own each additional vessel that we acquire in the future, through separate wholly-owned subsidiaries incorporated in the Republic of The Marshall Islands.
 
Our Dividend Policy
 
Initially, we do not intend to pay dividends to the holders of our common shares.  We will continue to assess our dividend policy and our board of directors may determine it is in the best interest of the Company to pay dividends in the future.  Upon the completion of our acquisition of additional vessels funded in whole or in part with a portion of the net proceeds of this offering, and depending on prevailing charter market conditions, our operating results and capital requirements and other relevant factors, our board of directors will re-evaluate our dividend policy.  Please see “Our Dividend Policy” for additional information regarding our dividend policy.
 
Our Credit Facilities
 
Two of our wholly-owned subsidiaries, Senatore Shipping Company Limited and Noemi Shipping Company Limited, are joint and several borrowers under a loan agreement dated May 17, 2005, or the 2005 Credit Facility, entered into with The Royal Bank of Scotland plc, as Lender, which is secured by, among other things, a first preferred mortgage over each of Senatore and Noemi .  The initial amount of the 2005 Credit Facility was $56.0 million, and its interest rate is 0.70% above LIBOR.  As of February 17, 2010, the outstanding balance is $38.9 million, which we intend to fully repay using the proceeds of this offering.
 
On March 9, 2010, we entered into a commitment letter with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA and Fortis Bank Nederland for a senior secured term loan facility of up to $150 million. The commitment letter has customary conditions including each Lender’s satisfaction with the completion of business, legal, environmental, tax, financial, accounting and customer call due diligence.  Under the terms of the commitment letter, the credit facility would have a maturity date of five years after the date on which definitive documentation for the facility is executed, and borrowings under the facility would bear interest at LIBOR plus an applicable margin of 3.00% per annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and 3.50% per annum when our debt to capitalization ratio is greater than 50%. We intend to use the credit facility to finance, in part, the cost of future vessel acquisitions, which vessels will be the collateral for the credit facility. For further details of the credit facility as set forth in the commitment letter, please read “Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
 
5
Risk Factors
 
We face a number of risks associated with our business and industry and must overcome a variety of challenges to utilize our strengths and implement our business strategy.  These risks include, among others, the highly cyclical tanker industry; partial dependence on spot charters; charter values; changing economic, political and governmental conditions affecting our industry and business; applicable laws and regulations; risks related to our recently-formed company and its subsidiaries; our fleet’s limited performance record, operating history and financial information; full performance by counterparties; acquisitions and dispositions; operating expenses; our capital expenditures; taxes; customer relationships; liquidity; financing; and management.
 
This is not a comprehensive list of risks to which we are subject, and you should carefully consider all the information in this prospectus prior to investing in our common shares. In particular, we urge you to carefully consider the risk factors set forth in the section of this prospectus entitled “Risk Factors” beginning on page 12.
 
Our Relationship with Scorpio Group and its Affiliates
 
We were incorporated in the Republic of The Marshall Islands on July 1, 2009 by Simon Financial Limited, or Simon, which is owned by members of the Lolli-Ghetti family and manages their shipping interests.  On October 1, 2009, (i) Simon transferred to Scorpio Tankers Inc. three operating subsidiary companies, which own the vessels in our initial fleet; (ii) Liberty Holding Company Ltd., or Liberty, became a wholly-owned subsidiary and operating vehicle of Simon; (iii) Scorpio Owning Holding Ltd. became a wholly-owned subsidiary of Liberty; and (iv) Scorpio Tankers Inc. became a wholly-owned subsidiary of Scorpio Owning Holding Ltd.  Liberty’s operations include the Scorpio Group's drybulk carriers, logistics operations in Southeast Asia, owning an offshore floating terminal, vessel pools, chartered-in vessels, and interests in joint ventures and investments.  Prior to the completion of this offering, Scorpio Group and its affiliates, which contributed the three Panamax tankers in our initial fleet, currently hold 100% of the voting and economic interests in our common stock.  Upon completion of this offering, Scorpio Group and its affiliates are expected to beneficially own    % of our outstanding shares of our common stock, which will represent    % of the voting and economic interest in our common stock (   % and    %, respectively, if the underwriters' over-allotment option is exercised in full).  After contributing the three Panamax tankers, Scorpio Group does not have an ownership interest in any tanker vessels other than our three tanker vessels, and will preclude itself from directly owning product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt.
 
Our board of directors will consist of five individuals, three of whom will be independent directors.  The three independent directors will form the board's Audit Committee and, pursuant to the Audit Committee charter, will be required to review all potential conflicts of interest between us and Scorpio Group.  The two non-independent directors, Emanuele Lauro and Robert Bugbee, serve in senior management positions within the Scorpio Group and have an ownership stake in Liberty, which is our Administrator, and which is also an affiliate of the Scorpio Group.
 
The Scorpio Group is owned and controlled by members of the Lolli-Ghetti family, of which Mr. Lauro is a member. Mr. Lauro is considered to be the acting Chief Executive Officer of Scorpio Group, and Mr. Bugbee is considered to be the acting President of Scorpio Group.  Mr. Lauro is employed by Scorpio Ship Management and Mr. Bugbee is employed by Scorpio USA, and both entities are affiliates within the Scorpio Group.  Prior to the completion of this offering, we estimate the ownership interest for Mr. Lauro and Mr. Bugbee in Liberty, an affiliate of the Scorpio Group, will be a restricted stock ownership interest of 2% and 1.75%, respectively, but they will have no other ownership interests in the Scorpio Group. Prior to the completion of this offering, Liberty, in turn, has a 100% ownership interest in us through its subsidiary, but this ownership interest will be significantly reduced at the completion of this offering. We are not affiliated with any other entities in the shipping industry other than those that are members of the Scorpio Group.
 
SCM and SSM, which as noted previously are affiliates of Scorpio Group, provide commercial and technical management services to us pursuant to our commercial and technical management agreements.  Under the commercial management agreement, we pay SCM a fee of $250 per vessel per day plus a 1.25% commission per charter fixture.  For vessels operating in a Scorpio Group pool, we pay SCM’s agent fee of $250 per vessel per day plus 1.25% commission per charter fixture.  We pay SSM $548 per vessel per day to provide technical management services for each of our vessels.  We have entered into separate commercial and technical management agreements in December 2009 for each of our vessels and expect to enter into similar agreements with respect to each vessel that we acquire going forward.  The commercial and technical management agreements with SCM and SSM are each for a period of three years, and may be terminated upon two year's notice.
 
6
We will reimburse Liberty, which as noted previously is our Administrator and also an affiliate of the Scorpio Group, for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We will also pay our Administrator a fee for arranging vessel purchases and sales for us equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. We believe this 1% fee on purchases and sales is customary in the tanker industry.
 
Pursuant to our administrative services agreement, Liberty, on behalf of itself and other members of the Scorpio Group, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt. We have no other agreements with SCM, SSM, our Administrator, or any other party providing for a resolution of potential conflicts in our favor.
 
For further details about our relationship and agreements with the Scorpio Group and its affiliates, please read “Related Party Transactions” and “Management - Board of Directors and Committees.”
 

 
7
 

The Offering
 
Common shares presently outstanding
 
             common shares
 
Common shares to be offered
 
             common shares
 
Over-allotment
 
We have granted the underwriters a 30 day option to purchase, from time to time, up to an additional        of our common shares to cover over-allotments.
 
Common shares to be outstanding immediately after this offering (1)
   
- assuming no exercise of over-allotment:
 
             common shares
 
- assuming full exercise of over-allotment:
 
             common shares
 
     
Use of proceeds
 
We estimate that we will receive net proceeds of approximately $        million , based on an assumed offering price of $        per share, which represents the midpoint of the price range set forth on the cover of this prospectus, from the issuance of new common shares in this offering, after deducting underwriting discounts and commissions and estimated expenses payable by us. After repayment of the 2005 Credit Facility, we intend to use the remaining net proceeds, after assessing any working capital and other general corporate expense needs, to pursue vessel acquisitions consistent with our strategy. See the section of this prospectus entitled “Use of Proceeds.”
 
Listing
 
We have applied to have our common shares approved for listing on the New York Stock Exchange under the symbol “STNG”.
 
(1) Excludes an aggregate of           restricted common shares that we expect to issue to our executive officers pursuant to the 2010 Equity Incentive Plan following the closing of this offering.
 
 
 

 
8
 

Summary Financial Data
 
The following table sets forth our summary combined financial data and other operating data. The summary financial data in the table as of and for the years ended December 31, 2008 and 2007 are derived from our audited combined financial statements, included elsewhere in this prospectus, which have been prepared in accordance with IFRS as issued by the IASB. The summary financial data as of September 30, 2009 and for the nine months ended September 30, 2009 and 2008 are derived from our unaudited condensed combined financial statements, which have been prepared in accordance with International Accounting Standards No. 34, Interim Financial Reporting (“IAS 34”) and are included elsewhere in this prospectus. The data set forth below should be read in conjunction with the audited combined financial statements, the unaudited condensed combined financial statements, related notes and other financial information included elsewhere in this prospectus.
 
Our historical combined financial statements have been prepared on a carve-out basis from the financial statements of our parent company, Liberty Holding Company Ltd.  These carve-out financial statements include all assets, liabilities and results of operations of the three vessel-owning subsidiaries owned by Scorpio Tankers Inc., formerly subsidiaries of Liberty Holding Company Ltd., for the periods presented.  For the periods presented, certain of the expenses incurred by these subsidiaries for commercial, technical and administrative management services were under management agreements with other Scorpio Group entities, which are parties related to us. Since agreements with related parties are by definition not at arms length, the expenses incurred under these agreements may have been different than the historical costs incurred if the subsidiaries had operated as unaffiliated entities during prior periods.  Our estimates of any differences between historical expenses and the expenses that may have been incurred had the subsidiaries been stand-alone entities have been disclosed in the notes to the historical combined financial statements included elsewhere in this prospectus.
 
   
For the Year Ended
   
For the Nine Months Ended
 
   
December 31,
   
September 30,
 
   
2008
   
2007
   
2009
   
2008
 
                         
Combined Income Statement Data
                       
Vessel revenue
  $ 39,274,196     $ 30,317,138     $ 21,752,091     $ 28,914,996  
                                 
Operating expenses
                               
Charterhire
    (6,722,334 )     -       (3,163,485 )     (4,104,081 )
Vessel operating costs
    (8,623,318 )     (7,600,509 )     (6,397,434 )     (6,535,389 )
Depreciation
    (6,984,444 )     (6,482,484 )     (5,155,675 )     (4,883,150 )
General and administrative expenses
    (600,361 )     (590,772 )     (304,404 )     (491,699 )
Impairment (1)
    -       -       (4,511,877 )     -  
                                 
Total operating expenses
    (22,930,457 )     (14,673,765 )     (19,532,875 )     (16,014,319 )
                                 
Operating income
    16,343,739       15,643,373       2,219,216       12,900,677  
                                 
Other income and expense, net
                               
Interest expense - bank loan
    (1,710,907 )     (1,953,344 )     (590,372 )     (1,353,682 )
(Loss)/gain on derivative financial instruments
    (2,463,648 )     (1,769,166 )     87,548       (455,446 )
Interest income
    35,492       142,233       4,754       28,672  
Other income, net
    (18,752 )     (9,304 )     (10,925 )     (27,614 )
Total other expenses, net
  $ (4,157,815 )   $ (3,589,581 )   $ (508,995 )   $ (1,808,070 )
                                 
Net income
  $ 12,185,924     $ 12,053,792     $ 1,710,221     $ 11,092,607  
                                 
Earnings per common share (2)
                               
Weighted average shares outstanding
    1,500       1,500       1,500       1,500  
Basic earnings per share
  $ 8,124     $ 8,036     $ 1,140     $ 7,395  
Diluted earnings per share
  $ 8,124     $ 8,036     $ 1,140     $ 7,395  

 
9
 
 
 
   
As of December 31,
   
As of September 30,
 
   
2008
   
2007
   
2009
 
Balance Sheet Data
                 
Cash and cash equivalents
  $ 3,607,635     $ 1,153,743     $ 480,748  
Vessels and drydock
  $ 109,260,102     $ 116,244,546     $ 101,212,117  
Total assets
  $ 117,111,827     $ 122,555,022     $ 104,020,190  
Bank loan
  $ 43,400,000     $ 47,000,000     $ 40,700,000  
Shareholder payable (3)
  $ 22,028,323     $ 19,433,097     $ 19,267,336  
Related party payable (3)
  $ 27,406,408     $ 27,406,408     $ 27,406,408  
Shareholder's equity
  $ 20,299,166     $ 26,897,242     $ 13,348,387  
                         

   
For the Year
   
For the Nine Months
 
   
Ended December 31,
   
Ended September 30,
 
   
2008
   
2007
   
2009
   
2008
 
Cash Flow Data
                       
Net cash provided by/(used by):
                       
Operating activities
  $ 24,837,892     $ 5,830,733     $ 8,234,113     $ 12,812,237  
Financing activities
  $ (22,384,000 )   $ (10,693,500 )   $ (11,361,000 )   $ (12,127,000 )
__________________
(1)
As of September 30, 2009, we recorded an impairment of two vessels for $4.5 million.  See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
 
(2)
Basic earnings per share is calculated by dividing the net income attributable to equity holders of the parent by the weighted average number of common shares outstanding assuming that the transfer of the vessel owning subsidiaries was effective during the period. Diluted earnings per share are calculated by adjusting the net income attributable to equity holders of the parent and the weighted average number of common shares used for calculating basic earnings per share for the effects of all potentially dilutive shares. Such potentially dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share.  For the periods presented, we had no potentially dilutive common shares.
 
  (3)
On November 18, 2009, the Shareholder payable and the Related party payable balances as of that date, were converted to equity as a capital contribution.  See Note 8 in the combined financial statements as of and for the year ended December 31, 2008 and the pro forma balance sheet and Note 4 in the unaudited condensed combined financial statements as of and for the nine months ended September 30, 2009.
 
Other Operating Data
     
   
For the Year
   
For the Nine Months
 
   
Ended December 31,
   
Ended September 30,
 
   
2008
   
2007
   
2009
   
2008
 
Average Daily Results
                       
Time charter equivalent per day (4)
  $ 29,889     $ 27,687     $ 24,089     $ 30,566  
Vessel operating costs per day (5)
  $ 7,854     $ 6,941     $ 7,811     $ 7,980  
TCE per revenue day - pool revenue
  $ 36,049     $ 29,848     $ 23,065     $ 38,243  
TCE per revenue day - time charters
  $ 24,992     $ 24,382     $ 24,881     $ 24,990  
Expenditures for drydock
  $ -     $ -     $ 1,619,567     $ -  
Fleet Data (6)
                               
Average number of owned vessels
    3.00       3.00       3.00       3.00  
Average number of time chartered-in vessels
    0.59       -       0.44       0.45  

 
10
 

(4)
Freight rates are commonly measured in the shipping industry in terms of Time charter equivalent per day (or TCE per day), which represent subtracting voyage expenses, including bunkers and port charges, from vessel revenue and dividing the net amount (time charter equivalent revenues) by the number of days revenue days in the period. Revenue days are the number of days the vessel is owned less the number of days the vessel is offhire for drydock.  Since our vessels are on time charter and operate in the pool, we do not have voyage expenses.
 
  (5)
Vessel operating costs per day represent vessel operating costs divided by the number of days the vessel is owned in the period.
 
(6)
For a definition of items listed under "Fleet Data," please see the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations."  We do not currently have any time chartered-in vessels and do not intend to time charter-in any vessels into our fleet in the future.
 

 
11
 


 
RISK FACTORS
 
Some of the following risks relate principally to the industry in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our common stock. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results or cash available for dividends or the trading price of our common stock.
 
RISKS RELATED TO OUR INDUSTRY
 
If the tanker industry, which historically has been cyclical, continues to be depressed in the future, our earnings and available cash flow may be adversely affected.
 
The tanker industry is both cyclical and volatile in terms of charter rates and profitability. The recent global financial crisis may adversely affect our ability to recharter our vessels or to sell them on the expiration or termination of their charters and the rates payable in respect of our one vessel currently operating in a tanker pool, or any renewal or replacement charters that we enter into may not be sufficient to allow us to operate our vessels profitably. Fluctuations in charter rates and tanker values result from changes in the supply and demand for tanker capacity and changes in the supply and demand for oil and oil products. The factors affecting the supply and demand for tankers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.
 
The factors that influence demand for tanker capacity include:
 
·  
demand for oil and oil products;
 
·  
supply of oil and oil products;
 
·  
regional availability of refining capacity;
 
·  
global and regional economic and political conditions;
 
·  
the distance oil and oil products are to be moved by sea;
 
·  
changes in seaborne and other transportation patterns;
 
·  
environmental and other legal and regulatory developments;
 
·  
currency exchange rates;
 
·  
weather;
 
·  
competition from alternative sources of energy; and
 
·  
international sanctions, embargoes, import and export restrictions, nationalizations and wars.
 
The factors that influence the supply of tanker capacity include:
 
·  
the number of newbuilding deliveries;
 
·  
the scrapping rate of older vessels;
 
·  
conversion of tankers to other uses;
 
·  
the price of steel;
 
·  
the number of vessels that are out of service; and
 
·  
environmental concerns and regulations.
 
 
 
12
Historically, the tanker markets have been volatile as a result of the many conditions and factors that can affect the price, supply and demand for tanker capacity. The recent global economic crisis may further reduce demand for transportation of oil over longer distances and supply of tankers to carry that oil, which may materially affect our revenues, profitability and cash flows. Two of our three vessels operate on long-term time charters, while the remaining vessel operates in the Scorpio Panamax Tanker Pool, which is spot-market oriented.  Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.  If time charter or spot charter rates decline, we may be unable to achieve a level of charterhire sufficient for us to operate our vessels profitably.
 
We are partially dependent on spot charters and any decrease in spot charter rates in the future may adversely affect our earnings.
 
We currently operate a fleet of three vessels. Of those, one is employed in a spot market-oriented tanker pool whose commission is based on the spot market charter rates of the pool, partially exposing us to fluctuations in spot market charter rates.
 
We may employ additional vessels that we may acquire in the future in the spot charter market. Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class. Although spot chartering is common in the tanker industry, the spot charter market may fluctuate significantly based upon tanker and oil supply and demand. The successful operation of our vessels in the competitive spot charter market, including within Scorpio Group pools, depends upon, among other things, obtaining profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. The spot market is very volatile, and, in the past, there have been periods when spot rates have declined below the operating cost of vessels. If future spot charter rates decline, then we may be unable to operate our vessels trading in the spot market profitably, meet our obligations, including payments on indebtedness, or to pay dividends in the future. Furthermore, as charter rates for spot charters are fixed for a single voyage which may last up to several weeks, during periods in which spot charter rates are rising, we will generally experience delays in realizing the benefits from such increases.
 
Our ability to renew the charters on our vessels on the expiration or termination of our current charters, or on vessels that we may acquire in the future, the charter rates payable under any replacement charters and vessel values will depend upon, among other things, economic conditions in the sectors in which our vessels operate at that time, changes in the supply and demand for vessel capacity and changes in the supply and demand for the seaborne transportation of energy resources.
 
Declines in charter rates and other market deterioration could cause us to incur impairment charges.
 
We evaluate the carrying amounts of our vessels to determine if events have occurred that would require an impairment of their carrying amounts. The recoverable amount of vessels is reviewed based on events and changes in circumstances that would indicate that the carrying amount of the assets might not be recovered. The review for potential impairment indicators and projection of future cash flows related to the vessels is complex and requires us to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these items have been historically volatile.
 
We evaluate the recoverable amount as the higher of fair value less costs to sell and value in use. If the recoverable amount is less than the carrying amount of the vessel, the vessel is deemed impaired. The carrying values of our vessels may not represent their fair market value at any point in time because the new market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. In the nine months ended September 30, 2009, charter rates in the oil and petroleum products charter market declined significantly and Panamax vessel values also declined, both as a result of a slowdown in the availability of global credit and the significant deterioration in charter rates. Due to these indicators of potential impairment, in September 2009, we evaluated the recoverable amount of our vessels, and we recognized a total impairment loss of $4.5 million for two of our vessels. Any additional impairment charges incurred as a result of further declines in charter rates could negatively affect our business, financial condition, operating results or the trading price of our common shares.
 
13
An over-supply of tanker capacity may lead to reductions in charter rates, vessel values, and profitability.
 
The market supply of tankers is affected by a number of factors such as demand for energy resources, oil, and petroleum products, as well as strong overall economic growth in parts of the world economy including Asia. If the capacity of new ships delivered exceeds the capacity of tankers being scrapped and lost, tanker capacity will increase. In addition, the newbuilding order book which extends to 2014 equaled approximately 28% of the existing world tanker fleet and the order book may increase further in proportion to the existing fleet. If the supply of tanker capacity increases and if the demand for tanker capacity does not increase correspondingly, charter rates could materially decline. A reduction in charter rates and the value of our vessels may have a material adverse effect on our results of operations and available cash.
 
Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business.
 
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea and in the Gulf of Aden off the coast of Somalia. Throughout 2008 and 2009, the frequency of piracy incidents against commercial shipping vessels has increased significantly, particularly in the Gulf of Aden off the coast of Somalia. For example, in November 2008, the M/V Sirius Star , a tanker vessel not affiliated with us, was captured by pirates in the Indian Ocean while carrying crude oil estimated to be worth $100 million. If these pirate attacks result in regions in which our vessels are deployed being characterized as "war risk" zones by insurers, as the Gulf of Aden temporarily was in May 2008, premiums payable for insurance coverage could increase significantly and such coverage may be more difficult to obtain. In addition, crew costs, including costs in connection with employing onboard security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, any of these events may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
 
If the contraction of the global credit markets and the resulting volatility in the financial markets continues or worsens that could have a material adverse impact on our results of operations, financial condition and cash flows, and could cause the market price of our common shares to decline.
 
Recently, a number of major financial institutions have experienced serious financial difficulties and, in some cases, have entered into bankruptcy proceedings or are in regulatory enforcement actions. These difficulties have resulted, in part, from declining markets for assets held by such institutions, particularly the reduction in the value of their mortgage and asset-backed securities portfolios. These difficulties have been compounded by a general decline in the willingness by banks and other financial institutions to extend credit, particularly in the shipping industry due to the historically low asset values of ships. As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it has been negatively affected by this decline.  If we are unable to obtain additional credit or draw down upon borrowing capacity, it may negatively impact our ability to fund current and future obligations.
 
If further emergency governmental measures are implemented in response to the economic downturn, that could have a material adverse impact on our results of operations, financial condition and cash flows.
 
Over the last year, global financial markets have experienced extraordinary disruption and volatility following adverse changes in the global credit markets. The credit markets in the United States have experienced significant contraction, deleveraging and reduced liquidity, and governments around the world have taken significant measures in response to such events, including the enactment of the Emergency Economic Stabilization Act of 2008 in the United States, and may implement other significant responses in the future. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The U.S. Securities and Exchange Commission, or the SEC, other regulators, self-regulatory organizations and exchanges have enacted temporary emergency regulations and may take other extraordinary actions in the event of market emergencies and may effect permanent changes in law or interpretations of existing laws. We cannot predict what, if any, such measures would be, but changes to securities, tax, environmental, or the laws of regulations, could have a material adverse effect on our results of operations, financial condition or cash flows.
 
 
14
 
Changes in fuel, or bunkers, prices may adversely affect profits.
 
Fuel, or bunkers, is a significant, if not the largest, expense in our shipping operations for our vessels employed on the spot market and can have a significant impact on pool earnings. With respect to our vessels employed on time charter, the charterer is generally responsible for the cost of fuel, however such cost may affect the charter rates we are able to negotiate for our vessels.  Changes in the price of fuel may adversely affect our profitability.  The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns.  Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.
 
We are subject to complex laws and regulations, including environmental laws and regulations, that can adversely affect our business, results of operations, cash flows and financial condition, and our available cash.
 
Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These requirements include, but are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, the International Maritime Organization, or IMO, International Convention on Civil Liability for Oil Pollution Damage of 1969 (as from time to time amended and generally referred to as CLC), the IMO International Convention for the Prevention of Pollution from Ships of 1973 (as from time to time amended and generally referred to as MARPOL), the IMO International Convention for the Safety of Life at Sea of 1974 (as from time to time amended and generally referred to as SOLAS), the IMO International Convention on Load Lines of 1966 (as from time to time amended) and the U.S. Marine Transportation Security Act of 2002. Compliance with such laws and regulations, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions including greenhouse gases, the management of ballast waters, maintenance and inspection, elimination of tin-based paint, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition and our available cash. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil in U.S. waters, including the 200-nautical mile exclusive economic zone around the United States. An oil spill could also result in significant liability, including fines, penalties, criminal liability and remediation costs for natural resource damages under other international and U.S. federal, state and local laws, as well as third-party damages, and could harm our reputation with current or potential charterers of our tankers. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations, cash flows and financial condition and available cash.
 
If we fail to comply with international safety regulations, we may be subject to increased liability, which may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
 
The operation of our vessels is affected by the requirements set forth in the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code.  The ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies.  If we fail to comply with the ISM Code, we may be subject to increased liability or our existing insurance coverage may be invalidated or decreased for our affected vessels. Such failure may also result in a denial of access to, or detention in, certain ports.  Each of our vessels, as well our technical manager, SSM, is currently ISM Code-certified.
 

 
15
 


 
The market values of our vessels may decrease, which could cause us to breach covenants in our credit facilities and adversely affect our operating results.
 
The market values of tankers have generally experienced high volatility. The market prices for tankers declined significantly from historically high levels reached in early 2008 and remain at relatively low levels. You should expect the market value of our vessels to fluctuate depending on general economic and market conditions affecting the shipping industry and prevailing charterhire rates, competition from other shipping companies and other modes of transportation, types, sizes and ages of vessels, applicable governmental regulations and the cost of newbuildings. If the market value of our fleet declines, we may not be able to obtain other financing or incur debt on terms that are acceptable to us. Further, while we believe that the current aggregate market value of our vessels will be in excess of loan to value amounts required under our two credit facilities, including our new credit facility, which we expect to enter into after the closing of this offering, which requires that the fair market value of the vessels pledged as collateral never be less than 150% of the aggregate principal amount outstanding under the new credit facility.  A decrease in these values could cause us to breach certain covenants that are contained in our credit facilities and in future financing agreements that we may enter into from time to time. If the recoverable amounts of our vessels further decline and we do breach such covenants and we are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on vessels in our fleet.  If we sell any vessel at any time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel's carrying amount on our financial statements, resulting in a loss and a reduction in earnings.  Please see the section of this prospectus entitled "The International Tanker Industry" for information concerning historical prices of tankers.
 
If our vessels suffer damage due to the inherent operational risks of the tanker industry, we may experience unexpected drydocking costs and delays or total loss of our vessels, which may adversely affect our business and financial condition.
 
Our vessels and their cargoes will be at risk of being damaged or lost because of events such as marine disasters, bad weather, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to persons, loss of revenues or property, environmental damage, higher insurance rates, damage to our customer relationships, market disruptions, delay or rerouting.  In addition, the operation of tankers has unique operational risks associated with the transportation of oil. An oil spill may cause significant environmental damage, and the associated costs could exceed the insurance coverage available to us.  Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil transported in tankers.
 
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and may be substantial. We may have to pay drydocking costs that our insurance does not cover in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business and financial condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to travel to a drydocking facility that is not conveniently located to our vessels' positions. The loss of earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities may adversely affect our business and financial condition.  Further, the total loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.  If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent any such damage, costs, or loss which could negatively impact our business, financial condition, results of operations and available cash.
 
We operate our vessels worldwide and as a result, our vessels are exposed to international risks which may reduce revenue or increase expenses.
 
The international shipping industry is an inherently risky business involving global operations. Our vessels are at a risk of damage or loss because of events such as mechanical failure, collision, human error, war, terrorism, piracy, cargo loss and bad weather. In addition, changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These sorts of events could interfere with shipping routes and result in market disruptions which may reduce our revenue or increase our expenses.
 
 
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International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points.  Inspection procedures can result in the seizure of the cargo and/or our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us. It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
 
Political instability, terrorist or other attacks, war or international hostilities can affect the tanker industry, which may adversely affect our business.
 
We conduct most of our operations outside of the United States, and our business, results of operations, cash flows, financial condition and available cash may be adversely affected by the effects of political instability, terrorist or other attacks, war or international hostilities. Terrorist attacks such as the attacks on the United States on September 11, 2001, the bombings in Spain on March 11, 2004 and in London on July 7, 2005 and the continuing response of the international community to these attacks, as well as the threat of future terrorist attacks, continue to contribute to world economic instability and uncertainty in global financial markets. As a result of the above, insurers have increased premiums and reduced or restricted coverage for loses caused by terrorist acts generally. Future terrorist attacks could result in increased volatility of the financial markets and negatively impact the U.S. and global economy. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all.
 
In the past, political instability has also resulted in attacks on vessels, such as the attack on the M/T Limburg in October 2002, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our business, financial condition, results of operations and available cash.
 
If our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. government, that could adversely affect our reputation and the market for our common stock.
 
From time to time, vessels in our fleet may call on ports located in countries subject to sanctions and embargoes imposed by the U.S. government and countries identified by the U.S. government as state sponsors of terrorism. Although these sanctions and embargoes do not prevent our vessels from making calls to ports in these countries, potential investors could view such port calls negatively, which could adversely affect our reputation and the market for our common stock. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in or to divest our common shares may adversely affect the price at which our common shares trade. Investor perception of the value of our common stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
 
Maritime claimants could arrest our vessels, which would have a negative effect on our cash flows.
 
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our business or require us to pay large sums of money to have the arrest lifted, which would have a negative effect on our cash flows.
 
 
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In addition, in some jurisdictions, such as South Africa, under the "sister ship" theory of liability, a claimant may arrest both the vessel which is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one vessel in our fleet for claims relating to another of our ships.
 
Governments could requisition our vessels during a period of war or emergency, which may negatively impact our business, financial condition, results of operations and available cash.
 
A government could requisition for title or seize our vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels may negatively impact our business, financial condition, results of operations and available cash.
 
Technological innovation could reduce our charterhire income and the value of our vessels.
 
The charterhire rates and the value and operational life of a vessel are determined by a number of factors including the vessel's efficiency, operational flexibility and physical life.  Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly.  Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits.  The length of a vessel's physical life is related to its original design and construction, its maintenance and the impact of the stress of operations.  If new tankers are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charterhire payments we receive for our vessels once their initial charters expire and the resale value of our vessels could significantly decrease.  As a result, our available cash could be adversely affected.
 
If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
 
We, indirectly through SSM, employ masters, officers and crews to man our vessels. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out as we expect and could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
 
RISKS RELATED TO OUR BUSINESS
 
We have a limited history of operations on which investors may assess our performance.
 
We were formed on July 1, 2009, and our three vessel-owning subsidiaries were transferred to us on October 1, 2009. We have a limited performance record and operating history, and, therefore, limited historical financial information, upon which you can evaluate our operating performance, ability to implement and achieve our business strategy or ability to pay dividends in the future. We cannot assure you that we will be successful in implementing our business strategy. Our initial fleet is composed of only three vessels with a relatively short operating history. As a newly formed company, we will face certain operational challenges not faced by companies with a longer operating history.
 
We have no history operating as a publicly traded entity and will incur increased costs as a result of being a publicly traded corporation.
 
We have never operated as a public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We anticipate that our incremental general and administrative expenses as a publicly traded corporation for U.S. federal income tax purposes will be approximately $      million annually, and will include costs associated with annual reports to shareholders, tax returns, investor relations, registrar and transfer agent's fees, incremental director and officer liability insurance costs and director compensation.
 
 
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If we do not identify suitable tankers for acquisition or successfully integrate any acquired tankers, we may not be able to grow or to effectively manage our growth.
 
One of our principal strategies is to continue to grow by expanding our operations and adding to our fleet. Our future growth will depend upon a number of factors, some of which may not be within our control. These factors include our ability to:
 
·  
identify suitable tankers and/or shipping companies for acquisitions at attractive prices;
 
·  
identify businesses engaged in managing, operating or owning tankers for acquisitions or joint ventures;
 
·  
integrate any acquired tankers or businesses successfully with our existing operations;
 
·  
hire, train and retain qualified personnel and crew to manage and operate our growing business and fleet;
 
·  
identify additional new markets;
 
·  
improve our operating, financial and accounting systems and controls; and
 
·  
obtain required financing for our existing and new operations.
 
Our failure to effectively identify, purchase, develop and integrate any tankers or businesses could adversely affect our business, financial condition and results of operations. The number of employees that perform services for us and our current operating and financial systems may not be adequate as we implement our plan to expand the size of our fleet, and we may not be able to effectively hire more employees or adequately improve those systems.  Finally, acquisitions may require additional equity issuances or debt issuances (with amortization payments), both of which could lower available cash. If we are unable to execute the points noted above, our financial condition may be adversely affected.
 
Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures.  The expansion of our fleet may impose significant additional responsibilities on our management and staff, and the management and staff of our commercial and technical managers, and may necessitate that we, and they, increase the number of personnel.  We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with such growth plans.
 
Delays in deliveries of additional vessels, our decision to cancel an order for purchase of a vessel or our inability to otherwise complete the acquisitions of additional vessels for our fleet, could harm our operating results.
 
We expect to purchase additional vessels from time to time.  The delivery of these vessels could be delayed, not completed or cancelled, which would delay or eliminate our expected receipt of revenues from the employment of these vessels.  The seller could fail to deliver these vessels to us as agreed, or we could cancel a purchase contract because the seller has not met its obligations.
 
If the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to a charter for which we become responsible for substantial liquidated damages to the customer as a result of the delay or cancellation, our business, financial condition and results of operations could be adversely affected.
 
We will not be able to take advantage of favorable opportunities in the current spot market with respect to vessels employed on medium- to long-term time charters.
 
As of January 1, 2010, we employed two tankers under fixed rate long-term time charter agreements with an average remaining duration of approximately 17 months.  Vessels committed to medium- and long-term charters may not be available for spot charters during periods of increasing charterhire rates, when spot charters might be more profitable.  Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.
 
 
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If we purchase and operate secondhand vessels, we will be exposed to increased operating costs which could adversely affect our earnings and, as our fleet ages, the risks associated with older vessels could adversely affect our ability to obtain profitable charters.
 
Our current business strategy includes additional growth through the acquisition of new and secondhand vessels. While we typically inspect secondhand vessels prior to purchase, this does not provide us with the same knowledge about their condition that we would have had if these vessels had been built for and operated exclusively by us. Generally, we do not receive the benefit of warranties from the builders for the secondhand vessels that we acquire.
 
In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.
 
Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
 
An increase in operating costs would decrease earnings and available cash.
 
Under the charter agreements for two of our vessels, the charterer is responsible for voyage costs and we are responsible for the vessel operating costs.  Under the tanker pool agreement for one of our vessels, the pool is responsible for the voyage expenses and we are responsible for vessel costs. Our vessel operating costs include the costs of crew, fuel (for spot chartered vessels), provisions, deck and engine stores, insurance and maintenance and repairs, which depend on a variety of factors, many of which are beyond our control. Some of these costs, primarily relating to insurance and enhanced security measures implemented after September 11, 2001, have been increasing. If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydocking repairs are unpredictable and can be substantial. Increases in any of these expenses would decrease earnings and available cash.
 
If we are unable to operate our vessels profitably, we may be unsuccessful in competing in the highly competitive international tanker market, which would negatively affect our financial condition and our ability to expand our business.
 
The operation of tanker vessels and transportation of crude and petroleum products is extremely competitive, in an industry that is capital intensive and highly fragmented. The recent global financial crisis may reduce the demand for transportation of oil and oil products which could lead to increased competition. Competition arises primarily from other tanker owners, including major oil companies as well as independent tanker companies, some of whom have substantially greater resources than we do. Competition for the transportation of oil and oil products can be intense and depends on price, location, size, age, condition and the acceptability of the tanker and its operators to the charterers. We will have to compete with other tanker owners, including major oil companies as well as independent tanker companies.
 
Our market share may decrease in the future. We may not be able to compete profitably as we expand our business into new geographic regions or provide new services. New markets may require different skills, knowledge or strategies than we use in our current markets, and the competitors in those new markets may have greater financial strength and capital resources than we do.
 
If we do not set aside funds and are unable to borrow or raise funds for vessel replacement, at the end of a vessel's useful life our revenue will decline, which would adversely affect our business, results of operations, financial condition, and available cash.
 
If we do not set aside funds and are unable to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our fleet upon the expiration of their remaining useful lives, which we expect to occur from 2021 to 2024, depending on the vessel. Our cash flows and income are dependent on the revenues earned by the chartering of our vessels. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations, financial condition, and available cash per share would be adversely affected. Any funds set aside for vessel replacement will reduce available cash.
 
 
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Our ability to obtain additional debt financing may be dependent on the performance of our then existing charters and the creditworthiness of our charterers.
 
The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital.  Our inability to obtain additional financing at all or at a higher than anticipated cost may materially affect our results of operation and our ability to implement our business strategy.
 
United States tax authorities could treat us as a "passive foreign investment company," which could have adverse United States federal income tax consequences to United States holders.
 
A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income."  For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business.  For purposes of these tests, income derived from the performance of services does not constitute "passive income."  United States shareholders of a PFIC are subject to a disadvantageous United States federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
 
In the opinion of Seward & Kissel LLP, our United States counsel, we should not be a PFIC with respect to any taxable year.  Based upon our operations as described herein, we do not believe that our income from our time charters should be treated as passive income for purposes of determining whether we are a PFIC.  Accordingly, our income from our time chartering activities should not constitute "passive income," and the assets that we own and operate in connection with the production of that income should not constitute passive assets.
 
There is substantial legal authority supporting this position consisting of case law and United States Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes.  However, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes.  Accordingly, no assurance can be given that the IRS or a court of law will accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC.  Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations change.
 
If the IRS were to find that we are or have been a PFIC for any taxable year, our United States shareholders would face adverse United States federal income tax consequences.  Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders, as discussed below under "Tax Considerations – United States Federal Income Taxation – United States Federal Income Taxation of United States Holders"), such shareholders would be liable to pay United States federal income tax at the then prevailing income tax rates on ordinary income plus interest, in respect of excess distributions and upon any gain from the disposition of their common shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of the common shares.  See "Tax Considerations – United States Federal Income Taxation – United States Federal Income Taxation of United States Holders" for a more comprehensive discussion of the United States federal income tax consequences to United States shareholders if we are treated as a PFIC.
 
We may have to pay tax on United States source shipping income, which would reduce our earnings.
 
Under the United States Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a corporation that owns or charters vessels, as we and our subsidiaries do, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the applicable Treasury Regulations promulgated thereunder.
 
 
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After this offering, we and our subsidiaries intend to take the position that we qualify for this statutory tax exemption for United States federal income tax return reporting purposes.  However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption after the offering and thereby become subject to United States federal income tax on our United States source shipping income.  For example, we would no longer qualify for exemption under Code section 883 for a particular taxable year if shareholders with a five percent or greater interest in our common shares owned, in the aggregate, 50% or more of our outstanding common shares for more than half the days during the taxable year.  Due to the factual nature of the issues involved, there can be no assurances on the tax-exempt status of us or any of our subsidiaries.
 
If we or our subsidiaries were not entitled to exemption under Section 883 for any taxable year, they could be subject for such year to an effective 2% United States federal income tax on the shipping income they derive during the year which is attributable to the transport or cargoes to or from the United States.  The imposition of this taxation would have a negative effect on our business and would decrease our earnings available for distribution to our shareholders.
 
Any dividends paid by us may not qualify for preferential rates of United States federal income taxation in the hands of United States non-corporate holders.

We expect that any dividends paid on our common shares to a United States shareholder who is an individual, trust or estate will generally be treated as "qualified dividend income" that is taxable at preferential United States federal income tax rates (through 2010).  Our dividends will be so treated provided that (1) our common shares are readily tradable on an established securities market in the United States (such as the New York Stock Exchange, on which we anticipate our common stock will be traded); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we have not been, are not and do not anticipate being in the future); (3) the recipient of the dividend has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend; and (4) the recipient of the dividend is not under an obligation to make related payments with respect to positions in substantially similar or related property.

There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a United States non-corporate shareholder.  For example, under current law, the preferential rate for qualified dividend income is scheduled to expire on December 31, 2010.  If the preferential rate for such dividends is not extended, then any dividends paid by us after December 31, 2010 will be treated as ordinary income.  In addition, legislation has been previously introduced in the United States Congress which, if enacted in its present form, would preclude our dividends from qualifying for such preferential rates prospectively from the date of enactment.  Finally, as discussed in more detail in "Tax Considerations—United States Federal Income Tax Considerations—Passive Foreign Investment Company Status and Significant Tax Consequences," we could be treated as a passive foreign investment company for the taxable year in which we pay the dividend or the immediately preceding taxable year.

We will be required to make substantial capital expenditures to expand the number of vessels in our fleet and to maintain all our vessels, which will be dependent on additional financing.
 
Our business strategy is based in part upon the expansion of our fleet through the purchase of additional vessels. We currently estimate, based upon current and anticipated market conditions, our capital expenditures on the acquisition of vessels in 2010 will be between $150 million and $250 million, which would be funded by the net proceeds of this offering after repayment of our 2005 Credit Facility and amounts we expect to be available under our new credit facility, assuming that we successfully complete this offering, enter into the new credit facility of up to $150 million and do not issue any additional equity during 2010.  Please see "Use of Proceeds" for additional information.  We currently have no commitments or obligations to purchase any additional vessels and do not plan to purchase any additional vessels prior to the offering.  If we are unable to fulfill our obligations under the memorandum of agreement for future vessel acquisitions, the sellers of such vessels may be permitted to terminate such contracts and we may forfeit all or a portion of the down payments we already made under such contracts.
 
 
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In addition, we will incur significant maintenance costs for our existing and any newly-acquired vessels. A newbuilding vessel must be drydocked within five years of its delivery from a shipyard, and vessels are typically drydocked every 30 months thereafter, not including any unexpected repairs.  We estimate the cost to drydock a vessel to be between $400,000 and $700,000, depending on the size and condition of the vessel and the location of drydocking.
 
We have a commitment letter and expect to enter into a new credit facility, after the closing of this offering, with Nordea Bank Finland Plc (acting through its New York Branch), DnB NOR ASA, and Fortis Bank Nederland that will provide us initially with up to $150 million.  We expect that the combination of the net proceeds of this offering, after repayment of our 2005 Credit Facility, and after assessing any working capital and other general corporate expense needs, along with our borrowings under this new credit facility, should be sufficient to finance the purchase of additional vessels and expected drydocking costs in the near term.  To fund any shortfall for purchasing other vessels or drydocking costs from time to time, we may be required to incur additional borrowings or raise capital through the sale of debt or additional equity securities.  Use of cash from operations will reduce available cash.  Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control.
 
RISKS RELATED TO OUR RELATIONSHIP WITH SCORPIO GROUP AND ITS AFFILIATES
 
We are dependent on our managers and there may be conflicts of interest between us and our managers that may not be resolved in our favor.
 
Our success depends to a significant extent upon the abilities and efforts of our technical manager, SSM, our commercial manager, SCM, and our management team. Our success will depend upon our and our managers' ability to hire and retain key members of our management team. The loss of any of these individuals could adversely affect our business prospects and financial condition.
 
Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain "key man" life insurance on any of our officers.
 
Our technical and commercial managers are affiliates of Scorpio Group, which is owned and controlled by the Lolli-Ghetti family, of which our founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, is a member.  Conflicts of interest may arise between us, on the one hand, and our commercial and technical managers, on the other hand. As a result of these conflicts, our commercial and technical managers, who have limited contractual duties, may favor their own or their owner's interests over our interests. These conflicts may have unfavorable results for us.
 
Our founder, Chairman and Chief Executive Officer has affiliations with our commercial and technical managers which may create conflicts of interest.
 
Emanuele Lauro, our founder, Chairman and Chief Executive Officer, is a member of the Lolli-Ghetti family which owns and controls our commercial and technical managers, and he will own      % of our common shares after the consummation of this offering.  These responsibilities and relationships could create conflicts of interest between us, on the one hand, and our commercial and technical managers, on the other hand.  These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus vessels managed by other companies affiliated with our commercial or technical managers. Our commercial and technical managers may give preferential treatment to vessels that are time chartered in by related parties because our founder, Chairman and Chief Executive Officer and members of his family may receive greater economic benefits.  In particular, our commercial and technical managers currently provide commercial and technical management services to approximately 54 and 10 vessels respectively, other than the vessels in our fleet, that are owned or operated by entities affiliated with Mr. Lauro, and such entities may acquire additional vessels that will compete with our vessels in the future.  Such conflicts may have an adverse effect on our results of operations.
 
 
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Our Chief Executive Officer and President will not devote all of their time to our business, which may hinder our ability to operate successfully.
 
Messrs. Lauro and Bugbee, our Chief Executive Officer and President, respectively, will be involved in other business activities with members of the Scorpio Group, which may result in their spending less time than is appropriate or necessary to manage our business successfully. Based solely on the anticipated relative sizes of our initial fleet and the fleet owned by members of the Scorpio Group over the next twelve months, we estimate that Messrs. Lauro and Bugbee will spend approximately 70-85% of their monthly business time on our business activities and their remaining time on the business of members of the Scorpio Group. However, the actual allocation of time could vary significantly from time to time depending on various circumstances and needs of the businesses, such as the relative levels of strategic activities of the businesses. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
Our commercial and technical managers are each privately held companies and there is little or no publicly available information about them.
 
SCM is our commercial manager and SSM is our technical manager. SCM's and SSM's ability to render management services will depend in part on their own financial strength.  Circumstances beyond our control could impair our commercial manager's or technical manager's financial strength, and because each is a privately held company, information about the financial strength of our commercial manager and technical manager is not available.  As a result, we and an investor in our securities might have little advance warning of financial or other problems affecting our commercial manager or technical manager even though their financial or other problems could have a material adverse effect on us and our security holders.
 
We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
 
We have entered into various contracts, including charter agreements with our customers, consisting of two long-term fixed-rate charter agreements and one tanker pool agreement, and our 2005 Credit Facility, which we intend to fully repay using the proceeds of this offering. Such agreements subject us to counterparty risks. The ability of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses. For example, the combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of our charterers to make charter payments to us. In addition, in depressed market conditions, our charterers and customers may no longer need a vessel that is currently under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
The failure of our charterers to meet their obligations under our time charter agreements, on which we depend for a majority of our revenues, could cause us to suffer losses or otherwise adversely affect our business.
 
As of January 1, 2010, we employed two tankers under fixed rate long-term time charter agreements with an average remaining duration of approximately 17 months.  The ability and willingness of each of our counterparties to perform its obligations under a time charter agreement with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the tanker shipping industry and the overall financial condition of the counterparties.  Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities such oil. In addition, in depressed market conditions, there have been reports of charterers renegotiating their charters or defaulting on their obligations under charters.  Our customers may fail to pay charterhire or attempt to renegotiate charter rates. Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters may be at lower rates given currently decreased tanker charter rate levels. Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.  If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends, if any, in the future, and compliance with covenants in our credit facilities.
 
 
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Our charterers may terminate or default on their charters, which could adversely affect our results of operations and cash flow.
 
Our charters may terminate earlier than the dates indicated in this prospectus.  The terms of our charters vary as to which events or occurrences will cause a charter to terminate or give the charterer the option to terminate the charter, but these generally include a total or constructive loss of the relevant vessel, the requisition for hire of the relevant vessel, the drydocking of the relevant vessel for a certain period of time or the failure of the relevant vessel to meet specified performance criteria.  In addition, the ability of each of our charterers to perform its obligations under a charter will depend on a number of factors that are beyond our control.  These factors may include general economic conditions, the condition of the tanker industry, the charter rates received for specific types of vessels and various operating expenses.  The costs and delays associated with the default by a charterer under a charter of a vessel may be considerable and may adversely affect our business, results of operations, cash flows and financial condition and our available cash.
 
We cannot predict whether our charterers will, upon the expiration of their charters, re-charter our vessels on favorable terms or at all.  If our charterers decide not to re-charter our vessels, we may not be able to re-charter them on terms similar to our current charters or at all.  In the future, we may also employ our vessels on the spot charter market, which is subject to greater rate fluctuation than the time charter market. Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.
 
If we receive lower charter rates under replacement charters or are unable to re-charter all of our vessels, our available cash may be significantly reduced or eliminated.
 
Our insurance may not be adequate to cover our losses that may result from our operations due to the inherent operational risks of the tanker industry.
 
We carry insurance to protect us against most of the accident-related risks involved in the conduct of our business, including marine hull and machinery insurance, protection and indemnity insurance, which includes pollution risks, crew insurance and war risk insurance. However, we may not be adequately insured to cover losses from our operational risks, which could have a material adverse effect on us.  Additionally, our insurers may refuse to pay particular claims and our insurance may be voidable by the insurers if we take, or fail to take, certain action, such as failing to maintain certification of our vessels with applicable maritime regulatory organizations. Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, results of operations, cash flows and financial condition and our available cash. In addition, we may not be able to obtain adequate insurance coverage at reasonable rates in the future during adverse insurance market conditions.
 
As a result of the September 11, 2001 attacks, the U.S. response to the attacks and related concern regarding terrorism, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. Accordingly, premiums payable for terrorist coverage have increased substantially and the level of terrorist coverage has been significantly reduced.
 
Because we obtain some of our insurance through protection and indemnity associations, which result in significant expenses to us, we may be required to make additional premium payments.
 
We may be subject to increased premium payments, or calls, in amounts based on our claim records, the claim records of our managers, as well as the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. In addition, our protection and indemnity associations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
 
 
25
 
RISKS RELATED TO OUR INDEBTEDNESS
 
Servicing debt, which we may incur in the future, would limit funds available for other purposes and if we cannot service our debt, we may lose our vessels.
 
Borrowing under our credit facility and our new credit facility requires us to dedicate a part of our cash flow from operations to paying interest on our indebtedness. These payments limit funds available for working capital, capital expenditures and other purposes, including further equity or debt financing in the future. Amounts borrowed under our credit facility bear interest at variable rates. Increases in prevailing rates could increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income and cash flows would decrease. We expect our earnings and cash flow to vary from year to year due to the cyclical nature of the tanker industry. If we do not generate or reserve enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:
 
·  
seeking to raise additional capital;
 
·  
refinancing or restructuring our debt;
 
·  
selling tankers; or
 
·  
reducing or delaying capital investments.
 
However, these alternative financing plans, if necessary, may not be sufficient to allow us to meet our debt obligations. If we are unable to meet our debt obligations or if some other default occurs under our credit facility, the lender could elect to declare that debt, together with accrued interest and fees, to be immediately due and payable and proceed against the collateral vessels securing that debt.
 
Our credit facility contains and our new credit facility is expected to contain restrictive covenants which limit the amount of cash that we may use for other corporate activities, which could negatively affect our growth and cause our financial performance to suffer.
 
Our credit facility imposes and our new credit facility is expected to impose operating and financial restrictions on us. These restrictions may limit our ability, or the ability of our subsidiaries party thereto to:
 
·  
pay dividends and make capital expenditures if we do not repay amounts drawn under our credit facility or if there is another default under our credit facility;
 
·  
incur additional indebtedness, including the issuance of guarantees;
 
·  
create liens on our assets;
 
·  
change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel;
 
·  
sell our vessels;
 
·  
merge or consolidate with, or transfer all or substantially all our assets to, another person; or
 
·  
enter into a new line of business.
 
Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders' interests may be different from ours and we may not be able to obtain our lenders' permission when needed. This may limit our ability to pay dividends to you if we determine to do so in the future, finance our future operations or capital requirements, make acquisitions or pursue business opportunities.
 
 
26
 
We cannot assure you that we will enter into the new credit facility or that if we do so that we will be able to borrow all or any of the amounts committed thereunder.
 
We have entered into a commitment letter with Nordea Bank Finland Plc, New York Branch (“Nordea”), DnB NOR Bank ASA (“DnB NOR”) and Fortis Bank Nederland (“Fortis” and together with Nordea and DnB NOR, the “Lenders”) to provide us with a $150,000,000 new credit facility, which we do not expect to enter into prior to the closing of this offering.  The Lenders’ commitment to enter into the new credit facility is subject to customary conditions, including each Lender’s satisfaction with the completion of business, legal, environmental, tax, financial, accounting and customer call due diligence.  Accordingly, we cannot assure you that we will be successful in entering into the new credit facility.  In addition, even if we enter into the new credit facility, borrowings under the new credit facility will be subject to customary conditions to be specified in the definitive documentation for the new credit facility.  Accordingly, we cannot assure you that we will be able to satisfy such conditions or be able to borrow all or any of the amounts committed under the new credit facility.  If we do not enter into the new credit facility or are unable to borrow the amounts committed thereunder, our ability to execute our growth strategy will be materially adversely affected.
 
If the recent volatility in LIBOR rates continues, it will affect the interest rate under our credit facility which could affect our profitability, earnings and cash flow.
 
Amounts borrowed under our credit facility bear interest at an annual rate ranging from 3.0% to 3.5% above LIBOR.  LIBOR rates have recently been volatile, with the spread between those rates and prime lending rates widening significantly at times.  These conditions are the result of the recent disruptions in the international credit markets.  Because the interest rates borne by amounts that we may drawdown under our credit facility fluctuate with changes in the LIBOR rates, if this volatility were to continue, it would affect the amount of interest payable on amounts that we were to drawdown from our credit facility, which in turn, would have an adverse effect on our profitability, earnings and cash flow.
 
RISKS RELATED TO THIS OFFERING
 
There is no guarantee that an active and liquid public market for our common shares will develop.
 
Prior to this offering, there has not been a public market for our common shares. A liquid trading market for our common shares may not develop. The initial public offering price will be determined in negotiations between the representatives of the underwriters and us and may not be indicative of prices that will prevail in the trading market. The tanker industry has been highly unpredictable and volatile, and the market for common shares in this industry may be equally volatile.
 
The price of our common shares after this offering may be volatile.
 
The price of our common shares may fluctuate due to factors such as:
 
·  
actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry;
 
·  
mergers and strategic alliances in the crude tanker and product tanker industries;
 
·  
market conditions in the crude tanker and product tanker industries;
 
·  
changes in government regulation;
 
·  
the failure of securities analysts to publish research about us after this offering, or shortfalls in our operating results from levels forecast by securities analysts;
 
·  
announcements concerning us or our competitors; and
 
·  
the general state of the securities market.
 
The seaborne transportation industry has been highly unpredictable and volatile. The market for our common shares in this industry may be equally volatile. Consequently, you may not be able to sell the common shares at prices equal to or greater than those paid by you in this offering.
 
 
27
 
Mr. Emanuele Lauro, our founder, Chairman and Chief Executive Officer, and Mr. Robert Bugbee, our President, will beneficially own approximately       % of our total outstanding common shares upon the consummation of this offering and the Lolli-Ghetti family, of which Mr. Lauro is a member will own approximately    % upon the consummation of this offering, which may limit your ability to influence our actions.
 
Mr. Emanuele Lauro, our founder, Chairman and Chief Executive Officer, and Mr. Robert Bugbee, our President, are expected to beneficially own approximately       % of our outstanding common shares upon the consummation of this offering (      % if the underwriters exercise their over-allotment option in full).  Additionally, Mr. Lauro is a member of the Lolli-Ghetti family, which owned 100% of our common shares at December 31, 2009 and had a controlling interest.  We currently expect to issue more than 50% of our existing shares at the time of the offering and therefore we do not expect that the Lolli-Ghetti Family, of which Mr. Lauro is a member, will maintain a controlling interest in Scorpio Tankers Inc. after the consummation of the offering.   Although they will not have a controlling interest in us after the offering, the Lolli-Ghetti family, are expected to be our largest shareholder.
 
As a result of the role of Mr. Lauro as Chairman and Chief Executive Officer, and Mr. Bugbee, as President, coupled with their direct ownership interests and in the case of Mr. Lauro, his family's ownership interests, together Mr. Lauro, Mr. Bugbee and the Lolli-Ghetti family may be able to exert considerable influence over our actions through their ability to significantly influence matters requiring shareholder approval, including the determination to enter into a corporate transaction or to prevent a transaction, regardless of whether our shareholders believe that any such transaction is in their or our best interests. For example, these parties could influence us to make a merger or acquisition that increases the amount of our indebtedness or cause us to sell all of our revenue-generating assets. We cannot assure you that the interests of Mr. Emanuele Lauro and Mr. Robert Bugbee will coincide with the interests of other shareholders. As a result, the market price of our common shares could be adversely affected.
 
Additionally, these parties may invest in entities that directly or indirectly compete with us, or companies in which these parties currently invest may begin competing with us. These parties may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. As a result of these relationships, when conflicts arise between the interests of these parties and the interests of our other shareholders, our directors who were nominated by these parties may not be disinterested. These parties will be able to exert significant influence on our corporate decisions so long as they continue to own a substantial number of our common shares and/or retain management roles in our company.
 
Future sales of our common shares could cause the market price of our common shares to decline.
 
The market price for our common shares could decline as a result of sales by existing shareholders of large numbers of our common shares after this offering, or as a result of the perception that such sales may occur. Sales of our common shares by these shareholders also might make it more difficult for us to sell equity or equity-related securities in the future at a time and at the prices that we deem appropriate. Of the estimated            common shares that will be outstanding following the completion of this offering, not including up to           shares reserved for issuance pursuant to our 2010 Equity Incentive Plan that we intend to effect after the closing of this offering of which we expect to issue         restricted shares immediately following completion of the offering to our executive
Officers:
·  
     shares, constituting all of the shares offered by this prospectus, will be freely tradable unless purchased by persons deemed our "affiliates," as that term is defined in Rule 144 under the Securities Act; and
 
·  
     additional shares may be sold after the expiration of 180-day lock-up agreements (as may be extended) that will be entered into by our executive officers and directors and certain other shareholders, subject to registration under the Securities Act, compliance with the requirements of Rule 144 or the availability of an exemption from the registration requirements of the Securities Act.
 
28
 
We are incorporated in the Republic of The Marshall Islands, which does not have a well-developed body of corporate law and, as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.
 
Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of The Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of The Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction. Please see the section of this prospectus titled "Enforceability of Civil Liabilities" beginning on page 124.
 
It may be difficult to serve process on or enforce a United States judgment against us, our officers and our directors.
 
We are a Republic of The Marshall Islands corporation and several of our executive offices are located outside of the United States.  Some of our directors and officers and certain of the experts named in this offering reside outside the United States.  In addition, a substantial portion of our assets and the assets of our directors, officers and experts are located outside of the United States.  As a result, you may have difficulty serving legal process within the United States upon us or any of these persons.  You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against us or any of these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.  Furthermore, there is substantial doubt that the courts of the Republic of The Marshall Islands or of the non-U.S. jurisdictions in which our offices are located would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws.
 
Anti-takeover provisions in our amended and restated articles of incorporation could make it difficult for our shareholders to replace or remove our current board of directors or could have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common shares.
 
Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of our management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.
 
These provisions include those that:
 
·  
authorize our board of directors to issue "blank check" preferred stock without shareholder approval;
 
·  
provide for a classified board of directors with staggered, three-year terms;
 
·  
prohibit cumulative voting in the election of directors;
 
·  
authorize the removal of directors only for cause and only upon the affirmative vote of the holders of at least two-thirds of the outstanding common shares entitled to vote for those directors;
 
·  
limit the persons who may call special meetings of shareholders;
 
·  
establish advance notice requirements for nominating directors or proposing matters that can be acted on by shareholders at shareholder meetings; and
 
·  
restrict business combinations with interested shareholders.
 
 
29
 
These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium.
 
You will experience immediate and substantial dilution of $       per common share.
 
The assumed initial public offering price of $       per common share, which represents the midpoint of the price range set forth on the cover of this prospectus, exceeds the pro forma net tangible book value per common share immediately after this offering. Based on an assumed initial public offering price of $      per common share, which represents the midpoint of the price range set forth on the cover of this prospectus, you will incur immediate and substantial dilution of $      per share. This dilution results primarily because the assets which have been contributed to us, in exchange for all of our common shares, are recorded at their historical cost, and not their fair value, in accordance with International Financial Reporting Standards (IFRS) principles. Please read "Dilution" for a more detailed description of the dilution that you will experience upon the completion of this offering.
 
We may issue additional common shares or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of our common shares.
 
We may issue additional common shares or other equity securities of equal or senior rank in the future in connection with, among other things, future vessel acquisitions, repayment of outstanding indebtedness or our equity incentive plan, without shareholder approval, in a number of circumstances.
 
Our issuance of additional common shares or other equity securities of equal or senior rank would have the following effects:
 
·  
our existing shareholders' proportionate ownership interest in us will decrease;
 
·  
the amount of cash available for dividends payable on our common shares may decrease;
 
·  
the relative voting strength of each previously outstanding common share may be diminished; and
 
·  
the market price of our common shares may decline.
 

 
30
 

 
FORWARD-LOOKING STATEMENTS
 
Our disclosure and analysis in this prospectus pertaining to our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business, include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "may," "should" and similar expressions are forward-looking statements.
 
All statements in this prospectus that are not statements of either historical or current facts are forward-looking statements. Forward-looking statements include, but are not limited to, such matters as:
 
·  
our future operating or financial results;
 
·  
global and regional economic and political conditions, including piracy;
 
·  
our pending vessel acquisitions, our business strategy and expected capital spending or operating expenses, including drydocking and insurance costs;
 
·  
competition in the tanker industry;
 
·  
statements about shipping market trends, including charter rates and factors affecting supply and demand;
 
·  
our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities;
 
·  
our ability to enter into fixed-rate charters after our current charters expire and our ability to earn income in the spot market; and
 
·  
our expectations of the availability of vessels to purchase and the time it may take to construct new vessels, or vessels' useful lives.
 
Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties that are described more fully under the "Risk Factors" section of this prospectus. Any of these factors or a combination of these factors could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following:
 
·  
changes in governmental rules and regulations or actions taken by regulatory authorities;
 
·  
changes in economic and competitive conditions affecting our business;
 
·  
potential liability from future litigation and potential costs due to environmental damage and vessel collisions;
 
·  
the length and number of off-hire periods and dependence on third-party managers; and
 
·  
other factors discussed under the "Risk Factors" section of this prospectus.
 
 
 
31
You should not place undue reliance on forward-looking statements contained in this prospectus, because they are statements about events that are not certain to occur as described or at all. All forward-looking statements in this prospectus are qualified in their entirety by the cautionary statements contained in this prospectus. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.
 
Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
 

 
32
 

 
USE OF PROCEEDS
 
We estimate that we will receive net proceeds of approximately $      million, based on an assumed offering price of $      per share, which represents the midpoint of the price range set forth on the cover of this prospectus, from the issuance of new common shares in this offering, after deducting underwriting discounts and commissions and estimated expenses payable by us. A $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds to us from this offering by approximately $      million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.
 
Our intention is to use these proceeds first to fully repay the debt outstanding under our 2005 Credit Facility. Our 2005 Credit Facility, as of February 17, 2010 has debt outstanding of $38.9 million, has an interest rate of 0.70% above LIBOR, and is scheduled to mature on May 18, 2015. The proceeds of this indebtedness were used to acquire the Senatore and Noemi .

We intend to use the remainder of our net offering proceeds, after repayment of our 2005 Credit Facility, of $        million, and after assessing any working capital and other general corporate expense needs, to pursue vessel acquisitions consistent with our strategy, including the purchase of additional modern tankers ranging in size from approximately 35,000 dwt, to approximately 200,000 dwt and that generally are not more than five years old.  We believe that our strong balance sheet, financing capacity and future access to capital will allow us to make opportunistic vessel acquisitions at attractive prices. We may purchase secondhand vessels that meet our specifications or newbuilding vessels, either directly from shipyards or from the current owners. The timing of these acquisitions will depend on our ability to identify suitable vessels on attractive purchase terms but we intend to acquire vessels within 12 months of this offering. 

Although we cannot assure you that we will be successful in acquiring vessels at prices comparable to current market prices, we could use the proceeds of this offering available for vessel acquisitions, per the above description and based upon current market conditions, to purchase up to four new Handysize tankers, two new Panamax tankers, or one new Aframax tanker, not including any borrowings under the new credit facility, and not accounting for any drydocking expenses.  These estimates are based on the newbuilding purchase price estimates as of February 2010 noted on page 62 of the "The International Tanker Industry" within this prospectus.  As noted, we may also purchase secondhand vessels that meet our specifications at prices to be determined by market conditions, which are affected by the age of the vessel.  No assets will be acquired from our affiliates.
 
We have also obtained a commitment letter for a new $150,000,000 senior secured credit facility that we expect to enter into after the closing of this offering.  Any borrowings under this credit facility are intended to facilitate future vessel acquisitions.
 

 

 
33
 

 
OUR DIVIDEND POLICY
 
Initially, we do not intend to pay dividends to the holders of our common shares.  We will continue to assess our dividend policy and our board of directors may determine it is in the best interest of the Company to pay dividends in the future.  Upon the completion of our acquisition of additional vessels funded in whole or in part with a portion of the net proceeds of this offering, and depending on prevailing charter market conditions, our operating results and capital requirements and other relevant factors, our board of directors will re-evaluate our dividend policy.
 
We believe that, under current U.S. law (which is scheduled to expire after 2010), any future dividend payments from our then current and accumulated earnings and profits, as determined under U.S. federal income tax principles, would constitute "qualified dividend income" and, as a consequence, non-corporate U.S. stockholders would generally be subject to a 15% U.S. federal income tax rate with respect to such dividend payments. Distributions in excess of our earnings and profits, as so calculated, will be treated first as a non-taxable return of capital to the extent of a U.S. stockholder's tax basis in its common shares on a dollar-for-dollar basis and thereafter as capital gain. Please see the section of this prospectus titled "Tax Considerations" for additional information relating to the tax treatment of our dividend payments, if any dividends are declared in the future.
 
We are a holding company with no material assets other than the equity interests in our wholly-owned subsidiaries. As a result, our ability to pay dividends, if any in the future, depends on our subsidiaries and their ability to distribute funds to us. Our new credit facility will have restrictions on our ability, and the ability of certain of our subsidiaries, to pay dividends in the event of a default or breach of covenants under the credit facility agreement. Under such circumstances, we or our subsidiaries may not be able to pay dividends so long as we are in default or have breached certain covenants of the credit facility without our lender's consent or waiver of the default or breach. In addition, Marshall Islands law generally prohibits the payment of dividends (i) other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or (ii) when a company is insolvent or (iii) if the payment of the dividend would render the company insolvent.
 
In addition, we may incur expenses or liabilities, including extraordinary expenses, decreases in revenues, including as a result of unanticipated off-hire days or loss of a vessel, or increased cash needs that could reduce or eliminate the amount of cash that we have available for distribution as dividends. The tanker shipping charter market is cyclical and volatile. We cannot predict with accuracy the amount of cash flows our operations will generate in any given period. Factors beyond our control may affect the charter market for our vessels and our charterers' ability to satisfy their contractual obligations to us, and we cannot assure you that dividends will actually be declared or paid in the future. We cannot assure you that we will be able to pay regular quarterly dividends, and our ability to pay dividends will be subject to the limitations set forth above and in the section of this prospectus titled "Risk Factors."
 

 
34
 

 
CAPITALIZATION
 
The following table sets forth our capitalization at September 30, 2009, on a historical basis and as adjusted to give effect to the offering and the items identified in the footnotes below. The adjustments that we have made for this offering include the issuance of       shares of our common shares in this offering at an assumed offering price of $      per share, which represents the midpoint of the expected range of $      to $      per common share.
 
   
As of September 30, 2009
 
   
Actual
   
Pro Forma (1)
   
Pro Forma
As Adjusted (2,3)
 
                   
Cash and cash equivalents
  $ 480,748     $ 480,748    
[●]
 
 
Current debt:
                     
Bank loan (2)
  $ 3,600,000     $ 3,600,000     $ -  
 
Non current debt:
                       
Bank loan (2)
  $ 37,100,000       37,100,000       -  
Total debt
    40,700,000       40,700,000       -  
 
Shareholders' equity:
                       
Common shares, $1.00 par value; 1,500  shares authorized, issued and outstanding, actual;       shares issued and outstanding, as adjusted;
  $ 1,500     $ 1,500    
[●]
 
Additional paid-in capital (1)
 
─
      46,272,338    
[●]
 
Merger reserve
    13,346,887       13,346,887       13,346,887  
Total shareholders' equity
    13,348,387       59,620,725    
[●]
 
                         
Total capitalization
  $ 54,048,387     $ 100,320,725     $ 
[●]
 
                         
_________________

(1)  Adjusted to reflect the conversion of the balances of the related party payable of $27,406,408 and the shareholder payable of $18,865,930 as of November 18, 2009 (both of which were included in current liabilities) to shareholders' equity as a capital contribution as if such conversion took place as of September 30, 2009.  See Note 7 to the condensed combined financial statements included elsewhere in this prospectus.

(2)  Adjusted to reflect the expected repayment of both the current and non-current bank loan balances of $40.7 million, as of September 30, 2009, with a portion of the net proceeds of the offering.  We have also obtained a commitment letter for a new $150,000,000 senior secured credit facility that we expect to enter into after the closing of this offering.  Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources" for a further description of the new credit facility.

(3)  Adjusted to reflect the estimated net proceeds of $[●] million.   Excludes           common shares issuable upon the exercise of the underwriters' option to purchase additional shares and            shares that we expect to issue to our executive officers following the completion of this offering pursuant to our 2010 Equity Incentive Plan.


 
35
 
 
DILUTION
 
Dilution is the amount by which the offering price paid by the purchasers of our common shares in this offering will exceed the net tangible book value per common share after the offering. The net tangible book value is equal to the amount of our total tangible assets (total assets less intangible assets) less total liabilities. The historical net tangible book value as of       was $      million in total and $      per share.
 
As adjusted to give effect to      , the pro forma net tangible book value as of       would have been $      million in total and $      per share.
 
As further adjusted to give effect to the sale by us of       common shares in this offering, after deducting underwriting discounts and estimated offering expenses, our pro forma net tangible book value as of       would have been $      million, or $      per common share.  This represents an immediate increase in net tangible book value of $      per share to the existing shareholder and an immediate dilution in net tangible book value of $      per share to new investors.
 
The following table illustrates the pro forma per share dilution and appreciation at       :
 
         
Initial public offering price per share
       
Pro forma net tangible book value per share as of      
       
Increase in net tangible book value attributable to new investors in this offering
       
Pro forma net tangible book value per share after giving effect to this offering
       
Dilution per share to new investors
       


The following table summarizes, on a pro forma basis as at      , the differences between the number of common shares acquired from us, the total amount paid and the average price per share paid by the existing shareholders and the number of common shares acquired from us, the total amount paid and average price per share paid by you in this offering, based upon the initial public offering price of $      per share.

 
   
Pro Forma
Shares Outstanding
   
Total Consideration
   
Average Price
 
   
Number
   
Percent
   
Amount
   
Percent
   
Per Share
 
Existing shareholder
                                       
New investors
                                       
Total
                                       
 
As the table indicates, the total consideration paid by the existing shareholder for its shares is approximately $       million (representing contributed assets), with an average share price of $      , which means that the existing shareholder in the aggregate will have received approximately $      million more than it originally invested. The assets contributed by the existing shareholder were recorded at historical book value, rather than fair value, in accordance with the IFRS.
 

 
36
 

 
SELECTED FINANCIAL AND OTHER DATA
 
The following table sets forth our selected combined financial data and other operating data. The selected financial data in the table as of and for the years ended December 31, 2008 and 2007 are derived from our audited combined financial statements, included elsewhere herein, which have been prepared in accordance with IFRS as issued by the IASB. The selected financial data as of September 30, 2009 and for the nine months ended September 30, 2009 and 2008 are derived from our unaudited condensed combined financial statements, which have been prepared in accordance with IAS 34 and are included herein. Please see the footnotes to our combined financial statements for a discussion of the basis upon which our financial statements are presented. The data set forth below should be read in conjunction with the audited combined financial statements, the unaudited condensed combined financial statements, related notes and other financial information included elsewhere herein.
 
Our historical combined financial statements have been prepared on a carve-out basis from the financial statements of our parent company, Liberty Holding Company Ltd.  These carve-out financial statements include all assets, liabilities and results of operations of our three vessel-owning subsidiaries, formerly subsidiaries of Liberty Holding Company Ltd., for the periods presented.  For the periods presented, certain of the expenses incurred by these subsidiaries for commercial, technical and administrative management services were under management agreements with other Scorpio Group entities, which are parties related to us. Since agreements with related parties are by definition not at arms length, the expenses incurred under these agreements may have been different than the historical costs incurred if the subsidiaries had operated as unaffiliated entities during prior periods.  Our estimates of any differences between historical expenses and the expenses that may have been incurred had the subsidiaries been stand-alone entities have been disclosed in the notes to the historical combined financial statements included elsewhere in this prospectus.
 
The selected financial data for 2006 has not been derived from audited financial statements as combined financial statements of the Company for 2006 do not exist.  Instead, the selected financial data for 2006 has been prepared by aggregating the historical standalone IFRS financial information of each of the three subsidiaries which were transferred to us.  In accordance with Item 3.A.1 of Form 20-F  we are omitting fiscal years 2005 and 2004 from the selected financial data as we did not prepare combined or consolidated financial statements for these periods and such information cannot be provided without unreasonable effort or expense.

 
   
For the Year Ended
   
For the Nine Months Ended
 
   
December 31,
   
September 30,
 
   
2008
   
2007
   
2006
   
2009
   
2008
 
                               
Combined Income Statement Data
                             
Vessel revenue
  $ 39,274,196     $ 30,317,138     $ 35,751,632     $ 21,752,091     $ 28,914,996  
                                         
Operating expenses
                                       
Charterhire
    (6,722,334 )     -       -       (3,163,485 )     (4,104,081 )
Vessel operating costs
    (8,623,318 )     (7,600,509 )     (7,061,514 )     (6,397,434 )     (6,535,389 )
Depreciation
    (6,984,444 )     (6,482,484 )     (7,058,093 )     (5,155,675 )     (4,883,150 )
General and administrative expenses
    (600,361 )     (590,772 )     (376,338 )     (304,404 )     (491,699 )
Impairment (1)
    -       -       -       (4,511,877 )     -  
                                         
Total operating expenses
    (22,930,457 )     (14,673,765 )     (14,495,945 )     (19,532,875 )     (16,014,319 )
                                         
Operating income
    16,343,739       15,643,373       21,255,687       2,219,216       12,900,677  
                                         
Other income and expense, net
                                       
Interest expense - bank loan
    (1,710,907 )     (1,953,344 )     (3,041,684 )     (590,372 )     (1,353,682 )
(Loss)/gain on derivative financial instruments
    (2,463,648 )     (1,769,166 )     816,219       87,548       (455,446 )
Interest income
    35,492       142,233       152,066       4,754       28,672  
Other income, net
    (18,752 )     (9,304 )     (24,034 )     (10,925 )     (27,614 )
Total other expenses, net
  $ (4,157,815 )   $ (3,589,581 )   $ (2,097,433 )   $ (508,995 )   $ (1,808,070 )

 
37
 
 
                               
Net income
  $ 12,185,924     $ 12,053,792     $ 19,158,254     $ 1,710,221     $ 11,092,607  
                                         
Earnings per common share (2)
                                       
Weighted average shares outstanding
    1,500       1,500       1,500       1,500       1,500  
Basic earnings per share
  $ 8,124     $ 8,036     $ 12,772     $ 1,140     $ 7,395  
Diluted earnings per share
  $ 8,124     $ 8,036     $ 12,772     $ 1,140     $ 7,395  
 
       
As of December 31,
   
As of
September 30,
 
       
2008
   
2007
   
2006
   
2009
 
   
Balance Sheet Data
                       
     
Cash and cash equivalents
  $ 3,607,635     $ 1,153,743     $ 6,016,470     $ 480,748  
     
Vessels and drydock
  $ 109,260,102     $ 116,244,546     $ 122,727,030     $ 101,212,117  
     
Total assets
  $ 117,111,827     $ 122,555,022     $ 137,728,758     $ 104,020,190  
     
Bank loan
  $ 43,400,000     $ 47,000,000     $ 50,600,000     $ 40,700,000  
     
Shareholder payable (3)
  $ 22,028,323     $ 19,433,097     $ 27,612,576     $ 19,267,336  
     
Related party payable (3)
  $ 27,406,408     $ 27,406,408     $ 34,338,356     $ 27,406,408  
     
Shareholder's equity
  $ 20,299,166     $ 26,897,242     $ 21,936,949     $ 13,348,387  
                                       
       
For the Year
   
For the Nine Months
 
       
Ended December 31,
   
Ended September 30,
 
       
2008
   
2007
   
2006
   
2009
   
2008
 
     
Cash Flow Data
                             
     
Net cash provided by/(used by):
                             
     
Operating activities
  $ 24,837,892     $ 5,830,733     $ 13,226,007     $ 8,234,113     $ 12,812,237  
     
Financing activities
  $ (22,384,000 )   $ (10,693,500 )   $ (14,850,000 )   $ (11,361,000 )   $ (12,127,000 )

 
38
 
___________________
 
(1)
As of September 30, 2009, we recorded an impairment of two vessels for $4.5 million.  See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
 
(2)
Basic earnings per share is calculated by dividing the net income attributable to equity holders of the parent by the weighted average number of common shares outstanding assuming that the transfer of the vessel owning subsidiaries was effective during the period. Diluted earnings per share are calculated by adjusting the net income attributable to equity holders of the parent and the weighted average number of common shares used for calculating basic earnings per share for the effects of all potentially dilutive shares. Such potentially dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share.  For the periods presented, we had no potentially dilutive common shares.
 
(3)
On November 18, 2009, the Shareholder payable and the Related party payable balances as of that date, were converted to equity as a capital contribution.  See Note 8 in the combined financial statements as of and for the year ended December 31, 2008 and the pro forma balance sheet and Note 4 in the unaudited condensed combined financial statements as of and for the nine months ended September 30, 2009.
 
 
39
 

Other Operating Data
 
   
For the Year
   
For the Nine Months
 
   
Ended December 31,
   
Ended September 30,
 
   
2008
   
2007
   
2006
   
2009
   
2008
 
Average Daily Results
                             
Time charter equivalent per day (4)
  $ 29,889     $ 27,687     $ 33,165     $ 24,089     $ 30,566  
Vessel operating costs per day (5)
  $ 7,854     $ 6,941     $ 6,449     $ 7,811     $ 7,980  
TCE per revenue day - pool revenue
  $ 36,049     $ 29,848     $ 33,165     $ 23,065     $ 38,243  
TCE per revenue day - time charters
  $ 24,992     $ 24,382     $ -     $ 24,881     $ 24,990  
Expenditures for drydock
  $ -     $ -     $ 805,845     $ 1,619,567     $ -  
Fleet Data (6)
                                       
Average number of owned vessels
    3.00       3.00       3.00       3.00       3.00  
Average number of time chartered-in vessels
    0.59       -       -       0.44       0.45  

(4)
Freight rates are commonly measured in the shipping industry in terms of Time charter equivalent per day (or TCE per day), which represent subtracting voyage expenses, including bunkers and port charges, from vessel revenue and dividing the net amount (time charter equivalent revenues) by the number of days revenue days in the period. Revenue days are the number of days the vessel is owned less the number of days the vessel is offhire for drydock.  Since our vessels are on time charter and operate in the pool, we do not have voyage expenses.
 
(5)
Vessel operating costs per day represent vessel operating costs divided by the number of days the vessel is owned in the period.
 
(6)
For a definition of items listed under "Fleet Data," please see the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations."  We do not currently have any time chartered-in vessels and do not intend to time charter-in any vessels into our fleet in the future.
 
 
 
40
 

 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following presentation of management's discussion and analysis of results of operations and financial condition should be read in conjunction with our combined financial statements, accompanying notes thereto and other financial information, as well as our unaudited condensed combined financial statements and accompanying notes appearing elsewhere in this registration statement.  You should also carefully read the following discussion with "Risk Factors," "The International Tanker Industry," "Forward-Looking Statements" and "Selected Financial and Other Data." The combined financial statements as of and for the years ended December 31, 2008 and 2007 have been prepared in accordance with IFRS as issued by the IASB and the unaudited condensed combined financial statements as of September 30, 2009 and for the periods ended September 30, 2009 and 2008 have been prepared in accordance with IAS 34. The combined financial statements are presented in U.S. Dollars unless otherwise indicated. Any amounts converted from another non-U.S. currency to U.S. Dollars in this registration statement are at the rate applicable at the relevant date, or the average rate during the applicable period.
 
OVERVIEW
 
We are Scorpio Tankers Inc., a company incorporated in the Republic of The Marshall Islands on July 1, 2009 by Simon Financial Limited, or Simon, which is owned by members of the Lolli-Ghetti family and manages their shipping interests.  We provide seaborne transportation of crude oil and other petroleum products worldwide. On October 1, 2009, (i) Simon transferred to Scorpio Tankers Inc. three operating subsidiary companies, which own the vessels in our initial fleet; (ii) Liberty Holding Company Ltd., or Liberty, became a wholly-owned subsidiary and operating vehicle of Simon; (iii) Scorpio Owning Holding Ltd. became a wholly-owned subsidiary of Liberty; and (iv) Scorpio Tankers Inc. became a wholly-owned subsidiary of Scorpio Owning Holding Ltd.  Liberty's operations include the Scorpio Group's drybulk carriers, logistics operations in Southeast Asia, ownership of an offshore floating terminal, vessel pools, chartered-in vessels and interests in joint ventures and investments.
 
Our founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, is a member of the Lolli-Ghetti family, which has been involved in shipping since the early 1950s through the Italian company Navigazione Alta Italia, or NAI.  The Lolli-Ghetti family owns and controls the Scorpio Group, which includes Simon, which prior to this offering was our ultimate parent company and controlling party; Scorpio Ship Management S.A.M., or SSM; and Scorpio Commercial Management S.A.M., or SCM; which provide us and third parties with technical and commercial management services, respectively; Liberty Holding Company Ltd., or Liberty, which provides us with administrative services; and other affiliated entities. Our President, Mr. Robert Bugbee, also has a senior management position at Scorpio Group, and was formerly the President and Chief Operating Officer of OMI Corporation, or OMI, which was a publicly traded shipping company.
 
We own and operate three Panamax tanker vessels, which we refer to as our initial fleet, that have an average age of 6.5 years as of January 1, 2010.  As noted above, we acquired the vessels in our initial fleet from entities affiliated with our founder, Chairman and Chief Executive Officer and other members of the Lolli-Ghetti family, in exchange for all of our common shares.
 
Our historical combined financial statements have been prepared on a carve-out basis from the financial statements of Liberty Holding Company Ltd.  These carve-out financial statements include all assets, liabilities and results of operations of our three vessel-owning subsidiaries, formerly subsidiaries of Liberty Holding Company Ltd., for the periods presented.  The other financial information included in this prospectus represents the aggregated financial information of the operations of our three vessel-owning subsidiaries.
 
We anticipate additional opportunities to expand our fleet through acquisitions of tankers, and We believe that recent downward pressure on tanker values will present attractive investment opportunities to ship operators that have the necessary capital resources.  We may purchase secondhand vessels that meet our specifications or newbuilding vessels, either directly from shipyards or from the current owners with shipyard contracts.  The timing of these acquisitions will depend on our ability to identify suitable vessels on attractive purchase terms.
 
 
41
 
OUR CHARTERS
 

We generate revenues by charging customers for the transportation of their crude oil and other petroleum products using our vessels. Historically, these services generally have been provided under the following basic types of contractual relationships:
 
·  
Voyage charters , which are charters for short intervals that are priced on current, or "spot," market rates; and
 
·  
Time charters , whereby vessels we operate and are responsible for crewing and other voyage expenses are chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates.
 
 
The table below illustrates the primary distinctions among these types of charters and contracts:
 
 
         
   
Voyage Charter
 
Time Charter
         
Typical contract length
 
Single voyage
 
One year or more
Hire rate basis (1)
 
Varies
 
Daily
Voyage expenses (2)
 
We pay
 
Customer pays
Vessel operating costs (3)
 
We pay
 
We pay
Off-hire (4)
 
Customer does not pay
 
Customer does not pay

(1)
"Hire rate" refers to the basic payment from the charterer for the use of the vessel.
 
(2)
Defined below under "Glossary of Shipping Terms."
 
(3)
Defined below under "— Important Financial and Operational Terms and Concepts."
 
(4)
"Off-hire" refers to the time a vessel is not available for service due primarily to scheduled and unscheduled repairs or drydocking.
 
Upon the closing of this offering, one of our vessels, Venice , will be in the Scorpio Panamax Tanker Pool,  The majority of the vessels in the Scorpio Panamax Tanker Pool trade in the spot market. The two other vessels, Noemi and Senatore , are currently chartered to customers under fixed-rate long-term time charter contracts that, as of January 1, 2010, have remaining durations of approximately 24 and nine months, respectively.
 
 
For more information on our charters, please read "Business – Our Initial Fleet" and "–Our Customers."
 
IMPORTANT FINANCIAL AND OPERATIONAL TERMS AND CONCEPTS
 
We use a variety of financial and operational terms and concepts. These include the following:
 
Vessel revenues.   Vessel revenues primarily include revenues from time charters and pool revenues. Vessel revenues are affected by hire rates and the number of days a vessel operates. Vessel revenues are also affected by the mix of business between vessels on time charter and vessels in pools. Revenues from vessels in pools  are more volatile, as they are typically tied to prevailing market rates.
 
Vessel operating costs.   We are responsible for vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees. The two largest components of our vessel operating costs are crews and repairs and maintenance. Expenses for repairs and maintenance tend to fluctuate from period to period because most repairs and maintenance typically occur during periodic drydockings. Please read "Drydocking" below. We expect these expenses to increase as our fleet matures and to the extent that it expands.
 
42
 
Additionally, these costs include technical management fees charged by SSM. Historically, our fees under technical management arrangements with SSM were under management agreements with other Scorpio Group entities, which are related parties of ours. Since agreements with related parties are by definition not at arms length, the expenses incurred under these agreements may have been different than the historical costs incurred if the subsidiaries had operated as unaffiliated entities during prior periods. Our estimates of any differences between historical expenses and the expenses that may have been incurred had the subsidiaries been stand-alone entities have been disclosed in the notes to the historical combined financial statements included elsewhere in this prospectus. Prior to the closing of this offering, we entered into a technical management agreement with SSM. Under this agreement, SSM will provide us technical services. We will pay market-based fees for this service which we believe are customary for the tanker industry.
 
Drydocking.   We must periodically drydock each of our vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Generally, each vessel is drydocked every 30 months. We capitalize a substantial portion of the costs incurred during drydocking and amortize those costs on a straight-line basis from the completion of a drydocking to the estimated completion of the next drydocking. We immediately expense costs for routine repairs and maintenance performed during drydocking that do not improve or extend the useful lives of the assets. The number of drydockings undertaken in a given period and the nature of the work performed determine the level of drydocking expenditures.
 
Depreciation.   Depreciation expense typically consists of:
 
·  
charges related to the depreciation of the historical cost of our fleet (less an estimated residual value) over the estimated useful lives of the vessels; and
 
·  
charges related to the amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking.
 
 
Time Charter Equivalent Rates.   Time charter equivalent, or TCE, rates, are a standard industry measure of the average daily revenue performance of a vessel. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by subtracting voyage expenses, including bunkers and port charges, from voyage revenue and dividing the net amount (time charter equivalent revenues) by the number of days in the period.
 
Revenue Days.   Revenue days are the total number of calendar days our vessels were in our possession during a period, less the total number of off-hire days during the period associated with major repairs or drydockings. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are included in revenue days. We use revenue days to show changes in net voyage revenues between periods.
 
Average Number of Vessels.   Historical average number of vessels consists of the average number of vessels that were in our possession during a period. We use average number of vessels primarily to highlight changes in vessel operating costs and depreciation and amortization.
 
Contract of Affreightment.   A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and ship owner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the ship owner may use different ships to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators such as pools or ship owners with large fleets of the same vessel type. All of the ship's operating, voyage and capital costs are borne by the ship owner while the freight rate normally is agreed on a per cargo ton basis.
 
 
43
 
Commercial Pools.   To increase vessel utilization and thereby revenues, we participate in commercial pools with other shipowners of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers. As of September 30, 2009, one of our vessels participates in the Scorpio Panamax Tanker Pool. For more information on the pool, please read "Business – Our Initial Fleet – Scorpio Panamax Tanker Pool Agreement." and "– Our Customers."
 
 
ITEMS YOU SHOULD CONSIDER WHEN EVALUATING OUR RESULTS
 
You should consider the following factors when evaluating our historical financial performance and assessing our future prospects:
 
·  
Our voyage revenues are affected by cyclicality in the tanker markets.   The cyclical nature of the tanker industry causes significant increases or decreases in the revenue we earn from our vessels, particularly those we trade in the spot market. If we choose to pay dividends in the future, this will, from period to period, affect the cash available to pay such dividends. We intend to employ a chartering strategy to capture upside opportunities in the spot market while using fixed-rate time charters to reduce downside risks, depending on SCM's outlook for freight rates, oil tanker market conditions and global economic conditions. Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in the supply of, and demand for, tanker capacity. The supply of tanker capacity is influenced by the number and size of new vessels built, vessels scrapped, converted and lost, the number of vessels that are out of service, and regulations that may effectively cause early obsolescence of tonnage. The demand for tanker capacity is influenced by, among other factors:
 
·  
global and regional economic and political conditions;
 
·  
increases and decreases in production of and demand for crude oil and petroleum products;
 
·  
increases and decreases in OPEC oil production quotas;
 
·  
the distance crude oil and petroleum products need to be transported by sea; and
 
·  
developments in international trade and changes in seaborne and other transportation patterns.
 
·  
Tanker rates also fluctuate based on seasonal variations in demand.   Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance. In addition, unpredictable weather patterns during the winter months tend to disrupt vessel scheduling. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months. As a result, revenues generated by Liberty Holding Company Ltd.'s vessels have historically been weaker during the fiscal quarters ended June 30 and September 30, and stronger in the fiscal quarters ended March 31 and December 31.
 
·  
Our general and administrative expenses will be affected by the commercial management, and administrative services agreements we have entered into with SCM and Liberty Holding Company Ltd., respectively, and costs we will incur from being a public company.   Historically, we incurred management fees for commercial and administrative management under management agreements with other Scorpio Group entities, which are parties related to us.  Since agreements with related parties are by definition not at arms length, the expenses incurred under these agreements may have been different than the historical costs incurred if the subsidiaries had operated as unaffiliated entities during prior periods.  Our estimates of any differences between historical expenses and the expenses that may have been incurred had the subsidiaries been stand-alone entities have been disclosed in the notes to the historical combined financial statements included elsewhere in this prospectus.  
 
 
44
 
Prior to the closing of this offering, we entered into a commercial management agreement with SCM.  We also entered into an administrative services agreement with Liberty Holding Company Ltd., or our Administrator. Under these agreements, SCM provides us with commercial services and our Administrator provides us with administrative services.  We pay market-based fees under our commercial management agreement, which we believe is customary for the tanker industry. We will reimburse our Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We will also pay our Administrator a fee for arranging vessel purchases and sales for us equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. We believe this 1% fee on purchases and sales is customary in the tanker industry.  Our historical general and administrative management fees are estimates of the value of the general and administrative services provided by Scorpio Group affiliates to us. These fees may not be equivalent to a market-based fee and, thus, our historical general and administrative expenses may not reflect what we will incur in the future. As a result of changes to our commercial management agreements agreed upon in December 2009, we estimate that our commercial management fees in 2010 will increase by $0.3 million.  The new technical and administrative services agreements were negotiated at rates similar to the rates under the previous agreements and therefore we expect there will be no additional impact on the results of operations in future periods for technical and administrative management services. In addition, we will incur additional general and administrative expenses as a result of being a publicly traded company, including costs associated with annual reports to shareholders and SEC filings, investor relations, New York Stock Exchange fees and tax compliance expenses.
 
RESULTS OF OPERATIONS
 
Vessel revenue in our combined income statements represents time charter equivalent revenues (TCE).  Revenues and TCE is the same for us because our vessels are employed on time charter contracts or in a pool.  When a vessel is on time charter, the customer pays us the contract revenue, and the customer is responsible for all of the voyage expenses.  When a vessel is in a pool, the pool pays us the vessel's allocated earnings within the pool, which we record as revenue, and the pool is also responsible for the voyage expenses.  The vessel's allocated earnings in the pool are reduced to reflect the commercial management fee charged by SCM, the pool manager.
 
Shipowners base economic decisions regarding the deployment of their vessels upon actual and anticipated TCE rates, and industry analysts typically measure rates in terms of TCE rates. This is because under time charters the customer usually pays the voyage expenses, while under voyage charters, also known as spot market charters, the shipowner usually pays the voyage expenses. Accordingly, the discussion of revenue below focuses on TCE rates where applicable.
 
The following tables separately present  our operating results for the nine months ended September 30, 2009 and 2008 and for the years ended December 31, 2008 and 2007. We only have one segment since all of our vessels are Panamax tankers and trade in the international shipping market.
 
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2008
 
   
For the Nine Months
             
   
Ended September 30,
         
Percentage
 
   
2009
   
2008
   
Change
   
Change
 
                         
Vessel revenue
  $ 21,752,091     $ 28,914,996     $ (7,162,905 )     (25 %)
Charterhire
    (3,163,485 )     (4,104,081 )     940,596       23 %
Vessel operating costs
    (6,397,434 )     (6,535,389 )     137,955       2 %
Depreciation
    (5,155,675 )     (4,883,150 )     (272,525 )     (6 %)
General and administrative expenses
    (304,404 )     (491,699 )     187,295       38 %
Impairment
    (4,511,877 )     -       (4,511,877 )     -  
Interest expense - bank loan
    (590,372 )     (1,353,682 )     763,310       56 %
Gain (loss) on derivative financial instruments
    87,548       (455,446 )     542,994       119 %
Interest income
    4,754       28,672       (23,818 )     (83 %)
Other expense, net
    (10,925 )     (27,614 )     16,689       60 %
Net Income
  $ 1,710,221     $ 11,092,607     $ (9,382,386 )     (85 %)
 
 
45

 
Net Income.   Net Income for the nine months ended September 30, 2009 was $1.7 million, a decrease of $9.4 million, or 85%, when compared to net income of $11.1 million for the nine months ended September 30, 2008.  The differences between the two periods are discussed below.
 
Vessel revenue .   Revenue was $21.8 million for the nine months ended September 30, 2009, a decrease of $7.2 million, or 25%, from the revenue of $28.9 million for the nine months ended September 30, 2008.  The following table summarizes our revenue:

 
   
For the Nine Months
       
   
Ended September 30,
       
   
2009
   
2008
   
Change
 
Owned vessels:
                 
Time charter revenue
  $ 12,664,375     $ 13,694,412     $ (1,030,037 )
Pool revenue
    6,089,354       10,279,439       (4,190,085 )
Time chartered-in vessels:
                       
Pool revenue
    2,998,360       4,941,145       (1,942,785 )
TOTAL
  $ 21,752,090     $ 28,914,996     $ (7,162,906 )
                         

The reduction in the time charter revenue of $1.0 million or 7.5% was primarily the result of Noemi and Senatore both being drydocked in 2009.   Noemi was drydocked in August 2009 (off-hire for 23 days), which reduced revenue by $0.6 million, and Senatore was drydocked in May 2009 (off-hire for 14 days), which was reduced revenue by $0.4 million.   Noemi and Senatore were employed on time charters that began in 2007 for the nine months ended September 30, 2009 and 2008.
 
The reduction of the pool revenue for the owned vessel Venice of $4.2 million or 41% was due to a decrease in the spot market rates.  The majority of the vessels in the Scorpio Panamax Tanker Pool operate in the spot market.
 
The reduction of the pool revenue for a time chartered-in vessel of $1.9 million, or 39%, was due to a decrease in spot market rates, which resulted in a decrease in the pool rates, and five less operating days for the period in 2009. In May 2008, we time chartered-in a vessel until May 2009.  The vessel operated in the Scorpio Panamax Tanker Pool.
 
Charterhire.   Charterhire expense of $3.2 million for the nine months ended September 30, 2009 decreased $0.9 million, or 23%, from $4.1 million for the nine months ended September 30, 2008.  The decrease was due to the profit and loss arrangement included in the charterparty and five less operating days in 2009.  The vessel was chartered-in by us from May 29, 2008 to May 1, 2009 at $26,750 per day plus a 50% profit and loss arrangement where we agreed to pay 50% of the vessel's earnings in the pool above the daily charterhire rate, and we would receive 50% of the vessels earnings in the pool below $26,750 per day.   For nine months ended September 30, 2009, we recorded a reduction in the charterhire expense of $17,000 because the vessel's earnings in the pool were less than $26,750 per day.  For the nine months ended September 30, 2008, we recorded an increase in the charterhire expense of $837,000 because the vessel's earnings in the pool were more than $26,750 per day.
 
Vessel operating costs.   Vessel operating costs for the owned vessels of $6.4 million for the nine months ended September 30, 2009 decreased $0.1 million, or 2%, from $6.5 million for the nine months ended September 30, 2008.  There were no significant changes in vessel operating costs.
 
General and administrative expense.   General and administrative expense, which includes the commercial management and administrative fees, of $0.3 million for the nine months ended September 30, 2009, decreased $0.2 million or 38% from $0.5 million for the nine months ended September 30, 2008. This decrease in 2009 primarily resulted from the reduction in the administrative fees charged by the provider.
 
Depreciation.   Depreciation and amortization expense of $5.2 million for the nine months ended September 30, 2009 increased $0.3 million, or 6%, from $4.9 million for the nine months ended September 30, 2008.  The increase in depreciation expense was primarily due to a change in the estimated residual value due to changes in scrap rates since September 30, 2008. See discussion of this change in estimate in Note 2 to the interim unaudited condensed combined financial statements included elsewhere in this prospectus.
 
 
46
 
Impairment.   As of September 30, 2009, we evaluated the carrying amounts of our vessels due to reductions in vessel values and determined that two of our vessels were impaired, the Noemi and Senatore , both built in 2004.  We wrote down the net book value of the vessels to their recoverable amount, being fair value less cost to sell.  We determined the fair value of each vessel  by adding (i) the charter free market value of the vessel to (ii) the discounted value of each vessel's time charter, which is the difference between each vessel's time charter contracted rate and the market rate for a similar type of vessel with a similar contracted duration. In determining the charter free market value, we took into consideration the estimated valuations provided by an independent ship broker. As a result of the test, we determined that the fair value of the vessel was below the carrying value.  This resulted in an impairment loss of $4,511,877 for Noemi and Senatore .
 
Interest expense - bank loan.   Interest expense -bank loan was $0.6 million for the nine months ended September 30, 2009, a decrease of $0.8 million or 56% from $1.4 million for the nine months ended September 30, 2008. The decrease in interest expense was primarily due to a reduction in LIBOR and a decrease in the principal outstanding during the periods of the 2005 Credit Facility, which we intend to fully repay using the proceeds of this offering.  The average interest rate including margin decreased to 1.85% for the nine months ended September 30, 2009 from 3.89% for the nine months ended September 30, 2008.  The average principal for the nine months ended September 30, 2009 and 2008 was $42.1 million and $45.6 million, respectively.
 
Gain (loss) on derivative financial instruments.   Gain (loss) on derivatives from our interest rate swap, which consists of realized and unrealized gains and losses, was a gain of $0.1 million for the nine months ended September 30, 2009; there was an unrealized gain of $0.7 million offset by a realized loss of $0.6 million.  For the nine months ended September 30, 2008, there was a loss on derivatives of $0.5 million, which was from an unrealized loss of $0.2 million and a realized loss of $0.3 million.  The unrealized gains and losses reflect the adjustment of the market value of the swap (the contract rate versus the current market rate).  The realized loss is the result of the settlement difference between contracted interest rates and the actual market interest rates (LIBOR).
 
