AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 2002.
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM F-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
------------------------------------
TEEKAY SHIPPING CORPORATION
(Exact name of registrant as specified in its charter)
REPUBLIC OF THE 4412 NOT APPLICABLE
MARSHALL ISLANDS (Primary Standard Industrial (I.R.S. Employer Identification
(State or other Jurisdiction Classification Code Number) Number)
of incorporation or
organization)
TK HOUSE, BAYSIDE EXECUTIVE PARK, WEST BAY STREET AND BLAKE ROAD
P.O. BOX AP-59213, NASSAU, COMMONWEALTH OF THE BAHAMAS
(242) 502-8820
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
LAWCO OF OREGON, INC.
1211 S.W. FIFTH AVENUE, SUITE 1500
PORTLAND, OR 97204
ATTN: KAREN M. DODGE
(503) 727-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------
COPIES TO:
DAVID MATHESON
DOUGLAS C. BOSLEY
PERKINS COIE LLP
1211 S.W. FIFTH AVENUE, SUITE 1500
PORTLAND, OR 97204
(503) 727-2000
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If 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. [ ]
------------------------------------
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED SECURITY PRICE(1) FEE
---------------------------------------------------------------------------------------------------------------------
8.875% Senior Notes Due July 15,
2011............................. $100,000,000 102.25% $102,250,000 $9,407
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee.
------------------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 17, 2002
PRELIMINARY PROSPECTUS
$100,000,000
TEEKAY LOGO
TEEKAY SHIPPING CORPORATION
OFFER TO EXCHANGE OUTSTANDING 8.875% SENIOR NOTES DUE JULY 15, 2011,
FOR 8.875% SENIOR NOTES DUE JULY 15, 2011, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER
- We will exchange all outstanding 8.875% senior notes due July 15, 2011,
that were issued on December 6, 2001, and which have not been registered
under the Securities Act of 1933, that are validly tendered and not
validly withdrawn for an equal principal amount of exchange notes that
are registered and freely tradable.
- You may withdraw tenders of outstanding notes at any time prior to the
expiration of the exchange offer.
- The exchange offer expires at 5:00 p.m., New York City time, on February
, 2002, unless extended. We do not currently intend to extend the
expiration date.
- The exchange of outstanding notes for exchange notes in the exchange
offer will not be a taxable event for U.S. federal income tax purposes.
- We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
- The exchange notes are being offered in order to satisfy certain of our
obligations under the exchange and registration rights agreement entered
into in connection with the private placement of the outstanding notes.
- The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the outstanding notes, except that the
exchange notes are registered under the Securities Act of 1933 and will
be freely tradable.
- Under the terms of the indenture governing the exchange notes, the
exchange notes will be consolidated with and form a single series of
securities with the $250,000,000 aggregate principal amount of 8.875%
senior notes due July 15, 2011 that previously were exchanged for notes
we originally issued on June 22, 2001.
RESALES OF EXCHANGE NOTES
- The exchange notes may be sold in the over-the-counter market, in
negotiated transactions or through a combination of such methods.
------------------------
If you are a broker-dealer and you receive exchange notes for your own
account, you must acknowledge that you will deliver a prospectus in connection
with any resale of such exchange notes. By making such acknowledgement, you will
not be deemed to admit that you are an "underwriter" under the Securities Act of
1933.
Broker-dealers may use this prospectus in connection with any resale of
exchange notes received in exchange for outstanding notes where such outstanding
notes were acquired by the broker-dealer as a result of market-making activities
or trading activities.
We will make this prospectus available to any broker-dealer for use in any
such resale for a period of up to 180 days after the date of this prospectus.
A broker-dealer may not participate in the exchange offer with respect to
outstanding notes acquired other than as a result of market-making activities or
trading activities.
If you are an affiliate of Teekay Shipping Corporation or are engaged in,
or intend to engage in, or have an agreement or understanding to participate in,
a distribution of the exchange notes, you must comply with the registration
requirements of the Securities Act of 1933 in connection with any resale
transaction.
------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 15 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Preliminary Prospectus dated January 17, 2002.
WHERE YOU CAN FIND MORE INFORMATION
We file annual and special reports and other information with the
Securities and Exchange Commission. You can read and copy any materials we file
with the SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the SEC's regional offices located at 500 West Madison Street,
Chicago, Illinois 60661. You can obtain information about the operation of the
SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the internet at http://www.sec.gov. In addition,
you can obtain information about us at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. We have agreed that, if we
are not subject to the informational requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934 at any time while the notes constitute
"restricted securities" within the meaning of the Securities Act of 1933, we
will furnish to holders and beneficial owners of the notes and to prospective
purchasers designated by such holders the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with
Rule 144A in connection with resales of the notes.
We have filed with the SEC a registration statement on Form F-4 under the
Securities Act of 1933. This prospectus, which forms a part of the registration
statement, does not contain all of the information in the registration
statement, as permitted by SEC rules and regulations. You may inspect and copy
the registration statement, including exhibits, at the SEC's public reference
facilities or its Web site. Our statements in this prospectus about the contents
of any contract or other document are not necessarily complete. You should refer
to the copy of each contract or other document we have filed as an exhibit to
the registration statement for complete information.
The SEC allows us to "incorporate by reference" into this prospectus the
information that we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information that we file with the SEC may automatically update and supersede
this information. We incorporate by reference the documents listed below:
- our Annual Report on Form 20-F for the year ended December 31, 2000,
filed on April 2, 2001;
- our reports on Form 6-K filed on April 16, May 9, May 24, June 7, July
27, August 2, August 14 and November 15, 2001, respectively; and
- all other documents filed by Teekay pursuant to Section 13(a), 13(c), or
15(d) of the Securities Exchange Act of 1934, after the date of this
prospectus and prior to the termination of the exchange offer.
You may request a copy of our filings at no cost, by writing or telephoning
us at the following address:
Teekay Shipping Corporation
505 Burrard Street, Suite 1400
Vancouver, B.C. CANADA V7X 1M5
Attention: Investor Relations
Telephone: (604) 844-6654
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus is accurate after the date on the front of the document. Information
contained on our Web site will not be deemed to be a part of this prospectus.
The indenture pursuant to which the notes offered by this prospectus will
be issued contains a covenant that requires us to provide to each holder of
record of the notes, upon request, and to the trustee under the indenture,
annual reports containing audited financial statements and a related report
expressed by independent chartered accountants, and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include statements regarding, among other items:
- our future earnings and other operating results;
- tanker supply and demand;
- our market share in the Indo-Pacific Basin and Atlantic region Aframax
tanker markets and in the world shuttle tanker market;
- expectations as to funding our future capital requirements;
- future capital expenditures;
- our growth strategy and measures to implement our growth strategy;
- possible disruption in commercial activities due to terrorist activity
and armed conflict;
- competition;
- prospects and trends of the tanker industry, including TCE rates; and
- other discussions of future plans and strategies, anticipated
developments and other matters that involve predictions of future
events.
Other statements contained in this prospectus are forward-looking
statements and are not based on historical fact, such as statements containing
the words "believes," "may," "will," "estimates," "continue," "anticipates,"
"intends," "expects" and words of similar import.
These forward-looking statements are subject to risks, uncertainties and
assumptions, including those discussed in "Risk Factors," and elsewhere in this
prospectus and in reports we file with the SEC. The risks, uncertainties and
assumptions involve known and unknown risks and are inherently subject to
significant uncertainties and contingencies, many of which are beyond our
control.
Actual results may differ materially from those projected in
forward-looking statements. Although we believe that our estimates are
reasonable, you should not unduly rely on these estimates, which are based on
our current expectations. Factors that could cause actual results to differ
materially include:
- the cyclical nature of the tanker industry and its dependence on oil
markets;
- the supply of tankers available to meet the demand for transportation of
petroleum products;
- our dependence on spot oil voyages;
- environmental and other regulation;
- possible disruption in commercial activities due to terrorist activity
and armed conflict;
- our potential inability to achieve and manage growth; and
- the other factors described in "Risk Factors."
We undertake no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for us to predict all
of these factors. Further, we cannot assess the impact of each such factor on
our business or the extent to which any factor, or combination of factors, may
cause actual results to be materially different from those contained in any
forward-looking statement. Neither we, nor any initial purchaser of the
outstanding notes, make any representation, warranty or assurance as to the
completeness or accuracy of these projections, and neither express an opinion or
any other form of assurance regarding them.
ii
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
We and most of our subsidiaries are incorporated in the Republic of the
Marshall Islands, and other of our subsidiaries are incorporated in Bermuda, the
Bahamas, Canada, Japan, Singapore, Australia, United Kingdom, Norway, India, the
Philippines, Liberia and the United States. Most of our directors and executive
officers and those of our subsidiaries are residents of countries other than the
United States. Substantially all of our and our subsidiaries' assets and a
substantial portion of the assets of the directors and officers are located
outside the United States. As a result, it may be difficult or impossible for
United States investors to effect service of process within the United States
upon us, our subsidiaries or the directors and officers or to realize against
them judgments obtained in United States courts. In addition, you should not
assume that courts in countries in which we or our subsidiaries are incorporated
or where our assets or the assets of our subsidiaries are located (a) would
enforce judgments of U.S. courts obtained in actions against us or our
subsidiaries based upon civil liabilities provisions of applicable U.S. federal
and state securities laws or (b) would enforce, in original actions, liabilities
against us or our subsidiaries based upon these laws.
------------------------------------
Unless otherwise specifically noted or the context otherwise requires, the
term "outstanding notes" refers to the $100 million aggregate principal amount
of 8.875% senior notes due 2011, that we issued on December 6, 2001; the term
"exchange notes" refers to the notes offered by this prospectus in exchange for
the outstanding notes; and the term "notes" refers to the outstanding notes, the
exchange notes and the $250 million aggregate principal amount of 8.875% senior
notes due July 15, 2011, that have been registered under the Securities Act of
1933, that we issued in exchange for $250 million aggregate principal amount of
unregistered 8.875% senior notes due July 15, 2011, that we originally issued on
June 22, 2001, pursuant to the Indenture dated as of the same date between us
and The Bank of New York Trust Company of Florida, N.A. (formerly U.S. Trust
Company of Texas, N.A.), as trustee.
Unless otherwise specifically noted or the context otherwise requires, the
term "tankers" refers to tankers, shuttle tankers and oil/bulk/ore carriers.
Except as otherwise indicated herein, when we describe our fleet, tankers or
vessels, we include newbuildings, time-chartered-in vessels and tankers that we
have an interest in through joint ventures. Unless otherwise specifically noted
or the context otherwise requires, when we describe our Aframax fleet we refer
to all of our Aframax-size tankers, including two Aframax-size oil/bulk/ore
carriers trading exclusively as crude oil carriers, but exclude our other
oil/bulk/ore carriers. Industry data in this prospectus relating to Aframax
tankers or vessels includes all Aframax-size tankers, including Aframax-size
oil/bulk/ore carriers.
All dollar references in this prospectus are to U.S. Dollars, unless
otherwise specifically indicated.
Certain statistical and graphical information contained in this prospectus,
including the documents incorporated herein by reference, is derived from data
published by third-party sources. While we have no reason to believe that such
information is inaccurate in any material respect, we cannot warrant its
accuracy. In addition, you are advised that some information in such databases
is based on estimates or subjective judgments.
The Teekay logo and the name Teekay Shipping Corporation are among our
trademarks. All other trademarks and trade names referred to in this prospectus
are the property of their respective owners.
iii
PROSPECTUS SUMMARY
The following summary supplements, and should be read in conjunction with,
the more detailed information contained elsewhere in this prospectus and in the
documents incorporated herein by reference. You should read carefully this
entire prospectus, including the documents incorporated herein by reference, to
understand our business, the nature of the notes and the tax and other
considerations that are important to your decision to invest in the notes. You
should pay special attention to the "Risk Factors" section.
THE COMPANY
OVERVIEW
Teekay is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium-size
oil tankers. Our modern fleet of 96 tankers (including eight newbuildings, six
vessels time-chartered-in and three vessels owned by joint ventures) provides
transportation services to major oil companies, major oil traders and government
agencies worldwide. We believe our Aframax fleet is approximately three times
larger than that of our nearest direct Aframax competitor. Through our recent
acquisition of Ugland Nordic Shipping ASA ("UNS"), we are also the largest owner
of shuttle tankers, which engage in the transportation of oil from offshore
production platforms to onshore storage and refinery facilities.
COMPETITIVE STRENGTHS
We pursue an intensively customer- and operations-focused business strategy
designed to achieve superior operating results. We base our business strategy on
the following five key competitive strengths:
- MARKET CONCENTRATION. In each market that we address within the
shipping industry, we seek to achieve significant scale and scope. This
market concentration has enabled us to provide comprehensive coverage of
charterers' requirements while also providing a base for efficient
operation and a high degree of capacity utilization. We believe we have
a significant share of the Indo-Pacific Basin and the Atlantic region
Aframax markets. Through our acquisition of UNS' shuttle tanker
operations, we also believe we have a significant share of the world
shuttle tanker market. Our presence in these markets strategically
positions us to deliver superior service to the oil industry on a global
basis.