Interest income.   Interest income was $4,754 for the nine months ended September 30, a decrease of $23,918 or 83% from the $28,672 for the nine months ended September 30, 2008.  The decrease was primarily due a reduction in interest rates for our cash deposits and reduction in the cash balance.
 
Other expense, net.   Other expense, net was a loss of $10,925 for the nine months ended September 30, 2009, and a net loss of $27,614 for the nine months ended September 30, 2008.  This change was primarily the result of a change in foreign currency gains and losses.
 
FOR THE YEAR ENDED DECEMBER 31, 2008 COMPARED TO THE YEAR ENDED DECEMBER 31, 2007

 
   
For the Year Ended December 31,
       
   
2008
   
2007
   
Change
   
Percentage Change
 
                         
Vessel revenue
  $ 39,274,196     $ 30,317,138     $ 8,957,058       30 %
Charterhire
    (6,722,334 )     -       (6,722,334 )     -  
Vessel operating costs
    (8,623,318 )     (7,600,508 )     (1,022,810 )     (13 %)
Depreciation
    (6,984,444 )     (6,482,484 )     (501,960 )     (8 %)
General and administrative expenses
    (600,361 )     (590,773 )     (9,588 )     (2 %)
Interest expense - bank loan
    (1,710,907 )     (1,953,344 )     242,437       12 %
Loss on derivative financial instruments
    (2,463,648 )     (1,769,166 )     (694,482 )     (39 %)
Interest income
    35,492       142,233       (106,741 )     (75 %)
Other expense, net
    (18,752 )     (9,304 )     (9,448 )     (102 )%
Net Income
  $ 12,185,924     $ 12,053,792     $ 132,132       1 %

 
47
 
 

Net Income.   Net Income for the year end December 31, 2008 was $12.2 million, an increase of $0.1 million or 1% when compared to net income of $12.1 million for the year ended December 31, 2007.  The differences between the two years are discussed below.
 
Vessel revenue.   Revenue was $39.3 million for the year ended December 31, 2008, an increase of $9.0 million from the revenue of $30.3 million for the year ended December 31, 2007.  The following table summarizes our revenue:
 
   
For the Years Ended
       
   
December 31,
       
   
2008
   
2007
   
Change
 
Owned vessels:
                 
Time charter revenue
  $ 18,293,963     $ 10,557,524     $ 7,736,439  
Pool revenue
    13,201,424       19,759,614     $ (6,558,190 )
Time chartered-in vessel:
                       
Pool revenue
    7,778,809       -       7,778,809  
    $ 39,274,196     $ 30,317,138     $ 8,957,058  

The increase in time charter revenue of $7.7 million or 73% was the result of:
 
·  
Noemi being on time charter for all of 2008 and only 344 days in 2007, an increase of $0.5 million.
 
·  
Senatore being on time charter for all of 2008 and only 89 days in 2007, an increase of $7.2 million.
 
The reduction of pool revenue for the owned vessels of $6.6 million or 33% was due to:
 
·  
Senatore operating in the pool for 276 days in 2007 and zero days in 2008, a decrease of $8.1 million.
 
·  
Noemi operating in the pool for 21 days in 2007 and zero days in 2008, a decrease of $0.6 million.
 
The reduction in the number of days for the owned vessels in the pool (366 in 2008 and 662 in 2007) was partially offset by an increase of $2.2 million (20%) in 2008 from Venice's revenue from the pool.  The vessel was in the pool for both years.  The 20% increase in Venice's revenue was due to higher rates in the spot market.  The majority of the vessels in the Scorpio Panamax Tanker Pool operated in the spot market.
 
The increase of the pool revenue for the time chartered in-vessel of $7.8 million was due to a vessel being time chartered-in from May 29, 2008 until May 1, 2009.  The vessel operated in the Scorpio Panamax Tanker Pool.
 
Charterhire.   Charterhire expense for the year ended December 31, 2008 was $6.7 million.  There was no charterhire expense in 2007 since we did not charter in any vessels during 2007.  The vessel was chartered in from May 29, 2008 to May 1, 2009.  The daily rate was at $26,750 per day plus a 50% profit and loss arrangement where (i) we agreed to pay 50% of the vessel's earnings above the daily charterhire rate and (ii) we received 50% of the vessel's earnings below $26,750 per day.  The profit sharing expense recorded during 2008 was $1.0 million.
 
Vessel operating costs.   Vessel operating costs for the owned vessels of $8.6 million for the year ended December 31, 2008 increased $1.0 million, or 13%, from $7.6 million for the year ended December 31, 2007.  The increase was primarily due to higher crew expenses, which included higher salaries and training expenses, and higher stores (e.g. lube oils).
 
General and administrative expenses.   General and administrative expenses of $0.6 million for the year ended December 31, 2008 was similar to the expense for the year ended December 31, 2007.
 
 
48
 
Depreciation.   Depreciation and amortization expense of $7.0 million for the year ended December 31, 2008 increased $0.5 million or 8% from $6.5 million for the year ended December 31, 2007.  The increase in depreciation expense was primarily due to a change in the estimated residual value due to changes in scrap rates in the period. See discussion of this change in estimate in Note 4 to the audited combined financial statements included elsewhere in this prospectus.
 
Interest expense – bank loan.   Interest expense-bank loan was $1.7 million for year ended December 31, 2008, a decrease of $0.25 million or 12% from $1.95 million for the year ended December 31, 2007. The decrease in interest expense was primarily due to a reduction in LIBOR and a decrease in the outstanding principal.  The average interest rate including margin decreased to 3.71% for the year ended December 31, 2008 from 6.05% for the year ended December 31, 2007.  The average principal outstanding for the years ended December 31, 2008 and 2007 was $45.2 million and $48.8 million, respectively.
 
Loss on derivative financial instruments.   Loss on derivatives from our interest rate swap, which consists of realized and unrealized losses, was a loss of $2.5 million for the year ended December 31, 2008; there was an unrealized loss of $2.1 million and a realized loss of $0.4 million.  For the year ended December 31, 2007, there was a loss on derivatives of $1.8 million, which was from an unrealized loss of $1.3 million and a realized loss of $0.5 million.  The unrealized gains and losses reflect the adjustment of the market value of the swap (the contract rate versus the current market rate).  The realized loss is the result of the settlement difference between contracted interest rates and the actual market interest rates (LIBOR).
 
Interest income.   Interest income was $35,492 for the year ended December 31, 2008, a decrease of $106,741 or 75% from $142,233 for the year ended December 31, 2007.  The decrease was primarily due a reduction in interest rates for our cash deposits.
 
Other expense, net.   Other expense net, was a loss of $18,752 and $9,304 for the years ended December 31, 2008 and 2007, respectively.  The increase in the loss of $9,448 or 102% was primarily due to a change in foreign currency losses.
 
LIQUIDITY AND CAPITAL RESOURCES
 
Liquidity
 
Our primary source of funds for our short-term and long-term liquidity needs will be the cash flows generated from our vessel operations, particularly cash flows from our two vessels on time charter.  Time charters provide contracted revenue that reduces the volatility (rates can fluctuate within months) and seasonality (rates are generally stronger in first and fourth quarters of the year) from vessels that operate in the spot market.  Our third vessel operates in the Scorpio Panamax Tanker Pool.  The Pool reduces volatility because (i) it aggregates the revenues and expenses of all pool participants and distributes net earnings to the participants based on an agreed upon formula and (ii) some of the vessels in the pool are on time charter.  We believe these cash flows from operations will be sufficient to meet our existing liquidity needs for the next 12 months.
 
As of September 30, 2009, our cash balance was $0.5 million, which is down from our cash balance of $3.6 million as of December 31, 2008.  This reduction was due in part to a dividend of $8.7 million paid during the nine months ended September 30, 2009.  We also paid a dividend of $18.8 million in 2008.
 
Our long-term liquidity needs are comprised of our debt repayment obligations for our 2005 Credit Facility, which we intend to fully repay using the proceeds of this offering, and debt repayment obligations under our new credit facility following the completion of this offering and drawdowns under the new facility and future drydock expenses.  As of September 30, 2009, the outstanding balance on this loan was $40.7 million with $3.6 million due within the next 12 months.  The loan was drawn down in May 2005, matures in May 2015, and is secured by the Noemi and Senatore .
 
The new credit facility will require the Company to comply with a number of covenants, including financial covenants related to liquidity, consolidated net worth, and collateral maintenance; delivery of quarterly and annual financial statements and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA; maintenance of flag and class of the initial vessels; restrictions on consolidations, mergers or sales of assets; prohibitions on changes in the Manager of the Company's initial vessels; limitations on liens; limitations on additional indebtedness; prohibitions on paying dividends if a covenant breach or an event of default has occurred or would occur as a result of payment of a dividend; prohibitions on transactions with affiliates; and other customary covenants.
 

49
 
Included in our current liabilities on our Combined Balance Sheet as of September 30, 2009 is a shareholder payable of $19.3 million, and a related party payable owed to a subsidiary of Simon Financial Limited of $27.4 million. The related party payable is repayable upon demand, non-interest-bearing and unsecured. The shareholder payable is owed to Simon. Historically, we and the shareholder have transferred cash depending on the need of each entity and the excess cash available. The shareholder payable is non-interest-bearing and unsecured. These outstanding balances as of November 18, 2009 of $46.3 million were converted to equity as a capital contribution. See our pro forma balance sheet as of September 30, 2009 which is included in our unaudited condensed combined financial statements elsewhere in this prospectus.
 
Since two of our vessels were in drydock in 2009 and the third received an underwater survey in 2009, we do not anticipate any vessels in our current fleet requiring drydocking within the next 12 months.
 
We plan on using the net proceeds from this offering, after repayment of our 2005 Credit Facility, and after assessing any working capital and other general corporate expense needs, to purchase vessels that meet our strategic goals, and we may also use debt facilities to finance any purchase of vessels. Since we operate in a capital intensive industry, we will be limited in our ability to purchase vessels if we are not able to issue equity or use debt financing.
 
Cash Flows
 
The table below summarizes our sources and uses of cash for the periods presented:
 
   
For the Year Ended
   
For the Nine Months Ended
 
   
December 31,
   
September 30,
 
   
2008
   
2007
   
2009
   
2008
 
Condensed Cash Flows
                       
Provided (Used) By:
                       
Cash Provided by Operating Activities
  $ 24,837,892     $ 5,830,773     $ 8,234,113     $ 12,812,237  
Cash Used by Investing Activities
    -       -       -       -  
Cash Used by Financing Activities
    (22,384,000 )     (10,693,500 )     (11,361,000 )     (12,127,000 )


For the Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

Cash provided by operating activities
 
Net cash provided by operating activities was $8.2 million for the nine months ended September 30, 2009, which was a decrease of $4.6 million from the nine months ended September 30, 2008.  The primary reasons for the decrease were (i) lower revenues from the vessels in the pool ($6.1 million), (ii) 37 off-hire days for two of the vessels that were in drydock during 2009 ($1.0 million); and (iii) drydock payments for two of our vessels that were performed in 2009 ($1.3 million). These reductions were partially offset by (i) a decrease in the charterhire expense ($0.9 million), and (ii) changes in other assets and liabilities ($2.1 million).
 
Cash used by investing activities
 
There was no cash used in investing activities for any of the periods shown.
 
Cash used by financing activities
 
Cash used by financing activities was $11.4 million for the nine months ended September 30, 2009, which was $0.7 million less than the cash used for the nine months ended September 30, 2008.  This decrease was due to a reduction in dividends paid of $0.7 million ($8.7 million in the nine months ended September 30, 2009 and $9.4 million in the nine months ended September 30, 2008).  During the nine months ended September 30, 2009 and 2008, we made scheduled principal payments on our debt of $2.7 million.
 
50
 
For the Twelve Months Ended December 31, 2008 Compared to the Twelve Months Ended December 31, 2007
 
Cash provided by operating activities
 
Net cash provided by operating activities was $24.8 million for the year ended December 31, 2008, which was an increase of $19.0 million from the year ended December 31, 2007.  Changes in operating cash flows before movements in working capital resulted in a net inflow of $1.4 million. The remaining changes in operating cash flows were due to changes in assets and liabilities.  The primary reasons for the increase were (i) a decrease in cash payments of $8.4 million to a related party ($8.4 million was paid in 2007 and none in 2008), (ii) an increase in net cash from the shareholder of $10.8 million (a net payment of $8.2 million was made in 2007 and a net receipt of $2.6 million in 2008); (iii) a decrease in receipts of accounts receivable of $2.0 million due to collection of receivables; and (iv) an increase in changes in other assets and liabilities of $0.3 million.
 
Cash used by investing activities
 
There was no cash used in investing activities for any of the periods shown.
 
Cash used by financing activities
 
Cash used by financing activities was $22.4 million for the year ended December 31, 2008, which was an increase of $11.7 million from the cash used by financing activities for the year ended December 31, 2007.  This change was due to an increase of $11.7 million in dividends paid ($18.8 million for the year ended December 31, 2008 and $7.1 million for the year ended December 31, 2007).  During the years ended December 31, 2008 and 2007, we made scheduled principal payments on our debt of $3.6 million.
 
Long-Term Debt Obligations and Credit Arrangements
 
2005 Credit Facility
 
Two of our wholly-owned subsidiaries, Senatore Shipping Company Limited and Noemi Shipping Company Limited, are joint and several borrowers under a loan agreement dated May 17, 2005, or the 2005 Credit Facility, entered into with The Royal Bank of Scotland plc, as lender, which is secured by, among other things, a first preferred mortgage over each of Senatore and Noemi .  We intend to fully repay the 2005 Credit Facility using the proceeds of this offering. The initial amount of the 2005 Credit Facility was $56,000,000 and consists of two tranches, one for each vessel-owning subsidiary.  Each tranche is repayable in 40 consecutive quarterly installments of $450,000, plus a balloon payment of $10,000,000, to be made together with the 40 th installment of each tranche.  The 2005 Credit Facility matures on May 18, 2015. The interest rate on the loan is 0.70% above LIBOR.  As of September 30, 2009, the outstanding balance was $40.7 million, with $3.6 million due within the next 12 months.  As of September 30, 2009, we were in compliance with all of our loan covenants.  We believe we will continue to meet our loan covenants as we expect the value of our vessels to exceed the amounts required by such covenants.
 
New Credit Facility
 
On March 9, 2010, we entered into a commitment letter with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA and Fortis Bank Nederland for a senior secured term loan facility of up to $150 million. We expect to enter into the credit facility after the closing of this offering. Our entry into the credit facility will be subject to our completion of this offering with gross proceeds to us of at least $150 million and customary conditions and documentation, including payment of an upfront fee and each Lender's satisfaction with the completion of business, legal, environmental, tax, financial, accounting and customer call due diligence .  
 
Under the terms of the commitment letter, the credit facility would have a maturity date of five years after the date on which definitive documentation for the facility is executed, and borrowings under the facility would bear interest at LIBOR plus an applicable margin of 3.00% per annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and 3.50% per annum when our debt to capitalization ratio is greater than 50%. A commitment fee equal to 40% of the applicable margin is payable on the unused daily portion of the credit facility, which begins accruing upon the completion of this offering. The credit facility may only be used to finance the cost of future vessel acquisitions, which vessels will be the collateral for the credit facility. The repayment schedule for each vessel financed under this facility, will depend upon the age of the vessel at acquisition.  Each tranche under the new credit facility will be repaid in equal quarterly installments, and a lump sum payment at maturity, based on a full repayment of such tranche when the vessel to which it relates is fifteen years of age.   Our subsidiaries, which may at any time own one or more of our initial vessels, will act as guarantors under the credit facility.  The new credit facility will be available for borrowing for a period of 18 months following the date on which definitive documentation for the facility is executed.
 
 
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The credit facility will require us to comply with a number of covenants, including financial covenants related to liquidity, consolidated net worth, and collateral maintenance; delivery of quarterly and annual financial statements and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA; maintenance of flag and class of the initial vessels; restrictions on consolidations, mergers or sales of assets; prohibitions on changes in the Manager of our initial vessels; limitations on liens; limitations on additional indebtedness; prohibitions on paying dividends if a covenant breach or an event of default has occurred or would occur as a result of payment of a dividend; prohibitions on transactions with affiliates; and other customary covenants.
 
Interest Rate Swaps
 
As of September 30, 2009, we had one interest rate swap.  The notional value was $20.35 million, and the effective fixed interest rate was 4.79%.  The swap began in May 2005.  The notional balance reduces by $450,000 per quarter and expires in May 2015.
 
CAPITAL EXPENDITURES
 
Drydock
 

We do not plan to drydock any of our vessels within the next 12 months because (i) Noemi and Senatore were drydocked in 2009 for an aggregate cost of $1.6 million and 37 off-hire days, and (ii) Venice received an underwater survey in 2009.  The vessels are not scheduled to be drydocked until 2011 and 2012.
 
As our fleet matures and expands, our drydock expenses will likely increase.  Ongoing costs for compliance with environmental regulations and society classification survey costs are a component of our vessel operating costs.  We are not currently aware of any regulatory changes or environmental liabilities that we anticipate will have a material impact on our current or future operations.
 
Dividends
 

We do not have immediate plans to pay dividends, but we will continue to assess our dividend policy.  In the future, our board of directors may determine it is in the best interest of the Company to pay dividends.
 
CONTRACTUAL OBLIGATIONS
 
The following table sets forth our total contractual obligations for our 2005 Credit Facility, which we intend to fully repay using the proceeds of this offering, as of September 30, 2009 (3):
 
   
in millions of $
 
   
Less than
   
1 to3
   
3 to 5
   
More than
       
   
1 year
   
years
   
years
   
5 years
   
Thereafter
 
Bank Loan
  $ 3.6     $ 7.2     $ 7.2     $ 22.7       -  
Bank Loan - Interest payments (1)
  $ 1.2     $ 2.1     $ 1.6     $ 0.5       -  
Related party payable (2)
  $ 27.4       -       -       -          
Shareholder payable (2)
  $ 19.3       -       -       -          

 
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(1)  
The interest expense on our loan is variable and based on LIBOR.  The payments in the above schedule were calculated using an interest swap rate of 2.31% plus a margin of 0.70%, which is the margin for the 2005 Credit Facility.
 
(2)  
These payables were converted to equity as a capital contribution in December 2009; therefore, there is no remaining obligation for these facilities.  See Note 8 in combined financial statements for the year ended December 31, 2008 and Note 4 in combined financial statements for the nine months ended September 30, 2009.
 
(3)  
On March 9, 2010, we entered into a commitment letter for a new credit facility.  We have not incurred any indebtedness under the new credit facility and are only permitted to incur indebtedness under the new credit facility after the consummation of this offering.  See "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources" for further details of our new facility.
 
OFF-BALANCE-SHEET ARRANGEMENTS
 

As of September 30, 2009, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital resources.
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 

Interest Rate Risk
 
We are exposed to the impact of interest rate changes primarily through our unhedged variable-rate borrowings. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to service our debt. From time to time, we will use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our variable-rate debt and is not for speculative or trading purposes. Currently, we are not using hedge accounting for our interest rate swaps.
 
Changes in the fair value of our interest rate swaps are either offset against the fair value of assets or liabilities through income. As of September 30, 2009, our outstanding floating rate debt was $40.7 million and the notional balance of the interest rate swap was $20.35 million.  As of December 31, 2008 the floating rate debt was $43.4 million, and the notional balance of the interest rate swap was $21.7 million.  Based on the floating rate debt at September 30, 2009, a one-percentage point increase in the floating interest rate would increase interest expense by $0.4 million per year.
 
The fair market value of our interest rate swaps was a liability of $2.0 million as of September 30, 2009, and $2.6 million as of December 31, 2008.

The following table presents the due dates for the principal payments of our floating rate debt and the notional balance reductions of our interest rate swaps:

   
As of September 30, 2009 in millions of $
 
   
Remaining
         
2011 to
   
2013 to
       
   
2009
   
2010
   
2012
   
2014
   
Thereafter
 
 Principal payments- floating rate debt
  $ 0.9     $ 3.6     $ 7.2     $ 7.2     $ 21.8  
 Notional balance (1)
    0.45       1.8       3.6       3.6       10.9  

(1) We are not using hedge accounting for our interest rate swaps.
 
 
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Spot Market Rate Risk
 
The cyclical nature of the tanker industry causes significant increases or decreases in the revenue that we earn from our vessels, particularly those vessels that participate in pools that are concentrated in the spot market such as the Scorpio Panamax Tanker Pool. To reduce this risk, we have vessels that are on time charter contracts.
 
Foreign Exchange Rate Risk
 
Our primary economic environment is the international shipping market. This market utilizes the U.S. Dollar as its functional currency. Consequently, virtually all of our revenues and the majority of our operating expenses are in U.S. Dollars. However, we incur some of our combined expenses in other currencies, particularly the Euro. The amount and frequency of some of these expenses (such as vessel repairs, supplies and stores) may fluctuate from period to period. Depreciation in the value of the U.S. dollar relative to other currencies will increases the U.S. dollar cost of us paying such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations.

There is a risk that currency fluctuations will have a negative effect on our cash flows. We have not entered into any hedging contracts to protect against currency fluctuations. However, we have some ability to shift the purchase of goods and services from one country to another and, thus, from one currency to another, on relatively short notice. We may seek to hedge this currency fluctuation risk in the future.
 
Inflation
 
We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.
 
CRITICAL ACCOUNTING ESTIMATES
 
In the application of our accounting policies, which are prepared in conformity with IFRS as issued by the IASB, we are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities, and revenues and expenses that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
 
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
 
The significant judgments and estimates are as follows:
 
Revenue recognition
 

We currently generate all of revenue from time charters and pools. Revenue recognition for time charters and pools is generally not as complex or as subjective as voyage charters.  Time charters are for a specific period of time at a specific rate per day. For long-term time charters, revenue is recognized on a straight-line basis over the term of the charter.  Pool revenues are determined by the pool managers from the total revenues and expenses of the pool and allocated to pool participants using a mechanism set out in the pool agreement.
 
Vessel impairment
 
We evaluate the carrying amounts of our vessels to determine whether there is any indication that those vessels have suffered an impairment loss.  If any such indication exists, the recoverable amount of vessels is estimated in order to determine the extent of the impairment loss (if any).
 
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Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The projection of cash flows related to vessels is complex and requires us to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these items have been historically volatile.  In assessing the fair value less cost to sell of the vessel, we obtain vessel valuations from leading, independent and internationally recognized ship brokers on an annual basis or when there is an indication that an asset or assets may be impaired.
 
If an indication of impairment is identified, the need for recognizing an impairment loss is assessed by comparing the carrying amount of the vessels to the higher of the fair value less cost to sell and the value in use.

As of September 30, 2009, we had two vessels ( Noemi and Senatore ) that were impaired.  The impairment charge was $4.5 million.  We did not have an impairment in prior years.
 
Vessel lives and residual value

The carrying value of each of our vessel represents its original cost at the time it was delivered or purchased less depreciation. We depreciate our vessels to their residual value on a straight-line basis over their estimated useful lives.  The estimated useful life of each vessel is 20 years from date of initial delivery from the shipyard. The residual value is estimated as the lightweight tonnage of each vessel multiplied by a forecast scrap value per ton. The scrap value per ton is estimated taking into consideration the scrap market rate ruling at the period end.

An increase in the estimated useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or estimated residual value would have the effect of increasing the annual depreciation charge. When regulations place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessel's useful life is adjusted to end at the date such regulations become effective. The estimated residual value of the vessels may not represent the fair market value at any one time since market prices of scrap values tend to fluctuate.

Deferred drydock cost

We recognize drydock costs as a separate component of the vessels' carrying amounts and amortizes the drydock cost on a straight-line basis over the estimated period until the next drydock. We use judgment when estimating the period between drydocks performed, which can result in adjustments to the estimated amortization of drydock expense. If the vessel is disposed of before the next drydock, the remaining balance of the deferred drydock is written-off and forms part of the gain or loss recognized upon disposal.  We expect that our vessels will be required to be drydocked approximately every 30 to 48 months for major repairs and maintenance that cannot be performed while the vessels are operating. Costs capitalized as part of the drydock include actual costs incurred at the drydock yard and parts and supplies used in undertaking the drydock.
 

 

 
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THE INTERNATIONAL TANKER INDUSTRY
 
The information and data in this section, which relates to the international maritime transportation industry, has been provided by Fearnley Fonds ASA (or Fearnley), a Norwegian securities firm which is part of the Astrup Fearnley group, a Norwegian privately owned group which, among other sources, provides research and statistics to the maritime industry.  Fearnley based its analysis on information drawn from published and private industry sources.  These included in-house databases, including data from its affiliate Fearnresearch; the International Energy Agency (or IEA), an autonomous energy forum for 26 industrial countries; the Central Intelligence Agency (or CIA), an independent US government agency; Eurostat, the statistical office of the European Union; and the BP Statistical Review of World Energy June 2009.  Although data is taken from the most recently available published sources, these sources do revise figures and forecasts from time to time.

Industry overview

Overview

Tanker vessels are used to transport liquid cargoes, of which the most important cargoes (measured in terms of volume) are crude oil and refined oil products.  The total seaborne volume of oil and oil products amounted to about 2.4 billion tons in 2008, based on data from Fearnresearch.  Transportation of crude oil is the largest segment of the tanker market, accounting for about 75% of total transported volume on tankers, and reflects the global imbalance between oil producing regions and oil consuming regions.  Tanker vessels represent a relatively low cost, and highly flexible, means of bridging these imbalances.

Crude oil is normally transported over long distances from the production site to large refining facilities or receiving terminals.  Accordingly, to benefit from economies of scale, crude oil is typically carried on the largest vessels that fit the harbor facilities at loading and discharging ports.  Smaller vessels will typically be used for regional trades, or where the cargo is going into ports that are too small for the largest tankers.

Refined oil products have a more complex trading pattern than crude oil, reflecting the multitude of products carried and regional imbalances between refinery capacity and product demand.  Tankers used to carry refined oil products, called product carriers, are typically smaller than crude oil tankers, reflecting smaller trading lots and the need to load and discharge at smaller ports.

Types of tanker vessels

It is common in the tanker industry to distinguish vessels based on size.  Sizes are normally measured in terms of cargo capacity, measured in deadweight tons (or dwt).

The following vessel categories are normally used in the transportation of crude oil:

Category term
Typical cargo capacity
Typical use
ULCC, or Ultra Large Crude Carrier
350,000 dwt
Middle East Gulf to the United States and Europe
VLCC, or Very Large Crude Carrier
300,000 dwt
Middle East Gulf to the United States, Europe, and Asia; West Africa to the United States
Suezmax
150,000 dwt
West Africa to the United States and Asia
Aframax
110,000 dwt
Caribbean to the United States; Various regional trades

Tanker vessels smaller than Aframaxes will normally not be used to carry crude oil.  Instead, these smaller tankers will be used to carry refined oil products.
 
 
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The following vessel categories are normally used in the transportation of refined oil products:

Category term
Typical cargo capacity
Typical use
LR2, or Long Range 2 product tanker (Aframax)
110,000 dwt
Middle East Gulf to Far East; Various regional trades
LR1, or Long Range 1 product tanker (Panamax)
75,000 dwt
Various regional trades
MR, or Medium Range product tanker
47,000 dwt
Transatlantic trade
Various regional trades
Handysize product tanker
30,000 dwt
Short haul trades

Product tankers are normally distinguished into the "long range" segment and the "medium range" segments, often referred to as LR and MR tankers.  The difference in cargo capacity provides greater economies of scale for the LR tankers and more flexibility for MR tankers.

Since many refined oil products will be transported in smaller quantities, product tankers will often have segregations and advanced piping systems which allow for transportation of multiple cargoes, unlike the crude oil tankers which will only carry one single product.  A typical product tanker will have the ability to carry four to six different cargoes at any given time.

The cargoes carried by product tankers are mainly made up of refined oil products, which are transported from refineries to factories, importing terminals, and other user areas.  The cargo lots are typically between 10,000 to 80,000 tons.

Owing to the diversity of these products, the interior cargo holds will often require cleaning between each cargo to avoid contamination, and these smaller tankers will therefore normally have a coating (such as epoxy or zinc) to facilitate efficient cleaning procedures.

In addition to these "commodity" segments of the tanker market, which account for the majority of cargo volumes, there are various smaller specialty tanker segments that have different special requirements.  These include chemical tankers, parcel tankers, tankers for pressurized or liquefied gases, smaller coastal tankers, and barges.

The charter market

Rate determination

The tanker market is generally a highly competitive and transparent market, where vessel owners compete for charters, and where cargo owners compete for vessels.  The market is characterized by a high number of participants, with no single owner having a dominating market share.  Although charters may be entered into on private terms, most charters are fixed through the use of shipbrokers and reported through market channels available to the industry.

Rates will vary over time on the basis of long- and short-term supply and demand factors, and particularly on the amount of oil available for export from the Middle East region.  Historically, tanker rates have shown significant volatility.

Charters mainly fall into three categories: spot charters, time charters, and bareboat charters.

·  
Spot charters are generally charters for a single voyage.  Since these charters are entered into on the basis of a prevailing market balance at a specific moment, this charter type offers potential for higher rates, but also carries the risk of lower rates or idle periods.

·  
Time charters are generally charters for a given period, varying from months to several years.  Under a time charter, the vessel owner maintains the operation of the vessel against the payment of a fixed rate from the charterer.  The fixed rate is to cover the cost of operation, the cost of capital, and any profit to the owner.  A time charter will give stability and predictability for the vessel owner and the charterer, with less exposure to spot market trends.
 
 
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·  
Bareboat charters are leasing arrangements where the charterer assumes the operation of the vessel, and pays a fixed rate to the vessel owner.  This fixed rate is to cover the cost of capital and any profit to the owner, but not the cost of operation since this is borne directly by the charterer.  These charters tend to be longer than time charters, and may be likened to financial leasing arrangements.  Bareboat charters give an even higher degree of stability and predictability than time charters to the vessel owner, by transferring the risk of cost changes to the charterer.

Status of the tanker market

The spot tanker market began a period of strong rate levels from 2003/2004, as a result of increasing crude oil demand worldwide, and especially in China.  In addition, the supply growth of tankers remained fairly low both as a result of low deliveries of new vessels from shipyards and high scrapping of older vessels built in the 1970s.  Rates remained elevated through 2007.  During the early part of 2008 rates spiked, partly as a result of tanker vessels being taken out of trading for conversion to drybulk vessels (transporting iron ore and coal).  From late 2008 to late 2009, spot rates declined following reduced worldwide crude demand, and reached a trough in the second half of 2009.  After reaching this trough, rates have experienced a trend of gradual improvement.

The charts below illustrate tanker rates over the last decade for each main segment, divided between spot rates and time charter rates for 1-year time charters.  All rates have been converted into "time charter equivalent" rates, which is often done to facilitate comparison.

 
 
 
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59
 
 
 
Vessel values

Newbuilding and second-hand markets

Shipowners can elect to purchase vessels in two distinct markets: either by placing newbuilding orders with a yard, or by purchasing vessels in the second-hand market.  There is a significant trade of second-hand vessels among market participants.  This trading is generally competitive and transparent, with trades and values being reported through industry media.

Newbuilding activity varies over time, as do newbuilding prices. The newbuilding order book which extends to 2014 equals approximately 29% of the existing world tanker fleet. Newbuilding prices are determined by a number of factors, including the underlying balance between shipyard output and newbuilding demand, raw material costs, freight markets and exchange rates.  From 2003 to 2007, high levels of new ordering were recorded across all sectors of shipping, and as a result, newbuilding prices increased significantly. However, since the freight markets declined in late 2008, new vessel ordering has come to almost a complete stop, which has made the assessment of newbuilding prices very difficult.  Nevertheless, based on the few contracts which have been reported, it is evident that prices for new ships have declined in line with the general downturn in rates.

The time from ordering a vessel until its delivery is normally 20 to 28 months, depending on available slots at the shipyards.  Therefore, the placement of a newbuilding order will be made in the context of the shipowner's expectations for a market into the future.

The purchase of vessels in the secondhand market provides an opportunity to generate revenue more immediately than through newbuildings.  Due to the opportunities to capture extraordinary markets, whenever these occur, the prices in the secondhand market may differ significantly from comparatively sized newbuildings.  In particular, this situation was seen in the first half of 2008 when shipowners were eager to acquire tonnage to immediately benefit from the rates at that time, and thus paid higher prices for modern secondhand tonnage than for newbuildings.
 
 
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However, this situation changed quickly when the freight market fell and values for all types vessels declined steeply in the second half of 2008.  It should be noted that there were very few recorded sales in the second half of 2008 and 2009 after the significant market drop since the peak in the first half of 2008.  The trend in prices during this period can only be taken as an assessment.  Fearnley estimates that from mid-2008, ship values on modern vessels are down approximately 50% on average, and back to levels from late 2003.  However, the cost of ordering new ships has seen a lower decline at approximately 35%, partly as a result of overall increased costs at shipyards compared to the latest trough.

Value development for newbuildings and second-hand vessels

The following charts illustrate newbuilding and second-hand prices for selected tanker segments:
 
 
 
 
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In the current market, asset values in the tanker industry are significantly the last five and ten year trailing averages.

As per February 2010, Fearnley estimates the following values for newbuilt vessels available for prompt delivery:

·  
MR and Handysize product tankers: About USD 27 million;
·  
LR1, or Panamax, product tankers:  About USD 40-41 million; and
·  
Aframax tankers:  About 53 million.

Global oil demand and tanker demand

Overview

Demand for oil tankers is normally described in ton-miles, reflecting that the demand is made up of a volume element and a distance element.  The volume element is a function of world oil demand and supply, whereas the distance element depends on where the oil is produced and consumed.

Maritime transport is a means to compensate for regional imbalances, through imports and exports.  In certain regions, pipelines are used to transport oil, but in the global transportation this is generally regarded as more costly and more vulnerable than maritime transport.  For crude oil, the major importers are the US, Europe, and Asia, while the largest exporting region is the Middle East Gulf.  For refined oil products, the picture is more complex and is based on industrial factors as well as refinery factors and on trading opportunities.  The tables below give an overview of the importers and exporters of crude oil and refined oil products.

 
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As an illustration of the importance of distances, a round trip for a VLCC from North Sea to North America is estimated by Fearnley to take about 23 days, while a round trip from Middle East to the same destination is estimated to take about 82 days.  Hence, the tanker demand generated by the North Sea based cargo represents only 28% of the tanker demand generated by the Middle East based cargo.  Changes in transportation patterns have in the past and could in the future impact tanker demand.

Oil demand

From 2000 to 2008 the world's primary energy consumption grew by 22% from 9,263 million to 11,295 million tons of oil equivalents, corresponding to an annualized growth of 2.5%, according to the BP Statistical Review of World Energy June 2009.  World's total energy consumption grew by 1.4% in 2008, which was below the trend seen since 2000.  Oil remains the dominant fuel, accounting for 34.8% of total energy consumption.   The number two and three energy sources are coal at 29.3% and natural gas at 24.1% of total consumption.

The long-term development in global oil demand is illustrated in the chart below.
 
 
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Since 2000 to 2008 the world's oil demand has grown by 13% from 76.6 million barrels per day to 86.3 million barrels per day, corresponding to an annualized growth of 1.5%.  According to IEA oil demand fell by 0.2 million barrels per day or 0.2% to 86.3 million barrels per day in 2008 from the previous year.  For 2009, IEA estimates a decline in the world's oil demand of 1.3 million barrels per day to 84.9 million barrels per day.

For 2010, IEA estimates that world's oil demand will recover by 1.57 million barrels per day or 1.8%, which is above the average growth level from 2000 to 2008.

In 2008 and 2009, the decline in oil demand was driven by weaker demand in the OECD countries (countries that are members of the international Organization for Economic Co-Operation and Development), and especially in the US.  For 2010 the growth is expected to come from non-OECD areas, with China being among the countries having the highest expected growth.
 
 
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[
There are significant differences in the energy intensity per capita in the different regions of the world.  As an example, the per capita consumption of oil equivalents in the South East Asia is less than 0.75 tons per year, while the similar figure for North America is more than 6 tons of oil equivalents.  These differences are illustrated in the following charts, reflecting overall and per capital oil consumption in some of the largest oil consuming nations.
 
 


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With the highest GDP growth currently taking place in economies in South East Asia, there are likely to be industrial and demographical changes (such as sharply increasing sales of private automobiles) which will contribute to increasing energy intensity in large economies in Asia, particularly in China.

Oil supply

The majority of the oil is produced in the Middle East.  Saudi Arabia, Iran, Iraq, UAE, Kuwait and Qatar accounted for about 24% of the world's oil production in 2008, according to IEA (report as of October 2009).  The majority of this oil is transported at sea to consuming areas like North America, Europe and the Far East.

At the end of 2008 the Middle East had approximately 60% of the world's total proved reserves of oil.

According to the BP Statistical Review of World Energy, current global proved reserves compared to annual production gives a reserve-to-production (R/P) ratio of 42 years on a worldwide basis.  However, there are significant regional differences, with the Middle East having an R/P of more than 75 years while North America and Asia Pacific have an R/P of around 15 years.

The world's proved oil reserves and reserves-to-production ratios by region are illustrated in the map below, with data based on the BP Statistical Review of World Energy.

 
Demand for crude oil tankers

Historically seaborne volume (in tons) has grown by an average of 2.6% per annum from 1990 to 2008, ranging between -1.9% to +6.3% per annum.  According to Fearnresearch, the total shipped volume is expected to decline by 6.4% year-on-year to 1,685 million tons in 2009.  For 2010, Fearnresearch expect an increase in volumes transported at sea of 4.0% year-on-year to 1,752 million tons.

Looking at demand in terms of ton-miles, the average growth has been 2.6% from 1990 to 2008, ranging from -2.8% to +9.2%.  For 2009, Fearnresearch has estimated a decline in seaborne trade in ton-miles of 6.9% year-on-year to 8,660 billion ton-miles.  For 2010, Fearnresearch expects an increase in demand of 4.5% year-on-year to 9,050 billion ton-miles.

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Refined product demand

Compared to crude oil transportation, demand for seaborne product tankers depends on additional factors such as regional refinery product output and consumption (shortfall or surplus of certain products), pricing differences in various regions, inventory levels and relative capacity utilization and profitability of refineries in various regions.  Other factors such as extreme weather conditions can also temporarily affect refinery output and thereby require higher imports of refined oil products for a period of time; for example, hurricanes in the Gulf of Mexico have from time to time caused refinery shutdowns and resulted in temporarily increased import requirements to the United States.

Refined oil products can broadly be classified as light distillates, middle distillates, fuel oils or other products:

·  
"light distillates" consist of aviation and motor gasoline, and light distillate feedstock;

·  
"middle distillates" consist of jet and heating kerosenes, and gas and diesel oils;

·  
"fuel oils" include marine bunkers and crude oil used directly as fuel; and

·  
"other products" include of refinery gas, LPG, solvents, petroleum coke, lubricants etc.

The regional differences in demand for each product segment create a transportation need and thus demand for product tankers.  Contrary to trade flows of crude oil where tankers generally carry oil on the outbound segment of the voyage and return empty, or ballast, to pick another cargo, product tankers operate on more complex trade routes, such as triangulations, giving opportunities for higher vessel utilization.  These trade routes may be generated by long-term factors such as product imbalances, or by short-term factors such as trading opportunities or temporary price differences.

According to the BP Statistical Review of World Energy June 2009, refined oil product demand in North America totalled 23.8 million barrels per day.  Of this total, the demand for light distillates was 10.9 million barrels per day, corresponding to 46% of total product demand.  Demand for middle distillates were 6.9 million barrels per day, or 29% of total demand.  By comparison, demand for light distillates in Europe was only 21% of the total product demand (3.4 million barrels per day of total demand 16.1 million barrels per day).  This is partly a reflection of a higher portion of diesel fueled cars in Europe compared to North America, and thereby less demand for motor gasoline and corresponding higher demand for diesel.  This in turn creates transportation of surplus gasoline from Europe to North America and surplus diesel fuel from North America to Europe.
 
 
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In 2008, the world's petroleum product consumption was 84.5 million barrels per day, according to the BP Statistical Review of World Energy June 2009.  From 1998 to 2003 the world's production increased by 7.4%, while it increased by 6.8% from 2003 to 2008.  North America has been the major consumer of petroleum products, and currently accounts for 28.1% of total world consumption or 23.8 million barrels per day.  From 1998 to 2003, the consumption in this region grew by 6.1%, while in the following five year period from 2003 to 2008 the consumption has decreased by 1.2%.  The growth in Asia-Pacific region has been very strong with a growth of 15.6% from 1998 to 2003, and increased by another 12.1% the following five year period.  Currently this region accounted for 30.0% of total consumption.  China has been the main driver within this region with volumes growing by 37.8% over the last five years.
 

 
Refined product supply

Refinery capacity in 2008 totalled 88.6 million barrels per day, according to the BP Statistical Review of World Energy June 2009.  Total refinery capacity has been growing by 6.0% from 2003 to 2008.  The major refinery capacity is situated in North America and Europe and Eurasia, accounting for 52.0% of total capacity.  The major growth in refinery capacity has occurred in the Asia-Pacific region, especially in China, in the last five years.  China has been growing its refinery capacity by 41% from 2003 to 2008, and accounts for 8.7% of total capacity.
 
 
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Both the US and Europe are large exporters of petroleum products, despite having minimal crude oil exports.  The export of petroleum products from these regions, which according to the BP Statistical Review of World Energy June 2009 amounted to approximately 24% of total world petroleum products, can be explained by a refinery surplus of certain product types.  Such regional imbalances create demand for product tankers.

The map below provides an illustration of the main trading routes for refined oil products.  Volumes such as diesel from US to Europe, naphtha from the Far East to Europe and naphtha from the Middle East Gulf to Japan tend to be driven by pricing differences in the various markets, creating trading opportunities.  Volumes such as gasoline from Europe to US, naphtha from the Middle East Gulf to the Far East or intra-Asia gasoil volumes are mainly transported due to a permanent surplus/shortage of the products in the respective markets.  Other routes include a wide range of volumes being transported in the Mediterranean, naphtha from the Middle East Gulf to Europe and gasoil volumes from South Korea and Japan to the US West Coast.  The arrows illustrate only the main trades, and not the relative size of the trades.
 

 
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Demand for product tankers

Product tanker demand has historically grown by an average of 2.6% per annum in volume terms since 1990.  Fearnresearch expects demand down 1.7% in volume terms for 2009, before a rebound of 7.0% for 2010.

Looking at demand in terms of ton-miles the average growth has been 3.6% per annum from 1990 to 2008, ranging from 1.5% to 7.0%.  For 2009, Fearnresearch expects a decline in seaborne trade in ton-miles of 0.2% year-on-year to 1,988 billion ton-miles.  For 2010, Fearnresearch expects an increase in demand of 5.3% year-on-year to 2,094 billion ton-miles.

Tanker vessel supply

Fleet overview

The supply side of the tanker market is determined by the existing fleet of tanker vessels, the pace of newbuilding deliveries from shipyards and scrapping/recycling of older vessels.  In addition, supply can be constrained by factors such as vessels being used for floating storage of crude oil or refined oil cargoes, congestion at loading or discharging ports and to a lesser extent extreme weather conditions.

The existing fleet of tankers numbers 4,531 vessels above 10,000 dwt, with a total capacity of 419 million dwt as per end of February 2010, according to Fearnresearch.  The larger size segments such as ULCCs, VLCCs, Suezmaxes and Aframaxes, transporting mainly crude oil, consists of 1,749 vessels with a total capacity of 306 million dwt, or approximately 73% of the total tanker capacity.  The smaller segments Panamaxes, MRs and Handysize consist of 2,782 vessels of 113 million dwt capacity, making up the remaining 27% of tanker capacity.  An overview of the fleet is set out in the table below.
 
 
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Category
Size in dwt
Vessels, no.
Total dwt
Average age
ULCC/VLCC
200,000 +
529
158
8.1
Suezmax
120 - 200,000
401
61
8.7
Aframax
85 - 120,000
819
87
8.1
Panamax
55 - 85,000
445
32
9.4
MR
25 - 50,000
1,681
71
8.7
Handysize
10 - 25,000
656
10
10.0
Total
 
4,531
419
8.6
Source: Fearnresearch

The average age of the total tanker fleet is approximately 8.6 years, with similar average age on the various size segments.  The economic useful life of tanker vessels depends on construction standards and maintenance, but can generally be estimated to around 25 years.

About 63% of the fleet, as measured in cargo capacity, is below 10 years.  About 8% of the fleet is above 20 years, which under normal conditions is potentially subject to scrapping.
 

 
The relatively young age of the current fleet reflects high ordering volumes in recent years, compared to the historical average.  The chart below provides an illustration of tanker ordering since the year 2000, showing particularly high ordering volumes in 2006-2007 and again in the second half of 2008.  Following the rapid rate decline in late 2008 until late 2009, ordering has been markedly lower.

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The single hull fleet

Of the total existing fleet of 4,531 vessels there are 429 vessels of single-hull design (as of end February 2010), meaning only one layer of steel between the cargo and the ocean, and as such higher risk of oil spill in the event of a collision or other accident.  Due to this risk, more than 150 nations have adopted regulations proposed by the International Maritime Organization (or IMO) to ban single-hull design vessels from trading by the end of 2010.  Given that the single-hull vessels accounts for about 8% of the existing fleet capacity, this scheduled phase-out will mitigate and offset a large part of the new vessels to be delivered over the next few years. In recent years, charterers' concerns about environmental and safety standards have shifted their preference toward modern tankers operated by reputable ship operators.
 


Construction of new vessels

According to Fearnresearch, the orderbook stands at about 121 million dwt as per end February 2010, corresponding to about 29% of the existing fleet.  Over the next two years, Fearnresearch expects gross deliveries to be in the range 45-58 million dwt, which compares to a total of 47 million dwt delivered in 2009.

The following table sets forth the orderbook in the various segments of the tanker fleet, including the contracted year of delivery.
 
 
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An orderbook of 29% is large in a historical context, and also in relation to the normal economic useful life of tankers which can normally be estimated to approximately 25 years.  The size of the orderbook therefore indicates that the fleet size could grow significantly over the next few years.  However, the orderbook should be seen in context with certain factors that could impact the amount of net fleet growth.  These factors include, in addition to the phasing out of the single-hull fleet through scrapping or conversions, the availability of financing to owners and ship yards, as well as slippage through delays from inexperienced ship yards, cancellations of orders, postponements of orders, etc.

The chart below illustrates historical and forecasted scrapping of tanker tonnage, with the high number forecasted for 2010 primarily being a reflection of the phasing-out of single-hull vessels.
 

Several ship yards have experienced challenges with meeting contracted delivery terms.  As much as approximately one-fifth of the orderbook has been placed with "greenfield" yards, or yards with limited construction experience.  The ability of these yards to complete orders in a timely manner remains uncertain.  Several yards have also experienced liquidity challenges from reduced order intake and a difficult financing environment, although some of this is mitigated by government aid to ship yards and owners, especially in Asia.  Several small and medium sized ship yards in South Korea and Japan were closed down in late 2008 and early 2009 from lack of financing.

According to data from Fearnresearch, delivery delays for tankers amounted to approximately 27% from January to December of 2009, meaning that actual deliveries were more than a quarter lower than initially forecasted at the beginning of the year.  Because inexperienced ship yards have contracted to build a disproportionate amount of smaller vessels, the delay has been higher, approximately 30%, in these segments.  Thus, it can be expected that actual deliveries of the remaining tankers on order will take place later than contracted, and that the net fleet growth in each period will be lower.  These delays, referred to as slippage, have not been material in the past.  However, with the large amount of orders placed at inexperienced ship yards over the last few years, slippage has become a much more significant factor in determining the fleet growth.  The slippage in tanker deliveries since 2006 is illustrated in the following chart.

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Several owners with vessels on order have been interested in cancelling their orders, due to a decline in earnings and ship prices and limited financing availability.  Ship yards are less willing to accept such cancellations, but may have to do so if delays go beyond contracted dates.  Shipbuilding contracts normally allow owners to cancel the order if the vessel is not delivered within a set time frame, often 180 or 270 days, after the contracted delivery date.

The extent of such cancellations in the future is uncertain, as is the extent of postponement of contracts based on agreement between owners and yards.


 

 
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BUSINESS
 
Our Company
 
We are Scorpio Tankers Inc., a company incorporated in the Republic of The Marshall Islands on July 1, 2009 by Simon Financial Limited, or Simon, which is owned by members of the Lolli-Ghetti family and manages their shipping interests.  We provide seaborne transportation of crude oil and other petroleum products worldwide. On October 1, 2009, (i) Simon transferred to Scorpio Tankers Inc. three operating subsidiary companies, which own the vessels in our initial fleet; (ii) Liberty Holding Company Ltd., or Liberty, became a wholly-owned subsidiary and operating vehicle of Simon; (iii) Scorpio Owning Holding Ltd. became a wholly-owned subsidiary of Liberty; and (iv) Scorpio Tankers Inc. became a wholly-owned subsidiary of Scorpio Owning Holding Ltd.  Liberty's operations include the Scorpio Group's drybulk carriers, logistics operations in Southeast Asia, owning an offshore floating terminal, vessel pools, chartered-in vessels, and interests in joint ventures and investments.
 
We believe that recent downward pressure on tanker values will present attractive opportunities for ship operators that have the necessary capital resources.  Following the completion of this offering, we expect to have approximately $      million of available cash from the net proceeds of this offering, based on an assumed offering price of $    per share, which represents the midpoint of the price range set forth on the cover of this prospectus. Our intention is to use these proceeds first to fully repay the debt outstanding under our 2005 Credit Facility. Our 2005 Credit Facility, as of February 17, 2010 has debt outstanding of $38.9 million, has an interest rate of 0.70% above LIBOR, was originally scheduled to mature on May 18, 2015, and the proceeds of this indebtedness were used to acquire the Senatore and Noemi .
 
We intend to use the remainder of our net offering proceeds, after repayment of our 2005 Credit Facility, of $              million, and after assessing any working capital and other general corporate expense needs, to pursue vessel acquisitions consistent with our strategy, including the purchase of additional modern tankers ranging in size from approximately 35,000 dwt, to approximately 200,000 dwt and that generally are not more than five years old.  We believe that our strong balance sheet, financing capacity and future access to capital will allow us to make opportunistic vessel acquisitions at attractive prices. We may purchase secondhand vessels that meet our specifications or newbuilding vessels, either directly from shipyards or from the current owners. The timing of these acquisitions will depend on our ability to identify suitable vessels on attractive purchase terms but we intend to acquire vessels within 12 months of this offering. 

Although we cannot assure you that we will be successful in acquiring vessels at prices comparable to current market prices, we could use the proceeds of this offering available for vessel acquisitions, per the above description and based upon current market conditions, to purchase up to four new Handysize tankers, two new Panamax tankers, or one new Aframax tanker, not including any borrowings under the new credit facility, and not accounting for any drydocking expenses.  These estimates are based on the newbuilding purchase price estimates as of February 2010 noted on page 62 of the "The International Tanker Industry" within this prospectus.  As noted, we may also purchase secondhand vessels that meet our specifications at prices to be determined by market conditions, which are affected by the age of the vessel.  No assets will be acquired from our affiliates.
 
We have also obtained a commitment letter for a new $150,000,000 senior secured credit facility that we expect to enter into after the closing of this offering.  Any borrowings under this credit facility are intended to facilitate future vessel acquisitions.
 
Our founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, is a member of the Lolli-Ghetti family, which has been involved in shipping since the early 1950s through the Italian company Navigazione Alta Italia, or NAI.  The Lolli-Ghetti family owns and controls the Scorpio Group, which includes Simon, which prior to this offering was our ultimate parent company and controlling party; Scorpio Ship Management S.A.M., or SSM; and Scorpio Commercial Management S.A.M., or SCM; which provide us and third parties with technical and commercial management services, respectively; Liberty Holding Company Ltd., or Liberty, which provides us with administrative services; and other affiliated entities. Our President, Mr. Robert Bugbee, also has a senior management position at Scorpio Group, and was formerly the President and Chief Operating Officer of OMI Corporation, or OMI, which was a publicly traded shipping company.
 
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Our Initial Fleet
 
We own and operate three Panamax tanker vessels, which we refer to as our initial fleet, that have an average age of 6.5 years as of January 1, 2010.  Two of these tankers, Noemi and Senatore , are employed under fixed-rate long-term time charters that, as of January 1, 2010, have remaining durations of approximately 24 and nine months, respectively, and have aggregate remaining contracted revenue of approximately $25.6 million.   Venice is currently participating in the Scorpio Panamax Tanker Pool (see description in "Business – Management of our Fleet – Scorpio Panamax Tanker Pool).  We acquired the vessels in our initial fleet from entities affiliated with our founder, Chairman and Chief Executive Officer and other members of the Lolli-Ghetti family in exchange for all of our common shares.
 
Our chartering policy is to employ our vessels on a variety of time charters and in the spot charter market. Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.  We believe this policy allows us to obtain attractive charterhire rates for our vessels while managing our exposure to short-term fluctuations in the tanker chartering market.
 
The following table summarizes key information about Venice , Noemi and Senatore and their associated charters or pool agreement as of the date of this prospectus:
 
Vessel
Vessel
Year
Charterer
Time
Charter Rate
Vessel Delivery
Re-Delivery from
Charterer
Name
Type
Built
Name
($ per day )(1)
Date
 
Venice (2)
Panamax
2001
Scorpio Panamax Tanker Pool
Pool earnings
April 2004
N/A
Noemi (3)
Panamax
2004
King Dustin
24,500
Jan 2007
Jan 2012
Senatore (4)
Panamax
2004
BP Shipping
26,000
Oct 2007
Oct 2010

(1)
This table shows gross charter rates and does not reflect commissions payable by us to third party and affiliated chartering brokers ranging from 2.5% to 3.75%, which includes the 1.25% payable to SCM .
 
(2)
Venice participates in the Scorpio Panamax Tanker Pool operated by our commercial manager, within which it is currently employed on spot charter with Marathon Oil. The vessel is allocated a pro-rata share of aggregated earnings of all the tankers in the pool, weighted by attributes such as size, fuel consumption, class notation and other capabilities. Based on 18 current vessels in the Scorpio Panamax Tanker Pool, the Venice 's specifications currently result in the vessel earning approximately 6.16% of all net pool revenues, assuming all pool participant vessels are operating for the full year. This percentage may not be reflective of future earnings in the pool. The vessel can be withdrawn from the pool upon 90 days notice or after the vessel is free from any commitment, whichever is later. Prior to December 2009, the Venice was provided as collateral to a third party under an agreement between a subsidiary of Liberty Holding Company Ltd. and a third party.  Neither the Venice , Scorpio Tankers Inc. nor any of its subsidiaries were party to this agreement, nor had they had a relationship with the third party involved.  At the request of Liberty Holding Company Ltd., in December 2009, the third party agreed to release the Venice from the agreement in exchange for Liberty Holding Company Ltd. providing other collateral in place of the Venice .  Scorpio Tankers Inc. and its subsidiaries have no remaining collateral obligation under the agreement. Please see "–Our Managers – Scorpio Panamax Tanker Pool" below for additional information comparing the Venice with other ships in the Scorpio Panamax Tanker Pool.
 
(3)
Noemi 's redelivery from King Dustin is in January 2012, plus or minus 30 days at the charterer's option.  King Dustin currently time charters-out Noemi to ST Shipping, a wholly owned subsidiary of Glencore S.A. of Zug, Switzerland. Please see "Related Party Transactions – King Dustin" for additional information.
 
(4)
Senatore 's redelivery from BP Shipping is in October 2010, plus or minus 30 days at the charterer's option.
 
 
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Our Managers
 
As our commercial and technical managers, SCM and SSM provide us with commercial and technical services pursuant to their respective commercial and technical management agreements with us. We expect to enter into similar agreements with respect to each vessel we acquire going forward.  Commercial management services include securing employment, on both spot market and time charters, for our vessels. Where we plan to employ a vessel on the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.  Technical management services include day-to-day vessel operation, performing general maintenance, monitoring regulatory and classification society compliance, customer vetting procedures, supervising the maintenance and general efficiency of vessels, arranging the hiring of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. We pay our managers fees for these services and reimburse our managers for the reasonable direct or indirect expenses they incur in providing us with these services.
 
We believe that Scorpio Group has established a reputation in the shipping industry as a leading independent provider of seaborne petroleum transportation services to major oil companies, national oil companies and oil traders in the Aframax, Panamax and Handymax tanker markets. Scorpio Group, headquartered in Monaco, was formed in 1971 and currently provides full technical management services through SSM to its own fleet as well as third party vessels and provides commercial management services through SCM to its own fleet as well as third party vessels. Scorpio Group is wholly-owned and controlled by the Lolli-Ghetti family, which has been involved in the shipping business since the early 1950s through NAI. Emanuele A. Lauro has served in a senior management position at Scorpio Group since 2004.
 
Scorpio Group has experienced significant growth since 2003 when it controlled a fleet of four vessels.  Today Scorpio Group, through SSM and SCM, manages a fleet of approximately 57 vessels, including the three vessels in our initial fleet, two drybulk vessels owned directly by affiliates within Scorpio Group, and approximately 55 vessels owned by third parties operated through one of three tanker pools that Scorpio Group operates. In addition to two minority investments in logistics businesses, Scorpio Group also maintains offices in London, Mumbai, New York, Singapore, and Jakarta with approximately 80 shore-based employees globally.
 
SSM, which was formed in New York in 1971 and has been based in Monaco since 1984, is a technical ship management company and currently manages a fleet of 13 vessels, including the three vessels in our initial fleet, two drybulk vessels owned by affiliates of SSM and eight vessels owned by third parties.  SCM, also based in Monaco, was formed in 2004 as a commercial management company and currently manages a fleet of 57 vessels, including the three vessels in our initial fleet, two drybulk vessels owned by affiliates of SCM and 52 vessels owned by third parties, of which all but one operate in the Scorpio Panamax Tanker Pool, the Scorpio Handymax Tanker Pool or the Scorpio Aframax Tanker Pool.  Our vessel Venice participates in the Scorpio Panamax Tanker Pool.  The Scorpio Panamax Tanker Pool employs vessels on time charters, contracts of affreightment, and in the spot market.  Although the Scorpio Panamax Tanker Pool has secured approximately 30% of the estimated operating days in 2010 for the vessels in the pool on time charter contracts, the remaining 70% of the estimated operating days in 2010 for the vessels in the pool will be from the spot market.  Given the historical volatility of spot market returns, we cannot provide a reasonable estimate of the Venice 's future daily charter rate for the duration of her participation in the pool.
 
Liberty Holding Company Ltd., which we refer to as our Administrator, is a Scorpio Group affiliate which provides us with administrative services pursuant to an administrative services agreement.  The administrative services provided under the agreement primarily include accounting, legal compliance, financial, information technology services, and the provision of administrative staff and office space. Our Administrator will also arrange vessel sales and purchases for us.  Further, pursuant to our administrative services agreement, Liberty, on behalf of itself and other members of the Scorpio Group, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt. We expect that our Administrator will sub-contract many of its responsibilities to other entities within the Scorpio Group.
 
 
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We pay our commercial manager and technical manager management fees.  In the nine months ended September 30, 2009 and the years ended December 31, 2008 and 2007 certain of the expenses incurred for commercial and technical management services were under management agreements with other Scorpio Group entities, which are related parties. Since agreements with related parties are by definition not at arm's length, the expenses incurred under these agreements may have been different than the historical costs incurred if the subsidiaries had operated as unaffiliated entities during prior periods.  Our estimates of any differences between historical expenses and the expenses that may have been incurred had the subsidiaries been stand-alone entities have been disclosed in the notes to the historical combined financial statements included elsewhere in this prospectus.  In December 2009, we negotiated new management service agreements which we believe are customary for the tanker industry. Beginning on December 1, 2009, we pay SCM, our commercial manager, a fee of $250 per vessel per day plus a 1.25% commission per charter fixture to provide commercial management services for Noemi and Senatore .   Venice is part of the Scorpio Panamax Tanker Pool, whose pool participants collectively pay SCM's agent fee of $250 per vessel per day plus 1.25% commission per charter fixture.  We pay our technical manager $548 per vessel per day to provide technical management services for each of our vessels.  In December 2009, we entered into separate commercial and technical management agreements for each of our vessels, and both our commercial management agreements with SCM and our technical management agreements with SSM are for a period of three years, and may be terminated upon two year's notice.
 
As a result of changes to our commercial management agreements agreed upon in December 2009, we estimate that our commercial management fees in 2010 will increase by $0.3 million.  The new technical and administrative management agreements were negotiated at rates similar to the rates under the previous agreements and therefore we expect there will be no additional impact on the results of operations in future periods for technical and administrative management services.
 
We will reimburse our Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We will also pay our Administrator a fee for arranging vessel purchases and sales for us equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. We believe this 1% fee on purchases and sales is customary in the tanker industry.
 
Scorpio Panamax Tanker Pool
 
To increase vessel utilization and thereby revenues, we participate in a commercial pool with other shipowners of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. The managers of the pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers.
 
 
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Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class. Our vessel Venice participates in SCM's Scorpio Panamax Tanker Pool.  As of December 1, 2009, the Scorpio Panamax Tanker Pool is comprised of 18 Panamax tankers: one, the Venice, owned by us, seven chartered-in by subsidiaries of our Administrator, Liberty Holding Company Ltd., and ten from third party participants.  All tankers in the Scorpio Panamax Tanker Pool are double hull and trade both clean and dirty petroleum products. The earnings allocated to vessels (charterhire expense for the pool) are aggregated and divided on the basis of a weighted scale, or Pool Points, which reflect comparative voyage results on hypothetical benchmark routes.  The Pool Point system generally favors those vessels with greater cargo-carrying capacity and those with better fuel consumption.  Pool Points are also awarded to vessels capable of carrying clean products and to vessels capable of trading in certain ice conditions.   Venice is significantly larger than the other tankers in the Scorpio Panamax Tanker Pool yet has a similar fuel consumption; her earnings on benchmark voyages are therefore approximately 12.6% greater than the average for the pool.  Also, Venice holds the class notation "Ice 1C" which means it can travel through icier waters than most of the other vessels in the pool.  Based on the 18 current vessels in the Scorpio Panamax Tanker Pool, the Venice 's specifications currently result in the vessel earning approximately 6.16% of all net pool earnings, assuming all pool participant vessels are operating for the full year, which is a greater pro-rata share of the pool earnings than most of the other vessels in the pool.  This percentage may not be reflective of future earnings in the pool. The vessel can be withdrawn from the pool upon 90 days notice or after the vessel is free from any commitment, whichever is later.
 
The Scorpio Panamax Tanker Pool employs vessels on time charters, contracts of affreightment, and in the spot market.  Although the Scorpio Panamax Tanker Pool has secured approximately 30% of the estimated operating days in 2010 for the vessels in the pool on time charter contracts, the remaining 70% of the estimated operating days in 2010 for the vessels in the pool will be from the spot market.  Given the historical volatility of spot market returns, we cannot provide a reasonable estimate of the Venice 's future daily charter rate for the duration of her participation in the pool.
 
SCM is responsible for the commercial management of the participating vessels, including the marketing, chartering, operating and bunker (fuel oil) purchases of the vessels.  The pool is administered by Scorpio Panamax Tanker Pool Ltd., or SPTP, a Cayman Islands corporation.  Our founder, Chairman and Chief Executive Officer is a member of the Lolli-Ghetti family which owns 100% of all issued and outstanding stock of SPTP.  Taking into account the recommendations of a pool committee and a technical committee, each of which is comprised of representatives of each pool participant, SPTP sets the pool's policies and issues directives to the pool participants and SCM.  The pool participants remain responsible for all other costs including the financing, insurance, manning and technical management of their vessels.  The earnings of all of the vessels are aggregated and divided according to the relative performance capabilities of the vessel and the actual earning days each vessel is available.
 
There are five other participants in this pool.  If a participant wants to sell or withdraw its vessel, it must give notice to SPTP, SCM and the other participants, and may not withdraw its vessel from the pool for 90 days following the date of such notice.
 
The following table outlines the TCE rates earned by vessels in the Scorpio Panamax Tanker Pool:
 
For the Year Ended
 
December 31, 2008
   
December 31, 2007
   
December 31, 2006
 
Charterhire
Expense
($000's)
   
Operating
Days
(1)
   
CE Per Operating Day
(2)
$
   
Charterhire
Expense
($000's)
   
Operating
Days
(1)
   
CE Per Operating Day
(2)
$
   
Charterhire
Expense
($000's)
   
Operating
Days
(1)
   
CE Per Operating Day
(2)
$
 
$ 186,436       5,726     $ 32,559     $ 133,802       4,928     $ 27,151     $ 123,001       3,860     $ 31,865  
                                                                     

For the Nine Months Ended
 
September 30, 2009
   
September 30, 2008
 
Charterhire
Expense
 ($000's)
   
Operating Days
(1)
   
CE Per Operating Day
(2)
$
   
Charterhire Expense
($000's)
   
Operating Days
(1)
   
CE Per Operating Day
(2)
$
 
$ 94,772       4,756     $ 19,927     $ 141,778       4,245     $ 33,399  
                                             
                                             

(1) For the years ended December 31, 2008, 2007 and 2006 we had  582,  662  and  1,078 operating days in the pool, respectively.  For the nine months ended September 30, 2009 and 2008, we had 394 and 398 operating days, respectively. 
 
(2) Charterhire expense, or CE, is earnings distributed to the pool participants (TCE revenue for the pool participants) based on each vessel's operating days and pool points.  The CE rate per operating day achieved is expressed in U.S. dollars/day and is calculated by dividing the total charterhire expense by the total operating days in the period.  The CE Per Operating Day disclosed above is an average for all tankers in the pool. This differs from the amount included in our Summary Financial Data and Selected Financial and Other Data tables, where the amount disclosed as "TCE per revenue day - pool revenue" represents our actual earnings distribution relating to our vessels that operated in the SPTP.
 
 
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Our Competitive Strengths
 
We believe that we possess a number of competitive strengths in our industry, including:
 
·  
Experienced management team with an established track record in the public market. Since 2003, under the leadership of Mr. Emanuele Lauro, our Chairman and Chief Executive Officer, Scorpio Group has grown from an owner of three vessels in 2003 to an owner of five vessels, and an operator or manager of approximately 60 vessels in 2008. Over the course of the last six years, Mr. Lauro has founded and developed the Scorpio Aframax Tanker Pool, Scorpio Panamax Tanker Pool and the Scorpio Handymax Tanker Pool which employ 10, 20 and 27 vessels, respectively, from Scorpio Group and third party participants. Our President, Mr. Robert Bugbee, who also holds a senior management position within the Scorpio Group, has more than 25 years of experience in the shipping industry and was formerly the President and Chief Operating Officer of OMI Corporation, or OMI, a NYSE-listed tanker company that was sold in 2007. As a key member of management, Mr. Bugbee assisted in growing OMI from 26 vessels in 1998 with an average age of approximately 15.1 years to 45 vessels with an average age of approximately 4.3 years when it was sold in 2007. Mr. Bugbee is supported by Brian Lee, our Chief Financial Officer, and Cameron Mackey, our Chief Operating Officer, both of whom also served as members of the management team responsible for the growth of OMI. Our General Counsel, Luca Forgione, has experience in the shipping and commodity trade industry, where he acquired knowledge of the relevant regulatory and compliance regimes. Our Vice President of Vessel Operations, Sergio Gianfranchi, serves as the Pool Fleet Manager of SCM and has assisted in the launch and operation of the Scorpio Group's Panamax, Handymax and Aframax pools. Messrs. Lee, Mackey, Forgione and Gianfranchi serve in similar positions in Scorpio Group and have 11, 17, six and 47 years of experience, respectively, in the shipping industry, and, with Mr. Bugbee, collectively have over 106 years of combined shipping experience and have developed tanker industry relationships with charterers, lenders, shipbuilders, insurers and other industry participants.
 
·  
Significant available liquidity to pursue acquisition and expansion opportunities.   Immediately following this offering and the repayment of our 2005 Credit Facility, we will have $        million of liquidity, which includes $      million of cash, based on an assumed offering price of $        per share, which represents the midpoint of the price range set forth on the cover of this prospectus.  We have also obtained a commitment letter for a new $150,000,000 senior secured credit facility that we expect to enter into after the closing of this offering.  We intend to use our available cash and borrowing capacity to pursue vessel acquisitions consistent with our business strategy. We believe that our strong balance sheet, financing capacity and future access to capital will allow us to make opportunistic acquisitions at attractive prices.
 
·  
Attractive Initial Fleet. Our initial fleet of three high-quality, modern Panamax tankers has an average age of 6.5 years compared to a current global Panamax tanker industry average of 9.4 years, both as of January 1, 2010.  We believe that owning a young, well-maintained fleet reduces operating costs, improves the quality of service we deliver and provides us with a competitive advantage in securing favorable time and spot charters with high-quality counterparties.  In addition, our initial fleet provides us with strong and visible cash flows through their existing charters.
 
Our Business Strategy
 
Our primary objectives are to profitably grow our business and emerge as a major operator of medium-sized tanker vessels. The key elements of our strategy are:
 
·  
Expanding our fleet through opportunistic acquisitions of high-quality vessels at attractive prices. We intend to acquire modern, high-quality tankers through timely and selective acquisitions. We currently view Suezmax, Aframax, Panamax and Handymax vessel classes as providing attractive return characteristics, and our management team has significant experience with these classes of vessels from their tenure at OMI and at Scorpio Group. A key element to our acquisition strategy will be to purchase high-quality vessels at attractive prices. When evaluating acquisitions, we will consider and analyze our expectation of fundamental developments in the particular industry sector, the level of liquidity in the resale and charter market, the cash flow earned by the vessel in relation to its value, its condition and technical specifications, expected remaining useful life, the credit quality of the charterer and duration and terms of charter contracts for vessels acquired with charters attached, as well as the overall diversification of our fleet and customers. In the current market, asset values in the tanker industry are significantly below the last five and 10 year trailing averages, and as a result of a weak spot market we believe these values may continue to deteriorate over the near term. We believe that these circumstances combined with our management's knowledge of the shipping industry present an opportunity for us to grow our fleet at favorable prices.
 
 
80
 
·  
Optimizing vessel revenues through a mix of time charter contracts and spot market exposure. We intend to employ a chartering strategy to capture upside opportunities in the spot market while using fixed-rate time charters to reduce downside risks.  As it relates to spot market exposure, through our participation in tanker pools managed by the Scorpio Group, we believe that the revenues of our vessels will exceed the rate we would otherwise achieve by operating these vessels outside of the pools.
 
·  
Focusing on tankers based on our experience and expertise in the segment.   We believe that energy companies seek transportation partners that are financially stable and have a reputation for reliability, safety, and high environmental and quality standards.  We intend to leverage the operational expertise and customer base of Scorpio Group and of the former members of OMI's management team in order to further expand these relationships with consistent delivery of superior customer service.
 
·  
Minimizing operating and corporate expenses. Under the management agreements with SSM and SCM that we have entered into for Venice , Noemi and Senatore , and that we plan to enter into for any vessels that we acquire in the future, these two managers will coordinate and oversee the technical and commercial management, respectively, of our fleet. We believe that SSM and SCM will be able to do so at a cost to us that would be lower than what could be achieved by performing the functions in-house.
 
Officers and Crewing
 
We currently have no employees other than our executive and non-executive officers, and our support staff is provided by our Administrator pursuant to our administrative services agreement. Our technical manager will be responsible for identifying, screening and recruiting, directly or through a crewing agent, the officers and all other crew members for our vessels that are employed by our vessel-owning subsidiaries. Our subsidiaries that own the vessels in our initial fleet, indirectly through our technical manager pursuant to the respective technical management agreements, currently employ approximately 72 officers and crew members.
 
Our Customers
 
Our customers include national, regional, and international companies, such as King Dustin and BP Shipping, or their affiliates, as well as the Scorpio Panamax Tanker Pool. We believe that developing strong relationships with the end users of our services allow us to better satisfy their needs with appropriate and capable vessels. A prospective charterer's financial condition, creditworthiness, and reliability track record are important factors in negotiating our vessels' employment.
 
Below is a brief description of our relationships with King Dustin, BP Shipping and the Scorpio Panamax Tanker Pool which, as of September 30, 2009, were chartering three of our vessels through period time charters or pool agreements.
 
King DustinTankschiffahrts GmbH&Co.KG , or King Dustin, is a special purpose entity that is owned equally by affiliates of Koenig & cie and Scorpio Group.  King Dustin time charters-in Noemi from us at $24,500 per day pursuant to a time charter that expires in January 2012.  The time charter began in January 2007.  King Dustin time charters-out Noemi to ST Shipping, a wholly owned subsidiary of Glencore S.A. of Zug, Switzerland.
 
BP Shipping is an affiliate of BP, the energy conglomerate.  BP Shipping time charters Senatore at $26,000 per day pursuant to a time charter that expires in September 2010.
 
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Scorpio Panamax Tanker Pool , or SPTP,   is a member of the Scorpio Group.  SPTP consists of 18 Panamax tankers that operate in the international shipping market with a majority of the vessels currently being employed in the spot market.   Venice participates in SPTP under the same terms and conditions as the third party vessels in the pool. The pool aggregates the revenues and expenses of all of the pool participants and distributes the net earnings based on (i) the Pool Points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics) and (ii) the number of days the vessel operates in the period. SPTP is operated by our commercial manager, SCM, which charges SPTP $250 a day for each vessel and 1.25% commission per charter fixture within the pool.  SCM negotiates voyage charters, short duration time charters, and contracts of affreightment; manages procurement of bunkers, port charges and administrative services; and distributes the cash earnings.
 
Competition
 
We operate in markets that are highly competitive and based primarily on supply and demand. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation and that of our commercial manager. We compete primarily with other independent tanker vessel-owners and with major oil companies that own and operate their own vessels. Our competitors may have more resources than us and may operate vessels that are newer, and therefore more attractive to charterers, than our vessels. Ownership of tanker vessels is highly fragmented and is divided among publicly listed companies, state-controlled owners and private shipowners.
 
Our Credit Facilities
 
Two of our wholly-owned subsidiaries, Senatore Shipping Company Limited and Noemi Shipping Company Limited, are joint and several borrowers under a loan agreement dated May 17, 2005, or the 2005 Credit Facility, entered into with The Royal Bank of Scotland plc, as Lender, which is secured by, among other things, a first preferred mortgage over each of Senatore and Noemi .  We intend to fully repay the 2005 Credit Facility using the proceeds of this offering.  The initial amount of the 2005 Credit Facility was $56.0 and consists of two tranches, one for each vessel-owning subsidiary.  Each tranche is repayable in 40 consecutive quarterly installments of $450,000, plus a balloon payment of $10.0 million, to be made together with the 40 th installment of each tranche.  The 2005 Credit Facility matures on May 18, 2015 and the interest rate on the loan is 0.70% above LIBOR.  As of September 30, 2009, the outstanding balance was $40.7 million, with $3.6 million due within the next 12 months.
 
 
        On March 9, 2010, we entered into a commitment letter with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA and Fortis Bank Nederland for a senior secured term loan facility of up to $150 million. The commitment letter has customary conditions including each Lender's satisfaction with the completion of business, legal, environmental, tax, financial, accounting and customer call due diligence.  Under the terms of the commitment letter, the credit facility would have a maturity date of five years after the date on which definitive documentation for the facility is executed, and borrowings under the facility would bear interest at LIBOR plus an applicable margin of 3.00% per annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and 3.50% per annum when our debt to capitalization ratio is greater than 50%. The credit facility may only be used to finance the cost of future vessel acquisitions, which vessels will be the collateral for the credit facility. For further details of the credit facility as set forth in the commitment letter, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."
 
Properties
 
We have no properties other than our vessels.
 
Environmental and Other Regulations
 
Government laws and regulations significantly affect the ownership and operation of our tankers.  We are subject to international conventions, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered.  Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
 
 
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A variety of government, quasi-governmental and private organizations subject our tankers to both scheduled and unscheduled inspections.  These organizations include the local port authorities, national authorities, harbor masters or equivalent, classification societies, flag state administrations (countries of registry), labor organizations (including but not limited to the International Transport Workers' Federation), charterers, terminal operators and oil companies.  Some of these entities require us to obtain permits, licenses, certificates and approvals for the operation of our tankers.  Our failure to maintain necessary permits, licenses, certificates or approvals could require us to incur substantial costs or temporarily suspend operation of one or more of the vessels in our fleet, or lead to the invalidation or reduction of our insurance coverage.
 
We believe that the heightened levels of environmental and quality concerns among insurance underwriters, regulators and charterers have led to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the tanker industry.  Increasing environmental concerns have created a demand for tankers that conform to stricter environmental standards.  We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with applicable local, national and international environmental laws and regulations.  Such laws and regulations frequently change and may impose increasingly strict requirements. We cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our tankers.  In addition, a future serious marine incident that results in significant oil pollution or otherwise causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.
 
International maritime organization
 
The IMO, the United Nations agency for maritime safety and the prevention of pollution, has adopted the International Convention for the Prevention of Pollution from Ships, or MARPOL, which has been updated through various amendments.  MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms.
 
Air Emissions
 
In September 1997, the IMO adopted Annex VI to MARPOL to address air pollution from ships.  Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits deliberate emissions of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile organic compounds from cargo tanks, and the shipboard incineration of specific substances.  Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions.  Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and adversely affect our business, cash flows, results of operations and financial condition.  In October 2008, the IMO adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone-depleting substances, which amendments enter into force on July 1, 2010.  The amended Annex VI will reduce air pollution from vessels by, among other things, (i) implementing a progressive reduction of sulfur oxide emissions from ships by reducing the global sulfur fuel cap initially to 3.50% (from the current cap of 4.50%), effective from January 1, 2012, then progressively to 0.50%, effective from January 1, 2020, subject to a feasibility review to be completed no later than 2018; and (ii) establishing new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation.  The United States ratified the Annex VI amendments in October 2008, and the U.S. Environmental Protection Agency, or EPA, promulgated equivalent emissions standards in late 2009.
 
The United States and Canada have requested IMO to designate the area extending 200 nautical miles from the Atlantic/Gulf and Pacific coasts of the U.S. and Canada and the Hawaiian Islands as Emission Control Areas under the MARPOL Annex VI amendments, which would subject ocean-going vessels in these areas to stringent emissions controls and cause us to incur additional costs.  In July 2009, the IMO accepted the proposal in principle, and all member states party to MARPOL Annex VI will vote on the proposal in March 2010.  Even if the proposal is not adopted, we cannot assure you that the United States or Canada will not adopt more stringent emissions standards independent of the IMO.
 
 
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Safety Management System Requirements
 
The IMO also adopted the International Convention for the Safety of Life at Sea, or SOLAS, and the International Convention on Load Lines, or LL, which impose a variety of standards that regulate the design and operational features of ships.  The IMO periodically revises the SOLAS and LL standards.
 
Our operations are also subject to environmental standards and requirements contained in the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, promulgated by the IMO under SOLAS.  The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies.  We rely upon the safety management system that has been developed for our vessels for compliance with the ISM Code.  
 
The ISM Code requires that vessel operators also obtain a safety management certificate for each vessel they operate.  This certificate evidences compliance by a vessel's management with code requirements for a safety management system.  No vessel can obtain a certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code.  SSM has obtained documents of compliance for its offices and safety management certificates for all of our vessels for which the certificates are required by the ISM Code.   These documents of compliance and safety management certificates are renewed as required.
 
Noncompliance with the ISM Code and other IMO regulations may subject the shipowner or bareboat charterer to increased liability, may lead to decreases in, or invalidation of, available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code by the applicable deadlines will be prohibited from trading in U.S. and European Union ports, as the case may be.
 
Pollution Control and Liability Requirements
 
IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatory nations to such conventions.  For example, many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage, or the CLC, although the United States is not a party.  Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner is strictly liable, subject to certain affirmative defenses, for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil.  The limits on liability outlined in the 1992 Protocol use the International Monetary Fund currency unit of Special Drawing Rights, or SDR.  The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner's actual fault and under the 1992 Protocol where the spill is caused by the shipowner's intentional or reckless conduct.  Vessels trading with states that are parties to these conventions must provide evidence of insurance covering the liability of the owner.  In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that of the CLC.  We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO.
 
The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel.  The Bunker Convention, which became effective on November 21, 2008, requires registered owners of ships over 1,000 gross tons to maintain insurance or other financial security for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended).  With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
 
 
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In addition, IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments, or BWM, in February 2004.   BWM's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits.  BWM will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world's merchant shipping.  To date, there has not been sufficient adoption of this standard for it to take force.
 
The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
 
U.S. Regulations
 
The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills.  OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S. territorial sea and its 200 nautical mile exclusive economic zone.  The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, whether on land or at sea.  Both OPA and CERCLA impact our operations.
 
Under OPA, vessel owners, operators and bareboat charterers are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels.  OPA defines these other damages broadly to include:
 
·  
natural resources damage and related assessment costs;
 
·  
real and personal property damage;
 
·  
net loss of taxes, royalties, rents, fees and other lost revenues;
 
·  
lost profits or impairment of earning capacity due to property or natural resources damage; 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.
 
Effective July 31, 2009, the U.S. Coast Guard adjusted the limits of OPA liability to the greater of $2,000 per gross ton or $17.088 million for any double-hull tanker that is over 3,000 gross tons (subject to possible adjustment for inflation), and our fleet is entirely composed of vessels of this size class. CERCLA, which applies to owners and operators of vessels, contains a similar liability regime and provides for cleanup, removal and natural resource damages.  Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $0.5 million for any other vessel. These OPA and CERCLA limits of liability do not apply if an incident was directly caused by violation of applicable U.S. federal safety, construction or operating regulations or by a responsible party's gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.
 
OPA and the U.S. Coast Guard also require owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the limit of their potential liability under OPA and CERCLA.  Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, self-insurance or a guaranty.  We plan to comply with the U.S. Coast Guard's financial responsibility regulations by providing a certificate of responsibility evidencing sufficient self-insurance.
 
We expect to maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels.  If the damages from a catastrophic spill were to exceed our insurance coverage, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges.  The CWA also imposes substantial liability for the costs of removal and remediation and damages and complements the remedies available under OPA and CERCLA.
 
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The EPA regulates the discharge of ballast water and other substances in U.S. waters under the CWA.  Effective February 6, 2009, EPA regulations require vessels 79 feet in length or longer (other than commercial fishing and recreational vessels) to comply with a Vessel General Permit authorizing ballast water discharges and other discharges incidental to the operation of vessels.  The Vessel General Permit imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, recordkeeping and reporting requirements to ensure the effluent limits are met. U.S. Coast Guard regulations adopted under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S. waters, and in 2009 the Coast Guard proposed new ballast water management standards and practices, including limits regarding ballast water releases.  Compliance with the EPA and the U.S. Coast Guard regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict our vessels from entering U.S. waters.
 
European Union Regulations
 
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims.
 
Greenhouse Gas Regulation
 
In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change, or UNFCCC, which we refer to as the Kyoto Protocol, entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing to global warming. Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol. However, international negotiations are continuing with respect to a successor to the Kyoto Protocol, which sets emission reduction targets through 2012, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the United States and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from vessels, if such emissions are not regulated through the IMO or the UNFCCC by December 31, 2010. In the United States, the EPA has issued a final finding that greenhouse gases threaten public health and safety, and has proposed regulations governing the emission of greenhouse gases from motor vehicles and stationary sources.  The EPA may decide in the future to regulate greenhouse gas emissions from ships and has already been petitioned by the California Attorney General to regulate greenhouse gas emissions from ocean-going vessels.  Other federal and state regulations relating to the control of greenhouse gas emissions may follow, including the climate change initiatives that are being considered in the U.S. Congress.  In addition, the IMO is evaluating various mandatory measures to reduce greenhouse gas emissions from international shipping, including market-based instruments.  Any passage of climate control legislation or other regulatory initiatives by the EU, U.S., IMO or other countries where we operate that restrict emissions of greenhouse gases could require us to make significant financial expenditures that we cannot predict with certainty at this time.
 
Vessel Security Regulations
 
Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the U.S. Maritime Transportation Security Act of 2002, or the MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new chapter became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the International Ship and Port Facilities Security Code, or the ISPS Code. The ISPS Code is designed to protect ports and international shipping against terrorism. After July 1, 2004, to trade internationally, a vessel must attain an International Ship Security Certificate from a recognized security organization approved by the vessel's flag state. Among the various requirements are:
 
 
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·  
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 alert 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, the 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.
 
The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt from MTSA vessel security measures non-U.S. vessels that have on board, as of July 1, 2004, a valid International Ship Security Certificate attesting to the vessel's compliance with SOLAS security requirements and the ISPS Code. We have implemented the various security measures addressed by the MTSA, SOLAS and the ISPS Code, and our fleet is in compliance with applicable security requirements.
 
Inspection by classification societies
 
Every oceangoing vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in-class," signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
 
The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.
 
For maintenance of the class, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:
 
·  
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.
 
 
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All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years.
 
Vessels have their underwater parts inspected every 30 to 36 months.  Depending on the vessel's age and other factors, this inspection can often be done afloat with minimal disruption to the vessel's commercial deployment.  However, vessels are required to be drydocked, meaning physically removed from the water, for inspection and related repairs at least once every five years from delivery.  If any defects are found, the classification surveyor will issue a recommendation which must be rectified by the ship owner within prescribed time limits.
 
Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in-class" by a classification society which is a member of the International Association of Classification Societies. All our vessels are certified as being "in-class" by American Bureau of Shipping. All new and secondhand vessels that we purchase must be certified prior to their delivery under our standard purchase contracts and memoranda of agreement. If the vessel is not certified on the scheduled date of closing, we have no obligation to take delivery of the vessel.
 
In addition to the classification inspections, many of our customers regularly inspect our vessels as a precondition to chartering them for voyages. We believe that our well-maintained, high-quality vessels provide us with a competitive advantage in the current environment of increasing regulation and customer emphasis on quality.
 
Risk of Loss and Liability Insurance
 
General
 
The operation of any cargo vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which in certain circumstances imposes virtually unlimited liability upon owners, operators and demise charterers of any vessel trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for vessel-owners and operators trading in the United States market. While we believe that our present insurance coverage is adequate, not all risks can be insured against, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.
 
Marine and War Risks Insurance
 
We have in force marine and war risks insurance for all of our vessels. Our marine hull and machinery insurance covers risks of particular average and actual or constructive total loss from collision, fire, grounding, engine breakdown and other insured named perils up to an agreed amount per vessel. Our war risks insurance covers the risks of particular average and actual or constructive total loss from confiscation, seizure, capture, vandalism, sabotage, and other war-related named perils. We have also arranged coverage for increased value for each vessel. Under this increased value coverage, in the event of total loss of a vessel, we will be able to recover amounts in excess of those recoverable under the hull and machinery policy in order to compensate for additional costs associated with replacement of the loss of the vessel.  Each vessel is covered up to at least its fair market value at the time of the insurance attachment and subject to a fixed deductible per each single accident or occurrence, but excluding actual or constructive total loss.
 
 
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Protection and Indemnity Insurance
 
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, and covers our third party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses resulting from injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by mutual protection and indemnity associations, or "clubs." Subject to the "capping" discussed below, our coverage, except for pollution, is unlimited.
 
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. We are a member of a P&I Club that is a member of the International Group of P&I Clubs, or the International Group. The P&I Clubs that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. Although the P&I Clubs compete with each other for business, they have found it beneficial to pool their larger risks under the auspices of the International Group. This pooling is regulated by a contractual agreement which defines the risks that are to be pooled and exactly how these risks are to be shared by the participating P&I Clubs. The pool provides a mechanism for sharing all claims in excess of $7 million up to approximately $5.4 billion as of October 23, 2009. We are subject to calls payable to the associations based on its claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Clubs comprising the International Group.
 
Legal Proceedings
 
To our knowledge, we are not currently a party to any lawsuit that, if adversely determined, would have a material adverse effect on our financial position, results of operations or liquidity. As such, we do not believe that pending legal proceedings, taken as a whole, should have any significant impact on our financial statements. From time to time in the future we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. While we expect that these claims would be covered by our existing insurance policies, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We have not been involved in any legal proceedings which may have, or have had, a significant effect on our financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position, results of operations or liquidity.
 
Exchange Controls
 
Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common shares.
 

 
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MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
Set forth below are the names, ages and positions of our directors and executive officers. Our board of directors is elected annually, and each director elected holds office for a three-year term or until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office. The initial term of office of each director is as follows: Two will serve for a term expiring at the 2011 annual meeting of shareholders, two will serve for a term expiring at the 2012 annual meeting of shareholders, and one will serve for a term expiring at the 2013 annual meeting of the shareholders. Officers are elected from time to time by vote of our board of directors and hold office until a successor is elected. The business address for each director and executive officer is the address of our principal executive office which is Scorpio Tankers Inc., 9, Boulevard Charles III, Monaco 98000.
 
     Messrs. Lauro and Mr. Bugbee, our Chief Executive Officer and President, respectively, will be involved in other business activities with members of the Scorpio Group, which may result in their spending less time than is appropriate or necessary to manage our business successfully. Based solely on the anticipated relative sizes of our initial fleet and the fleet owned by members of the Scorpio Group over the next twelve months, we estimate that Messrs. Lauro and Bugbee will spend approximately 70-85% of their monthly business time on our business activities and their remaining time on the business of members of the Scorpio Group. However, the actual allocation of time could vary significantly from time to time depending on various circumstances and needs of the businesses, such as the relative levels of strategic activities of the businesses. While there will be no formal requirements or guidelines for the allocation of Messrs. Lauro’s and Bugbee’s time between our business and the business of members of the Scorpio Group, Messr. Lauro’s and Bugbee’s performance of their duties will be subject to the ongoing oversight of our board of directors.
 
Name
Age
Position
Emanuele A. Lauro
31
Chairman, Class I Director, and Chief Executive Officer
Robert Bugbee
49
President and Class II Director
Brian Lee
43
Chief Financial Officer
Cameron Mackey
41
Chief Operating Officer
Luca Forgione
33
General Counsel
Sergio Gianfranchi
65
Vice President, Vessel Operations
Alexandre Albertini
33
Class III Director
Ademaro Lanzara
67
Class I Director
Donald C. Trauscht
76
Class II Director

Biographical information with respect to each of our directors and executive officers is set forth below.
 
Emanuele A. Lauro, Chairman & Chief Executive Officer
 
Emanuele A. Lauro, our founder, Chairman and Chief Executive Officer, joined Scorpio Group in 2003 and has continued to serve there in a senior management position since 2004.  Under Mr. Lauro's leadership, Scorpio Group has grown from an owner of three vessels in 2003 to an owner of five vessels, an operator or manager of approximately 60 vessels in 2008.  Over the course of the last six years, Mr. Lauro has founded and developed the Scorpio Aframax Tanker Pool, Scorpio Panamax Tanker Pool and the Scorpio Handymax Tanker Pool which employ 10, 20 and 27 vessels, respectively, from Scorpio Group and third party participants.  He also founded Scorpio Logistics in May 2007 , a company within the Scorpio Group which owns and operates specialized assets engaged in coal transhipment in Indonesia and which engages in strategic investments in coastal shipping and port development in India.  Furthermore, Mr. Lauro formed a joint venture with Koenig & cie., Scorship Navigation, in August 2005 which engages in the identification, placement, and management of certain international shipping investments on behalf of German investors.  In addition, Mr. Lauro developed a joint venture company, Crewtech Philippines, in May 2007 which screens, trains, and manages vessel staff for various third party owners of drybulk and tanker vessels.  Mr. Lauro has a degree in international business from the European Business School, London, and he has served as the Vice President of the Chamber of Shipping of Monaco since 2006.
 
 
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Robert Bugbee, President   and Director
 
Robert Bugbee, our President, has more than 25 years of experience in the shipping industry.  He joined Scorpio Group in February 2009 and has continued to serve there in senior management.   Prior to joining Scorpio Group, Mr. Bugbee was a partner at Ospraie Management LLP between 2007 and 2008, a company which advises and invests in commodities and basic industry.  From 1995 to 2007, Mr Bugbee was employed at OMI Corporation, or OMI, a NYSE-listed tanker company sold in 2007. While at OMI, Mr. Bugbee most recently served as President from January 2002 until the sale of the company, and he previously served as Executive Vice President since January 2001, Chief Operating Officer since March 2000 and Senior Vice President of OMI from August 1995 to June 1998.  Mr. Bugbee joined OMI in February 1993. Prior to this, he was employed by Gotaas-Larsen Shipping Corporation since 1984. During this time he took a two year sabbatical from 1987 for the M.I.B. Programme at the Norwegian School for Economics and Business administration in Bergen. He has a Fellowship from the International Shipbrokers Association and a B.A. (Honors) in from London University.
 
Brian Lee, Chief Financial Officer
 
Brian Lee, our Chief Financial Officer, joined Scorpio Group in April 2009.  In June 2009, he became the Scorpio Group's Controller.  He has been employed in the shipping industry since 1998.  Prior to joining Scorpio Group, he was the Controller of OMI Corporation from 2001 until the sale of the company in 2007.  Mr. Lee has a M.B.A. from the University of Connecticut and has B.S. in Business Administration from the University at Buffalo, State University of New York.
 
Cameron Mackey, Chief Operating Officer
 
Cameron Mackey, our Chief Operating Officer, joined Scorpio Group in March 2009, where he has served as Chief Operating Officer.  Prior to joining Scorpio Group, he was an equity and commodity analyst at Ospraie Management LLC from 2007-2008.  Prior to that, he was Senior Vice President of OMI Marine Services LLC from 2004-2007 and in Business Development at OMI Corporation from 2002-2004.  He has been employed in the shipping industry since 1994 and, earlier in his career, was employed in unlicensed and licensed positions in the merchant navy, primarily on tankers in the international fleet of Mobil Oil Corporation, where he held the qualification of Master Mariner.  He has an M.B.A. from the Sloan School of Management at the Massachusetts Institute of Technology, a B.S. from the Massachusetts Maritime Academy and a B.A. from Princeton University.
 
Luca Forgione, General Counsel
 
Luca Forgione, our General Counsel, joined Scorpio Group in August 2009 as General Counsel. He is licensed as a lawyer in his native Italy and as a Solicitor of the Supreme Court of England & Wales. Mr. Forgione has six years of shipping industry experience and has worked in the fields of shipping, offshore logistics, commodity trading and energy since the beginning of his in-house career, most recently with Constellation Energy Commodities Group Ltd. in London, which is part of Constellation Energy Group Inc. listed on the NYSE under "CEG," from 2007 to 2009., and previously with Coeclerici S.p.a. in Milan from 2004 to 2007. He has experience with all aspects of the supply chain of drybulk and energy commodities (upstream and downstream), and has developed considerable understanding of the regulatory and compliance regimes surrounding the trading of physical and financial commodities as well as the owning, managing and chartering of vessels. Mr. Forgione was a Tutor in International Trade Law and Admiralty Law at University College London (U.K.) and more recently a Visiting Lecturer in International Trade Law at King's College (U.K.). He has a Masters Degree in Maritime Law from the University of Southampton (U.K.) and a Law Degree from the University of Genoa (Italy).
 
Messers. Lauro, Bugbee, Lee, Mackey, and Forgione collectively have over 65 years of combined shipping experience and have developed strong tanker industry relationships with leading charterers, lenders, shipbuilders, insurers and other key industry participants.
 
 
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Sergio Gianfranchi, Vice President, Vessel Operations
 
Sergio Gianfranchi, our Vice President of Vessel Operations, served as Operations Manager of our technical manager, SSM, at its headquarters in Monaco from 2002 to 2004.  He has been instrumental in launching and operating the Scorpio Group's Panamax, Handymax and Aframax pools during the last five years, and was employed as the Fleet Manager of SCM, the Scorpio Group affiliate that manages the commercial operations of approximately 50 vessels grouped in the three Scorpio Group pools, from 2007 to 2009.  Mr. Gianfranchi is currently employed as the Pool Fleet Manager of SCM.  From 1999 to 2001, Mr. Gianfranchi served as the on-site owner's representative of the Scorpio Group affiliates named Doria Shipping, Tristan Shipping, Milan Shipping and Roma Shipping, to survey the construction of their Panamax and Post-Panamax newbuilding tankers being built at the 3Maj Shipyard in Rijeka, Croatia. When Mr. Gianfranchi joined SSM in 1989, he began as vessel master of its OBOs (multipurpose vessels that carry ore, heavy drybulk and oil).  Upon obtaining his Master Mariner License in 1972, he served until 1989 as a vessel master with prominent Italian shipping companies, including NAI, which is the largest private Italian  shipping company and owned by the Lolli-Ghetti family, and Almare, initially a subsidiary of NAI but later controlled by Finmare, the Italian state shipping financial holding company.  In this position he served mostly on OBOs, tankers and drybulk carriers. He graduated from La Spezia Nautical Institute in Italy in 1963.
 
Alexandre Albertini, Director
 
Alexandre Albertini has agreed to serve as a director effective as of the closing of this offering.  Mr. Albertini has more than 10 years of experience in the shipping industry. He has been employed by Marfin Management SAM, a drybulk ship management company, since 1997 and has served as Managing Director there since 2009, working in fields related to crew and human resources, insurance, legal, financial, technical, commercial, and information technology. He is a director of eight drybulk shipowning companies and serves as President of Ant. Topic srl, a vessel and crewing agent based in Italy.  The aggregate valuation of the drybulk shipping companies for which Mr. Albertini serves as a Secretary or director is approximately $300 million.  In 2008, Mr. Albertini was elected as a member of the Executive Committee of InterManager.  He is a founding member of the Chamber of Shipping of Monaco and has served as its Secretary General since 2006.  Mr. Albertini also holds various board positions in several other local business and associations.
 
Ademaro Lanzara, Director
 
Ademaro Lanzara has agreed to serve as a director effective as of the closing of this offering.   Mr. Lanzara has served as the Chairman of BPV Finance (International) Plc Dublin, a subsidiary of Banca Popolare di Vicenza, Italy, since 2008.  He is also a director of Istituto dell'Enciclopedia Italiana fondata da Giovanni Treccani Spa, Rome.  From 1963 to 2006, Mr. Lanzara held a number of positions with BNL spa Rome, a leading Italian banking group, including acting as the Chairman of the Credit Committee, Chairman of the Finance Committee and Deputy CEO. He also served as Chairman and/or director of a number of BNL controlled banks or financial companies in Europe, the United States and South America.  He formerly served as a director of each of the Institute of International Finance Inc. in Washington DC, Compagnie Financiere Edmond de Rothschild Banque, in Paris, France, ABI – Italian Banking Association in Rome, Italy, FITD - Interbank deposit Protection Fund, in Rome, Italy, ICC International Chamber of Commerce Italian section, Rome, Italy Co-Chairman Round Table of Bankers and Small and Medium Enterprises, European Commission, in Brussels, Belgium.  Mr. Lanzara has a economics degree (graduated magna cum laude ) from the University of Naples, a law degree from the University of Naples and a PMD from Harvard Business School.
 
 
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Donald C. Trauscht, Director
 
Donald C. Trauscht has agreed to serve as a director effective as of the closing of this offering.  He has served as the Chairman of BW Capital Corporation, a private investment company, since 1996.  From 1967 to 1995, Mr. Trauscht held a number of positions at Borg-Warner Corporation, including Chairman and Chief Executive Officer.  While at Borg Warner, Mr. Trauscht supervised an annual capital budget of $250 million and was responsible for risk assessment decisions involving the company's investments. He has participated in acquisitions, divestments, financings, public offerings and other transactions whose combined value is over $30 billion. Mr. Trauscht is a director of Esco Technologies Inc., Hydac International Corporation, Bourns Inc., and EyesForLearning LLC.  He formerly served as a director of Baker Hughes Inc., Cordant Technologies Inc., Blue Bird Corporation, Imo Industries Inc., Mannesmann Capital Corporation, Wynn International Inc., Recon Optical Inc., Global Motorsport Group Inc., OMI Corporation, IES Corporation, and NSK-Warner Ltd.  He has served as the Chairman, Lead Director, and Audit Committee, Compensation Committee, and Governance Committee Chairman at numerous public and private companies.
 