- OPERATIONAL CONTROL AND EXPERIENCED MANAGEMENT. Teekay services
substantially all of its operational and management needs in-house. We
have experienced management in all functions critical to our operations,
which provides us with a focused marketing effort, tight quality and
cost controls and effective safety monitoring.
- MODERN, HIGH-QUALITY TONNAGE. Our modern, high-quality tanker fleet
operates with high fuel efficiency and low maintenance and operating
costs. We now control a fleet of 80 tankers (excluding eight
newbuildings and eight oil/bulk/ore carriers) with an average age of
approximately 9.5 years. The average age for the world tanker fleet is
approximately 13.9 years. In an environment of increasingly stringent
operating and safety standards, we believe that the age profile and
quality of our fleet result in a high level of demand for our tankers by
charterers.
- LARGE FLEET OF UNIFORM, MEDIUM-SIZE VESSELS. Our large fleet of
medium-size tankers, many of which are substantially identical vessels,
allows us to substitute vessels to meet customer demands. This increases
our scheduling flexibility and allows us to enhance the capacity
utilization of our fleet. We believe that the scale of our operations
and the resulting purchasing power, combined with the uniformity of our
medium-size vessels, results in lower operating expenses than those
experienced by smaller operators.
1
- STRONG NETWORK OF CUSTOMER RELATIONSHIPS. We pursue an intensively
customer-oriented focus that, when combined with other competitive
strengths, has enabled us to establish a strong network of customer
relationships and a reputation for transportation excellence among
quality-sensitive customers such as Exxon Mobil, BP, ChevronTexaco and
Shell.
BUSINESS STRATEGY
Our business strategy is to leverage our existing competitive strengths to
continue to expand our business and increase shareholder value.
- MAINTAIN AND EXPAND AFRAMAX FRANCHISE. The expansion and upgrading of
our Aframax fleet will continue to be a key component of our strategy.
As the world's largest Aframax tanker operator, we believe we will be
able to provide the most comprehensive service to our customers and
generate superior operating results. For example, our size and scope of
services have enabled us to enter into contracts of affreightment to
provide large oil-company customers with ongoing services that will
grant us preferential rights on certain routes. We expect that this will
result in significant fleet utilization benefits and high market share
on strategically important routes.
- LEVERAGE THE FRANCHISE TO PROVIDE VALUE-ADDED SERVICES. Our
full-service marine operations capabilities, reputation for safety and
quality and strong customer orientation provide us with the opportunity
to expand our business by providing additional value-added and
innovative services to new and existing customers. Such services include
providing customers with floating storage and off-take vessels,
outsourcing arrangements where we service a customer's complete oil
transportation requirements and, with our acquisition of UNS, providing
shuttle tanker services for customers engaged in offshore oil
production. By providing our customers with these value-added services,
we believe that we will strengthen our franchise and further improve our
financial performance.
- SELECTIVELY EXPAND INTO RELATED MARKETS AND SERVICES. We intend to
continue to identify expansion opportunities in new tanker market
sectors, geographic areas and services to which our competitive
strengths are well suited and that will enhance shareholder value. We
may pursue such opportunities through internal growth, joint ventures or
business acquisitions, such as our acquisition of UNS, through which we
expanded into the shuttle tanker market.
ACQUISITION OF UGLAND NORDIC SHIPPING ASA
In the first quarter of 2001, we purchased Ugland Nordic Shipping ASA, the
world's largest shuttle tanker owner. UNS' modern fleet of 18 vessels engages in
the transportation of oil from offshore production platforms to onshore storage
and refinery facilities. The UNS fleet has an average age of 9.0 years
(excluding three newbuildings) and operates primarily in the North Sea under
long-term fixed-rate contracts. The total purchase price for the outstanding
shares of UNS was approximately $223 million (including estimated transaction
expenses of $7 million). The operating results of UNS have been reflected in our
financial statements commencing March 6, 2001, the effective date that we
acquired a majority interest in UNS.
UNS' large scale and high quality shuttle tanker operations provided us
with a strategic opportunity to enter this attractive market as a market leader.
The acquisition also allowed us to expand the portfolio of value-added services
we offer to our customers. We believe that as offshore oil fields become more
important to the global oil supply, the need for shuttle tanker services will
increase. By combining our global franchise and UNS' expertise in the shuttle
tanker market, we believe that the shuttle tanker business represents an area of
significant growth for Teekay. We believe the acquisition of UNS will also
provide added stability to our cash flow throughout the business cycle, due to
the long-term fixed-price nature of shuttle tanker contracts.
2
RECENT DEVELOPMENTS
On August 1, 2001, we announced an agreement with Tosco Corporation under
which we assumed Tosco's contracts for the construction of three Suezmax and two
Aframax tankers due for delivery in 2003, at a total cost of approximately $250
million. We paid approximately $48 million of this cost in August 2001, as
reimbursement to Tosco for installments already made by it under its
shipbuilding contracts. The balance of the installments and delivery payments on
the vessels are due in 2003. Upon delivery, the vessels will be time-chartered
to Tosco for a minimum of 12 years each, and Tosco has options to extend the
time-charters for up to an additional six years. Tosco may terminate these
time-charters at any time by requesting a sale of the applicable tankers or
giving us six months' prior notice of cancellation. If the proceeds from a sale
of the tankers are less than a specified amount, Tosco will pay us the
difference. If the sale proceeds are greater than the specified amount, we will
share the difference with Tosco. If Tosco cancels a time-charter without
requesting a sale, Tosco will pay us a lump-sum amount based upon the number of
years then remaining in the time-charter.
On September 11, 2001, several acts of terrorism were carried out in the
United States resulting in significant loss of life and property, and disruption
of the financial markets. These attacks and the resulting military and
diplomatic response by the United States and its allies have not resulted in any
material disruption in oil supply from the Middle East. The continuation or
escalation of hostilities or the worsening of diplomatic relations relating to
terrorism may result in a disruption in oil supply from the region.
In addition, the general global economic downturn that began in early 2001
was accelerated by the September 11, 2001 attacks. The World Bank currently
projects global economic growth for 2001 and 2002 at 1.3% and 1.6%,
respectively. The general slowdown has adversely affected global demand for oil
and, consequently, average time charter equivalents, or TCE, rates, particularly
since mid-2001. Following the September 11 attacks, the forecast rate of growth
for global oil demand was reduced by the International Energy Agency from 0.7%
to 0.1% for 2001, and from 1.0% to 0.7% for 2002. Worldwide industry average
Aframax spot TCE rates dropped from $26,598 per day for the month of August 2001
to $21,608 per day for the month of December 2001. Our TCE rates have also
declined during this period, which will negatively affect our results of
operations.
On September 19, 2001, we announced that our Board of Directors had
authorized the repurchase of up to 2 million shares of our common stock in the
open market. As at December 31, 2001, we had repurchased 512,800 shares of our
common stock at an average price of $27.62 per share.
On November 14, 2001, the Organization of the Petroleum Exporting Countries
(OPEC) announced a reduction in oil production of 1.5 million barrels per day
effective January 1, 2002. This cutback was conditional upon non-OPEC producers
reducing combined oil production by 0.5 million barrels per day effective
January 2002. Subsequently, Russia, Mexico, Norway, Oman and Angola have
collectively committed to a cut of 0.46 million barrels per day. OPEC members
met on December 28, 2001, and agreed to implement a 1.5 million barrel per day
cutback for a period of six months, effective January 1, 2002.
3
SUMMARY OF THE EXCHANGE OFFER
On December 6, 2001, we completed a private offering of our 8.875% senior
notes due July 15, 2011. We received proceeds of approximately $100.9 million
from the sale of the outstanding notes.
In connection with the offering of outstanding notes, we entered into an
exchange and registration rights agreement with the initial purchaser of the
outstanding notes in which we agreed to deliver this prospectus and to use our
best efforts to complete the exchange offer for the outstanding notes by August
3, 2002. In the exchange offer, you are entitled to exchange your outstanding
notes for exchange notes, with substantially identical terms, that are
registered under the Securities Act of 1933. You should read the discussion
under the heading "The Exchange Offer" beginning on page 38 and "Description of
the Notes" beginning on page 48 for further information about the exchange
notes. After the exchange offer is completed, you will no longer be entitled to
any exchange or, with limited exceptions, registration rights for your
outstanding notes.
The Exchange Offer............ We are offering to exchange up to $100 million
principal amount of the exchange notes for up
to $100 million principal amount of the
outstanding notes. Outstanding notes may only
be exchanged in $1,000 increments.
The terms of the exchange notes are identical
in all material respects to those of the
outstanding notes except the exchange notes
will not be subject to transfer restrictions
and holders of exchange notes, with limited
exceptions, will have no registration rights.
Also, the exchange notes will not contain
provisions for an increase in their stated
interest rate related to any registration or
exchange delay.
Outstanding notes that are not tendered for
exchange will continue to be subject to
transfer restrictions and, with limited
exceptions, will not have registration rights.
Therefore, the market for secondary resales of
outstanding notes that are not tendered for
exchange is likely to be minimal.
We will issue registered exchange notes on or
promptly after the expiration of the exchange
offer.
Expiration Date............... The exchange offer will expire at 5:00 p.m. New
York City time, on February , 2002, unless
we decide to extend the expiration date. Please
read "The Exchange Offer -- Extensions, Delay
in Acceptance, Termination or Amendment"
beginning on page 39 for more information about
an extension of the expiration date.
Withdrawal of Tenders......... You may withdraw your tender of outstanding
notes at any time prior to the expiration date.
We will return to you, without charge, promptly
after the expiration or termination of the
exchange offer any outstanding notes that you
tendered but that were not accepted for
exchange.
Conditions to the Exchange
Offer......................... We will not be required to accept outstanding
notes for exchange:
- if the exchange offer would be unlawful or
would violate any interpretation of the
staff of the SEC, or
- if any legal action has been instituted or
threatened that would impair our ability to
proceed with the exchange offer.
4
The exchange offer is not conditioned upon any
minimum aggregate principal amount of
outstanding notes being tendered. Please read
"The Exchange Offer -- Conditions to the
Exchange Offer" on page 40 for more information
about the conditions to the exchange offer.
Procedures for Tendering
Outstanding Notes........... If your outstanding notes are held through The
Depository Trust Company, or "DTC," and you
wish to participate in the exchange offer, you
may do so through DTC's automated tender offer
program. If you tender under this program, you
will agree to be bound by the letter of
transmittal that we are providing with this
prospectus as though you had signed the letter
of transmittal. By signing or agreeing to be
bound by the letter of transmittal, you will
represent to us that, among other things:
- any exchange notes that you receive will be
acquired in the ordinary course of your
business,
- you have no arrangement or understanding
with any person to participate in the
distribution of the outstanding notes or the
exchange notes,
- you are not our "affiliate," as defined in
Rule 405 of the Securities Act of 1933, or,
if you are our affiliate, you will comply
with any applicable registration and
prospectus delivery requirements of the
Securities Act,
- if you are not a broker-dealer, you are not
engaged in and do not intend to engage in
the distribution of the exchange notes, and
- if you are a broker-dealer that will receive
exchange notes for your own account in
exchange for outstanding notes that you
acquired as a result of market-making
activities or other trading activities, you
will deliver a prospectus in connection with
any resale of such exchange notes.
Special Procedures for
Beneficial Owners........... If you own a beneficial interest in outstanding
notes that are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee and you wish to tender the
outstanding notes in the exchange offer, please
contact the registered holder as soon as
possible and instruct the registered holder to
tender on your behalf and to comply with our
instructions described in this prospectus.
Guaranteed Delivery
Procedures.................... You must tender your outstanding notes
according to the guaranteed delivery procedures
described in "The Exchange Offer -- Guaranteed
Delivery Procedures" beginning on page 44 if
any of the following apply:
- you wish to tender your outstanding notes
but they are not immediately available,
5
- you cannot deliver your outstanding notes,
the letter of transmittal or any other
required documents to the exchange agent
prior to the expiration date, or
- you cannot comply with the applicable
procedures under DTC's automated tender
offer program prior to the expiration date.
Resales....................... Except as indicated herein, we believe that the
exchange notes may be offered for resale,
resold and otherwise transferred without
compliance with the registration and prospectus
delivery provisions of the Securities Act of
1933, provided that:
- you are acquiring the exchange notes in the
ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to
participate, in the distribution of the
exchange notes; and
- you are not an affiliate of Teekay.
Our belief is based on existing interpretations
of the Securities Act by the SEC staff set
forth in several no-action letters to third
parties. We do not intend to seek our own
no-action letter, and there is no assurance
that the SEC staff would make a similar
determination with respect to the exchange
notes. If this interpretation is inapplicable,
and you transfer any exchange note without
delivering a prospectus meeting the
requirements of the Securities Act or without
an exemption from such requirements, you may
incur liability under the Securities Act. We do
not assume or indemnify holders of notes
against such liability.
Each broker-dealer that is issued exchange
notes for its own account in exchange for
outstanding notes that were acquired by such
broker-dealer as a result of market-making or
other trading activities must acknowledge that
it will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of the exchange
notes. A broker-dealer may use this prospectus
for an offer to resell, resale or other
transfer of the exchange notes. Please read
"Plan of Distribution" on page 73.
U.S. Federal Income Tax
Considerations.............. The exchange of outstanding notes for exchange
notes will not be a taxable exchange for United
States federal income tax purposes. You will
not recognize any taxable gain or loss or any
interest income as a result of such exchange.
Please read "Tax Considerations -- United
States Federal Income Tax Consequences"
beginning on page 69.
Use of Proceeds............... We will not receive any proceeds from the
issuance of the exchange notes pursuant to the
exchange offer. We will pay all our expenses
incident to the exchange offer.
6
Registration Rights........... If we fail to complete the exchange offer as
required by the exchange and registration
rights agreement, we may be obligated to pay
additional interest to holders of outstanding
notes. Please read "Registration Rights"
beginning on page 66 for more information
regarding your rights as a holder of
outstanding notes.
7
THE EXCHANGE AGENT
We have appointed The Bank of New York as exchange agent for the exchange
offer. Please direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent. If you are
not tendering under DTC's automated tender offer program, you should send the
letter of transmittal and any other required documents to the exchange agent as
follows:
BY HAND DELIVERY TO 4:30 P.M.
The Bank of New York
c/o United States Trust Company of New York
30 Broad Street, B-Level
New York, NY 10004-2304
BY OVERNIGHT COURIER AND BY HAND
DELIVERY AFTER 4:30 P.M. ON EXPIRATION DATE
The Bank of New York
c/o United States Trust Company of New York
30 Broad Street, 14th Floor
New York, NY 10004-2304
BY REGISTERED OR CERTIFIED MAIL
The Bank of New York
c/o United States Trust Company of New York
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):
The Bank of New York
c/o United States Trust Company of New York
FAX: (646) 458-8111
CONFIRM BY TELEPHONE:
(800) 548-6565
8
THE EXCHANGE NOTES
The summary below describes the principal terms of the exchange notes.
Certain of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of the Notes" section of this
prospectus contains a more detailed description of the terms and conditions of
the exchange notes.
Issuer........................ Teekay Shipping Corporation
Notes Offered................. $100 million principal amount of 8.875% senior
notes due July 15, 2011, to be issued under a
first supplemental indenture to the indenture
dated as of June 22, 2001 between Teekay and
The Bank of New York Trust Company of Florida,
N.A. (formerly U.S. Trust Company of Texas,
N.A.), as trustee. Such indenture dated as of
June 22, 2001, relates to our outstanding $350
million aggregate principal amount of 8.875%
senior notes due July 15, 2011 (including the
$100 million aggregate principal amount of
outstanding notes issued December 6, 2001 which
are subject to exchange pursuant to this
offering). The exchange notes offered hereby
and the notes previously issued under the
indenture will be considered, collectively, to
be a single class for all purposes under the
indenture, as supplemented, including, without
limitation, with respect to waivers,
amendments, redemptions and offers to purchase.
Maturity...................... July 15, 2011.
Interest Payment Dates........ January 15 and July 15 of each year, commencing
January 15, 2002.
Ranking....................... The exchange notes will rank equally in right
of payment with all of our existing and future
senior unsecured debt, including our $350
million aggregate principal amount of 8.875%
senior notes due July 15, 2011 (including the
$100 million aggregate principal amount of
outstanding notes issued December 6, 2001 which
are subject to exchange pursuant to this
offering), and senior to our existing and
future subordinated debt. The exchange notes
will effectively rank behind all of our
existing and future secured debt, to the extent
of the value of the assets securing such debt.
We are a holding company and the notes will not
be guaranteed by any of our subsidiaries. The
exchange notes will effectively rank behind all
existing and future debt and other liabilities
of our subsidiaries.
As of September 30, 2001, as adjusted for the
offering of the outstanding notes and the
application of the estimated net proceeds of
the offering to prepay certain of our
outstanding secured revolving debt, we would
have had approximately $949 million of debt on
a consolidated basis, of which $596 million
would have been secured debt that represented
the obligations of, or was guaranteed by,
certain of our subsidiaries. In addition, our
subsidiaries have guaranteed $89 million of
debt of joint ventures.
9
On October 1, 2001, we borrowed $50 million
that was available under our revolving secured
credit facilities, which amount we repaid in
December 2001.
Additional Amounts............ All payments with respect to the notes will be
made without withholding or deduction for taxes
imposed by the Republic of the Marshall Islands
or any jurisdiction from or through which
payment on the notes is made unless required by
law or the interpretation or administration
thereof, in which case, subject to certain
exceptions, we will pay such additional amounts
as may be necessary so that the net amount
received by the holders after such withholding
or deduction will not be less than the amount
that would have been received in the absence of
such withholding or deduction. See "Description
of the Notes -- Additional Amounts."
Optional Redemption........... We may redeem all or a portion of the notes at
any time before their maturity date at a
redemption price equal to the greater of (a)
100% of the principal amount of the notes to be
redeemed and (b) the sum of the present value
of the remaining scheduled payments of
principal and interest discounted to the
redemption date at the treasury yield plus 50
basis points. See "Description of the Notes --
Optional Redemption."
Tax Redemption................ If we become obligated to pay additional
amounts under the notes as a result of changes
affecting certain withholding taxes, we may
redeem all, but not less than all, of the notes
at 100% of their principal amount plus accrued
interest to the date of redemption.
Change of Control Offer....... Upon a Change of Control Triggering Event,
which requires both a Change of Control and a
Rating Decline (all as defined herein), we will
be obligated to make an offer to purchase all
notes then outstanding at a redemption price of
101% of the principal amount thereof plus
accrued and unpaid interest to the date of
purchase. See "Description of the Notes --
Repurchase of Notes Upon a Change of Control
Triggering Event."
Certain Indenture
Provisions.................... The indenture governing the notes will contain
covenants limiting our ability to:
- create liens; and
- merge, consolidate or sell substantially all
of our assets.
These covenants are subject to a number of
important limitations and exceptions which are
described under the heading "Description of the
Notes."
Registration Rights........... If we fail to complete the exchange offer as
required by the exchange and registration
rights agreement, we may be obligated to pay
additional interest to holders of outstanding
notes. Please read "Registration Rights"
beginning on page 66 for more information
regarding your rights as a holder of
outstanding notes.
10
Use of Proceeds............... We will not receive any proceeds from the
issuance of the exchange notes pursuant to the
exchange offer. We will pay all our expenses
incident to the exchange offer. See "Use of
Proceeds."
Absence of Public Market for
the Notes................... There is no market for the exchange notes.
There can be no assurance that an active
trading market for the notes will develop, or,
if it develops, will continue to exist.
Although the initial purchaser of the
outstanding notes has informed us that it
currently intends to make a market in the
exchange notes, it is not obligated to do so,
and any such market making may be discontinued
at any time without notice. Accordingly, there
can be no assurance as to the development or
liquidity of any market for the exchange notes.
RISK FACTORS
You should carefully consider all of the information in this prospectus. In
particular, you should read the specific risk factors under "Risk Factors" for a
discussion of certain risks involved with an investment in the notes.
11
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
We derived the following summary consolidated financial and other data from
more detailed information and financial statements appearing elsewhere in this
prospectus and the documents incorporated herein by reference. You should read
the following information in conjunction with the consolidated financial
statements, unaudited pro forma consolidated condensed financial statements and
the related notes which are included in this prospectus or in the documents
incorporated herein by reference. We changed our fiscal year end from March 31
to December 31, commencing December 31, 1999, in order to facilitate comparison
of our operating results to those of other companies in the transportation
industry.
FISCAL YEAR ENDED
NINE MONTHS ENDED SEPTEMBER 30, ------------------------
--------------------------------------- PRO FORMA
PRO FORMA DEC. 31, DEC. 31,
2001(1) 2001 2000 2000(1) 2000
----------- ----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND FLEET DATA)
INCOME STATEMENT DATA:
Voyage revenues..................... $843,098 $ 825,910 $ 622,148 $ 962,307 $ 893,226
Voyage expenses..................... 189,565 188,637 184,566 248,957 248,957
Net voyage revenues................. 653,533 637,273 437,582 713,350 644,269
Income from vessel operations....... 342,769 337,347 194,205 346,986 327,675
Interest expense.................... (57,808) (50,944) (57,287) (106,500) (74,540)
Interest income..................... 8,064 7,867 9,667 15,090 13,021
Other income (loss)................. 12,292 11,051 953 9,978 3,864
Net income (loss)................... 305,317 305,321 147,538 265,554 270,020
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and marketable securities...... -- $ 171,095 $ 236,340 -- $ 223,123
Total assets........................ -- 2,463,805 1,978,165 -- 1,974,099
Total debt.......................... -- 947,333 922,957 -- 797,484
Total stockholders' equity.......... -- 1,386,277 975,725 -- 1,098,512
OTHER FINANCIAL DATA:
EBITDA(2)........................... $476,379 $ 462,892 $ 285,043 $ 504,127 $ 451,066
EBITDA to interest expense(2)(3).... 8.0x 8.9x 5.0x 4.8x 6.1x
Total debt to LTM EBITDA(2)(4)...... 1.4x 1.5x 2.9x -- 1.8x
Total debt to total
capitalization(5).................. -- 40.3% 48.5% -- 42.1%
Net debt to total
capitalization(6).................. -- 35.6% 41.2% -- 34.2%
Ratio of earnings to fixed
charges(7)......................... 6.1x 6.8x 3.6x 3.5x 4.6x
Cash earnings(8).................... $410,091 $ 403,954 $ 224,148 $ 389,626 $ 372,168
Capital expenditures:
Vessel purchases, gross(9)......... 178,779 167,071 35,705 143,601 43,512
Drydocking......................... 14,450 14,450 8,125 16,467 11,941
TOTAL FLEET DATA(10):
Average number of ships............. 83 81 71 80 72
Average age of our fleet (in years
at end of period).................. 9.9 9.9 9.1 9.2 9.0
Operating cash flow per ship per
day(11)............................ $ 20,074 $ 20,116 $ 14,042 $ 16,183 $ 16,687
SPOT AFRAMAX FLEET DATA(12):
Average number of ships............. 60 60 59 59 59
Average age of our fleet (in years
at end of period).................. 9.1 9.1 8.2 8.3 8.3
TCE per ship per day(13)............ $ 33,701 $ 33,701 $ 23,949 $ 27,138 $ 27,138
Vessel operating expenses per ship
per day(14)........................ 5,321 5,321 5,285 4,980 4,980
Operating cash flow per ship per
day(11)............................ 22,714 22,714 15,130 18,145 18,145
FISCAL YEAR ENDED
----------------------------------------------------
DEC. 31, MAR. 31, MAR. 31, MAR. 31,
1999 1999 1998 1997
------------- ---------- ---------- ----------
(NINE MONTHS)
(IN THOUSANDS, EXCEPT RATIOS AND FLEET DATA)
INCOME STATEMENT DATA:
Voyage revenues..................... $ 377,882 $ 411,922 $ 406,036 $ 382,249
Voyage expenses..................... 129,532 93,511 100,776 102,037
Net voyage revenues................. 248,350 318,411 305,260 280,212
Income from vessel operations....... 23,572 85,634 107,640 94,258
Interest expense.................... (44,996) (44,797) (56,269) (60,810)
Interest income..................... 5,842 6,369 7,897 6,358
Other income (loss)................. (4,013) 5,506 11,236 2,824
Net income (loss)................... (19,595) 45,406 70,504 42,630
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and marketable securities...... $ 226,381 $ 132,256 $ 115,254 $ 117,523
Total assets........................ 1,982,684 1,452,220 1,460,183 1,372,838
Total debt.......................... 1,085,167 641,719 725,369 699,726
Total stockholders' equity.......... 832,067 777,390 689,455 629,815
OTHER FINANCIAL DATA:
EBITDA(2)........................... $ 95,875 $ 186,069 $ 209,582 $ 191,632
EBITDA to interest expense(2)(3).... 2.1x 4.0x 3.8x 3.2x
Total debt to LTM EBITDA(2)(4)...... 8.3x 3.5x 3.5x 3.7x
Total debt to total
capitalization(5).................. 56.6% 45.2% 51.3% 52.6%
Net debt to total
capitalization(6).................. 50.7% 39.6% 46.9% 48.0%
Ratio of earnings to fixed
charges(7)......................... 0.6x 2.1x 2.3x 1.7x
Cash earnings(8).................... $ 43,343 $ 146,489 $ 165,575 $ 133,554
Capital expenditures:
Vessel purchases, gross(9)......... 23,313 85,445 197,199 65,104
Drydocking......................... 6,598 11,749 18,376 16,559
TOTAL FLEET DATA(10):
Average number of ships............. 65 47 43 41
Average age of our fleet (in years
at end of period).................. 8.4 8.7 7.8 8.2
Operating cash flow per ship per
day(11)............................ $ 5,177 $ 11,171 $ 12,682 $ 11,819
SPOT AFRAMAX FLEET DATA(12):
Average number of ships............. 55 43 42 41
Average age of our fleet (in years
at end of period).................. 7.4 8.0 7.6 7.9
TCE per ship per day(13)............ $ 13,462 $ 19,576 $ 21,373 $ 20,356
Vessel operating expenses per ship
per day(14)........................ 5,621 4,969 4,554 4,922
Operating cash flow per ship per
day(11)............................ 4,731 10,903 12,664 11,819
(Footnotes on following page)
12
(1) Represents actual amounts as adjusted to give effect to the acquisition of
100% of UNS, as if it had occurred on January 1, 2000. The primary
adjustments were (a) an increase in depreciation and amortization expense
relating to the amortization of goodwill arising upon the acquisition of
UNS, (b) an increase in interest expense as if we had borrowed funds under
our revolving credit facilities to finance the acquisition, and (c) an
increase in other income to reverse the expense related to the minority
interest portion of UNS' results for the period March 6, 2001 to April 26,
2001.