Board of Directors and Committees
 
Our board of directors currently consists of five directors, three of whom have been determined by our board of directors to be independent under the rules of the New York Stock Exchange and the rules and regulations of the SEC.  Prior to the listing of our common shares on the New York Stock Exchange, we will establish an Audit Committee, a Nominating Committee and a Compensation Committee, each of which will be comprised of our three independent directors, who are Messrs. Alexandre Albertini, Ademaro Lanzara and Donald Trauscht. The Audit Committee will, among other things, review our external financial reporting, engage our external auditors and oversee our internal audit activities, procedures and the adequacy of our internal accounting controls.  In addition, provided that no member of the Audit Committee has a material interest in such transaction, the Audit Committee will be responsible for reviewing transactions that we may enter into in the future with other members of the Scorpio Group that our board believes may present potential conflicts of interests between us and the Scorpio Group.  The Nominating and Corporate Governance Committee will be responsible for recommending to the board of directors nominees for director and directors for appointment to board committees and advising the board with regard to corporate governance practices.  We will also form a Compensation Committee that will oversee our equity incentive plan and recommend director and senior employee compensation. Our shareholders may also nominate directors in accordance with procedures set forth in our bylaws.
 
Compensation of Directors and Senior Management
 
We expect that the aggregate compensation that we will pay members of our senior executive officers in 2009 will be approximately $        . We expect to pay aggregate compensation to our senior executive officers in 2010 of approximately $       . Each of our non-employee directors will receive annual compensation in the aggregate amount of $        per year, plus reimbursements for actual expenses incurred while acting in their capacity as a director. Our officers and directors are eligible to receive awards under our equity incentive plan which is described below under "—Equity Incentive Plan." We do not have a retirement plan for our officers or directors.
 
We believe that it is important to align the interests of our directors and management with that of our shareholders.  In this regard, we have determined that it will generally be beneficial to us and to our shareholders for our directors and management to have a stake in our long-term performance. We expect to have a meaningful component of our compensation package for our directors and management consist of equity interests in the Company in order to provide them on an on-going basis with a meaningful percentage of ownership in the Company.
 
Equity Incentive Plan
 
We have adopted an equity incentive plan, which we refer to as the plan, under which directors, officers, employees, consultants and service providers of us and our subsidiaries and affiliates are eligible to receive incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted common stock. We have reserved a total of                    common shares for issuance under the plan, subject to adjustment for changes in capitalization as provided in the plan. The plan is administered by our compensation committee. We expect to issue a total of        restricted shares under the plan to our executive officers following the completion of this offering.
 
 
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Under the terms of the plan, stock options and stock appreciation rights granted under the plan will have an exercise price equal to the fair market value of a common share on the date of grant, unless otherwise determined by the plan administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights will be exercisable at times and under conditions as determined by the plan administrator, but in no event will they be exercisable later than ten years from the date of grant.

The plan administrator may grant shares of restricted stock and awards of restricted stock units subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator. Following the vesting of a restricted stock unit, the award recipient will be paid an amount equal to the number of vested restricted stock units multiplied by the fair market value of a common share on the date of vesting, which payment may be paid in the form of cash or common shares or a combination of both, as determined by the plan administrator. The plan administrator may grant dividend equivalents with respect to grants of restricted stock units.

Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a "change in control" (as defined in the plan), unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full.

Our board of directors may amend or terminate the plan and may amend outstanding awards, provided that no such amendment or termination may be made that would materially impair any rights, or materially increase any obligations, of a grantee under an outstanding award. Shareholder approval of plan amendments will be required under certain circumstances. Unless terminated earlier by our board of directors, the plan will expire ten years from the date the plan is adopted.
 
Employment Agreements
 
Prior to the completion of this offering, we expect to enter into employment agreements with each of our executives, and a form of such employment agreement is attached to this registration statement.  We expect that these employment agreements will be in effect for a period of up to two years, and will automatically renew for the same successive employment periods unless terminated in accordance with the terms of such agreements.  Pursuant to the terms of their respective employment agreements, our executives will be prohibited from disclosing or unlawfully using any of our material confidential information.
 
Upon a change in control of the Company, the annual bonus provided under the employment agreement becomes a fixed bonus of up to 150% of the executive's base salary.  If an executive's employment is terminated within two years of a change in control due to either disability or a reason other than "for cause," he will be entitled to receive upon termination an assurance bonus equal to such fixed bonus and an immediate lump-sum payment in an amount equal to three times the sum of the Executive's then current Base Salary and the assurance bonus, and he will continue to receive all salary, compensation payment and benefits, including additional bonus payments, otherwise due to him, to the extent permitted by applicable law, for the remaining balance of his then-existing employment period. If an executive's employment is terminated for cause or voluntarily by the employee, he shall not be entitled to any salary, benefits or reimbursements beyond those accrued through the date of his termination, unless he voluntarily terminated his employment in connection with certain conditions. Those conditions include a change in control combined with a significant geographic relocation of his office, a material diminution of his duties and responsibilities, and other conditions identified in the employment agreement, substantially in the form of an exhibit attached to this registration statement.

 

 
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PRINCIPAL SHAREHOLDERS
 
The following table sets forth information regarding the beneficial owners of more than five percent of our common shares, and the beneficial ownership of each of our directors and executive officers and of all of our directors and executive officers as a group as of the date of this prospectus. All of our shareholders, including the shareholders listed in this table, are entitled to one vote for each common share held.
 
Beneficial ownership is determined in accordance with the SEC's rules. In computing percentage ownership of each person, common shares subject to options held by that person that are currently exercisable or convertible, or exercisable or convertible within 60 days of the date of this prospectus, are deemed to be beneficially owned by that person. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
 
The percentage of beneficial ownership upon consummation of this offering is based on          common shares outstanding immediately after this offering, which number is calculated after giving effect to the issuance and sale of         common shares in this offering, or         shares if the underwriter's over-allotment opinion is exercised in full.
 
   
Shares Beneficially
         
Shares Beneficially
 
   
Owned Prior to Offering
         
Owned After Offering (1)
 
Identity of person or group
 
Number
   
Percentage
         
Number
   
Percentage
 
                               
                %                       %
                                         
                                         
                                         
                                         
All directors and executive officers, as a group
              %             1         %
____________________
(1) Does not include          shares of restricted common stock we expect to issue to our executive officers following the completion of this offering pursuant to the 2010 Equity Incentive Plan.


 
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RELATED PARTY TRANSACTIONS
 
Commercial and Technical Management Agreements
 
As our commercial and technical managers, SCM and SSM provide us with commercial and technical services pursuant to their respective commercial and technical management agreements with us. We expect to enter into similar agreements with respect to each vessel we acquire going forward.  Commercial management services include securing employment, on both spot market and time charters, for our vessels. Where we plan to employ a vessel on the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class.  Technical management services include day-to-day vessel operation, performing general maintenance, monitoring regulatory and classification society compliance, customer vetting procedures, supervising the maintenance and general efficiency of vessels, arranging the hiring of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. We pay our managers fees for these services and reimburse our managers for the reasonable direct or indirect expenses they incur in providing us with these services.
 
We pay our commercial manager and technical manager management fees.  For the nine months ended September 30, 2009 and the years ended December 31, 2008 and 2007, certain of the expenses incurred for commercial, technical and administrative management services were under management agreements with other Scorpio Group entities, which are related parties. Since agreements with related parties are by definition not at arms length, the expenses incurred under these agreements may have been different than the historical costs incurred if the subsidiaries had operated as unaffiliated entities during prior periods.  Our estimates of any differences between historical expenses and the expenses that may have been incurred had the subsidiaries been stand-alone entities have been disclosed in the notes to the historical combined financial statements included elsewhere in this prospectus.
 
Beginning on December 1, 2009, we pay SCM, our commercial manager, a fee of $250 per vessel per day plus a 1.25% commission per charter fixture to provide commercial management services for Noemi and Senatore .   Venice is part of the Scorpio Panamax Tanker Pool, whose pool participants collectively pay SCM's agent fee of $250 per vessel per day plus 1.25% commission per charter fixture.  We pay our technical manager $548 per vessel per day to provide technical management services for each of our vessels.  We have entered into separate commercial and technical management agreements for each of our vessels, and both our commercial management agreements with SCM and our technical management agreements with SSM are for a period of three years, and may be terminated upon two year's notice.
 
Administrative Services Agreement
 
Liberty Holding Company Ltd., which we refer to as our Administrator, provides us with administrative services pursuant to an administrative services agreement.  The administrative services provided under the agreement primarily include accounting, legal compliance, financial, information technology services, and the provision of administrative staff and office space. Our Administrator will also arrange vessel sales and purchases for us.  Further, pursuant to our administrative services agreement, Liberty, on behalf of itself and other members of the Scorpio Group, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt. We expect that our Administrator will sub-contract many of its responsibilities to other entities within the Scorpio Group.
 
We will reimburse our Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We will also pay our Administrator a fee for arranging vessel purchases and sales for us equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. We believe this 1% fee on purchases and sales is customary in the tanker industry.
 
Scorpio Panamax Tanker Pool
 
To increase vessel utilization and thereby revenues, we participate in a commercial pool with other shipowners of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. The managers of the pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers.
 
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Where we plan to employ a vessel in the spot charter market, we intend to generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel's size class. Our vessel Venice participates in SCM's Scorpio Panamax Tanker Pool.  As of December 1, 2009, the Scorpio Panamax Tanker Pool is comprised of 18 Panamax tankers: one, the Venice, owned by us, seven chartered-in by subsidiaries of our Administrator, Liberty Holding Company Ltd., and ten from third party participants.  All tankers in the Scorpio Panamax Tanker Pool are double hull and trade both clean and dirty petroleum products. The earnings allocated to vessels (charterhire expense for the pool) are aggregated and divided on the basis of a weighted scale, or Pool Points, which reflect comparative voyage results on hypothetical benchmark routes.  The Pool Point system generally favors those vessels with greater cargo-carrying capacity and those with better fuel consumption.  Pool Points are also awarded to vessels capable of carrying clean products and to vessels capable of trading in certain ice conditions.   Venice is significantly larger than the other tankers in the Scorpio Panamax Tanker Pool yet has a similar fuel consumption; her earnings on benchmark voyages are therefore approximately 12.6% greater than the average for the pool.  Also, Venice holds the class notation "Ice 1C" which means it can travel through icier waters than most of the other vessels in the pool.  Based on the 18 current vessels in the Scorpio Panamax Tanker Pool, the Venice 's specifications currently result in the vessel earning approximately 6.16% of all net pool earnings, assuming all pool participant vessels are operating for the full year, which is a greater pro-rata share of the pool earnings than most of the other vessels in the pool.  This percentage may not be reflective of future earnings in the pool. The vessel can be withdrawn from the pool upon 90 days notice or after the vessel is free from any commitment, whichever is later.
 
SCM is responsible for the commercial management of the participating vessels, including the marketing, chartering, operating and bunker (fuel oil) purchases of the vessels.  The pool is administered by Scorpio Panamax Tanker Pool Ltd., or SPTP, a Cayman Islands corporation.  Our founder, Chairman and Chief Executive Officer is a member of the Lolli-Ghetti family which owns 100% of all issued and outstanding stock of SPTP.  Taking into account the recommendations of a pool committee and a technical committee, each of which is comprised of representatives of each pool participant, SPTP sets the pool's policies and issues directives to the pool participants and SCM.  The pool participants remain responsible for all other costs including the financing, insurance, manning and technical management of their vessels.  The earnings of all of the vessels are aggregated and divided according to the relative performance capabilities of the vessel and the actual earning days each vessel is available.
 
There are five other participants in this pool.  If a participant wants to sell or withdraw its vessel, it must give notice to SPTP, SCM and the other participants, and may not withdraw its vessel from the pool for 90 days following the date of such notice.
 
Please see the section of this prospectus entitled "Business? Our Managers" and "?Our Initial Fleet."
 
Our Relationship with Scorpio Group and its Affiliates
 
We were incorporated in the Republic of The Marshall Islands on July 1, 2009 by Simon Financial Limited, or Simon, which is owned by members of the Lolli-Ghetti family and manages their shipping interests.  On October 1, 2009, (i) Simon transferred to Scorpio Tankers Inc. three operating subsidiary companies, which own the vessels in our initial fleet; (ii) Liberty Holding Company Ltd., or Liberty, became a wholly-owned subsidiary and operating vehicle of Simon; (iii) Scorpio Owning Holding Ltd. became a wholly-owned subsidiary of Liberty; and (iv) Scorpio Tankers Inc. became a wholly-owned subsidiary of Scorpio Owning Holding Ltd.  Liberty's operations include the Scorpio Group's drybulk carriers, logistics operations in Southeast Asia, owning an offshore floating terminal, vessel pools, chartered-in vessels, and interests in joint ventures and investments.  Prior to the completion of this offering, Scorpio Group and its affiliates, which contributed the three Panamax tankers in our initial fleet, currently hold 100% of the voting and economic interests in our common stock.  Upon completion of this offering, Scorpio Group and its affiliates are expected to beneficially own    % of our outstanding shares of our common stock, which will represent    % of the voting and economic interest in our common stock (   % and    %, respectively, if the underwriters' over-allotment option is exercised in full).  After contributing the three Panamax tankers, Scorpio Group does not have an ownership interest in any tanker vessels other than our three tanker vessels, and will preclude itself from directly owning product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt.
 
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Our board of directors will consist of five individuals, three of whom will be independent directors.  The three independent directors will form the board's Audit Committee and, pursuant to the Audit Committee charter, will be required to review all potential conflicts of interest between us and Scorpio Group.  The two non-independent directors, Emanuele Lauro and Robert Bugbee, serve in senior management positions within the Scorpio Group and have an ownership stake in Liberty, which is our Administrator, and which is also an affiliate of the Scorpio Group.
 
The Scorpio Group is owned and controlled by members of the Lolli-Ghetti family, of which Mr. Lauro is a member. Mr. Lauro is considered to be the acting Chief Executive Officer of Scorpio Group, and Mr. Bugbee is considered to be the acting President of Scorpio Group.  Mr. Lauro is employed by Scorpio Ship Management and Mr. Bugbee is employed by Scorpio USA, and both entities are affiliates within the Scorpio Group.  Prior to the completion of this offering, we estimate the ownership interest for Mr. Lauro and Mr. Bugbee in Liberty, an affiliate of the Scorpio Group, will be a restricted stock ownership interest of 2% and 1.75%, respectively, but they will have no other ownership interests in the Scorpio Group. This restricted stock ownership interest cannot be sold or otherwise disposed, can be forfeited under certain conditions such as termination of employment prior to vesting, and has no voting rights. We are not affiliated with any other entities in the shipping industry other than those that are members of the Scorpio Group.
 
Prior to the completion of this offering, Liberty, in turn, has a 100% ownership interest in us through its subsidiary, but this ownership interest will be significantly reduced at the completion of this offering.
 
SCM and SSM, which as noted previously are affiliates of Scorpio Group, provide commercial and technical management services to us pursuant to our commercial and technical management agreements.  Under the commercial management agreement, we pay SCM a fee of $250 per vessel per day plus a 1.25% commission per charter fixture.  For vessels operating in a Scorpio Group pool, we pay SCM's agent fee of $250 per vessel per day plus 1.25% commission per charter fixture.  We pay SSM $548 per vessel per day to provide technical management services for each of our vessels.  We have entered into separate commercial and technical management agreements in December 2009 for each of our vessels and expect to enter into similar agreements with respect to each vessel that we acquire going forward.  The commercial and technical management agreements with SCM and SSM are each for a period of three years, and may be terminated upon two year's notice.
 
We will reimburse Liberty, which as noted previously is our Administrator and also an affiliate of the Scorpio Group, for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We will also pay our Administrator a fee for arranging vessel purchases and sales for us equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. We believe this 1% fee on purchases and sales is customary in the tanker industry.
 
Pursuant to our administrative services agreement, Liberty, on behalf of itself and other members of the Scorpio Group, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt. We have no other agreements with SCM, SSM, our Administrator, or any other party providing for a resolution of potential conflicts in our favor.
 
Related Party Payable and Shareholder Payable
 
Included in our current liabilities on our Combined Balance Sheet as of September 30, 2009 is a shareholder payable of $19.3 million, and a related party payable owed to a subsidiary of Simon Financial Limited of $27.4 million. The related party payable is repayable upon demand, non-interest-bearing and unsecured. The shareholder payable is owed to Simon. Historically, our company and the shareholder have transferred cash depending on the need of each entity and the excess cash available. The shareholder payable is non-interest-bearing and unsecured.
 
These outstanding balances as of November 18, 2009 of $46.3 million were converted to equity as a capital contribution, in the amount of $18,865,930 for the shareholder payable to Simon, and in the amount of $27,406,408 for the related party payable to Iceberg Shipping Limited, a subsidiary of Liberty. These payables were converted to equity as a capital contribution and no shares were exchanged in this transaction. See our pro forma balance sheet as of September 30, 2009 which is included in our unaudited condensed combined financial statements elsewhere in this prospectus.
 
 
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King Dustin
 
King Dustin Tankschiffahrts GmbH&Co.KG , or King Dustin, is a special purpose entity that is owned equally by affiliates of Koenig & cie and Scorpio Group.  King Dustin time charters-in Noemi from us at $24,500 per day pursuant to a time charter that expires in January 2012.  The time charter began in January 2007.  King Dustin time charters-out Noemi to ST Shipping, a wholly owned subsidiary of Glencore S.A. of Zug, Switzerland.
 

 
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SHARES ELIGIBLE FOR FUTURE SALE
 
Upon completion of this offering, we will have         common shares outstanding. Of these shares, only the         shares sold in this offering will be freely transferable in the United States without restriction under the Securities Act, except for any shares acquired by one of our "affiliates" as defined in Rule 144 under the Securities Act.  Immediately after the closing of this offering,                , who are principal shareholders, directors and executive officers of our company, will continue to own         of our common shares, or         shares if the underwriters' over-allotment option is exercised in full, which were acquired in private transactions not involving a public offering, and these shares will therefore be treated as "restricted securities" for purposes of Rule 144. The restricted securities held by                  will be subject to the underwriters' lock-up agreement, as described below. Restricted securities may not be resold except in compliance with the registration requirements of the Securities Act or under an exemption from those registration requirements, such as the exemptions provided by Rule 144, Regulation S and other exemptions under the Securities Act.
 
In general, under Rule 144 as currently in effect, a person or persons who is an affiliate, or whose shares are aggregated and who owns shares that were acquired from the issuer or an affiliate at least six months ago, would be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of (i) 1% of our then outstanding common shares, which would be approximately         common shares immediately after this offering, or (ii) an amount equal to the average weekly reported volume of trading in our common shares on all national securities exchanges and/or reported through the automated quotation system of registered securities associations during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. Sales in reliance on Rule 144 are also subject to other requirements regarding the manner of sale, notice and availability of current public information about us.
 
A person or persons whose shares are aggregated, and who is not deemed to have been one of our affiliates at any time during the 90 days immediately preceding the sale, may sell restricted securities in reliance on Rule 144(b)(1) without regard to the limitations described above, subject to our compliance with Exchange Act reporting obligations for at least three months before the sale, and provided that six months have expired since the date on which the same restricted securities were acquired from us or one of our affiliates, and provided further that such sales comply with the public information provision of Rule 144 (until the securities have been held for one year). As defined in Rule 144, an "affiliate" of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, that same issuer.
 
We and our executive officers, directors and existing shareholders have entered into agreements with the underwriters of this offering which, subject to certain exceptions, generally restrict us and our executive officers, directors and shareholders from directly or indirectly offering, selling, pledging, hedging or otherwise disposing of our equity securities, restricted securities or any security that is convertible into or exercisable or exchangeable for our equity securities and from engaging in certain other transactions relating to such securities for a period of 180 days after the date of this prospectus without the prior written consent of Morgan Stanley & Co. Incorporated, or Morgan Stanley. However, if (a) during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the foregoing 180-day period and ends on the last day of the foregoing 180-day period, we issue an earnings release or material news or a material event relating to us occurs or (b) prior to the expiration of the foregoing 180-day period referred, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, these "lock-up" restrictions imposed will continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the issuance of the earnings release or the material news or material event occurs. Morgan Stanley may, in its sole discretion and at any time or from time to time before the expiration of the lock-up period, without notice, release all or any portion of the securities subject to these agreements. There are no existing agreements with Morgan Stanley providing consent to the sale of shares prior to the expiration of the "lock-up" period.
 
As a result of these lock-up agreements and rules of the Securities Act, the restricted shares will be available for sale in the public market, subject to certain volume and other restrictions, as mentioned above, as follows:
 
 
100
 
     
Date
Number of Shares Eligible for Sale
Comment
     
Date of prospectus
None
Shares not locked up and eligible for sale freely or under Rule 144
180 days from date of prospectus (1)
       
Lock-up released; shares eligible for sale under Rule 144
              , 2010
       
Shares eligible for sale under Rule 144

 
(1)
Assumes that the lock-up period will not be extended or waived in accordance with the terms of the lock-up agreement and that the underwriters do not exercise their over-allotment option.
 

Prior to this offering, there has been no public market for our common shares, and no prediction can be made as to the effect, if any, that future sales or the availability of common shares for sale will have on the market price of our common shares prevailing from time to time. Nevertheless, sales of substantial amounts of our common shares in the public market, including common shares issued upon the exercise of options that may be granted under any employee stock option or employee stock award plan of ours, or the perception that those sales may occur, could adversely affect prevailing market prices for our common shares.
 

 
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DESCRIPTION OF OUR CAPITAL STOCK
 
The following is a description of the material terms of our amended and restated articles of incorporation and bylaws that will be in effect immediately prior to the consummation of this offering. Please see our amended and restated articles of incorporation and bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part.
 
PURPOSE
 
Our purpose, as stated in our amended and restated articles of incorporation, is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Business Corporations Act of the Marshall Islands, or the BCA. Our amended and restated articles of incorporation and bylaws do not impose any limitations on the ownership rights of our shareholders.
 
AUTHORIZED CAPITAL STOCK
 
Under our amended and restated articles of incorporation our authorized capital stock consists of 250 million common shares, par value $1.00 per share, of which 1,500 shares are issued and outstanding, and 25 million preferred shares, par value $1.00 per share, of which no shares are issued and outstanding.
 
Common shares
 
Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of common shares are entitled to receive ratably all dividends, if any, declared by our board of directors out of funds legally available for dividends. Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common shares are entitled to receive pro rata our remaining assets available for distribution. Holders of common shares do not have conversion, redemption or pre-emptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of common shares are subject to the rights of the holders of any shares of preferred stock, which we may issue in the future.
 
Preferred shares
 
Our amended and restated articles of incorporation authorize our board of directors to establish one or more series of preferred stock and to determine, with respect to any series of preferred stock, the terms and rights of that series, including:
 
·  
the designation of the series;
 
·  
the number of shares of the series;
 
·  
the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series; and
 
·  
the voting rights, if any, of the holders of the series.
 
REGISTRAR AND TRANSFER AGENT
 
The registrar and transfer agent for our common shares is       .
 
LISTING
 
We have applied to have our common shares approved for quotation on the New York Stock Exchange under the symbol "STNG."
 
 
102
 
DIRECTORS
 
Our directors are elected by a plurality of the votes cast by shareholders entitled to vote. There is no provision for cumulative voting.
 
Our amended and restated bylaws require our board of directors to consist of at least one member. Upon the completion of this offering, our board of directors will consist of five members. Our amended and restated bylaws may be amended by the vote of a majority of our entire board of directors.
 
Directors are elected annually on a staggered basis, and each shall serve for a three year term and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our board of directors has the authority to fix the amounts which shall be payable to the members of the board of directors for attendance at any meeting or for services rendered to us.
 
SHAREHOLDER MEETINGS
 
Under our amended and restated bylaws, annual meetings of shareholders will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Republic of The Marshall Islands. Special meetings may be called at any time by a majority of our board of directors, the chairman of our board of directors or the president. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the shareholders that will be eligible to receive notice and vote at the meeting. One or more shareholders representing at least one-third of the total voting rights of our total issued and outstanding shares present in person or by proxy at a shareholder meeting shall constitute a quorum for the purposes of the meeting.
 
DISSENTERS' RIGHTS OF APPRAISAL AND PAYMENT
 
Under the BCA, our shareholders have the right to dissent from various corporate actions, including any merger or consolidation and the sale of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares. In the event of any further amendment of our articles of incorporation, a shareholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the high court of the Republic of The Marshall Islands or in any appropriate court in any jurisdiction in which our shares are primarily traded on a local or national securities exchange.
 
SHAREHOLDERS' DERIVATIVE ACTIONS
 
Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of common shares both at the time the derivative action is commenced and at the time of the transaction to which the action relates.
 
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
 
The BCA authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their shareholders for monetary damages for breaches of directors' fiduciary duties. Our amended and restated articles of incorporation and bylaws include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent permitted by law.
 
Our bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by law. We are also expressly authorized to advance certain expenses (including attorney's fees and disbursements and court costs) to our directors and officers and carry directors' and officers' insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and this insurance are useful to attract and retain qualified directors and executive officers.
 
 
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The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
 
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
 
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION AND BYLAWS
 
Several provisions of our articles of incorporation and bylaws, which are summarized below, may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of us by means of a tender offer, a proxy contest or otherwise that a shareholder may consider in its best interest and (2) the removal of incumbent officers and directors.
 
Blank check preferred stock
 
Under the terms of our amended and restated articles of incorporation, our board of directors has authority, without any further vote or action by our shareholders, to issue up to 25 million shares of blank check preferred stock. Our board of directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of us or the removal of our management.
 
Election and removal of directors
 
Our amended and restated articles of incorporation prohibit cumulative voting in the election of directors. Our bylaws require parties other than the board of directors to give advance written notice of nominations for the election of directors. Our articles of incorporation also provide that our directors may be removed for cause upon the affirmative vote of not less than two-thirds of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.
 
Limited Actions by Stockholders
 
Our amended and restated articles of incorporation and our bylaws provide that any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or by the unanimous written consent of our shareholders. Our amended and restated articles of incorporation and our bylaws provide that, subject to certain exceptions, our Chairman, Chief Executive Officer, or Secretary at the direction of the board of directors or holders of not less than one-fifth of all outstanding shares may call special meetings of our shareholders and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our board of directors and shareholder consideration of a proposal may be delayed until the next annual meeting.
 
104
Advance notice requirements for shareholder proposals and director nominations
 
Our bylaws provide that shareholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of shareholders must provide timely notice of their proposal in writing to the corporate secretary. Generally, to be timely, a shareholder's notice must be received at our principal executive offices not less than 150 days nor more than 180 days prior to the one year anniversary of the mailing date of the proxy materials for the immediately preceding annual meeting of shareholders. Our bylaws also specify requirements as to the form and content of a shareholder's notice. These provisions may impede shareholders' ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders.
 
Classified board of directors
 
As described above, our amended and restated articles of incorporation provide for the division of our board of directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered three year terms. Accordingly, approximately one-third of our board of directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of us. It could also delay shareholders who do not agree with the policies of our board of directors from removing a majority of our board of directors for two years.
 
Business combinations
 
Although the BCA does not contain specific provisions regarding "business combinations" between companies organized under the laws of the Marshall Islands and "interested shareholders," we have included these provisions in our articles of incorporation. Specifically, our articles of incorporation prohibit us from engaging in a "business combination" with certain persons for three years following the date the person becomes an interested shareholder. Interested shareholders generally include:
 
·  
any person who is the beneficial owner of 15% or more of our outstanding voting stock; or
 
·  
any person who is our affiliate or associate and who held 15% or more of our outstanding voting stock at any time within three years before the date on which the person's status as an interested shareholder is determined, and the affiliates and associates of such person.
 
Subject to certain exceptions, a business combination includes, among other things:
 
·  
certain mergers or consolidations of us or any direct or indirect majority-owned subsidiary of ours;
 
·  
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of our assets or of any subsidiary of ours having an aggregate market value equal to 10% or more of either the aggregate market value of all of our assets, determined on a combined basis, or the aggregate value of all of our outstanding stock;
 
·  
certain transactions that result in the issuance or transfer by us of any stock of ours to the interested shareholder;
 
·  
any transaction involving us or any of our subsidiaries that has the effect of increasing the proportionate share of any class or series of stock, or securities convertible into any class or series of stock, of ours or any such subsidiary that is owned directly or indirectly by the interested shareholder or any affiliate or associate of the interested shareholder; and
 
·  
any receipt by the interested shareholder of the benefit directly or indirectly (except proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial benefits provided by or through us.
 
These provisions of our articles of incorporation do not apply to a business combination if:
 
·  
before a person became an interested shareholder, our board of directors approved either the business combination or the transaction in which the shareholder became an interested shareholder;
 
 
105
 
·  
upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than certain excluded shares;
 
·  
at or following the transaction in which the person became an interested shareholder, the business combination is approved by our board of directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock that is not owned by the interest shareholder;
 
·  
the shareholder was or became an interested shareholder prior to the closing of our initial public offering in            2010;
 
·  
a shareholder became an interested shareholder inadvertently and (i) as soon as practicable divested itself of ownership of sufficient shares so that the shareholder ceased to be an interested shareholder; and (ii) would not, at any time within the three-year period immediately prior to a business combination between us and such shareholder, have been an interested shareholder but for the inadvertent acquisition of ownership; or
 
·  
the business combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required under our articles of incorporation which (i) constitutes one of the transactions described in the following sentence; (ii) is with or by a person who either was not an interested shareholder during the previous three years or who became an interested shareholder with the approval of the board; and (iii) is approved or not opposed by a majority of the members of the board of directors then in office (but not less than one) who were directors prior to any person becoming an interested shareholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. The proposed transactions referred to in the preceding sentence are limited to:
 
(i)  
a merger or consolidation of us (except for a merger in respect of which, pursuant to the BCA, no vote of our shareholders is required);
 
(ii)  
a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of us or of any direct or indirect majority-owned subsidiary of ours (other than to any direct or indirect wholly-owned subsidiary or to us) having an aggregate market value equal to 50% or more of either the aggregate market value of all of our assets determined on a consolidated basis or the aggregate market value of all the outstanding shares; or
 
(iii)  
a proposed tender or exchange offer for 50% or more of our outstanding voting stock.
 

 
106
 

 
MARSHALL ISLANDS COMPANY CONSIDERATIONS
 
Our corporate affairs are governed by our articles of incorporation and bylaws and by the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. While the BCA also provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Republic of The Marshall Islands and we can not predict whether Marshall Islands courts would reach the same conclusions as courts in the United States. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction which has developed a substantial body of case law. The following table provides a comparison between the statutory provisions of the BCA and the Delaware General Corporation Law relating to shareholders' rights.
 

 
Marshall Islands
   
Delaware
 
 
Shareholder Meetings
 
 
Held at a time and place as designated in the bylaws.
 
May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the board of directors.
 
 
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the articles of incorporation or by the bylaws.
 
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.
 
 
May be held within or without the Marshall Islands.
 
May be held within or without Delaware.
 
 
Notice:
 
Notice:
 
   
Whenever shareholders are required to take any action at a meeting, written notice of the meeting shall be given which shall state the place, date and hour of the meeting and, unless it is an annual meeting, indicate that it is being issued by or at the direction of the person calling the meeting.
 
   
Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any.
   
A copy of the notice of any meeting shall be given personally or sent by mail not less than 15 nor more than 60 days before the meeting.
   
Written notice shall be given not less than 10 nor more than 60 days before the meeting.
           
 
 
Shareholders' Voting Rights
 
 
Any action required to be taken by a meeting of shareholders may be taken without meeting if consent is in writing and is signed by all the shareholders entitled to vote.
 
Any action required to be taken at a meeting of shareholders may be taken without a meeting if a consent for such action is in writing and is signed by shareholders having not fewer than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
 
Any person authorized to vote may authorize another person or persons to act for him by proxy.
 
Any person authorized to vote may authorize another person or persons to act for him by proxy.
 
 
Unless otherwise provided in the articles of incorporation, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting.
 
For stock corporations, the certificate of incorporation or bylaws may specify the number of shares required to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.
 
 
 
107
 
 
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
 
 
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
 
The articles of incorporation may provide for cumulative voting in the election of directors.
 
 
The certificate of incorporation may provide for cumulative voting in the election of directors.
 
Any two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority vote of the holders of outstanding shares at a shareholder meeting.
 
Any two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution and upon the majority vote by shareholders of each constituent corporation at an annual or special meeting.
 
 
Any sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation's usual or regular course of business, once approved by the board, shall be authorized by the affirmative vote of two-thirds of the shares of those entitled to vote at a shareholder meeting.
 
Every corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as its board deems expedient and for the best interests of the corporation when so authorized by a resolution adopted by the holders of a majority of the outstanding stock of the corporation entitled to vote.
 
 
Any domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge such other corporation into itself without the authorization of the shareholders of any corporation.
 
Any corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation into itself and assume all of its obligations without the vote or consent of shareholders; however, in case the parent corporation is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent corporation entitled to vote at a duly called shareholder meeting.
 
 
Any mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without the vote or consent of the shareholders, unless otherwise provided for in the articles of incorporation.
 
Any mortgage or pledge of a corporation's property and assets may be authorized without the vote or consent of shareholders, except to the extent that the certificate of incorporation otherwise provides.
 
           
 
 
Directors
 
 
The board of directors must consist of at least one member.
 
 
The board of directors must consist of at least one member.
 
The number of board members may be changed by an amendment to the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw.
 
The number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by an amendment to the certificate of incorporation.
 
 
If the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long as no decrease in the number shall shorten the term of any incumbent director.
 
 
If the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment of the certificate.
 
Removal:
 
Removal:
   
Any or all of the directors may be removed for cause by vote of the shareholders.
   
Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote unless the certificate of incorporation otherwise provides.
 
   
If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the shareholders.
   
In the case of a classified board, shareholders may effect removal of any or all directors only for cause.
           
 
 
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Dissenters' Rights of Appraisal
 
Shareholders have a right to dissent from any plan of merger, consolidation or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their shares.
 
Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, subject to limited exceptions, such as a merger or consolidation of corporations listed on a national securities exchange in which listed stock is the offered consideration.
 
A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:
 
     
 
Alters or abolishes any preferential right of any outstanding shares having preference; or
 
     
 
Creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or
 
     
 
Alters or abolishes any preemptive right of such holder to acquire shares or other securities; or
 
     
 
Excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class.
     

Shareholder's Derivative Actions
 
An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law.
 
 
In any derivative suit instituted by a shareholder of a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such shareholder's stock thereafter devolved upon such shareholder by operation of law.
A complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.
 
Other requirements regarding derivative suits have been created by judicial decision, including that a shareholder may not bring a derivative suit unless he or she first demands that the corporation sue on its own behalf and that demand is refused (unless it is shown that such demand would have been futile).
 
Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic of The Marshall Islands.
 
   
Reasonable expenses including attorney's fees may be awarded if the action is successful.
 
   
A corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of stock and the shares have a value of less than $50,000.
   


 
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TAX CONSIDERATIONS
 
The following is a discussion of the material Marshall Islands and United States federal income tax considerations relevant to an investment decision by a United States Holder and a Non-United States Holder, each as defined below, with respect to the common shares. This discussion does not purport to deal with the tax consequences of owning common shares to all categories of investors, some of which, such as dealers in securities, tax-exempt organizations, investors whose functional currency is not the United States dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, may be subject to special rules. This discussion deals only with holders who purchase common shares in connection with this offering and hold the common shares as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under United States federal, state, local or non-U.S. law of the ownership of common shares.
 
Marshall Islands Tax Considerations
 
In the opinion of Seward & Kissel LLP, the following are the material Marshall Islands tax consequences of our activities to us and holders of our common shares. We are incorporated in the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our shareholders.
 
United States Federal Income Tax Considerations
 
In the opinion of Seward & Kissel LLP, our United States counsel, the following are the material United States federal income tax consequences to us of our activities and to United States Holders and Non-United States Holders, each as defined below, of the common shares. The following discussion of United States federal income tax matters is based on the United States Internal Revenue Code of 1986, or the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, all of which are subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of our business as described in this prospectus and assumes that we conduct our business as described herein. References in the following discussion to the "Company," "we," "our" and "us" are to Scorpio Tankers Inc. and its subsidiaries on a consolidated basis.
 
United States Federal Income Taxation of Operating Income:  In General
 
We anticipate that we will earn substantially all our income from the hiring or leasing of vessels for use on a time charter basis, from participation in a pool or from the performance of services directly related to those uses, all of which we refer to as "shipping income."
 
Unless exempt from United States federal income taxation under the rules of Section 883 of the Code, or Section 883, as discussed below, a foreign corporation such as the Company will be subject to United States federal income taxation on its "shipping income" that is treated as derived from sources within the United States, to which we refer as "United States source shipping income." For tax purposes, "United States source shipping income" includes 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.
 
Shipping income attributable to transportation exclusively between non-United States ports will be considered to be 100% derived from sources entirely outside the United States. Shipping income derived from sources outside the United States will not be subject to any United States federal income tax.
 
Shipping income attributable to transportation exclusively between United States ports is considered to be 100% derived from United States sources. However, we are not permitted by United States law to engage in the transportation of cargoes that produces 100% United States source shipping income.
 
Unless exempt from tax under Section 883, our gross United States source shipping income would be subject to a 4% tax imposed without allowance for deductions as described below.
 
 
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Exemption of Operating Income from United States Federal Income Taxation
 

Under Section 883 and the regulations thereunder, a foreign corporation will be exempt from United States federal income taxation on its United States source shipping income if:
 
 
(1)
it is organized in a qualified foreign country, which is one that grants an "equivalent exemption" from tax to corporations organized in the United States in respect of each category of shipping income for which exemption is being claimed under Section 883; and
 
 
(2)
one of the following tests is met:

 
(A)
more than 50% of the value of its shares is beneficially owned, directly or indirectly, by qualified shareholders, which as defined includes individuals who are "residents" of a qualified foreign country, which we refer to as the "50% Ownership Test"; or
 
 
(B)
its shares are "primarily and regularly traded on an established securities market" in a qualified foreign country or in the United States, to which we refer as the "Publicly-Traded Test".
 
The Republic of The Marshall Islands, the jurisdiction where we and our ship-owning subsidiaries are incorporated, has been officially recognized by the IRS as a qualified foreign country that grants the requisite "equivalent exemption" from tax in respect of each category of shipping income we earn and currently expect to earn in the future. Therefore, we will be exempt from United States federal income taxation with respect to our United States source shipping income if we satisfy either the 50% Ownership Test or the Publicly-Traded Test.
 
After this offering, we should satisfy the Publicly-Traded Test, as discussed below. We do not currently anticipate a circumstance under which we would be able to satisfy the 50% Ownership Test after this offering.
 
Publicly-Traded Test
 
The regulations under Section 883 provide, in pertinent part, that shares of a foreign corporation will be considered to be "primarily traded" on an established securities market in a country if the number of shares of each class of shares that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. The Company's common shares, which constitute its sole class of issued and outstanding shares will, after this offering, be "primarily traded" on the New York Stock Exchange.
 
Under the regulations, our common shares will be considered to be "regularly traded" on an established securities market if one or more classes of our shares representing more than 50% of our outstanding shares, by both total combined voting power of all classes of shares entitled to vote and total value, are listed on such market, to which we refer as the "listing threshold." Since, after this offering, all our common shares will be listed on the New York Stock Exchange, we should satisfy the listing threshold.
 
It is further required that with respect to each class of shares relied upon to meet the listing threshold, (i) such class of shares is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or one-sixth of the days in a short taxable year; and (ii) the aggregate number of shares of such class of shares traded on such market during the taxable year is at least 10% of the average number of shares of such class of shares outstanding during such year or as appropriately adjusted in the case of a short taxable year. The Company anticipates that it will satisfy the trading frequency and trading volume tests. Even if this were not the case, the regulations provide that the trading frequency and trading volume tests will be deemed satisfied if, as should be the case with our common shares, such class of shares is traded on an established market in the United States and such shares are regularly quoted by dealers making a market in such shares.
 
Notwithstanding the foregoing, the regulations provide, in pertinent part, that a class of shares will not be considered to be "regularly traded" on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified share attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the vote and value of such class of outstanding shares, to which we refer as the "5 Percent Override Rule."
 
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For purposes of being able to determine the persons who actually or constructively own 5% or more of the vote and value of our common shares, or "5% Shareholders," the regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the SEC, as owning 5% or more of our common shares. The regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes.
 
In the event the 5 Percent Override Rule is triggered, the regulations provide that the 5 Percent Override Rule will nevertheless not apply if we can establish that within the group of 5% Shareholders, there are sufficient qualified shareholders for purposes of Section 883 to preclude non-qualified shareholders in such group from owning 50% or more of our common stock for more than half the number of days during the taxable year.
 
We anticipate that after the offering is completed, we will be able to satisfy the Publicly-Traded Test and will not be subject to the 5 Percent Override Rule. However, there are factual circumstances beyond our control that could cause us to lose the benefit of the Section 883 exemption.  For example, after the offering, Emanuele Lauro is expected to own as much as       % of our outstanding common shares.  There is therefore a risk that we could no longer qualify for exemption under Code section 883 for a particular taxable year if other shareholders with a five percent or greater interest in the common shares were, in combination with Emanuele Lauro, to own 50% or more of our outstanding common shares on more than half the days during the taxable year.
 
Under the regulations, if we do not satisfy the Publicly-Traded Test and therefore are subject to the 5 Percent Override Rule, we would have to satisfy certain substantiation requirements regarding the identity of our shareholders in order to qualify for the Code Section 883 exemption.  These requirements are onerous and there is no assurance that we would be able to satisfy them.
 
Taxation In Absence of Section 883 Exemption
 
If the benefits of Section 883 are unavailable, our United States source shipping income would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, to the extent that such income is not considered to be "effectively connected" with the conduct of a United States trade or business, as described below. Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being United States source shipping income, the maximum effective rate of United States federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime.
 
To the extent our United States source shipping income is considered to be "effectively connected" with the conduct of a United States trade or business, as described below, any such "effectively connected" United States source shipping income, net of applicable deductions, would be subject to United States federal income tax, currently imposed at rates of up to 35%. In addition, we would generally be subject to the 30% "branch profits" tax on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our United States trade or business.
 
Our United States source shipping income would be considered "effectively connected" with the conduct of a United States trade or business only if:
 
·  
we have, or are considered to have, a fixed place of business in the United States involved in the earning of United States source shipping income; and
 
·  
substantially all of our United States source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States.
 
We do not intend to have, or permit circumstances that would result in having, any vessel sailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, it is anticipated that none of our United States source shipping income will be "effectively connected" with the conduct of a United States trade or business.
 
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United States Taxation of Gain on Sale of Vessels
 
If we qualify for exemption from tax under Section 883 in respect of the shipping income derived from the international operation of its vessels, then gain from the sale of any such vessel should likewise be exempt from tax under Section 883. If, however, our shipping income from such vessels does not for whatever reason qualify for exemption under Section 883, then any gain on the sale of a vessel will be subject to United States federal income tax if such sale occurs in the United States.  To the extent possible, we intend to structure the sales of our vessels so that the gain therefrom is not subject to United States federal income tax.  However, there is no assurance we will be able to do so.
 
United States Federal Income Taxation of United States Holders
 
As used herein, the term "United States Holder" means a beneficial owner of common shares that is an individual United States citizen or resident, a United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.
 
If a partnership holds the common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding the common shares, you are encouraged to consult your tax advisor.
 
Distributions
 
Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our common shares to a United States Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of such earnings and profits will be treated first as a nontaxable return of capital to the extent of the United States Holder's tax basis in his common shares on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a United States corporation, United States Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common shares will generally be treated as "passive category income" for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes.
 
Dividends paid on our common shares to a United States Holder who is an individual, trust or estate (a "United States Non-Corporate Holder") will generally be treated as "qualified dividend income" that is taxable to such United States Non-Corporate Holder at preferential tax rates (through 2010) provided that (1) the common shares are readily tradable on an established securities market in the United States (such as the New York Stock Exchange, on which our common stock will be traded); (2) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which, as discussed below, we have not been, are not and do not anticipate being in the future); (3) the United States Non-Corporate Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend; and (4) the United States Non-Corporate Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property.
 
There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a United States Non-Corporate Holder, although, as described above, they should be so eligible. Legislation has been previously introduced in the United States Congress which, if enacted in its present form, would preclude our dividends from qualifying for such preferential rates prospectively from the date of enactment. Any dividends out of earnings and profits we pay which are not eligible for these preferential rates will be taxed as ordinary income to a United States Non-Corporate Holder.
 
Special rules may apply to any "extraordinary dividend"—generally, a dividend in an amount which is equal to or in excess of 10% of a shareholder's adjusted basis in a common share—paid by us. If we pay an "extraordinary dividend" on our common shares that is treated as "qualified dividend income," then any loss derived by a United States Non-Corporate Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend.
 
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Sale, Exchange or Other Disposition of Common Shares
 
Assuming we do not constitute a passive foreign investment company for any taxable year, a United States Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common shares in an amount equal to the difference between the amount realized by the United States Holder from such sale, exchange or other disposition and the United States Holder's tax basis in such shares. Such gain or loss will be treated as long-term capital gain or loss if the United States Holder's holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States source income or loss, as applicable, for United States foreign tax credit purposes. Long-term capital gains of United States Non-Corporate Holders are currently eligible for reduced rates of taxation. A United States Holder's ability to deduct capital losses is subject to certain limitations.
 
Passive Foreign Investment Company Status and Significant Tax Consequences
 
Special United States federal income tax rules apply to a United States Holder that holds shares in a foreign corporation classified as a "passive foreign investment company", a PFIC, for United States federal income tax purposes. In general, we will be treated as a PFIC with respect to a United States Holder if, for any taxable year in which such holder holds our common shares, either
 
·  
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 our assets during such taxable year produce, or are held for the production of, passive income.
 
For purposes of determining whether we are a PFIC, we will be treated as earning and owning its proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary's stock.  Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute "passive income" unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.
 
We believe that our income from time charters should not be treated as passive income for purposes of determining whether we are a PFIC.   Although there is no legal authority directly on point, this position is based principally on the view that the gross income we derive from our time chartering activities should constitute services income, rather than rental income.  Accordingly, such income should not constitute passive income, and the assets that we own and operate in connection with the production of such income, in particular, the vessels, should not constitute passive assets for purposes of determining whether we are a PFIC.  There is substantial legal authority supporting this position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters as services income for other tax purposes.  However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes.  It should be noted that in the absence of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court could disagree with this position.  Therefore, based on our current operations and future projections, we should not be treated as a passive foreign investment company with respect to any taxable year after the offering.  Accordingly, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.
 
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a United States Holder would be subject to different taxation rules depending on whether the United States Holder makes an election to treat us as a "Qualified Electing Fund," which election we refer to as a "QEF election." As an alternative to making a QEF election, a United States Holder should be able to make a "mark-to-market" election with respect to our common stock, as discussed below.
 
 
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Taxation of United States Holders Making a Timely QEF Election
 
If a United States Holder makes a timely QEF election, which United States Holder we refer to as an "Electing Holder," the Electing Holder must report for United States federal income tax purposes its pro rata share of our ordinary earnings and net capital gain, if any, for each taxable year of ours for which we are a PFIC that ends with or within the taxable year of the Electing Holder, regardless of whether distributions were received from us by the Electing Holder. No portion of any such inclusions of ordinary earnings will be treated as "qualified dividend income." Net capital gain inclusions of United States Non-Corporate Holders would be eligible for preferential capital gains tax rates. The Electing Holder's adjusted tax basis in the common shares will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common shares and will not be taxed again once distributed. An Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respect to any year. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A United States Holder would make a timely QEF election for our shares by filing one copy of IRS Form 8621 with his United States federal income tax return for the first year in which he held such shares when we were a PFIC. If we were to be treated as a PFIC for any taxable year, we would provide each United States Holder with all necessary information in order to make the QEF election described above.
 
Taxation of United States Holders Making a "Mark-to-Market" Election
 
Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate will be the case, our shares are treated as "marketable stock," a United States Holder would be allowed to make a "mark-to-market" election with respect to our common shares, provided the United States Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury regulations. If that election is made, the United States Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common shares at the end of the taxable year over such holder's adjusted tax basis in the common shares. The United States Holder would also be permitted an ordinary loss in respect of the excess, if any, of the United States Holder's adjusted tax basis in the common shares over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A United States Holder's tax basis in his common shares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the United States Holder.
 
Taxation of United States Holders Not Making a Timely QEF or Mark-to-Market Election
 
Finally, if we were to be treated as a PFIC for any taxable year, a United States Holder who does not make either a QEF election or a "mark-to-market" election for that year, whom we refer to as a "Non-Electing Holder," would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common shares), and (2) any gain realized on the sale, exchange or other disposition of our common shares. Under these special rules:
 
·  
the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common shares;
 
·  
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, would be taxed as ordinary income and would not be "qualified dividend 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.
 
 
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United States Federal Income Taxation of "Non-United States Holders"
 
A beneficial owner of common shares (other than a partnership) that is not a United States Holder is referred to herein as a "Non-United States Holder."
 
If a partnership holds common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding common shares, you are encouraged to consult your tax advisor.
 
Dividends on Common Stock
 
Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on dividends received from us with respect to its common shares, unless that income is effectively connected with the Non-United States Holder's conduct of a trade or business in the United States. If the Non-United States Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-United States Holder in the United States.
 
Sale, Exchange or Other Disposition of Common Shares
 
Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common shares, unless:
 
·  
the gain is effectively connected with the Non-United States Holder's conduct of a trade or business in the United States (and, if the Non-United States Holder is entitled to the benefits of an income tax treaty with respect to that gain, that gain is attributable to a permanent establishment maintained by the Non-United States Holder in the United States); or
 
·  
the Non-United States Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.
 
If the Non-United States Holder is engaged in a United States trade or business for United States federal income tax purposes, dividends on the common shares and gain from the sale, exchange or other disposition of the shares, that is effectively connected with the conduct of that trade or business will generally be subject to regular United States federal income tax in the same manner as discussed in the previous section relating to the taxation of United States Holders. In addition, if you are a corporate Non-United States Holder, your earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.
 
Backup Withholding and Information Reporting
 
In general, dividend payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements if you are a non-corporate United States Holder. Such payments or distributions may also be subject to backup withholding tax if you are a non-corporate United States Holder and you:
 
·  
fail to provide an accurate taxpayer identification number;
 
·  
are notified by the IRS 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.
 
Non-United States Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8ECI or W-8IMY, as applicable.
 
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If you are a Non-United States Holder and you sell your common shares to or through a United States office of a broker, the payment of the proceeds is subject to both United States backup withholding and information reporting unless you certify that you are a non-United States person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common shares through a non-United States office of a non-United States broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common shares through a non-United States office of a broker that is a United States person or has some other contacts with the United States. Such information reporting requirements will not apply, however, if the broker has documentary evidence in its records that you are a non-United States person and certain other conditions are met, or you otherwise establish an exemption.
 
Backup withholding is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.
 

 
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UNDERWRITING
 
Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated is acting as representative, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:
 
 
Name
 
 
Number of Shares
 
Morgan Stanley & Co. Incorporated
 
Dahlman Rose & Company
 
Subtotal
 
Total
 

The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale.  The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions.  The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken.  However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below.
 
The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $        a share under the public offering price.  Any underwriter may allow, and such dealers may also allow, a concession not in excess of $        a share to other underwriters or to certain dealers.  After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representative.
 
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of         additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions.  The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus.  To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter's name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.  If the underwriters' option is exercised in full, the total price to the public would be $       , the total underwriters' discounts and commissions would be $        and the total proceeds to us would be $       .
 
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them.
 
Application has been made to have the common stock approved for quotation on the New York Stock Exchange under the symbol "STNG".
 
We, our directors, executive officers and certain other of our stockholders have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus:
 
·  
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock;
 
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·  
file any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or
 
·  
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock;
 
whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise.  The restrictions described in this paragraph do not apply to:
 
·  
the sale of shares to the underwriters; or
 
·  
the issuance by us of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing.
 
In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock.  Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position.  A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over allotment option.  The underwriters can close out a covered short sale by exercising the over allotment option or purchasing shares in the open market.  In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over allotment option.  The underwriters may also sell shares in excess of the over allotment option, creating a naked short position.  The underwriters must close out any naked short position by purchasing shares in the open market.  A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering.  As an additional means of facilitating the offering, the underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock.  The underwriting syndicate may also reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering, if the syndicate repurchases previously distributed common stock to cover syndicate short positions or to stabilize the price of the common stock.  These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock.  The underwriters are not required to engage in these activities, and may end any of these activities at any time.
 
The underwriters and their affiliates have in the past provided, and may in the future provide, investment banking, commercial banking, derivative transactions and financial advisory services to us and our affiliates in the ordinary course of business, for which they have received customary fees and expenses.
 
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
 
At our request, the underwriters have reserved for sale, at the initial public offering price, up to         shares offered in this prospectus for        .  The number of shares of common stock available for sale to the general public will be reduced to the extent such person purchases such reserved shares.  Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered in this prospectus.
 
A prospectus in electronic format may be made available on the internet sites or through other on-line services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms on-line and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders on-line. The underwriters may agree with us to allocate a specific number of shares for sale to on-line brokerage account holders. Any such allocation for on-line distributions will be made by the representative on the same basis as other allocations.
 
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Other than the prospectus in electronic format, the information on any underwriter's or selling group member's web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.
 
If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
 
Prior to this offering, there has been no public market for the shares of common stock.  The initial public offering price will be determined by negotiations between us and the representative of the underwriters.  Among the factors to be considered in determining the initial public offering price will be our future prospects and that of our industry in general, our earnings and certain other financial operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those in which we engage.  The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors.
 
Notice to Prospective Investors in the European Economic Area
 
In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of shares described in this prospectus may not be made to the public in that relevant member state prior to the publication of a prospectus in relation to the shares that has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, an offer of securities may be offered to the public in that relevant member state at any time:
 
·  
to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
 
·  
to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
 
·  
to fewer than 100 natural or legal persons (other than qualified investors as defined below) subject to obtaining the prior consent of the representatives for any such offer; or
 
·  
in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive.
 
Each purchaser of shares described in this prospectus located within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a "qualified investor" within the meaning of Article 2 (l)(e) of the Prospectus Directive.
 
For purposes of this provision, the expression an "offer to the public" in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.
 
The sellers of the shares have not authorized and do not authorize the making of any offer of shares through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the shares as contemplated in this prospectus.  Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of the shares on behalf of the sellers or the underwriters.
 
 
120
 
Notice to Prospective Investors in the United Kingdom
 
This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1) (e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) (a) to (d) of the Order (each such person being referred to as a "relevant person"). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom.  Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
 
Notice to Prospective Investors in France
 
Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be:
 
·  
released, issued, distributed or caused to be released, issued or distributed to the public in France: or
 
·  
used in connection with any offer for subscription or sale of the shares to the public in France.
 
Such offers, sales and distributions will be made in France only:
 
·  
to qualified investors ( investisseurs qualifiés ) and/or to a restricted circle of investors ( cercle restreint d'investisseurs ), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier ;
 
·  
to investment services providers authorized to engage in portfolio management on behalf of third parties; or
 
·  
in a transaction that, in accordance with article L.411-2-II-l º -or- 3º of the French Code monétaire et financier and article 211-2 of the General Regulations ( Réglement Général ) of the Autorité des Marchés Financiers , does not constitute a public offer ( appel public à l'épargne ).
 
The shares may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier .
 
Notice to Prospective Investors in Switzerland
 
Neither this prospectus nor any other material relating to the common stock which is the subject of the offering contemplated by this prospectus constitute an issue prospectus pursuant to Article 652a of the Swiss Code of Obligations.  The common stock will not be listed on the SWX Swiss Exchange and, therefore, the documents relating to the common stock, including, but not limited to, this document, do not claim to comply with the disclosure standards of the listing rules of SWX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SWX Swiss Exchange.  The common stock is being offered in Switzerland by way of a private placement, i.e. to a small number of selected investors only, without any public offer and only to investors who do not purchase the shares with the intention to distribute them to the public. The investors will be individually approached by us from time to time. This prospectus or any other material relating to the common stock are personal and confidential and do not constitute an offer to any other person. This prospectus or any other material relating to the common stock may only be used by those investors to whom it has been handed out in connection with the offering described herein and may neither directly nor indirectly be distributed or made available to other persons without our express consent. Such materials may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in (or from) Switzerland.
 
121
 
Notice to Prospective Investors in Hong Kong
 
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
 
Notice to Prospective Investors in Japan
 
The shares offered in this prospectus have not been registered under the Securities and Exchange Law of Japan. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.
 
Notice to Prospective Investors in Singapore
 
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore.  Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(lA), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
 
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
 
·  
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
 
·  
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
 
shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
 
·  
to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
 
·  
where no consideration is or will be given for the transfer; or
 
·  
where the transfer is by operation of law.
 
 
122
LEGAL MATTERS
 
The validity of the common shares and certain other matters relating to United States Federal income and Marshall Islands tax considerations and to Marshall Islands corporations law will be passed upon for us by Seward & Kissel LLP, New York, New York. The underwriters have been represented in connection with this offering by Davis Polk & Wardwell LLP.
 
 
EXPERTS
 
The combined financial statements as of December 31, 2008 and 2007, and for each of the two years in the period ended December 31, 2008, included in this Prospectus have been audited by Deloitte LLP, an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in the Registration Statement. Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
 
The sections in this prospectus titled "Prospectus Summary" and "The International Tanker Industry" have been reviewed by Fearnley, which has confirmed to us that such sections accurately describe the international tanker market, subject to the availability and reliability of the data supporting the statistical information presented in this prospectus.
 
 
WHERE YOU CAN FIND ADDITIONAL INFORMATION
 
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the common shares offered hereby. For the purposes of this section, the term registration statement means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus does not contain all of the information set forth in the registration statement we filed. Each statement made in this prospectus concerning a document filed as an exhibit to the registration statement is qualified by reference to that exhibit for a complete statement of its provisions. The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330, and you may obtain copies at prescribed rates from the Public Reference Section of the SEC at its principal office in Washington, D.C. 20549. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.
 
Upon completion of this offering, we will be subject to the reporting requirements of the Exchange Act. We will furnish holders of common shares with annual reports containing audited financial statements and a report by our independent registered public accounting firm and intend to make available quarterly financial information containing selected unaudited financial data for the first three quarters of each fiscal year, which quarterly financial data will be reviewed by our independent auditors pursuant to the Statement of Auditing Standards 100. The audited financial statements will be prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB and those reports will include a "Management's Discussion and Analysis of Financial Condition and Results of Operations" section for the relevant periods. As a "foreign private issuer," we will be exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders, but will be required to furnish those proxy statements to shareholders under New York Stock Exchange rules. Those proxy statements are not expected to conform to Schedule 14A of the proxy rules promulgated under the Exchange Act. In addition, as a "foreign private issuer," our officers and directors and holders of more than 10% of our issued and outstanding common shares, which we refer to collectively as insiders, will be exempt from the rules under the Exchange Act requiring insiders to report purchases and sales of our common share as well as from Section 16 short swing profit reporting and liability.
 
 
TANKER INDUSTRY DATA
 
The discussions contained under the heading "The International Tanker Industry" have been reviewed by Fearnley, which has confirmed to us that they accurately describe the international tanker market as of the date of this prospectus.
 
123
The statistical and graphical information we use in this prospectus has been compiled by Fearnley from its database. Fearnley compiles and publishes data for the benefit of its clients. Its methodologies for collecting data, and therefore the data collected, may differ from those of other sources, and its data does not reflect all or even necessarily a comprehensive set of the actual transactions occurring in the market.
 
 
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
We estimate the expenses in connection with the distribution of our common shares in this offering, other than underwriting discounts and commissions, will be as set forth in the table below. We will be responsible for paying the following expenses associated with this offering.
 
SEC Registration Fee
$ 10,695
Printing and Engraving Expenses
   
Legal Fees and Expenses
   
Accountants' Fees and Expenses
   
NYSE Listing Fee
   
FINRA Fee
   
Blue Sky Fees and Expenses
   
Transfer Agent's Fees and Expenses
   
Miscellaneous Costs
   
Total
$   

 
ENFORCEABILITY OF CIVIL LIABILITIES
 
We are a Marshall Islands company, and our executive office is located outside of the United States in Monaco, although we also have an office in New York.  Some of our directors, officers and the experts named in this registration statement reside outside the United States. In addition, a substantial portion of our assets and the assets of certain of our directors, officers and experts are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in United States courts against us or these persons.
 

 
124
 

 
GLOSSARY OF SHIPPING TERMS
 
The following are definitions of certain terms that are commonly used in the shipping industry.
 
Aframax tanker .   A tanker ranging in size from 85,000 dwt to 120,000 dwt.
 
Annual survey.   The inspection of a vessel pursuant to international conventions, by a classification society surveyor, on behalf of the flag state, that takes place every year.
 
Ballast.   A voyage during which the vessel is not laden with cargo.
 
Bareboat charter.   A charter of a vessel under which the vessel-owner is usually paid a fixed daily or monthly rate for a certain period of time during which the charterer is responsible for the ship operating expenses and voyage expenses of the vessel and for the management of the vessel. In this case, all voyage related costs, including vessel fuel, or bunker, and port dues as well as all vessel operating costs, such as day-to-day operations, maintenance, crewing and insurance are paid by the charterer. A bareboat charter is also known as a "demise charter" or a "time charter by demise" and involves the use of a vessel usually over longer periods of time ranging over several years The owner of the vessel receives monthly charterhire payments on a per day basis and is responsible only for the payment of capital costs related to the vessel.
 
Bunkers.   Fuel oil used to operate a vessel's engines, generators and boilers.
 
CERCLA. Comprehensive Environmental Response, Compensation and Liability Act.
 
Charter.   The hiring of a vessel, or use of its carrying capacity, for either (1) a specified period of time or (2) to carry a cargo for a fixed fee from a loading port to a discharging port. The contract for a charter is called a charterparty.
 
Charterer.   The party that hires a vessel pursuant to a charter.
 
Charterhire.   Money paid to the vessel-owner by a charterer for the use of a vessel under a time charter or bareboat charter. Such payments are usually made during the course of the charter every 15 or 30 days in advance or in arrears by multiplying the daily charter rate times the number of days and, under a time charter only, subtracting any time the vessel was deemed to be off-hire. Under a bareboat charter such payments are usually made monthly and are calculated on a 360 or 365 day calendar year basis.
 
Charter rate.   The amount of money agreed between the charterer and the vessel-owner accrued on a daily or monthly basis that is used to calculate the vessel's charterhire.
 
Classification society.   An independent society that certifies that a vessel has been built and maintained according to the society's rules for that type of vessel and complies with the applicable rules and regulations of the country in which the vessel is registered, as well as the international conventions which that country has ratified. A vessel that receives its certification is referred to as being "in class" as of the date of issuance.
 
Clean petroleum products.   Liquid products refined from crude oil, whose color is less than or equal to 2.5 on the National Petroleum Association scale. Clean products include naphtha, jet fuel, gasoline and diesel/gasoil.
 
Contract of Affreightment.   A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and ship owner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the ship owner may use different ships to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators such as pools or ship owners with large fleets of the same vessel type. All of the ship's operating, voyage and capital costs are borne by the ship owner while the freight rate normally is agreed on a per cargo ton basis.
 

125
 
Deadweight ton or "dwt."   A unit of a vessel's capacity for cargo, fuel oil, stores and crew, measured in metric tons of 1,000 kilograms. A vessel's dwt or total deadweight is the total weight necessary to submerge the vessel to its maximum permitted draft.
 
Dirty petroleum products.   Liquid products refined from crude oil, whose color is greater than 2.5 on the National Petroleum Association scale. Dirty products usually require heating during a voyage, because their viscosity or waxiness makes discharge difficult at ambient temperatures.
 
Double-hull.   Hull construction design in which a vessel has an inner and outer side and bottom separated by void space, usually 2 meters in width.
 
Draft.   Vertical distance between the waterline and the bottom of the vessel's keel.
 
Drydocking.   The removal of a vessel from the water for inspection and/or repair of those parts of a vessel which are below the water line. During drydockings, which are required to be carried out periodically, certain mandatory classification society inspections are carried out and relevant certifications issued. Drydockings are generally required once every 30 to 60 months.
 
Gross ton.   A unit of weight equal to 2,240 pounds.
 
Handymax (also known as MR or Medium Range) tanker.   A tanker ranging in size from 25,000 dwt to 50,000 dwt.
 
Handysize tanker:   A tanker ranging in size from 10,000 dwt to 25,000 dwt.
 
Hull.   Shell or body of a vessel.
 
IMO.   International Maritime Organization, a United Nations agency that issues international regulations and standards for seaborne transportation.
 
ISM Code. International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, which, among other things, requires vessel-owners to obtain a safety management certification for each vessel they manage.
 
ISPS Code. International Security Code for Ports and Ships, which enacts measures to detect and prevent security threats to vessels and ports.
 
Intermediate survey.   The inspection of a vessel by a classification society surveyor which takes place between two and three years before and after each special survey for such vessel pursuant to the rules of international conventions and classification societies.
 
Metric ton.   A unit of weight equal to 1,000 kilograms.
 
Newbuilding.   A new vessel under construction or just completed.
 
Off-hire.   The period a vessel is unable to perform the services for which it is required under a time charter. Off-hire periods typically include days spent undergoing repairs and drydocking, whether or not scheduled.
 
OPA.   Oil Pollution Act of 1990 of the United States (as amended).
 
Panamax tanker.   A tanker ranging in size from 55,000 dwt to 85,000 dwt. The term is derived from the maximum length, breadth and draft capable of passing fully loaded through the Panama Canal.
 
Period charter.   A period charter is an industry term referring to both time and bareboat charters. These charters are referred to as period charters or period market charters due to use of the vessel by the charterer over a specific period of time.
 
 
126
 
Product tanker. A tanker designed for the carriage of refined petroleum products whose cargo tanks are usually coated with epoxy-based paint to facilitate the cleaning of the tanker between the carriage of different cargoes and to prevent product contamination and hull corrosion. A product tanker typically has multiple cargo tanks capable of handling different cargoes simultaneously. The vessel may have equipment designed for the loading and unloading of cargoes with a high viscosity.
 
Protection and indemnity (or P&I) insurance.   Insurance obtained through mutual associations (called "Clubs") formed by vessel-owners to provide liability insurance protection against a large financial loss by one member by contribution towards that loss by all members. To a great extent, the risks are reinsured.
 
Refined petroleum products.   Refined crude oil products, such as fuel oils, gasoline and jet fuel.
 
Scrapping.   The disposal of old or damaged vessel tonnage by way of sale as scrap metal.
 
Single-hull.   A hull construction design in which a vessel has only one hull.
 
Sister ship.   Vessels of the same type and specification.
 
SOLAS.   The International Convention for the Safety of Life at Sea 1974, as amended, adopted under the auspices of the IMO.
 
Special survey.   An extensive inspection of a vessel by classification society surveyors that must be completed within five years. Special surveys require a vessel to be drydocked.
 
Spot charter.   A spot charter is an industry term referring to both voyage and trip time charters. These charters are referred to as spot charters or spot market charters due to their short term duration, consisting mostly of a single voyage between one load port and one discharge port.
 
Spot market.   The market for the immediate chartering of a vessel, usually for single voyages.
 
Strict liability.   Liability that is imposed without regard to fault.
 
Suezmax tanker.   Tanker ranging in size from 120,000 dwt to 200,000 dwt. The term is derived from the maximum length, breadth and draft capable of passing fully loaded through the Suez Canal.
 
Tanker.   Vessel designed for the carriage of liquid cargoes in bulk with cargo space consisting of many tanks. Tankers carry a variety of products including crude oil, refined petroleum products, liquid chemicals and liquid gas.
 
Time charter.   A time charter is a contract under which a charterer pays a fixed daily hire rate on a semi-monthly or monthly basis for a fixed period of time for use of the vessel. Subject to any restrictions in the charter, the charterer decides the type and quantity of cargo to be carried and the ports of loading and unloading. The charterer pays the voyage related expenses such as fuel, canal tolls, and port charges. The vessel-owner pays all vessel operating costs such as the management expenses and crew costs as well as for the capital costs of the vessel. Any delays at port or during the voyages are the responsibility of the charterer, except for certain specific exceptions such as loss of time arising from vessel breakdown and routine maintenance.
 
Time charter equivalent (TCE) rates.   Time charter equivalent, or TCE, rates, are a standard industry measure of the average daily revenue performance of a vessel. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by subtracting voyage expenses, including bunkers and port charges, from voyage revenue and dividing the net amount (time charter equivalent revenues) by the number of days in the period.
 
Trip time charter.   A trip time charter is a short term time charter where the vessel performs a single voyage between load port(s) and discharge port(s) and the charterer pays a fixed daily hire rate on a semi-monthly basis for use of the vessel. The difference between a trip time charter and a voyage charter is only in the form of payment for use of the vessel and the respective financial responsibilities of the charterer and vessel-owner as described under time charter and voyage charter.
 
127
 
Ton.   See "Metric ton."
 
Ultra Large Crude Carrier (ULCC). A tanker whose size is above 200,000 dwt and has a typical cargo capacity of about 350,000 dwt.
 
Very Large Crude Carrier (VLCC). A tanker whose size is above 200,000 dwt and has a typical cargo capacity of about 300,000 dwt.
 
Vessel operating costs.   The costs of operating a vessel that is incurred during a charter, primarily consisting of crew wages and associated costs, insurance premiums, lubricants and spare parts, and repair and maintenance costs. Vessel operating costs exclude fuel and port charges, which are known as "voyage expenses." For a time charter, the vessel-owner pays vessel operating costs. For a bareboat charter, the charterer pays vessel operating costs.
 
Voyage charter.   A voyage charter involves the carriage of a specific amount and type of cargo from specific load port(s) to specific discharge port(s), subject to various cargo handling terms. Most of these charters are of a single voyage nature between two specific ports, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tons of cargo loaded on board by the cost per cargo ton, as agreed to transport that cargo between the specific ports. The owner is responsible for the payment of all expenses including voyage, operating and capital costs of the vessel. The charterer is typically responsible for any delay at the loading or discharging ports.
 
Voyage expenses.   Expenses incurred due to a vessel's traveling from a loading port to a discharging port, such as fuel (bunker) cost, port expenses, agent's fees, canal dues and extra war risk insurance, as well as commissions.
 


 
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INDEX TO COMBINED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
 
F-2
 
Audited Combined Financial Statements
   
 
Combined Balance Sheets as of December 31, 2008 and 2007
 
 
F-3
 
Combined Income Statements for the years ended December 31, 2008 and 2007
 
 
F-4
 
Combined Statements of Changes in Shareholder's Equity for the years ended December 31, 2008 and 2007
 
 
F-5
 
Combined Cash Flow Statements for the years ended December 31, 2008 and 2007
 
 
F-6
 
Notes to the Combined Financial Statements
 
 
F-7
     
 
Unaudited Condensed Combined Financial Statements
   
 
Unaudited Condensed Combined Balance Sheets as of September 30, 2009 and December 31, 2008 and Unaudited Condensed Combined Pro Forma Balance Sheet as of September 30, 2009
 
 
F-29
 
Unaudited Condensed Combined Income Statements for the Nine Months Ended September 30, 2009 and 2008
 
 
F-30
 
Unaudited Condensed Combined Statements of Changes in Shareholder's Equity for the Nine Months Ended September 30, 2009 and 2008
 
 
F-31
 
Unaudited Condensed Combined Cash Flow Statements for the Nine Months Ended September 30, 2009 and 2008
 
 
F-32
 
Notes to the Unaudited Condensed Combined Financial Statements
 
 
F-33

 

 
F-1
 
 
Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Scorpio Tankers Inc.
 
Majuro, Marshall Island
 
We have audited the accompanying combined balance sheets of Scorpio Tankers Inc. and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the related combined income statements, combined statements of changes in shareholder's equity, and combined cash flow statements for each of the two years in the period ended December 31, 2008. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the combined financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such combined financial statements present fairly, in all material respects, the financial position of Scorpio Tankers Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2008, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
 

 
/s/ Deloitte LLP
 
DELOITTE LLP
 
London, United Kingdom
 
December 16, 2009 except for Note 15, as to which the date is March 10, 2010
 
 
F-2

Scorpio Tankers Inc. and Subsidiaries
 
Combined balance sheets
December 31, 2008 and 2007
         
As of December 31,
 
                    2008                2007   
   
Notes
    $       $       $       $    
Assets
                                     
Current assets
                                     
Cash and cash equivalents
          3,607,635               1,153,743          
Accounts receivable
    2       3,701,980               4,704,933          
Prepaid expenses
            39,596               62,064          
Inventories
    3       502,514               389,736          
                                         
Total current assets
                    7,851,725               6,310,476  
                                         
Non current assets
                                       
Vessels and drydock
    4               109,260,102               116,244,546  
                                         
Total assets
                    117,111,827               122,555,022  
                                         
Current liabilities
                                       
Bank loan
    6       3,600,000               3,600,000          
Accounts payable
    5       841,070               488,816          
Accrued expenses
            495,430               745,987          
Shareholder payable
    8       22,028,323               19,433,097          
Related party payable
    8       27,406,408               27,406,408          
Derivative financial instruments
    7       706,078               129,648          
                                         
Total current liabilities
                    55,077,309               51,803,956  
                                         
Non current liabilities
                                       
Bank loan
    6       39,800,000               43,400,000          
Derivative financial instruments
    7       1,935,352               453,824          
                                         
Total non current liabilities
                    41,735,352               43,853,824  
                                         
Total liabilities
                    96,812,661               95,657,780  
                                         
Shareholder's equity
                                       
                                         
Issued and authorised share capital:
                                       
1,500 shares of $1.00 each
            1,500               1,500          
Merger reserve
            20,297,666               26,895,742          
                                         
Total Shareholder's equity
                    20,299,166               26,897,242  
                                         
Total liabilities and shareholder's equity
                    117,111,827               122,555,022  
                                         
 
The accompanying notes are an integral part of these combined financial statements.

 
F-3
 

Scorpio Tankers Inc. and Subsidiaries
 
Combined income statements
For the years ended December 31, 2008 and 2007
 
 
         
For the year ended December 31
 
   
Notes
    $       $ 2008     $       $ 2007  
                                       
Revenue:
                                     
Vessel revenue
    9               39,274,196               30,317,138  
                                         
Operating expenses:
                                       
Charter hire
    10       (6,722,334 )             -          
Vessel operating costs
    11       (8,623,318 )             (7,600,509 )        
Depreciation
            (6,984,444 )             (6,482,484 )        
General and administrative expenses
            (600,361 )             (590,772 )        
                                         
Total operating expenses
                    (22,930,457 )             (14,673,765 )
                                         
Operating income
                    16,343,739               15,643,373  
                                         
Other income and (expense)
                                       
Interest expense – bank loan
            (1,710,907 )             (1,953,344 )        
Realized loss on derivative financial instruments
            (405,691 )             (523,694 )        
Unrealized loss on derivative financial instruments
            (2,057,957 )             (1,245,472 )        
Interest income
            35,492               142,233          
Other expenses, net
            (18,752 )             (9,304 )        
                                         
Total other expense, net
                    (4,157,815 )             (3,589,581 )
                                         
Net income
                    12,185,924               12,053,792  
                                         
Attributable to:
                                       
Equity holders of the parent
                    12,185,924               12,053,792  
                                         
Net earnings per share
    13                                  
Basic
                  $ 8,124             $ 8,036  
Diluted
                  $ 8,124             $ 8,036  
                                         
                                         
                                         
                                         

There were no sources of comprehensive income in either period other than those shown above. All operations were continuing in both years shown.
 
The accompanying notes are an integral part of these combined financial statements.


 
F-4
 

Scorpio Tankers Inc. and Subsidiaries
 
Combined statement of changes in shareholder's equity
For the years ended December 31, 2008 and 2007

   
Common Stock
             
   
Shares
Number
   
Share capital
   
Merger reserve
   
Total
 
        $       $       $    
                               
Balance at January 1, 2007
    1,500       1,500       21,935,450       21,936,950  
Net income for the year
    -       -       12,053,792       12,053,792  
Dividends paid ($ 4,729 per share)
    -       -       (7,093,500 )     (7,093,500 )
                                 
Balance at December 31, 2007
    1,500       1,500       26,895,742       26,897,242  
                                 
Net income for the year
    -       -       12,185,924       12,185,924  
Dividends paid ($ 12,523 per share)
    -       -       (18,784,000 )     (18,784,000 )
                                 
Balance at December 31, 2008
    1,500       1,500       20,297,666       20,299,166  
                                 

The accompanying notes are an integral part of these combined financial statements

 
F-5
 

Scorpio Tankers Inc. and Subsidiaries
 
Combined cash flow statements
For the years ended December 31, 2008 and 2007
   
For the year ended December 31
 
    $       $ 2008     $       $ 2007  
                                 
Operating activities
                               
Net income
    12,185,924               12,053,792          
                                 
Depreciation
    6,984,444               6,482,484          
Unrealized loss on derivatives
    2,057,957               1,245,472          
              21,228,325               19,781,748  
Changes in assets and liabilities:
                               
(Increase)/decrease in inventories
    (112,778 )             18,029          
Decrease in accounts receivable
    1,002,953               2,953,719          
Decrease in prepaid expenses
    22,469               83,250          
Increase/(decrease) in accounts payable
    352,254               (354,448 )        
Decrease in related party payable
    -               (8,417,500 )        
Increase/(decrease) in shareholder payable
    2,595,226               (8,186,213 )        
Decrease in accrued expenses
    (250,557 )             (47,812 )        
                                 
              3,609,567               (13,950,975 )
Net cash inflow from operating activities
            24,837,892               5,830,773  
                                 
                                 
Financing activities
                               
Dividends paid
    (18,784,000 )             (7,093,500 )        
Bank loan repayment
    (3,600,000 )             (3,600,000 )        
                                 
                                 
Net cash outflow from financing activities
            (22,384,000 )             (10,693,500 )
                                 
Increase/(decrease) in cash and cash equivalents
            2,453,892               (4,862,727 )
                                 
Cash and cash equivalents at January 1
            1,153,743               6,016,470  
                                 
Cash and cash equivalents at December 31
            3,607,635               1,153,743  
                                 
Supplemental information:
                               
Interest paid
            1,821,439               1,969,014  


The accompanying notes are an integral part of these combined financial statements


 
F-6
 
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

1.           General information and significant accounting policies
 
Company
 
Scorpio Tankers Inc. was incorporated in the Republic of the Marshall Islands on July 1, 2009 by Simon Financial Limited (Simon).  On October 1, 2009, Simon transferred to Scorpio Tankers Inc. three operating subsidiary companies, as described further below. Scorpio Tankers Inc. and its subsidiaries (together the Company) are engaged in seaborne transportation of crude oil and refined petroleum products in the international shipping markets. Simon is incorporated in Liberia and is the ultimate parent company and controlling party of the Company. Simon is owned by members of the Lolli-Ghetti family. Emanuele Lauro, our founder, Chairman and Chief Executive Officer is a member of the Lolli-Ghetti family.  At December 31, 2008, the Lolli-Ghetti family owns 100% of the Company's outstanding common shares and therefore maintains a controlling interest in the Company.  See Note 15 for a discussion of the Company's planned initial public offering of its common shares and the expected changes in ownership.
 
Business
 
The Company's fleet consists of three wholly owned Panamax tankers engaged in seaborne transportation of crude oil and refined petroleum products in the international shipping markets.
 
The Company's vessels, as described in Note 8, are commercially managed by Scorpio Commercial Management S.A.M. (SCM) which is a subsidiary of Simon.  SCM's services include securing employment, in the spot market and on time charters, for the Company's vessels.
 
The Company's vessels, as described in Note 8, are technically managed by Scorpio Ship Management S.A.M. (SSM), which is also owned by members of the Lolli-Ghetti family.  SSM facilitates vessel support such as crew, provisions, deck and engine stores, insurance, maintenance and repairs, and other services as necessary to operate the Company's vessels such as drydocks and vetting/inspection under a technical management agreement.
 
SSM also provides the Company with administrative services pursuant to an administrative services agreement.  The administrative services provided under the agreement primarily include accounting, legal compliance, financial, information technology services, and the provision of administrative staff and office space.
 
The Company pays their managers fees for these services and reimburses them for direct or indirect expenses that they incur in providing these services to the Company.
 
Basis of accounting
 
The combined financial statements have been presented in United States dollars (USD or $), which is the functional currency of Scorpio Tankers Inc. and all its subsidiaries.  The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and on a historical cost basis, except for the revaluation of certain financial instruments.
 
Since the Company has not previously prepared standalone or combined financial statements, the Company is a first time adopter of IFRS. The combined financial statements do not include any IFRS 1 first time adoption reconciliations as there are no prior period financial statements.
 
Simon transferred three subsidiaries to the Company (see below) on October 1, 2009 for a nominal consideration. For accounting purposes, this transfer represents a combination of entities under common control, with Simon being the ultimate parent company of all entities in the Company throughout all periods shown. As such, this business combination is outside the scope of IFRS 3, "Business Combinations", and the 2008 and 2007 results have therefore been prepared using the principles of merger accounting. Under this method:
 
●
the carrying values of the assets and liabilities of the parties to the combination are recorded at the historical carrying amount of those assets and liabilities and are not adjusted to fair value on consolidation;
 

 
F-7
 
 



 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

1.  
General information and significant accounting policies (continued)
 
●
the results and cash flows of all the combining entities are brought into the combined financial statements of the combined entity from the beginning of the financial year in which the combination occurred. Prior year comparatives are also presented on the basis that the combination was in place throughout the prior year; and
 
 
●
the difference between the historical carrying amount of net assets transferred and the consideration provided on transfer has been recognized in equity through share capital and the merger reserve.  The share capital presented represents the share capital of Scorpio Tankers Inc. as if Scorpio Tankers Inc. has been incorporated throughout the periods presented.  The remaining difference between historical carrying amount of net assets transferred and consideration paid is recognized in a merger reserve.
 
Any profits recognized after the reorganization will be recognized in equity within retained earnings in subsequent financial periods. 
Subsidiaries transferred to Scorpio Tankers Inc. on October 1, 2009 were:
 
Company
Vessel
Percent owned
Incorporated in
       
Noemi Shipping Company Limited
Noemi
100%
The Republic of the Marshall Islands
Senatore Shipping Company Limited
Senatore
100%
The Republic of the Marshall Islands
Venice Shipping Company Limited (A)
Venice
100%
The Republic of the Marshall Islands

 
All inter-company transactions, balances, income and expenses are eliminated on combination. There have been no cost allocations from Simon, as all costs of doing business have been included in the operations of the subsidiaries.
 
Going concern
 
The financial statements have been prepared in accordance with the going concern basis of accounting for the reasons outlined in the "Liquidity Risk" section of Note 14.
 
Significant Accounting Policies
 
Common control transactions

The assets and liabilities transferred from entities under common control are recorded at the transferor's carrying values. Any difference between the carrying value of the net assets acquired, and the consideration paid by the Company is accounted for as an adjustment to shareholder's equity. The net assets transferred and their results are recognized from the date on which control was obtained by the ultimate controlling party.
 
Revenue recognition
 
Vessel revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, and other sales-related or value added taxes.
 
Vessel revenue is comprised of time charter revenue and pool revenue. Time charter revenue is recognized as services are performed based on the daily rates specified in the time charter contract. Pool revenue for each vessel is determined in accordance with the profit sharing terms specified within each pool agreement. In particular, the pool manager aggregates the revenues and expenses of all of the pool participants and distributes the net earnings to participants based on:
 

 
F-8
 
 

 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
1.  
General information and significant accounting policies (continued)
 
(i)  
the Pool Points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics are taken into consideration); and
 
(ii)  
the number of days the vessel participated in the pool in the period.
 
The Company recognizes pool revenue on a monthly basis, when the vessel has participated in a pool during the period and the amount of pool revenue for the month can be estimated reliably.  The Company receives estimated vessel earnings based on the known number of days the vessel has participated in the pool, the contract terms, and the estimated monthly pool revenue.  On a quarterly basis, the Company receives a report from the pool which identifies the number of days the vessel  participated in the pool, the total Pool Points for the period, the total pool revenue for the  period, and the calculated share of pool revenue for the vessel.  The Company reviews the quarterly report for consistency with each vessel's pool agreement and vessel management records.  The estimated pool revenue is reconciled quarterly, coinciding with the Company's external reporting periods, to the actual pool revenue earned, per the pool report. Consequently, in the Company's financial statements, reported revenues represent actual pooled revenues.  While differences do arise in the performance of these quarterly reconciliations, such differences are not material to total reported revenues.
 
Interest receivable is accrued on a time basis and includes interest earned on cash deposits.
 
Vessel operating costs
 
Vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees, are expensed as incurred.
 
Earnings per share

Basic earnings per share is calculated by dividing the net income attributable to equity holders of the parent by the weighted average number of common shares outstanding assuming that the reorganization described under "Basis of Accounting" was effective during the period. Diluted earnings per share are calculated by adjusting the net income attributable to equity holders of the parent and the weighted average number of common shares used for calculating basic earnings per share for the effects of all potentially dilutive shares. Such potentially dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share.  For the years ended December 31, 2008 and 2007, the Company has no potentially dilutive common shares.
 
Operating leases
 
Costs in respect of operating leases are charged to the combined income statement on a straight line basis over the lease term.
 
Foreign currencies
 
The individual financial statements of Scorpio Tankers Inc. and each of its subsidiaries are presented in the currency of the primary economic environment in which the company operates (its functional currency), which in all cases is US dollars. For the purpose of the combined financial statements, the results and financial position of the Company are also expressed in US dollars.
 
In preparing the financial statements of Scorpio Tankers Inc. and each of its subsidiaries, transactions in currencies other than the US dollar are recorded at the rate of exchange prevailing on the dates of the transactions.  At the end of each reporting period, monetary assets and liabilities denominated in other currencies are retranslated into the functional currency at rates ruling at that date. All resultant exchange differences have been recognized in the combined income statement. The amount charged to the combined income statement during 2008 was a gain of $43,937, and a loss of $17,433 in 2007.
 
Segment reporting
 
A business segment is a distinguishable component of an entity that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment   is a distinguishable component of an entity that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.  
 
The Company has one business segment and one geographical segment since (i) all of the vessels are Panamax vessels and operate in the oil and refined petroleum products transportation market and (ii) all of the vessels can trade in the international shipping market and are not limited to specific parts of the world.
 
 
 
F-9
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
1.  
General information and significant accounting policies (continued)
 
Vessels and drydock
 
The fleet is measured at cost, which includes directly attributable financing costs and the cost of work undertaken to enhance the capabilities of the vessels, less accumulated depreciation and impairment losses.
 
Depreciation is calculated on a straight-line basis to the estimated residual value over the anticipated useful life of the vessel from date of delivery. The estimated useful life of each vessel is 20 years. The residual value is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration the scrap market rate ruling at the balance sheet date with changes accounted for prospectively. (See Note 4 for discussion of changes in the residual values during the period).
 
The vessels are required to undergo planned drydocks for replacement of certain components, major repairs and maintenance of other components, which cannot be carried out while the vessels are operating, approximately every 30 months or 48 months depending on the nature of work and external requirements. These drydock costs are capitalized and depreciated on a straight-line basis over the estimated period until the next drydock.
 
For an acquired or newly built vessel, a portion of the vessels cost is allocated to the components expected to be replaced or re-furbished at the next drydock.  This notional drydock cost is estimated by the Company, based on the expected costs related to the first-coming drydock, which is based on experience and past history of similar vessels, and carried separately from the cost of the vessel. Subsequent drydocks are recorded at actual cost incurred. The drydock asset is amortized on a straight-line basis to the next estimated drydock. The estimated amortization period for a drydock is based on the estimated period between drydocks.  The Company estimates the period between drydocks to be 30 months except for the drydock portion of a newly built vessel, which is amortized over 48 months. When drydock expenditure is incurred prior to the expiry of this period, the remaining balance is expensed.
 
Impairment of vessels and drydock
 
At each balance sheet date, the Company reviews the carrying amount of its vessels and drydock to determine whether there is any indication that those assets have suffered an impairment loss.  If any such indication exists, the recoverable amount of the vessels and drydock is estimated in order to determine the extent of the impairment loss (if any).  The Company treats each vessel and the related drydock as a cash generating unit.
 
Recoverable amount is the higher of the fair value less cost to sell and value in use.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
 
If the recoverable amount of the cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately.
 
Where an impairment loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the cash generating unit in the prior years. A reversal of impairment is recognized as income immediately.
 

 

 
F-10
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
1.           General information and significant accounting policies (continued)
 
Inventories
 
Inventories consist of lubricating oils and other items including stock provisions, and are stated at the lower of cost and net realisable value. Cost is determined by an average of the three last purchases, which is considered to be materially equivalent to a weighted average basis. Stores and spares are charged to vessel operating costs when purchased.
 
Financial instruments
 
Financial assets and financial liabilities are recognized in the Company's balance sheet when the Company becomes a party to the contractual provisions of the instrument.
 
Financial assets
 
All financial assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
 
Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
 
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
 
Financial assets at FVTPL
 
Financial assets are classified as at FVTPL where the financial asset is held for trading.
 
A financial asset is classified as held for trading if:
 
●
it has been acquired principally for the purpose of selling in the near future; or
 
●
  
it is a part of an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
 
●
it is a derivative that is not designated and effective as a hedging instrument.
 
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 14.
 
Receivables
 
Amounts due from the pool and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as accounts receivable. Accounts receivable are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
 

 

 
F-11
 
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
1.  
General information and significant accounting policies (continued)
 
Impairment of financial assets
 
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
 
Financial assets objective evidence of impairment could include:
 
●
significant financial difficulty of the issuer or counterparty; or
 
●
default or delinquency in interest or principal payments; or
 
●
it becomes probable that the borrower will enter bankruptcy or financial reorganization.
 
Cash and cash equivalents
 
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly-liquid investments with maturities of three months or less from the date of acquisition, and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.  The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.
 
Financial liabilities
 
Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.
 
Financial liabilities at FVTPL
 
Financial liabilities are classified as at FVTPL where the financial liability is held for trading, using the criteria set out above for financial assets.
 
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss as the Company chooses not to disclose the effective interest rate for debt instruments that are classified as at fair value through profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in Note 14.
 
Other financial liabilities
 
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest method.
 
Effective interest method
 
The effective interest method is a method of calculating the amortized cost of a financial asset and a financial liability.  It allocates interest income and interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash  flows (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) over the expected life of the financial asset and financial liability, or, where appropriate, a shorter period.
 
Derivative financial instruments
 
The Company enters into derivative   financial instruments to manage its exposure to interest rates. Further details of derivative financial instruments are disclosed in Notes 7 and 14 to the combined financial statements.
 

 
F-12
 
 



 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 
 
1.  
General information and significant accounting policies (continued)
 
Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a financial liability. The resulting gain or loss is recognized in profit or loss immediately.
 
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months.
 
Equity instruments
 
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.  Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
 
The Company has 1,500 registered shares authorized and issued with a par value of $1.00 per share. These shares provide the holders with rights to dividends and voting rights.
 
Provisions
 
Provisions are recognized when the Company has a present obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation. Provisions are measured at the Company's best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
 
Dividends
 
A provision for dividends payable is recognized when the dividend has been declared in accordance with the terms of the shareholder agreement.
 
Dividend per share presented in these combined financial statements is calculated by dividing the aggregate dividends declared by all of Scorpio Tankers Inc's subsidiaries by the number of Scorpio Tankers Inc shares assuming these shares have been outstanding throughout the periods presented.
 
Critical accounting judgements and key sources of estimation uncertainty
 
In the application of the accounting policies, we are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
 
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
 
The significant judgements and estimates are as follows:
 
Revenue recognition
 
We currently generate all of revenue from time charters and pools. Revenue recognition for time charters and pools is generally not as complex or as subjective as voyage charters.  Time charters are for a specific period of time at a specific rate per day. For long-term time charters, revenue is recognized on a straight-line basis over the term of the charter.  Pool revenues are determined by the pool managers from the total revenues and expenses of the pool and allocated to pool participants using a mechanism set out in the pool agreement.
 

 
F-13
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
1.  
General information and significant accounting policies (continued)
 
Vessel impairment
 
The Company evaluates the carrying amounts of its   vessels to determine whether there is any indication that those vessels have suffered an impairment loss.  If any such indication exists, the recoverable amount of vessels is estimated in order to determine the extent of the impairment loss (if any).
 
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The projection of cash flows related to vessels is complex and requires the Company to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these items have been historically volatile.  In assessing the fair value less cost to sell of the vessel, the Company obtains vessel valuations from leading, independent and internationally recognized ship brokers on an annual basis or when there is an indication that an asset or assets may be impaired.  The current economic climate has meant that the Company's valuers have referred to uncertainties in their assessment of the fair value of the Company's vessels as of December 31, 2008 and the very limited information on comparable transactions and market demand.
 
If an indication of impairment is identified, the need for recognising an impairment loss is assessed by comparing the carrying amount of the vessels to the higher of the fair value less cost to sell and the value in use.  We are satisfied that, in the years ended 31 December 2008 and 2007, the recoverable amount of each of the vessels is higher than the carrying value and consequently no impairments are required.
 
Vessel lives and residual value
 
The carrying value of each of our vessel represents its original cost at the time it was delivered or purchased less depreciation. We depreciate our vessels to their residual value on a straight-line basis over their estimated useful lives.  The estimated useful life of each vessel is 20 years from date of initial delivery from the shipyard. The residual value is estimated as the lightweight tonnage of each vessel multiplied by a forecast scrap value per ton. The scrap value per ton is estimated taking into consideration the scrap market rate ruling at the year end.
 
An increase in the estimated useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or estimated residual value would have the effect of increasing the annual depreciation charge.
 
When regulations place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessel's useful life is adjusted to end at the date such regulations become effective. The estimated residual value of the vessels may not represent the fair market value at any one time since market prices of scrap values tend to fluctuate.
 
Deferred drydock cost
 
The Company recognizes drydock costs as a separate component of the vessels' carrying amounts and amortizes the drydock cost on a straight-line basis over the estimated period until the next drydock. We use judgment when estimating the period between drydocks performed, which can result in adjustments to the estimated amortization of drydock expense. If the vessel is disposed of before the next drydock, the remaining balance of the deferred drydock is written-off and forms part of the gain or loss recognized upon disposal.  We expect that our vessels will be required to be drydocked approximately every 30 to 48 months for major repairs and maintenance that cannot be performed while the vessels are operating. Costs capitalized as part of the drydock include actual costs incurred at the drydock yard and parts and supplies used in undertaking the drydock.
 

 
F-14
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 

 
1.  
General information and significant accounting policies (continued)
 
Standards and interpretations in issue not yet adopted
 
At the date of authorisation of these combined financial statements, the following new and revised standards and interpretations were in issue but not yet effective for the Company:
 
IFRS 1 (amended)/IAS 27 (amended)
Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
IFRS 3 (revised 2008)
Business Combinations
IFRS 8
Operating Segments
IFRS 9
Financial Instruments
IAS 27 (revised 2008)
Consolidated and Separate Financial Statements
IFRIC 12
Service Concession Arrangements
IFRIC 15
Agreements for the Construction of Real Estate
 
In addition, certain other revisions to IFRS 5, IFRS 7, IAS7, IAS 16, IAS 17, IAS 28, IAS 36, IAS 38 and IAS 39 were in issue but not yet effective for the Company.
 
 
The Company anticipates that the adoption of these standards and interpretations in future periods will have no material impact on the combined financial statements of the Company.
 
2.           Accounts receivable
 
 
 
   
As of December 31,
 
   
2008
$
     
2007
$
 
               
Amounts due from Scorpio Panamax Tanker Pool Limited
    3,581,581       4,546,371  
Other receivables
    120,399       158,562  
     
3,701,980
     
4,704,933
 
 
 
Scorpio Panamax Tanker Pool Limited is a related party, as described in Note 8.
 
The Company considers that the carrying amount of accounts receivable approximates their fair value due to the short maturity thereof.  Accounts receivable are non-interest bearing.
 
At December 31, 2008 and December 31, 2007, no material debtor balances were past due or impaired.
 

 
F-15
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 
 
3.           Inventories
 
   
As of December 31,
 
      2008       2007  
      $       $  
Lubricating oils
    465,643       344,238  
Other
    36,871       45,498  
      502,514       389,736  

4.           Vessels and drydock
 
   
Vessels
   
Drydock
   
Total
 
Cost
  $       $       $    
As of January 1, and December 31, 2008
    138,713,588       2,105,847       140,819,435  
                         
Accumulated depreciation
                       
As of January 1, 2008
    (23,267,993 )     (1,306,896 )     (24,574,889 )
Charge for the year
    (6,450,651 )     (533,793 )     (6,984,444 )
                         
As of December 31, 2008
    (29,718,644 )     (1,840,689 )     (31,559,333 )
                         
Net book value
                       
As of December 31, 2008
    108,994,944       265,158       109,260,102  
                         
                         
   
Vessels
   
Drydock
   
Total
 
Cost
  $       $       $    
As of January 1, and December 31, 2007
    138,713,588       2,105,847       140,819,435  
Accumulated depreciation
                       
As of January 1, 2007
    (17,432,847 )     (659,558 )     (18,092,405 )
Charge for the year
    (5,835,146 )     (647,338 )     (6,482,484 )
                         
As of December 31, 2007
    (23,267,993 )     (1,306,896 )     (24,574,889 )
                         
Net book value
                       
As of December 31, 2007
    115,445,595       798,951       116,244,546  
                         
 
 
Two of the Company's vessels with a net book value as of December 31, 2008 of $85,328,080 have been provided as collateral for a long term loan agreement (see Note 6). The Company's remaining vessel has been provided as collateral under a third party commercial agreement, although this arrangement was cancelled in December 2009 (see note 15).
 
 
As described in Note 1, General information and significant accounting policies, Vessels and drydock, depreciation is calculated on a straight-line basis to the estimated residual value over the anticipated useful life of vessels from date of delivery. The residual value of vessels is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration the scrap market rate ruling at the balance sheet date. Where there is a significant change in the estimated residual value, the resulting effect on depreciation expense is accounted for in the period of change and in future periods.
 
 
F-16

 
 
In accordance with this accounting policy, the Company evaluated the estimated residual value of each vessel at December 31, 2007 taking into consideration the scrap market rate ruling at this date.  As a result of a significant increase in the scrap market rate, the Company increased its estimated residual values of its vessels.  The change in the estimated residual value at December 31, 2007 resulted in a decrease in depreciation expense of $717,082 in the year ended December 31, 2007 as compared to the depreciation which would have been recorded using the estimated residual values prevailing at December 31, 2006.
 
 
Additionally, the Company evaluated the estimated residual value of each vessel at December 31, 2008 taking into consideration the scrap market rate ruling at this date. As a result of a significant decrease in the scrap market rate, the Company decreased its estimated residual values of its vessels.  The change in the estimated residual value at December 31, 2008 resulted in an increase in depreciation expense of $615,506 in the year ended December 31, 2008, as compared to the depreciation which would have been recorded using the estimated residual values prevailing at December 31, 2007. See Note 15, Subsequent Events, for a discussion of changes in the estimated residual values subsequent to December 31, 2008.
 
 
5.           Accounts payable
 
 
   
As of December 31,
 
     
2008
$
 
 
   
2007
$
 
Amounts due to suppliers
    711,226       273,740  
Amounts due to Scorpio Panamax Tanker Pool Limited
    129,844       215,076  
    $ 841,070     $ 488,816  

Scorpio Panamax Tanker Pool Limited is a related party, as described in Note 8.
 
The majority of accounts payable are settled with a cash payment within 90 days.  No interest is charged on accounts payable.  The Company considers that the carrying amount of accounts payable approximate to their fair value.
 