(2) EBITDA represents net income (loss) before extraordinary items, interest
expense, income tax expense, depreciation and amortization expense,
minority interest, and gains or losses arising from prepayment of debt,
foreign exchange translation and disposal of assets. EBITDA is included
because such data is used by certain investors to measure a company's
financial performance. EBITDA is not required by accounting principles
generally accepted in the United States and should not be considered as an
alternative to net income or any other indicator of our performance
required by accounting principles generally accepted in the United States.
(3) For purposes of computing EBITDA to interest expense, interest expense
includes capitalized interest but excludes amortization of loan costs.
(4) Total debt to LTM EBITDA represents total debt as of the end of the period
compared to EBITDA for the 12-month period then ended.
(5) Total capitalization represents total debt, minority interest and total
stockholders' equity.
(6) Net debt represents total debt less cash, cash equivalents and marketable
securities. Total capitalization represents net debt, minority interest and
total stockholders' equity.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of net income (loss) before extraordinary items, interest expense,
amortization of capitalized interest and amortization of deferred costs.
Fixed charges consist of interest expense, capitalized interest and
amortization of deferred financing costs.
(8) Cash earnings represents net income (loss) before extraordinary items,
foreign exchange gains (losses), and depreciation and amortization expense.
Cash earnings is included because it is used by certain investors to
measure a company's financial performance as compared to other companies in
the shipping industry. Cash earnings is not required by accounting
principles generally accepted in the United States and should not be
considered as an alternative to net income or any other indicator of our
performance required by accounting principles generally accepted in the
United States.
(9) Excludes vessels purchased in connection with our corporate acquisitions of
Bona Shipholding Ltd. in 1999 and UNS in 2001.
(10) Excludes vessels of our joint ventures, newbuildings and one Aframax tanker
that has been subject to a bareboat charter.
(11) Operating cash flow represents income from vessel operations plus
depreciation and amortization expense (other than drydock amortization
expense). Ship days are calculated on the basis of a 365-day fiscal year
multiplied by the average number of vessels in our fleet for the respective
year (excluding vessels of our joint ventures). Operating cash flow is not
required by accounting principles generally accepted in the United States
and should not be considered as an alternative to net income or any other
indicator of our performance required by accounting principles generally
accepted in the United States.
(12) Includes our core Aframax fleet that operates primarily in the spot charter
market and excludes vessels that operate primarily under long-term
fixed-rate contracts, including our ten Aframax-size shuttle tankers and
our Aframax-size Australian-crewed vessels. TCE and vessel operating
expense data is separately presented only for this portion of our fleet
because the remainder of our fleet generally has varying revenue and
expense characteristics that make period-to-period comparisons not
meaningful. Also excludes one Aframax tanker that has been subject to a
bareboat charter and Aframax tankers of our joint ventures.
13
(13) TCE is a measure of the revenue performance of a vessel. Our average TCE
for a given period has been calculated by deducting total voyage expenses
(except commissions) from total voyage revenues and dividing the remaining
sum by our total voyage days in the period. Voyage expenses comprise all
expenses relating to particular voyages, including bunker fuel expenses,
port fees, canal tolls and brokerage commissions.
(14) Vessel operating expenses comprise all expenses relating to the operation
of vessels (other than voyage expenses), including crewing, repairs and
maintenance, insurance, stores and lubes, and communications expenses. Ship
days are calculated on the basis of a 365-day year multiplied by the
average number of owned vessels in our fleet for the respective year.
Vessel operating expenses exclude vessels time-chartered-in.
14
RISK FACTORS
Before investing in our notes, you should consider carefully the following
factors, as well as the information contained in the rest of this prospectus.
THERE MAY BE ADVERSE CONSEQUENCES TO YOU IF YOU DO NOT EXCHANGE YOUR OUTSTANDING
NOTES
If you do not exchange your outstanding notes for exchange notes in the
exchange offer, then you will continue to be subject to the transfer
restrictions on the outstanding notes described in the offering circular
distributed in connection with the private placement of the outstanding notes.
In general, the outstanding notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act of 1933 and
applicable state securities laws. Except as required by the exchange and
registration rights agreement that we entered into with the initial purchaser of
the outstanding notes, we do not intend to register resales of the outstanding
notes under the Securities Act. See "The Exchange Offer -- Consequences of
Failure to Exchange." You should refer to "The Exchange Offer" for information
about how to tender your outstanding notes. The tender of outstanding notes
pursuant to the exchange offer will reduce the outstanding principal amount of
the outstanding notes, which may have an adverse effect upon, and increase the
volatility of, the market price of the outstanding notes due to a reduction in
liquidity.
RISKS RELATING TO OUR DEBT
OUR SUBSTANTIAL DEBT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND PREVENT
US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES
We have substantial debt and debt service requirements. At September 30,
2001, after giving effect to the issuance of the outstanding notes and the
application of the estimated net proceeds of the offering of the outstanding
notes to prepay certain of our outstanding secured revolving debt, our
consolidated debt would have been approximately $949 million, and we would have
been able to borrow an additional $523 million under our credit facilities. On
October 1, 2001, we borrowed $50 million that was available under our revolving
secured credit facilities for general liquidity purposes, which amount we repaid
in December 2001.
The amount of our debt could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations under the
notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future capital expenditures, working capital
and other general corporate requirements;
- require us to dedicate a substantial portion of our cash flow from
operations to make interest and principal payments on our debt;
- limit our flexibility in planning for, or reacting to, changes in our
business and the shipping industry;
- place us at a competitive disadvantage compared to competitors that have
less debt; and
- limit our ability to borrow additional funds, even when necessary to
maintain adequate liquidity.
TO SERVICE OUR DEBT, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, WHICH MAY NOT
BE AVAILABLE TO US
Our ability to repay our debt, including the notes, will depend largely
upon our future operating performance and a number of other factors, many of
which are beyond our control. Such factors include the impact of the general
economy on the demand for oil and thus the oil shipping market. In addition, we
will rely on dividends and other intercompany cash flows from our subsidiaries
to repay our
15
obligations. Financing arrangements between some of our subsidiaries and their
respective lenders contain restrictions on dividends by and distribution from
such subsidiaries to us.
If we are unable to generate sufficient cash flow to meet our debt service
requirements, we may have to renegotiate the terms of our debt. We cannot assure
you that we would be able to renegotiate successfully those terms or refinance
our debt when required. If we were unable to refinance our debt or obtain new
financing under these circumstances, we would have to consider other options,
such as:
- sales of certain assets to meet our debt service obligations;
- sales of equity; and
- negotiations with our lenders to restructure applicable debt.
Our credit agreements and the indenture governing the notes may restrict
our ability to do some of these things.
OUR SUBSIDIARIES CONDUCT ALL OF OUR OPERATIONS AND OWN ALL OF OUR OPERATING
ASSETS, AND THE NOTES WILL BE STRUCTURALLY SUBORDINATED TO THE LIABILITIES OF
OUR SUBSIDIARIES
We are a holding company and our subsidiaries conduct all of our operations
and own all of our operating assets. Our only material asset is our ownership of
the capital stock of our subsidiaries. As a result, our ability to make required
payments on the notes depends on the operations of our subsidiaries and our
subsidiaries' ability to distribute funds to us. To the extent our subsidiaries
are unable to distribute, or are restricted from distributing, funds to us, we
may be unable to fulfill our obligations under the notes. Our subsidiaries will
have no obligation to pay amounts due on the notes, and none of our subsidiaries
will guarantee the notes.
The rights of holders of the notes will be structurally subordinated to the
rights of our subsidiaries' lenders. A default by a subsidiary under its debt
obligations would result in a block on distributions from the affected
subsidiary to us. The notes will be effectively junior to all liabilities of our
subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any
of our subsidiaries, creditors of our subsidiaries will generally be entitled to
payment of their claims from the assets of those subsidiaries before any assets
are made available for distribution to us. Assuming we had completed the
offering of the outstanding notes and applied the estimated net proceeds of the
offering to prepay certain secured revolving debt on September 30, 2001, the
notes would have been effectively junior to an aggregate of approximately $596
million of debt owed or guaranteed by certain of our subsidiaries and an
additional $89 million of debt of our joint ventures guaranteed by subsidiaries.
On October 1, 2001, we borrowed $50 million that was available under our
revolving secured credit facilities for general liquidity purposes, which amount
we repaid in December 2001.
THE NOTES WILL BE UNSECURED AND WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED
DEBT AND SECURED DEBT OF OUR SUBSIDIARIES
The notes are unsecured and therefore will be effectively subordinated to
any secured debt we, or our subsidiaries, currently maintain or may incur to the
extent of the value of the assets securing the debt. The debt of each of our
subsidiaries is currently secured by the tanker or tankers owned by that
subsidiary. In the event of a bankruptcy or similar proceeding involving us or a
subsidiary, the assets that serve as collateral will be available to satisfy the
obligations under any secured debt before any payments are made on the notes.
Assuming we had completed the offering of the outstanding notes and applied the
estimated net proceeds of the offering to prepay certain secured revolving debt
on September 30, 2001, the notes would have been effectively junior to an
aggregate of approximately $596 million in outstanding secured debt. On October
1, 2001, we borrowed $50 million that was available under our revolving secured
credit facilities for general liquidity purposes, which amount we repaid in
December 2001.
16
FAILURE TO COMPLY WITH COVENANTS COULD LEAD TO ACCELERATION OF DEBT
Our existing financing agreements and those of our subsidiaries impose
operating and financial restrictions that restrict our actions. These
restrictions limit or prohibit our ability to, among other things:
- incur additional debt;
- create liens;
- sell capital stock of subsidiaries or other assets;
- make certain investments;
- engage in mergers and acquisitions;
- make certain capital expenditures; or
- pay dividends.
Failure to comply with any of the covenants in our existing or future
financing agreements could result in a default under those agreements or under
other agreements containing cross-default provisions. A default would permit
lenders to accelerate the maturity of the debt under these agreements and to
foreclose upon any collateral securing that debt. Under these circumstances, we
might not have sufficient funds or other resources to satisfy all of our
obligations, including our obligations under the notes offered by this
prospectus. In addition, the secured nature of a portion of our other debt,
together with the limitations imposed by financing agreements on our ability to
incur additional debt and to take other actions, might significantly impair our
ability to obtain other financing.
Some of our existing financing agreements also impose restrictions on
changes of control of us or our ship-owning subsidiaries, including requirements
for prior consent and that we make an offer to redeem certain debt. See
"Description of Certain Debt."
DECLINING MARKET VALUES OF OUR VESSELS COULD ADVERSELY AFFECT OUR LIQUIDITY AND
RESULT IN BREACHES OF OUR FINANCING AGREEMENTS
Market values of tankers fluctuate depending upon general economic and
market conditions affecting the tanker industry and competition from other
shipping companies, other types and sizes of vessels, and other modes of
transportation. In addition, as vessels become older, they generally decline
significantly in value. Declining vessel values of our tankers could adversely
affect our liquidity by limiting our ability to raise cash by refinancing
vessels. Declining vessel values could also result in a breach of loan covenants
and events of default under relevant financing agreements that require us to
maintain certain loan-to-value ratios. If we are unable to pledge additional
collateral in the event of a decline in vessel values, the lenders could
accelerate our debt and foreclose on our vessels pledged as collateral for the
loans.
WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL
OFFER REQUIRED BY THE INDENTURE GOVERNING THE NOTES
Upon the occurrence of a change of control triggering event we will be
required to offer to purchase the notes (including the aggregate $350 million
principal amount of outstanding 8.875% senior notes due July 15, 2011, $100
million of which are subject to exchange pursuant to this offering) at a
purchase price equal to 101% of the principal amount of the notes, plus accrued
interest to the date of the purchase. In the event of a change of control
triggering event, the total debt represented by the notes could become due and
payable. We may not have sufficient funds available at the time of any change of
control to repurchase the notes. See "Description of the Notes -- Repurchase of
Notes Upon a Change of Control Triggering Event."
17
RISKS RELATING TO OUR BUSINESS
THE CYCLICAL NATURE OF THE TANKER INDUSTRY CAUSES VOLATILITY IN OUR
PROFITABILITY
Historically, the tanker industry has been cyclical, experiencing
volatility in profitability due to changes in the supply of, and demand for,
tanker capacity. Increases in tanker capacity supply or decreases in tanker
capacity demand could harm our business, financial condition and results of
operations. The supply of tanker capacity is a function of the number of new
vessels built, older vessels scrapped, converted and lost and the number of
vessels that are out of service. The demand for tanker capacity is influenced
by, among other factors:
- global and regional economic conditions;
- increases and decreases in industrial production and demand for crude
oil and petroleum products;
- 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.
Because many of the factors influencing the supply of and demand for tanker
capacity are unpredictable, the nature, timing and degree of changes in tanker
industry conditions are also unpredictable.
WE DEPEND UPON OIL MARKETS, CHANGES IN WHICH COULD RESULT IN DECREASED DEMAND
FOR OUR VESSELS AND SERVICES
Demand for our vessels and services in transporting crude oil and petroleum
products depends upon world and regional oil markets. Any decrease in shipments
of crude oil in those markets could harm our business, financial condition and
results of operations. Historically, those markets have been volatile as a
result of the many conditions and events that affect the price, production and
transport of oil, as well as competition from alternative energy sources. Demand
for our vessels and services may decrease due to the general slowing of the U.S.
and world economies throughout 2001 and the potential adverse economic impact of
the September 11, 2001, terrorist attacks.
OUR DEPENDENCE ON SPOT VOYAGES MAY RESULT IN SIGNIFICANT FLUCTUATIONS IN THE
UTILIZATION OF OUR VESSELS AND IN OUR PROFITABILITY
In the nine months ended September 30, 2001, we derived approximately 81%
of our net voyage revenues (79% after giving effect to our acquisition of UNS as
if it had occurred on January 1, 2001) from spot voyages or time charters and
contracts of affreightment priced on a spot market basis. Because we depend on
the spot charter market, declining charter rates in a given period generally
will result in corresponding declines in our operating results for that period.
The spot charter market is highly competitive and spot charter rates are subject
to significant fluctuations based on tanker and oil supply and demand. Charter
rates have varied dramatically in the last few years. Future spot charters may
not be available at rates that will be sufficient to enable our vessels to be
operated profitably or provide sufficient cash flow to service the notes and pay
our other debt obligations. Worldwide industry average Aframax spot TCE rates
dropped from $26,598 per day for the month of August 2001 to $21,608 per day for
the month of December 2001.
REDUCTION IN OIL PRODUCED FROM OFFSHORE OIL FIELDS COULD HARM OUR SHUTTLE TANKER
BUSINESS
Demand for our shuttle tankers in transporting crude oil and petroleum
products depends upon the amount of oil produced from offshore oil fields,
especially in the North Sea, where our shuttle tankers primarily operate. As oil
prices increase, the prospect of exploration and development of offshore oil
fields, which cost more to develop than land oil fields, becomes more attractive
to oil companies. However, if oil prices were to decline, it would become less
attractive for oil companies to explore for oil offshore and develop offshore
oil fields. If the amount of oil produced from offshore oil fields declines,
18
especially in the North Sea, our shuttle tanker business could be harmed. In
addition, if for environmental or other reasons, there is a change in policy
towards using pipelines rather than oceangoing vessels in transporting crude oil
and petroleum products from offshore oil fields, our shuttle tanker business
could be adversely affected.
OUR SUBSTANTIAL OPERATIONS OUTSIDE THE UNITED STATES EXPOSE US TO POLITICAL,
GOVERNMENTAL AND ECONOMIC INSTABILITY, WHICH COULD ADVERSELY AFFECT OUR
OPERATIONS
Because our operations are primarily conducted outside of the United
States, they may be affected by changing economic, political and governmental
conditions in the countries where we are engaged in business or where our
vessels are registered. Any disruption caused by these factors could materially
adversely affect our business, financial condition and results of operations.
We derive a substantial portion of our total revenues from our operations
in the Indo-Pacific Basin. Past political conflicts in this region, particularly
in the Arabian Gulf, have included attacks on tankers, mining of waterways and
other efforts to disrupt shipping in the area. Vessels trading in this region
have also been subject to, in limited instances, acts of terrorism and piracy.
Future hostilities or other political instability in this region or other
regions where we operate could affect our trade patterns and materially
adversely affect our business, financial condition and results of operations.
For instance, the recent responses by the United States to the September 11,
2001 terrorist attacks on the United States may provoke hostilities toward the
United States and other countries and their commercial operations in the
Indo-Pacific Basin. Further, tariffs, trade embargoes, and other economic
sanctions by the United States or other countries against countries in the
Indo-Pacific Basin as a result of the terrorist attacks may limit trading
activities with those countries, which could harm our business, financial
condition and results of operations.
OUR INABILITY TO RENEW OR REPLACE LONG-TERM CHARTER CONTRACTS COULD HARM OUR
BUSINESS
Twenty-six of our tankers, including 16 of our 18 shuttle tankers,
currently are subject to long-term charter contracts. Eleven of these contracts
terminate by their terms between April 2002 and September 2003. The 15 remaining
contracts terminate by their terms between 2004 and 2013. Our inability to renew
or replace these contracts on favorable terms, if at all, or the early
termination of a significant number of these contracts, could harm our business,
financial condition and results of operations.
THE INTENSE COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED PROFITABILITY
Our vessels operate in highly competitive markets. Competition arises
primarily from other Aframax and shuttle tanker owners, including major oil
companies as well as independent companies. We also compete with owners of other
size tankers. Our market share is insufficient to enforce any degree of pricing
discipline in the markets in which we operate and our competitive position may
erode in the future. Any new markets that we enter could include participants
that have greater financial strength and capital resources than us and we may
not be successful in entering into new markets, including the shuttle tankers
market through our acquisition of UNS.
THE TANKER INDUSTRY IS SUBJECT TO SUBSTANTIAL ENVIRONMENTAL AND OTHER
REGULATIONS, WHICH MAY SIGNIFICANTLY INCREASE OUR EXPENSES
Our operations are affected by extensive and changing environmental
protection laws and other regulations. We have incurred, and expect to continue
to incur, substantial expenses in complying with these laws and regulations,
including expenses for ship modifications and changes in operating procedures.
Additional laws and regulations may be adopted that could limit our ability to
do business or further increase the cost of our doing business. This could harm
our business, financial condition and results of operations.
19
The United States Oil Pollution Act of 1990 ("OPA 90") in particular has
increased our expenses. The OPA 90 provides for the phase-in of the exclusive
use of double-hull tankers at United States ports, as well as potentially
unlimited liability for owners, operators and demise or bareboat charterers for
oil pollution in U.S. waters. To comply with the OPA 90, tanker owners generally
incur additional costs in meeting additional maintenance and inspection
requirements, in developing contingency arrangements for potential spills and in
obtaining required insurance coverage. The OPA 90 contains financial
responsibility requirements for vessels operating in U.S. waters and requires
owners and operators of vessels to establish and maintain with the United States
Coast Guard evidence of insurance or of qualification as a self-insurer or other
evidence of financial responsibility sufficient to meet their potential
liabilities under the OPA 90.
Following the example of the OPA 90, the International Maritime
Organization, the United Nations' agency for maritime safety, adopted
regulations for tanker design and inspection that are designed to reduce oil
pollution in international waters and that will be phased in on a schedule
depending upon vessel age. In addition, certain U.S. states, the European
Community and certain countries are considering stricter technical and
operational requirements for tankers and legislation that will affect the
liability of tanker owners and operators for oil pollution.
Our shuttle tankers primarily operate in the North Sea. In addition to the
regulations imposed by the International Maritime Organization, the countries
having jurisdiction over areas of the North Sea impose regulatory requirements
in connection with operations in those areas. These regulatory requirements,
together with additional requirements imposed by the operators in the North Sea
oil fields, require us to make further expenditures for sophisticated equipment,
reporting and redundancy systems on our shuttle tankers and for the training of
seagoing staff. Additional regulations and requirements may be adopted or
imposed that could limit our ability to do business or further increase the cost
of doing business in the North Sea.
OUR INSURANCE MAY NOT BE SUFFICIENT TO COVER THE LOSSES THAT MAY OCCUR TO OUR
PROPERTY OR AS A RESULT OF OUR OPERATIONS
The operation of oil tankers carries the risk of environmental damage from
an oil spill as well as the risk of catastrophic marine disasters and property
losses inherent to any ocean-going vessel. We carry protection and indemnity
coverage to protect against most of the accident-related risks involved in the
conduct of our business and maintain environmental damage and pollution
coverage. Except with respect to our shuttle tankers, we do not carry insurance
covering the loss of revenue resulting from vessel off-hire time. All risks may
not be adequately insured against, and any particular claim may not be paid. In
addition, we may not be able to procure adequate coverage at commercially
reasonable rates in the future. Any uninsured loss could harm our business,
financial condition and results of operations.
More stringent environmental regulations at times in the past have resulted
in increased costs for, and in the future may result in the lack of availability
of, insurance against the risks of environmental damage or pollution. We
currently maintain $1 billion in coverage for liability for pollution, spillage
or leakage of oil for each of our vessels. A catastrophic spill could exceed the
coverage available, which could harm our business, financial condition and
results of operations.
BECAUSE OUR FUTURE GROWTH DEPENDS IN LARGE PART ON FACTORS BEYOND OUR CONTROL,
WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING OUR GROWTH STRATEGY
A principal component of our strategy is to continue to grow by expanding
our business both in the geographic areas and markets where we have historically
focused as well as into new geographic areas, market segments and services. We
may not be successful in expanding our operations and any
20
expansion may not be profitable. Our future growth will depend upon a number of
factors, both within and outside of our control. These include:
- our identification of new markets;
- our acceptance by new customers;
- our identification of and entering into suitable joint venture
opportunities;
- our identification and acquisition on favorable terms of suitable
acquisition candidates;
- our successful integration of any acquired businesses with our existing
operations;
- our ability to hire and train qualified personnel; and
- our ability to obtain required financing.
The failure to effectively identify, purchase, develop and integrate any
acquired businesses could harm our business, financial condition and results of
operations. In addition, the results we have achieved to date may not be
indicative of our ability to penetrate new markets, including the shuttle tanker
market, many of which may have different competitive conditions and
characteristics than our traditional markets.
THE STRAIN THAT OUR GROWTH PLACES UPON OUR SYSTEMS AND MANAGEMENT RESOURCES MAY
ADVERSELY AFFECT OUR BUSINESS
To the extent our operations continue to expand, we will continue to
experience growth in the number of our employees, the scope of our operating and
financial systems and the geographic area of our operations. Recent growth has
increased, and future growth will continue to increase, our operating complexity
and the level of responsibility of existing and new management personnel. We
cannot assure you that we will be able to attract and retain qualified
management and employees, especially qualified officers and other seagoing
personnel, of which there is a limited supply, that our current operating and
financial systems and controls will be adequate as we grow, or that any steps
taken to attract and retain management and employees and to improve such systems
and controls will be sufficient.
OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL FLUCTUATIONS
Our tankers operate in markets that have historically exhibited seasonal
variations in demand and, therefore, in charter rates. This seasonality may
result in quarter-to-quarter volatility in our results of operations. Tanker
markets are typically stronger in the winter months as a result of increased oil
consumption in the northern hemisphere. In addition, unpredictable weather
patterns in these 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, our revenues have
historically been weaker during our fiscal quarters ended June 30 and September
30, and, conversely, revenues have been stronger in our fiscal quarters ended
March 31 and December 31.
WE EXPEND SUBSTANTIAL SUMS DURING CONSTRUCTION OF NEWBUILDINGS WITHOUT EARNING
REVENUE AND WITHOUT ASSURANCE THAT THEY WILL BE COMPLETED
We are typically required to expend substantial sums as progress payments
during the construction of a newbuilding, but we do not derive any revenue from
the vessel until after its delivery. If we were unable to obtain financing
required to complete payments on any of our newbuilding orders, we could
effectively forfeit all or a portion of the progress payments previously made.