 
6.           Bank loan
 
Two of Scorpio Tankers Inc.'s wholly-owned subsidiaries, Senatore Shipping Company Limited and Noemi Shipping Company Limited, are joint and several borrowers under a loan agreement dated May 17, 2005 (the 2005 Credit Facility), entered into with The Royal Bank of Scotland plc.  The initial amount of the 2005 Credit Facility was $56,000,000, consisting of two tranches, one for each vessel-owning subsidiary.  Each tranche is repayable in 40 consecutive quarterly installments of $450,000, plus a balloon payment of $10,000,000, to be made together with the 40 th installment of each tranche (due on May 18, 2015).
 
Interest on the 2005 Credit Facility is currently payable at US$ LIBOR plus 0.70%.  The facility includes a variety of restrictive operating covenants including a loan to value financial covenant and a change of control covenant.  The Company was in compliance with all of its covenants as of December 31, 2008.
 
As security for the loan the lender has:
 
a)           a first preferred mortgage on Senatore and Noemi ; and
 
b)           an assignment of the earnings and any insurance proceeds on Senatore and Noemi .
 
 
 
F-17
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

   
As of December 31,
 
     
2008
$
 
   
2007
$
 
Current portion
    3,600,000       3,600,000  
Non-current portion
    39,800,000       43,400,000  
      43,400,000       47,000,000  

7.           Derivative financial instruments
 
The Company is exposed to interest rate risk on the 2005 Credit Facility due to changes in market interest rates. In order to fix the interest rate of the 2005 Credit Facility, Senatore Shipping Company Limited and Noemi Shipping Company Limited each signed an amortising interest rate swap with The Royal Bank of Scotland plc on April 15, 2005 for an initial notional amount of $56,000,000.
 
On February 15, 2007 these swap contracts were amended by reducing the then notional amount by 50%. As a result of the amendment, the Company received $366,000, which was recognized in the 2007 combined income statement within the realized loss on derivative financial instruments.
 
The notional interest rate swap amount was $21,700,000 as of December 31, 2008 and $23,500,000 as of December 31, 2007.  The Company has not elected to apply hedge accounting for these swaps.
 
The carrying value (liability) of the Company's interest rate swaps is as follows:

 
   
As of December 31,
 
     
2008
$
     
2007
$
 
Current portion
    (706,078 )     (129,648 )
Non-current portion
    (1,935,352 )     (453,824 )
      (2,641,430 )     (583,472 )

These instruments are carried at fair value through profit and loss.  See Note 14 for further details.
 
8.           Related party transactions
 
Transactions with subsidiaries of Simon (herein referred to as Simon subsidiaries) and transactions with entities outside of Simon but controlled by members of the Lolli-Ghetti family (herein referred to as related party affiliates) in the combined income statements are as follows:
 

   
For the year ended
December 31,
 
     
2008
$
     
2007
$
 
Vessel revenue (A)
    20,980,233       19,759,614  
Vessel operating costs (B)
    (765,422 )     (739,994 )
General and administrative expenses (C)
    (619,421 )     (536,910 )

 
(A)  
These transactions related to revenue earned in the Scorpio Panamax Tanker Pool (the Pool) a Simon subsidiary (See Note 9).
 

 

 
F-18
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
8.           Related party transactions (continued)
 
In January 2007, the Noemi was time chartered to King Dustin, which is 50% jointly controlled by a Simon subsidiary. The revenue recognized by the Company from King Dustin for the years ended December 31, 2008 and 2007 was $8,878,913 and $8,273,324, respectively.
 
(B)  
These transactions represent technical management fees charged by SSM, a related party affiliate, and included in the vessel operating costs in the combined income statement.  The Company's fees under technical management arrangements with SSM were not at market rates.  The Company estimates that its technical management fees for the years ended December 31, 2008 and 2007 would have been $601,704 and $600,060, respectively, and would have increased net income for the periods by $163,718 and $139,934, respectively, had the Company operated as an unaffiliated entity.  The Company's estimate is based upon the rates charged to third party participants by the related party affiliate in 2008 and 2009.  The Company signed new technical management agreements for its vessels in December 2009 (See Note 15).
 
(C)  
These transactions represent commercial management fees charged by SCM (a Simon subsidiary) and administrative fees charged by SSM and are both included in general and administrative expenses in the combined income statement
 
●
The Company incurred commercial management fees of $37,996 and $56,287 for the years ended December 31, 2008 and 2007, respectively.  The Company's commercial management fees for vessels not in the Pool were not at market rates in 2008 and 2007.  The Company estimates that its commercial management fees for the years ended December 31, 2008 and 2007 would have been $411,675 and $240,219, respectively, and would have decreased net income for the periods by $373,679 and $183,932, respectively, had the Company operated as an unaffiliated entity.  The Company's estimate is based upon the rates charged to third party participants in the Pool for 2008 and 2007. The Company signed new commercial management agreements for its vessels in December 2009 (See Note 15).
 
●
The Company incurred administrative management fees of $581,425 and $1,042,203 for the years ended December 31, 2008 and 2007, respectively.  The administrative fee included services for accounting, administrative, information technology and management of the Company.  The Company's fees under administrative management arrangements may not have been at market rates.  The Company cannot estimate what the cost would have been if we operated as an unaffiliated party, but believes the costs for the years ended December 31, 2008 and 2007 were reasonable and appropriate for the services provided. The Company agreed upon the terms of a new administrative services agreement in December 2009 (See Note 15).
 

 

 
F-19
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 

 
8.           Related party transactions (continued)
 
The Company had the following assets and liabilities with related parties which have been included in the combined balance sheets:
 
 
   
As of December 31,
 
     
2008
$
     
2007
$
 
Assets:
               
Accounts receivable (Note 2)
    3,581,581       4,546,371  
                 
Liabilities:
               
Accounts payable (Note 5)
    129,844       215,076  
Related party payable (D)
    27,406,408       27,406,408  
Shareholder payable (E)
    22,028,323       19,433,097  
 
(D)  
The related party payable at December 31, 2008 and 2007 was $27,406,408 and is owed to a subsidiary of Simon. The payable is repayable upon demand is non interest bearing and unsecured. The outstanding balance as of November 2009 was converted to equity as a capital contribution (See Note 15).
 
(E)  
The shareholder payable is owed to Simon. Historically, our company and the shareholder have transferred cash depending on the need of each entity and the excess cash available. The payable is non-interest bearing and unsecured. In November 2009, the outstanding balance was converted to equity as a capital contribution (See Note 15).
 
Key management remuneration
 
Executive management of the Company was provided by a related party affiliate and included in the management fees described in (C) above. The Company did not have any employees throughout the periods presented.  If  the Company was not part of Simon, and had the same ownership structure and a contract for administrative services, the Company estimates its general and administrative costs would have been comparable with the general and administrative costs presented on the combined income statement for the years ended December 31, 2008 and 2007.
 

 
F-20
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
9.           Vessel revenue
 
During 2008 and 2007, the Company had two vessels that were time chartered out.  The remaining revenue was from vessels operating in the Pool.
 
Revenue sources
 
   
For the year ended
December 31
 
     
2008
$
 
 
   
2007
$
 
Time charter revenue
    18,293,963       10,557,524  
Pool revenue
    20,980,233       19,759,614  
      39,274,196       30,317,138  

Time charter out contracts:
 
 
Time Charter Out
 
Vessel
From
To (i)
Daily rate
       
Noemi
Jan. 2007
Jan 2012
$ 24,500
Senatore
Sept 2007
Sept 2010
$ 26,000
 
(i)  
The time charter contracts terminate plus or minus 30 days from the anniversary date.
 
 
(ii)  
For the vessels and periods not covered above, the vessels participated in the Pool.
 
The estimated minimum future time charter revenue to be received is as follows:

   
As of December 31
 
    $ 2008     $ 2007  
Within 1 year
    18,432,500       18,483,000  
Between 1 and 5 years
    25,601,500       44,034,000  
      44,034,000       62,517,000  


 
F-21
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 

 
10.           Charter hire expense
 
On May 29, 2008, one of the vessels owned by the Company that was chartered out was chartered in for one year at a rate of $26,750 per day and treated as an operating lease.  The vessel operated in the Scorpio Panamax Tanker Pool until the time charter ended on May 1, 2009. The time charter contract also included a profit and loss sharing arrangement where (i) the Company agreed to pay 50% of the vessel's earnings from the pool in excess of $26,750 per day (an increase in charter hire expense) to the charterer, and (ii) the charterer agreed to pay 50% of the vessel's earnings from the pool below $26,750 per day (a decrease in charter hire expense). During 2008, the profit sharing arrangement resulted in an additional expense of $1,007,000.
 
The minimum lease payments (excluding any adjustment for the profit and loss arrangement) as of December 31, 2008 for 2009 were $4,012,500.  There were no payments due after May 2009. There were no minimum lease payments due as of December 31, 2007.
 
Prior to the charter in arrangement described above, the Company has not historically entered into any other charter in agreements. Since the completion of the charter-in arrangement in May 2009, the Company has not entered into any similar arrangements and does not expect to enter into any future charter-in arrangements.
 
11.           Vessel operating costs
 
Vessel operating costs primarily represents crew related costs, stores, routine maintenance and repairs, insurance, technical management fees, and other related costs.  The procurement of these services is managed on the Company's behalf by its technical manager, SSM (see Note 8).
 
12.           Tax
 
Scorpio Tankers Inc. and its subsidiaries are incorporated in the Republic of the Marshall Islands, and in accordance with the income tax laws of the Marshall Islands, are not subject to Marshall Islands' income tax.  The Company is also exempt from income tax in other jurisdictions including the United States of America due to tax treaties; therefore, the Company did not have any tax charges, benefits, or balances at December 31, 2008 and 2007.
 
13.           Earnings per share
 
The calculation for both basic and diluted earnings per share is based on net income attributable to equity holders of the parent of $12,185,924 (2007: $12,053,792) and a weighted average number of ordinary shares of 1,500 (2007: 1,500). There were no dilutive instruments in either period.
 
14.           Financial instruments
 
Funding and capital risk management
 
The Company manages its funding and capital resources to ensure the Company's ability to continue as a going concern while maximizing the return to the shareholder through optimization of the debt and equity balance.
 
The Company does not currently have any gearing targets and is not subject to externally imposed capital requirements.
 

 

 
F-22
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 
14.           Financial instruments (continued)
 
Categories of financial instruments
 
     
Carrying value
As of December 31
     
2008
$
2007
$
Financial assets
       
Cash and cash equivalents
   
3,607,635
1,153,743
Loans and receivable
   
3,701,980
4,704,933
         
Financial liabilities
       
Fair value through profit and loss - Derivative financial instruments
   
2,641,430
583,472
Other liabilities
   
94,171,261
95,074,308
 
 
 
 
Derivative financial instruments, comprised solely of interest rate swaps, are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates to determine the fair value.
 
The fair value of other financial assets and liabilities are approximately equal to their carrying values.
 
 
Financial risk management objectives
 
The Company identifies and evaluates significant risks on an ongoing basis with the objective of managing the sensitivity of the Company's results and financial position to those risks. These risks include market risk, credit risk and liquidity risk.
 
The use of financial derivatives is governed by the Company's policies approved by the board of directors.
 
Market risk
 
The Company's activities expose it to the financial risks of changes in interest rates. See Note 6 for a description of the interest rate risk.
 
The Company enters into interest rate swaps to mitigate the risk of rising interest rates.
 
The combined income statement includes the following material items in respect of such instruments:
 

   
For the year ended
December 31
 
     
2008
$
     
2007
$
 
Realized loss on interest rate swaps
    405,691       523,694  
Unrealized loss on interest rate swaps
    2,057,957       1,245,472  
      2,463,648       1,769,166  

 
 

 
F-23
 
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 
14.           Financial instruments (continued)
 
 
Sensitivity analysis – Interest rate swap
 
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at balance sheet date was outstanding for the whole year.
 
If interest rates had been 1% higher/lower and all other variables were held constant, the Company's net income for the year ended December 31, 2008 would have decreased/increased by $1 million (2007: decreased/increased by $1.1 million). This is mainly attributable to the Company's exposure to interest rate movements for the portion of the 2005 Credit Facility that is not hedged by the interest rate swap (see Note 6 and Note 7).
 
Credit risk
 
Credit risk is the potential exposure of the Company to loss in the event of non-performance by customers and derivative instrument counterparties.
 
Accounts receivable are generally not collateralized; however, the Company believes that the credit risk is partially offset by the creditworthiness of the Company's counterparties including the commercial and technical managers. The Company did not experience material credit losses on its accounts receivables portfolio in the years ended December 31, 2008 and 2007.
 
The carrying amount of financial assets recorded in the combined financial statements represents the Company's maximum exposure to credit risk without taking account of the value of any collateral obtained. The Company did not experience any impairment losses on financial assets in the years ended December 31, 2008 and 2007.
 
The Company monitors exposure to credit risk and they believe that there is no substantial credit risk arising from counterparties.
 
Liquidity risk
 
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments.
 
The Company manages liquidity risk by maintaining adequate reserves and borrowing facilities and by continuously monitoring forecast and actual cash flows.
 
Current economic conditions make forecasting difficult and there is the possibility that the Company's actual trading performance during the coming year may be materially different from the Company's expectations.
 
Based on internal forecasts and projections that take into account reasonably possible changes in the Company's trading performance, the Company believes that the Company has adequate financial resources to continue in operation for a period of at least twelve months from the date of approval of these combined financial statements. Accordingly, the Company continues to adopt the going concern basis in preparing the Company's financial statements.
 
Remaining contractual maturity on secured bank loan (Note 6)
 
The following tables detail the Company's remaining contractual maturity for its secured bank loan. The amounts have been drawn up based on the undiscounted cash flows of the financial liability based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.
 

 
F-24
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
14.           Financial instruments (continued)
 
As the interest cash flows are not fixed, the interest amount included has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
 
To be repaid as follows:
 
     
2008
$
     
2007
$
 
Less than 1 month
    -       -  
1-3 months
    238,320       584,791  
3 months to 1 year
    3,977,818       4,982,404  
1-5 years
    20,986,779       24,011,639  
5+ years
    22,813,613       25,326,773  
      48,016,530       54,905,607  
 
Liquidity analysis on interest rate swap
 
The following table details the Company's liquidity analysis for its interest rate swap.  The table has been drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instrument that settles on a net basis.  As the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
 
 
     
2008
$
     
2007
$
 
Less than 1 month
    (146,472 )     4,729  
1-3 months
    (563,627 )     (138,506 )
3 months to 1 year
    (1,716,177 )     (550,589 )
1-5 years
    (334,697 )     70,558  
5+ years
               
      (2,760,973 )     (613,808 )

 
15.           Subsequent events
 
Related party payable and shareholder payable
 
In November 2009, the shareholder payable and related party payable, included in current liabilities at December 31, 2008, were converted to equity as a capital contribution from Simon. As a result, the Company has no outstanding liabilities related to these related party arrangements.
 
Management service agreements
 
In December 2009, the Company amended its management agreements for commercial, technical and administrative management as follows:
 

 
F-25
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007

 
15.           Subsequent events (continued)
 
·  
Technical management – In December 2009, the Company signed the technical management agreement for each ship with SSM.  Each ship will pay $548 per day for technical management.  This fee is the same charged to third parties by SSM, and therefore the Company believes it represents a market rate for such services.
 
·  
Commercial management – In December 2009, the Company signed the commercial management agreement with SCM.  Each of the vessels will pay $250 per day and 1.25% of their revenue when the vessels are not in the Pool.  When the Company's vessels are in the Pool, SCM, the pool manager, charges all vessels in the Pool (including third party participants) $250 per day and 1.25% of their revenue.  The Company therefore believes that the commercial management agreement represents a market rate for such services.
 
·  
Administrative management – In December 2009, the Company agreed to the terms of an administrative services agreement for each vessel with an affiliated entity, which is owned by Simon.  The Company will pay the administrator a fixed monthly fee calculated at cost with no profit for providing the Company with administrative services, and will reimburse it for the reasonable direct or indirect expenses it incurs in providing the Company with such services. The Company will also pay the administrator a fee for arranging vessel purchases and sales, on behalf of the Company, equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale.
 
Release from collateral agreement
 
Prior to December 2009, the Venice was provided as collateral to a third party under an agreement between a subsidiary of Liberty Holding Company Ltd. and a third party.  Neither the Venice , Scorpio Tankers Inc. nor any of its subsidiaries were party to this agreement, nor had they had a relationship with the third party involved.  At the request of Liberty Holding Company Ltd., in December 2009, the third party agreed to release the Venice from the agreement in exchange for Liberty Holding Company Ltd. providing other collateral in place of the Venice .  Scorpio Tankers Inc. and its subsidiaries have no remaining collateral obligation under the agreement.
 
Impairment
 
The Company's unaudited interim condensed combined financial statements for the nine months ended September 30, 2009 include an impairment charge of $4,511,877 in relation to two vessels, primarily due to significant reductions in international charter rates subsequent to December 31, 2008.
 
Change in estimated residual values
 
As disclosed in Note 4, the Company changed the estimated residual values of its vessels during the period ended December 31, 2008. Due to further volatility in the scrap market rate, the Company's unaudited interim condensed combined financial statements for the nine months ended September 30, 2009 include a further change in the estimated residual value of the vessels due to an increase in the scrap market rate.  The change in the estimated residual value at September 30, 2009 resulted in a decrease in depreciation expense of $62,683 in the nine months ended September 30, 2009, and is expected to result in decreases in future periods of $85,398 per annum, as compared with the depreciation that would have been recorded using estimated residual values prevailing at December 31, 2008. Scrap market rates are historically volatile and therefore it is impracticable for the Company to estimate the effect of further changes in the scrap market rate and the residual values of the vessels on the Company's depreciation expense in periods subsequent to September 30, 2009.
 
F-26
 
Scorpio Tankers Inc. and Subsidiaries

Notes to the Combined Financial Statements
For the years ended December 31, 2008 and 2007
 
Initial Registration Statement

 
On February 17, 2010, the Company filed a Form F-1 registration statement with the United States Securities & Exchange Commission ("SEC") for the registration of shares to be offered in an initial public offering.  The Company currently expects to issue more than 50% of its existing shares at the time of the offering and therefore the Company does not expect that the Lolli-Ghetti Family, of which Mr. Lauro, our Chairman and Chief Executive Officer, is a member, will maintain a controlling interest in Scorpio Tankers Inc. after the consummation of the offering.
 
 
New Credit Facility
 
 
On March 9, 2010, the Company entered into a commitment letter with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA and Fortis Bank Nederland for a senior secured term loan facility of up to $150 million. The Company’s entry into the credit facility is subject to the completion of the offering with gross proceeds to the Company of at least $150 million and customary conditions and documentation, including payment of an upfront fee and each Lender’s satisfaction with the completion of due diligence.  The credit facility may only be used to finance the cost of future vessel acquisitions, which vessels will be the collateral for the credit facility.
 
 

 
F-27
 
 
Scorpio Tankers Inc. and Subsidiaries
Unaudited Condensed Combined Financial Statements
For The Nine Months Ended September 30, 2009 and 2008

 
Unaudited Condensed Combined
Balance Sheets

            As of Sepetember 30,               As of December 31,  
            2009       2009          2008  
     
Note
     
Pro forma
( Note 1) 
                 
  ASSETS                              
  Current Assets                              
Cash and cash equivalents
          480,748       480,748       3,607,635  
Accounts receivable
          1,797,574       1,797,574       3,701,980  
Prepaid expenses
          69,426       69,426       39,596  
Inventories
          460,325       460,325       502,514  
         
__________
   
__________
   
___________
 
Total Current Assets
          2,808,073       2,808,073       7,851,725  
                               
Non-Current Assets
                             
Vessels and drydock
    2       101,212,117       101,212,117       109,260,102  
Total Assets
            104,020,190       104,020,190       117,111,827  
                                 
Current Liabilities
                               
Bank loan
            3,600,000       3,600,000       3,600,000  
Accounts payable
            705,664       705,664       841,070  
Accrued expenses
            618,617       618,617       495,430  
Shareholder payable
    4       401,406       19,267,336       22,028,323  
Related party payable
    4       -       27,406,408       27,406,408  
Derivative financial instruments
            846,149       846,149       706,078  
           
__________
   
__________
   
___________
 
Total Current Liabilities
            6,171,836       52,444,174       55,077,309  
                                 
Non-Current Liabilities
                               
Bank loan
            37,100,000       37,100,000       39,800,000  
Derivative financial instruments
            1,127,629       1,127,629       1,935,352  
           
__________
   
__________
   
___________
 
Total Non-Current Liabilities
            38,227,629       38,227,629       41,735,352  
                                 
Total Liabilities
            44,399,465       90,671,803       96,812,661  
                                 
Shareholder's Equity
                               
                                 
Issued and authorised stock capital:
                               
1,500 shares of 1 US$ each
            1,500       1,500       1,500  
Additional paid-in capital
            46,272,338       -       -  
Merger reserve
            13,346,887       13,346,887       20,297,666  
                                 
Total Shareholder's Equity
            59,620,725       13,348,387       20,299,166  
Total Liabilities and Shareholder's Equity
            104,020,190       104,020,190       117,111,827  

 
The accompanying notes are an integral part of these condensed combined financial statements.
 
 
F-28
 
 
Scorpio Tankers Inc. and Subsidiaries
Unaudited Condensed Combined Financial Statements
For The Nine Months Ended September 30, 2009 and 2008

 
Unaudited Condensed Combined Income Statements
 
 
 
 
For the Nine Months Ended September 30,
 
Note
2009
 
2008
           
   
$
$
 
$
 $
Revenue:
           
Vessel revenue
5
 
21,752,091
     28,914,996
             
Operating Expenses:
           
Charter hire
 
(3,163,485)
   
(4,104,081)
 
Vessel operating costs
 
(6,397,434)
   
(6,535,389)
 
Impairment
3
(4,511,877)
   
-
 
Depreciation
2
(5,155,675)
   
(4,883,150)
 
General and administrative expenses
 
 (304,404)
   
(491,699)
 
             
Total operating expenses
   
(19,532,875)
     (16,014,319)
             
Operating Income
   
2,219,216
 
 
12,900,677
             
Other Income and Expense:
           
Interest expense – bank loan
 
(590,372)
   
(1,353,682)
 
Realized loss on derivative financial instruments
 
(580,104)
   
(276,626)
 
Unrealized gain /(loss) on derivative financial instruments
 
667,652
   
(178,820)
 
Interest income
 
4,754
   
28,672
 
Other expense, net
 
(10,925)
   
(27,614)
 
             
Total Other Income and Expense
   
(508,995)
     (1,808,070)
             
  Net Income      1,710,221      11,092,607
             
 
 
F-29
 
Scorpio Tankers Inc. and Subsidiaries
Unaudited Condensed Combined Financial Statements
For The Nine Months Ended September 30, 2009 and 2008

 
 
 Attributable to:              
Equity holders of the parent
     1,710,221      11,092,607  
               
  Attributable to:              
               
 Net Earnings Per Share          6            
               
  Basic      1,140      7,395  
  Diluted      1,140      7,395  
 
 
 
 
There were no sources of comprehensive income in either period other than those shown above. All operations were continuing in both periods.
 
The accompanying notes are an integral part of these combined financial statements.

 
F-30
 



 
******

 
Unaudited Condensed Combined Statements of Changes in Shareholder's Equity

   
Common Stock
             
   
Shares
Number.
   
Share capital
$
   
Merger reserve
$
   
Total
$
 
                         
Balance as of January 1, 2009
    1,500     $ 1,500     $ 20,297,666     $ 20,299,166  
Net income for the period
    -       -       1,710,221       1,710,221  
Dividends paid ($5,774 per share)
    -       -       (8,661,000 )     (8,661,000 )
                                 
Balance as of September 30, 2009     1,500       1,500     $ 13,346,887     $ 13,348,387  
 

 
                         
Balance as of January 1, 2008
    1,500     $ 1,500     $ 26,895,742     $ 26,897,242  
Net income for the period
    -       -       11,092,607       11,092,607  
Dividends paid ($6,285 per share)
    -       -       (9,427,000 )     (9,427,000 )
                                 
  Balance as of September 30, 2008     1,500     $ 28,561,349             $ 28,562,849  

The accompanying notes are an integral part of these combined financial statements.

 

F-31
 
 
Scorpio Tankers Inc. and Subsidiaries
Unaudited Condensed Combined Financial Statements
For The Nine Months Ended September 30, 2009 and 2008

Unaudited Condensed Combined Cash Flow Statements
(in US$)

 
   
For the Nine Months Ended September 30
 
   
2009
               
2008
       
    $             $       $       $    
Operating activities
                                     
Net income
    1,710,221                     11,092,607          
                                       
Depreciation
    5,155,675                     4,883,150          
Vessel impairment
    4,511,877                     -          
Unrealized (gain)/loss on derivatives
    (667,652 )                   178,820          
              10,710,121                       16,154,577  
Changes in assets and liabilities:
                                       
Drydock payments
    (1,253,841 )                     -          
Decrease/(increase) in inventories
    42,189                       (224,846 )        
Decrease in accounts receivable
    1,904,406                       67,745          
(Increase)/decrease in prepaid expenses
    (29,830 )                     7,487          
Increase/(decrease) in accounts payable
    (135,406 )                     232,695          
Decrease in shareholder's payable
    (2,760,987 )                     (3,720,774 )        
(Decrease)/increase in accrued expenses
    (242,539 )                     295,353          
                                         
              (2,476,008 )                     (3,342,340 )
Net Cash Inflow from Operating Activities
            8,234,113                       12,812,237  
                                         
                                         
                                         
Financing activities
                                       
Dividends paid
    (8,661,000 )                     (9,427,000 )        
Bank loan repayment
    (2,700,000 )                     (2,700,000 )     ,  
                                         
                                         
Net Cash Outflow from Financing Activities
            (11,361,000 )                     (12,127,000 )
                                         
  (Decrease)/Increase in cash and cash equivalents            
(3,126,887)
                     
685,237
 
                                         
Cash and cash equivalents at January 1,            
3,607,635
                     
1,153,743
 
                                         
  Cash and cash equivalents at September 30,            
480,748
                     
1,838,980
 
                                         
Supplemental information:
                                       
Interest paid            
650,478
                     
1,432,870
 
                                         
 
The accompanying notes are an integral part of these combined financial statements.

 
F-32

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008

1.           General information and significant accounting policies
 
Company
 
Scorpio Tankers Inc. was incorporated in the Republic of the Marshall Islands on July 1, 2009 by Simon Financial Limited (Simon).  On October 1, 2009, Simon transferred to Scorpio Tankers Inc. three operating subsidiary companies, as described further below. Scorpio Tankers Inc. and its subsidiaries (together the Company) are engaged in seaborne transportation of crude oil and refined petroleum products in the international shipping markets. Simon is incorporated in Liberia and is the ultimate parent company and controlling party of the Company. Simon is owned by members of the Lolli-Ghetti family. Emanuele Lauro, our founder, Chairman and Chief Executive Officer is a member of the Lolli-Ghetti family.  At September 30, 2009, the Lolli-Ghetti family owns 100% of the Company's outstanding common shares and therefore maintains a controlling interest in the Company.  See Note 7 for a discussion of the Company's planned initial public offering of its common shares and the expected changes in ownership.
 
Business
 
The Company's fleet consists of three wholly owned Panamax tankers engaged in seaborne transportation of crude oil and refined petroleum products in the international shipping markets.  The Company's vessels, as described in note 4 are commercially managed by Scorpio Commercial Management S.A.M. (SCM) which is a subsidiary of Simon.  SCM's services include securing employment, in pools, in the spot market and on time charters, for the Company's vessels.
 
The Company's vessels, as described in note 4, are technically managed by Scorpio Ship Management S.A.M. (SSM), which is also owned by members of the Lolli-Ghetti family.  SSM facilitates vessel support such as crew, provisions, deck and engine stores, insurance, maintenance and repairs, and other services as necessary to operate the Company's vessels such as drydocks and vetting/inspection under a technical management agreement.
 
SSM also provides the Company with administrative services pursuant to an administrative services agreement.  The administrative services provided under the agreement primarily include accounting, legal compliance, financial, information technology services, and the provision of administrative staff and office space.
 
The Company pays their managers fees for these services and reimburses them for direct or indirect expenses that they incur in providing these services to the Company.
 
Basis of accounting
 
The combined financial statements have been presented in United States dollars (USD or $), which is the functional currency of the Scorpio Tankers Inc. and all its subsidiaries.  The interim financial information for the nine months ended September 30, 2009 and 2008 has been prepared in accordance with International Accounting Standards (IAS) 34 as issued by the International Accounting Standards Board.   The interim report was prepared using the same accounting policies as adopted in the preparation of the combined financial statements for the year ended December 31, 2008.
 
Scorpio Tankers Inc. was transferred its subsidiaries (see below) on October 1, 2009 via a combination of entities under common control, with Simon Financial Limited being the ultimate parent company of all entities in the Company throughout all periods shown. As such, this business combination is outside the scope of IFRS 3 "Business Combinations" and the 2009 and 2008 interim results have therefore been prepared using the principles of merger accounting.  Using these principles, the assets and liabilities transferred from entities under common control are recorded at the transferor's carrying values.  Any difference between the carrying value of the net assets transferred and the consideration paid by the Company is accounted for as an adjustment to shareholder's equity through share capital and the merger reserve whilst any profit recognized after the reorganization will be recognized in equity within retained earnings. The net assets transferred and their results have been recognized from the date on which control of the subsidiaries was obtained by the ultimate controlling party.
 
 
F-33

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008

 
1.           General information and significant accounting policies (continued)
 
The subsidiaries transferred to Scorpio Tankers Inc. on October 1, 2009 were:
 
                                                                                            Percent
Company                                                          Vessel       Owned              Incorporated in
Noemi Shipping Company Limited                Noemi          100%         The Republic of the Marshall Islands
 
Senatore Shipping Company Limited            Senatore       100%         The Republic of the Marshall Islands
 
Venice Shipping Company Limited (A)         Venice          100%         The Republic of the Marshall Islands
 

 
Unaudited pro forma information

The unaudited pro forma balance sheet information as of September 30, 2009 assumes the conversion of the related party payable and shareholder payable balances as of November 18, 2009 to equity as a capital contribution (as described in Note 7) as if such conversion took place as of September 30, 2009.  No new shares were issued in conjunction with the conversion of the related party payable and shareholder payable to equity and therefore this transaction would have had no effect on the earnings per share for the nine months ended September 30, 2009.  The remaining balance of the shareholder payable in the pro forma balance sheet as of September 30, 2009 relates to payments made against the shareholder payable subsequent to September 30, 2009 and before the conversion of the shareholder payable to equity on November 18, 2009.  Therefore, as of the date of conversion, there was no outstanding balance for either the related party payable or the shareholder payable.
 
Going concern
 
Based on internal forecasts and projections that take into account reasonably possible changes in the Company's trading performance, the Company believes that it has adequate financial resources to continue in operation for at least twelve months from the date of approval of these interim financial statements. Accordingly, the Company continues to adopt the going concern basis in preparing the Company's interim financial statements.
 
Segment reporting
 
The Company adopted IFRS 8 "Operating Segments" on January 1, 2009. However, adoption of this standard has not resulted in any change to the Company's reportable segments. Historically, the chief operating decision makers of Simon did not evaluate the operating results of the Company on a discrete basis including on an individual subsidiary or individual vessel basis or by distinct geographical locations. Rather, operating results for the Company have been assessed on an aggregated owned vessel basis. The chief operating decision makers of the Company expect to continue to evaluate the operating results of the Company on an aggregated consolidated basis. Thus, the Company has determined that it operates under one reportable segment.
 
Critical accounting judgements and key sources of estimation uncertainty
 
In the application of the our accounting policies, we are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
 
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
 
The significant judgements and estimates are as follows:
 
Revenue recognition
 
F-34

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008
 
We currently generate all of our revenue from time charters and pools. Revenue recognition for time charters and pools is generally not as complex or as subjective as voyage charters.  Time charters are for a specific period of time at a specific rate per day. For long-term time charters, revenue is recognized on a straight-line basis over the term of the charter.  Pool revenues are determined by the pool managers from the total revenues and expenses of the pool and allocated to pool participants using a mechanism set out in the pool agreement.
 
1.           General information and significant accounting policies (continued)
 
Vessel impairment
 
The Company evaluates the carrying amounts of its vessels to determine whether there is any indication that those vessels have suffered an impairment loss.  If any such indication exists, the recoverable amount of vessels is estimated in order to determine the extent of the impairment loss (if any).
 
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The projection of cash flows related to vessels is complex and requires the Company to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these items have been historically volatile.  In assessing the fair value less cost to sell of the vessel, the Company obtains vessel valuations from leading, independent and internationally recognized ship brokers on an annual basis or when there is an indication that an asset or assets may be impaired.
 
If an indication of impairment is identified, the need for recognising an impairment loss is assessed by comparing the carrying amount of the vessels to the higher of the fair value less cost to sell and the value in use.
 
Vessel lives and residual value
 
The carrying value of each of our vessels represents its original cost at the time it was delivered or purchased less depreciation. We depreciate our vessels to their residual value on a straight-line basis over their estimated useful lives.  The estimated useful life of each vessel is 20 years from date of initial delivery from the shipyard.  The residual value is estimated as the lightweight tonnage of each vessel multiplied by a forecast scrap value per ton. The scrap value per ton is estimated taking into consideration the scrap market rate ruling at the period end.
 
An increase in the useful life of a vessel or in its scrap value would have the effect of decreasing the depreciation charge for the period and extending it into later periods. A decrease in the useful life of a vessel or scrap value would have the effect of increasing the depreciation charge for the period. However, when regulations place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessel's useful life is adjusted to end at the date such regulations become effective. The estimated salvage value of the vessels may not represent the fair market value at any one time since market prices of scrap values tend to fluctuate.
 
Deferred drydock cost
 
The Company recognizes drydock costs as a separate component of the vessels' carrying amounts and amortizes the drydock cost on a straight-line basis over the estimated period until the next drydock. We use judgment when estimating the period between drydocks performed, which can result in adjustments to the estimated amortization of drydock expense. If the vessel is disposed of before the next drydock, the remaining balance of the deferred drydock is written-off and forms part of the gain or loss recognized upon disposal of vessels in the period when contracted. We expect that our vessels will be required to be drydocked approximately every 30 to 48 months for major repairs and maintenance that cannot be performed while the vessels are operating. Costs capitalized as part of the drydock include actual costs incurred at the drydock yard and parts and supplies used in making such repairs.
 
 
 
F-35

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008


2.           Property, plant and equipment - vessels in operation
     
Vessels
   
Drydock
   
Total
 
Cost
                $    
 
As of January 1, 2009
  $ 138,713,588     $ 2,105,847     $ 140,819,435  
 
Additions
    -       1,619,567       1,619,567  
 
Drydock write off*
    -       (2,105,847 )     (2,105,847 )
                           
 
As of September 30, 2009
    138,713,588       1,619,567       140,333,155  
                           
Accumulated Depreciation
                       
 
As of January 1, 2009
    (29,718,644 )     (1,840,689 )     (31,559,333 )
 
Charge for the period
    (4,762,058 )     (393,617 )     (5,155,675 )
 
Impairment (See Note 3)
    (4,511,877 )     -       (4,511,877 )
 
Drydock write off*
    -       2,105,847       2,105,847  
                           
 
As of September 30, 2009
    (38,992,579 )     (128,459 )     (39,121,038 )
                           
Net Book Value
                       
 
As of September 30, 2009
  $ 99,721,009     $ 1,491,108     $ 101,212,117  
                           
Two of the vessels with an aggregated net book value of $79,231,815 as of September 30, 2009 and $85,328,080 as of December 31, 2008 have been provided as collateral for our long term bank loan. The Company's remaining vessel has been provided as collateral under a third party commercial agreement, although this arrangement was cancelled in December 2009 (see Note 7).
 
 
* Drydock write off represents the write off of drydock costs that were fully depreciated during the period. The Noemi and Senatore were drydocked as scheduled in 2009 for a total cost of $1,619,567 of which $1,253,841 had been paid by September 30, 2009.
 
Vessel depreciation is calculated on a straight-line basis to the estimated residual value over the anticipated useful life of vessels from date of delivery. The residual value of vessels is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration the scrap market rate ruling at the balance sheet date. Where there is a significant change in the estimated residual value, the resulting effect on depreciation expense is accounted for in the period of change and in future periods.
 
In accordance with this accounting policy, the Company evaluated the estimated residual value of each vessel at September 30, 2009 taking into consideration the scrap market rate ruling at this date.  As a result of a significant increase in the scrap market rate, the Company increased its estimated residual values of its vessels.  The change in the estimated residual value at September 30, 2009 resulted in a decrease in depreciation expense of $62,683 in the nine months ended September 30, 2009, and is expected to result in decreases in future periods of $85,398 per annum, as compared to the depreciation which would have been recorded using the estimated residual values prevailing at December 31, 2008.
 
Scrap market rates are historically volatile and therefore it is impracticable for the Company to estimate the effect of further changes in the scrap market rate and the residual values of the vessels on the Company's depreciation expense in periods subsequent to September 30, 2009.
 

 
3.           Impairment of vessels
 
F-36

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008

At the end of each reporting period, the Company evaluates the carrying amounts of vessels and related drydock costs to determine if there is any indication that those vessels and related drydock costs have suffered an impairment loss.  If such indication exists, the recoverable amount of the vessels and related drydock costs is estimated in order to determine the extent of the impairment loss (if any).The Company reviews certain indicators of potential impairment, such as discounted projected operating cash flows, business plans and overall market conditions.
 
 
The current economic and market conditions, including the significant disruptions in the global credit markets, are having broad effects on participants in a wide variety of industries. In the nine months ended September 30, 2009, the charter rates in the oil and petroleum products charter market  declined significantly and Panamax vessel values also declined, both as a result of a slowdown in the availability of global credit and the significant deterioration in charter rates.  These are both conditions that the Company considers indicators of a potential impairment and
 
3.           Impairment of vessels (continued)
 
therefore the Company performed an impairment test as of September 30, 2009 for each vessel to determine if any impairment loss had occurred.
 
 
To test for impairment, the Company estimated the recoverable amount by determining the higher of fair value less costs to sell and value in use for each vessel at September 30, 2009.   The fair value less costs to sell was estimated by adding (i) the charter free market value of the vessel to (ii) the discounted value of each vessel's time charter, which is the difference between each vessel's time charter contracted rate and the market rate for a similar type of vessel with a similar contracted duration.  In determining the charter free market value, the Company took into consideration the estimated valuations provided by an independent ship broker. In assessing value in use, the estimated future cash flows of each vessel were discounted to their present value using a pre-tax discount rate reflecting current market assessments of the time value of money and the risks specific to the vessel for which the estimates of future cash flows have not been adjusted.
 
As a result of the test, the Company determined the recoverable amount of each vessel to be the fair value less costs to sell.  The recoverable amounts of Noemi and Senatore were below the carrying values.  This resulted in an impairment loss of $4,511,877 for Noemi and Senatore which was recognized as a loss in the combined income statement for the period ended September 30, 2009 and a reduction in the carrying value of the vessels.
 
4.           Related party transactions
 
Transactions with subsidiaries of Simon (herein referred to as Simon subsidiaries) and transactions with entities outside of Simon but controlled by the Lolli-Ghetti family (herein referred to as related party affiliates) in the combined income statements are as follows:
 
     
For the nine months ended September 30,
    $
2009
2008
$
         
Vessel revenue (A)
   
9,087,714
15,220,584
         
Vessel operating costs (B)
   
(450,000)
(574,701)
         
General and administrative expenses (C)
   
(252,174)
(489,309)

 
(A)  
These transactions related to revenue earned in the Scorpio Panamax Tanker Pool (the Pool), a Simon subsidiary (See Note 5).
 
 
F-37

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008

In January 2007, the Noemi was time chartered to King Dustin, which is 50% jointly controlled by a Simon subsidiary. The revenue recognized by the Company from King Dustin for the nine months ended September 30, 2009 and 2008 was $6,049,254 and $6,647,088, respectively.
 
(B)  
These transactions represent technical management fees charged by SSM, a related party affiliate.  During the period ended September 30, 2008, the Company's fees under technical management arrangements with SSM were not at market rates.  The Company estimates that its technical management fees for the nine months ended September 30, 2008 would have been $450,456, and would have increased net income for the periods
 
4.           Related party transactions (continued)
 
by $124,245, had the Company operated as an unaffiliated entity.  The Company's estimate is based upon the rates charged to third party participants by the related party affiliate in 2008.  The Company believes that the technical management fees charged by SSM for the nine months ended September 30, 2009 approximates the amounts that would have been charged at market rates. The Company signed new technical management agreements for its vessels in December 2009 (See Note 7).
 
(C)  
These transactions represent commercial management fees charged by SCM (a Simon subsidiary) and administrative fees charged by SSM.
 
The Company incurred commercial management fees of $46,866 and $37,758 for the nine months ended September 30, 2009 and 2008, respectively.  The Company's commercial management fees for vessels not in the Pool were not at market rates for the nine months ended September 30, 2009 and 2008.  The Company estimates that its commercial management fees for the nine months ended September 30, 2009 and 2008 would have been $294,805 and $308,180 respectively, and would have decreased net income for the periods by $247,939 and $270,423, respectively, had the Company operated as an unaffiliated entity.  The Company's estimate is based upon the rates charged to third party participants in the Pool for 2009 and 2008. The Company signed new commercial management agreements for its vessels in December 2009 (See Note 7).
 
The Company incurred administrative management fees of $205,308 and $451,551 for the nine months ended September 30, 2009 and 2008, respectively.  The administrative fee included services for accounting, administrative, information technology and management of the Company.  The Company's fees under administrative management arrangements may not have been at market rates.  The Company cannot estimate what the cost would have been if operated as an unaffiliated party as the Company does not have relevant third party market data, but believes the costs for the nine months ended September 30, 2009 and 2008 were reasonable and appropriate for the services provided. The Company agreed upon the terms of a new administrative services agreement in December 2009 (See Note 7).
 
The Company had the following receivables and payables with related parties which have been included in the combined balance sheets:
 
   
As of,
 
   
September30, 2009
$
   
December 31, 2008
$
 
             
Assets:
           
Accounts receivable (due from the Pool)
    1,414,947       3,581,581  
                 
Liabilities:
               
Accounts payable (owed to the Pool)
    -       129,844  
Related party payable (D)
    27,406,408       27,406,408  
Shareholder payable (E)
    19,267,336       22,028,323  
 
 
F-38

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008

 
(D)  
The related party payable is owed to a subsidiary of Simon. The payable is repayable upon demand and is non interest bearing and unsecured. The outstanding balance as of November 2009 was converted to equity as a capital contribution (See Note 7).
 

 
4.           Related party transactions (continued)
 
(E)  
The shareholder payable is owed to Simon. Historically, our company and the shareholder have transferred cash depending on the need of each entity and the excess cash available. The payable is non-interest bearing and unsecured. In November 2009, the outstanding balance was converted to equity as a capital contribution (See Note 7).
 
Key management remuneration
 
Executive management of the Company was provided by a related party affiliate and included in the management fees described in (C) above. The Company did not have any employees throughout the periods presented.  If  the Company was not part of Simon, and had the same ownership structure and a contract for administrative services, the Company estimates its general and administrative costs would have been comparable with the general and administrative costs presented in the combined income statement for the nine months ended September 30, 2009 and 2008.
 
5.           Revenue
 
During the first nine months of 2009 and 2008, we had two vessels that were time chartered out.  The remaining revenue was from a vessel operating in the Pool.
 
Revenue Sources
 
   
For the Nine Months Ended
 
   
September 30,
 
   
2009
   
2008
 
Time charter revenue
  $ 12,664,377     $ 13,694,412  
Pool revenue
    9,087,714       15,220,584  
    $ 21,752,091     $ 28,914,996  
                 
Time charter out contracts:
 
Vessel
Time Charter Out
From                      To (i)
 
Daily rate
 
           
Noemi
Jan. 2007
Jan 2012
  $ 24,500  
Senatore
Sept 2007
Sept 2010
  $ 26,000  

 
(i)           The time charter contracts terminate plus or minus 30 days from the anniversary date.
 
Seasonality
 
The tanker market is typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance. In addition, unpredictable weather patterns during the winter months tend to disrupt vessel scheduling. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months.  As a result revenue generated by the Company's vessels have historically been weaker during April – September and stronger during October – March.
 
6.           Earnings per share
 
F-39
 

Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008

 
The calculation of both basic and diluted earnings per share is based on net income of $1,710,221 (nine months ended September 30, 2008: $11,092,607) and a weighted average number of ordinary shares of 1,500 (nine months ended September 30, 2008: 1,500) which assumes that the reorganization described in Note 1 was effective during the period. There were no dilutive instruments in either period.
 
7.
Subsequent events
 
Related party payable and shareholder payable
 
In  November 2009, the shareholder payable and related party payable, included in current liabilities at September 30, 2009 and December 31, 2008, were converted to equity as a capital contribution from Simon. As a result, the Company has no outstanding liabilities related to these related party arrangements.
 
Management service agreements
 
In December 2009, the Company amended its management agreements for commercial, technical and administrative management as follows:
 
·  
Technical management – In December 2009, the Company signed the technical management agreement for each ship with SSM.  Each ship will pay $548 per day for technical management.  This fee is the same charged to third parties by SSM, and therefore the Company believes it represents a market rate for such services.
 
·  
Commercial management – In December 2009, the Company signed the commercial management agreement with SCM.  Each of the vessels will pay $250 per day and 1.25% of their revenue when the vessels are not in the Pool.  When the Company's vessels are in the Pool, SCM, the pool manager, charges all vessels in the Pool (including third party participants) $250 per day and 1.25% of their revenue.  The Company therefore believes that the commercial management agreement represents a market rate for such services.
 
·  
Administrative management – In December 2009, the Company agreed upon the terms of an administrative services agreement for each vessel with an affiliated entity .  The Company will pay the administrator a fixed monthly fee calculated at cost with no profit for providing the Company with administrative services, and will reimburse it for the reasonable direct or indirect expenses it incurs in providing the Company with such services. The Company will also pay the administrator a fee for arranging vessel purchases and sales, on behalf of the Company, equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale.
 
Other
 
Prior to December 2009, the Venice was provided as collateral to a third party under an agreement between a subsidiary of Liberty Holding Company Ltd. and a third party.  Neither the Venice , Scorpio Tankers Inc. nor any of its subsidiaries were party to this agreement, nor had they had a relationship with the third party involved.  At the request of Liberty Holding Company Ltd., in December 2009, the third party agreed to release the Venice from the agreement in exchange for Liberty Holding Company Ltd. providing other collateral in place of the Venice .  Scorpio Tankers Inc. and its subsidiaries have no remaining collateral obligation under the agreement.
 

 
Initial Registration Statement
 

On February 17, 2010, the Company filed a Form F-1 registration statement with the United States Securities & Exchange Commission ("SEC") for the registration of shares to be offered in an initial public offering.  The Company currently expects to issue more than 50% of its existing shares at the time of the offering and therefore the Company does not expect that the Lolli-Ghetti Family, of which Mr. Lauro, our Chairman and Chief Executive Officer, is a member, will maintain a controlling interest in Scorpio Tankers Inc. after the consummation of the offering.


F-40


Notes to the Unaudited Condensed Combined Financial Statements
For the Nine Months Ended September 30, 2009 and 2008


New Credit Facility

 
On March 9, 2010, the Company entered into a commitment letter with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA and Fortis Bank Nederland for a senior secured term loan facility of up to $150 million. The Company’s entry into the credit facility is subject to the completion of the offering with gross proceeds to the Company of at least $150 million and customary conditions and documentation, including payment of an upfront fee and each Lender’s satisfaction with the completion of due diligence.  The credit facility may only be used to finance the cost of future vessel acquisitions, which vessels will be the collateral for the credit facility.

 

 

 
F-41
 



SCORPIO TANKERS INC.
 
 









                              


Through and including              , (the 25th date after the date of this prospectus) federal securities law may require all dealers that effect transactions in these securities, whether or not participating in this offering, to deliver a prospectus.  This requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


 
 
 

PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS

 
Item 6.    Indemnification of Directors and Officers
 
The bylaws of the Registrant provide that every director and officer of the Registrant shall be indemnified out of the funds of the Registrant against:
 
 
(1)
all civil 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 or officer acting in the reasonable belief that he has been so appointed or elected notwithstanding any defect in such appointment or election, provided always that such indemnity shall not extend to any matter which would render it void pursuant to any Marshall Islands statute from time to time in force concerning companies insofar as the same applies to the Registrant; and
 
 
(2)
all liabilities incurred by him as such director or officer in defending any proceedings, whether civil or criminal, in which judgment is given in his favor, or in which he is acquitted, or in connection with any application under any Marshall Islands statute from time to time in force concerning companies in which relief from liability is granted to him by the court.
 

The BCA authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their stockholders for monetary damages for breaches of directors' fiduciary duties.  Our Amended and Restated Articles of Incorporation and bylaws include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent permitted by law.
 
Our bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by law.  We are also expressly authorized to advance certain expenses (including attorney's fees and disbursements and court costs) to our directors and offices and carry directors' and officers' insurance providing indemnification for our directors, officers and certain employees for some liabilities.  We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.
 
The limitation of liability and indemnification provisions in our Amended and Restated Articles of Incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty.  These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders.  In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
 
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
 
Section 60 of the BCA provides as follows:
 
Indemnification of directors and officers:
 
(1)
Actions not by or in right of the corporation .  A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.  The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceedings, had reasonable cause to believe that his conduct was unlawful.
 
II-1

(2)
Actions by or in right of the corporation .  A corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not, opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claims, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
 
(3)
When director or officer successful .  To the extent that a director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (1) or (2) of this section, or in the defense of a claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
 
(4)
Payment of expenses in advance .  Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section.
 
(5)
Indemnification pursuant to other rights.   The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
 
(6)
Continuation of indemnification.   The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
 
(7)
Insurance .  A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer against any liability asserted against him and incurred by him in such capacity whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section.
 

 
II-2
 

Item 7.                      Recent Sales of Unregistered Securities.
 
On October 1, 2009, we issued 1,500 shares of common stock to Scorpio Owning Holding Ltd., a subsidiary of Liberty, which is an affiliate within the Scorpio Group, for aggregate consideration of $1,500.
 
On November 18, 2009, the outstanding balances of our shareholder payable and related party payable as of November 18, 2009 of $46.3 million were converted to equity as a capital contribution, in the amount of $18,865,930 for the shareholder payable to Simon, and in the amount of $27,406,408 for the related party payable to Iceberg Shipping Limited, a subsidiary of Liberty. These payables were converted to equity as a capital contribution and did not include the issuance of any unregistered securities.
 
The following table sets forth all private sales of our shares of our common stock since inception:
 
Securities Sold
Date Sold
Consideration Per Share
Total Consideration
Registration Exemption
Purchasers
1,500 Shares of common stock
October 1, 2009
$1 per share
$1,500
Section 4(2) of the Securities Act
Scorpio Owning Holding Ltd.
           
           
           
           
           

 

 
II-3
 

Item 8.             Exhibits and Financial Statement Schedules

Exhibit
Number
Description
   
*1
Form of Underwriting Agreement
   
3.1
Form of Amended and Restated Articles of Incorporation of the Company
   
3.2
Form of Amended and Restated Bylaws of the Company
   
4.1
Form of Stock Certificate
   
5.1
Form of Opinion of Seward & Kissel LLP, Marshall Islands counsel to the Company, as to the validity of the common stock
   
8.1
Form of Tax opinion of Seward & Kissel LLP
   
10.1
Form of Administrative Services Agreement between the Company and Liberty Holding Company Ltd.
   
10.2
Form of Commercial Management Agreement between a vessel-owning subsidiary of the Company and SCM
   
10.3
Form of Technical Management Agreement between a vessel-owning subsidiary of the Company and SSM
   
10.4
Form of Memorandum of Agreement
   
10.5
Form of Time Charter Agreement
   
10.6
Commitment Letter for New 2010 Credit Facility
   
10.7
Loan Agreement for 2005 Credit Facility
   
10.8
Form of Equity Incentive Plan
   
21
Subsidiaries of the Company
   
23.1
Consent of Seward & Kissel LLP (included within Exhibit 5.1)
   
23.2
Consent of Deloitte LLP, independent registered public accounting firm
   
23.3
Consent of Fearnley Fonds ASA
   
23.4
Consent of Alexandre Albertini
   
23.5
Consent of Ademaro Lanzara
   
23.6
Consent of Donald C. Trauscht
   
24.1
Powers of Attorney (included on the signature page hereto).

*    To be filed by subsequent amendment.

II-4

Item 9.
Undertakings

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
 
The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


 



 
 
II-5
 

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and Country of Monaco, on the 10th day of March, 2010.
 
 
SCORPIO TANKERS INC.
     
 
By:
/s/ Emanuele A. Lauro
   
Name:
Emanuele A. Lauro
   
Title:
Chairman & Chief Executive Officer
       

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lawrence Rutkowski and Edward Horton, or either of them, with full power to act alone, his or her true lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements to this registration statement, whether pre-effective or post-effective, including any subsequent registration statement for the same offering which may be filed under Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary to be done, as fully for all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
 
In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons on March 10, 2010 in the capacities indicated.
 

   
Signature
Title
   
 
/s/ Emanuele A. Lauro
Emanuele A. Lauro
Chairman & Chief Executive Officer
(Principal Executive Officer)
 
/s/Robert Bugbee
Robert Bugbee
Director & President
   
/s/Brian Lee
Brian Lee
Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer)
   
____________________
 
Director
   
____________________
     
Director
   
____________________
      
Director
 
 
 

 
 
 

SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT
 
Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative of Scorpio Tankers Inc. in the U.S., has signed this Amendment No. 1 to the Registration Statement on Form F-1 in the City of New York, State of New York on the 10th day of March, 2010.
 
   
STING LLC
By:   Scorpio Tankers Inc., its Sole Member
 
   
 
By:
/s/ Robert Bugbee
   
Name:
Robert Bugbee
   
Title:
President

 

 

 

 

 
 

 





SK 26596 0002 1079966 v4

 


 
 

 

 


EXHIBIT 3.1
 
 
FORM OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
 
OF
 
SCORPIO TANKERS INC.
 
UNDER SECTION 93 OF THE
 
THE MARSHALL ISLANDS BUSINESS CORPORATIONS ACT
 

 
The undersigned, Emanuele Lauro, as the Chief Executive Officer of Scorpio Tankers Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands on July 1, 2009 (the "Corporation"), for the purpose of amending and restating the Articles of Incorporation of said Corporation pursuant to section 93 of the Business Corporations Act, as amended, hereby certifies that:
 
1.  
The name of the Corporation is: Scorpio Tankers Inc.
 
2.  
The Articles of Incorporation were filed with the Registrar of Corporations on the 1st day of July, 2009.
 
3.  
The Corporation's total capital stock issued and outstanding is 1,500 Common Shares, par value $1.00.
 
4.  
The Articles of Incorporation were amended on December 9, 2009 to change the name of the Corporation to: Scorpio Tankers Inc.
 
5.  
The Articles of Incorporation are amended and restated in their entirety and are replaced by the Amended and Restated Articles of Incorporation attached hereto.
 
6.  
These Amended and Restated Articles of Incorporation were authorized by actions of the Board of Directors and Shareholders of the Corporation.
 
IN WITNESS WHEREOF, the undersigned has executed these Amended and Restated Articles of Incorporation this        day of March, 2010.
 
 
 
 
______________________________
Authorized Person
Name: Emanuele Lauro
Title:   Chief Executive Officer

 
 
 

FORM OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
 
OF
 
SCORPIO TANKERS INC.
 
PURSUANT TO THE MARSHALL ISLANDS BUSINESS CORPORATION ACT
 
A.  
The name of the Corporation shall be:
 
 SCORPIO TANKERS INC.
 
B.  
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act (the "BCA") and without in any way limiting the generality of the foregoing, the corporation shall have the power:
 
(1)   To purchase or otherwise acquire, own, use, operate, pledge, hypothecate, mortgage, lease, charter, sub-charter, sell, build, and repair steamships, motorships, tankers, whaling vessels, sailing vessels, tugs, lighters, barges, and all other vessels and craft of any and all motive power whatsoever, including landcraft, and any and all means of conveyance and transportation by land or water, together with engines, boilers, machinery equipment and appurtenances of all kinds, including masts, sails, boats, anchors, cables, tackle, furniture and all other necessities thereunto appertaining and belonging, together with all materials, articles, tools, equipment and appliances necessary, suitable or convenient for the construction, equipment, use and operation thereof; and to equip, furnish, and outfit such vessels and ships.
 
(2)   To engage in ocean, coastwise and inland commerce, and generally in the carriage of freight, goods, cargo in bulk, passengers, mail and personal effects by water between the various ports of the world and to engage generally in waterborne commerce.
 
(3)   To purchase or otherwise acquire, own, use, operate, lease, build, repair, sell or in any manner dispose of docks, piers, quays, wharves, dry docks, warehouses and storage facilities of all kinds, and any property, real, personal and mixed, in connection therewith.
 
(4)   To act as charterers, or chartering brokers, or shipbuilding/shiprepairing brokers or ship's sale and purchase brokers, ship's husband, customhouse brokers, ship's agents, manager of shipping property, freight contractors, forwarding agents, warehousemen, wharfingers, ship chandlers, and general traders.
 
C.  
The registered address of the Corporation in the Marshall Islands is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. The name of the Corporation's registered agent at such address is The Trust Company of the Marshall Islands, Inc.
 
D.  
The aggregate number of shares of stock that the Corporation is authorized to issue is Two Hundred Seventy-Five Million (275,000,000) registered shares, of which Two Hundred Fifty Million (250,000,000) shall be designated common shares with a par value of one United States dollar (US $1.00) per share, and Twenty Five Million (25,000,000) shall be designated preferred shares with a par value of one United States dollar (US $1.00) per share.  The Board of Directors shall have the authority to authorize the issuance from time to time of one or more classes of preferred shares with one or more series within any class thereof, with such voting powers, full or limited, or without voting powers and with such designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions thereon as shall be set forth in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such preferred shares.
 
E.  
The Corporation shall have every power which a corporation now or hereafter organized under the BCA may have.
 
 

 
F.  
The name and address of the incorporator is:
 
 
Name
Post Office Address
 
 
Majuro Nominees Ltd.
P.O. Box 1405
Majuro
Marshall Islands
 
 
G.  
No holder of shares of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive rights to subscribe for, purchase or receive any shares of the Corporation of any class, now or hereafter authorized or any options or warrants for such shares, or any rights to subscribe to or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time be issued, sold or offered for sale by the Corporation.
 
H.  
Corporate existence commenced on July 1, 2009 and shall continue upon filing these Amended and Restated Articles of Incorporation with the Registrar of Corporations as of the filing date stated herein.
 
I.   
(a)  The number of directors constituting the entire Board of Directors shall be not less than one, as fixed from time to time by the vote of not less than two-thirds of the entire Board of Directors; provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the entire Board of Directors shall be one unless and until otherwise fixed by the vote of not less than two-thirds of the entire Board of Directors. The phrase "two-thirds of the entire Board of Directors" as used in these Articles of Incorporation shall be deemed to refer to two-thirds of the number of directors constituting the Board of Directors as provided in or pursuant to this Section (a) of this Article I, without regard to any vacancies then existing.
 
(b)  The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the entire Board of Directors permits, with the term of office of one or another of the three classes expiring each year. As soon as practicable after the filing of these Amended and Restated Articles of Incorporation with the Registrar of Corporations responsible for non-resident corporations, the shareholders of the Corporation shall divide the Board of Directors into three classes, with the term of office of the first class to expire at the 2011 Annual Meeting of Shareholders, the term of office of the second class to expire at the 2012 Annual Meeting of Shareholders and the term of office of the third class to expire at the 2013 Annual Meeting of Shareholders. Commencing with the 2011 Annual Meeting of Shareholders, the directors elected at an annual meeting of shareholders to succeed those whose terms then expire shall be identified as being directors of the same class as the directors whom they succeed, and each of them shall hold office until the third succeeding annual meeting of shareholders and until such director's successor is elected and has qualified. Any vacancies in the Board of Directors for any reason, and any created directorships resulting from any increase in the number of directors, may be filled by the vote of not less than a majority of the members of the Board of Directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of preferred stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the then authorized number of directors shall be increased by the number of directors so to be elected, and the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of shareholders.
 
(c)  Notwithstanding any other provisions of these Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the bylaws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time, but only for cause and only by the affirmative vote of the holders of two-thirds or more of the issued and outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the shareholders called for that purpose. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of preferred stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of this Section (c) of this Article I shall not apply with respect to the director or directors elected by such holders of preferred stock.
 
(d)  Directors shall be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election.  Cumulative voting, as defined in Division 7, Section 71(2) of the BCA, shall not be used to elect directors.
 
(e)  Notwithstanding any other provisions of these Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of two-thirds or more of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article I.
 
J.   
Making, altering or repealing the bylaws of the Corporation shall be governed by the provisions of the Corporation's bylaws as in effect at such time.  Notwithstanding any other provisions of these Articles of Incorporation or the Corporation's bylaws (and notwithstanding the fact that some lesser percentage may be specified by law, the Articles of Incorporation of the Corporation or these bylaws), the affirmative vote of the holders of two-thirds or more of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article J.
 
K.  
(a)  The Corporation may not engage in any Business Combination with any Interested Shareholder for a period of three years following the time of the transaction in which the person became an Interested Shareholder, unless:
 
(1)   prior to such time, the Board of Directors of the Corporation approved either the Business Combination or the transaction which resulted in the shareholder becoming an Interested Shareholder;
 
(2)   upon consummation of the transaction which resulted in the shareholder becoming an Interested Shareholder, the Interested Shareholder owned at least 85% of the voting stock of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
 
(3)   at or subsequent to such time, the Business Combination is approved by the Board of Directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested shareholder; or
 
(4)   the shareholder became an Interested Shareholder prior to the consummation of the initial public offering of the Corporation's common stock under the United States Securities Act of 1933.
 
 
(b)  The restrictions contained in this section shall not apply if:
 
(1)   A shareholder becomes an Interested Shareholder inadvertently and (i) as soon as practicable divests itself of ownership of sufficient shares so that the shareholder ceases to be an Interested
 
 
 
Shareholder; and (ii) would not, at any time within the three-year period immediately prior to a Business Combination between the Corporation and such shareholder, have been an Interested Shareholder but for the inadvertent acquisition of ownership; or
 
(2)   The Business Combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required hereunder of a proposed transaction which (i) constitutes one of the transactions described in the following sentence; (ii) is with or by a person who either was not an Interested Shareholder during the previous three years or who became an Interested Shareholder with the approval of the Board; and (iii) is approved or not opposed by a majority of the members of the Board then in office (but not less than one) who were Directors prior to any person becoming an Interested Shareholder during the previous three years or were recommended for election or elected to succeed such Directors by a majority of such Directors. The proposed transactions referred to in the preceding sentence are limited to:
 
(i)   a merger or consolidation of the Corporation (except for a merger in respect of which, pursuant to the BCA, no vote of the shareholders of the Corporation is required);
 
(ii)   a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation (other than to any direct or indirect wholly-owned subsidiary or to the Corporation) having an aggregate market value equal to 50% or more of either that aggregate market value of all of the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding shares; or
 
(iii)   a proposed tender or exchange offer for 50% or more of the outstanding voting shares of the Corporation.
 
The Corporation shall give not less than 20 days notice to all Interested Shareholders prior to the consummation of any of the transactions described in clause (i) or (ii) of the second sentence of this paragraph.
 
(c)  For the purpose of this Article K only, the term:
 
(1)   "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.
 
(2)   "Associate," when used to indicate a relationship with any person, means: (i) Any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 15% or more of any class of voting shares; (ii) any trust or other estate in which such person has at least a 15% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.
 
(3)   "Business Combination," when used in reference to the Corporation and any Interested Shareholder of the Corporation, means:
 
(i)              Any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation with (A) the Interested Shareholder or any of its affiliates, or (B) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the Interested Shareholder.
 
(ii)              Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a shareholder of the Corporation, to or with the Interested Shareholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the
 
Corporation determined on a consolidated basis or the aggregate market value of all the outstanding shares;
 
(iii)              Any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any shares, or any share of such subsidiary, to the Interested Shareholder, except: (A) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares, or shares of any such subsidiary, which securities were outstanding prior to the time that the Interested Shareholder became such; (B) pursuant to a merger with a direct or indirect wholly-owned subsidiary of the Corporation solely for purposes of forming a holding company; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares, or shares of any such subsidiary, which security is distributed, pro rata to all holders of a class or series of shares subsequent to the time the Interested Shareholder became such; (D) pursuant to an exchange offer by the Corporation to purchase shares made on the same terms to all holders of said shares; or (E) any issuance or transfer of shares by the Corporation; provided however, that in no case under items (C)-(E) of this subparagraph shall there be an increase in the Interested Shareholder's proportionate share of the any class or series of shares;
 
(iv)           Any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of any class or series of shares, or securities convertible into any class or series of shares, or shares of any such subsidiary, or securities convertible into such shares, which is owned by the Interested Shareholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares not caused, directly or indirectly, by the Interested Shareholder; or
 
(v)     Any receipt by the Interested Shareholder of the benefit, directly or indirectly (except proportionately as a shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial benefits (other than those expressly permitted in subparagraphs (i)-(iv) of this paragraph) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.
 
(4)   "Control," including the terms "controlling," "controlled by" and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract or otherwise. A person who is the owner of 15% or more of the outstanding voting shares of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting shares, in good faith and not for the purpose of circumventing this provision, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.
 
(5)   "Interested Shareholder" means any person (other than the Corporation and any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting shares of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting shares of the Corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an Interested Shareholder; and the affiliates and associates of such person; provided, however, that the term "Interested Shareholder" shall not include any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of action taken solely by the Corporation; provided that such person shall be an Interested Shareholder if thereafter such person acquires additional shares of voting shares of the Corporation, except as a result of further Corporation action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an Interested Shareholder, the voting shares of the Corporation deemed to be outstanding shall include voting shares deemed to be owned by the person through application of paragraph (8) below, but shall not include any other unissued shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
 
 
(6)   "Person" means any individual, corporation, partnership, unincorporated association or other entity.
 
(7)   "Voting stock" means, with respect to any corporation, shares of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of such entity.
 
(8)   "Owner," including the terms "own" and "owned," when used with respect to any shares, means a person that individually or with or through any of its affiliates or associates:
 
(i)           Beneficially owns such shares, directly or indirectly; or
 
(ii)           Has (A) the right to acquire such shares (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of shares tendered pursuant to a tender or exchange offer made by such person or any of such person's affiliates or associates until such tendered shares is accepted for purchase or exchange; or (B) the right to vote such shares pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any shares because of such person's right to vote such shares if the agreement, arrangement or understanding to vote such shares arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to 10 or more persons; or
 
(iii)   Has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of subparagraph (ii) of this paragraph), or disposing of such shares with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such shares.
 
(d)           Notwithstanding any other provisions of these Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of two-thirds or more of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article K.
 
L.           At all meetings of shareholders of the Corporation, except as otherwise expressly provided by law, there must be present either in person or by proxy shareholders of record holding at least one-third of the shares issued and outstanding and entitled to vote at such meetings in order to constitute a quorum, but if less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present.
 

 
 
 
 
 
 
SK 26596 0002 1079950




EXHIBIT 3.2
 
SCORPIO TANKERS INC.
(the "Corporation")
 
FORM OF AMENDED AND RESTATED BYLAWS
 
As Adopted March ___ , 2010
 
ARTICLE I
 
OFFICES

 
The principal place of business of the Corporation shall be at such place or places as the Directors shall from time to time determine.  The Corporation may also have an office or offices at such other places within or without the Marshall Islands as the Board of Directors (the "Board") may from time to time appoint or the business of the Corporation may require.
 
ARTICLE II
 
SHAREHOLDERS
 
Section 1.   Annual Meeting :  The annual meeting of shareholders of the Corporation shall be held on such day and at such time and place within or without the Marshall Islands as the Board of Directors may determine for the purpose of electing Directors and of transacting such other business as may properly be brought before the meeting. The Chairman of the Board (the "Chairman") or, in the Chairman's absence, another person designated by the Board shall act as the Chairman of all annual meetings of shareholders.
 
Section 2.   Nature of Business at Annual Meetings of Shareholders :  No business may be transacted at an annual meeting of shareholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof); (b) otherwise properly brought before the annual meeting by or at the direction of the Board (or any duly authorized committee thereof); or (c) otherwise properly brought before the annual meeting by any shareholder of the Corporation (i) who is a shareholder of record on the date of the giving of the notice provided for in Section 2 of this Article II and has remained a shareholder of record through the record date for the determination of shareholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in Section 2 of this Article II.
 
In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation (the "Secretary").
 
To be timely a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one-hundred fifty (150) days nor more than one-hundred eighty (180) days prior to the one-year anniversary of the immediately preceding annual meeting of shareholders.  In no event shall the public disclosure of any adjournment of an annual meeting of the shareholders commence a new time period for the giving of the shareholder's notice described herein.
 
To be in proper written form, a shareholder's notice to the Secretary must set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such shareholder along with such shareholder's tax identification number, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder, (iv) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business and (v) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.  In addition,
 
 
 
notwithstanding anything in Section 2 of this Article II to the contrary, a shareholder intending to nominate one or more persons for election as a Director at an annual meeting must comply with Article III Section 3 of these Bylaws for such nomination or nominations to be properly brought before such meeting.
 
No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in Section 2 of this Article II; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in Section 2 of this Article II shall be deemed to preclude discussion by any shareholder of any such business.  If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman of the meeting shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.
 
Section 3.   Special Meeting :  Special meetings of shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time by the Chairman, a majority of the Board, or any officer of the Corporation who is also a Director. No other person or persons are permitted to call a special meeting, unless otherwise prescribed by law.  No business may be conducted at the special meeting other than business brought before the meeting by the Board. Such meetings shall be held at such place and on a date and at such time as may be designated in the notice thereof by the officer of the Corporation designated by the Board of Directors to deliver the notice of  such meeting.  The business transacted at any special meeting shall be limited to the purposes stated in the notice.
 
Section 4.   Notice of Meetings :  Notice of every annual and special meeting of shareholders, other than any meeting the giving of notice of which is otherwise prescribed by law, stating the date, time, place and purpose thereof, and in the case of special meetings, the name of the person or persons at whose direction the notice is being issued, shall be given personally or sent by mail, telefax, telegraph, cablegram, telex, or teleprinter at least fifteen (15) but not more than sixty (60) days before such meeting, to each shareholder of record entitled to vote thereat and to each shareholder of record who, by reason of any action proposed at such meeting would be entitled to have his shares appraised if such action were taken, and the notice shall include a statement of that purpose and to that effect. If mailed, notice shall be deemed to have been given when deposited in the mail, directed to the shareholder at his address as the same appears on the record of shareholders of the Corporation or at such address as to which the shareholder has given notice to the Secretary.  Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior to the conclusion thereof the lack of notice to him.  If the Corporation shall issue any class of bearer shares, notice for all meetings shall be given in the manner proved in the Articles of Incorporation.
 
Section 5.   Adjournments :  Any meeting of shareholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.  If the meeting is adjourned for lack of quorum, notice of the new meeting shall be given to each shareholder of record entitled to vote at the meeting.  If after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice in Section 4 of this Article II.
 
Section 6.   Quorum :  At all meetings of shareholders for the transaction of business, the number of shares of capital stock issued and outstanding and entitled to vote thereat, present either in person or represented by proxy, which is provided in the Articles of Incorporation or, if not in the Articles of Incorporation, by statute, shall be requisite and shall constitute a quorum.  If less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present.
 
Section 7.   Voting :  If a quorum is present, and except as otherwise expressly provided by law, the Corporation's Articles of Incorporation then in effect or these bylaws, the affirmative vote of a majority of the votes cast by holders of shares of stock represented at the meeting shall be the act of the shareholders.  At any meeting of shareholders each shareholder entitled to vote any shares on any matter to be voted upon as such meeting shall be entitled to one vote on such matter for each such share, and may exercise such voting right either in person or by proxy.  Any action required to be permitted to be taken at a meeting, may be taken without a meeting if a consent in
 
 
writing, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
 
Section 8.   Fixing of Record Date :  The Board of Directors may fix a time not more than sixty (60) nor less than fifteen (15) days prior to the date of any meeting of shareholders, or more than sixty (60) days prior to the last day on which the consent or dissent of shareholders may be expressed for any purpose without a meeting, as the time as of which shareholders entitled to notice of and to vote at such a meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who were holders of record of voting shares at such time and no others shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be.  The Board of Directors may fix a time not exceeding sixty days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the shareholders entitled to receive any such dividend, distribution, or allotment or for the purpose of such other action.
 
ARTICLE III
 
DIRECTORS
 
Section 1.   Number :  The affairs, business and property of the Corporation shall be managed by its Board of Directors.  The number of Directors is determined according to the Articles of Incorporation. The Directors need not be residents of the Marshall Islands nor shareholders of the Corporation. Corporations may, to the extent permitted by law, be elected Directors.
 
Section 2.   How Elected :  The Board of Directors shall be elected as specified in the Articles of Incorporation.
 
Section 3. Nomination of Directors : Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors of the Corporation, except as may be otherwise provided in the Articles of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board may be made at any annual meeting of shareholders (a) by or at the direction of the Board (or any duly authorized committee thereof) or (b) by any shareholders of the Corporation (i) who is a shareholder of record on the date of the giving of the notice provided for in Section 3 of this Article III and on the record date for the determination of shareholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in Section 3 of this Article III.
 
In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary.
 
To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one-hundred fifty (150) days nor more than one-hundred eighty (180) days prior to the one-year anniversary date of the immediately preceding annual meeting of shareholders.
 
To be in proper written form, a shareholder's notice to the Secretary must set forth; (a) as to each person whom the shareholder proposes to nominate for election as a Director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder applicable to issuers that are not foreign private issuers and (b) as to the shareholder giving the notice (i) the name and record address of such shareholder along with such shareholder's tax identification number, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such shareholder, (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person and persons (including their names) pursuant to
 
which the nomination(s) are to be made by such shareholder, (iv) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons named in its notice and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors of companies other than foreign private issuers pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.  Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a Director if elected.
 
No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in Section 3 of this Article III.  If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.
 
Notwithstanding any other provisions of the Articles of Incorporation or these bylaws (and notwithstanding the fact that some lesser percentage may be specified by law, the Articles of Incorporation or these bylaws), the vote of not less than two-thirds of the entire Board of Directors shall be required to amend, alter, change or repeal this Article III Section 3.
 
Section 4.   Removal :  Removal of Directors is governed by Articles of Incorporation Section I.
 
No proposal by a shareholder to remove a Director shall be voted upon at a meeting of the shareholders unless such shareholder has given timely notice thereof in proper written form to the Secretary.  To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred and fifty (150) days nor more than one hundred eighty (180) days prior to the one-year anniversary date of the immediately preceding annual meeting of the shareholders.  To be in proper written form, a shareholder's notice must set forth: (a) a statement of the grounds, if any, on which such Director is proposed to be removed, (b) evidence reasonably satisfactory to the Secretary of such shareholder's status as such and of the number of shares of each class of capital stock of the Corporation beneficially owned by such shareholder, and (c) a list of the names and addresses of other shareholders of the Corporation, if any, with whom such shareholder is acting in concert, and the number of shares of each class of capital stock of the Corporation beneficially owned by each such shareholder.
 
No shareholder proposal to remove a Director shall be voted upon at an annual meeting of the shareholders unless proposed in accordance with the procedures set forth in Section 4 of this Article III.  If the Chairman of the meeting determines, based on the facts, that a shareholder proposal to remove a Director was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that a proposal to remove a Director of the Corporation was not made in accordance with the procedures prescribed by these Bylaws, and such defective proposal shall be disregarded.
 
Section 5.   Vacancies :  Any vacancies in the Board of Directors shall be governed by the Articles of Incorporation.
 
Section 6.   Regular Meetings :  Regular meetings of the Board of Directors may be held at such time and place as may be determined by resolution of the Board of Directors and no notice shall be required for any regular meeting.  Except as otherwise provided by law, any business may be transacted at any regular meeting.
 
Section 7.   Special Meetings :  Special meetings of the Board of Directors may, unless otherwise prescribed by law, be called from time to time by the Chairman, a majority of the Board, or any officer of the Corporation who is also a Director.  The President or the Secretary shall call a special meeting of the Board upon written request directed to either of them by any two Directors stating the time, place, and purpose of such special meeting.  Special meetings of the Board shall be held on a date and at such time and at such place as may be designated in the notice thereof by the officer calling the meeting.
 
Section 8.   Notice of Special Meetings :  Notice of the date, time and place of each special meeting of the Board of Directors shall be given to each Director at least forty-eight (48) hours prior to such meeting, unless the notice is given orally or delivered in person, in which case it shall be given at least twenty-four (24) hours prior to
 
 
such meeting.  For the purpose of this section, notice shall be deemed to be duly given to a Director if given to him personally (including by telephone) or if such notice be delivered to such Director by mail, telegraph, telefax, cablegram, telex, or teleprinter to his last known address.  Notice of a meeting need not be given to any Director who submits a signed waiver of notice, whether before or after the meeting or who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice to him.
 
Section 9.   Quorum :  A majority of the Directors at the time in office, present in person or by proxy or by conference telephone, shall constitute a quorum for the transaction of business.
 
Section 10.   Interested Directors .  No contract or transaction between the Corporation and one or more of its Directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its Directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, or, if the votes of the disinterested Directors are insufficient to constitute an act of the Board of Directors as defined in Section 55 of the BCA, by unanimous vote of the disinterested Directors; or (ii) the material facts as to his relationship or interest and as to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders.  Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
 
Section 11.   Voting :  The vote of the majority of the Directors, present in person, by proxy, or by conference telephone, at a meeting at which a quorum is present shall be the act of the Directors.  Any action required or permitted to be taken at a meeting may be taken without a meeting if all members of the Board consent thereto in writing.
 
Section 12.   Compensation of Directors and Members of Committees :  The Board may from time to time, in its discretion, fix the amounts which shall be payable to members of the Board of Directors and to members of any committee, for attendance at the meetings of the Board or of such committee and for services rendered to the Corporation.
 
ARTICLE IV
 
COMMITTEES
 
The Board of Directors may, by resolution or resolutions passed by a majority of the entire Board, designate from among its members an executive committee to consist of one or more of the Directors of the Corporation, which, to the extent provided in said resolution or resolutions, or in these Bylaws, shall have and may exercise, to the extent permitted by law, the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it, provided, however, that no committee shall have the power or authority to (i) fill a vacancy in the Board or in a committee thereof, (ii) amend or repeal any Bylaw or adopt any new Bylaw, (iii) amend or repeal any resolution of the entire Board, (iv) or increase the number of Directors on the Board, or (v) remove any Director.  In addition, the Board of Directors may, by resolution or resolutions passed by a majority of the entire Board designate from among its members other committees to consist of one or more of the Directors of the Corporation, each of which shall perform such function and have such authority and powers as shall be delegated to it by said resolutions or as provided for in these Bylaws, except that only the executive committee may have and exercise the powers of the Board of Directors.  Members of the executive committee and any other committee shall hold office for such period as may be prescribed by the vote of a majority of the entire Board of Directors. Vacancies in membership of such committees shall be filled by vote of the board of Directors.  Committees may
 
 
 
adopt their own rules of procedure and may meet at stated times or on such notice as they may determine.  Each committee shall keep a record of its proceedings and report the same to the Board when requested.
 
ARTICLE V
 
OFFICERS
 
Section 1.   Number of Designation:   The Board of Directors shall appoint a President, Secretary and Treasurer and such other officers with such duties as it may deem necessary.  Officers may be of any nationality, need not be residents of the Marshall Islands and may be, but are not required to be, Directors.  Officers of the Corporation shall be natural persons except the secretary may be a corporate entity.  Any two or more offices may be held by the same natural person.
 
The salaries of the officers and any other compensation paid to them shall be fixed from time to time by the Board of Directors.  The Board of Directors may at any meeting appoint additional officers.  Each officer shall hold office until his successor shall have been duly appointed and qualified, except in the event of the earlier termination of his term of office, through death, resignation, removal or otherwise.  Any officer may be removed by the Board at any time with or without cause.  Any vacancy in an office may be filled for the unexpired portion of the term of such office by the Board of Directors at any regular or special meeting.
 
Section 2 .   President:   The President shall have general management of the affairs of the Corporation together with the powers and duties usually incident to the office of President, except as specifically limited by appropriate written resolution of the Board of Directors and shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors.  The President shall preside at all meetings of shareholders at which he is present and, if he is a Director, at all meetings of the Directors.
 
Section 3.   Treasurer:   The Treasurer shall be the chief financial officer of the Corporation and shall have general supervision over the care and custody of the funds, securities, and other valuable effects of the Corporation and shall deposit the same or cause the same to be deposited in the name of the Corporation in such depositories as the Board of Directors may designate, shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall have supervision over the accounts of all receipts and disbursements of the Corporation, shall, whenever required by the Board, render or cause to be rendered financial statements of the Corporation, shall have the power and perform the duties usually incident to the office of Treasurer, and shall have such powers and perform such other duties as may be assigned to him by the Board of Directors or the President.
 
Section 4.   Secretary:   The Secretary shall act as Secretary of all meetings of the shareholders and of the Board of Directors at which he is present, shall have supervision over the giving and serving of notices of the Corporation, shall be the custodian of the corporate records and of the corporate seal of the Corporation, shall be empowered to affix the corporate seal to those documents, the execution of which, on behalf of the Corporation under its seal, is duly authorized and when so affixed may attest the same, and shall exercise the powers and perform such other duties as may be assigned to him by the Board of Directors or the President.  If the Secretary is a corporation, the duties of the Secretary may be carried out by any authorized representative of such corporation.
 
Section 5.   Other Officers:   Officers other than those treated in Sections 2 through 4 of this Article shall exercise such powers and perform such duties as may be assigned to them by the Board of Directors or the President.
 
Section 6.   Bond:   The Board of Directors shall have power to the extent permitted by law, to require any officer, agent or employee of the Corporation to give bond for the faithful discharge of his duties in such form and with such surety or sureties as the Board of Directors may deem advisable.

 
ARTICLE VI
 
CERTIFICATES FOR SHARES

 
Section 1.   Form and Issuance:   The shares of the Corporation shall be represented by certificates in a form meeting the requirements of law and approved by the Board of Directors.  Certificates shall be signed by (i) the President or a Vice President and by (ii) the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer.  These signatures may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employees.  Shares may also be represented in uncertificated form, and, specifically, the Corporation may issue shares to be represented in any manner permitted or required by the rules of the stock exchange on which the Corporation may be listed.
 
Section 2.   Transfer:   The Board of Directors shall have power and authority to make such rules and regulations as they may deem expedient concerning the issuance, registration and transfer of shares of the Corporation's stock, and may appoint transfer agents and registrars thereof.
 
Section 3.   Loss of Stock Certificates:   The Board of Directors may direct a new certificate or certificates of stock to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed.  When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.
 
ARTICLE VII
 
DIVIDENDS
 
Dividends may be declared in conformity with law by, and at the discretion of, the Board of Directors at any regular or special meeting.  Dividends may be declared and paid in cash, stock, or other property of the Corporation.
 
ARTICLE VIII
 
INDEMNIFICATION
 
Section 1. Indemnification .  Any person who is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another, partnership, joint venture, trust or other enterprise shall be entitled to be indemnified by the Corporation upon the same terms, under the same conditions, and to the same extent as authorized by Section 60 of the BCA, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.  The Corporation shall have the power to pay in advance expenses a director or officer incurred while defending a civil or criminal proceeding, provided that the director or officer will repay the amount if it shall ultimately be determined that he or she is not entitled to indemnification under this section.
 
Section 2. Insurance .  The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a Director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer against any liability asserted against such person and incurred by such person in such capacity whether or not the Corporation would have the power to indemnify such person against such liability by law or under the provisions of these Bylaws.
 
ARTICLE IX
 
CORPORATE SEAL
 
The seal of the Corporation, if any, shall be circular in form, with the name of the Corporation in the circumference and such other appropriate legend as the Board of Directors may from time to time determine.

 
ARTICLE X
 
FISCAL YEAR
 
The fiscal year of the Corporation shall be such period of twelve consecutive months as the Board of Directors may by resolution designate.
 
ARTICLE XI
 
AMENDMENTS
 
The Board of Directors of the Corporation are expressly authorized to make, alter or repeal these bylaws of the Corporation by a vote of not less than a majority of the entire Board of Directors, unless otherwise provided in these bylaws.
 
 
 
 
 
 
 
 
 
SK 26596 0002 1079952


EXHIBIT 4.1

 FORM OF
STOCK CERTIFICATE
 
 

No. of NUMBER
 
No. of SHARES

 
 
 
   


 
 
 
 
 
SCORPIO TANKERS INC.
 
Organized under the Laws of the Republic of the Marshall Islands Pursuant to the Business Corporations
Act by Articles of Incorporation Filed in the Office of the Registrar of Corporations on JULY 1, 2009
AUTHORIZED CAPITAL ONE THOUSAND FIVE HUNDRED (1,500) SHARES WITH A PAR VALUE OF ONE U.S. DOLLAR (US$1.00) PER SHARE
 

 
 

 
This Certifies that   is the owner o f
     
   
 
  FULLY PAID AND NON-ASSESSABLE SHARES OF THE CAPITAL STOCK OF
 
SCORPIO TANKERS INC.
 
 
  transferable on the books of the Corporation by the holder hereof in person or by duly
Authorized Attorney upon surrender of this Certificate, properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized officers and director.
 
 
 
Dated:
 
 
 
 
     
     MANAGING DIRECTOR
     
     
SECRETARY                                                   TREASURER   VICE-PRESIDENT                                            PRESIDENT

 



EXHIBIT 5.1
[Seward & Kissel LLP Letterhead]

  FORM OF OPINION

Scorpio Tankers Inc.                                                                                                           March      , 2010
9, Boulevard Charles III
Monaco 98000

                        Re:  Scorpio Tankers Inc.

Ladies and Gentlemen:

We have acted as counsel to Scorpio Tankers Inc. (the "Company") in connection with the Company's Registration Statement on Form F-1 (File No. 333-164940) (the "Registration Statement") as filed with the U.S. Securities and Exchange Commission (the "Commission") on February 17 th , 2010, as thereafter amended or supplemented, with respect to the public offering (the "Offering") of up to           of the Company's Common Shares, par value $0.01 per share (the "Common Shares").

We have examined originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Registration Statement; (ii) the prospectus of the Company (the "Prospectus") included in the Registration Statement; and (iii) such corporate documents and records of the Company and such other instruments, certificates and documents as we have deemed necessary or appropriate as a basis for the opinions hereinafter expressed. In such examinations, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, the genuineness of all signatures and the legal competence or capacity of persons or entities to complete the execution of documents. As to various questions of fact which are material to the opinions hereinafter expressed, we have relied upon statements or certificates of public officials, directors of the Company and others.
 
We have further assumed for the purposes of this opinion, without investigation, that (i) all documents contemplated by the Prospectus to be executed in connection with the Offering have been duly authorized, executed and delivered by each of the parties thereto other than the Company, and (ii) the terms of the Offering comply in all respects with the terms, conditions and restrictions set forth in the Prospectus and all of the instruments, agreements and other documents relating thereto or executed in connection therewith.
 
Based upon and subject to the foregoing, and having regard to such other legal considerations which we deem relevant, we are of the opinions that under the laws of the Republic of the Marshall Islands, the Common Shares have been duly authorized and when issued, sold and paid for as contemplated in the Prospectus, the Common Shares will be validly issued, fully paid for and non-assessable.

 
 
 



This opinion is limited to the law of the Republic of the Marshall Islands as in effect on the date hereof.
 
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, and to each reference to us and the discussions of advice provided by us under the headings "Legal Matters" in the Prospectus, without admitting we are "experts" within the meaning of the Securities Act of 1933, as amended, or the rules and regulations of the Commission thereunder with respect to any part of the Registration Statement.

Very truly yours,

/s/ DRAFT




                                                                                                EXHIBIT 8.1

[Seward & Kissel LLP Letterhead]

  FORM OF OPINION

Scorpio Tankers Inc.                                                                                                           March      , 2010
9, Boulevard Charles III
Monaco 98000

                        Re:  Scorpio Tankers Inc.

Ladies and Gentlemen:

We have acted as counsel to Scorpio Tankers Inc. (the "Company") in connection with the Company's Registration Statement on Form F-1 (File No. 333-164940) (the "Registration Statement") as filed with the U.S. Securities and Exchange Commission (the "Commission") on February 17 th , 2010, as thereafter amended or supplemented, with respect to the public offering (the "Offering") of up to           of the Company's Common Shares, par value $0.01 per share (the "Common Shares").

In formulating our opinion as to these matters, we have examined such documents as we have deemed appropriate, including the Registration Statement and the prospectus of the Company (the "Prospectus") included in the Registration Statement.  We also have obtained such additional information as we have deemed relevant and necessary from representatives of the Company.
 
Capitalized terms not defined herein have the meanings ascribed to them in the Registration Statement.
 
Based on the facts as set forth in the Registration Statement and, in particular, on the representations, covenants, assumptions, conditions and qualifications described under the captions "Risk Factors"  and "Tax Considerations" therein, we hereby confirm that the opinions of Seward & Kissel LLP with respect to United States federal income tax matters and Marshall Islands tax matters are those opinions attributed to Seward & Kissel LLP expressed in the Registration Statement under the captions "Tax Considerations" and "Risk Factors - We may have to pay tax on United States source shipping income, which would reduce our earnings", "Risk Factors – "Any dividends paid by us may not qualify for preferential rates of United States federal income taxation in the hands of United States non-corporate holders", and "Risk Factors – United States tax authorities could treat us as a 'passive foreign investment company,' which could have adverse United States federal income tax consequences to United States holders" in the Registration Statement accurately state our views as to the tax matters discussed therein.

 
 
 


Our opinions and the tax discussion as set forth in the Registration Statement are based on the current provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service which may be cited or used as precedents, and case law, any of which may be changed at any time with retroactive effect.  No opinion is expressed on any matters other than those specifically referred to above by reference to the Registration Statement.
 
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement.
 
 

Very truly yours,
 
DRAFT



EXHIBIT 10.1
 
FORM OF
 
ADMINISTRATIVE SERVICES AGREEMENT
 
THIS ADMINISTRATIVE SERVICES AGREEMENT (as the same may be amended or modified from time to time, this " Agreement ") is dated as of               , 2010 and is by and between Scorpio Tankers Inc., a Marshall Islands corporation (the " Company "), and Liberty Holding Company Ltd., a Marshall Islands corporation (" Liberty " or the " Administrator ").
 
RECITALS
 
A. The Company was recently formed in anticipation of the Company's initial public offering (the " Public Offering ") of shares of its Common Stock, par value $0.01 per share (" Common Shares ").
 
B. In order to provide administrative services to the Company with respect to Vessels it may acquire and its business, the Company desires to engage the Administrator to provide, directly or indirectly, such services to the Company as are set out herein, and the Administrator desires to provide such services to the Company, on the terms and subject to the conditions set forth in this Agreement.
 
NOW, THEREFORE, in consideration of the mutual covenants and premises of the Parties herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
 
1. DEFINITIONS AND INTERPRETATION
 
1.1 Certain Definitions. In this Agreement, including the recitals hereto, unless the context requires otherwise, the following terms shall have the respective meanings set forth below:
 
" Accounting Referee " has the meaning ascribed to such term in Section 6.3.
 
" Administrator Breach " has the meaning ascribed to such term in Section 8.3(a).
 
" Administrator Indemnified Persons " has the meaning ascribed to such term in Section 7.3.
 
" Administrator Misconduct " has the meaning ascribed to such term in Section7.1(a).
 
" Administrator's Personnel " means all individuals who are employed by or have entered into consulting arrangements with the Administrator or any subcontractor under Section 2.3.
 
" Affiliates " means, with respect to any Person as at any particular date, any other Persons that directly or indirectly, through one or more intermediaries, are Controlled by, Control or are under common Control with the Person in question, and " Affiliate " means any one of them.
 
" Applicable Laws " means, in respect of any Person, property, transaction or event, all laws, statutes, ordinances, regulations, municipal by-laws, treaties, judgments and decrees applicable to that Person, property, transaction or event, all applicable official directives, rules, consents, approvals, authorizations, guidelines, orders, codes of practice and policies of any Governmental Authority having authority over that Person, property, transaction or event and having the force of law, and all general principles of common law and equity.
 
" Board of Directors " means the board of directors of the Company, as the same may be constituted from time to time.
 
" Books and Records " means all books of accounts and records, including tax records, sales and purchase records, Vessel records, computer software, formulae, business reports, plans and projections and all other documents, files, correspondence and other information of the Company with respect to the Vessels or the Business (whether or not in written, printed, electronic or computer printout form).
 

 
 
 

" Business " means the Company's business of owning, operating and/or chartering or re-chartering Vessels to other Persons and any other lawful act or activity customarily conducted in conjunction therewith.
 
" Business Day " means a day other than a Saturday, Sunday or statutory holiday on which the banks in New York, New York and Monaco are required to close.
 
" Change of Control " has the meaning ascribed to such term in Section 8.4.
 
" Chief Financial Officer " means the chief financial officer of the Company.
 
" Common Shares " has the meaning ascribed to such term in the recitals to this Agreement.
 
" Company " has the meaning ascribed to such term in the preamble, and to the extent applicable, references to the Company shall include the Company's wholly owned Subsidiaries.
 
 " Company Breach " has the meaning ascribed to such term in Section 8.4(b).
 
" Company Indemnified Persons " has the meaning ascribed to such term in Section 7.3.
 
 " Confidential Information " means all nonpublic or proprietary information or data (including all oral and visual information or data recorded in writing or in any other medium or by any other method) relating to a Disclosing Party that is obtained from the Disclosing Party or any third party on the Disclosing Party's behalf, at any time before, simultaneously with, or after the execution of this Agreement; and, without prejudice to the general nature of the foregoing definition, the term Confidential Information shall include, but not by way of limitation, (i) information regarding the Disclosing Party's existing or proposed operations, business plans, market opportunities, and business affairs and (ii) any information ascertainable by inspection of Confidential Information disclosed to the Receiving Party or by the analysis of any materials supplied to the Receiving. Notwithstanding the foregoing, Confidential Information shall not include any information which (x) is public knowledge at the time of disclosure or which subsequently becomes public knowledge other than as a result of a breach of this Agreement; (y) the Receiving Party can show was made available to it by some other Person who had a right to do so and who was not subject to any obligation of confidentiality or restricted use regarding such information; or (z) was developed by the Receiving Party independently without use of any confidential information provided hereunder or by a third party in breach of its confidentiality obligations.
 
" Control " or " Controlled " means, with respect to any Person, the right to elect or appoint, directly or indirectly, a majority of the directors of such Person or a majority of the Persons who have the right, including any contractual right, to manage and direct the business, affairs and operations of such Person, or the possession of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of Voting Securities, by contract, or otherwise.
 
" Costs and Expenses " has the meaning ascribed to such term in Section 6.1.
 
" Credit Facility " means any credit facility agreement to which any Company may be a party from time to time.
 
" Designated Representative " and " Designated Representatives " each have the meaning ascribed to such terms in Section 9.1.
 
" Disclosing Party " means a Party who has disclosed Confidential Information hereunder to the other Party or on whose behalf Confidential Information has been disclosed to the other Party.
 
" Dispute " has the meaning ascribed to such term in Section 9.1.
 

 
2
 

" Exchange Act " means the Securities Exchange Act of 1934, as amended.
 
" Existing Ownership Group " means Liberty and all Affiliates thereof.
 
" Fiscal Quarter " means a fiscal quarter for the Company or, in the case of the fiscal quarter ending [March 31, 2010], the portion of such fiscal quarter between the date of this Agreement and the commencement of the next fiscal quarter.
 
" Fiscal Year " means the fiscal year of the Company, being the twelve-month period ending December 31.
 
" Governmental Authority " means any domestic or foreign government, including any federal, provincial, state, territorial or municipal government, any multinational or supranational organization, any government agency (including the SEC), any tribunal, labor relations board, commission or stock exchange (including the New York Stock Exchange), and any other authority or organization exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government.
 
" IFRS "   means the international financial reporting standards.
 
" Initial Term " has the meaning ascribed to such term in Section 8.1.
 
" Legal Action " means any action, claim, complaint, demand, suit, judgment, investigation or proceeding, pending or threatened, by any Person or before any Governmental Authority.
 
" Losses " means losses, expenses, costs, liabilities and damages, excluding lost profits and consequential damages, but including interest charges, penalties, fines and monetary sanctions.
 
" Mediator's Report " has the meaning ascribed to such term in Section 9.2(c).
 
" Parties " means the Company and the Administrator.
 
" Person " means an individual, corporation, limited liability company, partnership, joint venture, trust or trustee, unincorporated organization, association, Governmental Authority or other entity.
 
 " President " means the president of the Company.
 
 " Public Offering " has the meaning ascribed to such term in the recitals to this Agreement.
 
" Questioned Items " has the meaning ascribed to such term in Section 3.4(b).
 
" Receiving Party " means a Party to whom Confidential Information of a Disclosing Party has been disclosed hereunder.
 
" Renewal Term " has the meaning ascribed to such term in Section 8.2.
 
" Sale and Purchase Fee " has the meaning ascribed to such term in Section 6.1.
 
" SEC " means the United States Securities and Exchange Commission.
 
" Services" has the meaning set out in Section 3.1.
 
" Subsidiary(ies) " means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of
 

 
3
 

 
directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Persons Controlled by such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Person Controlled by such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, one or more Persons Controlled by such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Persons Controlled by such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.
 
" Term " means the Initial Term and any Renewal Term, in each case subject to any early termination of this Agreement as permitted herein.
 
" Vessels " means the vessels owned by the Company or any of its Subsidiaries.
 
" Voting Securities " means securities of all classes of a Person entitling the holders thereof to vote on a regular basis in the election of members of the board of directors or other governing body of such Person.
 
1.2 Construction. In this Agreement, unless the context requires otherwise:
 
(a) references to laws and regulations refer to such laws and regulations as they may be amended from time to time, and references to particular provisions of a law or regulation include any corresponding provisions of any succeeding law or regulation;
 
(b) references to money refer to legal currency of the United States;
 
(c) "including" means "including, without limitation," whether or not so expressed;
 
(d) words importing the singular include the plural and vice versa, and words importing gender include all genders; and
 
(e) a reference to an "approval," "authorization," "consent," "notice" or "agreement" means an approval, authorization, consent, notice or agreement, as the case may be, in writing.
 
1.3 Headings. All article or section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof.
 
2. ENGAGEMENT OF ADMINISTRATOR
 
2.1 Engagement. The Company hereby engages the Administrator to provide, upon the Company's request, the Services specified herein, and the Administrator hereby accepts such engagement, all in accordance with the terms of this Agreement. The Company and the Administrator each acknowledge that to the extent set out in this Agreement, the Administrator is acting solely on behalf of, as agent of and for the account of, the Company. The Administrator shall advise Persons with whom it deals on behalf of the Company that it is conducting such business for and on behalf of the Company.
 
2.2 Powers and Duties of the Administrator. The Administrator shall take such actions on its own behalf or on behalf of the Company as it from time to time considers necessary or appropriate to enable it to perform its obligations under this Agreement, subject to customary oversight and supervision of the Company, its Board of Directors and its executive officers. The Administrator shall use its reasonable best efforts to provide the Services hereunder in a commercially reasonable manner and with the care, diligence and skill that a prudent manager would possess and exercise, except that the Administrator may allocate available supplies, manpower and services in such manner as in the prevailing circumstances the Administrator, acting reasonably, considers to be fair and reasonable.
 

 
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2.3 Ability to Subcontract. The Administrator may subcontract any of its duties and obligations hereunder to provide the Services to any of its Affiliates without the consent of the Company and may subcontract its duties and obligations hereunder to provide the Services to Persons that are not Affiliates with the prior written consent of the Company. In the event of any subcontract by the Administrator, the Administrator shall promptly notify the Company thereof and shall remain fully liable for the due performance of its obligations under this Agreement. To the extent the Administrator subcontracts any of the Services hereunder, the Company shall directly pay the relevant subcontractor all reasonable direct and indirect fees, costs, reimbursements, and other expenses payable to such subcontractor as the Administrator may direct.
 
2.4 Outside Activities; Competition. The Company acknowledges that the Administrator and its Affiliates may have business interests and engage in business activities in addition to those relating to the Company and its Affiliates, for their own respective accounts and for the accounts of other Persons. The Administrator and its Affiliates may undertake activities that compete with the activities of the Company. The Administrator agrees that it will provide the same level of service to the Company or any subsidiary thereof as it would to any other Affiliate.
 
2.5 Limitation on Administrator's Acquisition of Certain Vessels.   Recognizing the Company's intentions to acquire Vessels meeting certain specific characteristics, the Administrator, on its own behalf and for that of its Subsidiaries, hereby agrees that, for the duration of this Agreement, neither it nor its Subsidiaries shall acquire any product or crude tanker which is between 35,000 – 200,000 deadweight tons.
 
2.6 Authority of the Parties. Each Party represents to the other that it is duly authorized with full power and authority to execute, deliver and perform its obligations under this Agreement. The Company represents that the engagement of the Administrator has been duly authorized by the Company and is in accordance with all governing documents of the Company.
 
2.7 Inspection of Books and Records. At all reasonable times and on reasonable notice, any Person authorized by the Company may inspect, examine, copy and audit the Books and Records of the Company kept by the Administrator pursuant to this Agreement.
 
3. ADMINISTRATIVE SERVICES
 
The Administrator shall provide to the Company the services described in this Section 3 (collectively, the " Services ").
 
3.1 Accounting and Records. The Administrator shall, on behalf of the Company, establish an accounting system, including the development, implementation, maintenance and monitoring of internal control over financial reporting and disclosure controls and procedures, and maintain Books and Records, with such modifications as may be necessary to comply with Applicable Laws. The Books and Records shall contain particulars of receipts and disbursements relating to the Company's assets and liabilities and shall be kept pursuant to normal commercial practices that will permit financial statements to be prepared for the Company in accordance with IFRS. The Books and Records shall be the property of the Company but shall be kept at the Administrator's primary office or such other place as the Company and the Administrator may mutually agree. Upon expiration or termination of this Agreement, all of the Books and Records shall be provided to the Company or as the Company shall direct.
 
3.2 Reporting Requirements. The Administrator shall prepare and deliver to the President and the Chief Financial Officer the following reports, which the Administrator shall use its reasonable best efforts to prepare and deliver within the time periods specified below or, if not so specified, within the time period requested by the relevant party:
 
(a) a quarterly report to be delivered within 45 days of the end of each Fiscal Quarter setting out the interim financial results of the Company for such quarter and for the applicable Fiscal Year through the end of such Fiscal Quarter;
 

 
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(b) as and when requested by the Board of Directors, the President or the Chief Financial Officer, draft reports regarding financial and other information required in connection with Applicable Laws (including annual and other reports that may be required to be filed under the Exchange Act and all other Applicable Laws); and
 
(c) as and when reasonably requested by the Company from time to time, such other reports with respect to financial and other information of the Company.
 
3.3 Financial Statements and Tax Returns. At the instruction of the Chief Financial Officer, the Administrator shall prepare and deliver for review by the Chief Financial Officer and the Audit Committee of the Board of Directors the following, which the Administrator shall use its reasonable best efforts to prepare and deliver within the time periods specified below or, if not so specified, within the time period requested by the relevant party:
 
(a) within 30 days of the end of each Fiscal Quarter, unaudited financial statements of the Company for such Fiscal Quarter, to be reviewed by the external auditors of the Company, prepared in accordance with IFRS and the rules and regulations of the SEC, on a consolidated basis with all Subsidiaries of the Company;
 
(b) within 40 days of the end of each Fiscal Year, financial statements of the Company for such Fiscal Year, to be audited by the external auditors of the Company, prepared in accordance with IFRS and the rules and regulations of the SEC, on a consolidated basis with all Subsidiaries of the Company; and
 
(c) tax returns for the Company and all of its Subsidiaries required to be filed by Applicable Laws.
 
Notwithstanding the foregoing, in the event that the Company's reporting obligations are accelerated under the Exchange Act beyond what such obligations are at the time of the Public Offering, the Administrator shall use its reasonable best efforts to provide to the Company the financial statements referred to in clauses (a) and (b) above within such periods as shall be required for the Company to comply with any reporting requirements under the Exchange Act or other similar applicable laws and regulations.
 
In addition, the Administrator shall attend to the time calculation and payment of all taxes payable by the Company. At the instruction of the Chief Financial Officer, the Administrator shall cause the Company's external accountants to review the Company's unaudited financial statements, audit the Company's annual financial statements and finalize tax returns. The Administrator shall make available to the Company's accountants the relevant Books and Records for the Company and shall assist the accountants in their duties.
 
3.4 Legal and Securities Compliance Services.
 
(a) Responsibilities of the Administrator.
 
The Administrator shall assist the Company with the following items, whether or not related to any of the Vessels:
 
(i) compliance with all Applicable Laws, including all relevant securities laws and the rules and regulations of the SEC, the New York Stock Exchange or any other securities exchange upon which the Company's securities are listed;
 
(ii) arranging for the provision of advisory services to the Company with respect to the Company's obligations under applicable securities laws in the United States and disclosure and reporting obligations under applicable securities laws, including the preparation for review, approval and filing by the Company of reports and other documents with the SEC and all other applicable regulatory authorities;
 
(iii) maintaining the Company's corporate existence and good standing in all necessary jurisdictions and assisting in all other corporate and regulatory compliance matters;
 

 
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(iv) conducting investor relations functions on behalf of the Company; and
 
(v) adjusting and negotiating settlements, with or on behalf of claimants or underwriters, of any claim, damages for which are recoverable under insurance policies (subject to any applicable deductible).
 
(b) Administration and Settlement of Legal Actions.
 
If any Legal Action is commenced against or is required to be commenced in favor of the Company or any of the Vessels, the Administrator shall arrange for the commencement or defense of such Legal Action, as the case may be, in the name of, on behalf of and at the expense of the Company, including retaining and instructing legal counsel, investigating the substance of the Legal Action and entering pleadings with respect to the Legal Action. The Administrator shall assist the Company in administering and supervising any such Legal Actions and shall keep the Company advised of the status thereof. The Administrator may settle any Legal Action on behalf of a Company where the amount of settlement is less than $500,000 with the approval of the President or the Chief Financial Officer and, in excess of such amount, with the approval of the Board of Directors.
 
(c) Interaction with Regulatory Authorities.
 
Notwithstanding anything in this Section 3 or otherwise, the Administrator shall not act for or on behalf of the Company in its relationships with any regulatory authorities except to the extent specifically authorized by the Company from time to time.
 
3.5 Bank Accounts.
 
The Administrator shall oversee banking services for the Company and shall establish in the name of the Company an operating account, a retention account and such other accounts with such financial institutions as the Company may request. The Administrator shall administer and manage all of the Company's cash and accounts, including making any deposits and withdrawals reasonably necessary for the management of its business and day-to-day operations. The Administrator shall promptly deposit all moneys payable to the Company and received by the Administrator into a bank account held in the name of the Company.
 
3.6 Other Services.
 
The Administrator shall assist the Company to:
 
(a) identify, negotiate and secure opportunities for the Company to acquire Vessels or companies which own Vessels, or to construct Vessels, and to negotiate and carry out the purchase or sale of existing Vessels, newbuilding Vessels or companies which are the registered owners of Vessels.
 
(b) obtain, on behalf of the Company, general insurance, director and officer liability insurance and other insurance of the Company not related to the Vessels that would normally be obtained for a company in a similar business to that of the Company;
 
(c) administer payroll services, benefits and directors fees, for the Chief Executive Officer, the General Counsel and any other non-United States resident employee, officer or director of the Company and its Subsidiaries;
 
(d) provide the Company with information technology support;
 
(e) provide office space and office equipment for personnel of the Company at the location of the Administrator  or any subsidiary thereof or as otherwise reasonably designated by the Company, and clerical, secretarial, accounting and administrative assistance as may be reasonably necessary;
 

 
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(f) at the request and under the direction of the Company, handle all administrative and clerical matters in respect of (i) the call and arrangement of all annual and special meetings of shareholders, (ii) the preparation of all materials (including notices of meetings and proxy or similar materials) in respect thereof and (iii) the submission of all such materials to the Company in sufficient time prior to the dates upon which they must be mailed, filed or otherwise relied upon so that the Company has full opportunity to review, approve, execute and return them to the Administrator for filing or mailing or other disposition as the Company may require or direct;
 
(g) provide, at the request and under the direction of the Company, such communications to the transfer agent for the Company as may be necessary or desirable;
 
(h) make recommendations to the Company for the appointment of auditors, accountants, legal counsel and other accounting, financial or legal advisers, and technical, commercial, marketing or other independent experts; provided, however, that nothing herein shall permit the Administrator to engage any such adviser or expert for the Company without the Company's specific approval; and
 
(i) attend to all other administrative matters necessary to ensure the professional management of the Company's business or as reasonably requested by the Company from time to time.
 
4. EMPLOYEES AND ADMINISTRATOR'S PERSONNEL
 
4.1 Administrator's Personnel . The Administrator shall provide the Services hereunder through the Administrator's Personnel. The Administrator shall be responsible for all aspects of the employment or other relationship of the Administrator's Personnel as required in order for the Administrator to perform its obligations hereunder, including recruitment, training, staffing levels, compensation and benefits, supervision, discipline and discharge, and other terms and conditions of employment or contract. However, the Administrator shall remain directly responsible and liable to the Company to carry out all of its obligations under this Agreement, whether performed directly or subcontracted to another Person.
 
5. COVENANTS OF THE ADMINISTRATOR
 
The Administrator hereby agrees and covenants with the Company that, during the Term, the Administrator shall:
 
(a) obtain and maintain for its benefit professional indemnity insurance and other insurance as is reasonable having regard to the nature and extent of the Administrator's obligations under this Agreement;
 
(b) exercise all due care, skill and diligence in carrying out its duties under this Agreement as required by Applicable Laws;
 
(c) provide the chairman, President, the Chief Financial Officer, and the Board of Directors with all information in relation to the performance of the Administrator's obligations under this Agreement as the President, the Chief Financial Officer, or the Board of Directors may reasonably request;
 
(d) use its reasonable best efforts to have all material property of the Company clearly identified as such, held separately from property of the Administrator and, where applicable, in safe custody;
 
(e) use its reasonable best efforts to have all property of the Company (other than money to be deposited to any bank account of the Company) transferred to or otherwise held in the name of the Company or any nominee or custodian appointed by the Company;
 
(f) use its reasonable best efforts to retain at all times a qualified staff so as to maintain a level of expertise sufficient to provide the Services; and
 

 
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(g) use its reasonable best efforts to keep full and proper books, records and accounts showing clearly all transactions relating to its provision of the Services in accordance with established general commercial practices and in accordance with IFRS, and allow the Company and its representatives to audit and examine such books, records and accounts at any time during customary business hours.
 
6. ADMINISTRATOR'S COMPENSATION AND REIMBURSEMENT
 
6.1 Fees for the Services; Reimbursement. In consideration for the provision of the Services by the Administrator to the Company, the Company shall pay the Administrator the amounts set forth on Schedule A hereto in accordance with Section 6.2 ( "Sale and Purchase Fee" ). In addition, the Company shall reimburse the Administrator for (a) all of the reasonable direct and indirect costs and expenses incurred by the Administrator and its Affiliates in providing the Services and (b) the pro rata portion of the salary and other costs incurred by the Administrator in employing and compensating an internal auditor who will be made available to the Company on a part time basis (the " Costs and Expenses ").
 
6.2 Invoicing. The Administrator shall, in good faith, determine the expenses related to the Services that are allocable to the Company and its Affiliates in any reasonable manner determined by the Administrator and shall provide to the Company on a quarterly basis an invoice for the Costs and Expenses to be paid under Section 6.1, which invoice shall contain a description in reasonable detail of the Costs and Expenses that comprise the aggregate amount of the payment being invoiced. The Administrator shall maintain the records of all Costs and Expenses incurred, including any invoices, receipts and supplementary materials as are necessary or proper for the settlement of accounts between the Parties. The Company shall pay such invoices within thirty (30) days of receipt, unless the invoice is being disputed in accordance with this Agreement.
 
6.3 Dispute of Invoice. If the Company, in good faith, disputes the amount of an invoice, the Company shall give written notice of such dispute (including the particulars of such dispute) to the Administrator on or before the due date with respect to all or any portion of such invoice. Upon receipt of such notice, the Administrator shall furnish the Company with additional supporting documentation to reasonably substantiate the amount of the invoice or the Sale and Purchase   Fee calculation, as applicable. Upon delivery of such additional documentation, the Company and the Administrator shall cooperate in good faith and use commercially reasonable efforts to resolve such dispute. If they are unable to resolve the dispute within (i) ten (10) Business Days of the delivery of such additional supporting information (in the case of an invoice) or (ii) five (5) days of such delivery (in the case of the Sale and Purchase   Fee calculation), the dispute shall be referred for resolution to a firm of independent accountants of nationally recognized standing in the United States reasonably satisfactory to each of the Administrator and the Company (the " Accounting Referee "), which shall determine the disputed amounts within thirty (30) days of the referral of such invoice dispute to such Accounting Referee, or within ten (10) days of the referral of such Sale and Purchase   Fee calculation dispute. The determination of the Accounting Referee shall not require the Company to pay more than the amount in dispute nor require the Administrator to return any amount previously paid by the Company. The fees and expenses of the Accounting Referee shall be borne equally by the Company and the Administrator. If any invoice dispute is resolved in favor of the Administrator, the Company shall make payment to the Administrator within ten (10) days of resolution of the dispute. Notwithstanding the foregoing, in no event shall the Company be entitled to withhold any amounts other than those portions of the applicable payment that are in dispute.
 
6.4 Direction to Pay. By written notice to the Company, the Administrator may direct the Company to pay any amounts owing under this Agreement directly to an Affiliate of the Administrator pursuant to a subcontracting arrangement relating to this Agreement.
 
7. LIABILITY OF THE ADMINISTRATOR; INDEMNIFICATION
 
7.1 Liability of the Administrator. The Administrator shall not be liable to the Company for any Losses arising from the Services unless and to the extent that such Loss resulted from:
 

 
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(a) the fraud, gross negligence, recklessness or willful misconduct of the Administrator or any of its Affiliates or any of their respective employees, agents or subcontractors (" Administrator Misconduct "); or
 
(b) any breach of this Agreement by the Administrator of any of its Affiliates.
 
7.2 Administrator Indemnification. The Company shall indemnify and save harmless the Administrator and its directors, officers, employees, subcontractors and Affiliates (the " Administrator Indemnified Persons ") from and against any and all Losses incurred or suffered by the Administrator Indemnified Persons by reason of or arising from or in connection with their performance of this Agreement or any third-party Legal Action brought or threatened against such Administrator Indemnified Persons in connection with their performance of this Agreement, other than for any Losses to the extent related to or that resulted from:
 
(a) any liabilities or obligations that the Administrator has agreed to pay or for which the Administrator is otherwise expressly responsible under this Agreement;
 
(b) Administrator Misconduct; or
 
(c) any breach of this Agreement by the Administrator or any of its Affiliates (other than the Company or its Affiliates).
 
7.3 Company Indemnification . The Administrator shall indemnify and save harmless each Company and such Company's directors, officers, employees, subcontractors and Affiliates (the " Company Indemnified Persons ") from and against any and all Losses incurred or suffered by the Company Indemnified Persons, to the extent related to or that resulted from:
 
(a) any liabilities or obligations that the Administrator has agreed to pay or for which the Administrator is otherwise expressly responsible under this Agreement;
 
(b) Administrator Misconduct; or
 
(c) any breach of this Agreement by the Administrator or any of its Affiliates (other than the Company or its Affiliates).
 
8. TERM AND TERMINATION
 
8.1 Initial Term. The initial term of this Agreement shall commence on            2010 and end on December 31, 2012, unless terminated earlier pursuant to this Agreement (the " Initial Term ").
 
8.2 Renewal Term. This Agreement will, without any further act or formality on the part of either Party, on the expiration of the Initial Term or any Renewal Term, be automatically renewed for a further term of two (2) years (each a " Renewal Term ") unless notice of termination is given by the Company to the Administrator.
 
8.3 Termination by the Company. This Agreement may be terminated by the Company:
 
(a) if, at any time, the Administrator materially breaches this Agreement and the matter is unresolved after ninety (90) days pursuant to the dispute resolution procedures set forth in Section 9 (" Administrator Breach ");
 
(b) if, at any time;
 
(i) the Administrator has been convicted of, has entered a plea of guilty or nolo contendere with respect to, or has entered into a plea bargain or settlement admitting guilt for, a crime, which conviction, plea bargain or settlement is demonstrably and materially injurious to the Company; and
 

 
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(ii) the holders of a majority of the outstanding Common Shares elect to terminate this Agreement;
 
(c) if the Administrator commits fraud or is grossly negligent in the performance of its obligations hereunder, or commits an act of willful misconduct, and the Company is materially injured thereby in any such case;
 
(d) if, at any time, the Administrator becomes insolvent, admits in writing its inability to pay its debts as they become due, is adjudged bankrupt or declares bankruptcy or makes an assignment for the benefit of creditors, a proposal or similar action under the bankruptcy, insolvency or other similar laws of any applicable jurisdiction, or commences or consents to proceedings relating to it under any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction; or
 
(e) if any Person or group of Persons acquires Control or economic control of the Administrator in contravention of Section 10.2.
 
8.4 Termination by the Administrator. This Agreement may be terminated by the Administrator:
 
(a) after the third anniversary of the Public Offering, with twelve (12) months' prior notice by the Administrator to the Company;
 
(b) if, at any time, the Company materially breaches the Agreement and the matter is unresolved after ninety (90) days pursuant to the dispute resolution procedures set forth in Section 9 (" Company Breach "); or
 
(c) at any time upon the earlier of (i) the occurrence of a Change of Control of the Company or (ii) the Administrator's receipt of written notice from the Company that such a Change of Control will occur until sixty (60) days after the later of (x) the occurrence of such a Change of Control or (y) the Administrator's receipt of the written notice in the preceding clause (ii). If the Company has knowledge that a Change of Control of the Company will occur, the Company shall give prompt written notice thereof to the Administrator. A " Change of Control " means the occurrence of any of the following:
 
(A) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Company's assets, except such a disposition to the Existing Ownership Group;
 
(B) an order made for, or the adoption by the Board of Directors of a plan of, liquidation or dissolution of the Company;
 
(C) the consummation of any transaction (including any merger or consolidation) the result of which is that any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) becomes the beneficial owner, directly or indirectly, of more than a majority of the Company's Voting Securities (unless such "person" is a member of the Existing Ownership Group), measured by voting power rather than number of shares;
 
(D) if, at any time, the Company becomes insolvent, admits in writing its inability to pay its debts as they become due, is adjudged bankrupt or declares bankruptcy or makes an assignment for the benefit of creditors, or makes a proposal or similar action under the bankruptcy, insolvency or other similar laws of any applicable jurisdiction or commences or consents to proceedings relating to it under any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction;
 
(E) the consolidation of the Company with, or the merger of the Company with or into, any "person" (other than a member of the Existing Ownership Group), or the consolidation of any "person" (other than a member of the Existing Ownership Group) with, or the merger of any "person" (other than a member of the Existing Ownership Group) with or into, the Company, in any such event pursuant to a transaction in which any of the Common Stock outstanding immediately prior to such transaction are converted into or exchanged for cash, securities or other
 

 
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property or receive a payment of cash, securities or other property, other than any such transaction where the Company's Voting Securities outstanding immediately prior to such transaction are converted into or exchanged for Voting Securities of the surviving or transferee "person" constituting a majority (measured by voting power rather than number of shares) of the outstanding Voting Securities of such surviving or transferee "person" immediately after giving effect to such issuance; or
 
(F) a change in directors after which a majority of the members of the Board of Directors are not directors who were either nominated by, appointed by or otherwise elected with the approval of current board members at the time of such election.
 
9. DISPUTE RESOLUTION
 
9.1 Notice of Dispute. If (a) a dispute or disagreement arises between the Parties with respect to any provision of this Agreement (other than Section 6.3), including its interpretation or the performance of a Party under this Agreement or (b) (i) the Company in good faith believes that an Administrator Breach has occurred or is reasonably likely to occur or (ii) the Administrator in good faith believes that a Company Breach has occurred or is reasonably likely to occur (each of the foregoing being a " Dispute "), either Party may, or the Party alleging such breach or potential breach shall, deliver written notice to the other Party. Such notice shall contain in detail the specific facts and circumstances relating to the Dispute. With respect to any Dispute described in clause (a) or (b) above, each Party shall designate an individual to negotiate and resolve the Dispute (each a " Designated Representative " and, together, the " Designated Representatives "). The Designated Representatives shall in good faith attempt to resolve the matter within a thirty (30) day period from the date of delivery of the notice referred to above. If either Designated Representative intends to be accompanied by counsel at any meeting, such Designated Representative shall give the other Designated Representative at least three (3) Business Days' notice. All discussions and negotiations pursuant to this Section 9 shall be confidential and without prejudice to settlement negotiations.
 
9.2 Mediation. If a Dispute described in clause (a) or (b) of Section 9.1 is not resolved by the Designated Representatives during after the thirty (30) days provided in Section 9.1, either of the Parties may refer the matter to mediation.  With respect to the mediation of any Dispute, the mediator shall be mutually agreed upon by the Parties, and such mediator will be instructed to:
 
(a) review the terms of the Dispute and the position of the Parties;
 
(b) consider the terms of and context of this Agreement; and
 
(c) render a non-binding report within sixty (60) days of the appointment of the mediator (the " Mediator's Report ") or such later date as to which the Parties may agree.
 
The Parties shall consider the Mediator's Report and may mutually decide to make it a binding report. If the mediator is not able to facilitate a binding agreement between the Parties, the Dispute is not resolved to the satisfaction of the Parties as a result of the Mediator's Report or a mediator cannot be chosen mutually by the Parties, the Dispute shall be submitted to binding arbitration pursuant to Section 9.3.
 
9.3 Arbitration. Any Dispute not resolved by the Parties pursuant to Section 9.1 or 9.2 shall be fully and finally resolved by binding arbitration pursuant to this Section 9.3. Either Party may refer the Dispute to arbitration, which shall take place in London, England in accordance with the London Maritime Arbitrators Association rules before a single arbitrator. The prevailing Party in any such arbitration shall be entitled to costs, expenses and reasonable attorneys' fees, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
 
 

 
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10. GENERAL

10.1 Assignment; Binding Effect. The Parties may not assign any of their respective rights under this Agreement in whole or in part without the prior written consent of the other Party, which consent may be withheld in the sole discretion of such other Party. This Agreement is binding upon and inures to the benefit of the Parties and their successors and permitted assigns.
 
10.2 Change of Control of the Administrator. If any Person or group of Persons acting in concert (other than Affiliates of Liberty) proposes to acquire Control of the Administrator, directly or indirectly, the Administrator shall provide at least thirty (30) days' written notice of the change of Control to the Company, which notice shall identify the Person that will acquire, directly or indirectly, Control of the Administrator.
 
10.4 Confidentiality. (a) Each Receiving Party agrees:
 
(i) to use any Confidential Information solely to carry out its obligations or exercise its rights under this Agreement (the " Purpose ") and for no other purpose;
 
(ii) to copy and make other works based on Confidential Information only as strictly necessary for the Purpose;
 
(iii) to maintain the confidentiality of the Confidential Information using at least the same degree of care that the Receiving Party uses for its own confidential or proprietary information of a similar nature, but no less than reasonable care;
 
(iv) to reveal any Confidential Information to any third party without the prior written consent of the Disclosing Party, except that if the Receiving Party is required by law, court or administrative order or regulation to reveal any Confidential Information, the Receiving Party is permitted to do so provided that the Receiving Party gives the Disclosing Party reasonable prior written notice (if permitted) of the required disclosure and cooperate with the Disclosing Party at its expense in seeking a protective order or other relief;
 
(v) to limit disclosure of the Confidential Information to such of your officers and employees as is necessary for the Purpose;
 
(vi) to inform each officer and employee who receives any Confidential Information of the restrictions as to use and disclosure of Confidential Information contained herein and to be responsible for any breach of such restrictions by any such persons;
 
(vii) Forthwith upon the Disclosing Party's request, to procure the return of all Confidential Information together with any copies, abstracts, or other works which contain or are based on any of the Confidential Information; provided that, notwithstanding the foregoing, the Receiving Party shall be permitted to retain Confidential Information to the extent it is required to retain such Confidential Information pursuant to law, court or administrative order or regulation;
 
(b) Each Receiving Party further acknowledges that any breach of the provisions of this Agreement would result in serious damage being sustained by the Disclosing Party, and as a result hereby unconditionally agrees:
 
(i) To be responsible for losses, damages or expenses (including without limitation attorneys' fees and expenses) that have been determined to have been caused by any such breach; and
 
(ii) That the Disclosing Party shall be entitled to equitable relief (including without limitation injunctive relief) in relation to any threatened or actual breach of the provisions of this Agreement without any requirement of posting a bond and without limiting any other remedy that may be available to the Disclosing Party.
 

 
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10.5 Notices. Each notice, consent or request required to be given to a Party pursuant to this Agreement must be given in writing. A notice may be given by delivery to an individual or by fax, and shall be validly given if delivered on a Business Day to an individual at the following address, or, if transmitted on a Business Day, by fax or email addressed to the following Party:
 
(a)
if to the Company:
(b)
if to the Administrator:
           
 
Address:
   
Address:
 
 
Attention:
   
Attention:
 
 
Fax No.:
   
Fax No.:
 

or to any other address or fax number that the Party so designates by notice given in accordance with this Section. Any notice
 
(a) if validly delivered on a Business Day, shall be deemed to have been given when delivered; and
 
(b) if validly transmitted by fax on a Business Day, shall be deemed to have been given on that Business Day.
 
10.6 Third Party Rights. The provisions of this Agreement are enforceable solely by the Parties to this Agreement, and no shareholder, employee, agent of any Party or any other Person shall have the right to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement.
 
10.7 No Partnership. Nothing in this Agreement is intended to create or shall be construed as creating a partnership or joint venture between the Parties, and this Agreement shall not be deemed for any purpose to constitute any Party a partner of any other Party to this Agreement in the conduct of any business or otherwise or as a member of a joint venture or joint enterprise with any other Party to this Agreement.
 
10.8 Severability. Each provision of this Agreement is several. If any provision of this Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, the illegality, invalidity or unenforceability of that provision will not affect:
 
(a) the legality, validity or enforceability of the remaining provisions of this Agreement; or
 
(b) the legality, validity or enforceability of that provision in any other jurisdiction;
 
except that if:
 
(x) on the reasonable construction of this Agreement as a whole, the applicability of the other provision presumes the validity and enforceability of the particular provision, the other provision will be deemed also to be invalid or unenforceable; and
 
(y) as a result of the determination by a court of competent jurisdiction that any part of this Agreement is unenforceable or invalid and, as a result of this Section 10.8, the basic intentions of the Parties in this Agreement are entirely frustrated, the Parties shall use commercially reasonable efforts to amend, supplement or otherwise vary this Agreement to confirm their mutual intention in entering into this Agreement.
 
10.9 Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in accordance with the laws of England.
 

 
14
 

10.10 Amendments. No amendment, supplement, modification or restatement of any provision of this Agreement shall be binding unless it is in writing and signed by each Person that is a Party to this Agreement at the time of the amendment, supplement, modification or restatement.
 
10.11 Entire Agreement. This Agreement constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
 
10.12 Waiver. No failure by any Party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or of any other covenant, duty, agreement or condition. Any waiver must be specifically stated as such in writing.
 
10.13 Counterparts. This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the Parties.
 
[Remainder of This Page Intentionally Left Blank]
 

 
15
 

 
IN WITNESS WHEREOF, this Administrative Services Agreement has been duly executed by the Parties as of the date first written above.
 

SCORPIO TANKERS INC.
 
LIBERTY HOLDING COMPANY LTD.
         
         
By:
   
By:
 
Name:
   
Name:
 
Title:
   
Title:
 


 
16
 

 
SCHEDULE A
 
 
SALE AND PURCHASE FEE
 

 
For the provision of Services directly involving the sale and purchase of Vessels or companies which own Vessels as specified in Section 3.6(a), the Company shall pay the Administrator a fee equal to 1% of the gross purchase or sale price of a Vessel, or a company which owns Vessels, upon consummation of such sale or purchase. In addition, in the event of a sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Company's assets, except such a disposition to the Existing Ownership Group, the Company shall pay the Administrator a fee equal to 1% of the gross sale price upon consummation thereof.
 

 





 
 
 
 
 
 
SK 26596 0002 1049412 v5

 
17
 

EXHIBIT 10.2
FORM OF COMMERCIAL MANAGEMENT AGREEMENT
between a vessel-owning subsidiary of the Copany and SCM
 
        ORIGINAL
1.
Date of Agreement
 
 
THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
 
STANDARD SHIP MANAGEMENT AGREEMENT
 
CODE NAME:  "SHIPMAN 98"                                         PART I
2.
Owners (name, place of registered office and law of registry) ( Cl. 1 ).
3.
Managers (name, place of registered office and law of registry) ( Cl. 1 ).
 
 
     Name
 
 
     Name
     Scorpio Commercial Management sam  
 
     Place of registered office
     Ajeltake Road, Ajeltake Island, Majuro, MH96960
     Marshall Islands
 
     Place of registered office
     9 Blvd Charles III, MC98000 
     Monaco                                                                
 
     Law of Registry
     Marshall Islands
 
 
     Law of Registry
     Principality of Monaco
4.
Day and year of commencement of Agreement ( Cl. 2 ).
December 1, 2009
 
   
5.
Crew Management (state "yes" or "no" as agreed) ( Cl. 3. 1 ).
NO
 
6.
Technical Management (state "yes" or "no" as agreed) ( Cl. 3.2 ).
NO
7.
Commercial Management (state "yes" or "no" as agreed) ( Cl. 3.3 ).
YES
 
8.
Insurance Arrangements (state "yes" or "no" as agreed) ( Cl. 3.4 ).
NO
9.
Accounting Services (state "yes" or "no" as agreed) ( Cl. 3.5 ).
YES
 
10.
Sale or purchase of the Vessel (state "yes" or "no" as agreed) ( Cl. 3.6 ).
NO
11.
Provisions (state "yes" or "no" as agreed) ( Cl. 3.7 ).
NO
 
12.
Bunkering (state "yes" or "no" as agreed) ( Cl. 3.8 ).
YES
13.
Ch artering Services Period (only to be filled in if "yes" stated in Box 7) ( Cl. 3.3(i) ).
YES, up to twelve (12) months
 
14.
Owners' insurance (state alternative ( i ), ( ii ) or ( iii ) of ( Cl. 6.3 )).
Alternative 6.3(ii) to apply
15.
Annual Management Fee (state annual amount) ( Cl. 8.1 ).
See clause 8.1
16.
Severance costs ( state maximum amount ) ( Cl. 8.4(ii) ).
N/A
17.
Day and year of termination of Agreement ( Cl. 17 ).
See Cl. 17
18.
Law and Arbitration (state alternative 19.1 , 19.2 or 19.3 ; if 19.3 place of arbitration must be stated) ( Cl. 19 ).
19.1
 
19.
Notices (state postal and cable address, telex and telefax number for serving notice and communication to the Owners ) ( Cl. 20 ).
   c/o Scorpio Ship Management sam
9 blvd. Charles III
MC98000 Monaco
Phone:  +377 97985700
Fax:       +977 92057045
email: management@scorpio.mc
 
20.
Notices (state postal and cable address, telex and telefax number for serving notice and communication to the Managers )( Cl. 20 ).
9 blvd. Charles III
MC98000 Monaco
Phone: +377 97985850
Fax:      +377 97985858
email:management@scorpiogroup.net
 
It is mutually agreed between the party stated in Box 2 and the party stated in Box 3 that this Agreement consisting of PART I and PART II as well as Annexes "A" (Details of Vessel), "B" (Details. of Crew), "C" (Budget) and "D" (Associated vessels) attached hereto, shall be performed subject to the conditions contented herein.  In the event of a conflict of conditions, the provisions of PART I and Annexes "A" , "B" , "C" and "D" shall prevail over those of PART II to the extent of such conflict but no further.
 
 
 
Signature(s) (Owners)
 
 
 
 
 
 
S ignature(s) (Managers)
 
 

This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO.  Any insertion or deletion to the form must be clearly visible.  In the event of any modification made to the pre-printed text of this document which is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expense as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 
 
 
 
PART II
 
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT

1.      Definitions
1
insurance, discipline and other requirements;
63
In this Shipman 98 form (together with any Additional Clauses of
2
(iii) ensuring that all members of the Crew have passed a medical
64
even date herewith and any Schedules thereto (the
 
examination with a qualified doctor certifying that they are fit
65
"Agreement")) save where the context otherwise requires,
 
for the duties for which they are engaged and are in possession
66
the following words and expressions shall have the meanings
3
of valid medical certificates issued in accordance with
67
hereby assigned to them.
4
appropriate flag State requirements, in the absence of
68
   
applicable flag State requirements the medical certificate shall
69
" Owners " means the party identified in Box 2 .
5
be dated not more than three months prior to the respective
70
" Managers " means the party identified in Box 3 .
6
Crew members leaving their country of domicile and
71
" Vessel " means the vessel or vessels details of which are set
7
maintained for the duration of their service on board the Vessel;
72
out in Annex "A" attached hereto.
8
(iv) ensuring that the Crew shall have a command of the English
73
“Crew” means the Master, officers and ratings of the numbers,
9
language of a sufficient standard to enable them to perform
74
rank and nationality specified in Annex "B" attached hereto.
10
their duties safely;
75
" Crew Support Costs " means all expenses of a general nature
11
(v) arranging transportation of the Crew, including repatriation:
76
which are not particularly referable to any Individual vessel for
12
(vi) training of the Crew and supervising their efficiency;
77
the time being managed by the Managers and which are incurred
13
(vii) conducting union negotiations;
78
by the Managers for the purpose of providing an efficient and
14
(viii) operating the Managers' drug and alcohol policy unless
79
economic management service and, without prejudice to the
15
otherwise agreed.
80
generality of the foregoing, shall include the cost of crew standby
16
   
pay, training schemes for officers and ratings, cadet training
17
3.2 Technical Management
81
schemes, sick pay, study pay, recruitment and interviews.
18
(only applicable if agreed according to Box 6 )
82
"Severance Costs " means the costs which the employers are
19
The Managers shall provide technical management which
83
legally obliged to pay to or in respect of the Crew as a result of
20
Includes, but is not limited to, the following functions:
84
the early termination of any employment contract for service on
21
(i) provision of competent personnel to supervise the
85
the Vessel.
22
maintenance and general efficiency of the Vessel;
86
"Crew insurances " means insurances against crew risks which
23
(ii) arrangement and supervision of dry dockings, repairs,
87
shall Include but not be limited to death, sickness, repatriation,
24
alterations and the upkeep of the Vessel to the standards
88
injury, shipwreck unemployment indemnity and loss of personal
25
required by the Owners provided that the Managers shall
89
effects.
26
be entitled to incur the necessary expenditure to ensure
90
" Management Services " means the services specified in sub-
27
that the Vessel will comply with the law of the flag of the
91
clauses 3.1 to 3.8 as indicated affirmatively in Boxes 5 to 12
28
Vessel and of the places where she trades, and all
92
" ISM Code " means the International Management Code for the
29
requirements and recommendations of the classification
93
Safe Operation of Ships and for Pollution Prevention as adopted
30
Society;
94
by the International Maritime Organization (IMO) by resolution
31
(iii) arrangement of the supply of necessary stores, spares and
95
A.741(18) or any subsequent amendment thereto.
32
lubricating oil;
96
"STCW 95" moans the International Convention on Standards
33
(iv) appointment of surveyors and technical consultants as the
97
of Training, Certification and Watchkeeping for Seafarers, 1978,
34
Managers may consider from time to time to be necessary;
98
as amended in 1995 or any subsequent amendment thereto.
35
(v) development, implementation and maintenance of a Safely
99
   
Management System (SMS) in accordance with the ISM
100
2.    Appointment of Managers
36
Code (see sub- clauses 4.2 and 5.3 )
101
With effect from the day and year stated in Box 4 and continuing
37
   
unless and until terminated as provided herein, the Owners
38
3.3 Commercial Management
102
hereby appoint the Managers and the Managers hereby agree
39
(only applicable if agreed according to Box 7 )
103
to act as the Managers of the Vessel in accordance with the
40
The Managers shall provide the commercial operation of the
104
provisions and the recitals of this Agreement.
 
Vessel, as required by the Owners, which includes, but is not
105
   
limited to, the following functions:
106
3.    Basis of Agreement
41
(i) providing chartering services in accordance with the Owners'
107
Subject to the terms and conditions herein provided, during the
42
instructions which include, but are not limited to, seeking
108
period of this Agreement, the Managers shall carry out
43
and negotiating employment for the Vessel and the conclusion
109
Management Services in respect of the Vessel as agents for
44
(including the execution thereof) of charter parties or other
110
and on behalf of the Owners.  The Managers shall have authority
45
contracts relating to the employment of the Vessel.  If such a
111
to take such actions as they may from time to time in their absolute
46
contract exceeds the period stated in Box 13 , consent thereto
112
discretion consider to be necessary to enable them to perform
47
in writing shall first be obtained from the Owners.
113
this Agreement In accordance with sound ship management
48
(ii) arranging of the proper payment to Owners or their nominees
114
practice.
49
of all hire and/or freight revenues or other moneys of
115
   
whatsoever nature to which Owners may be entitled arising
116
         3.1 Crew Management     50
out of the employment of or otherwise in connection with the
 117
        (only applicable if agreed according to Box 5 )     51
Vessel.
 118
The Managers shall provide suitably qualified Crew for the Vessel
52
(iii) providing voyage estimates and accounts and calculating of
119
as required by the Owners in accordance with the STCW 95
53
hire, freights, demurrage and/or despatch moneys due from
120
requirements, provision of which includes but is not limited to
54
or due to the charterers of the Vessel;
121
the following functions.
55
(iv) issuing of voyage instructions, Including but not limited to,
122
(i) selecting and engaging the Vessel's Crew, including payroll
56
authorizing the Master to release cargo;
 
arrangements, pension administration, and insurances for
57
(v) appointing agents;
123
the Crew other than those mentioned in Clause 6 ;
58
(vi) appointing stevedores;
124
(ii) ensuring that the applicable requirements of the law of the
59
(vii) arranging surveys associated with the commercial operation
125
flag of the Vessel are satisfied in respect of manning levels.
60
of the Vessel.
126
rank, qualification and certification of the Crew and
61
   
employment regulations including Crew's tax, social
62
3.4 Insurance Arrangements'
127
   
(only applicable if agreed according to Box 8)
128
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which Is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expenses as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 
 
 
PART II
 
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
The Managers shall arrange insurances in accordance with
129
responsibilities imposed by the ISM Code when applicable
192
Clause 6, on such terms and conditions as the Owners shall
130
   
have instructed or agreed, in particular regarding conditions,
131
   
insured values, deductibles and franchises.
132
6.    Insurance Policies
193
   
The Owners shall procure, whether by instructing the Managers
194
3.5 Accounting Services
133
under sub clause 3.4 or otherwise, that throughout the period of
195
(only applicable if agreed according to Box 9 )
134
this Agreement.
196
The Managers shall:
135
6.1 at the Owners' expense, the Vessel is insured for not less
197
(i) establish an accounting system which meets the
136
than her sound market value or entered for her full gross tonnage.
198
requirements of the Owners and will provide for regular
137
as the case may be for:
199
accounting
 
(i) usual hull and machinery marine risks (including crew
200
services, supply regular monthly reports and records,
138
negligence) and excess liabilities;
201
(ii) maintain the records of all costs and expenditure incurred
139
(ii) protection and indemnity risks (including pollution risks and
202
as well as data necessary or proper for the settlement of
140
Crew Insurances); and
203
accounts between the parties.
141
(iii) war risks (including protection and indemnity and crew risks)
204
   
in accordance with the best practice of prudent owners of
205
3.6 Sale or Purchase of the Vessel
142
vessels of a similar type to the Vessel, with first class insurance
206
(only applicable if agreed according to Box 10 )
143
companies, underwriters or associations ("the Owners'
207
The Managers shall, in accordance with the Owners' instructions,
144
Insurances");
208
supervise the sale or purchase of the Vessel, including the
145
6.2 all premiums and calls on the owners' insurances are paid
209
performance of any sale or purchase agreement, but not
146
promptly by their due date;
210
negation of the same.
147
6.3 the Owners' Insurances name the Managers and, subject
211
   
to underwriters' agreement, any third party designated by the
212
3.7 Provisions (only applicable if agreed according to Box 11 )
148
Managers as a joint assured, with full cover, with the Owners
213
The Managers shall arrange for the supply of provisions.
149
obtaining cover in respect of each of the insurance specified in
214
   
sub-clause 6.1 ;
215
3.8 Bunkering (only applicable if agreed according to Box 12 )
150
(i) on terms whereby the Managers and any such third party
216
The Managers shall arrange for the provision of bunker fuel of the
151
are liable in respect of premiums or calls arising in connection
217
quality specified by the Owners as required for the Vessel's trade.
152
with the Owners' Insurances; or
218
   
(ii) if reasonably obtainable, on terms such that neither the
219
4. Managers' Obligations
153
Managers nor any such third party shall be under any
220
4.1 The Managers undertake to use their best endeavours to
154
liability in respect of premiums or calls arising in connection
221
provide the agreed Management Services as agents for and on
155
with the Owners' insurances; or
222
behalf of the Owners in accordance with sound ship management
156
(iii) on such other terms as may be agreed in writing
223
practice and to protect and promote the interests of the Owners in
157
Indicate alternative (i), (ii) or (iii) in Box 14, if Box 14 is left
224
all matters relating to the provision of services hereunder.
158
blank then (i) applies.
225
Provided, however, that the Managers in the performance of their
159
6.4 written evidence is provided, to the reasonable satisfaction
226
management responsibilities under this Agreement shall be entitled
160
of the Managers, of their compliance with their obligations under
227
to have regard to their overall responsibility in relation to all vessels
161
Clause 6 within a reasonable time of the commencement of
228
as may from time to time be entrusted to their management and
162
the Agreement, and of each renewal date and, if specifically
229
in particular, but without prejudice to the generality of the foregoing,
163
requested, of each payment date of the Owners' Insurances.
230
the Managers shall be entitled to allocate available supplies,
164
   
manpower and services in such manner as in the prevailing
165
7.    Income Collected and Expenses Paid on Behalf of
       Owners
231
circumstances the Managers in their absolute discretion consider
166
7.1 All moneys, if any, collected by the Managers under the terms of
232
to be fair and reasonable.
167
this Agreement (other than moneys payable by the Owners to
233
4.2 Where the Managers are providing Technical Management
168
the Managers) and any interest thereon shall be held to the
234
in accordance with sub clause 3.2 , they shall procure that the
169
credit of the Owners in a separate bank account.
235
requirements of the law of the flag of the Vessel are satisfied and
170
7.2 All expenses, if any, incurred by the Managers under the terms
236
rhey shall in particular be deemed to be the "Company" as defined
171
of this Agreement on behalf of the Owners (including expenses
237
by the ISM Code, assuming the responsibility for the operation of
172
as provided in Clause 8 ) may be debited against the Owners
238
the Vessel and taking over the duties and responsibilities imposed
173
in the account referred to under sub-clause 7.1 but shall in any
239
by the ISM Code when applicable.
174
event remain payable by the Owners to the Managers on
240
   
demand.
241
5. Owners' Obligations
175
   
5.1 The Owners shall pay all sums due to the Managers punctually
176
8.    Management Fee
242
in accordance with the terms of this Agreement.
177
8.1 When the Vessel is trading in the Scorpio Panamax Tanker
243
5.2 Where the Managers are providing Technical Management
178
Pool, the Managers shall be remunerated in accordance with the
 
in accordance with sub clause 3.2 , the Owners shall;
179
provisions of the governing pool agreement.  Otherwise when
 
(i) procure that all officers and ratings supplied by them or on
180
the Vessel is not trading in the Pool, The Owners shall pay to the
 
their behalf comply with the requirements of STCW 95;
181
Managers for their services.
 
(ii) instruct such officers and ratings to obey all reasonable orders
182
as Managers under this Agreement.
244
of the Managers in connection with the operation of the
183
(i) an annual flat management
 
Managers' safety management system.
184
fee of US$250 per day pro rata as stated in Box 15 which shall be
245
5.3   Where the Managers are not providing Technical Management
185
payable by equal
 
in accordance with sub-clause 3.2 , the Owners shall procure that
186
monthly instalments in advance; and the first installment being
246
the requirements of the law of the flag of the Vessel are satisfied
187
payable on the commencement of this Agreement (see Clause
247
and that they, or such other entity as may be appointed by them
188
2 and Box 4) and subsequent installments being payable every
248
and identified to the Managers, shall be deemed to be the
189
month .
249
"Company" as defined by the ISM Code assuming the responsibility
190
8.2 The management fee shall be subject to an annual review
250
for the operation of the Vessel end taking over the duties and
191
on the anniversary date of the Agreement and the proposed
251
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which Is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expenses as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 
 
 
PART II
 
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
fee shall be presented in the annual budget referred to in sub- clause
252
Management Services.
317
9.1
     
(ii) for providing chartering services in accordance clause 3.3(i) a
 
10.   Managers' Right To Sub-Contract
318
commission of 1.25% on all monies earned by the Owners on each
 
The managers shall not have the right to sub-contract any of
319
Vessel fixture.
253
their obligations hereunder, including those mentioned in sub-
320
   
clause 3.1 , without the prior written consent of the Owners which
321
8.3 The Managers shall, at no extra cost to the Owners, provide
254
shall not be unreasonably withheld.  In the event of such a sub-
322
their own office accommodation. Office, staff, facilities and
255
contract the Managers shall remain fully liable for the due
323
stationery, Without limiting the generality of Clause 7 the Owners
256
performance of their obligations under this Agreement.
324
shall reimburse the Managers for postage and communication
257
   
expenses, travelling expenses, and other out of pocket
258
11.   Responsibilites
325
expenses properly incurred by the Managers in pursuance of
259
11.1 Force Majeure – Neither the Owners nor the Managers
326
the Management Services.
260
shall be under any liability for any failure to perform any of their
327
8.4 In the event of the appointment of the Managers being
261
obligations hereunder by reason of any cause whatsoever of
328
terminated by the Owners or the Managers in accordance with
262
any nature or kind beyond their reasonable control.
329
the provisions of Clauses 17 and 18 other than by reason of
263
11.2 Liability to Owners - (i) Without prejudice to sub-clause
330
default by the Managers, or if the Vessel is lost, sold or otherwise
264
11.1, the Managers shall be under no liability whatsoever to the
331
disposed of, the "management fee" payable to the Managers
265
Owners for any loss, damage, delay or expense of whatsoever
332
according to the provisions of sub-clause 8.1 shall continue to
266
nature, whether direct or indirect, (including but  not limited to
333
be payable for a further period of three calendar months as
267
loss of profit arising out of or in connection with detention of or
334
from the termination date .  In addition,  provided that the
268
delay to the Vessel) and howsoever arising in the course of
335
Managers provide Crew for the Vessel in accordance with sub-
269
performance of the Management Services UNLESS same Is
336
Clause 3.1 ;
270
proved to have resulted solely from the negligence, gross
337
(i)   the Owners shall continue to pay Crew Support Costs during
271
negligence or wilful default of the Managers or their employees,
338
the said further period of three calendar months and
272
or agents or sub-contractors employed by them In connection
339
(ii)   the Owners shall pay an equitable proportion of any
273
with the Vessel, In which case (save where loss, damage, delay
340
Severance Costs which may materialize, not exceeding
274
or expense has resulted from the Managers' personal act or
341
The amount stated in Box 16 .
275
omission committed with the intent to cause same or recklessly
342
8.5 If the Owners decide to lay up the Vessel whilst this
276
and with knowledge that such loss, damage, delay or expense
343
Agreement remains in force and such lay up lasts for more
277
would probably result) the Managers' liability for each Incident
344
than three months, an appropriate reduction of the management
278
or series of incidents giving rise to a claim or claims shall never
345
fee for the period exceeding three months until one month
279
exceed a total of ten-five times the annual management fee payable
346
before the Vessel is again put into service shall be mutually
280
hereunder.
347
agreed between the parties.
281
(ii) Notwithstanding anything that may appear to the contrary in
348
8.6 Unless otherwise agreed in writing all discounts and
282
this Agreement, the Manager shall not be liable for any of the
349
commissions obtained by the Managers in the course of the
283
actions of the Crew, even if such actions are negligent, grossly
350
management of the Vessel shall be credited to the Owners.
284
negligent or wilful, except only to the extent that they are shown
351
   
to have resulted from a failure by the Managers to discharge
352
9. Budgets and Management of Funds
285
their obligations under sub-clause 3.1 , in which case their liability
353
9.1 The Managers shall present to the Owners annually a
286
shall be limited in accordance with the terms of this Clause 11.
354
budget for the following twelve months in such form as the
287
11.3 indemnity - Except to the extent and solely for the amount
355
Owners require.  The budget for the first year hereof is set out
288
therein set out that the Managers would be liable under sub-
356
in Annex "C" hereto.  Subsequent annual budgets shall be
289
clause 11.2 , the Owners hereby undertake to keep the Managers
357
prepared by the Managers and submitted to the Owners not
290
and their employees, agents and sub-contractors indemnified
358
less than there months before the anniversary date of the
291
and to hold them harmless against all actions, proceedings,
359
commencement of this Agreement  (see Clause 2 and Box 4 ),
292
claims, demands or liabilities whatsoever or howsoever arising
360
9.2 The Owners shall indicate to the Managers their acceptance
293
which may be brought against them or incurred or suffered by
361
and approval of the annual budget within one month of
294
them arising out of or in connection with the performance of the
362
presentation and in the absence of any such indication the
295
Agreement, and against and in respect of all costs, losses,
363
Managers shall be entitle to assume that the Owners have
296
damages and expenses (including legal costs and expenses on
364
accepted the proposed budget.
297
a full indemnity basis) which the Managers may suffer or incur
365
9.3 Following the agreement of the budget, the Managers shall
298
(either directly or indirectly) in the course of the performance of
366
prepare and present to the Onwers their estimate of the working
299
this Agreement.
367
capital requirement of the Vessel and the Managers shall each
300
11.4 "Himalaya " - It is hereby expressly agreed that no
368
month up date this estimate.  Based thereon, the Managers shall
301
employee or agent of the Managers (including every sub-
369
each month request the Owners in writing for the funds required
302
contractor from time to time employed by the Managers) shall in
370
to run the Vessel for the ensuing month, including the payment
303
any circumstances whatsoever be under any liability whatsoever
371
of any occasional or extraordinary item of expenditure, such as
304
to the Owners for any loss, damage or delay of whatsoever kind
372
emergency repair costs, additional insurance premiums, bunkers
305
arising or resulting directly or indirectly from any act, neglect or
373
or provisions.  Such funds shall be received by the Managers
306
default on his part while acting In the course of or in connection
374
within ten running days after the receipt by the Owners of the
307
with his employment and, without prejudice to the generality of
375
Managers' written request and shall be held to the credit of the
 308
the foregoing provisions in this Clause 11 , every exemption,
376
Owners in a separate bank account..
 309
limitation, condition and liberty herein contained and every right,
377
9.4 The Managers shall produce a comparison between
  310
exemption from liability, defense and Immunity of whatsoever
378
budgeted and actual income and expenditure of the Vessel in
  311
nature applicable to the Managers or to which the Managers are
379
such form as required by the Owners monthly or at such other
  312
entitled hereunder shall also be available and shall extend to
380
intervals as mutually agreed.
  313
protect every such employee or agent of the Managers acting
381
9.5 Notwithstanding anything contained herein to the contrary,
  314
as aforesaid and for the purpose of all the foregoing provisions
382
 the Managers shall in no circumstances be required to use or
  315
of this Clause 11 the Managers are or shall be deemed to be
383
commit their own funds to finance the provision of the
  316
   
 
This document is a computer generated SHIPMAN 98 form printed by authority cf BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which Is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expenses as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 
 
 
PART II
 
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
acting as agent or trustee on behalf of and for the benefit of all
384
years from the
 
persons who are or might be their servants or agents from time
385
date upon which such notice was given, Clause 18.6 will apply.
439
to time (Including sub-contractors as aforesaid) and all such
386
   
persons shall to this extent be or be deemed to be parties to this
387
18.   Termination
440
Agreement.
388
18.1 Owners' default
441
   
(i) The Managers shall be entitled to terminate the Agreement
442
12. Documentation
389
with Immediate effect by notice in writing if any moneys
443
Where the Managers are providing Technical Management in
390
payable by the Owners under this Agreement and/or the
444
accordance with sub-clause 3.2 and/or Crew Management in
391
owners of any associated vessel, details of which are listed
445
 accordance with sub-clause 3.1 , they shall make available,
392
in Annex "D " shall not have been received In the Managers'
446
upon Owners' request, all documentation and records related
393
nominated account within ten running days of receipt by
447
to the Safety Management System (SMS) and/or the Crew
394
the Owners of the Managers written request or if the Vessel
448
which the Owners need in order to demonstrate compliance
395
is repossessed by the Mortgagees.
449
 with the ISM Code and STCW 95 or to defend a claim against
396
(ii)  If the Owners:
450
a third party.
397
(a)  fail to meet their obligations under sub-clauses 5.2
451
   
and 5.3 of this Agreement for any reason within their
452
13. General Administration
398
control, of
453
13.1 The Managers shall handle and settle all claims arising
399
(b) proceed with the employment of or continue to employ
454
out of the Management Services hereunder and keep the Owners
400
the Vessel In the carriage of contraband, blockade
455
informed regarding any incident of which the Managers become
401
running, or in an unlawful trade, or on a voyage which
456
aware which gives or may give rise to claims or disputes involving
402
in the reasonable opinion of the Managers is unduly
457
third parties and Indlvitually are reasonably estimated to be In
403
hazardous or improper,
458
excess of US$15,000.
 
the Managers may give notice of the default to the Owners,
459
13.2 The Managers shall, as instructed by the Owners, bring
404
requiring them to remedy It as soon as practically possible.
460
or defend-actions, suits or proceedings in connection with matters
405
In the event that the Owners fail to remedy It within a
461
entrusted to the Managers according to this Agreement and subject
406
reasonable time to the satisfaction of the Managers, the
462
to the provisions of clause 13.1 hereto.
 
Managers shall be entitled to terminate the Agreement
463
13.3 The Managers shall also have power to obtain legal or
407
with Immediate effect by notice In writing,
464
technical or other outside expert advice in relation to the handling
408
18.2  Managers' Default
465
and settlement of claims and disputes or all other matters
409
(i)  If the Managers fail to meet their obligations under Clauses 3
466
affecting the interests of the Owners In respect of the Vessel, save
410
and 4 of this Agreement for any reason within the control of the
467
Managers should obtain Owners approval prior to taking any
 
Managers, the Owners may give notice to the Managers of the
468
action If time permits.
 
default, requiring them to remedy It as soon as practically
469
13.4 The Owners shall arrange for the provision of any
411
possible. In the event that the Managers fail to remedy it within a
470
necessary guarantee bond or other security.
412
reasonable time to the satisfaction of the Owners, the Owners
471
13.5 Any costs reasonably incurred by the Managers in
413
shall be entitled to terminate the Agreement with immediate affect
472
carrying out their obligations according to Clause 13 shall be
414
by notice in writing.
473
reimbursed by the Owners.
415
(ii)  if the Managers are convicted of, or admits guilt for, a crime,
 
   
then the Owners shall be entitled to terminate the Agreement
 
14. Auditing
416
with Immediate effect by notice in writing.
 
The Managers shall at all times maintain and keep true and
417
18.3  Extraordinary Termination
474
correct accounts and shall make the same available for inspection
418
This Agreement shall be deemed to be terminated in the case of
475
and auditing by the Owners at such times as may he mutually
419
the sale of the Vessel or if the-Vessel becomes a total loss or is
476
agreed. On the termination, for whatever reasons, of this
420
declared as a constructive or compromised or arranged total
477
Agreement, the Managers shall release to the Owners, if so
421
loss or is requisitioned.
478
requested, the originals where possible, or otherwise certified
422
18.4   For the purpose of sub-clause 18.3 hereof
479
copies, of all such accounts and all documents specifically relating
423
(I) the date upon which the Vessel is to be treated as having
480
to the Vessel and her operation.
424
been sold or otherwise disposed of shall be the date on
481
   
which the Owners cease to be registered as Owners of
482
15. Inspection of Vessel
425
the Vessel;
483
The Owners shall have the right at any time after giving
426
(ii) The Vessel shall not be deemed to be lost unless either
484
reasonable notice to the Managers to inspect the Vessel for any
427
she has become an actual total loss or agreement has
485
reason they consider necessary.
428
been reached with her underwriters in respect of her
486
   
constructive, compromised or arranged total loss or if such
487
16.  Compliance with Laws and Regulations
429
agreement with her underwriters is not reached it is
488
The Managers will not do or permit to be done anything which
430
adjudged by a competent tribunal that a constructive loss
489
might cause any breach or infringement of the laws and
431
of the Vessel has occurred.
490
regulations of the Vessel's flag, or of the places where she trades.
432
18.5 This Agreement shall terminate forthwith in the event of
491
   
an order being made or resolution passed for the winding up
492
17. Duration of the Agreement
433
dissolution, liquidation or bankruptcy of either party (otherwise
493
This Agreement shall come into effect on the day and year stated
434
than for the purpose of reconstruction or amalgamation) or if a
494
in Box 4 and shall remain in force and effect (unless earlier
435
receiver is appointed, or if it suspends payment, ceases to carry
495
terminated in accordance with the terms of clause 18) for a
 
on business or makes any special arrangement or composition
496
minimum period of three (3) calendar years and thereafter shall
 
with its creditors,
497
continue indefinitely unless terminated in accordance with the
 
18.6 The termination of this Agreement egad be without
498
provision hereof, continue until the date stated in Box 17
 
prejudice to all rights accrued due between the parties prior to
499
Thereafter it shall continue until terminated by Upon the expiration
436
the date of termination.
500
of the first calendar year either party giving may give
     
to the other notice of termination in writing.  In which event the
437
19. Law and Arbitration
501
Agreement shall
 
19.1 This Agreement shall be governed by and construed in
502
terminate upon the expiration of a period of two months (2) calendar
438
   
 
This document is a computer generated SHIPMAN 98 form printed by authority cf BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which Is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expenses as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 
 
 
 
PART II
 
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
accordance with English law and any dispute arising out of or
503
by each of the parties hereto, and the third by the two so
541
in connection with this Agreement shall be referred to arbitration
504
chosen; their decision or that of any two of them shall be
542
in London in accordance with the Arbitration Act 1996 or
505
final, and for the purposes of enforcing any award
543
any statutory modification or re-enactment thereof save to
506
judgement may be entered on an award by any court of
544
the extent necessary to give effect to the provisions of this
507
competent jurisdiction.  The proceedings shall be conducted
545
Clause.
508
in accordance with the rules of the Society of Maritime
546
The arbitration shall be conducted in accordance with the
509
Arbitrators, Inc.
547
London Maritime Arbitrators Association (LMAA) Terms
510
In cases where neither the claim nor any counterclaim
548
current at the time when the arbitration proceedings are
511
exceeds the sum of USD60,000 ( or such other sum as the
549
commenced.
512
parties may agree) the arbitration shall be conducted in
550
The reference shall be to three arbitrators. A party wishing
513
accordance with the Shortened Arbitration Procedure of the
551
to refer a dispute to arbitration shall appoint its arbitrator
514
Society of Maritime Arbitrators, Inc. current at the time when
552
and send notice of such appointment In writing to the other
515
the arbitration proceedings are commenced.
553
party requiring the other party to appoint its own arbitrator
516
19.3  This Agreement shall be governed by and construed
554
within 14 calendar days of that notice and stating that it will
517
in accordance with the laws of the place mutually agreed by
555
appoint its arbitrator as sole arbitrator unless the other party
518
the parties and any dispute arising out of or in connection
556
Appoints it own arbitrator and gives notice that it has done
519
with this Agreement shall be referred to arbitration at a
557
so within the 14 days specified.  If the other party does not
520
mutually agreed place, subject to the procedures applicable
558
appoint Its own arbitrator and give notice that it has done so
521
there.
559
within the 14 days specified, the party referring a dispute to
522
19.4  If Box 18 in Part I is not appropriately filled in sub-
560
arbitration may, without the requirement of any further prior
523
clause 19.1 of this Clause shall apply .
561
notice to the other party, appoint its arbitrator as sole
524
   
arbitrator and shall advise the other party accordingly. The
525
Note:   19.1 , 19.2 and 19.3 are alternatives; indicate
562
award of a sole arbitrator shall be binding on both parties
526
alternative agreed in B ox 18 .
563
as If he had been appointed by agreement.
527
   
Nothing herein shall prevent the parties agreeing in writing
528
20. Notices
564
to vary these provisions to provide for the appointment of a
529
20.1 Any notice to be given by either party to the other
565
sole arbitrator.
530
party shall be In writing and may be sent by fax, telex,
566
In cases where neither the claim nor any counterclaim
531
registered or recorded ma) or by personal service.
567
exceeds the sum of USD50,000 (or such other sum as the
532
20.2 The address of the Parties for service of such
568
parties may agree) the arbitration shall be conducted in
533
communication shall be as slated In Boxes 19 and 20 ,
569
accordance with the LMAA Small Claims Procedure current
534
respectively.
570
at the time when the arbitration proceedings are commenced.
535
   
19.2                   This Agreement shall be governed by and construed
536
Any Additional Clauses attached hereto together with any
 
In accordance with title 9 of the United States Code and
537
subsequent addenda, schedules, appendleles or otherwise, shall
 
The Maritime Law of the United States and any dispute
538
be construed as an integral part of this Agreement and shall be
 
arising out of or in connection with this Agreement shall be
539
interpreted accordingly.
 
referred to three persons at New York, one to be appointed
540
   
       
This document is a computer generated SHIPMAN 98 form printed by authority cf BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which Is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expenses as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 




 
 
 
 

 

EXHIBIT 10.3
 
 

FORM OF
 
        ORIGINAL
1 .
Date of Agreement
December 1, 2009
 
 
THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD SHIP MANAGEMENT AGREEMENT
CODE NAME:  "SHIPMAN 98"                       PART I
2.
Owners (name, place of registered office and law of registry) ( Cl. 1 )
 
   3.
 
Managers (name, place of registered office and law of registry) ( Cl.1 )
 
 
Name
 
 
 
Name
 
Scorpio Ship Management sam
 
Place of registration office
 
Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands
 
Place of registration office
 
9 blvd Charles III, MC98000 Monaco
 
Law of Registry
 
Marshall Islands
 
Law of Registry
 
Principality of Monaco
4.
Day and year of commencement of Agreement ( Cl. 2 )
 
December 1, 2009
   
5.
Crew Management (state "yes" or "no" as agreed) ( Cl. 3.1 )
 
YES
   6.
Technical Management (state "yes" or "no" as agreed) ( Cl. 3.2 )
YES
7.
Commercial Management (state "yes" or "no" as agreed) ( Cl. 3.3 )
NO
   8.
Insurance Arrangements (state "yes" or "no" as agreed) ( Cl. 3.4 )
YES
9.
Accounting Services (state "yes" or "no" as agreed) ( Cl. 3.5 ).
 
YES
   10.
Sale or purchase of the Vessel (state "yes" or "no" as agreed) ( Cl. 3.6 )
YES
11.
Provisions (state "yes" or "no" as agreed) ( Cl. 3.7 )
 
YES
   12.
Bunkering (state "yes" or "no" as agreed) ( Cl. 3.8 )
 
NO
13.
Chartering Services Period (only to be filled in if "yes" stated in Box 7) ( Cl. 3.3 (i) )
NO
   14.
Owners' insurance (state alternative ( i ), ( ii ) or ( iii ) of ( Cl. 6.3 )).
6.3(i) to apply
15.
Annual Management Fee (state annual amount) ( Cl. 8.1 )
 
US$200,000.
   16.
Severance costs ( state maximum amount ) ( Cl. 8.4(ii) )
 
For Owners' account: please see clause 8.4(ii)
17.
Day and year of termination of Agreement ( Cl. 17 )
 
See clause 17.
   18.
Law and Arbitration (state alternative 19.1 , 19.2 or 19.3 ; if 19.3 place of arbitration must be stated) ( Cl. 19 )
19.1
19.
Notices (state postal and cable address, telex and telefax number for serving notice and communication to the Owners ) ( C l. 20 )
 
c/o Scorpio Commercial Management sam
9 blvd Charles III
MC98000 Monaco
 
 
   20.
Notices (state postal and cable address, telex and telefax number for serving notice and communication to the Managers ) ( Cl. 20 ).
9 blvd. Charles III
MC98000 Monaco
Phone:   +377 97985700
Fax: +377 92057045
email:  technical@scorpio.mc
 
It is mutually agreed between the party stated in Box 2 and the party stated in Box 3 that this Agreement consisting of PART I and PART II as well as Annexes "A"  (Details of Vessel), "B" (Details. of Crew), "C" (Budget) and "D" (Associated vessels) attached hereto, shall be performed subject to the conditions contained herein.  In the event of a conflict of conditions, the provisions of PART I and Annexes "A" , "B" , "C" and "D" shall prevail over those of PART II to the extent of such conflict but no further.
 
 
Signature(s) (Owners)
 
 
 
 
 
Signature(s) (Managers)
 
 
 
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO.  Any insertion or deletion to the form must be clearly visible.  In the event of any modification made to the pre-printed text of this document which is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expense as a result of discrepancies between the original BIMCO approved document and this computer generated document.

 
 
 

PART II
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
1.   Definitions
1
insurance, discipline and other requirements;
63
In this Shipman 98 form (together with the Additional Clauses of
2
 
(iii) ensuring that all members of the Crew have passed a medical
64
 
even date herewith and any Schedules thereto (the
 
examination with a qualified doctor certifying that they are fit
65
 
"Agreement")) save where the context otherwise requires,
 
for the duties for which they are engaged and are in possession
66
 
the following words and expressions shall have the meanings
3
 
of valid medical certificates issued in accordance with
67
 
hereby assigned to them.
4
 
appropriate flag State requirements, in the absence of
68
 
   
applicable flag State requirements the medical certificate shall
69
 
" Owners " means the party identified in Box 2 .
5
 
be dated not more than three months prior to the respective
70
 
" Managers " means the party identified in Box 3 .
6
 
Crew members leaving their country of domicile and
71
 
" Vessel " means the vessel or vessels details of which are set
7
 
maintained for the duration of their service on board the Vessel;
72
 
out in Annex "A " attached hereto.
8
 
(iv) ensuring that the Crew shall have a command of the English
73
 
" Crew " means the Master, officers and ratings of the numbers,
9
language of a sufficient standard to enable them to perform
74
rank and nationality specified in Annex "B" attached hereto.
10
their duties safely;
75
" Crew Support Costs " means all expenses of a general nature
11
 
(v) arranging transportation of the Crew, including repatriation;
76
 
which are not particularly referable to any individual vessel for
12
 
(vi) training of the Crew and supervising their efficiency;
77
 
the time being managed by the Managers and which are incurred
13
 
(vii) conducting union negotiations;
78
 
by the Managers for the purpose of providing an efficient and
14
 
(viii) operating the Managers' drug and alcohol policy unless
79
 
economic management service and, without prejudice to the
15
 
otherwise agreed.
 
80
 
generality of the foregoing, shall include the cost of crew standby
16
 
   
pay, training schemes for officers and ratings, cadet training
17
 
3.2   Technical Management
81
 
schemes, sick pay, study pay, recruitment and interviews.
18
 
(only applicable if agreed according to Box 6 )
82
 
"Severance Costs " means the costs which the employers are
19
 
The Managers shall provide technical management which
83
 
legally obliged to pay to or in respect of the Crew as a result of
20
 
includes, but is not limited to, the following functions:
84
 
the early termination of any employment contract for service on
21
(i) provision of competent personnel to supervise the
85
 
the Vessel.
22
maintenance and general efficiency of the Vessel;
86
"Crew insurances " means insurances against crew risks which
23
 
(ii) arrangement and supervision of dry dockings, repairs,
87
 
shall include but not be limited to death, sickness, repatriation,
24
alterations and the upkeep of the Vessel to the standards
88
 
injury, shipwreck unemployment indemnity and loss of personal
25
 
required by the Owners provided that the Managers shall
89
 
effects.
 
26
 
be entitled to incur the necessary expenditure to ensure
90
 
" Management Services " means the services specified in sub-
27
 
that the Vessel will comply with the law of the flag of the
91
 
clauses 3.1 to 3.8 as indicated affirmatively in Boxes 5 to 12
28
 
Vessel and of the places where she trades, and all
92
 
" ISM Code " means the In terna tional Management Code for the
29
 
requirements and recommendations of the classification
93
 
Safe Operation of Ships and for Pollution Prevention as adopted
30
 
Society;
94
 
by the International Maritime Organization (IMO) by resolution
31
 
(iii) arrangement of the supply of necessary victualling, stores, spares and
95
 
A.741(18) or any subsequent amendment thereto.
32
 
lubricating oil and services for the Vessel;
96
 
" STCW 95 " means the International Convention on Standards
33
 
(iv) appointment of surveyors and technical consultants as the
97
 
of Training, Certification and Watchkeeping for Seafarers, 1978,
34
 
Managers may consider from time to time to be necessary;
98
 
as amended in 1995 or any subsequent amendment thereto.
35
 
(v) development, implementation and maintenance of a Safety
99
 
   
Management System (SMS) in accordance with the ISM
100
 
2.   Appointment of Managers
36
Code and an ISPS (see sub-clauses 4.2 and 5.3 ).
101
With effect from the day and year stated in Box 4 and continuing
37
 
unless and until terminated as provided herein, the Owners
38
3.3 Commercial Management
102
 
hereby appoint the Managers and the Managers hereby agree
39
 
(only applicable if agreed according to Box 7 )
103
 
to act as the Managers of the Vessel.
40
 
The Managers shall provide the commercial operation of the
104
 
 
 
Vessel, as required by the Owners, which includes, but is not
105
  3.   Basis of Agreement
41
limited to, the following functions:
106
Subject to the terms and conditions herein provided, during the
42
(i) providing chartering services in accordance with the Owners'
107
period of this Agreement, the Managers shall carry out
43
instructions which include, but are not limited to, seeking
108
 
 
 
and negotiating employment for the Vessel and the conclusion
109
Management Services in respect of the Vessel as agents for
44
 
(including the execution thereof) of charter parties or other
110
 
and on behalf of the Owners.  The Managers shall have authority
45
 
contracts relating to the employment of the Vessel.  If such a
111
 
to take such actions as they may from time to time in their absolute
46
 
contract exceeds the period stated in Box 13 , consent thereto
112
 
discretion consider to be necessary to enable them to perform
47
 
in writing shall first be obtained from the Owners.
113
 
this Agreement in accordance with sound ship management
48
 
(ii) arranging of the proper payment to Owners or their nominees
114
 
practice.
49
 
of all hire and/or freight revenues or other moneys of
115
 
   
whatsoever nature to which Owners may be entitled arising
116
 
3.1   Crew Management
50
 
out of the employment of or otherwise in connection with the
117
 
(only applicable if agreed according to Box 5 )
51
 
Vessel.
 
118
 
The Managers shall provide suitably qualified Crew for the Vessel
52
 
(iii) providing voyage estimates and accounts and calculating of
119
 
as required by the Owners in accordance with the STCW 95
53
 
hire, freights, demurrage and/or despatch moneys due from
120
 
requirements, provision of which includes but is not limited to
54
 
or due to the charterers of the Vessel;
121
 
the following functions:
55
 
(iv) issuing of voyage instructions,
122
 
(i) selecting and engaging the Vessel's Crew, including payroll
56
 
( v) appointing agents;
 123
arrangements, pension administration, and insurances for
57
 
(vi) appointing stevedores;
124
the Crew other than those mentioned in Clause 6 ;
58
 
(vii) arranging surveys associated with the commercial operation
125
(ii) ensuring that the applicable requirements of the law of the
59
 
of the Vessel.
126
 
flag of the Vessel are satisfied in respect of manning levels,
60
 
 
 
rank, qualification and certification of the Crew and
61
 
  3.4   Insurance Arrangements' 127
employment regulations including Crew's tax, social
62
 
(only applicable if agreed according to Box 8)
128
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO.  Any insertion or deletion to the form must be clearly visible.  In the event of any modification made to the pre-printed text of this document which is not clearly visible, the text of the originally BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expense as a result of discrepancies between the original BIMCO approved document and this computer generated document.

 
 
 

PART II
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
The Managers shall arrange insurances in accordance with
129
 
and that they, or such other entity as may be appointed by them
188
 
Clause 6, on such terms and conditions as the Owners shall
130
 
and identified to the Managers, shall be deemed to be the
189
 
have instructed or agreed, in particular regarding conditions,
131
 
"Company" as defined by the ISM Code assuming the responsibility
190
 
insured values, deductibles and franchises.
132
 
for the operation of the Vessel end taking over the duties and
191
 
   
responsibilities imposed by the ISM Code when applicable
192
 
3.5   Accounting Services
133
   
(only applicable if agreed according to Box 9 )
134
 
6.   Insurance Policies
 
193
 
The Managers shall:
135
The Owners shall procure, whether by instructing the Managers
194
(i) establish an accounting system which meets the
136
under sub-clause 3.4 or otherwise, that throughout the period of
195
requirements of the Owners and provide regular
137
 
this Agreement:
196
 
accounting
 
6.1    at the Owners' expense, the Vessel is insured for not less
197
 
services, supply regular reports and records,
138
 
than her sound market value or entered for her full gross tonnage,
198
 
(ii) maintain the records of all costs and expenditure incurred
139
 
as the case may be for:
199
 
as well as data necessary or proper for the settlement of
140
(i) usual hull and machinery marine risks (including crew
200
 
accounts between the parties.
141
negligence) and excess liabilities;
201
   
(ii) protection and indemnity risks (including pollution risks and
202
3.6   Sale or Purchase of the Vessel
142
Crew Insurances, FDD cover); and
203
(only applicable if agreed according to Box 10 )
143
(iii) war risks (including protection and indemnity and crew risks)
204
The Managers shall, if so requested and in accordance with the Owners' instructions,
144
(iv) Loss of Hire (TBA)
 
provide technical assistance in connection with any sale of the
Vessel, supervise the sale or purchase of the Vessel, including the
performance of any sale or purchase agreement, but not
145
 
146
in accordance with the best practice of prudent owners of
 
 
205
 
   
negotiation of the same.  At any time lost by the Vessel and cost
associated with the sale and purchase of the Vessel will be
147
vessels of a similar type to the Vessel, with first class insurance
206
 
    considered as contingency and out of budget (please refer to
    clause 8.10 hereto).
 
companies, underwriters or associations ("the Owners'
207
 
   
Insurances");
208
3.7   Provisions (only applicable if agreed according to Box 11 )
148
6.2 all premiums and calls on the Owners' Insurances are paid
209
The Managers shall arrange for the supply of provisions.
149
promptly by their due date;
210
   
6.3    the Owners' Insurances name the Managers and, subject
211
3.8   Bunkering   (only applicable if agreed according to Box 12)
150
to underwriters' agreement, any third party designated by the
212
The Managers shall arrange for the provision of bunker fuel of the
151
Managers as a joint assured, with full cover, with the Owners
213
quality specified by the Owners as required for the Vessel's trade.
152
obtaining cover in respect of each of the insurances specified in
214
   
sub-clause 6.1 ;
215
4.   Managers' Obligations
153
(i) on terms whereby the Managers and any such third party
216
4.1    The Managers undertake to use their best endeavours to
154
are liable in respect of premiums or calls arising in connection
217
 
provide the agreed Management Services as agents for and on
155
with the Owners' Insurances; or
 
218
 
behalf of the Owners in accordance with sound ship management
156
(ii) if reasonably obtainable, on terms such that neither the
219
 
practice and to protect and promote the interests of the Owners in
157
Managers nor any such third party shall be under any
220
 
all matters relating to the provision of services hereunder.
158
liability in respect of premiums or calls arising in connection
221
 
Provided, however, that the Managers in the performance of their
159
 
with the Owners' Insurances; or
222
 
management responsibilities under this Agreement shall be entitled
160
 
(iii) on such other terms as may be agreed in writing,
223
 
to have regard to their overall responsibility in relation to all vessels
161
 
Indicate alternative (i), (ii) or (iii) in Box 14. If Box 14 is left
224
 
as may from time to time be entrusted to their management and
162
 
blank then (i) applies .
225
 
in particular, but without prejudice to the generality of the foregoing,
163
 
6.4    written evidence is provided, to the reasonable satisfaction
226
 
the Managers shall be entitled to allocate available supplies,
164
 
of the Managers, of their compliance with their obligations under
227
 
manpower and services in such manner as in the prevailing
165
 
Clause 6 within a reasonable time of the commencement of
228
 
circumstances the Managers in their absolute discretion consider
166
 
the Agreement, and of each renewal date and, if specifically
229
 
to be fair and reasonable.
 
167
 
requested, of each payment date of the Owners' Insurances.
230
 
4.2    Where the Managers are providing Technical Management
168
 
   
in accordance with sub-clause 3.2 , they shall procure that the
169
 
7.   Income Collected and Expenses Paid on Behalf of Owners
231
 
requirements of the law of the flag of the Vessel are satisfied and
170
 
7.1    All moneys, collected by the Managers under the terms of
232
 
they shall in particular be deemed to be the "Company" as defined
171
this Agreement (other than moneys payable by the Owners to
233
 
by the ISM Code, assuming the responsibility for the operation of
172
the Managers) and any interest thereon shall be held to the
234
 
the Vessel and taking over the duties and responsibilities imposed
173
credit of the Owners in a separate bank account.
235
 
by the ISM Code when applicable.
174
7.2    All expenses, incurred by the Managers under the terms
236
 
   
of this Agreement on behalf of the Owners (including expenses
237
 
5.   Owners' Obligations
175
as provided in Clause 8 ) may be debited against the Owners
238
 
5.1    The Owners shall pay all sums due to the Managers punctually
176
in the account referred to under sub-clause 7.1 but shall in any
239
 
in accordance with the terms of this Agreement.
177
event remain payable by the Owners to the Managers on
240
 
5.2 Where the Managers are providing Technical Management
178
 
demand.
 
241
 
in accordance with sub clause 3.2 , the Owners shall:
179
 
   
(i) procure that all officers and ratings supplied by them or on
180
 
8.   Management Fee – see also Additional Clause 24
242
 
their behalf comply with the requirements of STCW 95;
181
8.1    The Owners shall pay to the Managers for their services
243
 
(ii) instruct such officers and ratings to obey all reasonable orders
182
as Managers under this Agreement an annual management
244
 
of the Managers in connection with the operation of the
183
fee as stated in  Box 15 which shall be payable by equal
245
 
Managers' safety management system.
184
monthly instalments in advance, the first instalment being
246
 
5.3   Where the Managers are not providing Technical Management
185
 
payable on the commencement of this Agreement (see Clause
247
 
in accordance with sub-clause 3.2 , the Owners shall procure that
186
2 and Box 6 ) and subsequent instalments being payable every
248
the requirements of the law of the flag of the Vessel are satisfied
187
 
month.
 
249
 
 
188
 
8.2    The management fee shall be subject to an annual review
250
 
   
on the anniversary date of the Agreement and the proposed
251
 
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO. Any insertion or deletion to the form must be clearly visible. In the event   of any modification made to the pre-printed text of this document which is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expense as a result of discrepancies between the original BIMCO approved document and this computer generated document.

 
 
 

PART II
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
fee shall be presented in the annual budget referred to in sub-
252
 
of any occasional or extraordinary item of expenditure, such as
304
 
clause 9.1
253
 
emergency repair costs, additional insurance premiums, bunkers
305
 
8.3 The Managers shall, at no extra cost to the Owners, provide
254
 
or provisions.  Such funds shall be received by the Managers
306
 
their own office accommodation, office staff, facilities and
255
 
within ten running days after the receipt by the Owners of the
307
 
stationery. Without limiting the generality of Clause 7 the Owners
256
 
Managers' written request and shall be held to the credit of the
308
 
shall reimburse the Managers for postage and communication
257
 
Owners in a separate bank account.
 
309
 
expenses, travelling expenses, and other out of pocket
258
 
9.4    The Managers shall produce a comparison between
310
 
expenses properly incurred by the Managers in pursuance of
259
 
budgeted and actual income and expenditure of the Vessel in
311
 
the Management Services.
260
 
such form as required by the Owners monthly on a quartly basis
312
 
8.4    In the event of the appointment of the Managers being
261
 
or at such other
 
terminated by the Owners or the Managers in accordance with
262
 
intervals as mutually agreed
313
 
the provisions of Clauses 17 and 18 other than by reason of
263
9.5    Notwithstanding anything contained herein to the contrary,
314
default by the Managers, or if the Vessel is lost, sold or otherwise
264
 the Managers shall in no circumstances be required to use or
315
disposed of, the "management fee" payable to the Managers
265
 
commit their own funds to finance the provision of the
Management Services.
316
317
according to the provisions of sub-clause 8.1 shall continue to
266
 
   
be payable for a further period of three calendar months as
267
 
10.   Managers' Right to Sub-Contract
318
 
from the termination date.  In addition,  provided that the
268
 
The managers shall not have the right to sub-contract any of
319
 
Managers provide Crew for the Vessel in accordance with sub-
269
 
their obligations hereunder, including those mentioned in sub-
320
 
clause 3.1 ;
 
270
 
clause 3.1 , without the prior written consent of the Owners which
321
 
(i) the Owners shall continue to pay Crew Support Costs during
271
 
shall not be unreasonably withheld.  In the event of such a sub-
322
 
the said further period of three calendar months and
272
contract the Managers shall remain fully liable for the due
323
 
(ii) the Owners shall pay an equitable proportion of any
273
performance of their obligations under this Agreement.
324
 
the Severance Costs which may materialize, net
274
   
exceeding  
the amount stated in Box 16.
 
275
 
11.   Responsibilites
325
 
8.5    If the Owners decide to lay-up the Vessel whilst this
276
11.1    Force Majeure – Neither the Owners nor the Managers
326
 
Agreement remains in force and such lay-up lasts for more
277
shall be under any liability for any failure to perform any of their
327
 
than three months, an appropriate reduction of the management
278
obligations hereunder by reason of any cause whatsoever of
328
 
fee for the period exceeding three months until one month
279
 
any nature or kind beyond their reasonable control.
329
 
before the Vessel is again put into service shall be mutually
280
 
11.2   Liability to Owners - (i) Without prejudice to sub-clause
330
 
agreed between the parties.
281
 
11.1,     the Managers shall be under no liability whatsoever to the
331
 
8.6   Unless otherwise agreed in writing all discounts and
282
 
Owners for any loss, damage, delay or expense of whatsoever
332
 
commissions obtained by the Managers in the course of the
283
 
nature, whether direct or indirect, (including but  not limited to
333
 
management of the Vessel shall be credited to the Owners.
284
 
loss of profit arising out of or in connection with detention of or
334
 
8.7    Where a charterers vetting inspection may be required and a
 
delay to the Vessel) and howsoever arising in the course of
335
 
pre-inspection is requested, the costs of such additional
 
performance of the Management Services UNLESS same Is
336
 
services shall be charged to the Vessel's account (see cl. 23)
 
proved to have resulted solely from the negligence, gross
337
 
8.8 If the Vessel is placed on time starter, additional expenses
 
negligence or wilful default of the Managers or their employees,
338
 
incurred in complying with charterers requirements (including,
 
or agents or sub-contractors employed by them in connection
339
 
but not limited to, additional reporting requirements and visits
 
with the Vessel, in which case (save where loss, damage, delay
340
 
to the charterers) will be paid by the Owners.
 
or expense has resulted from the Managers' personal act or
341
 
8.9    All fees are exclusive of Value Added Taxes or other
 
omission committed with the intent to cause same or recklessly
342
 
 
applicable taxes, if any.
 
and with knowledge that such loss, damage, delay or expense
343
 
8.10    If as a result of collision, accident, emergency, or any
 
would probably result) the Managers' liability for each Incident
344
 
other extraordinary circumstances, the Managers' workload is
 
or series of incidents giving rise to a claim or claims shall never
345
 
increased beyond that which the parties could reasonably have
 
exceed a total of ten times the annual management fee payable
346
 
anticipated, the Managers shall be entitled to reasonable
 
hereunder.
347
 
additional remuneration having regard to the nature of the
 
(ii) Notwithstanding anything that may appear to the contrary in
348
 
incident, the personnel and resources of the Managers
 
this Agreement, the Manager shall not be liable for any of the
349
 
deployed, and all other relevant circumstances including
 
actions of the Crew, even if such actions are negligent, grossly
350
 
insurance recoveries.
 
negligent or wilful, except only to the extent that they are shown
351
 
 
to have resulted from a failure by the Managers to discharge
352
 
   
their obligations under sub-clause 3.1 , in which case their liability
353
 
9.   Budgets and Management of Funds
285
shall be limited In accordance with the terms of this Clause 11.
354
 
9.1 The Managers shall present to the Owners annually a
286
 
11.3    Indemnity - Except to the extent and solely for the amount
355
 
budget for the following twelve months in such form as the
287
 
therein set out that the Managers would be liable under sub-
356
 
Owners require.  The budget for the first year hereof is set out
288
 
clause 11.2 , the Owners hereby undertake to keep the Managers
357
 
in Annex "C" hereto.  Subsequent annual budgets shall be
289
 
and their employees, agents and sub-contractors indemnified
358
 
prepared by the Managers and submitted to the Owners not
290
and to hold them harmless against all actions, proceedings,
359
 
less than one month before the anniversary date of the
291
 
claims, demands or liabilities whatsoever or howsoever arising
360
 
commencement of this Agreement  (see Clause 2 and Box 4 ).
292
 
which may be brought against them or incurred or suffered by
361
 
9.2 The Owners shall indicate to the Managers their acceptance
293
them arising out of or in connection with the performance of the
362
 
and approval of the annual budget within one month of
294
Agreement, and against and in respect of all costs, losses,
363
 
presentation and in the absence of any such indication the
295
damages and expenses (including legal costs and expenses on
364
 
Managers shall be entitled to assume that the Owners have
296
a full indemnity basis) which the Managers may suffer or incur
365
 
accepted the proposed budget.
297
 
(either directly or indirectly) in the course of the performance of
366
 
9.3 Following the agreement of the budget, the Managers shall
298
 
this Agreement.
367
 
prepare and present to the Onwers their estimate of the working
299
 
11.4    " Himalaya " - It is hereby expressly agreed that no
368
 
capital requirement of the Vessel and the Managers shall each
300
 
employee or agent of the Managers (including every sub-
369
 
month up-date this estimate.  Based thereon, the Managers shall
301
 
   
each month request the Owners in writing for the funds required
302
 
   
to run the Vessel for the ensuing month, including the payment
303
 
   
       
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expense as a result of discrepancies between the original BIMCO approved document and this computer generated document.

 
 
 

PART II
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
contractor from time to time employed by the Managers) shall in
370
regulations of the Vessel's flag, or of the places where she trades.
432
 
any circumstances whatsoever be under any liability whatsoever
371
 
presently in force.  Any additional time and costs arising out of
 
to the Owners for any loss, damage or delay of whatsoever kind
372
 
the requirements for compliance with rules and regulations
 
arising or resulting directly or indirectly from any act, neglect or
373
 
(including research expenses) which may become enforceable
 
default on his part while acting in the course of or in connection
374
 
on the Vessel shall be for Owners account.
 
with his employment and, without prejudice to the generality of
375
 
   
the foregoing provisions in this Clause 11 , every exemption,
376
17.   Duration of the Agreement
433
 
limitation, condition and liberty herein contained and every right,
377
 
This Agreement shall come into effect on the day and year stated
434
 
exemption from liability, defence and immunity of whatsoever
378
 
in Box 4 and shall remain in force and effect (unless earlier
435
 
nature applicable to the Managers or to which the Managers are
379
 
terminated in accordance with the terms of clause 18) for a
 
entitled hereunder shall also be available and shall extend to
380
 
minimum period of three (3) calendar years and thereafter shall
 
protect every such employee or agent of the Managers acting
381
 
continue indefinitely unless terminated in accordance with the
 
as aforesaid and for the purpose of all the foregoing provisions
382
 
provisions hereof continue until the date stated in Box 17,
 
of this Clause 11 the Managers are or shall be deemed to be
383
 
Thereafter it shall continue until terminated by Upon the expiration of
436
 
acting as agent or trustee on behalf of and for the benefit of all
384
 
the first calendar year either party giving may give
 
persons who are or might be their servants or agents from time
385
 
to the other notice of termination in writing, in which event the
437
to time (including sub-contractors as aforesaid) and all such
386
 
Agreement shall
 
persons shall to this extent be or be deemed to be parties to this
387
 
terminate upon the expiration of a period of two months (2) calendar
438
 
Agreement.
388
years from the
 
   
date upon which such notice was given. Clause 18.6 will apply.
439
 
12.   Documentation
389
   
Where the Managers are providing Technical Management in
390
18.   Termination
 
440
 
accordance with sub-clause 3.2 and/or Crew Management in
391
 
18.1    Owners' default
441
 
 accordance with sub-clause 3.1 , they shall make available,
392
 
(i)  The Managers shall be entitled to terminate the Agreement
442
 
upon Owners' request, all documentation and records related
393
 
with immediate effect by notice in writing if any moneys
443
 
to the Safety Management System (SMS) and/or the Crew
394
 
payable by the Owners under this Agreement and/or the
444
 
which the Owners need in order to demonstrate compliance
395
 
owners of any associated vessel, details of which are listed
445
 
with the ISM Code and STCW 95 or to defend a claim against
396
 
in Annex "D " , shall not have been received in the Managers'
446
 
a third party.
397
nominated account within ten running days of receipt by
447
   
the Owners of the Managers written request or if the Vessel
448
13.   General Administration
398
 
is repossessed by the Mortgagees.
449
 
13.1   The Managers shall handle and settle all claims arising
399
 
(ii)  If the Owners:
450
 
out of the Management Services hereunder and keep the Owners
400
 
(a)  fail to meet their obligations under sub-clauses u
451
 
informed regarding any incident of which the Managers become
401
 
and 5.3 of this Agreement for any reason within their
452
 
aware which gives or may give rise to claims or disputes involving
402
 
control, or
453
 
third parties.
403
 
(b)  proceed with the employment of or continue to employ
454
 
 
 
the Vessel in the carriage of contraband, blockade
455
13.2    The Managers shall, as instructed by the Owners, bring
404
 
running, or in an unlawful trade, or on a voyage which
456
 
or defend-actions, suits or proceedings in connection with matters
405
 
in the reasonable opinion of the Managers is unduly
457
 
entrusted to the Managers according to this Agreement.
406
 
hazardous or improper,
458
 
 
the Managers may give notice of the default to the Owners,
459
 
13.3    The Managers shall also have power to obtain legal or
407
 
requiring them to remedy it as soon as practically possible.
460
 
technical or other outside expert advice in relation to the handling
408
 
In the event that the Owners fail to remedy it within a
461
 
and settlement of claims and disputes or all other matters
409
 
reasonable time to the satisfaction of the Managers, the
462
 
affecting the interests of the Owners in respect of the Vessel, save
410
 
Managers shall be entitled to terminate the Agreement
463
 
Managers should obtain Owners approval prior to taking any
 
with Immediate effect by notice in writing.
464
 
action if time permits.
 
18.2    Managers' Default
465
13.4   The Owners shall arrange for the provision of any
411
(i)  If the Managers fail to meet their obligations under Clauses 3
466
 
necessary guarantee bond or other security.
412
and 4 of this Agreement for any reason within the control of the
467
 
13.5   Any costs reasonably incurred by the Managers in
413
 
Managers, the Owners may give notice to the Managers of the
468
 
carrying out their obligations according to Clause 13 shall be
414
 
default, requiring them to remedy it as soon as practically
469
 
reimbursed by the Owners.
415
possible. In the event that the Managers fail to remedy it within a
470
 
   
reasonable time to the satisfaction of the Owners, the Owners
471
 
14.   Auditing
416
 
shall be entitled to terminate the Agreement with immediate affect
472
 
The Managers shall at all times maintain and keep true and
417
by notice in writing.
473
 
correct accounts and shall make the same available for inspection
418
(ii)  If the Managers are convicted of, or admits guilt for, a crime,
 
and auditing by the Owners at such times as may be mutually
419
 
then the Owners shall be entitled to terminate the Agreement
 
agreed. On the termination, for whatever reasons, of this
420
 
with Immediate effect by notice in writing.
 
Agreement, the Managers shall release to the Owners, if so
421
 
18.3    Extraordinary Termination
474
 
requested, the originals where possible, or otherwise certified
422
 
This Agreement shall be deemed to be terminated in the case of
475
 
copies, of all such accounts and all documents specifically relating
423
 
the sale of the Vessel or if the Vessel becomes a total loss or is
476
 
to the Vessel and her operation.
424
declared as a constructive or compromised or arranged total
477
 
   
loss or is requisitioned.
478
15.   Inspection of Vessel
425
18.4    For the purpose of sub-clause 18.3 hereof
479
The Owners shall have the right at any time after giving
426
 
(i)  the date upon which the Vessel is to be treated as having
480
 
reasonable notice to the Managers to inspect the Vessel for any
427
been sold or otherwise disposed of shall be the date on
481
 
reason they consider necessary.
428
which the Owners cease to be registered as Owners of
482
 
   
the Vessel;
483
16.   Compliance with Laws and Regulations
429
(ii)  The Vessel shall not be deemed to be lost unless either
484
 
The Managers will not do or permit to be done anything which
430
 
she has become an actual total loss or agreement has
485
 
might cause any breach or infringement of the laws and
431
been reached with her underwriters in respect of her
486
 
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which Is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expenses as a result of discrepancies between the original BIMCO approved document and this computer generated document.

 
 
 

PART II
"SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT
 
constructive, compromised or arranged total loss or if such
487
 
exceeds the sum of USD50,000 (or such other sum as the
532
 
agreement with her underwriters is not reached it is
488
 
parties may agree) the arbitration shall be conducted in
533
 
adjudged by a competent tribunal that a constructive loss
489
 
accordance with the LMAA Small Claims Procedure current
534
 
of the Vessel has occurred.
490
 
at the time when the arbitration proceedings are commenced.
535
 
18.5    This Agreement shall terminate forthwith in the event of
491
 
19.2   This Agreement shall be governed by and construed
536
 
an order being made or resolution passed for the winding up,
492
 
in accordance with Title 9 of the United States Code and
537
 
dissolution, liquidation or bankruptcy of either party (otherwise
 
493
 
the Maritime Law of the United States and any dispute
 
538
 
than for the purpose of reconstruction or amalgamation) or if a
 
494
 
arising out of or in connection with this Agreement shall be
 
539
 
receiver is appointed, or if it suspends payment, ceases to carry
495
 
referred to three persons at New York, one to be appointed
540
 
on business or makes any special arrangement or composition
496
 
by each of the parties hereto, and the third by the two so
541
 
with its creditors.
497
 
chosen; their decision or that of any two of them shall be
542
 
18.6    The termination of this Agreement shall be without
498
 
final, and for the purposes of enforcing any award
543
 
prejudice to all rights accrued due between the parties prior to
499
 
judgement may be entered on an award by any court of
544
 
the date of termination.
 
competent jurisdiction.  The proceedings shall be conducted
545
 
   
in accordance with the rules of the Society of Maritime
546
 
19.    Law and Arbitration
501
Arbitrators, Inc.
547
19.1    This Agreement shall be governed by and construed in
502
 
In cases where neither the claim nor any counterclaim
548
 
accordance with English law and any dispute arising out of or
503
 
exceeds the sum of USD50,000 (or such other sum as the
549
 
in connection with this Agreement shall be referred to arbitration
504
 
parties may agree) the arbitration shall be conducted in
550
 
in London in accordance with the Arbitration Act 1996 or
505
 
accordance with the Shortened Arbitration Procedure of the
551
 
any statutory modification or re-enactment thereof save to
506
 
Society of Maritime Arbitrators, Inc. current at the time when
552
 
the extent necessary to give effect to the provisions of this
507
 
the arbitration proceedings are commenced.
553
 
Clause.
508
 
19.3   This Agreement shall be governed by and construed
554
 
The arbitration shall be conducted in accordance with the
509
 
in accordance with the laws of the place mutually agreed by
555
 
London Maritime Arbitrators Association (LMAA) Terms
510
 
the parties and any dispute arising out of or in connection
556
 
current at the time when the arbitration proceedings are
511
 
with this Agreement shall be referred to arbitration at a
557
 
commenced.
 
512
 
mutually agreed place, subject to the procedures applicable
558
 
The reference shall be to three arbitrators. A party wishing
513
 
there.
559
 
to refer a dispute to arbitration shall appoint its arbitrator
514
 
19.4   If Box 18 in Part I is not appropriately filled in, sub-
560
 
and send notice of such appointment in writing to the other
515
 
clause 19.1 of this Clause shall apply.
561
 
party requiring the other party to appoint its own arbitrator
516
 
   
within 14 calendar days of that notice and stating that it will
517
 
Note:   19.1 , 19.2 and 19.3 are alternatives; indicate
562
 
appoint its arbitrator as sole arbitrator unless the other party
518
 
alterative agreed in Box 18 . .
 
563
 
appoints its own arbitrator and gives notice that it has done
519
 
   
so within the 14 days specified.  If the other party does not
520
 
20.   Notices
564
 
appoint its own arbitrator and give notice that it has done so
521
 
20.1   Any notice to be given by either party to the other
565
 
within the 14 days specified, the party referring a dispute to
522
 
party shall be in writing and may be sent by fax, telex,
566
 
arbitration may, without the requirement of any further prior
523
 
registered or recorded mail) or by personal service.
567
 
notice to the other party, appoint its arbitrator as sole
524
 
20.2   The address of the Parties for service of such
568
 
arbitrator and shall advise the other party accordingly. The
525
communication shall be as stated in Boxes 19 and 20 ,
569
 
award of a sole arbitrator shall be binding on both parties
526
 
respectively.
570
 
as if he had been appointed by agreement.
527
   
Nothing herein shall prevent the parties agreeing in writing
528
 
The Additional Clauses attached hereto together with any
 
to vary these provisions to provide for the appointment of a
529
 
subsequent addenda, schedules, appendices or otherwise, shall
 
sole arbitrator.
530
 
be construed as an integral part of this Agreement and shall be
 
In cases where neither the claim nor any counterclaim
531
 
interpreted accordingly.
 
 
This document is a computer generated SHIPMAN 98 form printed by authority of BIMCO. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the pre-printed text of this document which is not clearly visible, the text of the original BIMCO approved document shall apply.  BIMCO assumes no responsibility for any loss, damage or expense as a result of discrepancies between the original BIMCO approved document and this computer generated document.
 

 
 
 

 
SHIPMAN98
ADDITIONAL CLAUSES TO THE MANAGEMENT AGREEMENT
MADE BETWEEN :
(I) NOEMI SHIPPING COMPANY LIMITED
AND
(II) SCORPIO SHIP MANAGEMENT SAM
 
 
21.
OPA
 
21.1
The Managers will:
 
 
(i)
arrange for the preparation, filing and updating of a contingency Vessel Response Plan in accordance with the requirements of OPA and Instruct the Crew in all aspects of the operation of such plan;
 
 
(ii)
identify and ensure the availability by contract or otherwise of a Qualified Individual, a Spill Management Team, an Oil Spill Removal Organisation, resources having salvage, fire fighting, Iightering and, if applicable, dispersant capabilities, and public relations/media personnel to assist the Owners to deal with the media in the event of discharges of oil.
 