We currently have eight newbuildings on order, with deliveries scheduled between
December 2002 and December 2003. We may in the future order additional
newbuildings.
21
THE LOSS OF ANY KEY CUSTOMER COULD RESULT IN A SIGNIFICANT LOSS OF REVENUE IN A
GIVEN PERIOD
We have derived, and believe that we will continue to derive, a significant
portion of our voyage revenues from a limited number of customers. A single
customer, an international oil company, accounted for approximately $113
million, or 14% of our consolidated voyage revenues during the nine months ended
September 30, 2001. Giving pro forma effect to our acquisition of UNS as if it
had occurred on January 1, 2001, this percentage would have been 13%. Two
customers, both international oil companies, individually accounted for
approximately $118 million, or 13%, and approximately $110 million, or 12%, of
our consolidated voyage revenues during the twelve months ended December 31,
2000. Giving pro forma effect to our acquisition of UNS as if it had occurred on
January 1, 2000, such percentages would have been 12% and 11%, respectively. No
other customer accounted for more than 10% of our consolidated voyage revenues
in any of the periods presented above. The loss of any significant customer, or
a substantial decline in the amount of services requested by a significant
customer, could harm our business, financial condition and results of
operations.
EXPOSURE TO CURRENCY EXCHANGE RATE AND INTEREST RATE FLUCTUATIONS COULD RESULT
IN FLUCTUATIONS IN OUR NET INCOME
While virtually all of our revenues are earned in U.S. Dollars, a portion
of our operating costs is incurred in currencies other than U.S. Dollars. This
partial mismatch in operating revenues and expenses could lead to fluctuations
in net income due to changes in the value of the U.S. Dollar relative to other
currencies, in particular the Japanese Yen, the Singapore Dollar, the Canadian
Dollar, the Norwegian Kroner, the British Pound and the Australian Dollar.
At September 30, 2001, after giving effect to the issuance of the
outstanding notes and the application of the net proceeds to prepay certain of
our outstanding secured revolving debt, approximately $429 million, or 45%, of
our debt would have borne interest at floating interest rates. Increases in
interest rates would increase interest payments on this debt, and could
materially adversely affect our business, financial condition and results of
operations. In order to partially mitigate our floating interest rate exposure,
as of December 31, 2001, we were parties to four interest rate swaps, totaling
$85 million in notional principal amount with maturities between December 2002
and May 2004. The average interest rate of the swaps is 6.40%. As of December
31, 2001, the fair value of these interest rate swaps was negative $2.4 million.
WE MAY NOT BE EXEMPT FROM U.S. TAXATION FOR OUR UNITED STATES SOURCE INCOME,
WHICH WOULD REDUCE OUR NET INCOME AND CASH FLOW BY THE AMOUNT OF THE APPLICABLE
TAX
If not exempt from tax under Section 883 of the United States Internal
Revenue Code, the shipping income derived from United States sources
attributable to our transportation of cargoes to or from the United States will
be subject to U.S. federal income tax. If we are subject to such tax, our net
income and cash flow would be reduced by the amount of such tax. Although we
currently believe we are exempt from taxation under Section 883, proposed
regulations, if they become final as proposed, may not permit us to continue to
claim the Section 883 exemption.
In the nine months ended September 30, 2001, approximately 18.5% of our
voyage revenues was derived from U.S. sources attributable to the transportation
of cargoes to or from the United States. The average U.S. federal income tax on
such U.S. source income, in the absence of exemption under Section 883, would
have been 4% thereof, or approximately $6.2 million, which remains unchanged
after giving effect to our acquisition of UNS as if it had occurred on January
1, 2001.
22
AN ACTIVE PUBLIC MARKET MAY NOT DEVELOP FOR YOUR NOTES, WHICH MAY HINDER YOUR
ABILITY TO LIQUIDATE YOUR INVESTMENT
There is no established trading market for the notes. Although the initial
purchaser of the outstanding notes has informed us that it intends to make a
market in the exchange notes after the exchange offer, it may stop making a
market at any time. Accordingly, we cannot assure you that a market for the
exchange notes will develop. Furthermore, if a market were to develop, the
market price for the notes may be adversely affected by changes in our financial
performance, changes in the overall market for similar securities and the
performance or prospects for companies in our industry.
The outstanding notes have not been registered under the Securities Act of
1933 or any state securities laws and may not be offered or sold except pursuant
to an exemption from the registration requirements of the Securities Act and
applicable state securities laws, or pursuant to an effective registration
statement.
The liquidity of, and trading market for, the exchange notes may also be
adversely affected by general declines in the market for similar securities or
by changes in our financial performance. Such a market decline may adversely
affect such liquidity and trading markets independent of our financial
performance and resources.
23
USE OF PROCEEDS
We issued $100 million principal amount of the outstanding notes on
December 6, 2001 to the initial purchasers of those notes. We are making the
exchange offer to satisfy our obligations under the outstanding notes, the
indenture and the exchange and registration rights agreement. We will not
receive any cash proceeds from the exchange offer. In consideration of issuing
the exchange notes in the exchange offer, we will receive an equal principal
amount of outstanding notes. Any outstanding notes that are properly tendered in
the exchange offer will be accepted, canceled and retired and cannot be
reissued.
Our net proceeds from the offering of the outstanding notes, which does not
include accrued interest on the notes, were approximately $100.9 million, after
deducting the discount payable to the initial purchaser. We used these net
proceeds to prepay certain of our outstanding secured revolving debt. The
secured debt that we have repaid was borrowed pursuant to a credit facility
bearing interest at a floating rate based on LIBOR plus a margin depending on
our financial leverage. This credit facility had a margin of 0.75% at December
31, 2001, and matures in December 2008.
24
CAPITALIZATION
The following table sets forth our consolidated capitalization at September
30, 2001, to reflect:
(1) our actual capitalization; and
(2) our pro forma capitalization to give effect to the offering of the
outstanding notes, the application of the estimated net proceeds
therefrom and the payment of an estimated $400,000 of expenses with
respect to the offering of the outstanding notes from cash on hand.
You should read the following table in conjunction with our historical and
pro forma consolidated condensed financial statements and the related notes
included elsewhere in this prospectus. See "Use of Proceeds," and "Description
of Certain Debt."
SEPTEMBER 30, 2001
--------------------------
ACTUAL PRO FORMA
----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
Cash and marketable securities.............................. $ 171,095 $ 170,695
========== ==========
Current obligations(1):
Current portion of long-term debt......................... $ 54,573 $ 54,573
---------- ----------
Total current obligations.............................. 54,573 54,573
---------- ----------
Long-term debt(1):
Long-term debt............................................ 892,760 791,860
Notes offered hereby(2)................................... -- 102,250
---------- ----------
Total long-term debt................................... 892,760 894,110
---------- ----------
Minority interest........................................... 19,475 19,475
---------- ----------
Stockholders' equity:
Capital stock............................................. 472,241 472,241
Retained earnings......................................... 919,498 919,948
Accumulated other comprehensive loss...................... (5,462) (5,462)
---------- ----------
Total stockholders' equity............................. 1,386,277 1,386,277
---------- ----------
Total capitalization................................... $2,353,085 $2,354,435
========== ==========
---------------
(1) For information concerning our borrowing arrangements, see "Description of
Certain Debt," Note 6 to our consolidated financial statements included in
our Report on Form 20-F for our 2000 fiscal year filed with the SEC on April
2, 2001, and Note 7 to our consolidated financial statements included in our
Report on Form 6-K for the quarter ended September 30, 2001, filed with the
SEC on November 15, 2001, which reports are incorporated herein by
reference.
(2) Includes premium on original issue that will be amortized over the term of
the notes and excludes accrued interest on the notes.
25
ENVIRONMENTAL REGULATION
Our business and the operation of our vessels are materially affected by
government regulation in the form of international conventions, national, state
and local laws and regulations in force in the jurisdictions in which the
vessels operate, as well as in the country or countries of their registration.
Because such conventions, laws and regulations are often revised, we cannot
predict the ultimate cost of complying with such conventions, laws and
regulations or the impact they may have on the resale price or useful life of
our vessels. Additional conventions, laws and regulations may be adopted which
could limit our ability to do business or increase the cost of our doing
business and which may have a material adverse effect on our operations. We are
required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses and certificates with respect to our operations.
Subject to the discussion below and to the fact that the kinds of permits,
licenses and certificates required for the operations of our vessels will depend
upon a number of factors, we believe that we have been and will be able to
obtain all permits, licenses and certificates material to the conduct of our
operations.
We believe that the heightened environmental and quality concerns of
insurance underwriters, regulators and charterers will impose greater inspection
and safety requirements on all vessels in the tanker market and will accelerate
the scrapping of older vessels throughout the industry.
ENVIRONMENTAL REGULATION -- INTERNATIONAL MARITIME ORGANIZATION
On March 6, 1992, the International Maritime Organization adopted
regulations that set forth new and upgraded requirements for pollution
prevention for tankers. These regulations, which went into effect on July 6,
1995 in many jurisdictions in which our tanker fleet operates, provide that:
- tankers between 25 and 30 years old must be of double-hull construction
or of a mid-deck design with double side construction, unless they have
wing tanks or double-bottom spaces, not used for the carriage of oil,
which cover at least 30% of the length of the cargo tank section of the
hull, or are capable of hydrostatically balanced loading which ensures
at least the same level of protection against oil spills in the event of
collision or stranding;
- tankers 30 years old or older must be of double-hull construction or
mid-deck design with double-side construction; and
- all tankers will be subject to enhanced inspections.
Also, under International Maritime Organization regulations, a tanker must
be of double-hull construction or a mid-deck design with double side
construction or be of another approved design ensuring the same level of
protection against oil pollution in the event that such tanker (a) is the
subject of a contract for a major conversion or original construction on or
after July 6, 1993, (b) commences a major conversion or has its keel laid on or
after January 6, 1994, or (c) completes a major conversion or is a newbuilding
delivered on or after July 6, 1996.
On April 27, 2001, the International Maritime Organization revised its
regulations relating to prevention of pollution from tankers. These regulations,
which are scheduled to take effect on September 1, 2002, generally provide that
single-hull tankers must be phased out between 2003 and 2015. These regulations
identify three categories of single-hull tankers, which include double-bottom
and double-side tankers:
- "Category 1 oil tanker" means any oil tanker of 20,000 dwt and above
carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as
cargo, and of 30,000 dwt and above carrying other oils, which does not
have segregated ballast tanks;
- "Category 2 oil tanker" means any oil tanker of 20,000 dwt and above
carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as
cargo, and of 30,000 dwt and above carrying other oils, which has
segregated ballast tanks; and
26
- "Category 3 oil tanker" means an oil tanker of 5,000 dwt and above but
less than the tonnage specified for Category 1 and 2 oil tankers.
All of the single-hull tankers we operate are Category 2 oil tankers. As
illustrated in the following table, the new regulations provide for the
phase-out on a rolling basis of Category 1 single-hull oil tankers by 2007 and
of Category 2 oil tankers by 2015.
PHASE-OUT DATES FOR SINGLE-HULL TANKERS
-------------------------------------------------------------------------------------------------------
CATEGORY OF OIL TANKER YEAR TO BE REMOVED FROM SERVICE
-------------------------------------------------------------------------------------------------------
Category 1.............................. 2003 for ships delivered in 1973 or earlier
2004 for ships delivered in 1974 and 1975
2005* for ships delivered in 1976 and 1977
2006* for ships delivered in 1978, 1979 and 1980
2007* for ships delivered in 1981 or later
-------------------------------------------------------------------------------------------------------
Category 2.............................. 2003 for ships delivered in 1973 or earlier
2004 for ships delivered in 1974 and 1975
2005 for ships delivered in 1976 and 1977
2006 for ships delivered in 1978 and 1979
2007 for ships delivered in 1980 and 1981
2008 for ships delivered in 1982
2009 for ships delivered in 1983
2010* for ships delivered in 1984
2011* for ships delivered in 1985
2012* for ships delivered in 1986
2013* for ships delivered in 1987
2014* for ships delivered in 1988
2015* for ships delivered in 1989 or later
-------------------------------------------------------------------------------------------------------
---------------
* Subject to compliance with Condition Assessment Scheme Survey.
However, under certain conditions, Category 1 and Category 2 oil tankers
may continue in operation beyond the date set forth in the table above. Category
2 oil tankers fitted with double bottoms or double sides may continue in service
until 25 years after their delivery date. Category 1 oil tankers over 25 years
old must have double bottoms or operate with hydrostatically balanced loading.
However, a port state may declare that it does not accept entry of such vessels
after their phase-out date. The European Union, Cyprus and Malta have already
declared that they will not permit the entry of such vessels.