21.2
The Managers are expressly authorised as agents for the Owners to enter into such arrangements by contract or otherwise as are required to ensure the availability of the services outlined in Clause 21.1. The Managers are further expressly authorised as agents for the Owners to enter into such other arrangements as may from time to time be necessary to satisfy the requirements of OPA or other US Federal or State laws.
 
21.3
The Owners will pay the fees due to third parties providing the services described above together with a fee to the Managers for their services. The level of fees will be included in the Vessel's running costs.
 
21.4
On termination of this Agreement, the Vessel Response Plan and all documentation will be returned to the Managers at the expense of the Owners.
 
22.
IT Services
 
22.1
The Managers will, subject to the remaining provisions of this Clause 22, provide the Vessel with the Management System Software.
 
22.2
The main features of the Management System Software at the date of this Agreement are:
 
 
(i)
comprehensive management software providing single point of entry to the Vessel incorporating crew management, defect and deficiency reporting and performance monitoring;
 
 
(ii)
a ship to shore and shore to ship e-mail package providing cost efficient communications available to both Managers and their charterers; and
 
 
(iii)
a computerised maintenance system including inventory control and automated purchase order handling.
 
22.3
The costs for the Management System Software are set out in the Fee Schedule, and are included in the Vessel's running costs, as follows;
 
 
(i)
the annual maintenance fee;
 
 
(ii)
maintenance and upgrades;
 
 
(iii)
24 hour support;
 
 
 
(iv)
provision of anti-virus software and regular upgrades;
 
 
(v)
operational manuals and regular updates;
 
 
(vi)
annual audit on board the Vessel providing a system health check;
 
 
(vii)
user manuals and training of the Crew in the use of the Management System Software; and
 
 
(viii)
e-mail on board the Vessel.
 
22.4
Such costs do not include the costs of appropriate hardware, licence fee and installation/set-up on board the Vessel.
 
22.5
Installation and set-up of the Information System Software will be undertaken on a date agreed between the Managers and the Owners having regard to the Vessel's schedule and the availability of the Managers' personnel.
 
22.6
The Management System Software is owned by the Managers or its subsidiaries and is protected by applicable copyright and patent laws,
 
22.7
The Managers do not warrant that the use or operation of the Information System Software will be uninterrupted or error free.
 
23.
Vetting
 
 
The Managers shall undertake as soon as reasonably possible to have the Vessel either inspected or screened by the following oil majors: BP, Shell, Exxonmobil, ChevronTexaco and Total. The cost of such vetting process is already included into the Vessel's budget. The Managers shall use their best endeavors to accommodate the Owners requests for other/additional vetting inspections or screening processes, the cost of which shall be, however, considered out of budget.
 
24.
Management Fee
 
24.1
Without prejudice to the generality of clause 8.3 (Management Fee), it is agreed that the remuneration provided for by that clause shall be deemed to cover the Manager's administrative and general expenses and any other expenses which are not directly and exclusively applicable to the operation or conduct of the business of the Vessel and shall include:
 
 
Salaries of corporate officers, executives, department heads, administrative, clerical and office employees, port engineers, port captain, port stewards, paymaster and other employees of the shore side establishment, payroll taxes, group insurance and pension annuity payments applicable to personnel in the above named categories, office and administrative expenses, including insurance, rent, heat, light, power, office stationary, office services, depreciation and repair of office equipment, janitor services and expenses, accounting expenses, the Managers' outside auditing fees, dues and membership in trade associations, office subscriptions, contributions and donations and franchise taxes, as well as legal fees in connection with the Managers' corporate and management functions, excluding all and any legal fees or other expenses incurred by the Managers in connection with any claims arising out of any matter related with the Vessel.
 
24.2
In addition to the remuneration payable to the Managers under the provisions of the first paragraph of this section, the Owners shall reimburse the Managers for, inter alia, the amount of such necessary travelling expenses (outside Monaco), seafarers interviewing costs, telephone calls, communication, vessel's postage, freight and forwarding, warehousing, agency services and fees which are not included in budget and will be treated as contingency costs.
 
25.
Dry docking
 
 
Dry docking to be carried out with prior approval of costs by the Owners, however the repair list to be at the discretion of the Managers
 
26.
Benefit of Existing and Future Contracts
 
 
Where possible, the Owners shall (for the duration of this Agreement) have the advantage of any existing or future contracts of the Managers for the purchase or renewal of materials, facilities, services or equipment, by way of the benefit of discounts (if any).
 
 
 
 
27.
Passing of Title
 
27.1
To the extent already paid for by the Managers using funds specifically provided by the Owners for such a purpose, title to any goods, materials or supplies purchased by the Managers for use in the performance of this Agreement shall belong to the Owners.
 
27.2
Upon termination of this Agreement all such goods, materials or supplies in the hands of the Managers shall be delivered to the Vessel or If requested by the Owners the Managers shall sell or dispose of such goods, materials or supplies at such price, terms and conditions as may be approved by the Owners and remit the proceeds thereof less any expenses Incurred in selling or disposing of such goods to an account of the Owners, to be advised separately in writing to the Managers.
 
28.
Termination on Bareboat Charter of Vessel
 
 
The Managers shall be entitled to terminate this Agreement by notice in writing in the event that the Vessel is bareboat chartered by the Owners. The date upon which the Vessel Is to be treated as having been bareboat chartered, shall be the date on which the Owners deliver the Vessel to bareboat charterer, notwithstanding the fact that the Managers may learn of the bareboat charter at a later date.
 
29.
Slop and any other disposal ashore
 
 
Disposal of slop produced for whatever reason (including but not limited to tank inspection, repairs, drydock preparation, tank cleaning) and any other disposal ashore compulsory as per local regulation is considered out of budget and the Owners shall provide the Managers with such additional funds as may be required.
 
30.
ISPS Code
 
30.1
The Manager shall comply with the requirements of the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter XI of SOLAS (ISPS Code) relating to the Vessel and " the Company" (as defined by the ISPS Code). If trading to or from the United States or passing through United States waters, in addition to ensure that the Vessel   has been issued with a COFR, the Manager shall also comply with the requirements of the US Maritime Transportation Security Act 2002 (the "MTSA") relating to the Vessel and the "Owner" (as defined by the MTSA).
 
30.2
Where sub-chartering, the Owner shall ensure that the contact details of all sub-charterers are provided to the Managers and the Master. Furthermore, the Owners shall ensure that all charter parties entered into during the period of this Agreement contain the following provision:
 
 
"The Charterers shall provide the Owners with their full style contact details and, where sub-chartering is permitted under the terms of the charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners".
 
30.3
Notwithstanding anything else contained in this Agreement all costs or expenses whatsoever arising out of or related  to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code and/or the MTSA including, but not limited to, security guards, launch services, vessel escorts, security fees, waiting costs and associated expenses, taxes and inspections, shall be out of budget. All measures required by the Manager to comply with the Ship Security Plan shall be for the Manager's account excluding costs associated with calls at non ISPS compliant port, facilities, installations, vessels or port, facilities, installations, vessels included in any relevant authority warning list (ie USCG Port Security Advisory) as applicable in which case Owners shall provide Managers with such additional funds as may be required.
 
31.
Additional Costs
 
 
The Owners' representative's meals and slop chest, charterers' meal and slop chest, representation costs, gratuity (either official or not official) provided with the aim to safeguard Vessel's operation and given in the sole discretion of Master will be separately debited to the Owners at cost. Any extraordinary trading cost (including but not limited to AMPD, COFR, ENOA/D, ICB, EWR coverage, Ransom and Kidnap coverage, security guard, special arrangement for transiting pirate infested areas etc), will be debited to Owners at cost, out of budget, under contingency accounting code.
 
 
 
32.
Provision of Information
 
 
The Owners undertake to provide to the Managers directly or through the charterers all information and instruction necessary for the Master to efficiently perform his duties including but not limited to: charterers name and full style, cargo information including MSDS, cargo carriage instruction relevant to that particular cargo (loading, segregating, carrying, heating, discharging, purging, ventilating, tank cleaning, inerting, stripping, CO washing instruction), port and terminal information and requirements, navigation instruction, speed to be attained, notification requirement, agency full style, fuel MSDS, bunker delivery notes, information necessary for AMS reporting, chartering contracts the Owners will enter into, voyage instructions including service speeds to attain.
 
33.
HSQE blanket approval clause
 
 
The Owner undertakes to provide full support for the implementation and   approval of the Managers' health, safety, quality and environmental policy including extra costs which could be from time to time communicated to Owners.
 
34 .
Cabo tage. storage and STS
 
 
Cabotage, storage and frequent STS are not considered normal operations and a special evaluation of risk and extra costs will be provided on a case by case basis by the Managers. The Owners shall make available to the Managers such additional funds as may be required in order for such additional duties to be carried out.
 
35.
Payments
 
 
All payments to the Managers shall be made in (i) full without any deductions, withholdings and/or set-off and (ii) US Dollars, to the account of the Managers from time to time advised to the Owners by the Managers.
 
36.
Third Party Rights
 
36.1
Any person (other than parties to this Agreement) who is given any rights or benefits under Clauses 10 or 11 (a "Third Party") shall be entitled to enforce those rights or benefits against the parties in accordance with the Contracts (Rights of Third Parties) Act 1999.
 
36.2
Save as provided in Clause 36.1 above the operation of the Contracts (Rights of Third Parties) Act 1999 is hereby excluded.
 
36.3
The parties may amend vary or terminate this Agreement in such a way as may affect any rights or benefits of any Third Party which are directly enforceable against the parties under the Contracts (Rights of Third Parties) Act 1999 without the consent of any such Third Party.
 
36.4
Any Third Party entitled pursuant to the Contracts (Rights of Third Parties) Act 1999 to enforce any rights or benefits conferred on it by this Agreement may not veto any amendment, variation or termination of this Agreement which is proposed by the parties and which may affect the rights or benefits of any such Third Party.
 
37.
Bunker Quality
 
37.1
The Owners shall provide that bunker supplied is of a quality suitable for burning in the Vessel's engines and auxiliaries and which conform to the specification(s) mutually agreed under this contract.
 
37.2
At the time of delivery of the Vessel the Owners shall place at the disposal of the Managers, the bunker delivery note(s) and any samples relating to the fuels existing on board. During the currency of the contract, the Owner shall ensure that bunker delivery notes are presented to the Vessel on the delivery of fuel(s) and that during bunkering representative samples of the fuel(s) supplied shall be taken at the Vessel's bunkering manifold and sealed in the presence of competent representatives of the fuel supplier and the Vessel as foreseen by Marpol.
 
 
 
37.3
Without prejudice to anything else contained in this contract, the Owners shall provide that fuel supplied is of such specifications and grades to permit the Vessel, at all times, to comply with the maximum sulphur content requirements of any emission control zone when the Vessel is ordered to trade within that zone.
 
37.4
The Owners also warrant that any bunker suppliers, bunker craft operators and bunker surveyors used by the Owners to supply such fuels shall comply with Regulations 14 and 18 of MARPOL Annex VI as applicable, including the Guidelines in respect of sampling and the provision of bunker delivery notes.
 
37.5
Owners to provide as well that a bunker minimum quantity is always kept on board corresponding to 10% of any type of bunker necessary for any particular voyage or 3 days whichever is more. For vessel with a single boiler system, minimum 30 tons of distillate to be always kept on board. Commingling of bunker is not recommended and special manager permission to be obtained on a case by case basis. Managers not to be held responsible for any consequence of commingling.
 
38.
War, war risk areas trading
 
38.1
Managers prior assessment to be always sought before to order the vessel to trade in any war, warlike area as defined by JWC and any cost directly or indirectly incurred as a consequence to obey to said order will be out of budget and debited to the Owners as contingency.
 
38.2
For the purpose of this clause, the words war risk shall include any actual, threatened or reported war; act of war; civil war; hostilities; revolution; rebellion; civil commotion; warlike operations; laying of mines; acts of piracy; acts of terrorists; acts of hostility or malicious damage; blockades (whether Imposed against all vessels or imposed selectively against vessels of certain flags or ownership, or against certain cargoes or crews or otherwise howsoever); by any person, body, terrorist or political group, or the Government of any state whatsoever, which, In the reasonable judgment of the Managers, may be dangerous or are likely to be or to become dangerous to the Vessel, her cargo, crew or other persons on board the Vessel.
 
39 .
Ice trading.
 
 
Manager prior assessment to be always sought before to order the vessel to trade in any ice bound area as defined by IWL or by prevailing local condition and any cost directly or indirectly incurred as a consequence to obey to said order wilt be out of budget and debited to owner as contingency.
 
40.
Sub-let.
 
 
Any extra cost and expenses necessary for owner to perform any sub letting charterer contract are excluded from budget. Take over cost are excluded from budget and vessel is supposed to be fully stocked at delivery
 
41.
Entire Agreement.
 
41.1
This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter of this Agreement; and in relation to such subject matter) supersedes all prior discussions, understandings and agreements between the parties and all prior representations and expressions of opinion by the parties.
 
41.2
Each of the parties acknowledges that it is not relying on any statements, warranties, representations or understandings (whether negligently or innocently made) given or made by or on behalf of the other in relation to the subject matter hereof and that it shall have no rights or remedies with respect to such subject matter otherwise than under this Agreement. The only remedy available shall be for breach of contract under the terms of this Agreement. Nothing in this Clause shall, however, operate to limit or exclude any liability or fraud.
 
 

 
 
 
Dated this 1st day of December 200 9
 
 
     
   
For the Owners:
 
By:
Its:
                                
 
 
 
For the Managers:
 
 
 
 
     



SK 99999 0010 1072828
EXHIBIT 10.4
 
FORM OF
MEMORANDUM OF AGREEMENT
 
 
Original
 
 
MEMORANDUM OF AGREEMENT
 
Norwegian Shipbroker’s Association’s Memorandum of Agreementfor sale and purchase of ships.  Adopted by The Baltic and international Maritime Council (BIMCO) in 1956.
Code-name
SALEFORM 1993
Revised 1966, 1983 and 1986/87.
 
 
  Dated:     ______________________________
 
_______________________________________ 
hereinafter called the Sellers, have agreed to sell, and
 
 
 
1 
 
 
___________________________________________________ , Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960
hereinafter called the Buyers, have agreed to buy the
2
   
Name:  __________________________________________
3
   
Classification Society/Class:
 
4
     
Built:
By:
5
     
Flag:
Place of Registration:
6
     
Call sign:
Grt/Nrt:
7
     
Register Number:
 
8
     
hereinafter called the Vessel, on the following terms and conditions:
9
   
Definitions
10
   
"Banking days" are days on which banks are open both in the country of the currency.
11
Stipulated for the Purchase Price in Clause 1 and in the place of closing stipulated in Clause 8.
12
"in writing" or "written" means a letter handed over from the Sellers to the Buyers or vice versa,
13
a registered letter, telex, telefax or other modern form of written communication
14
"Classification Society" or "Class" means the Society referred to in line 4
15
   
1.
Purchase Price:
USD _______________________________________ cash on delivery, without any deductions into Sellers' nominated  bank account with Sellers nominated first class international bank
16
       
2.
Deposit
17
   
As security for the correct fulfilment of this Agreement the Buyers shall pay a deposit of 10%
18
(ten percent) of the Purchase Price within 3 ( three ) banking days after all subjects lifted and after signing a fax copy by both Buyers and Sellers of this Agreement.
19
This deposit shall be placed with Sellers nominated international 1 st class bank ,
20
and held by them in an interest bearing joint account for the Sellers and the Buyers, to be released in accordance
21
with joint written instructions of the Sellers and the Buyers.  Interest , if any, to be credited to the
22
Buyers.
23
Any fee charged for holding the said deposit shall be borne equally by the Sellers and the Buyers.
24
   
 
3.
Payment
25
   
The said Purchase Price shall be paid in full free of bank charges to Sellers account with Sellers same nominated international 1 5t class bank as per Cl. 2
26
on delivery of the Vessel, but not later than 3 banking days after the Vessel is in every respect
27
physically ready for delivery in accordance with the terms and conditions of this
28
Agreement and Notice of Readiness has been given in accordance with Clause 5.
29
   
4.
Inspections
25
   
a)*
The Buyers have inspected and accepted the Vessel's classification records.  The Buyers
31
 
have also inspected the Vessel at/ in  __________________ on ____________________                              
32
 
and have accepted the Vessel following this inspection and the sale is outright and
33
 
definite, subject only to the terms and conditions of this Agreement.
34
   
b)*
The Buyers shall have the right to inspect the Vessel's classification records and declare
35
 
whether same are accepted or not with in March 18 th , 2005
36
     
 
The Seller shall provide for inspection of the Vessel at/in Cristobal on 10 th March 05
37
     
 
The Buyers shall undertake the inspection without undue delay to the Vessel.  Should the
38
 
Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred.
39
 
The Buyers shall inspect the Vessel without opening up and without cost to the Sellers
40
 
During the inspection, the Vessel's deck and engine log books shall be made available for
41
 
examination by the Buyers.  If the Vessel is accepted after such inspection, the sale shall
42
 
become outright and define, subject only to the terms and conditions of this Agreement,
43
 
provided the Sellers receive written notice of acceptance from the Buyers within 72 hours
44
 
after completion of such inspection.   March 18th, 2005
45
 
Should notice of acceptance of the Vessel's classification records and of the Vessel not be
46
 
received by the Sellers as aforesaid, the deposit together with interest earned shall be
47
 
released immediately to the Buyers, whether this Agreement shall be null and void.
48
     
 
4 a) and 4b) are alternatives; delete whichever is not applicable.  In the absence of
49
 
deletions, alternative 4a) to apply.
50
     
5.
Notices, time and place of delivery
51
     
a)
The Sellers shall keep the Buyers well informed of the Vessel's itinerary and shall
52
 
provide the Buyers with 21, 15 , 10, 7 and 5 days notice of the estimated time of arrival at
53
 
the intended place of drydocking/underwater inspection/ delivery and 3, 2, 1 days definite notices of the date Sellers expect the vessel to be ready for delivery.  Intended delivery port to be nominated concurrently with the 15 th and 7 th days notices.   When
54
 
the Vessel is at the place of delivery and in every respect physically ready for delivery in
55
 
accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
56
 
 
 
 
     
b)
The Vessel shall be delivered and taken over free of cargo and charter safely afloat at a safe and accessible port or berth or anchorage at/ in
57
 
Euromed, UK Cont, incl. Baltic Sea, Caribs, USAC, USG, USWC, ECC
58
 
area in the Sellers' option or any other safe port/berth as mutually agreed.
59
 
Expected time of delivery:   The vessel shall be between ___________________________                                                                                         in Seller's option
60
 
Date of cancelling (see Clauses 5 c), 6 b) (iii) and 14):   June 15 th 2005 in Buyers' option
61
     
c)
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the
62
 
Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in
63
 
writing stating the date when they anticipate that the Vessel will be ready for delivery and
64
 
propose a new cancelling date. Upon receipt of such notification the Buyers shall have the
65
 
option of either cancelling this Agreement in accordance with Clause 14 within 7 running
66
 
days of receipt of the notice or of accepting the new date as the new cancelling date.  If the
67
 
Buyers have not declared their option within 7 running days of receipt of the Sellers'
68
 
notification or if the Buyers accept the new date, the date proposed in the Sellers'
69
 
notification shall be deemed to be the new cancelling date and shall be substituted for
70
 
the cancelling date stipulated in line 61.
71
 
If this Agreement is maintained with the new cancelling date all other terms and conditions
72
 
hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full
73
 
force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any
74
 
claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by
75
 
The original cancelling date
76
     
d)
Should the Vessel become an actual, constructive or compromised total loss before
77
 
delivery the deposit together with interest earned shall be released immediately to
78
 
the Buyers whereafter this Agreement shall be null and void
79
     
6.
Drydocking / Divers Inspection
80
     
a)**
The Seller shall place the Vessel in drydock at the port of delivery for inspection by the
81
 
Classification Society of the Vessel's underwater parts below the deepest load line, the
82
 
extent of the inspection being in accordance with the Classification Society's rules.  If the
83
 
rudder, propeller, bottom or other underwater parts below the deepest load line are found
84
 
broken, damaged or defective so as to affect the Vessel's class, such defects shall be made
85
 
good at the Sellers' expense to the satisfaction of the Classification Society without
86
 
condition/recommendation*.
87
     
b)**
(i)           The Vessel is to be delivered without drydocking. However, the Buyers shall
88
 
have the right at their expense to arrange for an underwater inspection by a diver approved
89
 
by the Classification Society prior to the delivery of the Vessel. The Sellers shall at their
90
 
cost make the Vessel available for such inspection. The extent of the inspection and the
91
 
conditions under which it is performed shall be to the satisfaction of the Classification
92
 
Society. If the conditions at the port of delivery are unsuitable for such inspection, the
93
 
Sellers shall make the Vessel available at a suitable alternative place near to the delivery
94
 
port.
95
     
 
(ii)           If the rudder, propeller, bottom or other underwater parts below the deepest load
96
 
line are found broken, damaged or defective so as to affect the Vessel's class, then unless
97
 
repairs can be carried out afloat to the satisfaction of the Classification Society, the Sellers
98
 
shall arrange for the Vessel to be drydocked at their expense for inspection by the
99
 
Classification Society of the Vessel's underwater parts-below the deepest load line, the
100
 
extent of the inspection being in accordance with the Classification Society's rules. If the
101
 
 
 
 
 
rudder, propeller, bottom or other underwater parts below the deepest load line are found
102
 
broken, damaged or defective so as to affect the Vessel's class, such defects shall be
103
 
made good by the Sellers at their expense to the satisfaction of the Classification Society
104
 
without condition/recommendation*.  In such event the Sellers are to pay also for the cost of
105
 
the underwater inspection and the Classification Society's attendance.
106
     
 
(iii)           If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry-
107
 
docking facilities are available at the port of delivery, the Sellers shall take the Vessel
108
 
to a port where suitable drydocking facilities are available, whether within or outside the
109
 
delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall
110
 
deliver the Vessel at a port within the delivery range as per Clause 5 b) which shall, for the
111
 
purpose of this Clause, become the new port of delivery. In such event the cancelling date
112
 
provided for in Clause 5 b) shall be extended by the additional time required for the
113
 
drydocking and extra steaming, but limited to a maximum of 14 running days.
114
     
c)
If the Vessel is drydocked pursuant to Clause 6 a) or 6 b) above
115
     
 
(i)           the Classification Society may require survey of the tailshaft system, the extent of
116
 
the survey being to the satisfaction of the Classification surveyor.  If such survey is not
117
 
required by the Classification Society, the Buyers shall have the right to require the tailshaft
118
 
to be drawn and surveyed by the Classification Society, the extent of the survey being in
119
 
accordance with the Classification Society's rules for tailshaft survey and consistent with
120
 
the current stage of the Vessel's survey cycle. The Buyers shall declare whether they
121
 
require the tailshaft to be drawn and surveyed not later than by the completion of the
122
 
Inspection by the Classification Society. The drawing and refitting of the tailshaft shall be
123
 
arranged by the Sellers. Should any parts of the tailshaft system be condemned or found
124
 
defective so as to affect the Vessel's class, those parts shall be renewed or made good at
125
 
the Sellers' expense to the satisfaction of the Classification Society without
126
 
condition/recommendation*.
127
     
 
(ii)           the expenses relating to the survey of the tailshaft system shall be borne
128
 
by the Buyers unless the Classification Society requires such survey to be carried out, in
129
 
which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses
130
 
if the Buyers require the survey and parts of the system are condemned or found defective
131
 
or broken so as to affect the Vessel's class*.
132
     
 
(iii)           the expenses in connection with putting the Vessel in and taking her out of
133
 
drydock, including the drydock dues and the Classification Society's fees shall be paid by
134
 
the Sellers if the Classification Society issues any condition/recommendation* as a result
135
 
of the survey or if it requires survey of the tailshaft system.  In all other cases the Buyers
136
 
shall pay the aforesaid expenses, dues and fees.
137
     
 
(iv)           the Buyers' representative shall have the right to be present in the drydock, but
138
 
without interfering with the work or decisions of the Classification surveyor.
139
     
 
(v)           the Buyers shall have the right to have the underwater parts of the Vessel
140
 
cleaned and painted at their risk and expense without interfering with the Sellers' or the
141
 
Classification surveyors work, if any, and without affecting the Vessel's timely delivery.  If,
142
 
however, the Buyers' work in drydock is still in progress when the Sellers have
143
 
Completed the work which the Sellers are required to do, the additional docking time
144
 
needed to complete the Buyers' work shall be for the Buyers' risk and expense.  In the event
145
 
that the Buyers' work requires such additional time, the Sellers may upon completion of the
146
 
Sellers' work tender Notice of Readiness for delivery whilst the Vessel is still in drydock
147
 
and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether
148
 
the Vessel is in drydock or not and irrespective of Clause 5 b).
149
     
*
Notes, if any, in the surveyor's report which are accepted by the Classification Society
150
 
without condition/recommendation are not to be taken into account.
151
 
 
 
     
**
6 a) and 6 b) are alternatives; delete whichever is not applicable.  In the absence of deletions,
152
 
Alternative 6 a) to apply
153
     
7.
Spares/bunkers, etc.
154
     
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on
155
Shore and on order at the time of physical inspection .  All equipment/ spare parts and spare equipment including full communication equipment, spare anchors, navigational and computer equipment, wireless installations and navaids , spare tail-end shaft(s) and/or spare
156
propeller(s)/propeller blade(s), if any, belonging to the Vessel at the time of inspection used or
157
unused, whether on board or not shall become the Buyers' property, but spares are to be
158
excluded at no extra cost .  Forwarding charges, if any, shall be for the Buyers' account.  The Sellers are not required to
159
replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which
160
are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the
161
property of the Buyers.  The radio installation and navigational equipment shall be included in the sale
162
without extra payment if they are the property of the Sellers .  Unused stores and provisions shall be
163
included in the sale and be taken over by the Buyers without extra payment.   Any running/maintenance system and their logs concerning the vessel to be included in the sale.  Furthermore broached and unbroached stores (including unbroached paint) as on board to be included in the sale.
164
   
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the
165
Sellers' flag or name, provided they replace same with similar unmarked items.  Library, forms, etc,
166
exclusively for use in the Sellers' vessel(s), shall be excluded without compensation. Captain's,
167
Officers' and Crew's personal belongings including the slop chest are to be excluded from the sale,
168
as well as the following additional items (including items on hire):
169
—
—
 
—
—
—
—
—
—
crew recreational equipment incl. Crew's personal PC's and laptops
certificates which Sellers have to return to issuing authorities according to law, but Buyers to have the right to take copies of such certificates
log books, but Buyers to have the right to take copies of same
Iridium Crew satellite telephone
Unitor gas bottles
Chartco equipment
Videotel library
Chartco equipment
 
   
The Buyers shall take over the remaining bunkers and unused lubricating oils in storage tanks (oil shall not have passed through the vessels system) and
170
sealed drums and pay at Sellers' last paid net contract price after discounts as evidenced by supporting invoices/vouchers the current net market price (excluding barging expenses) at the port and date
171
of delivery of the Vessel
172
Payment under this Clause shall be made at the same time and place and in the same currency as
173
the Purchase Price.   Bunkers on board are Pool's property and shall be taken over without payment to Sellers, as the ship will remain In the pool.
174
   
8.
Documentation see Cl. 17.
175
   
The place of closing:   Hamburg or Monaco, to be mutually agreed
176
   
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery
177
documents namely :   Buyers and Sellers shall within 10 days after date of signing MoA provide a list of closing documents which are to be mutually agreed and attached to the MoA as an addendum.
178
 
 
 
 
   
a)
Legal Bill of Sale in a form recordable in _____________ (the country in which the Buyers are)
179
 
to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages
180
 
and maritime liens or any other debts or claims whatsoever, duly notarially attested and
181
 
legalized by the cousul of such country or other competent authority.
182
     
b)
Current Certificate of Ownership issued by the competent authorities of the flag state of
183
 
the Vessel
184
     
c)
Confirmation of Class issued within 72 hours prior to delivery.
185
     
d)
Current Certificate issued by the competent authorities stating that the Vessel is free from
186
 
registered encumbrances
187
     
e)
Certificate of Deletion of the Vessel from the Vessel's registry or other official evidence of
188
 
deletion appropriate to the Vessel's registry at the time of delivery, or, in the event that the
189
 
registry does not as a matter of practice issue such documentation immediately, a written
190
 
undertaking by the Sellers to effect deletion from the Vessel's registry forthwith and furnish a
191
 
Certificate or other official evidence of deletion to the Buyers promptly and latest within 4
192
 
(four) weeks after the Purchase Price has been paid and the Vessel has been delivered.
193
     
f)
Any such additional documents as may reasonably be required by the competent authorities
194
 
for the purpose of registering the Vessel, provided the Buyers notify the Sellers of any such
195
 
documents as soon as possible after the date of the Agreement
196
     
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of
197
Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the
198
Buyers.
199
   
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as-well-as-all
200
plans etc., which are on board the Vessel.  Other certificates which are on board the Vessel shall also
201
be handed over to the Buyers unless the Sellers are required to retain same, in which case the
202
Buyers to have the right to take copies.  Other technical documentation which may
203
Be in the Sellers' possession shall be promptly forwarded to the Buyers at their expense, if they so
204
request.  The Sellers may keep the Vessels log books but the Buyers to have the right to take
205
copies of same.
206
   
9.
Encumbrances
207
   
The Sellers warrant that the Vessel, at the time of delivery, is free from any and all charters, encumbrances, Mortgages, and maritime liens and taxes or any other debts or claim whatsoever.
208
The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made
209
against the vessel which have been incurred prior to the time of delivery.
210
 
211
 
 
   
10.
Taxes, etc.
212
   
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers' flag
213
shall be for the Buyers' account, whereas similar charges in connection with the closing of the Sellers'
214
register shall be for the Sellers' account.
215
   
11.
Condition on delivery see also Cl. 22
216
   
The Vessel with everything belonging to her shall be at the Sellers' risk and expense until she is
217
Delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be
218
delivered and taken over as she was at the time of inspection, fair wear and tear excepted.  However, the
219
Vessel shall be delivered with her class maintained without notation/ condition/ recommendation*,
220
free of average damage affecting the Vessels class, and with all of her classification certificates, trading certificates and
221
national / international certificates, as well as all other certificates the Vessel had at the time of inspection, clean, valid and
222
unextended without notation /condition/recommendation* by Class or the relevant authorities for a minimum period of 6 (six) months at the time of
223
delivery.
224
"inspection" in this Clause 11, shall mean the Buyers' inspection according to Clause 4a) or 4b), if
225
applicable, or the Buyers' inspection prior to the signing of this Agreement. If the Vessel is taken over
226
without inspection, the date of this Agreement shall be the relevant date.
227
   
*
Notes, if any, in the surveyor's report which are accepted by the Classification Society
228
 
without condition/recommendation are not to be taken into account.
229
     
12.
Name / markings
230
   
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings.
231
   
13.
Buyers' default
232
   
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this
233
Agreement, and they shall be entitled to claim compensation for their losses and for all expenses
234
incurred together with interest.
235
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to
236
cancel the Agreement, in which case the deposit together with interest earned shall be released to the
237
Sellers.  If the deposit does not cover their loss, the Sellers shall be entitled to claim further
238
compensation for their losses and for all expenses incurred together with interest.
239
   
14.
Sellers' default
240
   
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready
241
to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have
242
the option of cancelling this Agreement provided always that the Sellers shall be granted a
243
maximum of 3 banking days after Notice of Readiness has been given to make arrangements
244
for the documentation set out in Clause 8. If after Notice of Readiness has been given but before
245
the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not
246
made physically ready again in every respect by the date stipulated in line 61 and new Notice of
247
Readiness given, the Buyers shall retain their option to cancel. In the event that the Buyers elect
248
to cancel this Agreement the deposit together with interest earned shall be released to them
248
immediately .
250
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready
251
 
 
to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for
252
their loss and for all expenses together with interest if their failure is due to proven
253
negligence and whether or not the Buyers cancel this Agreement.
254
   
15.
Buyers' representatives
255
   
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers
256
have the right to place two representatives on board the Vessel at their sole risk and expense upon
257
arrival at on or about
258
These representatives are on board for the purpose of familiarisation and in the capacity of
259
observers only, and they shall not interfere in any respect with the operation of the Vessel.  The
260
Buyers' representatives shall sign the Sellers' letter of indemnity P+l indemnity form prior to their embarkation.
261
   
16.
Arbitration
262
     
a)*
This Agreement shall be governed by and construed in accordance with English law and
263
 
any dispute arising out of this Agreement shall be referred to arbitration in London in
264
 
accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or
265
 
re-enactment thereof for the time being in force, one arbitrator being appointed by each
266
 
party. On the receipt by one party of the nomination in writing of the other party's arbitrator,
267
 
that party shall appoint their arbitrator within fourteen days, failing which the decision of the
268
 
single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree
269
 
they shall appoint an umpire whose decision shall be final.   Disputes of less than USD 50.000. (Fifty Thousand US Dollars) to be settled in accordance with LMAA's small claims procedure.
270
     
b)*
This Agreement shall be governed by and construed in accordance with Title 9 of the
271
 
United States Code and Law of the State of New York and should any dispute arise out of
272
 
this Agreement, the matter in dispute shall be referred to three persons at New York, one to
273
 
be appointed by each of the parties hereto, and the third by the two so chosen; their
274
 
decision or that of any two of them shall be final, and for purpose of enforcing any award, this
275
 
Agreement may be made a rule of the Court.
276
 
The proceedings shall be conducted in accordance with the rules of the Society of Maritime
277
 
Arbitrators, Inc. New York.
278
     
c)*
Any dispute arising out of this Agreement shall be referred to arbitration at
279
 
___________________________________________, subject to the procedures applicable there
280
 
The laws of _____________ shall govern this Agreement.
281
     
*
16 a), 16 b) and 16 c) are alternatives; delete whichever is not applicable.  In the absence of
282
 
deletions, alternative 16 a) to apply.
283
     
     
Clause 17 to 21 both inclusive as herewith attached shall form an integral part of this Memorandum of Agreement.
 

 
 
 
 
 

Appendix to Memorandum of Agreement dated ________________
MT _________________



Cl. 17
The Sellers to assist the Buyers and provide all information and copies of all Certificates that may be reasonably required for the Buyers registration and/or Change of flag.
 
 
At the time of delivery , Sellers to hand over one complete set of manuals/instruction books and plans/drawings pertaining to 'Colin Jacob' and her equipment on board. A further set of such documents, in addition to all other technical documentation the Sellers have in their possession, shall be delivered to the Buyers' office, with forwarding costs, if any, for Byuers' account.
 
Cl. 18
The Sellers confirm that to the best of their knowledge the vessel is not, and will not be at the time of delivery, blacklisted by any port, terminal, nation or organisation and is eligible for trading to/bunkering in any part of the world.

Cl. 19
Vessel to continue to be traded in the Jacob-Scorpio Tanker Pool with an extended lock-in period of three years, provided the Pool remains in existance as provided in the Pool Agreement. The new Principals are not to time-charter out the vessel unless the Pool so decides.
 
 
A seperate Supplement Agreement hereto will be issued and signed by both prior to signing this Memorandum of Agreement.
 
Cl. 20
The details of the sale to be kept private and confidential as long as possible. should, however, details of the sale become known or reported on the market, neither the Buyers, nor the Sellers shall have the right to withdraw from the sale or fail to fulfil their obligations under this Memorandum of Agreement.

Cl. 21
At the time of delivery the vessel and all her equipment (incl. Tank Cleaning System and segregated ballast tanks) to comply with Marpol, USCG and IMO-regulations as evidenced by statutory certificates.



On behalf of the Sellers
 
 
On behalf of the Buyers
 
 
 
 
 
 
 
 
 
 
 
 

 


 
 
 
 
 
Addendum No. 1
to the
MOA dates _______________ – MT ________________
made between
 
 ___________________ (the Sellers)
 
and
             ___________________ (the Buyers)

It has been today mutually agreed between the Sellers and the Buyers that following documents are to be provided by Sellers respectively Buyers as per Clause 8 of the above mentioned Memorandum of Agreement at the time of delivery.

 
I.
List of documents to be provided by the Sellers

 
1.
Bill of sale (3 originals) notarised and in a form acceptable to the Marshall Islands Maritime Authority
 
2.
Certified Minutes of the Board of directors approving the sale of the vessel and the MOA and appointing relevant attorneys to attend the closing meeting and the physical delivery of the vessel and to sign all relevant documentation (including but not limited to the MOA, the protocol of delivery and acceptance, the deposit release letter, etc.)
 
3.
Certified Power of attorney
 
4.
Extract from the public registry
 
5.
Copies of the Articles of Association/by laws in German
 
6.
Transcript of registry showing that the vessel is registered in the name of the Sellers and free of any registered encumbrances dated as of the date of closing (to be faxed with originals to follow)
 
7.
Deletion certificate issued by the registry from which the vessel is presently registered (to be faxed with original to follow)
 
8.
Confirmation of class issued within 72 hours prior to delivery (after underwater survey)
 
9.
Letter confirming no blacklisting (clause 18 of the MOA)
 
10.
Letter confirming that the vessel has not touched bottom since per delivery to the sellers and/or her last dry-dock
 
11.
List of outstanding guarantee claims
 
12.
Within 15 days from the delivery of the Vessel, one copy of the Vessel's current complete CSR File certified by the flag administration from which the vessel is being transferred

 
II.
List of documents to be provided by the Buyers

 
1.
Minutes of the Board of directors (with signatures to be certified by a Notary Public in Monaco) approving the purchase of the vessel and the MOA and appointing relevant attorneys to attend the closing meeting and the physical delivery of the vessel and to sign all relevant documentation (including but not limited to the MOA, the protocol of delivery and acceptance, the deposit release letter, etc.)
 
2.
Power of attorney (with signatures to be certified by a Notary Public in Monaco)
 
4.
Certificate of Goodstanding
 
5.
Copies of the Articles of Association/by laws
 
6.
Certificate of Incumbency
 
7.
Payment Letter

 
On behalf of the Sellers
 
 
On behalf of the Buyers
 
 
 
 
 
 
 
 
 
 
 

Date __________________
 


 
EXHIBIT 10.5

   
 
ORIGINAL
 
     

 
FORM OF

  Code word for this Charter Party
"SHELLTIME 4"
 
Issued December 1984
 
Time Charter Party
LONDON, 31.10.2006
 
IT IS THIS DAY AGREED between
 
Of Marshall Islands                         (hereinafter referred to as "Owners"), being owners of the
 
good motor tanker vessel called
 
(hereinafter referred to as "the vessel") described as per Additional Clauses Number 1, hereof and
of                                                     (hereinafter referred to as "Charterers"):
 
Description and
Condition of
Vessel
1.      At the date of delivery of the vessel under this charter
(a)   she shall be classed: (See additional clause 1)
(b)  she shall be in every way fit to carry crude petroleum and/or its clean and dirty products; always in accordance with vessel's class certificates, coating manufacturers resistance list and the vessel's trim, stability and stress requirements, maximum 3 grades (within the vessel's natural segregations), but always excluding asphalt , bitumens, casinghead — LWSR permitted only if compatible with coating manufacturers resistance list. Charterers not to re-dellver the vessel with last cargo orimulsion, CBFS or LSWR.
 
 
(c)   she shall be tight, staunch, strong, in good order and condition, and in every way fit for the service with her machinery, boilers, hull and other equipment including but not limited the hull stress calculator and radar) in a good and efficient state:
(d)   her tanks, valves and pipelines should be oil-tight;
(e)   she shall be in every way fitted for burning
at sea fuel oil with a maximum viscosity of Centistokes at-50-dogreos Contigrade/any
commercial grade of fuel oil ("ACGFO ") for main propulsion , marine diesel oil/ ACGFO for auxiliaries
In  port marine diesel oil/ ACGFO for auxiliaries :
IFO and MGO as per clause 29 hereof
(f)     she shall comply with the regulations in force so as to enable her to pass through the Suez and Panama Canals by day and night without delay:
(g)      she shall have on board all certificates, documents and equipment required from time to time by any applicable lawito enable her to perform the charter service without delay:
(h)      she shall comply with the description in Intertanko Questionnaire 88 and OCIMF questionnaire Form B appended hereto, provided however that if there is any conflict between the provision of  Form B Inertanko Questionnaire 88 and OCIMF questionnaire and any other provision, including this Clause I,of this charter such other provision shall govern. See vessel's description rider Clause I,
 
Shipboard
Personnel
And their Duties
2. (a) At the date of delivery of the vessel under this charter and throughout the entire period of this Charter Party
(i) she shall have a full and efficient complement of master, officers and crew for vessel of her tonnage, who shall in any event be not less than the number required by the laws of the flag state and who shall be trained to operate the vessel and her equipment competently and safely;
(ii) all shipboard personnel shall hold valid certificates of competence in accordance with the requirements of the law of the flag state;
(iii) all shipboard personnel shall be trained in accordance with the relevant provisions of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978; as amended from time to time.
(iv) there shall be on board sufficient personnel with a good working knowledge of the English language to enable cargo operations at loading and discharging places to be carried out efficiently and safely and to enable communications between the vessel and those loading the vessel or accepting discharge therefrom to be carried out quickly and efficiently.
(v) All ship board personnel will comply with the OCIMF Guidelines for the control of drugs and alcohol on board ship.
(vi) Owners guarantee that the Owners or management company as the case may be shall always be in compliance with ISM Code or any future equivalent.
(b)      Owners guarantee that throughout the charter service the master shall with the vessel's officers and crew, unless otherwise ordered by Charterers,
(i) prosecute all voyages with the utmost despatch;
(ii) render all customary assistance. And
(iii) load and discharge cargo as rapidly as possible when required by Charterers or their agents to do so , by night and day, but always in accordance with the laws of the place of loading or discharging ( as the ease may be) and in each case in accordance with any applicable laws of the flag state.

 
 
 

Duty to Maintain
 
 
3.            (i) Throughout the charter service Owners shall, whenever the passage of time, wear and tear or any event (whether or not coming within Clause 27 hereof) requires steps to be taken to maintain or restore the conditions stipulated in Clause l and 2 (a), exercise due diligence so to maintain or restore the vessel.
(ii)  if at any lime whilst the vessel is on hire under this charter the vessel fails to comply with the requirements of clauses 1,2 (a) or 10 then hire shall be reduced to the extent necessary to indemnify Charterers for such failure. If and to the extent that such failure affects the time taken by the vessel to perform any services under this charter, hire shall be reduced by an amount equal to the value, calculated at the rate of hire, of the time so lost.
Any reduction of hire under this sub-Clause (ii) shall be without prejudice to any other remedy available to Charterers, but such reduction of hire is in respect of the time lost, such time shall be excluded from any calculation tinder Clause 24.
(iii)  If owners are in breach of their obligation under Clause 3(i) Charterers may also so notify Owners in writing: an if, after the expiry of 30 days following the receipt by Owners of any such notice, Owners have failed to demonstrate to Charterers' reasonable satisfaction the exercise of due diligence as required in Clause 3 (i), the vessel shall be off-hire, and no further hire payments shall be due, until Owners have so demonstrated that they are exercising such due diligence.
 
Furthermore, at any time while the vessel is off-hire under this Clause 3 Charterers have the option to terminate this charter by giving notice in writing with effect from the date on which such notice of termination is received by owners or from any later date stated in such notice. This sub-Clause (iii) is without prejudice to any rights of Charterers or obligations of Owners under this charter of otherwise (including without limitation Charterers' rights under Clause 21 hereof.
 
Period Training
Limits
 
 
4. Owners agree to let and Charterers agree to hire the vessel for a period of See Additional Clause 23 (Period clause which will reflect agreement in main terms)
commencing from the time and date of delivery of the vessel, for the purpose of carrying all lawful merchandise
(subject always to Clause 28) including in particular . See Additional Clause 3 (Trading Limits)
 
In any part of the world as Charterers shall direct, subject to the limits of the current  British Institute Warranties and any subsequent amendments thereof, Notwithstanding the foregoing, but subject to Clause 35, Charterers may order the vessel to ice bound waters or to any part of the world outside such limits provided that Owners consent thereto (such consent not to be unreasonably withheld) and that Charterers pay for any insurance premium required by the vessel's underwriters as a consequence of such order. (Including but not limited to, extra premiums due under Owners loss of hire insurance cover)
Charterers shall use due diligence to ensure that the vessel is only employed between and at safe places (which expression when used in this charter shall include ports, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters, and other locations including locations at sea) where she can safely lie always afloat. Notwithstanding anything contained in this or any other clause of this charter, Charterers do not warrant the safety of any place to which they order the vessel and shall be under no liability in respect thereof expect for loss or damage caused by their failure to exercise due diligence as aforesaid. Subject as above the vessel shall be loaded and discharged at any places as Charterers may direct, provided that Charterers shall exercise due diligence to ensure that any ship-to-ship transfer operations shall conform to standards not less than those set out in the latest published edition of the ICS/OCIMF Ship-to-ship Transfer Guide. Vessel not to be used as storage tanker nor as a shuttle vessel for more than 2 months per year.
The vessel shall be delivered by Owners in: DOP I SP/SA MED/BSEA/UKCONT/USAC/USG CARIES/EAST COAST CANADA in Owner's option. It is also Owners option to deliver the vessel at sea 5 days steaming south of Los Angeles. Should Owners exercise such option and deliver the vessel at this position then the Charterers will have the right to redeliver the vessel at sea in the Pacific Ocean in a position which is no further from Balbao than the delivery position, and
redelivered to Owners at a port in dropping last outbound sea pilot One (I) safe port United States Atlantic coast, United States Gulf Caribbean, East coast Canada, Mediterranean, United Kingdom Continent European Mediterranean
At Charterers' option.
   
Laydays/
Cancelling
5. The vessel shall not be delivered to Charterers before December 2006 — January 2007 to be narrowed (See also Rider Clause 37) and Charterers shall have the option of cancelling this charter if the vessel is not ready and at their disposal on or before
   
Owners to
Provide
6. Owners undertake to provide and to pay for all provisions, luboils, wages, and shipping and discharging fees and all other expenses of the master, officers and crew: also, except as provided in Clause 4 and 34 hereof, for all insurance on the vessel, for all deck, cabin and engine-room stores, and for water: for all dry-docking, overhaul maintenance and repairs to the vessel: and for all fumigation expenses and de-rat certificates, Owners' obligations under this Clause 6 extend to all liabilities for customs or import duties arising at any time during the performance of this charter in relation to the personal effects of the master, officers and crew, and in relation to the stores provisions and other matters aforesaid which Owners are to provide and paid for and Owners shall refund the Charterers any sums Charterers or their agents may have paid or been compelled to pay in respect of any such liability. Any amounts allowable in general average for wages and provisions and stores shall be credited to Charterers insofar as such amounts are in respect of a period when the vessel is on-hire.
   
Charterers to
Provide
7. Charterers shall provide and pay for all fuel (except fuel used for domestic services), towage and pilotage and shall pay agency fees, port charges, commissions, expenses of loading and unloading cargoes, canal dues and tax/dues on cargo/freight and all charges other than those payable by Owners in accordance with Clause 6 hereof, provided that all charges for the said items shall be for Owners' account when such items are consumed, employed or incurred for Owners' purposes or while the vessel is off-hire (unless such items reasonably relate to any service given or distance made good and taken into account under Clause 21 or 22) : and provided further that any fuel used in connection with a general average sacrifice or expenditure shall be paid for by Owners. OPA charges for Charterers account.

 
 
 

Rate of
Hire
 
8. Subject as herein provided, Charterers shall pay for the use and hire of the vessel at the rate of USD           per day, and pro rata for any part of a day, from the time and date of her delivery UTC  (local time)   until the time and date of her redelivery (local time) to Owners.
   
Payment of
Hire
 
9. Subject to Clause 3 (iii), payment of hire shall be in immediately available funds to: In US$ to Owners designated Bank :
In U.S.A. Dollars per calendar month in advance, less:
(i)   any hire paid which Charterers reasonably estimate to relate to off-hire periods , and
(ii)   any amounts disbursed on Owners' behalf, any advances and commission thereon, and charges which are
for Owners' account pursuant to any provision hereof, and
(iii)   any amounts due or reasonably estimated to become due to Charterers under Clause 3 (ii) or 24 hereof, any such adjustments to be made at the due date for the next monthly payment after the facts have been ascertained, Charterers shall not be responsible for any delay or error by Owners' hank in crediting Owners' account provided that Charterers have made proper and timely payment.
In default of such proper and timely payment,
(a)   Owners shall notify Charterers of such default and Charterers shall within seven days of receipt of
such notice pay to Owners the amount due including interest, failing which Owners may withdraw the
vessel from the service of Charterers without prejudice to any other rights Owners may have under this charter or otherwise : and
(b)        Interest on any amount due but not paid on the due date shall accrue from the days after that date up to and including the day when payment is made, at a rate per annum which shall be 1% above the U.S. Prime Interest Rate as published by the Chase Manhattan Bank in New York at 12:00 New York time on the due date; or, if no such interest rate is published on that day, the interest rate published on the next preceding day on which such a rate was so published, computed on the basis of a 360 day year of twelve 30 day months, compounded semi-annually.
   
Space
Available to
Charterers
10.      The whole reach, burthen and decks of the vessel and any passenger accommodation (including Owners' suite shall be at Charterers' disposal, reserving only proper and sufficient space for the vessel's master, officers, crew, tackle, apparel, furniture, provisions and stores, provided that the weight of stores on board shall not, unless specially agreed, exceed 550 tonnes at any time during the charter period.
   
Overtime
11.      Overtime pay of the master, officers and crew in accordance with ship's articles, even telecommunication expenses and gratuities to third parties shall be for Owners C harterers' account , when incurred as a result of complying with the request of Charterers or their agents, for loading, discharging, heating of cargo, bunkering or tank cleaning. Charterers shall pay together with hire lumpsum USD         per month covering all the above.
   
Instructions
And Logs
12.       Charterers shall from time to time give the master all requisite instructions and sailing directions, and he shall keep a full and correct log of the voyage or voyages, which Charterers or their agents may inspect as required. The master shall when required furnish Charterers or their agents with a true copy of such log and with properly completed loading and discharging port sheets and voyage reports for each voyage and other returns as Charterers may require, Charterers shall be entitled to take copies at Owners' expense of any such documents which are not provided by the master, Reports to be completed in English.
   
Bills of
Lading
13. (a) The master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency and other arrangements, and shall sign bills of lading as Charterers or their agents may direct ( subject always to Clauses 35 (a) and 40) without prejudice to this charter, Charterers hereby indemnify Owners against all consequences or liabilities that may arise
(i)  from signing bills of lading in accordance with the directions of Charterers or their agents, to the extent that the terms of such bills of lading fail to confonn to the requirements of this charter , or (except as provided in Clause 13 (b) from the master otherwise complying with Charterers' or their agents orders;
(ii)  from any irregularities in papers supplied by Charterers or their agents.
(b) Notwithstanding the foregoing, Owners shall not be obliged to comply with any orders from Charterers to discharge all or part of the cargo.
(i) at any place other than that shown on the bill of lading and/or
(ii) without presentation of an original bill of lading
unless they have received from Charterers both written confirmation of such orders and an indemnity in the form acceptable to Owners . Invoking the letter of Indemnity as per additional Clause Na. 25 of the riders.
   
Conduct of
Vessel's
personnel
 
 
14. If Charterers complain of the conduct of the master or any of the officers or crew, Owners shall immediately investigate the complaint. If the complaint proves to be well founded , Owners shall, without delay, make a change in the appointments and Owners shall in any event communicate the result of their investigations to Charterers as soon as possible.

 
 
 


Bunkers at
Delivery and
Redelivery
 
 
15.      Charterers shall accept and pay for all bunkers on board at the time of delivery, and Owners shall on redelivery (whether it occurs at the end of the charter period or on the early termination of this charter) accept and pay for all bunkers remaining on board, at their respective purchase price which to be supported by vouchers. a t the then current market prices at the port of delivery or redelivery, as the case may be, or if such prices are not available payment shall be at the then current market prices at the nearest port at which such prices are available provided that if delivery or redelivery does not take place in a port payment shall be at the price paid at the vessel's last port of bunkering before delivery or redelivery, as the case may be, Owners shall give Charterers the use and benefit of any fuel contracts that may have in force from time to time, if so required by Charterers, provided supplies agree.
   
Stevedores,
Pliots,Tugs
 
 
16.            Stevedores when required shall be employed and paid by Charterers, but this shall not relieve Owners  from responsibility at all times for proper stowage, which must be controlled by the master who shall keep a strict account of all cargo loaded and discharged, Owners hereby indemnify Charterers, their servants and agents against all losses, claims, responsibilities and liabilities arising in any way whatsoever from the employment of pilots, tugboats or stevedores, who although employed by Charterers shall be deemed to be the servants of and in the service of Owners and under their instructions ( even if such pilots, tugboat personnel or stevedores are in fact the servants of Charterers their agents or any affiliated company): provided, however, that
(i)   The foregoing indemnity shall not exceed the amount to which Owners would have been entitled to limit  their  liability if they had themselves employed such pilots, tugboats or stevedores, and
(ii)           Charterers shall be liable for any damage to the vessel caused by or arising out of the use of stevedores, fair wear and tear excepted, to the extent that Owners arc unable by the exercise of due diligence to obtain redress therefor from stevedores.
   
Supernumeraries
 
17.            Charterers may send representatives in the vessel's available accommodation upon any voyage made under this charter, Owners finding provisions and all requisites as supplied to officers, except liquors, Charterers paying at the rate of US$      per day for each representative while on board the vessel.
   
Sub-letting
18.           Charterers may sub-let the vessel, but shall always remain responsible to Owners for due fulfilment of this charter.
   
FinalVoyage
 
19.           If when a payment of hire is due hereunder Charterers reasonably expect to redeliver the vessel before the next payment of hire would fall due, the hire to be paid shall be assessed on Charterers' reasonable estimate of the time necessary to complete Charterers' programme up to redelivery, and from which estimate Charterers may deduct amounts due or reasonably expected to become due for
(i)   Disbursements on Owners' behalf or charges for Owners' account pursuant to any provision hereof, and
(ii)   Bunkers on board at redelivery pursuant to Clause 15.
Promptly after redelivery any overpayment shall be refunded by Owners or any underpayment made good by Charterers.
If at the lime this charter would otherwise terminate in accordance with Clause 4 the vessel is on a ballast voyage to a port of redelivery or is upon a laden voyage, Charterers shall continue to have the use of the vessel at the same rate and conditions as stand herein for as long as necessary to complete such ballast voyage, or to complete such laden voyage and return to a port of redelivery as provided by this charter, as the case may be.
   
Loss of
Vessel
 
 
20.            Should the vessel be lost, this charter shall terminate and hire shall cease at noon on the day of her loss: should the vessel be a constmctive total loss, this charter shall terminate and hire shall cease at noon on the day on which the vessel's underwriters agree that the vessel is a constructive total loss: should the vessel be missing, this charter shall terminate and hire cease at noon on the day of which she was last heard of. Any hire paid in advance and not earned shall be returned to Charterers and Owners shall reimburse Charterers for the value of the estimated quantity of bunkers on board at the time of termination, at the price paid by Charterers at the last bunkering port.
   
Off-hire
21. (a) On each and every occasion that there is loss of time (whether by way of interniption in the vessel's service or, from reduction in the vessel's performance, or in any other manner)
(i)   Due to deficiency of personnel or stores; repairs; gas-freeing for repairs; time in and waiting to enter dry dock for repairs: breakdown (whether partial or total) of machinery, boilers or other parts of the vessel or her equipment (including without limitation tank coatings); overhaul, maintenance or survey;  time lost by vessel for obtaining all necessary authorisation or certificates for trading, collision, stranding, accident or damage to the vessel: or any other similar cause preventing the efficient working of the vessel: and such loss continues for more than three consecutive hours (if resulting from interruption in the vessel's service) or cumulates to more than three hours (if resulting from partial loss of service); or
(ii)   Due to industrial action, refusal to sail, breach of orders or neglect of duty on the part of the master, officers or crew ; or
(iii)   For the purpose of obtaining medical advice or treatment for or landing any sick or injured person (other than a Charterers' representative carried under clause 17 hereof) or for the purpose of landing the body of any person (other than a Charterers' representative), and such loss continues for more than three consecutive hours; or
(iv) Due to any delay in quarantine arising from the master, officers or crew having had communication with the shore at any infected area without5 the written consent or instructions of Charterers or their agents, or at any detention by customs or other authorities caused by smuggling or other infraction of local law on the part of the master , officers or crew; or
 
 
 
(v)   Due to detention of the vessel by authorities at home or abroad attributable to legal action against or breach of regulations by the vessel, the vessel's owners, or Owners (unless brought about by the act or neglect of Charterers);
(vi)   Delay for failure in obtaining M. O. C vetting approvals See additional clause No. 22.4, then without prejudice to Charterers' rights under clause 3 or to any other rights of Charterers hereunder or otherwise the vessel shall be of from the commencement of such loss of time until she is again ready and in efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced; provided, however , that any service given or distance made good by the vessel whilst off-hire shall be taken into account in assessing the amount to be deducted from hire.
(b)           If the vessel fails to proceed at any guaranteed speed pursuant to Clause 24, and such failure arises wholly or partly from any of the causes set out in Clause 21(a) above, then the period for which the vessel shall be off-hire under this Clause 21 shall be the difference between
(i)   the time the vessel would have required to perform the relevant service at such guaranteed speed, and
(ii)   the time actually taken to perform such service (including any loss of time arising from interruption in the performance of such service).
For the avoidance of doubt, all time included under (ii) above shall be excluded from any computation under Clause 24.
(c)           Further and without prejudice to the foregoing, in the event of the vessel deviating (which expression includes without limitation putting back, or putting into any port other than that to which she is bound under the instructions of Charterers) for any cause or purpose mentioned in Clause 21 (a), the vessel shall be off-hire from the commencement of such deviation until the time when she is again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which the deviation commenced, provided, however, that any service given or distance made good by the vessel whilst so off-hire shall be taken into account in assessing the amount to be deducted from hire. If the vessel, for any cause or purpose mentioned in Clause 21 (a), puts into any port other than the port to which she is bound on the instructions of Charterers, the port charges, pilotage and other expenses at such port shall be borne by Owners. Should the vessel be driven into any port or anchorage by stress of weather hire shall continue to be due and payable during any time lost thereby.
(d) If the vessel's flag state becomes engaged in hostilities, and Charterers in consequences of such hostilities find it commercially impracticable to employ the vessel and have given Owners written notice thereof, then from the date of receipt by Owners of such notice until the termination of such commercial impracticability the vessel shall be off-hire and Owners shall have the right to employ the vessel on their own account.
(e) Time during which the vessel is off hire under this charter shall count as part of the charter period.
(e) Time during which the vessel is off hire under this Charter Party shall count as part of the Charter Period, but Charterers shall have the option, in the event off-Hire period exceeds 20 days, to add such time over the said allowance to the relevant Charter period, by notifying the Owners 30 days prior to the natural expiration of each Charter period, as the case may be.
   
Periodical
Drydocking
 
 
22. (a) Owners have the right and obligation to drydock the vessel at regular intervals of as required by Classification Society and in case of emergency. On each occasion Owners shall propose to Charterers a date on which they wish to drydock the vessel, not less than 90 days before such date, and Charterers shall offer a port for such periodical drydocking and shall take all reasonable steps to make the vessel available as near to such date as practicable.
Owners shall put the vessel in drydock at their expense as soon as practicable after Charterers place the vessel at Owners' disposal clear of cargo other than tank washings and residues. Owners shall be responsible for and pay for the disposal into reception facilities of such tank washings and residues and shall have the right to retain any monies received therefor, without prejudice to any claim for loss of cargo under any bill of lading or this charter.
(b) If a periodical drydocking is carried out in the port offered by Charterers (which must have suitable accommodation for the purpo0se and reception facilities for tank washings an residues), the vessel shall be off hire from the time she arrives at such port until drydocking is completed and she is in every way ready to resume Charterers' service and is at the position at which she went off hire or a position no less favourable to Charterers, whichever she first attains. However
(i) provided that owners exercise due diligence in gas freeing, any time lost in gas freeing to the standard required for entry into drydock for cleaning or painting the hull shall not count as off hire, whether, lost on passage to the drydocking port or after arrival there (notwithstanding Clause 21), and
(ii) any additional time lost in further gas freeing to meet the standard required for hot work or entry to cargo tanks shall count as off hire, whether lost on passage to the drydocking port or after arrival there.
Any time which, but for sub clause (i) above, would be off hire, shall not be included in any calculation under Clause 24.
Time and The expenses of gas-freeing, including without limitation the cost of bunkers, shall be for Owners' account.
(c) If Owners require the vessel,  instead of proceeding to the offered port, to carry out periodical drydocking at a special port selected by them, the vessel shall be off-hire from the time when she is released to proceed to the special port until she next presents for loading in accordance with Charterers' instructions, provided, however, that Charterers shall credit Owners with the time which would have been taken on passage at the service speed had the vessel not proceeded to drydock. All fuel consumed shall be paid for by Owners but Charterers shall credit Owners with the value of the fuel which would have been used of such notional passage calculated at the guaranteed daily consumption for the service speed, and shall further credit Owners with any benefit they may gain in purchasing bunkers at the special port.
(c)          Charterers shall, insofar as cleaning for periodical drydocking may have reduced the amount of tank cleaning necessary to meet Charterers' requirements credit Owners with the value of any bunkers which Charterers calculate to have been saved thereby, whether the vessel drydocks at an offered or a special port.

 
 
 


Ship Inspection
 
23.            Charterers shall have the right at any time during the charter period to make such inspection of the vessel as they may consider necessary. This right may be exercised as often and at such intervals as Charterers in their absolute discretion may determine and whether the vessel is in port or on passage. Owners affording all necessary co-operation and accommodation on board provided, however,
(i)           That neither the exercise nor the non-exercise, nor anything done or not done in the exercise or non-exercise, by Charterers of such right shall in any way reduce the master's or Owners' authority over, or responsibility to Charterers or third parties for, the vessel and every aspect of her operation, nor increase Charterers' responsibilities to Owners or third parties for the same; and
(ii)         That Charterers shall not be liable for any act, neglect or default by themselves, their
servants or agents in the exercise or non-exercise of the aforesaid right.
 
   
Detailed
Description
24.        (a) Owners guarantee that the speed and consumption of the vessel shall be as follows:-
And
Performance
Average speed
In knots
 
Laden
Maximum average bunker consumption
main propulsion-auxiliaries
Fuel oil /diesel oil  fuel oil /diesel   oil
Tonnes                      tonnes
 
   
   
   
 
Ballast
   
   
   
 
See Vessels Description Clause Number 1 and over performance Clause Number 26
 
The foregoing bunker consumptions are for all purposes except cargo heating and tank cleaning and shall be pro-rated between the speeds shown.
The service speed of the vessel is       knots laden and           knots in ballast and in the absence of Charterers' orders to the contrary the vessel shall proceed at the service speed. However if more than one laden and one ballast speed are shown in the table above Charterers shall have the right to order the vessel to steam at any speed within the range set out in the table (the "ordered speed").
If the vessel is ordered to proceed at any speed other than the highest speed shown in the table, and the average speed actually attained by the vessel during the currency of such order exceeds such ordered speed plus 0.5 knots (the "maximum recognised speed"), than for the purpose of calculating any increase or decrease of hire under this Clause 24 the maximum recognized speed shall be used in place of the average speed actually attained.
 
For the purposes of this charter the "guaranteed speed" at any time shall be the then-current ordered speed or the service speed, as the case may be
The average speeds and bunker consumptions shall for the purposes of this Clause 24 be calculated by reference to the observed distance from pilot station to pilot station on all sea passages during each period stipulated in Clause 24(c) , but excluding any time during which the vessel is (or-but-for Clause   22 (b) (i) would be) off-hire and also excluding "Adverse Weather Periods", being (i) any periods during which reduction of speed is necessary for safety in congested waters or in poor visibility (ii) any days, noon to noon, when winds exceed force 8 5 on the Beaufort Scale for more than 12 hours.
(b) If during any year from the date on which the vessel enters service (anniversary to anniversary) the vessel falls below or-exceeds the performance guaranteed in Clause 24 (a) then if such shortfall  or excess   results
(i)From a reduction or an increase in the average speed of the vessel, compared to the speed guaranteed its Clause 24 (a), then an amount equal to the value at the hire rate or the time so lost or gained, as the case may be, shall be deducted from or added to the hire paid;
(ii) From an increase or a decrease in the total bunkers consumed, compared to the total bunkers which would have been consumed had the vessel performed as guaranteed in Clause 24 (a), an amount equivalent to the value of the additional bunkers consumed or the bunkers saved, as the case may be , based on the average price paid by Charterers for the vessel's bunkers in such period, shall be deducted from or added to the hire paid.
The   addition to or deduction from hire so calculated for laden and ballast mileage respectively shall be adjusted to take into account the mileage steamed in each such condition during Adverse Weather Periods, by dividing such addition or deduction by the number of miles over which the performance has been calculated and multiplying by the same number of miles plus the miles steamed during the Adverse Weather Periods, in order to establish the total  addition to or  deduction from hire to be made for such period.
Reduction of hire under the foregoing sub-Clause (b) shall be without prejudice to any other remedy available to Charterers.
(c)      Calculations under this Clause 24 shall be made for the yearly periods terminating on each successive anniversary of the date on which the vessel enters service, and for the period between the last such anniversary and the dale of termination of this charter if less than a year. Claims in respect of reduction of hire arising under this Clause during the final year or part year of the charter period shall in the first instance be settled in accordance with Charterers' estimate made two months before the end of the charter period. Any necessary adjustment after this charter terminates shall be made by payment by Owners to Charterers or by Charterers to
(d) Owners a
(e) the case may require. Payments in respect increase of hire arising under this Clause shall be made promptly after receipt by Charterers of all the information necessary to calculate such increase .
 

 
 
 


Salvage
 
 
25.       Subject to the provisions of Clause 21 hereof, all loss of time and all expenses (excluding any damage to or loss of the vessel or tortious liabilities to third parties) incurred in saving or attempting to save life or in successful or unsuccessful attempts at salvage shall be borne equally by Owners and Charterers provided that Charterers shall not be liable to contribute towards any salvage payable by Owners arising in any way out of services rendered under this Clause 25.
All salvage and all proceeds from derelicts shall be divided equally between Owners and Charterers after deducting the master's, officers' and crew's share.
 
   
Lien
26. Owners shall have a lien upon all cargoes and freights, sub-freights and demurrage for any amounts due under this charter; and Charterers shall have a lien on the vessel for all monies paid in advance and not earned, and for all claims for damages arising from any breach by Owners of this charter.
 
   
Exceptions
 
27.       (a)      The vessel, her master and Owners shall not, unless otherwise in this charter expressly provided, be liable for any loss or damage or delay or failure arising or resulting from any act, neglect or default of the master, pilots, mariners or other servants of Owners in the navigation or management of the vessel: fire, unless caused by the actual fault or privity of Owners: collision or stranding; dangers and accidents of the sea; explosion, bursting of boilers, breakage of shafts or any latent defect in hull, equipment or machinery: provided, however that Clauses 1,2,3 and 24 hereof shall be unaffected by the foregoing. Further, neither the vessel, her master or Owners, nor Charterers shall, unless otherwise in this charter expressly provided, be liable for any loss or damage or delay or failure in performance hereunder arising or resulting from act of God, act of war, seizure under legal process, quarantine restrictions, strikes, lock-outs, riots, restraints of labour, civil commotions or arrest or restraint of princes, rulers or people.
(b)      The vessel shall have liberty to sail with or without pilots, to tow or go to the assistance of vessels in distress and to deviate for the purpose of saving life or property.
(e)      Clause 27(a) shall not apply to or affect any liability of Owners or the vessel or any other relevant person in respect of
(i)   loss or damage caused to any berth, jetty, dock, dolphin, buoy, mooring line pipe or crane or other works or equipment whatsoever at or near any place to which the vessel may proceed under this charter, whether or not such works or equipment belong to Charterers, or
(ii)   any claim ( whether brought by Charterers or any other person) arising out of any loss of or damage to or in connection with cargo. Any All such claims shall be subject to the Hague-Visby Rules or the Hague Rules, as the case may be, which ought pursuant to Clause 38 hereof to have been incorporated in the relevant bill of lading (whether or not such Rules were so incorporated) or, if no such bill of lading is issued, to the Hague-Visby Rules.
(d)      In particular and without limitation, the foregoing subsections (a) and (b) of this Clause shall not apply to or in any way affect any provision in this charter relating to off-hire or to reduction of hire.
 
   
Injurious
Cargoes
 
 
28.   No acids, explosives or cargoes injurious to the vessel shall be shipped and without prejudice to the foregoing any damage to the vessel caused by the shipment of any such cargo and the time taken to repair such damage, shall be for Charterers' account. No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments.
 
   
Grade of Bunkers
 
29.            Charterers shall supply marine diesel oil/fuel oil with a maximum viscosity of 380 Centistokes at 50 degrees-Centigrade according to RMG 35 /ACGFO for main propulsion and diesel oil /ACGFO according to DMA for the auxiliaries. If Owners require the vessel to be supplied with more expensive bunkers they shall be reliable for the extra cost thereof. (See also additional Clause 38).
Charterers warrant that all bunkers provided by them in accordance herewith shall be of a quality complying with the International Marine Bunker Supply Terms and conditions of Shell International Trading Company and with its specification for marine fuels as amended from time to time.
   
Disbursements
30.       Should the master require advances for ordinary disbursements at any port, Charterers or their agents shall make such advances to him, in consideration of which Owners shall pay a commission of two and a half per cent, and all such advantages and commissions shall be deducted from hire.
   
Laying-up
31.             Charterers shall have the option, after consultation with Owners, of requiring Owners to lay up the vessel at a safe places nominated by Charterers, in which case the hire provided for under this charter shall be adjusted to reflect any net increases in expenditure reasonably incurred or any net saving which should reasonably be made by Owners as a result of such lay up.  Charters may exercise the said option any number of times during the charter period.
   
Requisition
32.       Should the vessel be requisitioned by any government, de facto or de jure, during the period of this charter, the vessel shall be off-hire during the period of such requisition, and any hire paid by such government in respect of such requisition period shall be or Owners' account. Any such requisition period shall count as part of the charter period.

 
 
 


Outbreak of War
 
33. If war hostilities break out between any two or more of the following countries: USA., Russia and CIS States, PRC, UK, Netherlands, Germany, France, Italy in so far that such areas have been declared War Risk areas by the War Risk rating committee in London as recognised by the Lloyds of London both Owners and Charterers have the right to cancel this Charter. However neither party shall be entitled to terminate this Charter Party on account of minor and/or local warlike operation or economic warfare anywhere which will not interfere with the vessel's trade. This cancellation to be declared within a period of 15 days from the date in which the Hull & Machinery insurers officially report the outbreak of such war. If war or hostile break out between two or more of the following countries: USA, U.S.S,R., P.R.C., U.K., Netherlands, both Owners and Charterers shall have the right to cancel this charter.
   
Additional War
Expenses
 
 
34. If the vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war, Charterers shall reimburse Owners for any additional insurance premia, (net of discounts) including Hail & Machinery and Loss of  Hire, crew bonuses and other expenses which are reasonably incurred by Owners as a consequence of such orders, provided that Charterers are given notice of such expenses as soon as practicable and in any event before such expenses are incurred, and provided further that Owners obtain from their insurers a waiver of any subrogated rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders.
   
War Risks
35. See Rider Clause 32 (a) The maser shall not be required or bound to sign bills of lading for any place which in his or Owners' reasonable opinion is dangerous or impossible for the vessel to enter or reach owing to any blockade, war, hostilities, warlike operations, civil war, civil commotions or revolutions.
(b)             If in the reasonable opinion of the maser or Owners it becomes, for any of the reasons set out in Clause 35(a) or by the operation of international law, dangerous, impossible or prohibited for the vessel to reach or enter, or to load or discharge cargo at, any place to which the vessel has been ordered pursuant to this charter (a "place or period"), then Charterers or their agents shall be immediately notified by telex or radio message, and Charterers shall thereupon have the right to order the cargo, or such part of it as may be affected, to be loaded or discharged, as the case may be, at any other place within the trading limits of this charter (provided such other place is not itself a place of peril). If any place of discharge is or becomes a place of period, and no orders have been received from Charterers or their agents within 48 hours after dispatch of such messages, then Owners shall be at liberty to discharge the cargo or such part of its as may be affected at any place which they or the maser may in their or his discretion select within the trading limits of this charter and such discharge shall be deemed to be due fulfillment of Owners' obligations under this charter so far as the cargo so discharged is concerned.
(c)             The vessel shall have liberty to comply with any directions and recommendations as to departure, arrival, routes, ports of call, stoppages, destinations, zones, waters, delivery or in any other wise whatsoever given by the government of the state under whose flag the vessel sails or any other government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority or by any committee or person having under the terms of the war risk insurance on the vessel the rigt to give any such directions or recommendations.  If by reason of or in compliance with any such directions or recommendations anything is done or is not done, such shall not be deemed a deviation .
If by reasons of or in compliance with any such direction or recommendation the vessel does not proceed to any place of discharge to which she has been ordered pursuant to this charter, the vessel may proceed to any place which the maser or Owners in his or their discretion select and there discharge the cargo or such part of it as may be affected.  Such discharge shall be deemed to be due fulfillment of Owners' obligations under this charter so far as cargo so discharged is concerned.
Charterers shall procure that all bills of lading issued under this charter shall contain the Chamber of Shipping War Risks Clause 1952.
   
Both to blame
Collision Clause
 
 
36. If the liability for any collision in which the vessel is involved while performing this charter falls to be determined in accordance with the laws of the United States of America, the following provision shall apply; "If the ship comes into collision with another ship as a result of the negligence of the other ship and any act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship, the owners of the cargo carried hereunder will indemnify the carrier against all loss, or liability to the other or non-carrying ship or her owners in so far as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of the said cargo, paid or payable by the other or non- carrying ship or her owners to the owners of the said cargo and set off, recouped or recovered by the other or non-carrying ship or her owners as part of their claim against the carrying ship or carrier".
"The foregoing provisions shall also apply where the owners, operators or those in charge of any ship or ships or objects other than, or in addition to, the colliding ships or objects are at fault in respect of a collision or contract".
Charterers shall procure that all bills of lading issued under this charter shall contain a provision in the foregoing terms to be applicable where the liability for any collision in which the vessel is involved falls to be determined in accordance with the laws of the United States of America.
   
New Jason
Clause
 
37. General average contributions shalt be payable according to the York/Antwerp Rules, 1974, 1994, as amended from time to time and shall be adjusted in London in accordance with English law and practice but should adjustment be made in accordance with the law and practice of the United States of America, the following provision shall apply:
"In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the carrier is not responsible by statute, contract or otherwise, the cargo, shippers, consignees or owners of the cargo shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses

 
 
 


 
of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo"
"If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers, such deposit as the earner or his agents may deem sufficient to cover the estimated contribution of the cargo and any salvage and special charges thereon shall, if required, be made by the cargo, shippers, consignees or owners of the cargo to the carrier before delivery."
Charterers shall procure that all bills of lading issued under this charter shall contain a provision in the foregoing terms, to be applicable where adjustment of general average is made in accordance with the laws and practice of the United States of America.
   
Clause Paramount
38. Charterers shall procure that all bills of lading issued pursuant to this charter shall contain the following clause:
"(1) Subject to sub-clause (2) hereof, this bill of lading shall be governed by, and have effect subject to, the rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading signed at Brussels on 25 th August 1924 (hereafter the "Hague Rules") as amended by the Protocol signed at Brussels on 23 rd February 1968 (hereafter the "Hague-Visby Rules"). Nothing contained herein shall be deemed to be either a surrender by the carrier of any of his rights or immunities or any increase of any of his responsibilities or liabilities under the "Hague-Visby Rules".
"(2) If there is governing legislation which applies the Hague Rules compulsorily to this bill of lading to the exclusion of the Hague-Visby Rules, then this bill of lading shall have effect subject to the Hague Rules. Nothing herein contained shall be demised to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hague Rules."
"(3)  If any term of this bill of lading is repugnant to the Hague-Visby Rules or Hague Rules if applicable, such term shall be void to that extent but no further."
"(4)  Nothing in this bill of lading shall be construed as in any way restricting, excluding or waiving the right of any relevant party or person to limit his liability under any available legislation and/or law."
 
   
TOVALOP
 
39.            Owners warrant that the vessel is:
(i) a tanker in TOVALOP and.
(ii) Properly enter in Steamship Mutual P&I Club
and will so remain during the currency of this charter.   See ITOPF Clause 28
When an escape of discharge of Oil occurs from the vessel and causes or threatens to cause Pollution Damage, or when there is the Threat of an escape or discharge of Oil (i.e. a grave and imminent danger of the escape or discharge of Oil which, if it occurred, would create a serious danger of Pollution Damage, whether or not an escape or discharge in fact subsequently occurs), then Charterers may, at their option, upon notice to Owners or master, undertake such measures as are reasonably necessary to prevent or minimize such Pollution Damage or to remove the Threat, unless Owners promptly undertake the same. Charterers shall keep Owners advised of the nature and result of any such measures taken by them and, if time permits, the nature of the measures intended to be taken by them.. Any of the aforementioned measures taken by Charterers shall be deemed taken on Owners' authority as Owners' agent, and shall be at Owners' expense except to the extent that:
(1) any such escape or discharge or Threat was caused or contributed to by Charterers, or
(2) by reason of the exceptions set out in Article III, paragraph 2, of the 1969 International Convention on Civil Liability for Oil Pollution Damage.  Owners are or, had the said Convention applied to such escape or discharge or to the Threat, would have been exempt from liability for the same, or
(3) the cost of such measures together with all other liabilities, costs and expenses of Owners arising out of or in connection with such escape or discharge or Threat exceeds one hundred and sixty United States Dollars (US$106) per ton of the vessel's Tonnage or sixteen million eight hundred thousand United States Dollars (US$16,800,000), whichever is the lesser, save and insofar as Owners shall be entitled in recover such excess under either.
The 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage or under CRISTAL;
PROVIDED ALWAYS that if Owners in their absolute discretion consider said measures should be discontinued, Owners shall so notify Charterers and thereafter Charterers shall have no right to continue said measures under the provisions of this Clause 39 and all further liability to Charterers under this Clause 39 shall thereon cease.
The above provisions are not in derogation of such other rights as Charterers or Owners may have under this charter or may otherwise have no acquire by law or any International Convention or TOVALOP.
The term "TOVALOP" means the Tanker Owners' Voluntary Agreement Concerning Liability for Oil Pollution dated 7 th January 1969, as amended from time to time, and the term "CRISTAL" means the Conmet Regarding an Interim Supplement to Tanker Liability for Oil Pollution dated 14 th January 1971, as amended from time to time.  The term "Oil", "Pollution Damage", and "Tonnage" shall for the purposes of this Clause 39 have the meaning ascribe to them in TOVALOP
   
Export Restriction
40. The master shall not be required or bound to sign bills of lading for the carriage of cargo to any place to which export of such cargo is prohibited under the laws, rules or regulations of the country in which the cargo was produced and/or shipped.
Charterers shall procure that all bills of lading issued under this charter shall contain the following clause:
"If any laws rules or regulations applied by the government of the country in which the cargo was produced and/or shipped, or any relevant agency thereof, impose a prohibition on export of the cargo to the place of discharge designated in or ordered under this bill of lading, carriers shall be entitle to require cargo owners forthwith to nominate an alternative discharge place for the discharge of the cargo, or such part of it as may be affected, which alternative place shall not be subject to the prohibition, and carriers shall be entitled to accept orders from cargo owners to proceed to and discharge at such alternative place. If cargo owners fail to nominate an alternative place within 72 hours after they or their agents have received from carriers notice of such prohibition, carriers shall be at liberty to discharge the cargo or such part of it as may be affected by the prohibition at any safe

 
 
 


 
place on which they or the master may in their absolute discretion decide and which is not subject to the prohibition, and such discharge shall constitute due performance of the contract contained in this bill of lading so far as the cargo so discharged is concerned".
The foregoing provision shall apply mutatis mutandis to the charter, the reference to a bill of lading being deemed to be references to this chapter.
   
Law and
Litigation
 
 
 
41. (a) This charter shall be construed and the relations between the parties determined in accordance with the laws of England.
(b) Any dispute arising under this charter shall be decided by as per LMAA Arbitration Clause (see clause 27 of the rider) the English Courts to whos jurisdiction the parties hereby agree.
(c) For smaller disputes upto US$ 100,000 the small claim procedure laid by the London Maritime Arbitrators Association and any subsequent amendment thereto shall apply.
(d) Notwithstanding for foregoing, but without prejudice to any party's right to arrest or maintain the arrest of any maritime property, either party may, by giving written notice of election to the other party, elect to have any such dispute referred to the arbitration of a single arbitrator in London in accordance with the provisions of the Arbitration Act 1950, or any statutory modification or re-enactment thereof for the time being in force.
(i) A party shall lose its right to make such an election only if:
(a) It receives from the other party a written notice of dispute which.
(1) States expressly that a dispute has arisen out of this charter;
(2) Specifies the nature of the dispute; and
(3) Refers expressly to this clause 41 (c)
and
(b) It fails to give notice of election to have the dispute referred to arbitration not later than 30 days from the date of receipt of such notice of dispute
(ii) The parties hereby agree that either party may
(a) appeal to High Court on any question of law arising out of an award;
(b) apply to the High Court for an order that the arbitrator state the reasons of his award;
(c) give notice to the arbitrator for that a reasoned award is required; and
(d) It shall be a condition precedent to the right of any party to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay.
   
Construction
42. The side headings have been included in this charter for convenience of reference and shall in no way affect the construction hereof.
"Charterers" Additional Clauses from No.1 to No. 40 attached hereto are to be incorporated into this Charter Party.
   
   
 


 
The Owners :
   
       
 
The Charterers :
   


 
 
 


 
ADDITIONAL CLAUSES
 
TIME CHARTER PARTY DATED
 
1. VESSEL'S DESCRIPTION CLAUSE
Owners guarantee the following speed/consumption in moderate weather up to and including Beaufort Scale Force 5 excluding voyages of less than 24 hours and areas such as restricted channels and where slow speed is required by authorities of the port. Calculation to be made from full away on leaving last pilot to end of seapassage,
 
Class: ABS +Al (E), Crude and Oil Product Carrier, +AMS, +ACCU, SH, SHCM, ReS, VBC(-L)
Deadweight: 72,515 mt
 

Gross Tonnage: Net Tonnage:
41,526 mt
20,970 mt

Main dimensions:
LOA: 227.8 Metres
LBP: 219 Metres
Beam: 32.24 Metres
Depth: 20.6 Metres
 
Cargo cubic capacity (including slop tanks)(98%): 83,058.20 m 3
 
Main engine/power: MAN B&GW6S60MC — 14,100 BHP
 
Speed/consumption
 
All consumption expressed in tonnes of IFO 380 per day, unless otherwise specified. Consumption up to Beaufourt 5 included, at service speed.


Ballast
Laden
14.5 knots on 37.0 mt + 3.0 mt
14.0 knots on 37.0 mt + 3.0 mt
 
Maintain Cargo Temperature upto 135 F
10 mt Ifo
 
Increase Temperature from 44 To 66 C
 
(Air 0 Deg - Sea 5 Deg) in 96 Hours
120 mt Ifo/Total
 
Inerting all tanks by IGS
20 mt Ifo per 36 Hrs or 13.3 mt Ifo per day
 
Diesel generator idle
3.0 mt Ifo
Boilers idle
4.0 mt Ifo
 
Discharging in 24 hrs
32.0 mt Ifo + 12.0 Mt of mgo
Loading
10.0 mt Ifo


 
 
 


Ballasting/Deballasting     
8.0 mt Ifo X 12 Hrs
 
 
Butterworth all tanks about 36 hrs 
17.0 mt Ifo
 
Vessels full description as given and vessel speed and consumptions are guaranteed as average speed for voyages over 24 hrs and subject to vessel not remaining idle in tropical waters for more than 15 days, Actual speed and consumptions are to be compared against the TCP figures above and shall be mutually revised/agreed between Owners and Charterers after six months of trading however final consumptions to be in line for with those of similar vessels/engines. No claims in respect of the Vessel's performance shall be submitted by either party during the first six months of trading. The speed and consumption so agreed by Owners and Charterers to be included into an addendum to be attached to this TCP.
 
Cargo System/pumps:  
3 steam driven centrifugal pumps of 2,000 Cu M/hr each
 
 
Ballast system/pumps: 
2 electric driven centrifugal pumps of 1,200 Cu M/hr each
 
 
Auxiliary boilers: 
2 Aalborg 2.0 ton/hr x 16.6 Kg/cm2
Exhaust:   
1 Kangrim 1.0 ton/hr x 6 Kg/em2
 
 
Mooring equipment:   according to OCIMF requirements
   
Lifting equipment:  1 hose handling crane 15 mt
                                                
2.   COFR CLAUSE
If U.S.A. trade all cost payable per call related to COFR and OPA 90 to be paid by Charterers to Owners against relevant documents, Owners to pass any relevant discount on the above to Charterers.

 
3.  TRADING LIMITS CLAUSE
Vessel to trade between good and safe ports/places, always afloat, worldwide within the current Institute Warranty Limits, however excluding: Albania, Turkish controlled Cyprus, Arab League boycotted countries, Sierra Leone, Liberia, Haiti, Orinoco river, Caripito, Somalia, Eritrea,Yugoslavia and former Yugoslavian republics (but including Omisalj and Rijeka), North Korea, Kampuchea and Vietnam, any voyage which will incur the risk of black listing and/or boycotting, war zones as defined by Lloyds of London and any other areas to which restrictions may be imposed by the United States, or the United Nations, or the flag state, The vessel is not allowed to trade Cuba during the last 6 months of the c/p. The vessel can trade Israel on a case-by-case basis and subject to the Owner's consent, Charterers may be allowed to order the ship to any war zones as defined by Lloyd's of London upon payment by Charterers of any additional insurance premiums required by the vessel's underwriters for such breach subject to owners prior consent which shall not be unreasonably withheld. Charterers may be allowed to breach Institute Warranty Limits, however breach of IWL to be always subject to owners/head owners approval on a case by case basis and upon payment by Charterers of any additional insurance premiums required by the Vessel's Underwriters for such breach. Vessel not to force ice nor follow ice-breakers,

 
 
 


 
4.  EXXON DRUG CLAUSE
Owners warrant that it has a policy on drug and Alcohol abuse ("Policy") applicable to the vessel which meets or exceeds the standards in the Oil International Marine Forum Guidelines for the Control of Drug and Alcohol onboard Ship. Under the Policy, alcohol impairment shall be defined as a blood alcohol content of 40 mg/I00 ml or greater; the appropriate seafarers to be tested shall be all vessel's officers and the drug / alcohol testing and screening shall include unannounced testing in addition to routine medical examinations. An objective of the Policy should be that the frequency of the unannounced test be adequate to be as an effective abuse deterrent, and that all officers to be tested at least once a year through a combined program of announced testing, and routine medical examinations. Owners further warrant that the policy will remain in effect during the term of this charter and that the owners shall exercise due diligence to ensure that the policy is complied with,

 
5.  DETENTION CLAUSE
Should the vessel be seized or detained by any authority or arrested at the suit of any party having or purporting to have a claim against any interest of the vessel borne by the owner, hire shall not be payable in respect of any period during which the vessel is not at Charterers' use and all extra expenses shall be for Owners' account.
 
6.  STS - LIGHTERING CLAUSE
Owners shall allow transfer of cargo between the vessel and another vessel made fast alongside or while underway. However such procedure always subject to master's approval and to be in accordance with the ICS/OCIMF Ship to Ship Transfer guide (Petroleum), All extra equipment required and extra expenses incurred for such transfer operation shall be provided by Charterers for their account,
 
7.  FINANCIAL RESPONSIBILITY IN RESPECT OF POLLUTION CLAUSE
(1) Owners warrant that throughout the currency of this Charter they will provide the vessel with the following certificates:
 
(a)   Certificates issued pursuant to the Civil Liability Convention 1969 (`CLC"), and pursuant to the 1992 protocols to the CLC, as and when in force
 
(b)   Certificates issued pursuant to the Section 1016 (a) of the Oil Pollution Act 1990, and Section 108 of the Comprehensive Environmental Response, Compensation and Liability Act 1980, as amended in accordance with Part 138 of Coast Guard Regulations 3 CFR, so long as these can be obtained by the owners from or by (identify the applicable scheme or schemes)
 
(c)   Any other similar certificates of responsibility which may be required of Owners during the currency of this Charter Party to the extent that such certification can be readily and commercially obtained such that a prudent owner trading for his own account would obtain such certification.
 

 
 
 


 
(2) Notwithstanding anything whether printed or typed herein to the contrary,
 
(a)   save as required for compliance with paragraph (1) hereof, owners shall not be required to establish or maintain financial security or responsibility in respect of oil or other pollution damage to enable the vessel lawfully to enter, remain or leave any port, place, territorial or contiguous waters of any country, state or territory in performance of this Charter
 
(b)   Charterers shall indemnify owners and hold them harmless in respect of any loss, damage, liability or expense (including but not limited to the costs of any delay incurred by the vessel as a result of any failure by the charterers promptly to give alternative voyage orders) whatsoever and howsoever arising which owners may sustain by reason of any requirement to establish or maintain financial security or responsibility in order to enter, remain in or leave any port, place or waters, other than to the extent provided in paragraph (1) hereof.
 
(c)   Owners shall not be liable for any loss, damage, liability or expense whatsoever and howsoever arising which charterers and/or the holders of any bill of lading issued pursuant to this Charter may sustain by reason of any requirement to establish or maintain financial security or responsibility in order to enter, remain or leave any port, place or waters, other than to the extent provided in paragraph (1) hereof.
 
(3)
Owners warrant that they have and will maintain through the period of this charter party the Standard Oil Pollution Insurance cover issued by the vessel's P & I club (currently USD One billion)
 
(4)
if requested by Charterers, Owners shall promptly furnish to the Charterers proper evidence of such P & I Insurance and Excess Insurance immediately upon signing this charter or any time during the charter term. The above warranty is to be regarded as an essential part of this charter, which is conditional on its truth or performance, so that the breach entitles the charterers in eharterer's option, to terminate the charter and/or recover any damages allowable in Law.
 
Charterers warrant that terms of this clause will be incorporated effectively into any bill of lading issued pursuant to this charter,
 
8.  NOTICE CLAUSE
Owners and Charterers to give delivery/re-delivery notices, respectively: 15, 10 days approximate and 7, 5, 3, 2, 1 days definitive,
 
9.  ENGLISH LANGUAGE CLAUSE
Owners/Managers undertake to have English speaking personnel available to ensure appropriate communications between Chatterers/Owners/Managers/Agents/ Authorities/ Terminal Officials.

 
 
 


 
10.  CHANGE OF OWNERSHIP CLAUSE
Throughout the duration of this Charter party, the Owners shall have the right to sell the vessel or to change management of the vessel, subject to the prior consent of Charterers, which shall not be unreasonably withheld.
 
11.  REMEASURING CLAUSE
Owner guarantee to immediately upon Charterers' request remeasure the vessel's DWT for the purpose of satisfying certain port/terminal regulations; such remeasurement will be performed by the Vessel's Registry subject availability and in accordance to the Vessel's Flag state regulations. All time and expenses for remeasurement to be for the Charterers' account against Owners' proper documentation and invoice.
 
12.  ITF CLAUSE
Ref. to clause 1. Owners warrant that the vessel has I.T.F. or equivalent certificate on board. In any event of the vessel being delayed by no compliance with the above or being rendered inoperative by strikes, labour stoppages, or by any difficulties due to vessel flag, ownership, crew, terms of employment of officers or, crew, or any other vessel under the same ownership, operation or control, all time lost is to be considered as off hire and expenses to be for Owners' account.
 
13.  IGS/SBT/COW SYSTEMS CLAUSE
Owners warrant that the vessels is equipped with an inert gas system and segregated ballast tanks on board the vessel and said system are in working order and shall be operational during the duration of this charter,
 
In the event is required by terminal personnel or independent inspectors to breach the inert gas system for the purpose of gauging, sampling, temperature determination or ascertaining remaining on board quantities after discharge, the master shall comply with these requirements consistent with safe operation of the vessel and regulations of the port.
 
If requested by Charterers, Owners agree to conduct crude oil washing of all cargo tanks at discharge port(s) simultaneously with discharge operations.
 
If the above systems are not in good working conditions due to the vessel/crew/Owners' negligence and is causing delay in vessel's normal operations, the vessel will be put off hire for such time actually lost and bunkers consumed shall be for Owners' account.
 
14.  HEATING CLAUSE
Vessel to load cargo up to and maximum 165 degrees Fahrenheit. Vessel to be able through the time charter period to maintain the cargo temperature up to maximum of 135 degrees Fahrenheit. Vessel to heat up to 10 degrees Celsius in 96 hours, but cargo temperature never to exceed 145 degrees


 
 
 


 
Fahrenheit.
 
15.  CLEANING VESSEL CLAUSE
Owners/Master to be at Charterers' disposal for all tank cleaning making full use of the vessel's crew and equipment. Owners, master and crew to use best endeavour to minimise cleaning time and expenses.
 
16.  CAST IRON CLAUSE
Owners warrant that all riser valves and fittings, outboard of the last fixed rigid support to the vessel's deck that are used in the transfer of cargo or ballast will be made of steel or nosular iron and that only one steel reducer or spacer will be used between the vessel's valve and the loading arm. The fixed rigid support must be designed to prevent both lateral and vertical movement of the transfer manifold
 
17.  CARGO RETENTION CLAUSE
In the event that any cargo remain on board upon completion of discharge, Charterers shall have the right to claim against Owners an amount equal to the FOB port of loading value of such cargo plus freight due with respect thereto, provided that volume of such cargo is liquid, pumpable and reachable by vessel's normal discharge equipment as determined by an independent surveyor. The independent surveyor to be mutually agreed by both parties,
 
18.  ELIGIBILITY CLAUSE
Owners warrant the vessel is in all respects eligible under applicable conventions, laws and regulations for trading to the ports and places as specifies under this time charter. Owners warrants that vessel should have onboard for inspection by the appropriate authorities, all certificates, records, compliance letters, contingency plans and other documents required for such service, including but not limited to, the US Coast Guard Certificate of Financial Responsibility and the Certificate required by the International Convention on Civil Liability for Oil Pollution Damage 1969, as amended.
 
Owners further warrant that the vessel does, and will comply with all applicable conventions, laws, regulations and ordinances of any international, national states or local government entity having jurisdiction including but not limited to the US. Port and Tanker Safely Ad, as amended, the US Federal Water Pollution Control Act as amended, the International Convention for the Prevention of Pollution from Ships (MARPOL 1973) as amended together with 1978 protocol and 1984 amendments thereto and the International Convention for Safety of Life at Sea (SOLAS 1974) as amended together with 1978 Protocol and 1981/1 983 amendment thereto, IMO regulations.
 
Any delays, losses, expenses or damages arising as a result of failure to comply with this clause, shall be for Owner's account and charterers shall not be liable for any delay caused by Vessel's failure to comply the above warranties.
 
Notwithstanding any other provisions to the contract, if during the currency of the Time Charter party any laws and/or regulations are appraised and engaged prohibiting or restricting the employment of the vessel in her reasonably intended trade, Charterers shall without prejudice have the option to cancel the Time Charter Party, unless Owners decide to make the vessel in full compliance with such laws and/or regulations whereby the vessel can trade fully and freely according to the terms of the Charter Party.
 


 
 
 


 
19.  COMPLIANCES WITH REGULATIONS CLAUSE
Owners warrant that all trading certificates will remain valid during the course of this Chatter Party and the vessel will comply with all regulations in force al the ports within the trading range, as defined in C1.3 of this rider. If vessel fails to comply with the above, any damages, costs, delays or losses incurred will be, in any ease, for Owners account and Charterers shall have the option to put the vessel off-hire. Vessel shall not be put off-hire for alleged non-compliances only.
 
Should new legislations, rules and regulations ho adopted by any country, government body of other legislative authority so to affect the tradability of the vessel to any country, port or place under the terms of this charter party, then Owners and Charterers undertake to act reasonably in all circumstances, in a spirit of good cooperation, to discuss and find the right solution(s).
 
20.  LIBYAN CERTIFICATE CLAUSE
If required for calls to Libya, Charterers shall arrange for the Vessel's certificates to be translated into the Arabic language for their risk and time, and at Charterers' cost for the translation.
 
21.  O.C.I.M.F. CLAUSE
Ref, to Clause 1, Owners warrant that the vessel fully complies with Standards and Recommendations OCIMF for Oil Tankers, 1981 International safety Guide for Oil Tankers and Terminals, Standards for Oil Tankers Manifold and Associated Equipment (latest edition), Ship to Ship Transfer Guide (Petroleum) (latest edition) and Recommendation for Equipment Employed in the mooring of the Ship at single point Moorings (latest edition) and any future amendment thereto.
 
Should new legislations, rules and regulations adopted by any country, government body of other legislative authority so to affect the tradability of the vessel to any country, port or place under the terms of this charter party, then Owners and Charterers undertake to act reasonably in all circumstances, in a spirit of good cooperation, to discuss and find the right solution(s).
 
22.  VETTING CLAUSE
1.. Throughout the duration of this charter, owners to arrange for the following oil company inspections at their time and expense: bp, shell, exxon/mobil, chevrontexaco and total, subject always to (i) the vessel's trading pattern, (ii) the oil company's acceptance criteria regarding new building vessels, (iii) the availability of inspectors at that time and (iv) that owners requests for vetting inspections are not declined unreasonably for oil companies' reasons.
 
2.      however, since the vessel is a new building, owners shall be granted a period of 3 (three) months from the completion of the first voyage under this charter to have the vessels inspected by the majors listed above, but always subject to the limitations provided in subparagraph (1) above.

 
 
 


 
3.   if during the charter period, the vessel is found to be unacceptable by any of the major oil companies, listed in subparagraph (1) above, owners will immediately take steps to rectify any outstanding deficiencies at owners' expense and shall have the vessel re-inspected by the involved major oil company as soon as practicable, but always subject to the limitations provided in subparagraph (1) above.
 
4.   in the event that
 
(a)   either the vessel fails to obtain the acceptance(s) as per paragraph 2) above and she remains unacceptable for one or more oil companies for sixty (60) days after the time limit provided therein are expired, or
 
(b)   the vessel remains unacceptable for any of the above major oil companies as per paragraph 1) above for 45 days after she has been found unacceptable as per paragraph 3) above,
charterers shall have the right to put the vessel off-hire until missing acceptance(s) are reinstated, always subject to the limitations provided in subparagraph (1) above
 
5           the Owners will endeavour to arrange for newbuilding inspection from as many oil companies as possible before delivery.
 
23.  PERIOD AND OPTION
Owners agree to let and Charterers agree to hire the vessel for a period of five (5) years plus/minus thirty (30) days in Charterers option.
 
24.  PUMPING CLAUSE
Owners warrant vessel is capable of discharging her entire cargo within 24 hours or maintain 100 PSI at ship's rail provided shore facilities are capable of receiving same. If vessel fails to maintain this discharge rate, Owners are to instruct master to clarify by protest letter or remarks in time sheets, countersigned by receivers, the reason of such failure. If vessel's performance is below above referenced standard and pumping is delayed due to vessel's deficiency, owners shall be responsible for any excessive pumping time and should it become necessary to withdraw the vessel from the berth all expenses are to be for Owners' account and time to be considered off-hire. Additional time to be allowed for COW in accordance with vessel's technical description.
 