Vessels must pass a Condition Assessment Scheme survey after 2005 for
Category 1 oil tankers, and after 2010 for Category 2 oil tankers. The
Conditional Assessment Scheme Survey includes surveys of the hull structure,
including cargo tanks, pump rooms, cofferdams, pipe tunnels, void spaces within
the cargo area and all ballast tanks.
Under the current International Maritime Organization regulations, our
vessels will be able to operate for substantially all of their respective
economic lives before being required to have double-hulls. Although 16 of our
vessels are over 15 years old (including the eight oil/bulk/ore carriers we
acquired in the Bona acquisition), IMO regulations do not require any of our
vessels to be phased out until 2007. However, compliance with the regulations
regarding inspections of all vessels may adversely affect our operations. We
cannot at the present time evaluate the likelihood or magnitude of any such
adverse effect on our operations due to uncertainty of interpretation of the
International Maritime Organization regulations.
27
The operation of our vessels is also affected by the requirements set forth
in the International Maritime Organization's International Management Code for
the Safe Operation of Ships and Pollution Prevention (the "ISM Code"). The ISM
Code requires shipowners 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. The
failure of a shipowner or bareboat charterer to comply with the ISM Code may
subject that party to increased liability, may decrease available insurance
coverage for the affected vessels and may result in a denial of access to, or
detention in, certain ports. Currently, each of our applicable vessels is ISM
code-certified. However, we cannot assure that such certification will be
maintained indefinitely.
ENVIRONMENTAL REGULATION -- THE UNITED STATES OIL POLLUTION ACT OF 1990 ("OPA
90")
OPA 90 established an extensive regulatory and liability regime for the
protection and cleanup of the environment from oil spills. OPA 90 affects all
owners and operators whose vessels trade to the United States or its territories
or possessions or whose vessels operate in U.S. waters, which include the U.S.
territorial sea and its two hundred nautical mile exclusive economic zone.
Under OPA 90, vessel owners, operators and bareboat (or "demise")
charterers are "responsible parties" and are jointly, severally and strictly
liable (unless the spill results solely from the act or omission of a third
party, an act of God or an act of war) for all containment and clean-up costs
and other damages arising from discharges or threatened discharges of oil from
their vessels. These other damages are defined broadly to include:
- natural resources damages and the costs of assessment thereof;
- real and personal property damages;
- 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;
- 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.
OPA 90 limits the liability of responsible parties to the greater of $1,200
per gross ton or $10 million per tanker that is over 3,000 gross tons (subject
to possible adjustment for inflation). These limits of liability would not apply
if the incident was proximately caused by violation of applicable United States
federal safety, construction or operating regulations or by the responsible
party's gross negligence or willful misconduct, or if the responsible party
fails or refuses to report the incident or to cooperate and assist in connection
with the oil removal activities. We currently plan to continue to maintain for
each of our vessels pollution liability coverage in the amount of $1 billion per
incident through protection and indemnity clubs. A catastrophic spill could
exceed the coverage available, which could materially adversely affect our
business, financial condition and result of operations.
Under OPA 90, with limited exceptions, all newly built or converted tankers
operating in United States waters must be built with double-hulls, and existing
vessels that do not comply with the double-hull requirement must be phased out
over a 20-year period (1995-2015) based on size, age and hull construction.
Vessels with double-sides and vessels with double-bottoms are granted an
additional five years of service life before being phased out. Of our vessels,
16 are over 15 years old (including the 8 oil/bulk/ore carriers we acquired in
the Bona acquisition), and 14 of those vessels have double-sides or
double-bottoms, the oldest of which would not be phased out until 2009. Our
oldest single-hull tanker is part of our shuttle tanker fleet and does not trade
in the United States. Notwithstanding the phase out period, OPA 90 currently
permits existing single-hull tankers to operate until the year 2015 if their
operations within United States waters are limited to discharging at the
28
Louisiana Off-shore Oil Platform, or off-loading by means of lightering
activities within authorized lightering zones more than 60 miles offshore.
OPA 90 requires owners and operators of vessels to establish and maintain
with the United States Coast Guard evidence of financial responsibility
sufficient to meet their potential liabilities under OPA 90. In December 1994,
the U.S. Coast Guard implemented regulations requiring evidence of financial
responsibility in the amount of $1,500 per gross ton for tankers, coupling the
OPA limitation on liability of $1,200 per gross ton with the Comprehensive
Environmental Response, Compensation, and Liability Act liability limit of $300
per gross ton. Under the regulations, evidence of financial responsibility may
be demonstrated by insurance, surety bond, self-insurance or guaranty. Under OPA
90, an owner or operator of a fleet of tankers is required only to demonstrate
evidence of financial responsibility in an amount sufficient to cover the tanker
in the fleet having the greatest maximum limited liability under OPA 90.
The U.S. Coast Guard's regulations concerning certificates of financial
responsibility provide, in accordance with OPA 90, that claimants may bring suit
directly against an insurer or guarantor that furnishes certificates of
financial responsibility; and, in the event that such insurer or guarantor is
sued directly, it is prohibited from asserting any contractual defense that it
may have had against the responsible party and is limited to asserting those
defenses available to the responsible party and the defense that the incident
was caused by the willful misconduct of the responsible party. Certain
organizations that had typically provided certificates of financial
responsibility under pre-OPA 90 laws, including the major protection and
indemnity organizations, declined to furnish evidence of insurance for vessel
owners and operators if they are subject to direct actions or required to waive
insurance policy defenses.
The U.S. Coast Guard's financial responsibility regulations may also be
satisfied by evidence of surety bond, guaranty or by self-insurance. Under the
self-insurance provisions, the ship owner or operator must have a net worth and
working capital, measured in assets located in the United States against
liabilities located anywhere in the world, that exceeds the applicable amount of
financial responsibility. We have complied with the U.S. Coast Guard regulations
by providing a financial guaranty from a related company evidencing sufficient
self-insurance for all our vessels trading into the United States. If other
vessels in our fleet trade to the United States in the future, we expect to
provide guaranties through self-insurance, or to obtain such guaranties from
third party insurers.
OPA 90 specifically permits individual states to impose their own liability
regimes with regard to oil pollution incidents occurring within their
boundaries, and some states in the United States have enacted legislation
providing for unlimited liability for oil spills. In some cases, states that
have enacted such legislation have not yet issued implementing regulations
defining tanker owners' responsibilities under these laws. We intend to comply
with all applicable state regulations in the ports where our vessels call.
Owners or operators of tankers operating in United States waters are
required to file vessel response plans with the U.S. Coast Guard, and their
tankers are required to operate in compliance with their Coast Guard approved
plans. The response plans must, among other things:
- address a "worst case" scenario and identify and ensure, through
contract or other approved means, the availability of necessary private
response resources to respond to a "worst case discharge;"
- describe crew training and drills; and
- identify a qualified individual with full authority to implement removal
actions.
We have filed vessel response plans with the U.S. Coast Guard for the
tankers we own and have received approval of such plans for all vessels in our
fleet that operate in United States waters.
29
ENVIRONMENTAL REGULATION -- OTHER ENVIRONMENTAL INITIATIVES
The European Union is considering legislation that will affect the
operation of tankers and the liability of owners for oil pollution. It is
impossible to predict what legislation, if any, may be promulgated by the
European Union or any other country or authority.
Although the United States is not a party, many countries have ratified and
follow the liability scheme adopted by the International Maritime Organization
and set out in the International Convention on Civil Liability for Oil Pollution
Damage, 1969, as amended (the "CLC"), and the Convention for the Establishment
of an International Fund for Oil Pollution of 1971, as amended. Under these
conventions, a vessel's registered owner is strictly liable for pollution damage
caused on the territorial waters of a contracting state by discharge of
persistent oil, subject to certain complete defenses. Approximately one-quarter
of the countries that have ratified the CLC have increased the liability limits
through a 1992 Protocol to the CLC. The liability limits in the countries that
have ratified this Protocol are currently approximately $3.8 million plus
approximately $532 per gross registered ton above 5,000 gross tons with an
approximate maximum of approximately $75.6 million, with the exact amount tied
to a unit of account which varies according to a basket of currencies. The right
to limited liability is forfeited under the CLC where the spill is caused by the
owner's actual fault or privity and, under the 1992 Protocol, where the spill is
caused by the owner's intentional or reckless conduct. Vessels trading to
contracting states must provide evidence of insurance covering the limited
liability of the owner. In jurisdictions where the CLC has not been adopted,
various legislative schemes or common law govern, and liability is imposed
either on the basis of fault or in a manner similar to the CLC.
In addition, the International Maritime Organization, various countries and
states, such as Australia, the United States and the State of California, and
various regulators, such as port authorities, the U.S. Coast Guard and the U.S.
Environmental Protection Agency, have either adopted legislation or regulations,
or are separately considering the adoption of legislation or regulations, aimed
at regulating the discharge of ballast water as a potential pollutant.
30
TAXATION OF TEEKAY
The following discussion is a summary of the principal United States,
Bahamian, Bermuda, Marshall Islands and Norwegian tax laws applicable to us. The
following discussion of tax matters, as well as the conclusions regarding
certain issues of tax law that are reflected in such discussion, are based on
current law and upon the advice received by us from our counsel. This advice is
based, in part, on representations made by our officers, some of which relate to
anticipated future factual matters and circumstances. No assurance can be given
that changes in or interpretation of existing laws will not occur or will not be
retroactive or that anticipated future factual matters and circumstances will in
fact occur. Our views and those of our counsel have no binding effect or
official status of any kind, and no assurance can be given that the conclusions
discussed below would be sustained if challenged by taxing authorities.
UNITED STATES TAXATION
The following discussion is based on the advice of Seward & Kissel, LLP,
special United States tax counsel to us. The following discussion is based upon
the provisions of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed U.S. Treasury Department regulations,
administrative rulings and court decisions, all as of the date of this
prospectus.
Teekay has made special U.S. tax elections, the effect of which are to
disregard our relevant vessel owning or operating subsidiaries as separate
taxable entities from Teekay. Therefore, for purposes of the ensuing U.S. tax
discussion, Teekay, and not our subsidiaries, will be treated as the owner or
operator of our vessels.
We anticipate that Teekay will derive substantially all of its gross income
from the use and operation of vessels in international commerce and that this
income will principally consist of freights from the transportation of cargoes,
hire or lease from time or voyage charters and the performance of services
directly related thereto ("Shipping Income"). Unless exempt from U.S. taxation
under Section 883 of the Code, Teekay will be subject to U.S. federal income
taxation, in the manner discussed below, to the extent such Shipping Income is
considered derived from sources within the United States.
Shipping Income that is attributable to transportation that begins or ends,
but that does not both begin and end, in the United States will be considered to
be 50% derived from sources within the United States. Shipping Income
attributable to transportation that both begins and ends in the United States
will be considered to be 100% derived from sources within the United States. All
Shipping Income attributable to transportation exclusively between non-U.S.
ports will be considered to be 100% derived from sources outside the United
States. Shipping Income derived from sources outside the United States will not
be subject to U.S. federal income tax.
Based upon Teekay's anticipated shipping operations, Teekay's vessels will
operate in various parts of the world, including to or from U.S. ports. In the
nine months ended September 30, 2001, approximately 37% of its Shipping Income
was attributable to the transportation of cargoes either to or from a U.S. port.
Accordingly, only 18.5% of Teekay's Shipping Income would have been treated as
derived from U.S. sources for such period, which remains unchanged after giving
effect to our acquisition of UNS as if it had occurred on January 1, 2001.
THE INTERNAL REVENUE CODE SECTION 883 EXEMPTION
Teekay will qualify for the exemption from U.S. federal income taxation
under Section 883 of the Code if, in relevant part:
- Teekay is organized in a foreign country that grants an equivalent
exemption from tax to corporations organized in the United States ("the
country of organization requirement"); and
- more than 50% of the value of Teekay's shares is treated as owned,
directly or indirectly, by individuals who are "residents" of such
country or of another foreign country that grants an
31
equivalent exemption to corporations organized in the United States (the
"ownership requirement").
Since the U.S. Treasury Department has recognized Teekay's country of
incorporation, the Marshall Islands, as a foreign country that grants an
equivalent exemption to U.S. corporations, Teekay satisfies the country of
organization requirement.
There is an exemption from the ownership requirement provided by Section
883 if Teekay can satisfy a special publicly traded stock rule. Teekay will
qualify for the exemption if its common stock is considered to be "primarily and
regularly traded on an established securities market" in the United States (the
"publicly traded test").
We have taken the position that, under the current tax regime, we qualify
under the Section 883 exemption. However, proposed regulations interpreting
Section 883 were promulgated by the U.S. Treasury Department on February 8,
2000. The proposed regulations will apply to taxable years ending 30 days or
more after the date the proposed regulations are published as final regulations
in the Federal Register. At this time, it is unclear when the proposed
regulations will be finalized and whether they will be finalized in their
present form.