25.  LOI CLAUSE
STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING
 
[P&I wording to be included]
 
STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO AT A PORT OTHER THAN THAT STATED IN THE BILL OF LADING

 
 
 


 
[P&I wording to be included]
 
STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO AT A PORT OTHER THAN THAT STATED IN THE BILL OF LADING AND WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING.
 
[P&I wording to be included]
 
26.  OVERPERFORMANCES CLAUSE
Notwithstanding anything contained in clause 24 hereabove, Charterers will not pay more than the rate provided in clause 8 and Owners are not entitled to ask compensation for vessel overperformances.
 
27.  LMAA ARBITRATION CLAUSE
All disputes or differences arising out of this contract which cannot be amicably resolved shall be referred to arbitration in London. Unless the parties agree upon a sole arbitrator, one arbitrator shall be appointed by each party. In the case of arbitration on documents, if the two arbitrators so appointed are in agreement their decision shall be final. In all other cases the arbitrators so appointed shall appoint a third arbitrator and the reference shall be the three-man tribunal thus constituted.
If either the appointed arbitrators refuses to act or is incapable of acting, the party who appointed him shall appoint a new arbitrator in his place.
 
If one party fails to appoint an arbitrator, whether originally or by way of substitution for two (2) weeks after the other party, having appointed his arbitrator, has (by telex or letter) called upon the defaulting party to make the appointment, the president for the time being of the London Maritime Arbitrators Association, shall upon application of the other party, appoint an arbitrator on behalf of the defaulting party and that arbitrator shall have the like powers to act in the reference and make an award (and, if the case so requires, the like duty in relation to the appointment of a third arbitrator) as if he had been appointed in accordance with the terms of the agreement,.
This contract is governed by English Law and there shall apply to all proceedings under this clause the Terms of the London Maritime Arbitrators Association current at the time when the arbitration proceeding were commenced. All appointees shall be member of the Association.
 
28.  I.T.O.P.F. CLAUSE
Notwithstanding anything to the contrary in this Charter, there shall be no obligation upon the Owner or the Vessel to be a participant in the tanker Owners voluntary agreement concerning liability for oil pollution dated January 7th. 1969 as amended ("TOVALOP"). Owner, however, warrants that it is a member of the International Tanker Owners Pollution Federation ("ITOPF") and that Owner will retain such membership during the entire period of the services of the Vessel under this Charter.
 
29.  VESSEL'S MAINTENANCE CLAUSE
Upon reasonable notice, Owners to give to Charterers reasonable access to all documents regarding the vessel's performances whether aboard, ashore in Owners' or Owners Management's office together with reasonable access to the vessel for inspection purposes.
Owners and Charterers agree that a meeting will take place as often as necessary, but al least twice a

 
 
 


 
year, between Owners and Charterers' technical staff in order to review and ensure prompt settlement of any technical problem that may have arisen,
During the charter party period(s), the Charterers to have the option every six (6) months to arrange for an independent surveyor to inspect the vessel at Charterers cost and expenses. The copy of the inspection report to be supplied to both Owners and Charterers.
 
30.  VESSEL'S FLAG AND CLASSIFICATION SOCIETY CLAUSE
For the duration of the charter party period the Owners will register the vessel into the Marshall Islands Registry and fly its flag. The vessel was built and is classed under ABS and the Owners intend to maintain this classification during the period of the Charter Party. Owners have the option to change classification within the IACS group for important reasons only.
 
War Clause
(clause n. 33 of Intertanktime 80 in substitution of 'War Risk Clause' n. 35 of Shelltime 4)
 
31.  ADDITIONAL WAR EXPENSES CLAUSE
If the Vessel is ordered to trade in areas were there is war (de facto or de jure) or /and where the area in question has been declared additional war risk premium areas by the Vessel's war risk insurers. Charterers shall reimburse Owners for any additional insurance premia, crew bonuses and other expenses which are reasonably incurred by Owners as a consequence of such orders, provided that Charterers are given notice of such expenses as soon as practicable and in any event when such expenses are incurred, and provided further that Owners obtain from their insurers a waiver of any subrogated rights against Charterers in respect of any claim by owners under their war risk insurance arising out compliance with such orders. For the purpose of this Charter Party, Charterers liability for war risk insurance premiums is to be based upon the insured value of the Vessel, which at delivery is United States Dollars (insured value to be advised) Charterers to benefit from rebates from hull insurers on war risk insurance premiums.
 
32.  WAR RISKS CLAUSE
(a)   The Master shall not be required or bound to sign Bills of Lading for any place which in his or Owners' reasonable opinion is dangerous or impossible for the Vessel to enter or reach owing to any blockade, war, hostilities, warlike operations, civil war, civil commotions, or revolutions.
(b)   If in reasonable opinion of the Master or Owners it becomes, for any of the reasons set out in Clause 32 (a) or by the operation of international law, dangerous, impossible or prohibited for the Vessel to reach or enter, or to load or discharge cargo at, any place to which the Vessel has been ordered pursuant to this Charter, (a "place of peril"), then Charterers or their agents shall be immediately notified by telex or radio messages, and Charterers shall thereupon have the right to order the cargo, or such part of it as may be affected, to be loaded or discharged, as the case may be, at any other place within the trading limits of this Charter (provided such other place is not itself a place of peril). If any place of discharge is or become a place of peril, and no orders have been received from Charterers or their agents within 48 hours after dispatch of such messages, then Owners shall be at liberty to discharge the cargo of such part of it as may be affected at any place which they or the Master may in their or his descretion select within the trading limits of this charter and such discharge shall be deemed to be due fulfilment of Owner's obligations under this Charter so far as cargo so discharge is concerned.
(c)   The Vessel shall have liberty to comply with any directions or recommendations as to departure,
 


 
 
 


 
arrival, routes, ports of call, stoppages, destinations, zones, water, delivery or any other wise whatsoever given by the government of the state under whose flag of the Vessel sails or any other government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority including de facto government or local authority or by any committee or person having under the terms of war risks insurance
on the Vessel the right to give any such directions or recommendations. If by reason of or in compliance with any such directions or recommendations anything is done or is not done, shall not be deemed a deviation.
If by reason of or in compliance with any such direction or recommendation the Vessel does not proceed to any place of discharge to which she has been ordered pursuant to this Charter, the Vessel may proceed to any place which the master or Owners in his or their opinion select and their discharge the cargo or such part of it as may be affected.
Such discharge shall be deemed to be due fulfilment of Owners' obligations under this Charter so far as cargo so discharged is concerned.
Charterers shall procure that all Bill of Lading issued under this Charter shall contain the Chamber of Shipping War Risks clause 1952. See clause 31 (Additional War Expenses).
Owners to be entitled to insure their interest in the vessel for such terms as they deem fit up to its total insured value and also in the hire against any of the risks likely to be involved thereby, and Charterers shall make refund on demand of any additional premium thereby incurred and
1 Notwithstanding the terms of Clause 20 hire shall be payable for all time lost including any loss owing to loss or injury to the Master, officers or crew or to refusal by the Master, officer or crew to proceed to such zone or to be exposed of such risks.
2. In the event of the wages of the Master and/or officers and/or crew and/or the cost of provisions and/or stores for deck and/or engine room and/or insurance being increased by reason of or during the existence of any of the matter mentioned in Section (A) the amount of any increase shall be added to the hire and paid by the Charterers on production of Owners' account thereof.
Furthermore, notwithstanding any other provision of this Charter Party, any war bonus payable to Master and/or officers and/or crew shall be for Charterers' account,
 
33  VESSEL'S TRACKING CLAUSE
It is agreed that Charterers may from the time of fixing until completion of the Charter period employ an Inmarsat C Tracking system on the Vessel. All registration/communication costs relating to this tracking system will be for the Charterers' account. Charterers will advise when the system is operative and confirm termination upon completion of Charter. Owners to supply lnmarsat C number (9 digits, beginning with 4), manufacturer, make etc, model No., terminal S/W version prior to vessel's delivery.
 
34  WAR P&I LIABILITIES INCLUSION CLAUSE
Owners to ensure that Hull War Risk insurance incorporates provisions for War P & I liabilities inclusion clause.
 
35  SECURITY CLAUSE (replaced by Bianco ISPS clause for TCP)
(a) (i) From the date of coming into force of the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter XI of SOLAS (ISPS Code) in relation to the Vessel and thereafter during the currency of this Charter Party, the Owners shall procure that both the Vessel and "the Company" (as defined by the ISPS Code) shall comply with the requirements of the

 
 
 


 
ISPS Code relating to the Vessel and "the Company". Upon request the Owners shall provide a copy of the relevant International Ship Security Certificate (or the Interim International Ship Security Certificate) to the Charterers. The Owners shall provide the Charterers with the full style contact details of the Company Security Officer (CSO),
(ii) Except as otherwise provided in this Charter Party, loss, damage, expense or delay, excluding consequential loss, caused by failure on the part of the Owners or "the Company" to comply with the requirements of the ISPS Code or this Clause shall be for the Owners' account.
(b)   (i) The Charterers shall provide the CSO and the Ship Security Officer (SSO)/Master with their full style contact details and, where sub-letting is permitted under the terms of this Charter Party, shall ensure that the contact details of all sub-charterers are likewise provided to the CSO and the SSO/Master. Furthermore, the Charterers shall ensure that all sub-charter parties they enter into during the period of this Charter Party contain the following provision:
"The Charterers shall provide the Owners with their full style contact details and, where sub-letting is permitted under the terms of the charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners",
(ii) Except as otherwise provided in this Charter Party, loss, damage, expense or delay, excluding consequential loss, caused by failure on the part of the Charterers to comply with this Clause shall be for the Charterers' account.
(c)   Notwithstanding anything else contained in this Charter Party all delay, costs or expenses whatsoever arising out of or related to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be for the Charterers' account, unless such costs or expenses result solely from the Owners' negligence. All measures required by the Owners to comply with the Ship Security Plan shall be for the Owners' account.
(d)   If either party makes any payment which is for the other party's account according to this Clause, the other party shall indemnify the paying party.
 
36.  AIR POLLUTION CLAUSE
Owners will endeavour to comply with IMO Regulations regarding air pollution, however Charterers always to provide bunkers to the Vessel in compliance with applicable IMO Regulations.
 
37.  LAY-CAN AND NON-DELIVERY CLAUSE.
Deleted -   not applicable
 
38.  BUNKER QUALITY CLAUSE
A.  
charterers to ensure that bunkers supplied during the currency of this charter shall be suitable for the vessel's engines, charterers to supply: fueloil 380 cst (iso 8217:1996(e) (and as subsequently amended) (grade ring 35) and mgo dma.
 
B.  
without prejudice to anything else contained in this charter party, the charterers shall supply fuels of such specifications and grades to permit the vessel, at all times, to comply with the maximum sulphur content requirements of any emission control zone when the vessel is ordered to trade within that zone.
the charterers also warrant that any bunker suppliers, bunker craft operators and bunker surveyors used by the charterers to supply such fuels shall comply with regulations 14 and 18 of marpol annex vi, including the guidelines in respect of sampling and the provision of bunker delivery notes. The Charterers shall indemnify, defend and hold harmless the owners in respect of any loss,
 
 
 
 
 


 
liability, delay, fines, costs or expenses arising or resulting from the charterers' failure to comply with this sub-clause (b).
 
C.
provided always that the charterers have fulfilled their obligations in respect of the supply of fuels in accordance with sub-clause (b), the owners warrant that:
 
(i)
the vessel shall comply with regulations 14 and 18 of marpol annex vi and with the
 requirements of any emission control zone; and
(ii)      the vessel shall be able to consume fuels of the required sulphur content
when ordered by the charterers to trade within any such zone
subject to having supplied the vessel with fuels in accordance with sub-clause (b), the charterers shall not otherwise be liable for any loss, delay, fines, costs or expenses arising or resulting from the vessel's failure to comply with regulations 14 and 18 of marpol annex vi.
 
D.
for the purpose of this clause, "emission control zone" shall mean zones as stipulated in marpol annex vi and/or zones regulated by regional and/or national authorities such as, but not limited to, the eu and the us environmental protection agency
 
E.  
owners use fobas (lloyds) petroleum services analysis or equivalent for determining bunker quality which charterers also recognize. charterers recognizing and accepting vps applied test methods and written sampling on board procedures.
 
F.  
should any dispute arise as to the quality of bunkers supplied under this charter party, then owners and charterers are to immediately agree an independent surveying firm, specializing in bunker analysis to attend the vessel and analyse bunkers on board following internationally recognized test methods such asiso or similar. failing agreement within 72 hours of first notification of suspected defect in supply owners shall have the right to appoint their own surveyor whose findings shall be binding on both parties. if the analysis shows that the supply is out of specification, charterers to immediately arrange for replacement of the bunkers. all time, costs, expenses, surveys to be for charterers account. should the analysis confirm the supply is within specification, all time, costs, expenses, surveys will be for owners accounts,
 
G.  
vessel to keep some gasoil on board for cleaning, manoevring and mandatory and operational equipment.
 
39.  MARINE GROWTH CLAUSE
If the Vessel stays or is laid up for more than 25 days in a port and/or anchorage and/or berth, or 15 days in tropical waters then the Owners to notify the Charterers that the vessel's performance may be affected. Owners will not be responsible for changes in the Vessel's description of speed and consumptions. Charterers to have the right to provide for scamping of underwater hull (against acceptance of Owners letter of indemnity for damages to hull and or paint (to be provided)), but Owners description to be re-instated only after the certification by an independent surveyor confirming that the hull state is recovered, except for fair wear and tear, as it was at the time of Vessel's delivery,
 
40.  ASSIGNMENT AND SUBLET CLAUSE
Notwithstanding any other provision of this charter, Charterers may assign all of their rights and obligations under the charter to any of Charaterers' related or affiliated company, subject to Owners approval which shall not be unreasonably withheld. Charterers shall also have the right to sublet the
 


 
 
 


 
Vessel, but in such an event, Charterers shall always remain responsible to Owners for the fulfilment of charter in all its terms and conditions, save that the Owners shall always be entitled to assign the benefit of this charter party to any bank(s) or other institution(s) in connection with the vessel's financing.
 

EXHIBIT 10.6

Scorpio Tankers Inc.
150 East 58 th Street
New York, NY 10155

Attention: Brian Lee, Chief Financial Officer


March 9, 2010


CONFIDENTIAL


Re: $150 Million Senior Secured Credit Facility - Commitment Letter

Ladies and Gentlemen:

Scorpio Tankers Inc. (the “ Company ”) has requested that Nordea Bank Finland Plc, New York Branch (“ Nordea ”), DnB NOR Bank ASA (“ DnB NOR ”) and Fortis Bank Nederland (“ Fortis ”) (in such capacity, the “ Lead Arrangers ”) arrange a credit facility to partially finance the acquisition costs of (i) three double-hull Panamax tankers, “M/V Venice”, “M/V Noemi” and “M/V Senatore” and (ii) other vessels not yet identified which meet the following criteria:
 
 
(i)
either clean petroleum or crude double-hull oil tankers;

 
(ii)
from 35,000 dwt to 200,000 dwt;

 
(iii)
no older than seven (7) years of age at the time of acquisition; and

 
(iv)
classed with the American Bureau of Shipping, Det Norske Veritas or such other classification society as may be acceptable to the Lead Arrangers.

The Lead Arrangers are pleased to advise the Company that they have arranged the Credit Facility referred to below.  As used herein, the term “ Transaction ” shall mean the incurrence of all indebtedness under the Credit Facility and payment of all fees and expenses in connection with the foregoing.
 
The Credit Facility (the “ Credit Facility ”) shall consist of a term loan facility in the initial principal amount of US$150,000,000 (the “ Initial Facility Amount ”).  The Company shall have the right (the “ Upsize Option ”), until the date falling twelve (12) months following the closing date, without consent of the Lenders (as defined below), by notice to the Agent (as defined below), to increase the Initial Facility Amount by adding one or more financial institutions reasonably acceptable to the Company and the Lead Arrangers or by allowing one or more Lead Arrangers, in their sole discretion, to increase their respective commitment(s) under the Credit Facility, provided that:
 

 
 
 

(i)           the aggregate amount of such increase shall not exceed US$100,000,000 (any such increased amount, up to an including US$100,000,000, the “ Increased Facility Amount ”);
 
 
(ii)
unless provided by a Lead Arranger, no additional commitments shall be less than US$25,000,000;
 
 
(iii)
the Company shall have raised aggregate equity proceeds equal to or exceeding the Increased Facility Amount; and
 
 
(iv)
no Lender’s commitment shall be increased without the consent of such Lender.
 
A summary of certain terms of the Credit Facility is set forth in Exhibit A attached hereto (the “ Term Sheet ”).  Please note that those matters that are not covered or made clear herein or in the Term Sheet are subject to mutual agreement of the parties hereto and shall be consistent with this letter and the Term Sheet (together with the Term Sheet, this “ Commitment Letter ”), provided that any fee letter (each a “ Fee Letter ”) between the Lead Arrangers and the Company shall be negotiated separately between Lead Arrangers and the Company.  The terms and conditions of this commitment may be modified only in writing signed by each of the parties hereto.
 
The Lead Arrangers are pleased to confirm that, subject to the terms and conditions set forth herein and in the Term Sheet:
 
 
(i)
each of the Lead Arrangers hereby commits to provide US$50,000,000 of the commitments for the Initial Facility Amount under the Credit Facility;
 
 
(ii)
Nordea, DnB NOR and Fortis will act as Lead Arrangers for the Credit Facility; and
 
 
(iii)
Nordea will act as sole Administrative Agent and Security Trustee (in such capacity, the “ Agent ” and “ Security Trustee ”, respectively) for Nordea, DnB NOR and Fortis and such other financial institutions (the “ Additional Lenders ” and together with Nordea, DnB NOR and Fortis acting in such capacity, the “ Lenders ”) reasonably acceptable to the Company and the Lead Arrangers as may be added for purposes of the Upsize Option or pursuant to a Lender’s assignment of all or part of its commitment who will participate in the Credit Facility as Lenders.
 
The commitments in this Commitment Letter are subject to (i) the accuracy and completeness of all representations that the Company and its subsidiaries (collectively, the “ Group ”) make, and all information that the Group furnishes, to the Lead Arrangers and (ii) the Company’s compliance with the terms of this Commitment Letter and the payment in full of all fees, expenses and other amounts payable hereunder or under and Fee Letter.
 
You represent, warrant and covenant that (i) no information which has been or is hereafter furnished by you or on your behalf in connection with the Company or its subsidiaries or the transactions contemplated hereby and (ii) no other information given at information meetings for prospective Additional Lenders and supplied or approved by you (collectively, the “ Information ”) taken as a whole contained (or, in the case of Information furnished after the date hereof, will contain), as of the time it was (or hereafter is) furnished, any material misstatement of fact or omitted (or will omit) as of such time to state any material fact necessary to make the statements therein taken as a whole not misleading, in the light of the circumstances under which they were (or
 

 
 
 

hereafter are) made; provided that , with respect to Information consisting of statements, estimates and projections (collectively, the “ Projections ”) regarding the future performance of the Company and its subsidiaries, no representation, warranty or covenant is made other than that the Projections have been (and, in the case of Projections furnished after the date hereof, will be) prepared in good faith based on assumptions believed to be reasonable at the time of preparation thereof.  You agree to supplement the Information and the Projections from time to time until the date of the initial borrowing under the Credit Facility, as appropriate, so that the representations and warranties in the preceding sentence remain correct.
 
As you are aware, the Lead Arrangers have not yet had the opportunity to conduct their respective business, legal, environmental, tax, financial, accounting, and customer call due diligence in connection with the Transaction, or with respect the Company and its subsidiaries.  Accordingly, each of the Lead Arranger’s commitments and agreements hereunder are subject to the completion of such business, legal, environmental, tax, financial, accounting and customer call due diligence, and to each of the Lead Arranger’s satisfaction with the results thereof.  Furthermore, the Lead Arranger’s commitments and agreements hereunder are subject to:
 
 
(i)
there not occurring or becoming known to the Lead Arrangers any condition or circumstance which any of the Lead Arrangers shall determine has had, or could reasonably be expected to have, a material adverse effect on (a) the Transaction, (b) the business, property, assets, condition (financial or otherwise), operations or prospects of the Company or its subsidiaries taken as a whole since December 31, 2009, or (c) the rights or remedies of the Lenders or the ability of the Company and its subsidiaries to perform their obligations to the Lenders under the Credit Facility (each, a “ Material Adverse Effect ”);

 
(ii)
None of the Lead Arrangers becoming aware (whether as a result of its due diligence analyses and review or otherwise) after the date hereof of any information not previously known to any of them which any of them believes is materially negative information with respect to the Transaction or the business, property, assets, operations, liabilities, condition (financial or otherwise) or prospects of the Company or its subsidiaries taken as a whole, or which is inconsistent in a material and adverse manner with any such information or other matter disclosed to any of the Lead Arrangers prior to the date hereof;

 
(iii)
there not having occurred after the date hereof a disruption of, or an adverse change in, financial, banking or capital markets that could reasonably be expected to materially impair the ability of any of the Lead Arrangers to fund its commitment hereunder as determined by each of the Lead Arrangers in its reasonable discretion; and

 
(iv)
the other conditions set forth or referred to herein and in the Term Sheet.

You hereby agree that all reasonable fees and expenses (including the reasonable fees and expenses of counsel and insurance consultants) of the Agent and its affiliates arising in connection with this Commitment Letter and the enforcement of rights and remedies hereunder and in connection with the Transaction and other matters described herein (including in connection with our due diligence) shall be for your account (and that you shall from time to time upon request from the Agent reimburse it and its affiliates for all such fees and expenses paid by it), whether or not the
 

 
 
 

Credit Facility is made available or definitive credit documents are executed.  You further agree to indemnify and hold harmless (i) Nordea, in its capacity as Agent, Security Trustee, Lead Arranger and Lender, (ii) DnB NOR, in its capacity as Lead Arranger and Lender, and (iii) Fortis, in its capacity as Lead Arranger and Lender, and each of their respective affiliates and each director, officer, employee, representative and agent thereof (each, an “ indemnified person ”) from and against any and all actions, suits, proceedings (including any investigations or inquiries), claims, losses, damages, liabilities or expenses of any kind or nature whatsoever which may be incurred by or asserted or awarded against or involve any of Nordea, DnB NOR or Fortis in their respective capacities described above, or any other such indemnified person as a result of or arising out of or in any way related to or resulting from this Commitment Letter (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith) or the definitive documentation for the Credit Facility or the transactions contemplated hereby or thereby or any actual or proposed use of the proceeds of the Credit Facility and, upon demand, to pay and reimburse each of Nordea, DnB NOR or Fortis in their respective capacities described above, and each other indemnified person for any legal or other out-of-pocket expenses incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including any inquiry or investigation) or claim (whether or not such entity or person is a party to any action or proceeding out of which any such expenses arise and whether or not such action or proceeding is brought by or on behalf of the Company, any of its directors, security holders or creditors, an indemnified person or any other person); provided that you shall not have to indemnify any indemnified person against any loss, claim, damage, expense or liability to the extent same resulted from the gross negligence or willful misconduct of the respective indemnified person (as determined by a court of competent jurisdiction in a final and non-appealable judgment).  This Commitment Letter is issued for your benefit only and no other person or entity may rely hereon (except indemnified persons to the extent set forth herein).  None of any of Nordea, DnB NOR or Fortis in their respective capacities described above, nor any other indemnified person shall be responsible or liable to you or any other person or entity for (i) any determination made by it pursuant to this Commitment Letter in the absence of gross negligence or willful misconduct on the part of such person (as determined by a court of competent jurisdiction in a final and non-appealable judgment) or (ii) any consequential, indirect, special or punitive damages which may be alleged as a result of this Commitment Letter or the financing contemplated hereby.
 
Each of Nordea, DnB NOR and Fortis reserves the right to employ the services of its affiliates in providing services contemplated by this Commitment Letter and to allocate, in whole or in part, to its affiliates certain fees payable to it in such manner as it and its affiliates may agree in its sole discretion.  You also agree that each of Nordea, DnB NOR and Fortis may at any time and from time to time assign all or any portion of its commitments hereunder to one or more of its affiliates.  You further acknowledge that each of Nordea, DnB NOR and Fortis may share with any of its affiliates, and such affiliates may share with them, any information related to the Transaction, the Company and its subsidiaries and affiliates, or any of the matters contemplated hereby.  Each of Nordea, DnB NOR and Fortis agrees to treat, and cause any such affiliate to treat, all non-public information provided to it by the Company and its subsidiaries as confidential information in accordance with customary banking industry practices (it being understood and agreed that we may provide potential Additional Lenders and their respective affiliates with non-public information provided by the Company and its subsidiaries).
 
You agree that this Commitment Letter is for your confidential use only and that, unless each of Nordea, DnB NOR and Fortis has otherwise consented, neither its existence nor the terms hereof will be disclosed by you to any person or entity other than your officers, directors, employees,
 

 
 
 

accountants, attorneys and other advisors, and then only on a “need to know” basis in connection with the transactions contemplated hereby and on a confidential basis.  Notwithstanding the foregoing, following your acceptance of the provisions hereof and your return of an executed counterpart of this Commitment Letter to us as provided below (i) you may make public disclosure of the existence and amount of the commitments hereunder and of the identity of each of the Lead Arrangers, (ii) you may file a copy of this Commitment Letter (but not any Fee Letter) in any public record in which it is required by law to be filed and (iii) you may make such other public disclosure of the terms and conditions hereof as, and to the extent, you are required by law, in the opinion of your counsel, to make.  If this Commitment Letter is not accepted by you as provided below, please immediately return this Commitment Letter (and any copies hereof) to the undersigned.
 
The provisions of the three immediately preceding paragraphs shall survive any termination of this Commitment Letter regardless of whether any definitive form of documentation shall be executed and delivered, provided that your obligations under this Commitment Letter relating to indemnification shall automatically terminate and be superseded by the provisions of the definitive documentation relating to the Credit Facility upon the initial funding thereunder, and you shall automatically be released from all indemnification obligations under this Commitment Letter.
 
In order to comply with the USA PATRIOT Act, each of Nordea, DnB NOR and Fortis must obtain, verify and record information that sufficiently identifies each entity (or individual) that enters into a business relationship with it.  As a result, in addition to your and your subsidiaries’ corporate name and address, each of Nordea, DnB NOR and Fortis will obtain your and your subsidiaries’ corporate tax identification number and certain other information.  Each of Nordea, DnB NOR and Fortis may also request relevant corporate resolutions and other identifying documents.
 
This Commitment Letter shall not be assignable by you to any person or entity without the prior written consent of each party hereto (and any purported assignment without such consent shall be null and void).  This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and us.  This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement.  Delivery of an executed signature page of this Commitment Letter or the Fee Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof or thereof, as the case may be.  The Company acknowledges that information and documents relating to the Credit Facility may be transmitted through Intralinks, the internet or similar electronic transmission systems.  This Commitment Letter set forth the entire agreement between the parties hereto as to the matters set forth herein and supersede all prior communications, written or oral, with respect to the matters herein.
 
THIS COMMITMENT LETTER AND THE FEE LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS COMMITMENT LETTER OR THE FEE LETTER.  YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE COUNTY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS COMMITMENT LETTER, THE FEE LETTER OR ANY MATTERS CONTEMPLATED HEREBY OR THEREBY.
 

 
 
 

Our willingness, and commitments, with respect to the Credit Facility as set forth above will terminate on April 30, 2010, unless on or prior to such date the Transaction has been consummated and a definitive credit agreement evidencing the Credit Facility (together with related financing and security documentation, the “ Credit Documentation ”), in form and substance reasonably satisfactory to each of the Lead Arranger and consistent with this Commitment Letter and Term Sheet shall have been entered into.  Before such date, any Lead Arranger may terminate its commitment hereunder if any event occurs or information becomes available that, in its reasonable judgment, results or is reasonably likely to result in the failure to satisfy any of the conditions or requirements with which the Company must comply, contained in this letter.
 

*  *  *

If you are in agreement with the foregoing, please sign and return to us the enclosed copy of this Commitment Letter no later than 5:00 p.m., New York time, on March 12, 2010.  Unless this Commitment Letter is signed and returned by the time and date provided in the immediately preceding sentence, this Commitment Letter shall terminate at such time and date.
 
Very truly yours,

NORDEA BANK FINLAND PLC,
NEW YORK BRANCH


By: /s/ Martin Lunder
Name: Martin Lunder
Title: Senior Vice President


By: /s/ Martin Kahm
Name: Martin Kahm
Title: Vice President

DNB NOR BANK ASA


By: /s/ Giacomo Landi
Name: Giacomo Landi
Title: Senior Vice President


By: /s/ Nikolai A. Nachamkin
Name: Nikolai A. Nachamkin
Title: Senior Vice President




 
 
 

FORTIS BANK NEDERLAND


By: /s/ J.A.L.M. Gorgels
Name: J.A.L.M. Gorgels
Title: Director

By: /s/ A.L. Lockhorst
Name: A.L. Lockhorst
Title:




Accepted and Agreed to this 9 day
of March, 2010

SCORPIO TANKERS INC.


By: /s/ Brian M. Lee
Name: Brian M. Lee
Title: Chief Financial Officer

 
 
 

EXHIBIT A

SUMMARY OF TERMS AND CONDITIONS
$150,000,000 MILLION SENIOR SECURED CREDIT FACILITY

Unless otherwise defined herein, capitalized terms used herein and defined in the letter to which this Exhibit A is attached (the “ Commitment Letter ”) are used herein as therein defined.  This outline of terms and conditions is provided for indicative purposes only and is not a commitment.  No legal obligations are intended to be, or shall be, created hereby.

Borrower:
Scorpio Tankers Inc., a corporation incorporated in the Republic of The Marshall Islands.

Guarantors:
Each subsidiary of the Borrower which owns or will own one or more Collateral Vessels (as defined herein).

Lead Arrangers:
DnB NOR ASA (“ DnB NOR ”), Fortis Bank Nederland (“ Fortis ”) and Nordea Bank Finland Plc, New York Branch (“ Nordea ”). It is the intention that each of the Lead Arrangers shall make available US$ 50,000,000 on the Closing Date.

Security Trustee
and Agent:
Nordea

Lenders:
The Lead Arrangers and such other financial institutions (the “ Additional Lenders ” and together with the Lead Arrangers the “ Lenders ”) as may be added upon the Borrower’s exercise of the Upsize Option (as defined herein), however such Additional Lenders shall be reasonably acceptable to the Lead Arrangers and the Borrower.

Swap Bank(s):
Each or any of the Lead Arrangers.

Credit Facility:
A senior secured term loan facility (the “ Credit Facility ”) in an aggregate principal amount of US$150,000,000 or such higher amount resulting from exercising the Upsize Option (as defined herein) (the “ Facility Amount ”).

Upsize Option:
The Borrower shall have the right until the date falling twelve (12) months following the Closing Date, by notice to the Agent, to effectuate an increase of the Credit Facility by adding one or more Additional Lenders or by allowing one or more Lead Arrangers in their sole discretion to increase their respective commitments hereunder; provided that (i) such aggregate increase shall not exceed US$100,000,000, (ii) unless provided by a Lead Arranger, no added commitments shall be less than US$25,000,000, (iii) the Borrower shall have raised aggregate equity proceeds equal to or exceeding the increased Facility Amount and (iv) no Lender’s commitment shall be increased without the consent of such Lender.

Use of Proceeds:
The loans made pursuant to the Credit Facility (each a “ tranche ” and together the “ Loans ”) shall be utilized to finance, in part, the acquisition cost of Collateral Vessels however such financed amount shall not exceed the lower of (i) fifty percent (50%) of the fair market value of such Collateral Vessel as established by two acceptable brokerage firms at the

 
 
 

 
time of such tranche is drawn or (ii) fifty percent (50%) of the purchase price of such Collateral Vessel.

Closing Date:
As soon as practicable following the date when a Successful IPO (as defined below) has been completed and the shares have started trading on NYSE or NASDAQ; however such Closing Date shall occur no later than April 30, 2010.

Successful IPO:
An initial public offering of capital stock of the Borrower on NYSE or NASDAQ raising gross proceeds of a minimum of US$ 150,000,000.

Availability:
The Credit Facility shall be available for drawings, with one tranche per Collateral Vessel, on or after the date on which the Credit Facility documentation is executed and delivered until the date falling eighteen (18) months following the Closing Date (the “ Cancellation Date ”).

Maturity Date:
The Credit Facility will mature on the fifth (5 th ) anniversary of the Closing Date.

Scheduled
Repayments:
Each tranche shall be repaid in quarterly installments, commencing on the last day of the calendar quarter (March 31, June 30, September 30, and December 31) following the calendar quarter in which such tranche drawing took place using a linear repayment profile, i.e., equal installments of principal, corresponding to a full repayment of such tranche by the time such Collateral Vessel is fifteen (15) years of age.

Voluntary
Prepayments:
Voluntary prepayments of any tranche or of the Loans may be made at any time on three (3) business days’ notice, without premium or penalty, subject to minimum notice and in minimum principal amounts of US$1,000,000; provided that voluntary prepayments made on a day other than the last day of an interest period applicable thereto shall be subject to payment of customary breakage costs.

 
All voluntary prepayments described in the preceding paragraph shall be applied to reduce Scheduled Repayments in an inverse order of the maturity.

Mandatory
Prepayment on
Sale or Total Loss:
Upon the sale or loss of any Collateral Vessel, the Facility Amount shall be required to be reduced in an amount equal to the outstanding amount of the respective tranche attributed to such Collateral Vessel.

Voluntary
Reduction and
Cancellation:
Any unutilized commitment under the Credit Facility may be voluntarily reduced (each a “ Voluntary Reduction ”) by the Borrower at any time with three (3) days notice; however all unutilized commitments shall be cancelled on the Cancellation Date.


 
 
 

Interest Rate
And Periods:
Borrowings under the Credit Facility shall bear interest at the London Interbank Offered Rate (“ LIBOR ”) for an interest period elected by the Borrower of three or six months, or such other periods as the Lenders may agree, plus the Applicable Margin (as defined herein). Interest is payable at the end of each interest period, unless a period longer than three months is elected, in which case interest is payable quarterly in arrears.  Interest is calculated based on actual days over 360 days.  No interest period shall extend beyond the Maturity Date.
 
 
The Credit Facility shall include customary protective provisions for such matters as defaulting banks, capital adequacy, increased costs, funding losses, illegality and withholding taxes. The Borrower shall have the right, in the absence of a default or event of default, to replace any Lender that (i) charges a material amount in excess of that being charged by the other Lenders with respect to contingencies described in the immediately preceding sentence or (ii) refuses to consent to certain amendments or waivers of the Credit Facility which expressly require the consent of such Lender.
 
 
Interest in respect of Loans shall be payable in arrears at the end of the applicable interest period and every three months in the case of interest periods in excess of three months. All calculations of interest, commitment fees and other fees shall be based on a 360-day year and actual days elapsed.
 
Applicable Margin:
The Applicable Margin shall be subject to adjustments as set forth in the pricing grid provided below based on meeting certain debt to capitalization ratios;

Debt to Capitalization
Applicable Margin
   
≤ 50%
3.00%
> 50%
3.50%

Initial Vessels:
Three double hull Panamax tankers “MV Venice”, “MV Noemi”, and “MV Senatore” (the “ Initial Vessels ”) registered in a flag state acceptable to the Lead Arrangers.

Collateral Vessels:
First priority mortgages in each Initial Vessel and other vessels not yet identified (the “ Additional Vessels ” and together with the Initial Vessels the “ Collateral Vessels ”), provided that the mortgage in respect of an Initial Vessel will be released upon the Borrower’s written request if (a) no tranche has been advanced in respect of such Initial Vessel and (b) the Borrower is in compliance with all covenants of the loan facility documents at the time such request is made and after giving effect to such request (including without limitation the Collateral Maintenance Ratio (as defined below)).  The Additional Vessels shall meet the following criteria: (i) be either clean petroleum or crude double-hull oil tankers, (ii) range in size from 35,000 dwt to 200,000 dwt, (iii) be no older than seven (7) years of age at the time of acquisition and (iv) be classed with the American Bureau of Shipping, Det Norske Veritas or such other classification society as may be acceptable to the Lead Arrangers.  The Borrower shall have the right to tender any

 
 
 

 
Initial Vessel previously mortgaged to the Security Trustee but subsequently released from such mortgage as a substitute for any Additional Vessel, provided that such Initial Vessel meets the foregoing criteria at the time it is tendered as substitute collateral.

Security:
(i) All amounts owing under the Credit Facility, (ii) all obligations under the Guaranties and (iii) the Borrower’s obligations under interest rate swaps (on a subordinated basis), will in each case be secured by:

 
a)
First priority cross-collateralized mortgages over the Collateral Vessels;
 
b)
First priority assignments of the insurances on the Collateral Vessels;
 
c)
First priority assignment of all earnings from the Collateral Vessels;
 
d)
First priority pledges of all equity interests of the Guarantors; and
 
e)
First priority pledges over all earnings accounts of the Borrower and Guarantors. Such earnings accounts shall be held with a Lead Arranger; and
 
f)
First priority assignment of all charters in excess of 12 months in respect of the Collateral Vessels provided that the Borrower, using reasonably commercial efforts, is able to obtain the charterer’s consent to any such assignment.
 
Collateral
Substitution:
The Borrower or any Guarantor may dispose of any Collateral Vessel and offer a substitution for such Collateral Vessel (each a “ Replacement Vessel ”) so long as no Event of Default or potential Event of Default has occurred and is continuing. Such Replacement Vessel shall be (i) an Initial Vessel (so long as it meets the requirements of an Additional Vessel) or (ii) a vessel of substantially similar value, type and age, as the Collateral Vessel it replaces and shall be reasonably acceptable to the Lead Arrangers.

Guaranties:
The Guarantors shall jointly and severally guarantee all amounts owing under the Credit Facility. Such Guaranties shall also guarantee, on a subordinated basis, obligations under interest rate swap agreements or other hedging agreements entered into between a Lender and the Borrower. The Guaranties shall be guaranties of payment and not of collection.

Documentation and
Governing Law:
The Lenders’ commitments will be subject to the negotiation, execution and delivery of mutually satisfactory definitive credit  agreement, security documents and other supporting documentation, consistent with the terms and conditions set forth herein, in each case prepared by Watson, Farley & Williams (New York) LLP and satisfactory to the Lenders and including without limitation conditions precedent, representations and warranties, covenants and events of default customary for transactions of this type and appropriate under the circumstances. All documentation (except security documentation that the Lenders determine should be governed by local law) shall be governed by New York law.

Conditions
Precedent:
Those conditions precedent which are usual and customary for facilities of this type and such additional conditions precedent as are customary under the circumstances including, without limitation, a Successful IPO, delivery

 
 
 

 
of certified resolutions of the board of directors (and, if necessary, shareholders) of each of the Borrower and the Guarantors, certified copies of the constitutional documents of each of the Borrower and the Guarantors, all documentation required in relation to each of the Borrower and the Guarantors, including without limitation, all “know your customer” requirements, execution and delivery of all documentation in respect of the Credit Facility in form and substance satisfactory to the Lenders, receipt of all fees due under the Credit Facility, no event of default or an event that with the giving of notice or the passage of time could give rise to an event of default shall have occurred and be continuing, certified copies of all required consents which any of the Borrower or the Guarantors are required to enter into, or make any payment or perform any of its obligations under or in connection with the transactions contemplated by the Credit Facility, certified copies of the MOAs (and documents to be delivered thereunder) in respect of the Collateral Vessels (other than the Initial Vessels), certified copies of all technical and commercial management agreements, fair market valuations of the Collateral Vessels, a favorable report from an insurance consultant nominated by the Agent confirming that the insurance placed on the relevant Collateral Vessel is in compliance with the requirements of the relevant ship mortgage, delivery of a confirmation of class certificate in respect of each Collateral Vessel and delivery of all relevant legal opinions.

Market
Disruption:
If a Market Disruption Event occurs in relation to any tranche of the Loan for any Interest Period, then the rate of interest on each Lender’s share of such tranche of the Loan for the Interest Period shall be the rate per annum which is the sum of (x) the Applicable Margin and (y) the rate notified to the Facility Agent by that Lender, which expresses the cost to that Lender of funding its participation in such tranche of the Loan from whatever source it may reasonably select.  A “Market Disruption Event” shall mean (i) if LIBOR is not available or (ii) the Facility Agent receives notifications from a Lender or Lenders whose participations in such tranche of the Loan exceed 50% of such tranche of the Loan that the cost to it or them of obtaining matching deposits in the London interbank market would be in excess of LIBOR.

Representations
and Warranties:
Those representations and warranties which are usual and customary for facilities of this type and such additional representations and warranties as are appropriate under the circumstances including, without limitation, corporate existence, good standing, power and authority, no violation, receipt of all necessary governmental and third party consents, enforceability of loan documents, accuracy of financial statements, no undisclosed liabilities, no pending or threatened litigation with respect to the Credit Facility or any documentation executed in connection therewith or which is reasonably likely to have a Material Adverse Effect, no Material Adverse Effect, no event of insolvency, true and complete disclosure, use of proceeds, payment of taxes, ERISA, compliance with laws and regulations, identity of subsidiaries, maintenance of properties and insurance, citizenship, vessel classification, and such additional representations and warranties as are customary under the circumstances.

 
 

 
 
 

Affirmative
Covenants:
Those covenants usual and customary for facilities of this type and such additional affirmative covenants as are appropriate under the circumstances including, without limitation, maintenance of corporate existence and good standing, use of proceeds, maintenance of properties, payment of taxes and other obligations, maintenance of customary insurance, maintenance of time charters, delivery of financial statements, access to books and records, compliance with laws and notices of defaults, litigation, deposit of earnings, ownership of subsidiaries, registry of vessels, notice of material adverse change, Collateral Vessel appraisals from two (2) independent appraisers (satisfactory to the Lead Arrangers) every six (6) months (at the expense of the Borrower), provided that the Lead Arrangers shall have the right to request additional vessel appraisals, which vessel appraisals shall not be at the expense of the Borrower unless an event of default shall have occurred and is continuing, and such additional affirmative covenants as are customary under the circumstances.

Negative Covenants:
Those covenants usual and customary for facilities of this type and such additional negative covenants as are customary under the circumstances including, without limitation, limitations on certain indebtedness, liens, investments, acquisitions, transactions with affiliates, changes in the registry, class, or management of the Collateral Vessels, changes in nature of business, changes in senior management, change in fiscal year end and no change of control.

Financial Covenants:
The following financial covenants shall apply to the Borrower and its subsidiaries on a consolidated basis and shall be measured on a quarterly basis (definitions to be agreed upon):

 
1)
Maximum Leverage : The ratio of debt to capitalization shall be no greater than 0.60 to 1.00.

 
2)
Minimum Tangible Net Worth: The Borrower shall maintain consolidated tangible net worth of no less than US$ 150,000,000 plus 25% of the Borrower’s cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and 75% of the value of any new equity issues from July 1, 2010 going forward.

 
3)
Minimum Interest Coverage : This covenant will become effective with the commencement of the 5 th fiscal quarter following the Closing Date, at which time the ratio of EBITDA (excluding all non-cash items (e.g. unrealized gains or losses) to actual interest expense (i.e., interest on indebtedness but excluding fees and expenses) shall be no less than 2.50 to 1.00. Such ratio shall be calculated quarterly on a trailing quarter basis from and including the 5 th fiscal quarter however for the 9 th fiscal quarter and periods thereafter the ratio shall be calculated on a trailing four quarter basis.

 
4)
Free Liquidity : During the first five fiscal quarters following the Closing Date unrestricted cash and cash equivalents including amounts on deposit with the Lead Arrangers shall at all times be no less than the higher of (i) US$ 2,000,000 per vessel or (ii) US$ 10,000,000 however thereafter unrestricted cash and cash equivalents shall at all times be no less than the higher of (i) US$ 1,000,000 per vessel or (ii) US$ 10,000,000.

 
5)
Dividend Restrictions : The Borrower is not permitted to pay dividend or return any equity capital to its stockholders in any other form (each a “ Dividend ”) if (i) it is in non compliance with any of its covenants or (ii) an Event of Default has occurred and is continuing and provided that no Event of Default will occur as a result of the payment of such Dividend.

Collateral
Maintenance:
The aggregate fair market value of the Collateral Vessels shall at all times be no less than 150% of the then aggregate outstanding principal amount of Loans (the “ Collateral Maintenance Ratio ”).

Events of
Default:
Those events of default usual and customary for facilities of this type and such additional events of default as are customary under the circumstances including, without limitation, nonpayment of principal, nonpayment of interest, breach of affirmative covenants, breach of negative covenants, material inaccuracy of representations and warranties, cross default to other material indebtedness, ERISA event, failure of effectiveness of security documents or guaranty, bankruptcy or insolvency event, or change of control (to be defined) of the Borrower, and such additional events of default as are appropriate under the circumstances.

Expenses/
Indemnification:
All reasonable and documented costs and expenses incurred by the Lenders relating to the Credit Facility, the documentation and enforcement thereof, shall be borne by the Borrower. The documentation for the Credit Facility shall contain customary indemnities for the Lenders (other than as a result of such indemnified party’s gross negligence or willful misconduct).

Insurance:
The Borrower shall procure that each Collateral Vessel is insured as appropriate for an internationally reputable shipping company against such risks including: (i) Hull and Machinery (ii) Hull Interest, (iii) Freight Interest (dependent upon the level of the Hull and Machinery policy), (iv) Protection & Indemnity (including an adequate club cover for oil pollution liability for the Collateral Vessel) and (v) War Risk (including terrorism and confiscation), in such amounts, on such terms and conditions as the Facility Agent may approve and with such insurance brokers and insurers as the Facility Agent may approve.

 
The total insured value (Hull and Machinery plus Hull Interest and Freight Interest) of each Collateral Vessel shall at all times be equal to or greater than its fair market value, and the aggregate total insured value of all Collateral Vessels (Hull and machinery plus Hull Interest and Freight Interest) shall be equal to or greater than 120% of the aggregate outstanding principal amount of Loans. Furthermore, the Hull and Machinery insured value of each Collateral Vessel shall at all times cover 80% of its fair market value, and the aggregate Hull and Machinery insured value of all Collateral Vessels shall be equal to or greater than the aggregate outstanding principal amount of Loans while the remaining cover may be taken out by way of Hull and Freight Interest insurances.

Additionally the Borrower shall reimburse the Facility Agent for the cost of Mortgagees Interest Insurance and Mortgagees Additional Perils Pollution Insurance which the Facility Agent will take out on these vessels upon such terms and in such amounts as the Facility Agent shall deem appropriate.
 
The loss payable clause for each Collateral Vessel to be in excess of $1 million and standard letters of undertaking to be executed.
 
Required Lenders:
Lenders having aggregate commitments in the Credit Facility in excess of 66-2/3%, however required lenders shall include all Lead Arrangers (the “ Required Lenders ”).

Assignments and Participations:
After the Closing Date any Lender may assign and may sell participations in its rights and obligations under the Credit Facility, subject to such limitations as may be established in the definitive credit documentation including, but not limited to, a requirement that no assignment or participation may result in any increased costs (including for taxes, interest or otherwise) for which the Borrower would be liable.

“KYC”:
The Borrower shall supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent or any Lender in order to carry out and be satisfied with all necessary KYC (“ know your customer ”) or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Credit Facility.
 


SK 26596 0002 1080169


EXHIBIT 10.7
 
Dated 17 May 2005


 

SENATORE SHIPPING COMPANY LIMITED
NOEMI SHIPPING COMPANY LEVIITED
as joint and several Borrowers



- and -



THE ROYAL BANK OF SCOTLAND plc
as Lender



 
LOAN AGREEMENT
 






 





Watson, Farley & Williams
London

 
 
 

INDEX

Clause
 
 
Page
 
1
 
PURPOSE, DEFINITIONS AND INTERPRETATION
 
1
 
2
 
DRAWDOWN   8
3
 
INTEREST AND INTEREST PERIODS
 
9
 
4
 
REPAYMENT AND PREPAYMENT
 
10
 
5
 
CONDITIONS PRECEDENT
 
12
 
6
 
REPRESENTATIONS AND WARRANTIES
 
18
 
7
 
UNDERTAKINGS
 
21
 
8
 
APPLICATION OF EARNINGS
 
25
 
9
 
EVENTS OF DEFAULT
 
25
 
10
 
FEES AND EXPENSES
 
28
 
11
 
PAYMENTS AND CALCULATIONS
 
29
 
12
 
NO COUNTERCLAIM, TAXATION
 
29
 
13
 
CHANGES IN CIRCUMSTANCES
 
30
 
14
 
INDEMNITIES
 
32
 
15
 
SET-OFF
 
32
 
16
 
SECURITY AND APPLICATION
 
33
 
17
 
JOINT AND SEVERAL LIABILITY
 
34
 
18
 
COMMUNICATIONS
 
34
 
19
 
ASSIGNMENTS
 
35
 
20
 
MISCELLANEOUS
 
35
 
21
 
LAW AND JURISDICTION
 
36
 
SCHEDULE MANDATORY COST RATE
 
  37
APPENDIX A NOTICE OF DRAWING
 
  39
APPENDIX B FORM OF MORTGAGE
 
  40
APPENDIX C FORM OF GENERAL ASSIGNMENT
 
  41
APPENDIX D FORM OF ACCOUNT CHARGE
 
  42

 
 
 


APPENDIX E FORM OF MANAGER'S UNDERTAKING
 
  43
APPENDIX F FORM OF MASTER AGREEMENT SECURITY DEED
 
  44
APPENDIX G FORM OF FFA TRANSACTION CONFIRMATION
 
  45
APPENDIX H FORM OF SUBORDINATION LETTER
 
  46

 
 

 
 
 


THIS LOAN AGREEMENT is made on the 17 day of May 2005

BETWEEN

(1)
SENATORE SHIPPING COMPANY LIMITED and NOEMI SHIPPING COMPANY LIMITED as joint and several Borrowers; and

(2)
THE ROYAL BANK OF SCOTLAND plc , as Lender.

WHEREAS the Lender has agreed to make available to the Borrowers on a joint and several basis a loan facility of up to Fifty six million United States Dollars (US$56,000,000) in two (2) Tranches (as defined below), upon and subject to the terms and conditions contained in this Agreement.

WHEREBY IT IS AGREED

1           PURPOSE, DEFINITIONS AND INTERPRETATION

1.1
The purpose of the Loan shall be:

(a)
to enable Borrower A to part finance the payment of the Contract Price of Ship A from Seller A; and

(b)
to enable Borrower B to part finance the payment of the Contract Price of Ship B from Seller B.

1.2
In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:

" Account Charge " means, in relation to each Borrower, the deed containing, inter alia, a charge in respect of its Operating Account executed or to be executed by the relevant Borrower in favour of the Lender substantially in the form set out in Appendix D (or in such other form as the Lender may approve or require) and, in the plural, means both such Account Charges;

" Approved Brokers Panel " means H Clarkson & Company Limited, Braemer Seascope Limited and Galbraith's Limited or such other firm or firms of independent sale and purchase shipbrokers as may from time to time be agreed by the Lender;

" Approved Manager " means, for the time being, Scorpio Ship Management S.A.M., a company incorporated under the laws of Monaco and having a place of business at 9, Rue du Gabian, MC 98000, Monaco, or any other company which the Lender may, in its sole and absolute discretion, approve from time to time as the technical manager of the Ships;

" Balloon Instalments " means the Tranche A Balloon Instalment and the Tranche B Balloon Instalment and in the singular, means either of them;
 
" Borrower A " means Senatore Shipping Company Limited a corporation organised and existing under the laws of the Marshall Islands and having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, (and includes its successors);

" Borrower B " means Noemi Shipping Company Limited a corporation organised and existing under the laws of Marshall Islands and having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (and includes its successors);

 
 

" Borrowers " means Borrower A and Borrower B together and, in the singular, means either of them;

" Business Day " means a day (other than a Saturday or Sunday) on which banks and financial markets in London are open for business and, in respect of a day on which a payment is required to be made hereunder, also a day on which banks and financial markets are open for business in New York City;

" Commitment " means the sum of Fifty six million Dollars ($56,000,000) to be made available under this Agreement by the Lender to the Borrowers in two tranches, Tranche A and Tranche B, subject to the terms and conditions herein contained;

" Contract Price " means, in relation to Ship A, the contract price payable for Ship A under the Ship A MOA being the amount of Fifty two million Dollars ($52,000,000) and, in relation to Ship B, the contract price payable for Ship B under the Ship B MOA being the amount of Fifty two million Dollars ($52,000,000);

" Credit Support Document " has the meaning given to that expression in section 14 of the Master Agreement;

" Credit Support Provider " has the meaning given to that expression in section 14 of the Master Agreement;

" Dollars " and " $ " means the lawful currency for the time being of the United States of America;

" Drawdown Date " means, in relation to each Tranche, the date upon which the Borrowers have requested that such a Tranche be made pursuant to Clause 2, or (as the context requires) the date on which such Tranche is actually made to the Borrowers hereunder;

" Earnings " means, in relation to each Ship, all moneys whatsoever due or to become due to or for the account of the Borrower which owns such Ship at any time during the Security Period arising out of the use or operation of such Ship including (but not limited to) all freight, hire and passage moneys, compensation payable to the Borrower which owns such Ship in the event of requisition of such Ship for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of such Ship and all sums recoverable under insurances in respect of loss of Earnings (and including, if and whenever such Ship is employed on terms whereby any or all such moneys as aforesaid are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to such Ship);
 
" Early Termination Date " has the meaning given to that expression in section 14 of the Master Agreement;

" Environmental Claim ", " Environmental Incident " and " Total Loss " have, in relation to each Ship, the meanings respectively ascribed to such terms in the Mortgage relating to such Ship;

" Event of Default " means any one of the events listed in Clause 9.1;

" FFA Transactions " means commodity swap transactions in respect of forward freight arrangements;

" Final Drawdown Date " means 30 June 2005;

 
2
 
 
" Financial Indebtedness " means, in relation to any person (a) monies borrowed or raised by such person, (b) any liability of such person under any debenture, bond, note or other security, (c) any liability of such person under acceptance credit facilities, financial leases, deferred purchase consideration arrangements or any other agreement or instrument having the commercial effect of a borrowing or raising of money by such person and (d) any guarantee, indemnity or other assurance against financial loss given by such person in respect of any of the foregoing;

" General Assignment " means, in relation to each Ship, the general assignment of Earnings, insurances and requisition compensation in respect of such Ship executed or to be executed by the relevant Borrower in favour of the Lender substantially in the form set out in Appendix C (or in such other form as the Lender may approve or require) and in the plural, means both the General Assignments;

" Indebtedness " means, in relation to any person, any obligation (whether present or future, actual or contingent, secured or unsecured, as principal or surety or otherwise) for the payment or repayment of money;

" Interest Period " means, in relation to the Loan (or any part thereof), a period the commencement and length of which shall be determined in accordance with the provisions of Clause 3.3;

" ISM Code " means in relation to its application to each Borrower, each Ship and their operation:

 
(a)
'The International Management Code for the Safe Operation of Ships and for Pollution Prevention', currently known or referred to as the 'ISM Code', adopted by the Assembly of the International Maritime Organisation by Resolution A.741(18) on 4 November 1993 and incorporated on 19 May 1994 into chapter IX of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974); and

 
(b)
all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or on behalf of the International Maritime Organisation or any other entity with responsibility for implementing the ISM Code, including without limitation, the 'Guidelines on implementation or administering of the International Safety Management (ISM) Code by Administrations' produced by the International Maritime Organisation pursuant to Resolution A.788(19) adopted on 25 November 1995,

as the same may be amended, supplemented or replaced from time to time;

" ISM Code Documentation " includes the document of compliance (DOC) and safety management certificate (SMC) issued by a Classification Society in accordance with the ISM Code in relation to each Ship within the periods specified by the ISM Code;

" ISM SMS " means the safety management system which is required to be developed, implemented and maintained under the ISM Code;

" ISPS Code " means the International Ship and Port Facility Security Code adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time);

" ISSC " means a valid and current International Ship Security Certificate issued under the ISPS Code;

" Jacob-Scorpio Tanker Pool Limited Pool " means the pool of vessels operating under the name of, and known as, the "Jacob-Scorpio Tanker Pool Limited";

 
3
 
 
" Lender " means The Royal Bank of Scotland plc, a company incorporated in Scotland having its registered office at 36 St. Andrew Square, Edinburgh EH2 2YB, Scotland acting through the Shipping Business Centre at 5-10 Great Tower Street, London EC3P 3HX, England or through any other branch notified to the Borrowers from time to time pursuant to Clause 18.3 (and includes all persons directly or indirectly deriving title under it whether by assignment, amalgamation, operation of law or otherwise);

" Loan " means the principal amount of the Tranches or (as the context requires) the principal amount thereof for the time being outstanding under this Agreement;

" Manager's Undertaking " means, in relation to each Ship, an undertaking executed or to be executed by the Approved Manager in respect of such Ship in the form set out in Appendix E (or in such other form as the Lender may approve or require) and, in the plural, means both such Manager's Undertakings;

" Mandatory Cost Rate " means the percentage rate, which represents the cost to the Lender, relative to the Loan, of compliance with the requirements of the Bank of England, the Financial Services Authority or any other regulatory authority, as determined by the Lender in accordance with the formula detailed in the Schedule hereto;

" Margin " means, in relation to each Tranche, zero point seven zero per cent (0.70%) per annum;

" Master Agreement " means the Master Agreement (on the 1992 ISDA (Multicurrency - Crossborder) form as modified) dated 13 April 2005 as supplemented by a supplemental agreement dated 13 April 2005 and as further supplemented by a supplemental agreement of even date herewith made between the Lender and the Borrowers, and includes all transactions from time to time entered into and confirmations from time to time exchanged under the Master Agreement and any amending, supplementing or replacement agreements made from time to time;

" Master Agreement Liabilities " means, at any relevant time, all liabilities actual or contingent, present or future, of the Borrowers to the Lender under the Master Agreement;

" Master Agreement Security Deed " means the deed containing, inter alia, a charge in respect of the Master Agreement executed or to be executed by the Borrowers in favour of the Lender substantially in the form set out in Appendix G (or in such other form as the Lender may approve or require);

" MOAs " means the Ship A MOA and the Ship B MOA and, in the singular, means either of them;

" Mortgage " means, in relation to each Ship, the first preferred Marshall Islands ship mortgage over such Ship executed or to be executed by the relevant Borrower in favour of the Lender substantially in the form set out in Appendix B (or in such other form as the Lender may approve or require) and in the plural, means both Mortgages;

" Notice of Drawing " means a notice in the form set out in Appendix A (or in such other form as the Lender may approve or require);

" Operating Accounts " means, for the time being, in relation to Borrower A, an account to be opened in the name of Borrower A with the Lender designated "SENASHI - USD1" and, in relation to Borrower B, an account to be opened in the name of Borrower B with the Lender designated "NOESHI - USD1" (or in each case such other account with any other branch of the Lender or with a bank or financial institution other than the Lender (whether associated with the Lender or not) substituted therefor pursuant to this Agreement) and in the singular, means either of them;


 
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" Original Financial Statements " means, the audited accounts and financial statements of the Borrower for the financial year ended 31 December 2005;

" Permitted Security Interests " means:

 
(a)
Security Interests created by the Security Documents;

 
(b)
liens for unpaid master's and crew's wages in accordance with usual maritime practice;

 
(c)
liens for salvage;

 
(d)
liens arising by operation of law for not more than 2 months' prepaid hire under any charter in relation to either Ship not prohibited by this Agreement;

 
(e)
liens for master's disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Ships, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the Borrower in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 7.1(n) of the relevant Mortgage;

 
(f)
any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses where the relevant Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and

 
(g)
Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

" RBS LIBOR " means, for an Interest Period, the rate per annum at which deposits in Dollars in an amount approximately equal to the Loan (or any part thereof) are (or would have been) offered by the Lender to leading banks in the London Interbank Dollar Market at or about 11.00a.m. (London time) on the second Business Day prior to the commencement of such Interest Period for a period equal to such Interest Period and for delivery on the first Business Day thereof;

" Receiving Bank " means American Express Bank Limited, 3 World Financial Centre, 23rd Floor, New York, NY 10285 - 2300 USA, or such branch or other bank as may from time to time be notified by the Lender to the Borrowers;

" Relevant Interest Rate " means RBS LIBOR or, in the case where a Transaction is to be, or has been, entered into under the Master Agreement and the Borrowers have not made an election pursuant to Clause 3.5(b), TELERATE;

" Repayment Date " means each of the dates specified in Clause 4.1;

" Repayment Instalments " means the repayment instalments specified in Clause 4.1 and, in the singular, means any of them;

" Security Documents " means (a) the General Assignments, the Manager's Undertakings, the Mortgages, the Account Charges, the Subordination Letter, the Credit Support Documents and the Master Agreement Security Deed and (where the context so permits) this Agreement and (b) any other agreement or document that may be executed at any time by any of the Borrowers or any other person as security for all or any part of the Loan, interest thereon, Master Agreement Liabilities and any other moneys payable to the Lender under or in connection with this Agreement and/or the Master Agreement and/or any of the documents referred to in this definition;


 
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" Security Interest " means a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, encumbrance, assignment, trust arrangement, title retention or other distress, execution, attachment, arrangement or process of any kind having the effect of conferring security;

" Security Period " means the period commencing on the date of this Agreement and terminating on the date upon which all moneys payable or to become payable at any time and from time to time pursuant to the terms of this Agreement and/or any of the Security Documents shall have been paid and discharged in full;

" Seller A " means Schiffahrtsgesellschaft Ariadne Jacob mbH & Co. KG, a company organised and existing under the laws of Germany having its registered office at Ballindamm 6, 20095 Hamburg;

" Seller B " means Schiffahrtsgesellschaft Colin Jacob mbH & Co. KG, a company organised and existing under the laws of Germany having its registered office at Ballindamm 6, 20095 Hamburg;

" Sellers " means Seller A and Seller B and, in the singular, means either of them;

" Ship A " means the 2004 built crude and product tanker of about 72,700 dwt currently named "ARIADNE JACOB" and registered in the name of Seller A in the German International Ship Registry and parallel registered under Liberian flag to be purchased by Borrower A pursuant to the Ship A MOA and registered in the name of Borrower A under the Marshall Islands flag with the name "SENATORE";

" Ship B " means the 2004 built crude and product tanker of about 72,700 dwt currently tamed "COLIN JACOB" and registered in the name of Seller B in the German International Ship Registry and parallel registered under Liberian flag to be purchased by Borrower B pursuant to the Ship B MOA and registered in the name of Borrower B under the Marshall Islands flag with the name "NOEMI";

" Ship A MOA " means the memorandum of agreement dated 21 March 2005 entered into between Borrower A and Seller A in respect of the sale by Seller A to, and the purchase by Borrower A of, Ship A;

" Ship B MOA " means the memorandum of agreement dated 21 March 2005 entered into between Borrower B and Seller B in respect of the sale by Seller B to, and the purchase by Borrower B of, Ship B;

" Ships " means Ship A and Ship B and, in the singular, means either of them;
 
" Subordinated Lender " means Simon Financial Limited, a corporation organised and existing under the laws of the Republic of Liberia and having its registered office. at 80 Broad Street, Monrovia, the Republic of Liberia;

" Subordination Letter " means a letter of subordination to be executed by the Subordinated Lender in favour of the Lender substantially in the form set out in Appendix H (or in such other form as the Lender may approve or require);

" Subsidiary " means a body corporate from time to time of which another (a) has direct or indirect control, or (b) owns directly or indirectly more than fifty (50) per cent, of the share capital or similar right of ownership (and in this definition "control" means the power to direct the management and the policies of a body corporate, whether through the ownership of voting capital, by contract or otherwise);

 
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" Taxes " includes all present and future income, corporation or value-added taxes and all stamp and other taxes and levies, imposts, deductions, duties, charges and withholdings whatsoever together with interest thereon and penalties with respect thereto, if any, and charges, fees or other amounts made on or in respect thereof (and references to "Taxation" shall be construed accordingly);

" TELERATE " means, for an Interest Period:

 
(a)
the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to, or as near as, possible equal to, the relevant Interest Period which appears on Telerate. Page 3750 at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period (and, for the purposes of this Agreement, "Telerate Page 3750" means the display designated as "page 3750" on the Telerate Service or such other page as may replace Page 3750 on that service for the purpose of displaying rates comparable to that rate or on such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for Dollars); or

 
(b)
if no rate is quoted on Telerate Page 3750, the rate per annum determined by the Lender to be the rate per annum which leading banks in the London Interbank Market offer for deposits in Dollars in the London Interbank Market at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it;

" Termination Amount " shall have the meaning given to such term in Clause 7.3(a) of this Agreement;

" Tranche A " means that part of the Commitment in the amount of Twenty eight million Dollars ($28,000,000) to be advanced, subject to the terms of this Agreement, by the Lender to the Borrowers and as the context may require, the outstanding principal amount thereof from time to time hereunder;

" Tranche A Balloon Instahneuit " has the meaning given to such term in Clause 4.1(a);

" Tranche A Maturity Date " means the date falling one hundred and twenty (120) months after the Drawdown Date of Tranche A;

" Tranche B " means that part of the Commitment in the amount of Twenty eight million Dollars ($28,000,000) to be advanced, subject to the terms of this Agreement, by the Lender to the Borrowers and as the context may require, the outstanding principal amount thereof from time to time hereunder;

" Tranche B Balloon Instalment " has the meaning given to such term in Clause 4.1(b);

" Tranche B Maturity Date " means the date falling one hundred and twenty (120) months after the Drawdown Date of Tranche B;

" Tranches " means together, Tranche A and Tranche B and, in the singular, means either of them; and

" Transaction " means a Transaction as defined in the introductory paragraph of the Master Agreement.

1.3
In this Agreement, references to periods of " months " shall mean a period beginning in one calendar month and ending in the relevant calendar month on the day numerically corresponding to the day of the calendar month in which such period started, provided that (a) if such period started on the last Business Day in a calendar month, or if there is no such numerically corresponding day, such period shall end on the last Business Day in the relevant calendar month and (b) if such numerically corresponding day, is not a Business Day, such period shall end on the next following Business Day in the same calendar month, or if there is no such Business Day, such period shall end on the preceding Business Day (and " month " and " monthly " shall be construed accordingly).

 
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1.4
In this Agreement:

(a)
Clause headings are inserted for convenience only and shall not affect the construction of this Agreement and unless otherwise specified, all references to Clauses and Appendices are to Clauses of, and Appendices to, this Agreement;

(b)
unless the context otherwise requires, words denoting the singular number shall include the plural and vice versa;

(c)
references to persons include bodies corporate and unincorporate;

(d)
references to assets include property, rights and assets of every description;

(e)
references to any document are to be construed as references to such document as amended or supplemented from time to time; and

(f)
references to any enactment include re-enactments, amendments and extensions thereof.

2
DRAWDOWN

2.1
Subject to the terms of this Agreement, and in reliance (inter alia) on the representations and warranties of the Borrowers set out in Clauses 6.1, 6.2 and 6.3 and the representations and warranties of the Borrowers and the other parties to the Security Documents set out in the Security Documents, the Lender agrees to make available to the Borrowers a loan facility in an amount up to Fifty six million Dollars ($56,000,000) to be divided into two tranches being Tranche A and Tranche B for the purposes described in Clause 1.1.

2.2
The Borrowers may make a request for the advance of each Tranche by sending to the Lender a duly completed Notice of Drawing (which shall be irrevocable) to be received by the Lender not later than 11.00 a.m. (London time) two (2) Business Days prior to the relevant Drawdown Date, provided that each Tranche may only be advanced on a Business Day on or prior to the Final Drawdown Date (or such later date as the Lender, in its sole and absolute discretion, shall agree).

2.3
Subject to the terms of this Agreement, the Lender shall advance each Tranche to the Borrowers on the relevant Drawdown Date as follows:

(a)
in the case of Tranche A, by paying the proceeds thereof to the Operating Account of Borrower A for immediate payment to Seller A towards satisfaction of the Contract Price payable under the Ship A MOA;

(b)
in the case of Tranche B, by paying the proceeds thereof to the Operating Account of Borrower B for immediate payment to Seller B towards satisfaction of the Contract Price payable under the Ship B MOA;

and the Borrowers hereby unconditionally and irrevocably authorise the Lender to make such payments on their behalf.

 
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3              INTEREST AND INTEREST PERIODS

3.1
Subject to the terms of this Agreement, the rate of interest applicable to each Tranche (or any part thereof) for each Interest Period relating thereto shall be the rate per annum determined by the Lender to be the aggregate of (a) the Margin and (b) the Mandatory Cost Rate and (c) the Relevant Interest Rate.

3.2
Subject to the terms of this Agreement, the Borrowers shall pay interest in respect of each Tranche for each Interest Period relating thereto in arrears on the last day of such Interest Period, provided that where such Interest Period is of a duration of longer than three months, accrued interest in respect of the Loan (or such part) shall be paid quarterly during such Interest Period and on the last day of such Interest Period.

3.3
The duration of each Interest Period shall be three (3), six (6) or twelve (12) months as notified by the Borrowers to the Lender not later than 11.00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period (or such other period as the Lender, in its sole and absolute discretion, may agree), provided that:
 
(a)
the first Interest Period in relation to each Tranche shall commence on its respective Drawdown Date and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period relating thereto;

(b)
if the Borrowers fail to select an Interest Period then, subject as provided in this Clause 3.3, the Borrowers shall be deemed to have selected an Interest Period of three (3) months;

(c)
the selection of Interest Periods under this Clause 3.3 shall be made in such manner as to ensure that the expiry of an Interest Period in respect of an amount of a Tranche equal to the repayment instalment which is then due to be repaid under Clause 4.1 in relation to such Tranche shall coincide with each Repayment Date relating to such Tranche (and, for this purpose alone, shall Interest Periods of different lengths be selected in relation to each Tranche); and

(d)
the Lender, in its sole and absolute discretion, is satisfied that deposits in Dollars for a period equal to such Interest Period will be available to the Lender in the London Interbank Dollar Market at the commencement of such Interest Period and, if the Lender is not so satisfied, such Interest Period shall be of such duration as the Lender and the Borrowers shall agree (or, in the absence of such agreement, as the Lender shall specify).

3.4
In the event that the Lender does not receive on the due date any sum due under this Agreement or any of the Security Documents to which the Borrowers are a party (or any agreement entered into by either of the Borrowers in connection herewith or therewith), the Borrowers shall pay to the Lender on demand interest on such sum from and including the due date therefor to the date of actual payment (as well after as before judgment) at the rate per annum determined by the Lender to be, if such sum is principal; one per cent. (1%) above the higher of the rates set out at (a) and (b) below and, if such sum is other than principal, one per cent. (1%) above the rate set out at (b) below:

(a)
the rate (inclusive of the Margin) applicable to such overdue principal immediately prior to the due date (and in any event only for the unexpired part of any Interest Period relative to such overdue principal) together with the Mandatory Cost Rate;

(b)
the Margin plus the rate per annum at which deposits in Dollars in an amount equal to such overdue amount are offered by the Lender to leading banks in the London Interbank Dollar Market on call or for successive periods of any duration up to three months, as the Lender may determine from time to time together with the Mandatory Cost Rate. Such interest rate shall be determined on the commencement of each such period. If the Lender determines that Dollar deposits are not being made available by it to leading banks in the London Interbank Dollar Market in the ordinary course of business, such interest rate shall be determined by reference to the cost of funds to the Lender from such other sources as the Lender may from time to time determine.

 
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Any such interest which is not paid when due shall be compounded at the end of each such Interest Period or other period as the case may be (both before and after any notice of demand by the Lender under Clause 9.2).
 
Such a default rate of interest will not apply to any late payment if and so long as any delay to such payment is due solely to technical problems within the Lender's payment system beyond the control of the Borrowers.

3.5
 

(a)
In the event that a Transaction is to be entered into under the Master Agreement then (subject to Clause 3.5(b) below) the Relevant Interest Rate for each and every Interest Period applicable to that part of the Loan the subject of the Transaction (commencing with the first Interest Period relating to such Transaction) shall be TELERATE.

(b)
The Borrowers may elect for the Relevant Interest Rate for each and every Interest Period applicable to that part of the Loan the subject of a Transaction (commencing with the first Interest Period relating to such Transaction) to be RBS LIBOR rather than TELERATE provided that such election (which shall be irrevocable) is notified in writing by the Borrowers to the Lender not later than 11.00 a.m. (London time) three (3) Business Days prior to the commencement of such first Interest Period (or such other period as the Lender, in its sole and absolute discretion, may agree).

4              REPAYMENT AND PREPAYMENT

4.1
 

(a)
The Borrowers shall repay Tranche A by (i) forty (40) consecutive quarterly instalments each to be in the amount of Four hundred and fifty thousand Dollars ($450,000), the first such instalment to be repaid three months after the Drawdown Date in respect of such Tranche and the fortieth and final of such instalments to be repaid on the Tranche A Maturity Date and (ii) a balloon instalment to be in the amount of Ten million Dollars ($10,000,000) (the " Tranche A Balloon Instalment "), such Tranche A Balloon Instalment to be repaid on the Tranche A Maturity Date.

(b)
The Borrowers shall repay Tranche B by (i) forty (40) quarterly instalments each to be in the amount of Four hundred and fifty thousand Dollars ($450,000), the first such instalment to be repaid three (3) months after the Drawdown Date in respect of such Tranche and the fortieth and final of such instalments to be repaid on the Tranche B Maturity Date and (ii) a balloon instalment to be in the amount of Ten million Dollars ($10,000,000) (the " Tranche B Balloon Instalment "), such Tranche B Balloon Instalment to be repaid on the Tranche B Maturity Date.

4.2
The Borrowers may prepay the whole or any part of a Tranche on any Business Day, provided that:

(a)
the Lender shall have received from the Borrowers not less than fourteen (14) days' prior written notice (which shall be irrevocable) of their intention to make such prepayment and specifying the amount and date on which such prepayment is to be made and the Tranche against which such payment is to be applied;
 
(b)
the amount of any such partial prepayment shall be not less than Five hundred thousand Dollars ($500,000) (or a higher integral multiple of Five hundred thousand Dollars ($500,000));

 
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(c)
no amount prepaid under this Agreement may be reborrowed;

(d)
each prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and all other sums payable thereon under the terms of this Agreement and, if such prepayment is not made on the last day of an Interest Period relating to the amount prepaid, together with any sums payable pursuant to Clause 14.1(d) but without premium or other payment;

(e)
each partial prepayment of a Tranche under this Agreement shall (unless the Lender otherwise agrees in writing prior to the date of any relevant repayment) be applied against the.instalments of such Tranche in inverse order of maturity.

4.3
In the event of an arm's length sale of either of the Ships the subject of a Mortgage to a party unconnected to the Borrowers or in the event of a Total Loss of either of the Ships the subject of a Mortgage, the Borrower shall only be obliged to prepay the Tranche relative to such Ship (with the balance of the sale or Total Loss proceeds being released to the Borrowers) if:

(a)
the Borrowers and all other parties to the Security Documents are in compliance with all their covenants and undertakings in this Agreement and the Security Documents; and

(b)
no Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) shall have occurred and is continuing; and

(c)
the security maintenance covenant set out in Clause 7.3 will be met in relation to the remaining Ship immediately following such prepayment; and

(d)
such prepayment is made in accordance with sub-clauses (c), (d) and (e) of Clause 4.2 immediately upon the completion of such sale or (subject to Clause 9.1(m)) the receipt of the insurance proceeds in respect of such Total Loss.

4.4
If for any reason any part of the Loan is not drawn down under this Agreement but nonetheless a Transaction has been entered into under the Master Agreement then, subject to Clause 4.6, the Lender shall be entitled but not obliged to amend, supplement, cancel, net out, terminate, liquidate, transfer or assign all or any part of the rights, benefits and obligations created by the Master Agreement and/or to obtain or re-establish any hedge or related trading position in any manner and with any person the Lender decides, and in the event of the Lender exercising any part of its entitlement aforesaid the Borrowers' continuing obligations under the Master Agreement shall, unless agreed otherwise by the Lender, be calculated so far as the Lender considers it practicable by reference to the repayment schedule for the Loan taking into account the fact that less than the full amount of the Loan has been advanced.
 
4.5
In the case of a prepayment of all or part of the Loan or a Tranche under this Agreement then, subject to Clause 4.6, the Lender shall be entitled but not obliged to amend, supplement, cancel, net out, transfer or assign all or such part of the rights, benefits and obligations created by the Master Agreement which equate or relate to the part of the Loan or Tranche so prepaid and/or to obtain or re-establish any hedge or related trading position in any manner and with any person the Lender decides, and in the case of a partial prepayment and the Lender exercising any part of its entitlement as aforesaid the Borrowers' continuing obligations under the Master Agreement shall, unless agreed otherwise by the Lender, be calculated so far as the Lender considers it practicable by reference to the amended repayment schedule for the Loan taking account of the fact that less than the full amount of the Loan remains outstanding.

 
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4.6
If:

(a)
less than the full amount of the Loan or a Tranche remains outstanding following a prepayment under this Agreement; or

(b)
less than the full amount of the Loan is drawndown under this Agreement,

and the Lender agrees, following a written request of the Borrowers, that the Borrowers may be permitted to maintain all or part of a Transaction in an amount not wholly matched with or linked to all or part of the Loan, the Borrowers shall within ten (10) days of being notified by the Lender of such requirement provide the Lender with, or procure the provision to the Lender of, such additional security as shall in the opinion of the Lender be adequate to secure the performance of such Transaction, which additional security shall take such form, be constituted by such documentation, and be entered into between such parties, as the Lender may approve or require, and each document comprising such additional security shall constitute a Credit Support Document.

4.7
The Borrowers shall on the first written demand of the Lender indemnify the Lender in respect of all loss, cost and expense (including the fees of legal advisers) incurred or sustained by the Lender as a consequence of or in relation to the effecting of any matters or transactions referred to in Clauses and 4.6.

4.8
Without prejudice to or limitation of the obligations of the Borrowers under Clause 4.7, in the event that the Lender exercises any of its rights under Clauses 4.4 or 4.5 and such exercise results in all or part of a Transaction being terminated such termination shall be treated under the Master Agreement in the same manner as if it were a Terminated Transaction (as defined in section 14 of the Master Agreement) effected by the Lender after an Event of Default by the Borrowers, and, accordingly, the Lender shall be permitted to recover from the Borrowers a payment for early termination calculated in accordance with the provisions of section 6(e)(i) of the Master Agreement.

5              CONDITIONS PRECEDENT

5.1
The obligation of the Lender to advance any of the Tranches to the Borrowers shall be subject to the condition that the Lender shall have received the following documents and evidence in all respects in form and substance satisfactory to the Lender and its legal advisers on or before the date of this Agreement:
 
(a)
copies of the Memorandum and Articles of Association (or equivalent documents) (and all amendments thereto) of each of the Borrowers and any other documents required to be filed or registered or issued under the laws of their respective countries of incorporation to establish their incorporation and/or good standing;

(b)
copies of resolutions passed at separate meetings of the board of directors and shareholders of each of the Borrowers evidencing approval of such of this Agreement, the relevant MOA, the Master Agreement and the Security Documents to which each is a party and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given hereunder or thereunder on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Lender (or, in the case of the MOA, ratifying the execution thereof);

(c)
the original of any power of attorney issued in favour of any person executing this Agreement, the Master Agreement or any of the Security Documents on behalf of the Borrowers;

(d)
a list specifying the directors and officers of each of the Borrowers (together with their specimen signatures) and specifying the authorised and issued share capital of each of the Borrowers;

 
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(e)
copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by the Borrowers of their respective obligations under those of this Agreement, the relevant MOA, the Master Agreement and the Security Documents to which each is a party and the execution, validity and enforceability of this Agreement, the Master Agreement and the Security Documents;

(f)
a statement in writing from a person satisfactory to the Lender confirming the identity of the legal and beneficial owner of the shares in each of the Borrowers and of the ultimate beneficial owner or owners of the shares in each of the Borrowers;

(g)
the Master Agreement Security Deed and the Subordination Letter duly executed and delivered by the parties thereto together with such evidence as the Lender and its legal advisers shall require in relation to the due authorisation and execution by the Subordinated Lender of the Subordination Letter;

(h)
a written confirmation from the Borrowers as to which individuals are authorised to give verbal and/or written instructions to the Lender on behalf of the Borrowers in respect of the selection of any Interest Period pursuant to Clause 3.3 of this Agreement;

(i)
evidence that the agent for service of process named in Clause 21.5 has accepted its appointment for the purposes of this Agreement and the Security Documents;
 
(j)
favourable legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the Marshall Islands and such other relevant jurisdictions as the Lender may require;

(k)
evidence that the Lender has received the arrangement fees payable and due pursuant to Clause 10.1; and

(l)
such documents and evidence as the Lender shall require in relation to each Borrower based on applicable law and regulations, and the Lender's own internal guidelines, relating to the Lender's knowledge of its customers;

each of the documents specified in sub-clauses (a), (b), (d) and (e) above shall be certified as a true and up-to-date copy by a Director or Secretary (or equivalent officer) of the relevant Borrower as the case may be.

5.2
The obligation of the Lender to advance Tranche A shall be subject to the condition that the Lender shall have received the following documents and evidence in all respects in form and satisfactory to the Lender and its legal advisers on or before the Drawdown Date relating thereto:

(a)
evidence that each of the conditions specified in Clause 5.1 have been satisfied;

(b)
evidence that the Operating Account in relation to Ship A has been duly opened by Borrower A and that all board resolutions, mandates, signature cards and other documents or evidence required in connection with the opening, maintenance and operation of such Operating Account have been duly delivered to the Lender;

(c)
to the extent required by any change in applicable law and regulation or any changes in the Lender's own internal guidelines since the date on which the applicable documents and evidence were delivered to the Lender pursuant to Clause 5.1(1), such further documents and evidence as the Lender shall require relating to the Lender's knowledge of its customers;

(d)
a certified true and up-to-date copy of the Ship A MOA certified by a Director or Secretary (or equivalent officer) of Borrower A;

 
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(e)
such evidence as the Lender and its legal advisers shall require in relation to the due authorisation and execution by Seller A and Borrower A of the Ship A MOA and all documents to be executed by Seller A and Borrower A pursuant thereto;

(f)
the Mortgage, the General Assignment and the Account Charge relating to Borrower A and Ship A duly executed and delivered by the parties thereto together with all other items and documents required to be delivered pursuant to the terms thereof, including (but without limitation) insurance notices of assignment, acknowledgements and letters of undertaking pursuant to such General Assignment;

(g)
evidence that:
 
 
(i)
Ship A has been unconditionally delivered by Seller A, and accepted by Borrower  A, pursuant to the Ship A MOA together with evidence that the full Contract Price in respect of Ship A payable to Seller A under the Ship A MOA (in addition to the part thereof to be financed by way of Tranche A) has been duly paid or will be paid upon the advance of Tranche A;

 
(ii)
Ship A is provisionally registered in the name of Borrower A under the Marshall Islands flag;

 
(iii)
Ship A is in the absolute and unencumbered ownership of Borrower A save as contemplated by this Agreement and the relevant' Security Documents;

 
(iv)
Ship A maintains the highest classification available to it with American Bureau of Shipping or such other classification society acceptable to the Lender in its absolute discretion free of all recommendations and qualifications of such classification society save those notified and approved in writing by the Lender;

 
(v)
the relevant Mortgage has been duly registered against Ship A as a valid first preferred ship mortgage in accordance with the laws of the Republic of The Marshall Islands;

 
(vi)
Ship A is insured in accordance with the provisions of the relevant Mortgage;

(h)
a valuation (on a charter free basis) of Ship A, dated not earlier than thirty (30) days prior to the relevant Drawdown Date, from an independent London sale and purchase shipbroker acceptable to the Lender showing that the minimum security covenant contained in Clause 7.3 will be complied with immediately following the advance of Tranche A;

(i)
in relation to Ship A, evidence that it will, as from the Drawdown Date relating to Tranche A, be managed by the Approved Manager on terms acceptable to the Lender together with:

 
(i)
the Manager's Undertaking relative to such Ship duly executed and delivered by the Approved Manager;

 
(ii)
copies of the document of compliance (DOC) and safety management certificate (SMC) referred to in paragraph (a) in the definition of the ISM Code Documentation certified as true and in effect by Borrower A and the Approved Manager or, in the event that the DOC and SMC are not legally required by Borrower A for such Ship at the Drawdown Date, evidence that those documents have been applied for, accompanied by a statement from a director or officer of Borrower A and the Approved Manager that neither of them is aware of any reason why such application may be refused;

 
14
 

 
(iii)
a copy of the ISSC certified as true and in effect by Borrower A and the Approved Manager;
 
(j)
in relation to Ship A, a letter from Borrower A to the protection and indemnity association in which such Ship is or is to be entered instructing it to provide the Lender with a copy of the certificate of entry of such Ship and any other information relating to the entry of such Ship in such protection and indemnity association;

(k)
such further legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the Marshall Islands and such other relevant jurisdictions as the Lender may require;

(l)
a favourable opinion from an independent insurance consultant acceptable to the Lender on such matters relating to the insurances for Ship A as the Lender may require;

(m)
such evidence as the Lender and its legal advisers shall require that such part of the acquisition cost of Ship A which has not been funded out of the proceeds of the Commitment and which has been borrowed by Borrower A is subordinated to the obligations of Borrower A to the Lender under this Agreement and the Master Agreement in terms satisfactory to the Lender in its absolute discretion;

(n)
evidence that Ship A is free from the bareboat charter the subject of its bareboat registration under Liberian flag and evidence that Ship A has been deleted from both the German International Ship Registry and the Liberian Ship Registry free from all registered encumbrances, or in the alternative, evidence that Ship A will be so deleted within such period as the Lender shall require and that, in any event there are no encumbrances registered against Ship A in either of such registries; and

(o)
in relation to Ship A, evidence that it will as from the Drawdown Date relating to Tranche A, be entered into the Jacob-Scorpio Tanker Pool Limited Pool and be commercially managed by the commercial managers of the Jacob-Scorpio Tanker Pool Limited Pool on terms acceptable to the Lender.

5.3
The obligation of the Lender to advance Tranche B shall be subject to the condition that the Lender shall have received the following documents and evidence in all respects in form and satisfactory to the Lender and its legal advisers on or before the Drawdown Date relating thereto:

(a)
evidence that each of the conditions specified in Clauses 5.1 and 5.2 have been satisfied;

(b)
evidence that the Operating Account in relation to Ship B has been duly opened by Borrower B and that all board resolutions, mandates, signature cards and other documents or evidence required in connection with the opening, maintenance and operation of such Operating Account have been duly delivered to the Lender;

(c)
to the extent required by any change in applicable law and regulation or any changes in the Lender's own internal guidelines since the date on which the applicable documents and evidence were delivered to the Lender pursuant to Clause 5.1(1), such further documents and evidence as the Lender shall require relating to the Lender's knowledge of its customers;
 
(d)
a certified true and up-to-date copy of the Ship B MOA certified by a Director or Secretary (or equivalent officer) of Borrower B;

(e)
such evidence as the Lender and its legal advisers shall require in relation to the due authorisation and execution by Seller B and Borrower B of the Ship B MOA and all documents to be executed by Seller B and Borrower B pursuant thereto;

 
15
 

(f)
the Mortgage, the General Assignment and the Account Charge relating to Borrower B and Ship B duly executed and delivered by the parties thereto together with all other items and documents required to be delivered pursuant to the terms thereof, including (but without limitation) insurance notices of assignment, acknowledgements and letters of undertaking pursuant to such General Assignment;

(g)
evidence that:

 
(i)
Ship B has been unconditionally delivered by Seller B, and accepted by Borrower B, pursuant to the Ship B MOA together with evidence that the full Contract Price in respect of Ship B payable to Seller B under the Ship B MOA (in addition to the part thereof to be financed by way of Tranche B) has been duly paid or will be paid upon the advance of Tranche B;

 
(ii)
Ship B is provisionally registered in the name of Borrower B under the Marshall Islands flag;

 
(iii)
Ship B is in the absolute and unencumbered ownership of Borrower B save as contemplated by this Agreement and the relevant Security Documents;

 
(iv)
Ship B maintains the highest classification available to it with American Bureau of Shipping or such other classification society acceptable to the Lender in its absolute discretion free of all recommendations and qualifications of such classification society save those notified and approved in writing by the Lender;

 
(v)
the relevant Mortgage has been duly registered against Ship B as a valid first preferred ship mortgage in accordance with the laws of the Republic, of The Marshall Islands;

 
(vi)
Ship B is insured in accordance with the provisions of the relevant Mortgage;

(h)
a valuation (on a charter free basis) of Ship B, dated not earlier than thirty (30) days prior to the relevant Drawdown Date, from an independent London sale and purchase shipbroker acceptable to the Lender showing that the minimum security covenant contained in Clause 7.3 will be complied with the immediately following the advance of Tranche 15;

(i)
in relation to Ship B, evidence that it will, as from the Drawdown Date relating to Tranche B, be managed by the Approved Manager on terms acceptable to the Lender together with:
 
(i)
the Manager's Undertaking relative to such Ship duly executed and delivered by the Approved Manager;

 
(ii)
copies of the document of compliance (DOC) and safety management certificate (SMC) referred to in paragraph (a) in the definition of the ISM Code Documentation certified as true and in effect by Borrower B and the Approved Manager or, in the event that the DOC and SMC are not legally required by Borrower B for such Ship at the Drawdown Date, evidence that those documents have been applied for, accompanied by a statement from a director or officer of Borrower B and the Approved Manager that neither of them is aware of any reason why such application may be refused;

 
(iii)
a copy of the ISSC certified as true and in effect by Borrower B and the Approved Manager;

(j)
in relation to Ship B, a letter from Borrower B to the protection and indemnity association in which such Ship is or is to be entered instructing it to provide the Lender with a copy of the certificate of entry of such Ship and any other information relating to the entry of such Ship in such protection and indemnity association;

 
16
 

(k)
such further legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the Marshall Islands and other relevant jurisdictions as the Lender may require;

(l)
a favourable opinion from an independent insurance consultant acceptable to the Lender on such matters relating to the insurances for Ship B as the Lender may require;

(m)
such evidence as the Lender and its legal advisers shall require that such part of the acquisition cost of Ship B which has not been funded out of the proceeds of the Commitment and which has been borrowed by Borrower B is subordinated to the obligations of Borrower B to the Lender under this Agreement and the Master Agreement in terms satisfactory to the Lender in its absolute discretion;

(n)
evidence that Ship B is free from the bareboat charter the subject of its bareboat registration under Liberian flag and evidence that Ship B has been deleted from both the German International Ship Registry and the Liberian Ship Registry free from all registered encumbrances, or in the alternative, evidence that Ship B will be so deleted within such period as the Lender shall require and that, in any event there are no encumbrances registered against Ship B in either of such registries; and

(o)
in relation to Ship B, evidence that it will as from the Drawdown Date relating to Tranche B, be entered into the Jacob-Scorpio Tanker Pool Limited Pool and be commercially managed by the commercial managers of the Jacob-Scorpio Tanker Pool Limited Pool on terms acceptable to the Lenders.

5.4
Without prejudice to any of the other provisions of this Agreement, in the event that the Lender, in its sole and absolute discretion, advances any of the Tranches to the Borrowers prior to the satisfaction of all or any of the conditions referred to in Clauses 5.1, 5.2 and 5.3, the Borrowers hereby covenant and undertake to satisfy or procure the satisfaction of such condition or conditions within fourteen (14) days after the relevant Drawdown Date (or such longer period as the Lender may, in its sole and absolute discretion, agree or specify).
 
5.5
The obligation of the Lender to advance a Tranche is subject to the following further conditions:

(a)
that both at the date of the relevant Notice of Drawing and on the relevant Drawdown Date:

 
(i)
no Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) has occurred and is continuing or might result from the advance of the relevant Tranche;

 
(ii)
the representations and warranties of the Borrowers in Clause 6.1 and the representations and warranties of the Borrowers and other parties to the Security Documents set out in the Security Documents are true and accurate as of each such date, as if made on each such date with reference to the facts then subsisting;

 
(iii)
none of the circumstances specified in Clause 13.3 has occurred and is continuing; and

(b)
the Lender has received, and found to be satisfactory to it in all respects, such further opinions, consents, agreements and documents in connection with this Agreement, the Master Agreement and the Security Documents as the Lender may reasonably request by notice to the Borrowers prior to the Drawdown Date.

 
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6             REPRESENTATIONS AND WARRANTIES

6.1
Each of the Borrowers hereby jointly represents and warrants to the Lender that:

(a)
each Borrower is a body corporate duly organised and validly existing and in good standing under the laws of the Marshall Islands and has an authorised share capital of $1,500 divided into 1500 shares of $1 each, all of which shares have been issued fully paid and are in the legal and beneficial ownership of Simon Financial Limited;

(b)
each Borrower has full power and authority to (i) to execute and deliver the relevant MOA to purchase and pay for the relevant Ship pursuant to that MOA and register its Ship in its name under the Marshall Islands flag, (ii) to execute and deliver this Agreement, the Master Agreement and the Security Documents to which it is a party, (iii) to borrow under this Agreement and (iv) to comply with the provisions of and perform all its obligations under, this Agreement, the Master Agreement and the Security Documents to which it is a party;

(c)
each Borrower has complied with or, where relevant, shall have procured that the Approved Manager has complied with the ISM Code and the ISPS Code and all other statutory and other requirements relative to its business and in particular has obtained and maintains a valid SMC, DOC and ISSC and, where at the date of this Agreement it is not required by law to have obtained an SMC and a DOC, it has applied for an SMC and a DOC and has no reason to believe that such application will be refused within the period allowed to it to obtain those items to comply with the ISM Code and neither Borrower has an established place of business in any part of the United Kingdom or the United States of America;
 
(d)
each Borrower has taken all necessary action to authorise the borrowing of the Loan and the execution and delivery of this Agreement, the Master Agreement and the Security Documents to which such Borrower is a party, and this Agreement, the Master Agreement, and the Security Documents to which such Borrower is a party, constitute or, as the case may be, will, upon execution and delivery thereof (and, where applicable, registration thereof as provided for in this Agreement and the Security Documents), constitute each Borrower's legal, valid and binding obligations enforceable against it in accordance with their respective terms, except as such enforcement may be limited by any relevant bankruptcy, insolvency, administration or similar laws affecting creditors' rights generally;

(e)
the entry into and performance  by each Borrower of this Agreement, the Master Agreement and the Security Documents to it is a party, do not, and will not during the Security Period, violate in any respect (i) any law or regulation of any governmental or official authority or body, or (ii) its constitutional documents, or (iii) any agreement, contract or other undertaking to which it is a party or which is binding on it or any of its assets;

(f)
all consents, licences, approvals and authorisations required in connection with the entry into, performance, validity and enforceability of the MOAs, this Agreement, the Master Agreement and the Security Documents have been obtained and are in full force and effect;

(g)
save for such registrations and filings as are referred to in this Agreement and the Security Documents, it is not necessary for the legality, validity, enforceability or admissibility in evidence of this Agreement, the Master Agreement and the Security Documents that any of them or any document relating thereto be registered, filed, recorded or enrolled with any court or authority in any relevant jurisdiction or that any stamp, registration or similar Taxes be paid on or in relation to this Agreement, the Master Agreement or any of the Security Documents;

 
18
 

(h)
no action, suit, proceeding, litigation or dispute against either Borrower is currently taking place or pending or, to either Borrower's knowledge, threatened nor is there subsisting any judgment or award given against either Borrower before any court, board of arbitration or other body which, in either case, could or might result in any material adverse change in the business or condition' (financial or otherwise) of either Borrower other than such proceedings which are being contested in good faith by appropriate legal proceedings and particulars of which have been provided to the Lender;
 
(i)
neither Borrower is in default under the Master Agreement or any other agreement by which it is bound and no Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition might constitute an Event of Default) has occurred and is continuing nor will such a default or Event of Default (or such event) result from the purchase of either Ship, the entry by the Borrowers into this Agreement, the Master Agreement and the Security Documents to which each Borrower is a party, the making of the Loan to the Borrowers or the performance by each Borrower of any of its obligations under this Agreement, the Master Agreement and the Security Documents to which it is a party;

(j)
all financial and other information furnished by or on behalf of the Borrowers in connection with the negotiation of this Agreement and the Security Documents or delivered to the Lender pursuant to this Agreement or any of the Security Documents was true and accurate when given and there are no other facts or matters the omission of which would have made any statement or information contained therein misleading;

(k)
all payments made or to be made by the Borrowers under or pursuant to this Agreement, the Master Agreement and the Security Documents to which it is a party may be made free and clear of, and without deduction or withholding for or on account of, any Taxes;

(l)
the copies of the MOAs delivered to the Lender prior to the date of this Agreement are true and complete copies thereof constituting valid, binding and enforceable obligations of the Sellers and the Borrowers respectively in accordance with their terms and no amendments thereto or variations thereof have been (or will be) agreed nor has any action been taken by such parties which, would in any way render either MOA inoperative or unenforceable;

(m)
there are no commissions, rebates, premiums or other payments in connection with the MOAs or the purchase by the Borrowers of the Ships, other than as disclosed to the Lender in writing on or prior to the date of this Agreement;

(n)
each Borrower's place of business and offices are located, and the corporate documents and records of the Borrower are kept at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;

(o)
at the date of this Agreement, neither Borrower is liable under or in respect of any Financial Indebtedness other than (i) under the MOAs, this Agreement, the Master Agreement and the Security Documents to which it is a party, (ii) such Financial Indebtedness as shall have been notified to, and approved by, the Lender on or prior to the date of this Agreement and (iii) to the Subordinated Lender;

(p)
each Borrower has paid all Taxes applicable to, or imposed on or in relation to it, its business or its Ship; and

(q)
each Borrower confirms that it is acting for its own account and that the borrowing of the Loan and the performance and discharge of its obligations and liabilities under this Agreement and other arrangements effected or contemplated by this Agreement will not involve or lead to contravention of any law, official, requirement or other regulatory measure or procedure implemented to combat "money laundering" (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Community).


 
19
 
 
6.2
The Borrowers hereby further jointly and severally represent to the Lender that on the Drawdown Date relating to Tranche A:

(a)
Ship A will have been unconditionally delivered by Seller A to and accepted by Borrower A pursuant to the Ship A MOA and the full Contract Price payable under the Ship A MOA (in addition to the part thereof to be financed by way of Tranche A) will have been duly paid to Seller A;

(b)
Ship A will be provisionally registered in the name of Borrower A under the Marshall Islands flag;

(c)
Ship A will be in the absolute and unencumbered ownership of Borrower A save a contemplated by this Agreement and the Security Documents;

(d)
Ship A will maintain the highest classification available to it with American Bureau of Shipping or such other classification society acceptable to the Lender free of all recommendations and qualifications of such classification society save for those notified to, and approved in writing by the Lender;

(e)
Ship A will be operationally seaworthy;

(f)
Ship A will comply with all relevant laws, regulations and requirements (statutory or otherwise) as are applicable to (i) ships under the Marshall Islands flag and (ii) engaged in the same or a similar service as Ship A is or is to be engaged;

(g)
the Mortgage in relation to Ship A will have been duly registered against Ship A as a valid first preferred Marshall Islands ship mortgage in accordance with the laws of the Republic of The Marshall Islands;

(h)
Ship A will be insured in accordance with the provisions of the Mortgage relating thereto and the requirements in respect of insurances will have been complied with;

(i)
Ship A will be managed by the Approved Manager on terms acceptable to the Lender;

(j)
the Approved Manager will be in compliance with the ISM Code and will have obtained and continues to maintain a valid DOC and will have applied for an SMC in relation to Ship A and the Borrowers will be in compliance with all statutory and other requirements relative to their business;

(k)
Ship A will comply with the ISPS Code.

6.3
The Borrowers hereby further jointly and severally represent to the Lender that on the Drawdown Date relating to Tranche B:
 
(a)
Ship B will have been unconditionally delivered by Seller B to and accepted by Borrower B pursuant to the Ship B MOA and the full Contract Price payable under the Ship B MOA (in addition to the part thereof to be financed by way of Tranche B) will have been duly paid to Seller B;

(b)
Ship B will be provisionally registered in the name of Borrower B under the Marshall Islands flag;

(c)
Ship B will be in the absolute and unencumbered ownership of Borrower B save a contemplated by this Agreement and the Security Documents;

 
20
 

(d)
Ship B will maintain the highest classification available to it with American Bureau of Shipping or such other classification society acceptable to the Lender free of all recommendations and qualifications of such classification society save for those notified to, and approved in writing by the Lender;

(e)
Ship B will be operationally seaworthy;

(f)
Ship B will comply with all relevant laws, regulations and requirements (statutory or otherwise) as are applicable to (i) ships under the Marshall Islands flag and (ii) engaged in the same or a similar service as Ship B is or is to be engaged;

(g)
the Mortgage in relation to Ship B will have been duly registered against Ship B as a valid first preferred Marshall Islands ship mortgage in accordance with the laws of the Republic of The Marshall Islands;

(h)
Ship B will be insured in accordance with the provisions of the Mortgage relating thereto and the requirements in respect of insurances will have been complied with;

(i)
Ship B will be managed by the Approved Manager on terms acceptable to the Lender;

(j)
the Approved Manager will be in compliance with the ISM Code and will have obtained and continues to maintain a valid DOC and will have applied for an SMC in relation to Ship B and the Borrowers will be in compliance with all statutory and other requirements relative to their business;

(k)
Ship B will comply with the ISPS Code.

6.4
The representations and warranties of the Borrowers set out in Clauses 6.1, 6.2 and 6.3 shall survive the execution of this Agreement and the advance of Loan hereunder and the representations and warranties set out in Clause 6.1 shall be deemed to be repeated at the commencement of each Interest Period, with respect to the facts and circumstances existing at each such time, as if made at each such time.
 
7
UNDERTAKINGS

7.1
Each of the Borrowers jointly and severally undertakes that, as and from the date of this Agreement and throughout the Security Period, it will comply in full with the following undertakings:

(a)
each Borrower will send (or procure that there is sent) to the Lender:

 
(i)
as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of such Borrower, the audited accounts and financial statements for such year;

 
(ii)
as soon as possible, but in no event later than sixty (60) days after the end of each of the first three financial quarters of each financial year of such Borrower, unaudited accounts and financial statements for such financial quarter;

(b)
each set of accounts and financial statements delivered to the Lender pursuant to Clause (a)(i) shall be certified as to their correctness by DCA SAM of 12 Avenue De Fontvieille, BP No. 185, 98004, Monaco Cedex (or other certified or chartered accountants acceptable to the Lender) and each set of accounts and financial statements delivered to the Lender pursuant to Clause (a)(ii) above shall be certified as to their correctness by the chief financial officer of such Borrower;

(c)
each Borrower shall procure that each set of accounts and financial statements delivered pursuant to Clause (a)(i) and (a)(ii) above is prepared in accordance with the International Financial Reporting Standards and using accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, it notifies the Lender that there has been a change in the International Financing Reporting Standards, the accounting practices or reference periods and the Borrowers' auditors deliver to the Lender:

 
21
 

 
(i)
a description of any change necessary for those financial statements to reflect the International Financing Reporting Standards, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

 
(ii)
sufficient information, in form and substance as may be reasonably required by the Lender, to enable the Lender to make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements.

(d)
each Borrower will send (or procure that there is sent) to the Lender:

 
(i)
if so requested by the Lender a copy of any charterparty for either of the Ships and any addenda thereto;

 
(ii)
as soon as the same is instituted (or, to the knowledge of either Borrower, threatened), details of any litigation, arbitration or administrative proceedings against or involving either Borrower, the Approved Manager or either Ship (including any actual breach of the ISM Code) which is likely to have a material adverse effect on such Borrower or the operation of such Ship;
 
 
(iii)
promptly upon being sent, copies of all communications to its shareholders and/or creditors generally (and in their capacities as such); and

 
(iv)
from time to time, and on demand, such additional financial or other information relating to either Borrower and/or its Ship as may be reasonably requested by the Lender;

(e)
each Borrower will notify the Lender of any Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) forthwith upon the occurrence thereof;

(f)
each Borrower will maintain its corporate existence as a body corporate duly organised and validly existing and in good standing under the laws of the Marshall Islands and will obtain and promptly renew from time to time, and will promptly furnish certified copies to the Lender of, all such authorisations, approvals, consents and licences as may be required under any applicable law or regulation to enable such Borrower to perform its obligations under this Agreement, the Master Agreement and the Security Documents to which it is a party (or any of them) or required for the validity or enforceability of this Agreement, the Master Agreement and the Security Documents to which it is a party (or any of them) or required to enable such Borrower to continue to own and operate its Ship, and such Borrower shall comply with the terms of the same;

(g)
neither Borrower will without the prior consent of the Lender, create, assume or permit to exist any Security Interest upon its Ship, her insurances or the Earnings or any of its other assets (whether now owned or hereafter acquired) (including, but not limited to, such Borrower's rights against the Lender under the Master Agreement or all or any part of such Borrower's interest in any amount payable to such Borrower by the Lender under the Master Agreement) except Permitted Security Interests;

(h)
neither Borrower will (voluntarily or involuntarily) without the prior consent of the Lender, sell, convey, transfer, lease, or otherwise dispose of all or a substantial part of its assets (whether by one transaction or a series of transactions and whether related or not) provided that a Borrower shall be free to agree to the sale of its Ship without the consent of the Lender if the sale proceeds will upon completion of such sale be sufficient to pay all amounts owing to the Lender under this Agreement and the Security Documents (or if the Ship being sold is the first of the two Ships to be sold by the Borrowers such amount as shall be sufficient to make a prepayment of the Loan in the amount required under Clause 4.3);

 
22
 

(i)
each Borrower or the Approved Manager on behalf of itself and the Borrowers will comply with the ISM Code and notify the Lender in writing in the event that the DOC or any SMC is withdrawn, cancelled or suspended;
 
(j)
each Borrower will produce such documents and evidence as the Lender from time to time require in relation to such Borrower, based on applicable law and regulations from time to time and the Lender's own internal guidelines from time to time relating to the Lender's knowledge of its customers; and

(k)
the Borrowers will not purchase any further tonnage without the consent of the Lender.

7.2
Each of the Borrowers further jointly and severally undertakes that it shall not, as and from the date of this Agreement and throughout the Security Period, without the prior consent of the Lender (such consent not to be unreasonably withheld):

(a)
conduct any business or activity other than the ownership, chartering and operation of its Ship; or

(b)
except for the Indebtedness under this Agreement, the MOAs the Master Agreement and those of the Security Documents to which it is a party and except for Indebtedness to the Subordinated Lender subordinated pursuant to the Subordination Letter, incur or agree to incur or issue any Financial Indebtedness, nor make any commitments, other than those occurring in the ordinary course of the trading of its Ship (including, without limitation, commitments in respect of purchases of ships); or

(c)
assign or otherwise dispose of any of its book debts; or

(d)
issue any shares in its capital other than to the shareholder(s); or

(e)
reduce its issued share capital; or

(f)
form or acquire any Subsidiaries; or

(g)
consolidate or amalgamate with, or merge into, any other entity; or

(h)
(save in accordance with the Subordination Letter) repay any stockholders' loans or any other loans advanced to it by any person, make any loans or advances to any person nor pay out any funds to any person; or

(i)
pay out any funds to any person except in connection with the administration of the Borrowers or the operation and/or repair of the Ships or the servicing of the Loan or as otherwise permitted by or pursuant to this Agreement and the other Security Documents; or

(j)
employ a technical manager of its Ship other than the Approved Manager nor change any of the material terms and conditions of the technical management of its Ship; or

(k)
employ a commercial manager of its Ship other than the commercial manager of the Jacob-Scorpio Tanker Pool Limited Pool or the Approved Manager.

 
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7.3
 
 
(a)
The Borrowers hereby further jointly and severally undertake that (subject to Clause 7.(c) below) if and so often as, the market value (as determined in accordance with Clause 7.3(b)) of the Ships which are the subject of a Mortgage (plus the market value of any additional security for the time being actually provided to the Lender pursuant to this Clause 7.3) falls below One hundred and twenty five per cent. (125%) of the aggregate of (i) the Loan and (ii) such amount (the " Termination Amount ") as determined by the Lender as the amount due from the Borrowers on terminating any Transaction under the Master Agreement in the same manner as if it were a Terminated Transaction (as defined in Section 14 of the Master Agreement) effected by the Lender after an Event of Default, they will within ten (10) days of being notified by the Lender of such requirement (which notification shall be conclusive and binding on the Borrowers) either:

 
(i)
provide the Lender with, or procure the provision to the Lender of, such additional security as shall in the opinion of the Lender be adequate to make up such deficiency, which additional security shall take such form, be constituted by such documentation and be entered into between such parties as the Lender in its absolute discretion may approve or require (and, if the Borrowers do not make proposals satisfactory to the Lender in relation to such additional security within five (5) days of the date of the Lender's notification to the Borrowers aforesaid, the Borrowers shall be deemed to have elected to prepay in accordance with (ii) below); or

 
(ii)
prepay (subject to, and in accordance with, sub-clauses (c), (d) and (e) of Clause 4.2) such part of the Loan as will ensure that the market value (determined as aforesaid) of the Ships which are the subject of a Mortgage and any such additional security is after such prepayment at least One hundred and twenty five per cent. (125%) of the aggregate of (i) the Loan and (ii) the Termination Amount.

(b)
For the purposes of this Clause 7.3, the market value of a Ship shall be determined at any such time as the Lender may request by means of a valuation made by such independent sale and purchase shipbroker as may from time to time be selected and appointed by the Lender from the Approved Brokers Panel. For this purpose, such valuation shall be made with or without physical inspection of such Ship (as the Lender may require), on the basis of a sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment. The Borrowers agree to accept any valuation made by a shipbroker or shipbrokers appointed as aforesaid as conclusive evidence of the market value of such Ship at the date of such valuation. The Borrowers agree to supply to the Lender and to any such shipbroker such information concerning the Ships and their condition as such shipbroker may require for the purpose of making such valuation.

(c)
All costs of obtaining valuations pursuant to Clause 7.3 shall be for the account of the Borrower provided that unless an Event of Default has occurred or unless any valuations show that the test set out in Clause 7.3(a) is not being met, the Borrowers shall not be required to pay for more than one set of such valuations in each calendar year.
 
(d)
Any cash collateral provided by the Borrower to the Lender pursuant to the terms of the Master Agreement shall be deducted from the Termination Amount when determining whether the Borrowers have complied with their undertaking under this Clause 7.3. For the purpose of this Clause 7.3, the market value of any other additional security provided or to be provided to the Lender shall be determined by the Lender in its absolute discretion without any necessity for the Lender assigning any reason therefor. If the market value of the Ships which are the subject of a Mortgage (plus the market value of any additional security for the time being actually provided to the Lender pursuant to this Clause 7.3) exceeds 125% of the aggregate of the Loan and the Termination Amount, the Lender shall, as soon as reasonably practicable after notice from the Borrowers to do so and subject to being indemnified to its reasonable satisfaction against the cost of doing so, release any such further security specified by the Borrowers provided that after such release the Lender is satisfied that the covenant in this Clause 7.3 shall be satisfied.

 
24
 

(e)
In connection with any additional security provided in accordance with this Clause 7.3, the Lender shall be entitled to receive certified copies of such documents of the kinds referred to in sub-clauses (a), (b), (c), (d) and (e) (inclusive) of Clause 5.1 and such favourable legal opinions as the Lender shall in its absolute discretion require.

7.4
The Borrowers may enter into FFA Transactions under the Master Agreement subject to the terms and conditions of the Master Agreement and subject to the following:

(a)
all Confirmations for such FFA Transactions will be substantially in the form set out in Appendix G or in such other form as the Lender may reasonably require or agree;

(b)
such FFA Transactions may only be entered into under the Master Agreement once drawdown of both Tranches under this Agreement has occurred and (subject to the following) for a period of eight years thereafter;

(c)
each such FFA Transaction will be for a maximum tenor of twelve (12) months;

In the event that either Ship is sold or becomes a Total Loss, the Lender shall have the right not to continue with the availability of the aforesaid FFA Facility if it so elects at the time.

7.5
Each Borrower is permitted to declare or pay any dividend or make any other distribution if its assets or profits to any stockholder provided that, in doing so, it is acting prudently and following the payment of such dividend or the making of such distribution it shall be able to continue to meet its payment obligations under this Agreement and the Security Documents.

8              APPLICATION OF EARNINGS

8.1
The Borrowers will comply with any written requirement of the Lender from time to time as to the location or relocation of the Operating Accounts and will from time to time enter into such documentation as the Lender may require in order to create or maintain in favour of the Lender a Security Interest in the Operating Accounts, all at the cost and expense of the Borrowers.
 
8.2
The Borrowers will procure that, throughout the Security Period (and subject only to the provisions of the General Assignment), all the Earnings relating to each Ship shall be paid to the Operating Account relating to such Ship.

8.3
Any amounts standing to the credit of the Operating Accounts shall, provided that the foregoing provisions of this Clause 8 shall have been complied with and provided that no Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) shall have occurred, be at the free disposal of the Borrowers.

9              EVENTS OF DEFAULT

9.1
Each of the following events shall constitute an Event of Default (whether such event shall occur or come about voluntarily or involuntarily or by operation of law or regulation or pursuant to, or in compliance with, any judgment, decree or order of any court or other authority):

 
25
 

(a)
either Borrower or any other party to any of the Security Documents fails to pay on the due date or, in the case of sums expressed to be payable on demand, within three (3) Business Days of the Lender's demand) any sum payable pursuant to this Agreement or any of the Security Documents (or any agreement entered into in connection with this Agreement or any of the Security Documents); or

(b)
either Borrower breaches any of the undertakings in Clause 7.1(f), (g), (h) or (k) or Clause 7.2 or either of the Borrowers fail to provide additional security or make a prepayment of part of the Loan in the circumstances referred to in Clause 7.3 within the time therein prescribed; or

(c)
either Borrower defaults under, or in the due and punctual observance and performance of, any other provision of this Agreement and where, in the opinion of the Lender, such default is capable of remedy, such default is not remedied within ten (10) days after written notice from the Lender requesting action to remedy the same; or

(d)
either Borrower or any other party to any of the Security Documents (other than the Lender) defaults under, or in the due observance and performance of any provision of any of the Security Documents; or

(e)
any representation or warranty made by either Borrower or any other party to any of the Security Documents (other than the Lender) in or pursuant to this Agreement or any of the Security Documents or in any notice, certificate, instrument or statement contemplated hereby or thereby or made or delivered pursuant hereto or thereto is, or proves to be, untrue or incorrect in any respect when made or deemed to be repeated; or

(f)
any Financial Indebtedness of either Borrower in an amount of Two hundred and fifty thousand Dollars ($250,000) (or its equivalent in other currencies) or more is not paid when due or becomes prematurely payable or capable of being prematurely declared payable as a consequence of a default with respect thereto or any Security Interest over any assets of either Borrower is enforced or becomes capable of being enforced; or
 
(g)
any preparatory or other steps are taken by any person to convene a meeting of any Borrower for the purposes of considering or passing any resolution or petition for the winding-up or dissolution of either Borrower, or (ii) a petition is presented or an order is made or a resolution is passed for the winding-up or dissolution of either Borrower, or (iii) either Borrower becomes insolvent or is deemed unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986 or either Borrower becomes unable to pay its debts as they fall due, or (iv) either Borrower stops or threatens to stop making payments generally or declares or threatens to declare a moratorium or suspension of payments with respect to all or any part of its debts or enters into any composition, scheme, compromise or other arrangement with its creditors generally (or any class of .them), or (v) any preparatory or other steps are taken by any person to appoint an administrative or other receiver or similar official of either Borrower or any of its assets, or (vi) any notice appointing an administrator or examiner or any notice of intended appointment or any other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person prior to, or in connection with, the appointment of an administrator or examiner is so filed or given in respect of either Borrower or (vii) any meeting of either Borrower is convened or any other preparatory or other steps are taken for the purpose of considering an application for an administration order in relation to either Borrower or such an administration order is made by a court, or (viii) (in the reasonable opinion of the Lender) anything analogous to any of the foregoing events occurs in any applicable jurisdiction; or

(h)
an encumbrancer takes possession of the whole or, in the reasonable opinion of the Lender, any material part of the assets of either Borrower or a Security Interest (other than in favour of the Lender) is levied or enforced upon or sued out against the whole or, in the reasonable opinion of the Lender, a material part of the assets of either Borrower; or

 
26
 

(i)
either Borrower ceases or threatens to cease, to carry on all or, in the reasonable opinion of the Lender, any material part of its business; or

(j)
any event occurs which renders it unlawful or impossible for (i) either Borrower or any other party to any of the Security Documents (other than the Lender) to perform or observe, or to procure the performance or observance of, any of its obligations or undertakings contained in this Agreement, the MOAs or any of the Security Documents, or (ii) the Lender to exercise any of the rights and remedies conferred on the Lender under this Agreement or any of the Security Documents; or

(k)
any authorisation, approval, consent, licence, exemption, filing or registration or other requirement necessary to enable either Borrower or any other party to any of the Security Documents (other than the Lender) to comply with any of its obligations or undertakings contained in this Agreement, the MOAs or any of the Security Documents is modified, revoked or withheld or does not remain in full force and effect; or

(l)
without the prior consent of the Lender, there is a change in the legal and beneficial owner or owners of the shares in either Borrower or in the ultimate beneficial ownership of shares in either Borrower from that disclosed to the Lender pursuant to Clause 5.1(f);

(m)
either Ship the subject of a Mortgage shall become a Total Loss and within one hundred and twenty (120) days (or such longer period as the Lender may agree) following the occurrence of such Total Loss either the Borrowers do not make a prepayment of the Loan in the amount required under Clause 4.3 or the Lender does not receive insurance proceeds relating to such Total Loss in an amount not less than the amount required to be prepaid under Clause 4.3; for the purpose of this Clause (m), (i) an actual Total Loss of such Ship shall be deemed to have occurred at the date and time when such Ship was lost but if the date of the loss is unknown the actual Total Loss shall be deemed to have occurred on the date on which such Ship was last reported, (ii) a constructive Total Loss Shall be deemed to have occurred at the date and time at which notice of abandonment of such Ship is given to the insurers of such Ship and (iii) a compromised, agreed or arranged Total Loss shall be deemed to have occurred on the date of the relevant compromise, agreement or arrangement; or

(n)
any Earnings of a Ship are paid otherwise than to the Operating Account relative to such Ship (unless so directed by the Lender); or

(o)
for any reason whatsoever, either Ship ceases to comply with the ISM Code or the ISPS Code; or

(p)
for any reason whatsoever, either Ship ceases to be technically managed by the Approved Manager on terms in all respects approved by the Lender; or

(q)
for any reason whatsoever, either Ship ceases to be employed within the Jacob-Scorpio Tanker Pool Limited Pool or to be commercially managed by the commercial managers of the Jacob-Scorpio Tanker Pool Limited Pool on terms in all respects approved by the Lender; or

(r)
the security constituted by any of the Security Documents is in the reasonable opinion of the Lender imperilled or jeopardised in any way whatsoever; or

(s)
this Agreement or any of the other Security Documents ceases at any time to be the legal, valid and binding obligations of either Borrower or any other party thereto (other than the Lender);

 
27
 

(t)

 
(i)
notice of an Early Termination Date is given by the Lender under section 6(a) of the Master Agreement; or

 
(ii)
a person entitled to do so gives notice of an Early Termination Date under section 6(b)(iv) of the Master Agreement; or

 
(iii)
an Event of Default (as defined in section 14 of the Master Agreement) occurs; or

 
(iv)
the Master Agreement is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in full force and effect for any reason (except in the event that the Master Agreement is voluntarily terminated by the Borrowers); or

(u)
any other event or events (whether related or not) occurs (including, without limitation, a material (in the reasonable opinion of the Lender) adverse change, from the position applicable as at the date of this Agreement, in the business, affairs or condition (financial or otherwise) of either of the Borrowers or a Credit Support Provider) (including any such change resulting from an Environmental Incident) the effect of which is, in the reasonable opinion of the Lender, to impair, delay or prevent the due Fulfilment by either of the Borrowers or a Credit Support Provider of any of their respective obligations or undertakings contained in this Agreement, the Master Agreement or any of the Security Documents.

9.2
Upon the occurrence of an Event of Default which is continuing:

(a)
the Lender, by notice to the Borrowers, may terminate the obligations of the Lender under this Agreement, whereupon the same shall be so terminated; and/or

(b)
the Lender, by notice to the Borrowers, may declare the Loan, accrued interest thereon and all other amounts payable under this Agreement either immediately due and payable or payable on demand, whereupon the Loan, accrued interest thereon and all other amounts payable under this Agreement shall become immediately due and payable or (as the case may be) payable on demand by the Lender; and/or

(c)
the Lender may take any other action, exercise any other right or pursue any other remedy conferred upon the Lender by this Agreement, the Master Agreement and/or by all or any of the Security Documents or by any applicable law or regulation or otherwise as a consequence of such Event of Default.

10           FEES AND EXPENSES

10.1
The Borrowers shall pay to the Lender an arrangement fee of Two hundred and ten thousand Dollars ($210,000) on the date of this Agreement.

10.2
The Borrowers shall reimburse to the Lender on demand all costs, fees and expenses (including, but not limited to, legal fees and expenses) and Taxes thereon incurred by the Lender in connection with:

(a)
the negotiation, preparation and execution of this Agreement, the Master Agreement and the Security Documents and the insurance consultant's report referred to in Clauses 5.2(1) and 5.3(1); and/or

(b)
any variation of, or amendment or supplement to, any of the terms of this Agreement, the Master Agreement and the Security Documents (or any of them); and/or

 
28
 

(c)
any consent or waiver required from the Lender in relation to this Agreement, the Master Agreement and the Security Documents (or any of them), and in each case, regardless of whether the same is actually implemented, completed or granted, as the case may be.

10.3
The Borrowers shall reimburse to the Lender on demand all costs, fees and expenses (including, bid not limited to, legal fees and expenses) and Taxes thereon incurred by the Lender in connection with the preserving or enforcing of, or attempting to preserve or enforce, any of its rights under this Agreement, the Master Agreement and the Security Documents (or any of them).

10.4
The Borrowers shall pay promptly all stamp, documentary and other like duties and Taxes to which this Agreement, the Master Agreement and the Security Documents (or any of them) may be subject or give rise and shall indemnify the Lender on demand against any and all liabilities with respect to or resulting from any delay or omission on the part of the Borrower to pay any such duties or Taxes.

10.5
The Lender shall, without prejudice to any other of the provisions of this Agreement, be entitled (but not obliged) at any time and from time to time (without prior notice) to debit the Operating Accounts or either of them in order to satisfy all or any amounts payable by the Borrowers to the Lender pursuant to this Clause 10.

11           PAYMENTS AND CALCULATIONS

11.1
All payments to be made by the Borrowers to the Lender under this Agreement and any of the Security. Documents to which either of the Borrowers is a party shall be made by not later than 11.00 a.m. (London time) on the due date in same day Dollar funds settled through the New York Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Lender shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement) to the account of the Lender at the Receiving Bank (Account No 000261123), or to such other account with such other bank as the Lender shall from time to time notify to the Borrowers.

11.2
If any sum payable by the Borrowers under this Agreement or any of the Security Documents to which either of the Borrowers is a party shall become due on a day which is not a Business Day, the due date therefor shall be extended to the next succeeding Business Day, unless such Business Day falls in the next calendar month, in which event such due date shall be the immediately preceding Business Day, and interest shall be payable on such sum during any such extension at the rate payable on the original due date.

11.3
The Lender shall maintain accounts showing the amounts from time to time lent by it under this Agreement and all other sums owing by the Borrowers under this Agreement and the Security Documents and all payments in respect thereof made by the Borrowers from time to time. Such accounts, in the absence of manifest error, shall be conclusive evidence as to any amounts from time to time owing by the Borrowers under this Agreement and the Security Documents.

11.4
All payments of interest and commitment fee and any other payments hereunder of an annual or periodic nature shall accrue from day-to-day and shall be calculated on the basis of the actual number of days elapsed in a three hundred and sixty (360) day year.

12
NO COUNTERCLAIM, TAXATION

12.1
All payments to be made by or on behalf of the Borrowers to the Lender pursuant to this Agreement and any of the Security Documents to which either Borrower is a party shall be made (a) without set-off counterclaim or condition whatsoever (including, but not limited to, any set-off, counterclaim or condition arising under or in relation to or in connection with the Master Agreement) and (b) free and clear of, and without deduction for or on account of, any present or future Taxes, unless the Borrowers are required by law or regulation to make any such payment subject to any Taxes.

 
29
 

12.2
In the event that either Borrower is required by any law or regulation to make any deduction or withholding on account of any Taxes which arise as a consequence of any payment due under this Agreement or any of the Security Documents to which such Borrower is a party, then:

(a)
such Borrower shall notify the Lender promptly as soon as it becomes aware of such requirement;

(b)
such Borrower shall remit promptly the amount of such Taxes to the appropriate taxation authority, and in any event prior to the date on which penalties attach thereto;

(c)
such payment shall be increased by such amount as may be necessary to ensure that the Lender receives a net amount which, after deducting or withholding such Taxes, is equal to the full amount which the Lender would have received had such payment not been subject to such Taxes; and

(d)
such Borrower shall indemnify the Lender against any liability of the Lender in respect of such Taxes.

12.3
Not later than thirty days after each deduction or withholding of any such Taxes, such Borrower shall forward to the Lender evidence satisfactory to the Lender that such Taxes have been remitted to the appropriate taxation authority.

12.4
If, following any such deduction or withholding as is referred to in Clause 12.2 from any payment by the Borrowers, the Lender shall receive or be granted a credit against or remission for any Taxes payable by it, the Lender shall, subject to the Borrowers having made any increased payment in accordance with Clause 12.1 and to the extent that the Lender can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Lender to obtain any other relief or allowance which may be available to it, reimburse the Borrowers with such amount as the Lender shall in its absolute discretion certify to be the proportion of such credit or remission as will leave the Lender (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Borrowers as aforesaid. Such reimbursement shall be made forthwith upon the Lender certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Lender to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing the Borrowers shall not by virtue of this Clause 12.4 be entitled to enquire about the Lender's tax affairs.
 
13           CHANGES IN CIRCUMSTANCES

13.1
In the event that by reason of:

(a)
the introduction of, or any change in, any applicable law or regulation, or any change in the interpretation or application thereof; or

(b)
compliance by the Lender with any directive, request or requirement (whether or not having the force of law) of any central bank, government, fiscal or other authority,

it becomes unlawful or it is prohibited or it is contrary to such directive, request or requirement for the Lender to maintain or give effect to any of its obligations as contemplated by this Agreement, then the Lender may notify the Borrowers thereof and, if the Loan has been advanced by the Lender, the Borrowers shall prepay the Loan forthwith in accordance with the terms of this Agreement and the obligations of the Lender shall thereupon terminate.

 
30
 

13.2
If the Lender shall at any time be of the reasonable opinion that:

(a)
the effect of any applicable law, regulation or regulatory requirements, or the interpretation or application thereof, or any change therein (including the imposition of Taxes on payments hereunder, other than Taxes on the overall net income of the Lender); or

(b)
the effect of complying with any applicable directive, request or requirement (whether or not having the force of law) of any central bank or any governmental, monetary or other authority (including any type of liquidity, stock or capital adequacy controls or other banking or monetary controls or requirements which affects the manner in which the Lender allocates capital resources to its, obligations hereunder), is:

 
(i)
to increase the cost to the Lender of making, funding or maintaining its commitment hereunder or the Loan or being a party to this Agreement; or

 
(ii)
to reduce the amount of any payment to the Lender under this Agreement or the effective return to the Lender under this Agreement or on its capital,

then, and in any such case, the Lender shall notify the Borrowers as soon as practicable thereof and the Borrowers shall from time to time pay to the Lender on demand such amounts as the Lender shall specify to be necessary to compensate the Lender for such increased cost or such reduction or, at the Borrowers' election, the Borrowers shall prepay the Loan in accordance with the terms of this Agreement whereupon the obligations of the Lender shall terminate.

13.3
If and each time that prior to any Interest Period the Lender shall have determined that, by reason of circumstances affecting the London Interbank Dollar Market, either:

(a)
adequate and fair means do not exist for ascertaining the rate of interest applicable to the Loan (or any part thereof) during such Interest Period pursuant to Clause 3.1; or

(b)
Dollars are not available to the Lender in order to fund the Loan (or any part thereof) during such Interest Period,

then the Lender shall as soon as practicable give notice of such determination to the Borrowers and, if such notice shall be given prior to the Loan being advanced by the Lender, the Borrowers' right to borrow hereunder shall be suspended during the continuance of such circumstances. In any event, during the thirty days following the giving of such notice, the Borrowers and the Lender shall negotiate in good faith in order to arrive at an alternative interest rate or (as the case may be) an alternative basis for the Lender to fund or continue to fund the Loan (or the relevant part thereof) during such Interest Period. If within such thirty day period an alternative interest rate or (as the case may be) an alternative basis to fund or to continue to fund the Loan (or the relevant part thereof) is agreed upon, then such alternative interest rate or (as the case may be) such alternative basis shall take effect in accordance with its terms. If the Borrowers and the Lender fail to agree on such an alternative interest rate or (as the case may be) alternative basis within such thirty day period and such circumstances are continuing at the end of such thirty day period, then the Lender shall set an interest period and interest rate representing the cost of funding of the Lender in Dollars or in any available currency of the Loan plus the Margin. If the circumstance shall continue at the end of such interest period, the procedure in this Clause 13.3 shall be repeated. If the Borrowers shall not agree with such rate then the Borrowers may give not less than fifteen (15) Business Days' irrevocable notice of prepayment to the Lender in which case the commitment hereunder of the Lender shall thereupon be cancelled and, if the Loan is outstanding, the Borrowers shall prepay the Loan on the first Business Day after such period in accordance with the terms of this Agreement and the obligations of the Lender shall thereupon terminate.

 
31
 

14           INDEMNITIES

14.1
The Borrowers shall indemnify the Lender on demand against all costs, expenses, liabilities and losses sustained or incurred as a result of or in connection with:

(a)
any default in payment on the due date of any sum due hereunder (after giving credit for any default interest paid by the Borrowers thereon under Clause 3.4); and/or

(b)
the occurrence and/or continuance of any Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) and/or the acceleration of repayment of the Loan pursuant to Clause 9.2; and/or

(c)
either Tranche not being borrowed on the date specified in the Notice of Drawing relating thereto, other than as a result of a default by the Lender, and/or
 
(d)
the payment or other receipt or recovery of all or any part of a Tranche or any part thereof or an overdue sum otherwise than on the last day of an Interest Period relating thereto or other relevant period,

(including, where appropriate, but not limited to loss of profit and any losses sustained or incurred in liquidating or employing deposits from third parties acquired or arranged to effect or maintain the relevant Tranche or any part thereof and, in the applicable circumstances referred to in Clause 14.1(d), an amount equal to the Margin which would, but for prepayment or other receipt or recovery of all or any part of the relevant Tranche, have accrued on the relevant Tranche from the date of such prepayment, receipt or recovery to the end of the current Interest Period).

14.2
If, under any applicable law or regulation, and whether pursuant to a judgment being made or registered against the Borrowers or the liquidation of the Borrowers or for any other reason, any payment under or in connection with this Agreement is made or falls to be satisfied in a currency (the " payment currency ") other than the currency in which such payment is due under or in connection with this Agreement (the " contractual currency "), then to the extent that the amount of such payment actually received by the Lender, when converted into the contractual currency at the rate of exchange, falls short of the amount due under or in connection with this Agreement, the Borrowers, as a separate and independent obligation, shall indemnify and hold harmless the Lender against the amount, of such shortfall. For the purposes of this Clause 14.2, " rate of exchange " means the rate at which the Lender is able on or about the date of such payment to purchase the contractual currency with the payment currency and shall take into account any premium and other costs of exchange with respect thereto.

14.3
The Borrowers shall indemnify the Lender on demand against all costs, expenses, liabilities and losses sustained or incurred as a result of or in connection with any Environmental Claims being made against the Lender or otherwise howsoever arising out of any Environmental Incident

15           SET-OFF

15.1
The Borrowers hereby authorise the Lender (without prior notice) to apply any credit balance (whether or not then due) which is at any time held by the Lender for the account of the Borrowers at any office of the Lender in any country in or towards satisfaction of any sum then due from the Borrowers to the Lender under this Agreement, the Master Agreement or any of the Security Documents to which any Borrower is a party and unpaid Provided however that such right shall not be exercisable by the Lender until the occurrence of an Event of Default. For that purpose:

 
32
 

(a)
the Lender is authorised to use all or any part of a deposit or other credit balance to buy such other currencies as may be necessary to effect such application; and

(b)
break, or alter the maturity of, all or any part of a deposit or other credit balance of either Borrower; and

(c)
enter into any other transaction or make any entry with regard to a deposit or other credit balance as the Lender considers appropriate.

15.2
If either Borrower is the defaulting party under the Master Agreement, the Lender, as the non-defaulting party, may (without prejudice to or limitation of its right of set-off under section 6(e) of the Master Agreement and its rights under Clause 15.1) at the same time as, or at any time after, such Borrower's default set-off any amount due from the Borrowers to the. Lender under this Agreement against any amount due from the Lender to the Borrowers under the Master Agreement, and apply the first amount in discharging the second amount. The effect of any set-off under this Clause 15.2 shall be effective to extinguish or, as the case may require, reduce the liabilities of the Lender under the Master Agreement.

15.3
The Lender shall not be obliged to exercise any • of its rights under Clause 15.1, which shall be without prejudice and in addition to any right of set-offs combination of accounts, lien or other rights to which the Lender is at any time otherwise entitled (whether by operation of law, contract or otherwise).

16           SECURITY AND APPLICATION

16.1
The Borrowers hereby undertake with the Lender to execute, deliver and perform the provisions of, and procure the execution, delivery and performance by the other parties thereto (other than the Lender) of, the Security Documents and the provisions thereof at the times and in the manner provided in this Agreement and in the Security Documents so that all such documents shall both at the date of such execution and delivery and at all times during the Security Period be valid and binding obligations of the Borrowers and such other parties enforceable in accordance with their respective terms.

16.2
All Moneys received by the Lender under or pursuant to this Agreement or any of the Security Documents and expressed to be applicable in accordance with the provisions of this Clause 16.2 shall (unless the Lender otherwise requires) be applied by the Lender in the following manner:

FIRST: in or towards satisfaction of any amounts as are then accrued due and payable under this Agreement, the Master Agreement and the Security Documents (or any of them) or are then due and payable by virtue, of payment demanded under this Agreement, the Master Agreement and the Security Documents (or any of them) in such order of application as the Lender shall think fit;

SECONDLY: at the option of the Lender (i) in retention of an amount equal to any amounts which are not then accrued due and payable under this Agreement, the Master Agreement and the Security Documents (or any of them) or are not then due and payable by virtue of payment demanded under this Agreement, the Master Agreement and the Security Documents (or any of them) but which (in the sole and absolute opinion of the Lender) will or may become due and payable in the future and, upon the same becoming due and payable, in or towards satisfaction thereof in accordance with the foregoing provisions of this Clause 16.2 and/or (ii) in or towards prepayment of the Loan in accordance with sub-clauses (d) and (e) of Clause 4.2; and


 
33
 
 
THIRDLY: the surplus (if any) shall be paid to the Borrowers or to whomsoever else may be entitled thereto.

17           JOINT AND SEVERAL LIABILITY

17.1
All the liabilities and obligations of the Borrowers under this Agreement shall, whether expressed to be so or not, be joint and several so that each Borrower shall be jointly and severally responsible with the other Borrower for all liabilities and obligations of the Borrowers under this Agreement and so that such liabilities and obligations shall not be impaired by:

(a)
any failure of this Agreement to be legal, valid, binding and enforceable in relation to either of the Borrowers whether as a result of lack of corporate capacity, due authorisation, effective execution or otherwise;

(b)
any giving of time, forbearance, indulgence, waiver or discharge in relation to either of the Borrowers or any party to either of the Security Documents;

(c)
any other matter or event whatsoever which might have the effect of impairing all or any of the liabilities and obligations of either of the Borrowers.

17.2
Each of the Borrowers declares that it is and will, throughout the Security Period, remain a principal debtor for all amounts owing under this Agreement and neither of the Borrowers shall in any circumstances be construed to be a surety for the obligations of the other Borrower hereunder.

17.3
Until such sums owing to the Lender by the Borrowers under this Agreement and the Security Documents have been paid in full neither of the Borrowers (hereinafter called the " Creditor Borrower ") will without the prior written consent of the Lender ask, demand, sue for, take or receive from the other Borrower (hereinafter called the " Debtor Borrower ") by set-off or in any manner whatsoever the whole or any part of all present and future sums, liabilities and obligations payable or owing by the Debtor Borrower to the Creditor Borrower whether actual or contingent, jointly and severally or otherwise howsoever so long as any Senior Liabilities are outstanding to the Lender (for such purposes " Senior Liabilities " shall mean all present and future sums, liabilities and obligations whatsoever payable or owing by the Borrowers (or either of them) to the Lender under the Loan Agreement and the Security Documents (or any of them) or otherwise whatsoever, whether actual or contingent jointly or severally or otherwise howsoever.

18           COMMUNICATIONS

18.1
Except as otherwise provided for in this Agreement, all notices or other communications under or in respect of this Agreement to either party hereto shall be in writing (that is by letter or fax) and shall be deemed to be duly given or made when delivered (in the case of personal delivery or letter) and when despatched or in the case of a fax from either party to the other) to such party addressed to it at the address appearing below (or at such address as such party may hereafter specify for such purpose to the other by notice in writing):
 
(a)
in the case of the Borrowers:
Scorpio Ship Management S.A.M.
Rue de Gabian
MC-98000
Monaco
 
Fax No:          00 377 92 05 31 46
 
Attention:     Emanuele A. Laura

 
34
 

(b)
in the case of the Lender:
Shipping Business Centre
5-10 Great Tower Street,
London EC3P 3HX
 
Fax No:   44 20 7283 7538
 
Attention:      Ship Finance Portfolio Management

A notice or other communication received on a non-working day or after business hours in the place of receipt, shall be deemed to be served on the next following working day in such place.

18.2
All communications and documents delivered pursuant to or otherwise relating to this Agreement or any of the Security Documents shall either be in English or accompanied by a certified English translation prepared by a translator approved by the Lender.

18.3
A certificate or determination of the Lender as to any matter provided for in this Agreement or any of the Security Documents shall, in the absence of manifest error, be conclusive and binding on the Borrowers.

19           ASSIGNMENTS

19.1
This Agreement shall be binding upon and inure to the benefit of the Lender and the Borrowers and their respective successors and permitted assigns.

19.2
The Borrowers may not assign or transfer all or any part of its rights and/or obligations under this Agreement.

19.3
The Lender may assign, transfer or sub-participate all or any part, of its rights or obligations under this Agreement and the Security Documents or change its lending office, in any such case, following consultation with the Borrowers. The Lender shall notify the Borrowers promptly following any such assignment or transfer or change of lending office.
 
19.4
The Lender may disclose to any potential assignee or transferee of all or any part of its rights or obligations under this Agreement and the Security Documents or to any such sub-participant or any other person who may otherwise enter into contractual relations with the Lender in relation to this Agreement and the Security Documents such information about this Agreement and/or the Security Documents (or any of them) and the Borrowers and/or its related entities as the Lender thinks fit.

20           MISCELLANEOUS

20.1
Time shall be of the essence in this Agreement. No delay or omission on the part of the Lender in exercising any right, power or remedy under this Agreement shall impair such right, power or remedy or be construed as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy preclude any further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies herein provided are cumulative and not exclusive of any rights, powers and remedies provided by law and may be exercised from time to time and as often as the Lender deems expedient.

20.2
Any waiver by the Lender of any provision of this Agreement, or any consent or approval given by the Lender hereunder, shall only be effective if given in writing and then only for the purpose and upon the terms for which it is. given.

20.3
If at any time any one or more of the provisions in this Agreement is or becomes invalid, illegal or unenforceable in any respect under any law or regulation, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be in any way affected or impaired thereby.

 
35
 

20.4
The obligations of the Borrowers under this Agreement shall remain in full force and effect until the Lender shall have received all amounts due or to become due to it hereunder and under the Security Documents in accordance with the terms hereof and thereof. Without prejudice to the foregoing, the obligations of the Borrower under Clauses 3.4, 10, 12, 13.2 and 14 shall survive the repayment of the Loan.

20.5
A person who is not a party to this Agreement has no right under the Contracts (Rights Of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

21           LAW AND JURISDICTION

21.1
This Agreement shall be governed by, and construed in accordance with; English law.

21.2
Subject to Clause 21.4, the courts of England shall have exclusive jurisdiction in relation to all matters which may arise out of or in connection with this Agreement.

21.3
The Borrowers shall not commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this Agreement.

21.4
Clause 21.2 is for the exclusive benefit of the Lender which reserves the rights:
 
(a)
to commence proceedings in relation to any matter which arises out of or in connection with this Agreement in the courts of any country other than England and which have or claim jurisdiction to that matter; and

(b)
to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

21.5
The Borrowers irrevocably appoint Cheeswrights at its office for the time being, presently at 10 Philpot Lane, London EC3M 8BR, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Agreement.

21.6
In this Clause 21, " proceedings " means proceedings of any kind, including an application for a provisional or protective measure.



 
36
 

SCHEDULE

MANDATORY COST RATE

The Mandatory Cost Rate will be calculated in accordance with the following formula:

 
F x 0.01
 
300

where on the day(s) of application of the formula:

F.           is the rate of charge payable by the Lender to the Financial Services Authority pursuant to paragraph 2 of the Fees Regulations (but where for this purpose, the figure at paragraph 2.02b/2.03b shall be deemed to be zero) and expressed in pounds per £1 million of the Fee Base of the Lender.

For the purposes. of this Schedule:

Fee Base has the meaning ascribed to it for the purposes of, and all be calculated in accordance with, the Fees Regulations.

Fees Regulations means, as appropriate, either the Banking Supervision (Fees) Regulations 2000 or such regulations as from time to time may be in force, relating to the payment of fees for banking supervision in respect of periods subsequent to 31 March 2001.

Any reference to a provision of any statute, directive, order or regulation herein is a reference to that provision as amended or re-enacted from time to time.

If alternative or additional financial requirements are imposed which in the Lender's opinion make the formula set out above no longer appropriate, the Lender shall be entitled to stipulate such other formula as shall be suitable to apply in substitution for the formula set out above.



 
37
 

IN WITNESS whereof the parties hereto have entered into this Agreement the date first above written.


SIGNED by
)
 
)
for and on behalf of
)
SENATORE SHIPPING COMPANY LIMITED
)
in the presence of
   
 
Kavita Shah
Solicitor
London
EC2A 2HB
 

SIGNED by
)
 
)
for and on behalf of
)
NOEMI SHIPPING COMPANY LIMITED
)
in the presence of
   
 
Kavita Shah
Solicitor
London
EC2A 2HB
 

SIGNED by
)
 
)
for and on behalf of
)
THE ROYAL BANK OF SCOTLAND PLC
)
in the presence of
   
 
Kavita Shah
Solicitor
London
EC2A 2HB
 



 
38
 

EXHIBIT 10.8

 
FORM OF
 
SCORPIO TANKERS INC.
2010 EQUITY INCENTIVE PLAN


ARTICLE I.
General

1.1.          Purpose

The Scorpio Tankers Inc. 2010 Equity Incentive Plan (the "Plan") is designed to provide certain key Persons (as defined below), whose initiative and efforts are deemed to be important to the successful conduct of the business of Scorpio Tankers Inc. (the "Company"), with incentives to (a) enter into and remain in the service of the Company or its Affiliates (as defined below), (b) acquire a proprietary interest in the success of the Company, (c) maximize their performance and (d) enhance the long-term performance of the Company.

1.2.          Administration

(a)            Administration .  The Plan shall be administered by the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors (the "Board"), or such other committee of the Board as may be designated by the Board to administer the Plan (the "Administrator"); provided that (i) in the event the Company is subject to Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the "1934 Act"), the Administrator shall be composed of two or more directors, each of whom is a "Non-Employee Director" (a "Non-Employee Director") under Rule 16b-3 (as promulgated and interpreted by the Securities and Exchange Commission (the "SEC") under the 1934 Act, or any successor rule or regulation thereto as in effect from time to time), and (ii) the Administrator shall be composed solely of two or more directors who are "independent directors" under the rules of any stock exchange on which the Company's Common Stock (as defined below) is traded; provided further , however, that, (A) the requirement in the preceding clause (i) shall apply only when required to exempt an Award intended to qualify for an exemption under the applicable provisions referenced therein, (B) the requirement in the preceding clause (ii) shall apply only when required pursuant to the applicable rules of the applicable stock exchange and (C) if at any time the Administrator is not so composed as required by the preceding provisions of this sentence, that fact will not invalidate any grant made, or action taken, by the Administrator hereunder that otherwise satisfies the terms of the Plan.  Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Administrator by the Plan, the Administrator shall have the full power and authority to: (1) designate the Persons to receive Awards (as defined below) under the Plan; (2) determine the types of Awards granted to a participant under the Plan; (3) determine the number of shares to be covered by, or with respect to which payments, rights or other matters are to be calculated with respect to, Awards; (4) determine the terms and conditions of any Awards; (5) determine whether, and to what extent, and under what circumstances, Awards may be settled or exercised in cash, shares, other securities, other Awards or other property, or cancelled, forfeited or suspended, and the methods by which Awards may be settled, exercised, cancelled, forfeited or suspended; (6) determine whether, to what extent, and under what circumstances cash, shares, other securities, other Awards, other property and other amounts payable with respect to an Award shall be deferred, either automatically or at the election of the holder thereof or the Administrator; (7)
 
 
1
 
 
construe, interpret and implement the Plan and any Award Agreement (as defined below); (8) prescribe, amend, rescind or waive rules and regulations relating to the Plan, including rules governing its operation, and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (9) make all determinations necessary or advisable in administering the Plan; (10) correct any defect, supply any omission and reconcile any inconsistency in the Plan or any Award Agreement; and (11) make any other determination and take any other action that the Administrator deems necessary or desirable for the administration of the Plan.  Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Administrator, may be made at any time and shall be final, conclusive and binding upon all Persons.

(b)            General Right of Delegation .  Except to the extent prohibited by applicable law, the applicable rules of a stock exchange or any charter, by-laws or other agreement governing the Administrator, the Administrator may delegate all or any part of its responsibilities to any Person or Persons selected by it and may revoke any such allocation or delegation at any time.

(c)            Indemnification .  No member of the Board, the Administrator or any employee of the Company or any of its Affiliates (each such Person, a "Covered Person") shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award hereunder.  Each Covered Person shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability or expense (including attorneys' fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement and (ii) any and all amounts paid by such Covered Person, with the Company's approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person; provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company's choice.  The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person's bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company's amended and restated Articles of Incorporation or Bylaws.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company's amended and restated Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Persons or hold them harmless.

(d)            Delegation of Authority to Senior Officers .  The Administrator may, in accordance with the terms of Section 1.2(b), delegate, on such terms and conditions as it determines, to one or more senior officers of the Company the authority to make grants of Awards to employees (other than officers) of the Company and its Subsidiaries (as defined below)(including any such prospective employee) and consultants of the Company and its Subsidiaries; provided , however , that in no event shall any such officer be delegated the authority to grant Awards to, or amend Awards held by,
 
 
2
 
the following individuals: (i) individuals who are subject to Section 16 of the 1934 Act, or (ii) officers of the Company (or directors of the Company) to whom authority to grant or amend Awards has been delegated hereunder.

(e)            Awards to Non-Employee Directors .  Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards to Non-Employee Directors or administer the Plan with respect to such Awards.  In any such case, the Board shall have all the authority and responsibility granted to the Administrator herein.

1.3.          Persons Eligible for Awards

The Persons eligible to receive Awards under the Plan are those directors, officers and employees (including any prospective officer or employee) of the Company and its Subsidiaries and Affiliates and consultants and service providers (including individuals who are employed by or provide services to any entity that is itself such a consultant or service provider) to the Company and its Subsidiaries and Affiliates (collectively, "Key Persons") as the Administrator shall select.

1.4.          Types of Awards

Awards may be made under the Plan in the form of (a) "incentive stock options" that are intended to qualify for special U.S. federal income tax treatment pursuant to Sections 421 and 422 of the Code (as defined below), as may be amended from time to time, or pursuant to a successor provision of the Code, and which is so designated in the applicable Award Agreement, (b) non-qualified stock options (i.e., any stock options granted under the Plan that are not "incentive stock options"), (c) stock appreciation rights, (d restricted stock, (e) restricted stock units and (f) unrestricted stock, all as more fully set forth in the Plan.  The term "Award" means any of the foregoing that are granted under the Plan.

1.5.          Shares Available for Awards; Adjustments for Changes in Capitalization

(a)            Maximum Number .  Subject to adjustment as provided in Section 1.5(c), the aggregate number of shares of common stock of the Company, par value $0.01 ("Common Stock"), with respect to which Awards may at any time be granted under the Plan shall be                .  The following shares of Common Stock shall again become available for Awards under the Plan: (i) any shares that are subject to an Award under the Plan and that remain unissued upon the cancellation or termination of such Award for any reason whatsoever; (ii) any shares of restricted stock forfeited pursuant to the Plan or the applicable Award Agreement; provided that any dividend equivalent rights with respect to such shares that have not theretofore been directly remitted to the grantee are also forfeited; and (iii) any shares in respect of which an Award is settled for cash without the delivery of shares to the grantee.  Any shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again become available to be delivered pursuant to Awards under the Plan.

(b)            Source of Shares .  Shares issued pursuant to the Plan may be authorized but unissued Common Stock or treasury shares.  The Administrator may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares.
 
 
3
 

 
(c)            Adjustments .  (i)  In the event that any dividend or other distribution (whether in the form of cash, Company shares, other securities or other property), stock split, reverse stock split, reorganization, merger, consolidation, split-up, combination, repurchase or exchange of Company shares or other securities of the Company, issuance of warrants or other rights to purchase Company shares or other securities of the Company, or other similar corporate transaction or event, other than an Equity Restructuring (as defined below), affects the Company shares such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of the number of shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan, including the maximum number of shares issuable to an individual as set forth in Section 1.5(d).

(ii)      In the event of any unusual or nonrecurring events (including a change in the capitalization of the Company or the events described in Section 1.5(c)(i) or the occurrence of a Change in Control (as defined below)) affecting the Company, any of its Affiliates, or the financial statements of the Company or any of its Affiliates, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law, other than any of the events described in Section 1.5(c)(iii), (iv), (v) or (vi), whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, including providing for (A) adjustment to (1) the number of shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards or to which outstanding Awards relate and (2) the Exercise Price (as defined below) with respect to any Award and (B) a substitution or assumption of Awards, accelerating the exercisability or vesting of, or lapse of restrictions on, Awards, or accelerating the termination of Awards by providing for a period of time for exercise prior to the occurrence of such event, or, if deemed appropriate or desirable, providing for a cash payment to the holder of an outstanding Award in consideration for the cancellation of such Award (it being understood that, in such event, any option or stock appreciation right having a per share Exercise Price equal to, or in excess of, the Fair Market Value (as defined below) of a share subject to such option or stock appreciation right may be cancelled and terminated without any payment or consideration therefor); provided , however , that with respect to options and stock appreciation rights, unless otherwise determined by the Administrator, such adjustment shall be made in accordance with the provisions of Section 424(h) of the Code.

(iii)           In the event of (A) a dissolution or liquidation of the Company, (B) a sale of all or substantially all the Company's assets, (C) a merger, reorganization or consolidation involving the Company in which the Company is not the surviving corporation or (D) a merger or consolidation involving the Company in which the Company is the surviving corporation but the holders of shares of Common Stock receive securities of another corporation and/or other property, including cash, the Administrator shall have the power to:
 
 
4

 
(1)  provide that outstanding options, stock appreciation rights and/or restricted stock units (including any related dividend equivalent right) shall either continue in effect, be assumed or an equivalent award shall be substituted therefor by the successor corporation or a parent corporation or subsidiary corporation, including providing for adjustment to (x) the number of shares or other securities of the Company (or number and kind of other securities or property) subject to such outstanding Awards or to which such outstanding Awards relate and (y) the Exercise Price (as defined below) with respect to any such Award; provided , however , that with respect to options and stock appreciation rights, unless otherwise determined by the Administrator, such adjustment shall be made in accordance with the provisions of Section 424(h) of the Code;

(2)  cancel, effective immediately prior to the occurrence of such event, options, stock appreciation rights and/or restricted stock units (including each dividend equivalent right related thereto) outstanding immediately prior to such event (whether or not then exercisable) and, in full consideration of such cancellation, pay to the holder of such Award a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Administrator) of the shares subject to such Award over the aggregate Exercise Price of such Award (it being understood that, in such event, any option or stock appreciation right having a per share Exercise Price equal to, or in excess of, the Fair Market Value of a share subject to such option or stock appreciation right may be cancelled and terminated without any payment or consideration therefor); or

(3)  notify the holder of an option or stock appreciation right in writing or electronically that each option and stock appreciation right shall be fully vested and exercisable for a period of 30 days from the date of such notice, or such shorter period as the Administrator may determine to be reasonable, and the option or stock appreciation right shall terminate upon the expiration of such period (which period shall expire no later than immediately prior to the consummation of the corporate transaction).

(iv)           In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in this Section 1.5(c):

(A)           The number and type of securities or other property subject to each outstanding Award and the Exercise Price or grant price thereof, if applicable, shall be equitably adjusted; and

(B)           The Administrator shall make such equitable adjustments, if any, as the Administrator may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations set forth in Sections 1.5(a)).  The adjustments provided under this Section 1.5(c)(iv) shall be nondiscretionary and shall be final and binding on the affected participant and the Company.

(v)      Subject to any required action by the stockholders of the Company, unless otherwise determined by the Administrator (in which case, notwithstanding anything to the contrary in this Section 1.5(c), the provisions of Section 1.5(c)(ii) shall then apply), in the event that the Company shall be the surviving corporation in any merger or consolidation (except a merger or consolidation as
 
 
5
 
a result of which the holders of shares of Common Stock receive securities of another corporation), each option, stock appreciation right and restricted stock unit outstanding on the date of such merger or consolidation shall pertain to and apply to the securities which a holder of the number of shares of Common Stock subject to such option, stock appreciation right or restricted stock unit would have received in such merger or consolidation; provided, however, that with respect to options and stock appreciation rights, unless otherwise determined by the Administrator, such adjustment shall be made in accordance with the provisions of Section 424(h) of the Code.

(vi)           The Administrator may adjust any grant of shares of restricted stock, the issue date with respect to which has not occurred as of the date of the occurrence of any of the following events, to reflect any dividend, stock split, reverse stock split, recapitalization, merger, consolidation, combination, exchange of shares or similar corporate change as the Administrator may deem appropriate to prevent the enlargement or dilution of rights of grantees.

(d)            Individual Limit .  Except for the limits set forth in this Section 1.5, no provision of this Plan shall be deemed to limit the number or value of shares of Common Stock with respect to which the Administrator may make Awards to any Key Person.  Subject to adjustment as provided in Section 1.5(c), the total aggregate number of shares of Common Stock with respect to which incentive stock options that are granted under the Plan to any one employee of the Company or a "parent corporation" or "subsidiary corporation" (as such terms are defined in Section 424 of the Code) of the Company during any calendar year shall not exceed                          .  Incentive stock options granted and subsequently cancelled or deemed to be cancelled ( e.g. , as a result of re-pricing) in a calendar year count against this limit even after their cancellation.

1.6.          Definitions of Certain Terms

(a)           "Affiliate" shall mean (i) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Administrator.

(b)           Unless otherwise set forth in an Award Agreement, in connection with a termination of employment or consultancy/service relationship or a dismissal from Board membership, for purposes of the Plan, the term "for Cause" shall be defined as follows:

(i)      if there is an employment, severance, consulting, service, change in control or other agreement governing the relationship between the grantee, on the one hand, and the Company or any of its Affiliates, on the other hand, that contains a definition of "cause" (or similar phrase), for purposes of the Plan, the term "for Cause" shall mean those acts or omissions that would constitute "cause" under such agreement; or
 
 
6
 

 
(ii)      if the preceding clause (i) is not applicable to the grantee, for purposes of the Plan, the term "for Cause" shall mean any of the following:

(A)         any failure by the grantee substantially to perform the grantee's employment or consulting/service or Board membership duties;

(B)         any excessive unauthorized absenteeism by the grantee;

(C)         any refusal by the grantee to obey the lawful orders of the Board or any other Person to whom the grantee reports;

(D)         any act or omission by the grantee that is or may be injurious to the Company or any of its Affiliates, whether monetarily, reputationally or otherwise;

(E)         any act by the grantee that is inconsistent with the best interests of the Company or any of its Affiliates;

(F)         the grantee's gross negligence that is injurious to the Company or any of its Affiliates, whether monetarily, reputationally or otherwise;

(G)         the grantee's material violation of any of the policies of the Company or any of its Affiliates, as applicable, including, without limitation, those policies relating to discrimination or sexual harassment;

(H)         the grantee's material breach of his or her employment or service contract with the Company or any of its Affiliates;

(I)         the grantee's unauthorized (1) removal from the premises of the Company or any of its Affiliates of any document (in any medium or form) relating to the Company or any of its Affiliates or the customers or clients of the Company or any of its Affiliates or (2) disclosure to any Person or entity of any of the Company's, or any of its Affiliate's, confidential or proprietary information;

(J)         the grantee's being convicted of, or entering a plea of guilty or nolo contendere to, any crime that constitutes a felony or involves moral turpitude; and

(K)         the grantee's commission of any act involving dishonesty or fraud.

Any rights the Company or any of its Affiliates may have under the Plan in respect of the events giving rise to a termination or dismissal "for Cause" shall be in addition to any other rights the Company or any of its Affiliates may have under any other agreement with a grantee or at law or in equity.  Any determination of whether a grantee's employment, consultancy/service relationship or Board membership is (or is deemed to have been) terminated "for Cause" shall be made by the Administrator.  If, subsequent to a grantee's voluntary termination of employment or consultancy/service relationship or voluntarily resignation from the Board or involuntary termination of employment or consultancy/service relationship without Cause or
 
 
 
7
 
removal from the Board other than "for Cause", it is discovered that the grantee's employment or consultancy/service relationship or Board membership could have been terminated "for Cause", the Administrator may deem such grantee's employment or consultancy/service relationship or Board membership to have been terminated "for Cause" upon such discovery and determination by the Administrator.

(c)           "Code" shall mean the Internal Revenue Code of 1986, as amended.

(d)           "Exercise Price" shall mean (i) in the case of options, the price specified in the applicable Award Agreement as the price-per-share at which such share can be purchased pursuant to the option or (ii) in the case of stock appreciation rights, the price specified in the applicable Award Agreement as the reference price-per-share used to calculate the amount payable to the grantee.

(e)           "Equity Restructuring" shall mean a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Common Stock (or other securities of the Company) or the share price thereof and causes a change in the per share value of the shares underlying outstanding Awards.

(f)           The "Fair Market Value" of a share of Common Stock on any day shall be the closing price on the stock exchange upon which such shares are listed, as reported for such day in The Wall Street Journal, or, if no such price is reported for such day, the average of the high bid and low asked price of Common Stock as reported for such day.  If no quotation is made for the applicable day, the Fair Market Value of a share of Common Stock on such day shall be determined in the manner set forth in the preceding sentence for the next preceding trading day.  Notwithstanding the foregoing, if there is no reported closing price or high bid/low asked price that satisfies the preceding sentences, or if otherwise deemed necessary or appropriate by the Administrator, the Fair Market Value of a share of Common Stock on any day shall be determined by such methods and procedures as shall be established from time to time by the Administrator.  The "Fair Market Value" of any property other than Common Stock shall be the fair market value of such property determined by such methods and procedures as shall be established from time to time by the Administrator.

(g)           "Person" shall mean any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind.

(h)           "Repricing" shall mean (i) lowering the Exercise Price of an option or a stock appreciation right after it has been granted, (ii) cancellation of an option or a stock appreciation right in exchange for cash or another Award when the Exercise Price exceeds the Fair Market Value of the underlying shares subject to the Award and (iii) any other action with respect to an option or a stock appreciation right that is treated as a repricing under (A) generally accepted accounting principles or (B) any applicable stock exchange rules.

(i)           "Subsidiary" shall mean any entity in which the Company, directly or indirectly, has a 50% or more equity interest.
 

 
8

ARTICLE II.
Awards Under The Plan

2.1.          Agreements Evidencing Awards

Each Award granted under the Plan shall be evidenced by a written certificate ("Award Agreement"), which shall contain such provisions as the Administrator may deem necessary or desirable and which may, but need not, require execution or acknowledgment by a grantee.  The Award shall be subject to all of the terms and provisions of the Plan and the applicable Award Agreement.

2.2.          Grant of Stock Options and Stock Appreciation Rights

(a)            Stock Option Grants .  The Administrator may grant non-qualified stock options and/or incentive stock options (collectively, "options") to purchase shares of Common Stock from the Company to such Key Persons, and in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject to the provisions of the Plan.  Except to the extent otherwise specifically provided in the applicable Award Agreement, no option will be treated as an "incentive stock option" for purposes of the Code.  Incentive stock options may be granted to employees of the Company and any "parent corporation" or "subsidiary corporation" (as such terms are defined in Section 424 of the Code) of the Company.  In the case of incentive stock options, the terms and conditions of such Awards shall be subject to such applicable rules as may be prescribed by Sections 421, 422 and 424 of the Code and any regulations related thereto, as may be amended from time to time.  If an option is intended to be an incentive stock option, and if for any reason such option (or any portion thereof) shall not qualify as an incentive stock option for purposes of Section 422 of the Code, then, to the extent of such non-qualification, such option (or portion thereof) shall be regarded as a non-qualified stock option appropriately granted under the Plan; provided that such option (or portion thereof) otherwise complies with the Plan's requirements relating to option Awards.  It shall be the intent of the Administrator to not grant an Award in the form of stock options to an individual who is then subject to the requirements of Section 409A of the Code with respect to such Award if the Common Stock (as defined below) underlying such Award does not then qualify as "service recipient stock" for purposes of Section 409A.  Furthermore, it shall be the intent of the Administrator, in granting options to individuals who are subject to Section 409A and/or 457 of the Code, to structure such options so as to comply with the requirements of Section 409A and/or 457 of the Code, as applicable.

(b)            Stock Appreciation Right Grants; Types of Stock Appreciation Rights .  The Administrator may grant stock appreciation rights to such Key Persons, and in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject to the provisions of the Plan.  The terms of a stock appreciation right may provide that it shall be automatically exercised for a payment upon the happening of a specified event that is outside the control of the grantee and that it shall not be otherwise exercisable.  Stock appreciation rights may be granted in connection with all or any part of, or independently of, any option granted under the Plan.  It shall be the intent of the Administrator to not grant an Award in the form of stock appreciation rights to any Key Person (i) who is then subject to the requirements of Section 409A of the Code with respect to such Award if the Common Stock underlying such Award does not then qualify as "service recipient stock" for purposes of Section 409A or (ii) if such Award would create adverse tax consequences for such Key Person under Section 457A of the Code.
 
 
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(c)            Nature of Stock Appreciation Rights .  The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applicable Award Agreement, to receive from the Company an amount equal to (i) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over the Exercise Price of the stock appreciation right, multiplied by (ii) the number of shares with respect to which the stock appreciation right is exercised.  Each Award Agreement with respect to a stock appreciation right shall set forth the Exercise Price of such Award and, unless otherwise specifically provided in the Award Agreement, the Exercise Price of a stock appreciation right shall equal the Fair Market Value of a share of Common Stock on the date of grant; provided that in no event may such Exercise Price be less than the greater of (A) the Fair Market Value of a share of Common Stock on the date of grant and (B) the par value of a share of Common Stock.  Payment upon exercise of a stock appreciation right shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or any combination of both, all as the Administrator shall determine.  Repricing of stock appreciation rights granted under the Plan shall not be permitted (1) to the extent such action could cause adverse tax consequences to the grantee under Sections 409A or 457A of the Code or (2) without prior shareholder approval, to the extent such approval would be required to be obtained by the Company pursuant to the rules of any applicable stock exchange on which the Common Stock is then listed, and any action that would be deemed to result in a Repricing of a stock appreciation right shall be deemed null and void if it would cause such adverse tax consequences or if any requisite shareholder approval related thereto is not obtained prior to the effective time of such action.  Upon the exercise of a stock appreciation right granted in connection with an option, the number of shares subject to the option shall be reduced by the number of shares with respect to which the stock appreciation right is exercised.  Upon the exercise of an option in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be reduced by the number of shares with respect to which the option is exercised.

(d)            Option Exercise Price .  Each Award Agreement with respect to an option shall set forth the Exercise Price of such Award and, unless otherwise specifically provided in the Award Agreement, the Exercise Price of an option shall equal the Fair Market Value of a share of Common Stock on the date of grant; provided that in no event may such Exercise Price be less than the greater of (i) the Fair Market Value of a share of Common Stock on the date of grant and (ii) the par value of a share of Common Stock.  Repricing of options granted under the Plan shall not be permitted (1) to the extent such action could cause adverse tax consequences to the grantee under Sections 409A or 457A of the Code or (2) without prior shareholder approval, to the extent such approval would be required to be obtained by the Company pursuant to the rules of any applicable stock exchange on which the Common Stock is then listed, and any action that would be deemed to result in a Repricing of an option shall be deemed null and void if it would cause such adverse tax consequences or if any requisite shareholder approval related thereto is not obtained prior to the effective time of such action.

2.3.          Exercise of Options and Stock Appreciation Rights

Subject to the other provisions of this Article II and the Plan, each option and stock appreciation right granted under the Plan shall be exercisable as follows:
 
 
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(a)            Timing and Extent of Exercise .  Options and stock appreciation rights shall be exercisable at such times and under such conditions as determined by the Administrator and set forth in the corresponding Award Agreement, but in no event shall any portion of such Award be exercisable subsequent to the tenth anniversary of the date on which such Award was granted.  Unless the applicable Award Agreement otherwise provides, an option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such Award is then exercisable.

(b)            Notice of Exercise .  An option or stock appreciation right shall be exercised by the filing of a written notice with the Company or the Company's designated exchange agent (the "Exchange Agent"), on such form and in such manner as the Administrator shall prescribe.

(c)            Payment of Exercise Price .  Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased.  Such payment shall be made: (i) by certified or official bank check (or the equivalent thereof acceptable to the Company or its Exchange Agent) for the full option Exercise Price; (ii) with the consent of the Administrator, which consent shall be given or withheld in the sole discretion of the Administrator, by delivery of shares of Common Stock having a Fair Market Value (determined as of the exercise date) equal to all or part of the option Exercise Price and a certified or official bank check (or the equivalent thereof acceptable to the Company or its Exchange Agent) for any remaining portion of the full option Exercise Price; or (iii) at the sole discretion of the Administrator and to the extent permitted by law, by such other provision, consistent with the terms of the Plan, as the Administrator may from time to time prescribe (whether directly or indirectly through the Exchange Agent), or by any combination of the foregoing payment methods.

(d)            Delivery of Certificates Upon Exercise .  Subject to Sections 3.2, 3.4 and 3.13, promptly after receiving payment of the full option Exercise Price, or after receiving notice of the exercise of a stock appreciation right for which the Administrator determines payment will be made partly or entirely in shares, the Company or its Exchange Agent shall (i) deliver to the grantee, or to such other Person as may then have the right to exercise the Award, a certificate or certificates for the shares of Common Stock for which the Award has been exercised or, in the case of stock appreciation rights, for which the Administrator determines will be made in shares or (ii) establish an account evidencing ownership of the stock in uncertificated form.   If the method of payment employed upon an option exercise so requires, and if applicable law permits, an optionee may direct the Company or its Exchange Agent, as the case may be, to deliver the stock certificate(s) to the optionee's stockbroker.

(e)            No Stockholder Rights .  No grantee of an option or stock appreciation right (or other Person having the right to exercise such Award) shall have any of the rights of a stockholder of the Company with respect to shares subject to such Award until the issuance of a stock certificate to such Person for such shares.  Except as otherwise provided in Section 1.5(c), no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued.

2.4.          Termination of Employment; Death Subsequent to a Termination of Employment

(a)            General Rule .  Except to the extent otherwise provided in paragraphs (b), (c), (d), (e) or (f) of this Section 2.4 or Section 3.5(b)(iii), a grantee who incurs a termination of employment or consultancy/service relationship or dismissal from the Board may exercise any outstanding option
 
 
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or stock appreciation right on the following terms and conditions: (i) exercise may be made only to the extent that the grantee was entitled to exercise the Award on the date of termination of employment or consultancy/service relationship or dismissal from the Board, as applicable; and (ii) exercise must occur within three months after termination of employment or consultancy/service relationship or dismissal from the Board but in no event after the original expiration date of the Award.

(b)            Dismissal "for Cause" .  If a grantee incurs a termination of employment or consultancy/service relationship or dismissal from the Board "for Cause", all options and stock appreciation rights not theretofore exercised shall immediately terminate upon the grantee's termination of employment or consultancy/service relationship or dismissal from the Board.

(c)            Retirement .  If a grantee incurs a termination of employment or consultancy/service relationship or dismissal from the Board as the result of his or her retirement (as defined below), then any outstanding option or stock appreciation right shall, to the extent exercisable at the time of such retirement, remain exercisable for a period of three years after such retirement; provided that in no event may such option or stock appreciation right be exercised following the original expiration date of the Award.  For this purpose, "retirement" shall mean a grantee's resignation of employment or consultancy/service relationship or dismissal from the Board, with the Company's or its applicable Affiliate's prior consent, on or after (i) his or her 65th birthday, (ii) the date on which he or she has attained age 60 and completed at least five years of service with the Company or one or more of its Affiliates (using any method of calculation the Administrator deems appropriate) or (iii) if approved by the Administrator, on or after his or her having completed at least 20 years of service with the Company or one or more of its Affiliates (using any method of calculation the Administrator deems appropriate).

(d)            Disability .  If a grantee incurs a termination of employment or consultancy/service relationship or a dismissal from the Board by reason of a disability (as defined below), then any outstanding option or stock appreciation right shall, to the extent exercisable at the time of such termination or dismissal, remain exercisable for a period of one year after such termination or dismissal; provided that in no event may such option or stock appreciation right be exercised following the original expiration date of the Award.  For this purpose, "disability" shall mean any physical or mental condition that would qualify the grantee for a disability benefit under the long-term disability plan maintained by the Company or its Affiliate, as applicable, or, if there is no such plan, a physical or mental condition that prevents the grantee from performing the essential functions of the grantee's position (with or without reasonable accommodation) for a period of six consecutive months.  The existence of a disability shall be determined by the Administrator.

(e)            Death .
 
 
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(i)       Termination of Employment as a Result of Grantee's Death .  If a grantee incurs a termination of employment or consultancy/service relationship or leaves the Board as the result of his or her death, then any outstanding option or stock appreciation right shall, to the extent exercisable at the time of such death, remain exercisable for a period of one year after such death; provided that in no event may such option or stock appreciation right be exercised following the original expiration date of the Award.

(ii)          Restrictions on Exercise Following Death .  Any such exercise of an Award following a grantee's death shall be made only by the grantee's executor or administrator or other duly appointed representative reasonably acceptable to the Administrator, unless the grantee's will specifically disposes of such Award, in which case such exercise shall be made only by the recipient of such specific disposition.  If a grantee's personal representative or the recipient of a specific disposition under the grantee's will shall be entitled to exercise any Award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and the applicable Award Agreement which would have applied to the grantee.

(f)            Administrator Discretion .  The Administrator may, in writing, waive or modify the application of the foregoing provisions of this Section 2.4.

2.5.          Transferability of Options and Stock Appreciation Rights

Except as otherwise provided in an applicable Award Agreement evidencing an option or stock appreciation right, during the lifetime of a grantee, each such Award granted to a grantee shall be exercisable only by the grantee, and no such Award shall be assignable or transferable other than by will or by the laws of descent and distribution.  The Administrator may, in any applicable Award Agreement evidencing an option or stock appreciation right, permit a grantee to transfer all or some of the options or stock appreciation rights to (a) the grantee's spouse, children or grandchildren ("Immediate Family Members"), (b) a trust or trusts for the exclusive benefit of such Immediate Family Members or (c) other parties approved by the Administrator.  Following any such transfer, any transferred options and stock appreciation rights shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer.

2.6.          Grant of Restricted Stock

(a)            Restricted Stock Grants .  The Administrator may grant restricted shares of Common Stock to such Key Persons, in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions as the Administrator shall determine, subject to the provisions of the Plan.  A grantee of a restricted stock Award shall have no rights with respect to such Award unless such grantee accepts the Award within such period as the Administrator shall specify by accepting delivery of a restricted stock Award Agreement in such form as the Administrator shall determine and, in the event the restricted shares are newly issued by the Company, makes payment to the Company or its Exchange Agent by certified or official bank check (or the equivalent thereof acceptable to the Administrator) in an amount at least equal to the par value of the shares covered by the Award (which payment may be waived at the time of grant of the restricted stock Award to the extent the restricted shares granted hereunder are otherwise deemed to be fully paid and non-assessable).
 
 
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(b)            Issuance of Stock Certificate .  Promptly after a grantee accepts a restricted stock Award in accordance with Section 2.6(a), subject to Sections 3.2, 3.4 and 3.13, the Company or its Exchange Agent shall issue to the grantee a stock certificate or stock certificates for the shares of Common Stock covered by the Award or shall establish an account evidencing ownership of the stock in uncertificated form.  Upon the issuance of such stock certificates, or establishment of such account, the grantee shall have the rights of a stockholder with respect to the restricted stock, subject to: (i) the nontransferability restrictions and forfeiture provisions described in the Plan (including paragraphs (d) and (e) of this Section 2.6); (ii) in the Administrator's sole discretion, a requirement, as set forth in the Award Agreement, that any dividends paid on such shares shall be held in escrow and, unless otherwise determined by the Administrator, shall remain forfeitable until all restrictions on such shares have lapsed; and (iii) any other restrictions and conditions contained in the applicable Award Agreement.

(c)            Custody of Stock Certificate .  Unless the Administrator shall otherwise determine, any stock certificates issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable Award Agreement.  The Administrator may direct that such stock certificates bear a legend setting forth the applicable restrictions on transferability.

(d)            Nontransferability .  Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of prior to the lapsing of all restrictions thereon, except as otherwise specifically provided in this Plan or the applicable Award Agreement.  The Administrator at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the nontransferability of the restricted stock shall lapse.

(e)            Consequence of Termination of Employment .  Unless otherwise set forth in the applicable Award Agreement, (i) a grantee's termination of employment or consultancy/service relationship or dismissal from the Board for any reason other than death or disability (as defined in Section 2.4(d)) shall cause the immediate forfeiture of all shares of restricted stock that have not yet vested as of the date of such termination of employment or consultancy/service relationship or dismissal from the Board and (ii) if a grantee incurs a termination of employment or consultancy/service relationship or dismissal from the Board as the result of his or her death or disability, all shares of restricted stock that have not yet vested as of the date of such termination or departure from the Board shall immediately vest as of such date.  Unless otherwise determined by the Administrator, all dividends paid on shares forfeited under this Section 2.6(e) that have not theretofore been directly remitted to the grantee shall also be forfeited, whether by termination of any escrow arrangement under which such dividends are held or otherwise.  The Administrator may, in writing, waive or modify the application of the foregoing provisions of this Section 2.6(e).

2.7.          Grant of Restricted Stock Units

(a)            Restricted Stock Unit Grants .  The Administrator may grant restricted stock units to such Key Persons, and in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject to the provisions of the Plan.  A restricted stock unit granted under the Plan shall confer upon the grantee a right to receive from the Company, conditioned upon the occurrence of such vesting event as shall be determined by the Administrator and specified in the Award Agreement, the number of such grantee's
 
 
 
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restricted stock units that vest upon the occurrence of such vesting event multiplied by the Fair Market Value of a share of Common Stock on the date of vesting.  Payment upon vesting of a restricted stock unit shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of vesting) or both, all as the Administrator shall determine, and such payments shall be made to the grantee at such time as provided in the Award Agreement, which the Administrator shall intend to be (i) if Section 409A of the Code is applicable to the grantee, within the period required by Section 409A such that it qualifies as a "short-term deferral" pursuant to Section 409A and the Treasury Regulations issued thereunder, unless the Administrator shall provide for deferral of the Award intended to comply with Section 409A, (ii) if Section 457A of the Code is applicable to the grantee, within the period required by Section 457A(d)(3)(B) such that it qualifies for the exemption thereunder, or (iii) if Sections 409A and 457A of the Code are not applicable to the grantee, at such time as determined by the Administrator.

(b)            Dividend Equivalents .  The Administrator may include in any Award Agreement with respect to a restricted stock unit a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such Award is outstanding and unvested, on the shares of Common Stock underlying such Award if such shares were then outstanding.  In the event such a provision is included in a Award Agreement, the Administrator shall determine whether such payments shall be (i) paid to the holder of the Award, as specified in the Award Agreement, either (A) at the same time as the underlying dividends are paid, regardless of the fact that the restricted stock unit has not theretofore vested, or (B) at the time at which the Award's vesting event occurs, conditioned upon the occurrence of the vesting event, (ii) made in cash, shares of Common Stock or other property and (iii) subject to such other vesting and forfeiture provisions and other terms and conditions as the Administrator shall deem appropriate and as shall be set forth in the Award Agreement.

(c)            Consequence of Termination of Employment .  Unless otherwise set forth in the applicable Award Agreement, (i) a grantee's termination of employment or consultancy/service relationship or dismissal from the Board for any reason other than death or disability (as defined in Section 2.4(d)) shall cause the immediate forfeiture of all restricted stock units that have not yet vested as of the date of such termination of employment or consultancy/service relationship or dismissal from the Board and (ii) if a grantee incurs a termination of employment or consultancy/service relationship or dismissal from the Board as the result of his or her death or disability, all restricted stock units that have not yet vested as of the date of such termination or departure from the Board shall immediately vest as of such date.  Unless otherwise determined by the Administrator, any dividend equivalent rights on any restricted stock units forfeited under this Section 2.7(c) that have not theretofore been directly remitted to the grantee shall also be forfeited, whether by termination of any escrow arrangement under which such dividends are held or otherwise.  The Administrator may, in writing, waive or modify the application of the foregoing provisions of this Section 2.7(c).

(d)            No Stockholder Rights .  No grantee of a restricted stock unit shall have any of the rights of a stockholder of the Company with respect to such Award unless and until a stock certificate is issued with respect to such Award upon the vesting of such Award (it being understood that the Administrator shall determine whether to pay any vested restricted stock unit in the form of cash or Company shares or both), which issuance shall be subject to Sections 3.2, 3.4 and 3.13.  Except as otherwise provided in Section 1.5(c), no adjustment to any restricted stock unit shall be made
 
 
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for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate, if any, is issued.

(e)            Transferability of Restricted Stock Units .  Except as otherwise provided in an applicable Award Agreement evidencing a restricted stock unit, no restricted stock unit granted under the Plan shall be assignable or transferable.  The Administrator may, in any applicable Award Agreement evidencing a restricted stock unit, permit a grantee to transfer all or some of the restricted stock units to (i) the grantee's Immediate Family Members, (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members or (iii) other parties approved by the Administrator.  Following any such transfer, any transferred restricted stock units shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer.

2.8.          Grant of Unrestricted Stock

The Administrator may grant (or sell at a purchase price at least equal to par value) shares of Common Stock free of restrictions under the Plan to such Key Persons and in such amounts and subject to such forfeiture provisions as the Administrator shall determine.  Shares may be thus granted or sold in respect of past services or other valid consideration.


ARTICLE III.
Miscellaneous

3.1.          Amendment of the Plan; Modification of Awards

(a)            Amendment of the Plan .  The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations under any Award theretofore made under the Plan without the consent of the grantee (or, upon the grantee's death, the Person having the right to exercise the Award).  For purposes of this Section 3.1, any action of the Board or the Administrator that in any way alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any grantee.

(b)            Stockholder Approval Requirement.  If (1) required by applicable rules or regulations of a national securities exchange or the SEC, the Company shall obtain stockholder approval with respect to any amendment to the Plan that (i) expands the types of Awards available under the Plan, (ii) materially increases the number of shares which may be issued under the Plan (except as permitted pursuant to Section 1.5(c)), (iii) materially increases the benefits to participants under the Plan, including any material change to (A) permit, or that has the effect of, a "re-pricing" of any outstanding Award, (B) reduce the price at which shares of options to purchase shares may be offered or (C) extends the duration of the Plan or (iv) materially expands the class of Persons eligible to receive Awards under the Plan, or (2) the Administrator determines that it desires to retain the ability to grant incentive stock options under the Plan thereafter, the Company shall obtain stockholder approval with respect to any amendment to the Plan that (i) increases the number of shares that may be issued under the Plan or the individual limit set forth under Section 1.5(d) of the Plan (except, in each case, as permitted pursuant to Section 1.5(c)) or (ii) expands the class of Persons eligible to receive incentive stock options under the Plan.
 
 
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(c)            Modification of Awards .  The Administrator may cancel any Award under the Plan.  The Administrator also may amend any outstanding Award Agreement, including, without limitation, by amendment which would: (i) accelerate the time or times at which the Award becomes unrestricted, vested or may be exercised; (ii) waive or amend any goals, restrictions or conditions set forth in the Award Agreement; or (iii) waive or amend the operation of Sections 2.4, 2.6(e) or 2.7(c) with respect to the termination of the Award upon termination of employment or consultancy/service relationship or dismissal from the Board; provided , however , that no such amendment shall be made without shareholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Award.  However, any such cancellation or amendment (other than an amendment pursuant to Section 1.5, 3.5 or 3.16) that materially impairs the rights or materially increases the obligations of a grantee under an outstanding Award shall be made only with the consent of the grantee (or, upon the grantee's death, the Person having the right to exercise the Award).  In making any modification to an Award ( e.g. , an amendment resulting in a direct or indirect reduction in the Exercise Price or a waiver or modification under Section 2.4(f), 2.6(e) or 2.7(c)), the Administrator may consider the implications, if any, of such modification under the Code with respect to incentive stock options granted under the Plan and/or Sections 409A and 457A of the Code with respect to Awards granted under the Plan to individuals subject to such provisions of the Code.

3.2.          Consent Requirement

(a)            No Plan Action Without Required Consent .  If the Administrator shall at any time determine that any Consent (as defined below) is necessary or desirable as a condition of, or in connection with, the granting of any Award under the Plan, the issuance or purchase of shares or other rights thereunder, or the taking of any other action thereunder (each such action being hereinafter referred to as a "Plan Action"), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Administrator.

(b)            Consent Defined .  The term "Consent" as used herein with respect to any Plan Action means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (ii) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Administrator shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies.

3.3.          Nonassignability

Except as provided in Sections 2.4(e), 2.5, 2.6(d) or 2.7(e),   (a) no Award or right granted to any Person under the Plan or under any Award Agreement shall be assignable or transferable other than by will or by the laws of descent and distribution and (b) all rights granted under the Plan or any Award Agreement shall be exercisable during the life of the grantee only by the grantee or the grantee's legal representative or the grantee's permissible successors or assigns (as authorized and determined by the Administrator).  All terms and conditions of the Plan and the applicable Award Agreements will be binding upon any permitted successors or assigns.
 
 
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3.4.          Taxes

(a)            Withholding .  A grantee or other Award holder under the Plan shall be required to pay, in cash, to the Company, and the Company and Affiliates shall have the right and are hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to such grantee or other Award holder, the amount of any applicable withholding taxes in respect of an Award, its grant, its exercise, its vesting, or any payment or transfer under an Award or under the Plan, and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for payment of such taxes.  Whenever shares of Common Stock are to be delivered pursuant to an Award under the Plan, with the approval of the Administrator, which the Administrator shall have sole discretion whether or not to give, the grantee may satisfy the foregoing condition by electing to have the Company withhold from delivery shares having a value equal to the amount of minimum tax required to be withheld.  Such shares shall be valued at their Fair Market Value as of the date on which the amount of tax to be withheld is determined.  Fractional share amounts shall be settled in cash.  Such a withholding election may be made with respect to all or any portion of the shares to be delivered pursuant to an Award as may be approved by the Administrator in its sole discretion.

(b)            Liability for Taxes .  Grantees and holders of Awards are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with Awards (including, without limitation, any taxes arising under Sections 409A and 457A of the Code) and the Company shall not have any obligation to indemnify or otherwise hold any such Person harmless from any or all of such taxes.  The Administrator shall have the discretion to organize any deferral program, to require deferral election forms, and to grant or, notwithstanding anything to the contrary in the Plan or any Award Agreement, to unilaterally modify any Award in a manner that (i) conforms with the requirements of Sections 409A and 457A of the Code (to the extent applicable), (ii) voids any participant election to the extent it would violate Sections 409A or 457A of the Code (to the extent applicable) and (iii) for any distribution event or election that could be expected to violate Section 409A or 457A of the Code, make the distribution only upon the earliest of the first to occur of a "permissible distribution event" within the meaning of Section 409A of the Code or a distribution event that the participant elects in accordance with Section 409A of the Code.  The Administrator shall have the sole discretion to interpret the requirements of the Code, including, without limitation, Sections 409A and 457A, for purposes of the Plan and all Awards.

3.5.          Change in Control

(a)            Change in Control Defined .  Unless otherwise set forth in the applicable Award Agreement, for purposes of the Plan, "Change in Control" shall mean the occurrence of any of the following:

(i)      any "person" (as defined in Section 13(d)(3) of the 1934 Act), corporation or other entity (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (C) any company or other entity owned, directly or indirectly, by the holders of the voting stock of the Company in substantially the same
 
 
18
 
proportions as their ownership of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company or (D) any entity which Simon Financial Limited or any of its subsidiaries directly or indirectly “controls” (as defined in Rule 12b-2 under the 1934 Act) ) acquires "beneficial ownership" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company;

(ii)      the sale of all or substantially all the Company's assets in one or more related transactions to a person or group of persons, other than such a sale (A) to a Subsidiary which does not involve a material change in the equity holdings of the Company, (B) to an entity which has acquired all or substantially all the Company's assets or (C) to an entity which Simon Financial Limited or any of its subsidiaries directly or indirectly “controls” (as defined in Rule 12b-2 under the 1934 Act) (any such entity described in clause (A), (B) or (C), the "Acquiring Entity") if, immediately following such sale, 50% or more of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Acquiring Entity (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of more than 50% of the aggregate voting power of the capital stock ordinarily entitled to elect directors ofthe Acquiring Entity) is beneficially owned by the holders of the voting stock of the Company, and such voting power among the persons who were holders of the voting stock of the Company immediately prior to such sale is, immediately following such sale, held in substantially the same proportions as the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company immediately prior to such sale;

(iii)      any merger, consolidation, reorganization or similar event of the Company or any Subsidiary as a result of which the holders of the voting stock of the Company immediately prior to such merger, consolidation, reorganization or similar event do not directly or indirectly hold 50% or more of the aggregate voting power of the capital stock of the surviving entity (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of more than 50% of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the surviving entity) and such voting power among the persons who were holders of the voting stock of the Company immediately prior to such sale is, immediately following such sale, held in substantially the same proportions as the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company immediately prior to such sale;

(iv)     the approval by the Company's stockholders of a plan of complete liquidation or dissolution of the Company; or

(v)      during any period of 12 consecutive calendar months, individuals:

 
(A)
who were directors of the Company on the first day of such period, or

 
(B)
whose election or nomination for election to the Board was recommended or approved by at least a majority of the directors then still in office who were directors of the Company on the first day of such period, or whose election or nomination for election were so approved,

 
19
 
 
shall cease to constitute a majority of the Board.

Notwithstanding the foregoing, (1) in no event shall a Change in Control be deemed to have occurred in connection with an initial public offering of Common Stock, and (2) for each Award subject to Section 409A of the Code, a Change in Control shall be deemed to occur under this Plan with respect to such Award only if a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code, provided that such limitation shall apply to such Award only to the extent necessary to avoid adverse tax effects under Section 409A of the Code.

(b)            Effect of a Change in Control .  Unless the Administrator provides otherwise in an Award Agreement, upon the occurrence of a Change in Control:

(i)      notwithstanding any other provision of this Plan, any Award then outstanding shall become fully vested and any restriction and forfeiture provisions thereon imposed pursuant to the Plan and the Award Agreement shall lapse and any Award in the form of an option or stock appreciation right shall be immediately exercisable;

(ii)      to the extent permitted by law and not otherwise limited by the terms of the Plan, the Administrator may amend any Award Agreement in such manner as it deems appropriate;

(iii)           a grantee who incurs a termination of employment or consultancy/service relationship or dismissal from the Board for any reason, other than a termination or dismissal "for Cause", concurrent with or within one year following the Change in Control may exercise any outstanding option or stock appreciation right, but only to the extent that the grantee was entitled to exercise the Award on the date of his or her termination of employment or consultancy/service relationship or dismissal from the Board, until the earlier of (A) the original expiration date of the Award and (B) the later of (x) the date provided for under the terms of Section 2.4 without reference to this Section 3.5(b)(iii) and (y) the first anniversary of the grantee's termination of employment or consultancy/service relationship or dismissal from the Board.

(c)            Miscellaneous .  Whenever deemed appropriate by the Administrator, any action referred to in paragraph (b)(ii) of this Section 3.5 may be made conditional upon the consummation of the applicable Change in Control transaction.  For purposes of the Plan and any Award Agreement granted hereunder, the term "Company" shall include any successor to Scorpio Tankers Inc.

3.6.          Operation and Conduct of Business

Nothing in the Plan or any Award Agreement shall be construed as limiting or preventing the Company or any of its Affiliates from taking any action with respect to the operation and conduct of their business that they deem appropriate or in their best interests, including any or all adjustments, recapitalizations, reorganizations, exchanges or other changes in the capital structure of the Company or any of its Affiliates, any merger or consolidation of the Company or any of its Affiliates, any issuance of Company shares or other securities or subscription rights, any issuance of
 
 
20
 
bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or other securities or rights thereof, any dissolution or liquidation of the Company or any of its Affiliates, any sale or transfer of all or any part of the assets or business of the Company or any of its Affiliates, or any other corporate act or proceeding, whether of a similar character or otherwise.

3.7.          No Rights to Awards

No Key Person or other Person shall have any claim to be granted any Award under the Plan.

3.8.          Right of Discharge Reserved

Nothing in the Plan or in any Award Agreement shall confer upon any grantee the right to continue his or her employment with the Company or any of its Affiliates, his or her consultancy/service relationship with the Company or any of its Affiliates, or his or her position as a director of the Company or any of its Affiliates, or affect any right that the Company or any of its Affiliates may have to terminate such employment or consultancy/service relationship or service as a director.

3.9.          Non-Uniform Determinations

The Administrator's determinations and the treatment of Key Persons and grantees and their beneficiaries under the Plan need not be uniform and may be made and determined by the Administrator selectively among Persons who receive, or who are eligible to receive, Awards under the Plan (whether or not such Persons are similarly situated).  Without limiting the generality of the foregoing, the Administrator shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Award Agreements, as to (a) the Persons to receive Awards under the Plan, (b) the types of Awards granted under the Plan, (c) the number of shares to be covered by, or with respect to which payments, rights or other matters are to be calculated with respect to, Awards and (d) the terms and conditions of Awards.

3.10.       Other Payments or Awards

Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any Person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

3.11.       Headings

Any section, subsection, paragraph or other subdivision headings contained herein are for the purpose of convenience only and are not intended to expand, limit or otherwise define the contents of such subdivisions.
 
 
21

 
3.12.       Effective Date and Term of Plan

(a)            Adoption; Stockholder Approval .  The Plan was adopted by the Board on                          and approved by the Company's stockholders on                             .  The Board may, but need not, make the granting of any Awards under the Plan subject to the approval of the Company's stockholders.

(b)            Termination of Plan .  The Board may terminate the Plan at any time.  All Awards made under the Plan prior to its termination shall remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.  No Awards may be granted under the Plan following the tenth anniversary of the date on which the Plan was adopted by the Board.

3.13.       Restriction on Issuance of Stock Pursuant to Awards

The Company shall not permit any shares of Common Stock to be issued pursuant to Awards granted under the Plan unless such shares of Common Stock are fully paid and non-assessable under applicable law.  Notwithstanding anything to the contrary in the Plan or any Award Agreement, at the time of the exercise of any Award, at the time of vesting of any Award, at the time of payment of shares of Common Stock in exchange for, or in cancellation of, any Award, or at the time of grant of any unrestricted shares under the Plan, the Company and the Administrator may, if either shall deem it necessary or advisable for any reason, require the holder of an Award (a) to represent in writing to the Company that it is the Award holder's then-intention to acquire the shares with respect to which the Award is granted for investment and not with a view to the distribution thereof or (b) to postpone the date of exercise until such time as the Company has available for delivery to the Award holder a prospectus meeting the requirements of all applicable securities laws; and no shares   shall be issued or transferred in connection with any Award unless and until all legal requirements applicable to the issuance or transfer of such shares have been complied with to the satisfaction of the Company and the Administrator.  The Company and the Administrator shall have the right to condition any issuance of shares to any Award holder hereunder on such Person's undertaking in writing to comply with such restrictions on the subsequent transfer of such shares as the Company or the Administrator shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and all share certificates delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Company or the Administrator may deem advisable under the Plan, the applicable Award Agreement or the rules, regulations and other requirements of the SEC, any stock exchange upon which such shares are listed, and any applicable securities or other laws, and certificates representing such shares may contain a legend to reflect any such restrictions.  The Administrator may refuse to issue or transfer any shares or other consideration under an Award if it determines that the issuance or transfer of such shares or other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the 1934 Act, and any payment tendered to the Company by a grantee or other Award holder in connection with the exercise of such Award shall be promptly refunded to the relevant grantee or other Award holder.  Without limiting the generality of the foregoing, no Award granted under the Plan
 
 
 
22
 
shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Administrator has determined that any such offer, if made, would be in compliance with all applicable requirements of any applicable securities laws.

3.14.       Requirement of Notification of Election Under Section 83(b) of the Code

If an Award recipient, in connection with the acquisition of Company shares under the Plan, makes an election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code), the grantee shall notify the Administrator of such election within ten days of filing notice of the election with the U.S. Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code.

3.15.       Severability

If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Administrator, such provision shall be construed or deemed amended to conform to the applicable laws or, if it cannot be construed or deemed amended without, in the determination of the Administrator, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

3.16.       Sections 409A and 457A

To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Sections 409A and 457A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder.  Notwithstanding any provision of the Plan or any applicable Award Agreement to the contrary, in the event that the Administrator determines that any Award may be subject to Section 409A or 457A of the Code, the Administrator may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (i) exempt the Plan and Award from Sections 409A and 457A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (ii) comply with the requirements of Sections 409A and 457A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under Sections 409A and 457A of the Code.

3.17.
Forfeiture; Clawback

The Administrator may, in its sole discretion, specify in the applicable Award Agreement that any realized gain with respect to options or stock appreciation rights and any realized value with respect to other Awards shall be subject to forfeiture or clawback, in the event of (a) a grantee's breach of any non-competition, non-solicitation, confidentiality or other restrictive covenants with respect to the Company or any of its Affiliates or (ii) a financial restatement that reduces the amount of bonus or incentive compensation previously awarded to a grantee that would have been earned had results been properly reported.
 
 
23

 
3.18.
No Trust or Fund Created

Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any of its Affiliates and an Award recipient or any other Person.  To the extent that any Person acquires a right to receive payments from the Company or any of its Affiliates pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or its Affiliates.

3.19.
No Fractional Shares

No fractional shares shall be issued or delivered pursuant to the Plan or any Award, and the Administrator shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional shares or whether such fractional shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.

3.20.       Governing Law

The Plan will be construed and administered in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.


 
SK 26596 0002 1062191 v3
 
 

 
24
 


Exhibit 21
 
SUBSIDIARIES OF SCORPIO TANKERS INC.
 

 
Name of Subsidiary
Jurisdiction of Incorporation
Noemi Shipping Company Limited
   Marshall Islands
Senatore Shipping Company Limited
   Marshall Islands
Venice Shipping Company Limited
   Marshall Islands
   


 
 



EXHIBIT 23.2


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No. 1 to Registration Statement No. 333-164940 on Form F-1 of our report dated December 16, 2009 except for Note 15, as to which the date is March 10, 2010, relating to the combined financial statements as of December 31, 2008 and 2007 and for each of the two years in the period ended December 31, 2008 of Scorpio Tankers Inc. and subsidiaries appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such Prospectus.





/s/ DELOITTE LLP
DELOITTE LLP
London, United Kingdom
March 10, 2010





SK 26596 0002 1080170




EXHIBIT 23.3
 
 
[FEARNLEY FONDS LETTERHEAD]


Scorpio Tankers Inc.
9, Boulevard Charles III
Monaco 98000
10 March 2010



Dear Sirs,
 
re.:   Scorpio Tankers Inc. – consent to use of information

Reference is made to the Form F-1 registration statement (the "Registration Statement") relating to the offer and sale of common shares, $1.00 par value per share, of Scorpio Tankers Inc.

We hereby consent to all references to our name in the Registration Statement and to the use of the statistical and graphical information supplied by us, as set forth therein.  We have accurately described the international tanker industry, subject to the availability and reliability of the data supporting the statistical and graphical information presented.  We further hereby advise Scorpio Tankers Inc. that (i) certain of the information provided is based on estimates or subjective judgements, (ii) the information in the databases of other maritime data collection concerns may differ from the information in our databases and other Astrup Fearnley group databases that we have relied on, and (iii) while we have taken reasonable care in the compilation of such statistical information and believe it to be correct, data collection is subject to limited audit and validation procedures.

We hereby consent to the filing of this letter as an exhibit to the Registration Statement of Scorpio Tankers Inc. to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, and to the reference to our firm in the section of the Registration Statement entitled "Experts".


Sincerely,
 
for Fearnley Fonds ASA
 
/s/ Eivind Hadler-Olsen

Eivind Hadler-Olsen
 
Managing director



EXHIBIT 23.4
 
 
 
CONSENT OF NOMINEE FOR DIRECTOR OF
SCORPIO TANKERS INC.
 
I hereby consent to the reference to me in the prospectus included in the registration statement on Form F-1 of Scorpio Tankers Inc., as shall be filed with the U.S. Securities and Exchange Commission and any and all amendments thereto.
 
 
 
 
/s/ Alexandre Albertini
Name: Alexandre Albertini
Date: March 10, 2010
 
 
 
 
 
 
 
SK 26596 0002 1079490




EXHIBIT 23.5
 
 
 
CONSENT OF NOMINEE FOR DIRECTOR OF
SCORPIO TANKERS INC.
 
I hereby consent to the reference to me in the prospectus included in the registration statement on Form F-1 of Scorpio Tankers Inc., as shall be filed with the U.S. Securities and Exchange Commission and any and all amendments thereto.
 
 
 
 
/s/ Ademaro Lanzara
Name: Ademaro Lanzara
Date: March 10, 2010
 
 
 
 
 
 
 

 
 
 
SK 26596 0002 1079491




EXHIBIT 23.6
 
 
 
CONSENT OF NOMINEE FOR DIRECTOR OF
SCORPIO TANKERS INC.
 
I hereby consent to the reference to me in the prospectus included in the registration statement on Form F-1 of Scorpio Tankers Inc., as shall be filed with the U.S. Securities and Exchange Commission and any and all amendments thereto.
 
 
 
 
/s/ Donald C. Trauscht
Name: Donald C. Trauscht
Date: March 10, 2010
 
 
 
 
 
 
 
SK 26596 0002 1079493