The proposed regulations provide, in pertinent part, that stock of a
foreign corporation will be considered to be "primarily traded" on an
established securities market if the number of shares that are traded during any
taxable year on that market exceeds the number of shares traded during that year
on any other established securities market. At present, the sole class of
Teekay's stock that is issued and outstanding is its common stock and its common
stock is listed on the New York Stock Exchange, which is an established
securities market in the United States. Since Teekay's common stock is not
listed or quoted on any other securities market, its common stock must be
considered to be "primarily" traded on such market.
The proposed regulations further provide that stock will be considered to
be "regularly traded" on a market if:
- stock representing 80% or more of the issuer's outstanding shares, by
voting power and value, is listed on such market (the "80% test");
- stock is traded on such market, other than in de minimis quantities, on
at least 60 days during the taxable year (the "trading frequency
threshold"); and
- the aggregate number of shares of stock traded is at least 10% of the
average number of shares outstanding during such year (the "trading
volume threshold").
Under the proposed regulations, the trading frequency threshold and the
trading volume threshold will be deemed satisfied if, as is the case here, stock
is traded on an established securities market in the United States and the stock
is regularly quoted by brokers and dealers making a market in the stock (the
"U.S. securities market exception").
Teekay's common stock should satisfy the "regularly traded" requirement of
the proposed regulations since the 80% test is satisfied by virtue of 100% of
its common stock being listed on the New York Stock Exchange and the trading
frequency threshold and trading volume threshold tests will be deemed satisfied
as a result of the applicability of the U.S. securities market exception.
Notwithstanding the foregoing, the proposed regulations provide, in
pertinent part, that stock will not be considered to be regularly traded on an
established securities market for any taxable year in which 50% or more of the
outstanding shares of such stock are owned, within the meaning of the
regulations, on any day during such taxable year by persons who each own 5% or
more of the value of the outstanding shares of such stock (the "5% override
rule").
Based on its existing shareholdings, Teekay may be subject to this 5%
override rule and hence, under the proposed regulations, may not qualify for
exemption from the ownership requirement pursuant
32
to the publicly traded test. Without such exemption, Teekay's ability to satisfy
the ownership requirement may prove to be problematic.
In response to an invitation for public comment on the proposed regulations
from the U.S. Treasury Department, we submitted written comments requesting
certain modifications be made to the 5% override rule which, if accepted and
reflected in the final regulations, would render Teekay not subject to the 5%
override rule based on its existing shareholdings. However, no assurance can be
given that our proposed modifications will ultimately be accepted and reflected
in the final regulations or that, even if the modifications are accepted, future
changes or shifts in the ownership of our shares will not preclude us from
obtaining the benefits of Section 883.
Until final regulations are promulgated and come into force, however, we
intend to take the position on our U.S. tax return filings that Teekay satisfies
the publicly traded test and qualifies for exemption under Section 883.
To the extent Teekay is unable to qualify for exemption from tax under
Section 883, its U.S. source Shipping Income will become subject to the 4% gross
basis tax regime or, alternatively, to the net basis and branch tax regime
described below.
TAXATION IN ABSENCE OF INTERNAL REVENUE CODE SECTION 883 EXEMPTION
4% GROSS BASIS TAX REGIME. To the extent the benefits of Section 883 are
unavailable, Teekay's U.S. source Shipping Income that is not considered to be
"effectively connected" with the conduct of a U.S. trade or business, as
discussed below, would be subject to a 4% tax imposed by Section 887 of the Code
on a gross basis, without the benefit of deductions. As discussed above, we
expect that substantially less than half of Teekay's Shipping Income will be
considered U.S. source Shipping Income. Accordingly, we believe that the maximum
effective rate of U.S. federal income tax on Teekay's gross Shipping Income
would not exceed 2%.
Based on its U.S. source Shipping Income for the nine months ended
September 30, 2001, Teekay would be subject to U.S. federal income tax of
approximately $6.2 million under Section 887 in the absence of an exemption
under Section 883.
NET BASIS AND BRANCH PROFITS TAX REGIME. To the extent the benefits of the
Section 883 exemption are unavailable and Teekay's U.S. source Shipping Income
is considered to be "effectively connected" with the conduct of a U.S. trade or
business, as described below, any such "effectively connected" U.S. source
Shipping Income, net of applicable deductions, would be subject to the U.S.
federal corporate income tax currently imposed at rates of up to 35%. In
addition, Teekay may be subject to the 30% "branch profits" taxes 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 its U.S. trade or business. Teekay's U.S.
source Shipping Income would be considered "effectively connected" with the
conduct of a U.S. trade or business only if:
- Teekay has, or is considered to have, a fixed place of business in the
United States involved in the earning of Shipping Income; and
- substantially all of Teekay's U.S. 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.
Currently, we do not intend to have, or permit circumstances that would
result in having, any Teekay vessel operating to the United States on a
regularly scheduled basis. Based on the foregoing and on the expected mode of
Teekay's shipping operations and other activities as described in this
prospectus, we believe that none of Teekay's U.S. source Shipping Income will be
"effectively connected" with the conduct of a U.S. trade or business.
33
GAIN ON SALE OF VESSELS. To the extent any Teekay vessel makes more than
an occasional voyage to U.S. ports, Teekay may be considered to be engaged in
the conduct of a U.S. trade or business. As a result, except to the extent such
gain falls within the scope of the Section 883 exemption as income that is
incidental to Teekay's Shipping Income, any U.S. source gain on the sale of a
vessel may be partly or wholly subject to U.S. federal income tax as
"effectively connected" income (determined under rules different from those
discussed above) under the net basis and branch tax regime described above.
BAHAMIAN TAXATION
Based on the advice of Graham, Thompson & Co., our Bahamian counsel, we and
our subsidiaries will not be subject to taxation under the laws of the Bahamas,
and distributions by our subsidiaries to us also will not be subject to any
Bahamian tax.
BERMUDA TAXATION
Based on the advice of Appleby Spurling & Kempe, our Bermuda counsel, we
and our subsidiaries will not be subject to taxation under the laws of Bermuda,
and distributions by our subsidiaries to us also will not be subject to any
Bermuda tax.
MARSHALL ISLANDS TAXATION
Based on the advice of Watson, Farley & Williams, our Republic of Marshall
Islands counsel, because we and our subsidiaries do not, and we do not expect
that we and our subsidiaries will, conduct business or operations in the
Republic of the Marshall Islands, we and our subsidiaries will not be subject to
taxation under the laws of the Republic of the Marshall Islands, and
distributions by our subsidiaries to us will not be subject to Marshall Islands
tax.
NORWEGIAN TAXATION
The following discussion is based on the advice of Bugge, Arentz-Hansen &
Rasmussen, our Norwegian counsel, and the tax laws of Norway and regulations,
rulings and judicial decisions thereunder, all as in effect as of the date of
this prospectus and subject to possible change on a retroactive basis. The
following discussion is for general information purposes only and does not
purport to be a comprehensive description of all of the Norwegian income tax
considerations applicable to UNS.
In December 1996, Norway introduced a new regime for the taxation of the
shipping industry. If a company meets certain requirements, it may choose to be
taxed according to this regime, which results in deferral of taxation for income
related to shipping activities until the accumulated untaxed profits are
distributed to shareholders outside the regime or upon the company's exit from
the regime. A company that is subject to the regime will, however, be liable to
pay without the benefit of deferral a 28% tax on investment income and a
relatively insignificant tonnage tax based on the registered tonnage of its
fleet. The rates for tonnage tax are set annually by the Norwegian parliament.
To qualify for the shipping taxation regime, the shipping activities of UNS
have been separated from other activities, such as management functions,
although, prior to Teekay's purchase of UNS, the companies engaged in shipping
activities and those providing management functions have been owned by the same
ultimate parent. While UNS as the parent company does not qualify under the
shipping tax regime, Ugland Nordic Investment AS, a wholly owned subsidiary of
UNS, owns the assets and companies engaged in shipping activities (the
"Qualifying Company"). These companies engaged in shipping activities constitute
"shipping companies" under the tax regime. Under the regime, the shipping
companies may not have employees; consequently, all service and management
functions must be obtained from a related or unrelated entity that is separate
from the shipping companies. Intra-group services are required to be priced in
accordance with market terms and UNS is subject to a 28% non-deferred tax with
respect to the net income of any management services it provides.
34
If the Qualifying Company were to cease to qualify for the shipping company
tax regime, it would be taxed on its accumulated untaxed profits and gains,
taking into account both value appreciations during the period it was under the
regime and any untaxed equity that may have been in the Qualifying Company upon
entry into the regime. The Qualifying Company would cease to qualify under the
regime if it sold all of its vessels and ownership interests in other shipowning
companies qualifying under the tax regime and the proceeds from such sale were
not reinvested in a shipowning company qualifying under the tax regime or a
replacement vessel, or an agreement to build a replacement vessel were not
entered into within a year from the sale. Furthermore, under certain conditions,
the Qualifying Company would also cease to qualify under the regime if one of
the shipowning companies in which the Qualifying Company holds an ownership
interest sold all of its vessels and the proceeds from such sale were not
reinvested in a replacement vessel or an agreement to build a replacement vessel
were not entered into within a year of the sale.
To the extent untaxed profits are distributed from the Qualifying Company
to shareholders outside the regime, which would include dividends or other
distributions paid by the Qualifying Company to UNS, the Qualifying Company will
be taxed at a rate of 28% of the distributed amount as grossed-up for such
taxes. Further, dividends paid from UNS to a non-Norwegian shareholder will be
subject to a Norwegian withholding tax of 25%, unless a lower tax has been
agreed upon in an applicable tax treaty.
We record deferred taxes under the Norwegian shipping tax regime on our
consolidated financial statements in accordance with accounting principles
generally accepted in the United States. See Note 6 to our September 30, 2001
unaudited consolidated financial statements included in our Report on Form 6-K
filed with the SEC on November 15, 2001, which report is incorporated into this
prospectus by reference.
35
DESCRIPTION OF CERTAIN DEBT
The following is a summary of our primary debt. This summary is qualified
in its entirety by reference to the full text of the documents that govern the
transactions so summarized.
As at September 30, 2001, we and our subsidiaries had obligations for
outstanding debt for borrowed money under existing credit agreements in the
aggregate principal amount of approximately $947 million, excluding $89 million
of joint venture debt guaranteed by certain of our subsidiaries. Of this $947
million, we were directly obligated for or guaranteed $636 million at September
30, 2001. Since that date, an internal restructuring of our ownership of one
joint venture vessel has resulted in $25 million of the $89 million joint
venture debt being guaranteed by Teekay. The following chart indicates, on a
consolidated basis, as of September 30, 2001, and after giving effect to the
offering of the outstanding notes and application of the estimated net proceeds
to prepay certain of our outstanding secured revolving debt, the aggregate
principal amount of debt due and payable in our upcoming fiscal years.
FISCAL YEAR AMOUNT
----------- ------------
2001 (October 1 to December 31)............................. $ 20 million
2002........................................................ $ 51 million
2003........................................................ $ 63 million
2004........................................................ $ 85 million
2005........................................................ $107 million
2006........................................................ $126 million
2007........................................................ $ 80 million
2008........................................................ $ 24 million
2009........................................................ $ 41 million
2010........................................................ $ 0 million
2011........................................................ $350 million
In January 1996, we issued $225 million of our 8.32% First Preferred Ship
Mortgage Notes in a public offering registered under the U.S. Securities Act of
1933. These notes currently are collateralized by first preferred mortgages
granted on seven of our Aframax tankers, together with other related collateral,
and are guaranteed by our subsidiaries that own the mortgaged vessels. Upon
these notes achieving investment grade status and subject to other conditions,
the guarantees of the notes will terminate, all of the collateral securing our
obligations and the guarantors under the related indenture and security
documents will be released and specified covenants under the indenture will no
longer be applicable to us. These notes are subject to a sinking fund, which
will retire $45 million principal amount of these notes on each February 1,
commencing February 1, 2004. These notes are listed for trading on the New York
Stock Exchange.
In January 1998, we negotiated a reducing revolving credit facility with
nine commercial banks which, as of September 30, 2001, provided for borrowings
of up to $130 million in order to refinance certain debt and to provide working
capital. This facility is secured by first priority mortgages granted on eight
of our Aframax tankers, together with other related collateral, and a guarantee
from us for all amounts outstanding under the facility. Interest payments are
based on LIBOR plus a specified margin that depends on our capital structure as
calculated on a quarterly basis. At September 30, 2001, the margin was 0.50%.
The amount available under the facility reduces by $10 million semi-annually
with a final balloon reduction in January 2006.
On June 22, 2001, we issued $250 million aggregate principal amount of
senior notes bearing interest at 8.875% per year and maturing on July 15, 2011.
On December 6, 2001, we issued an additional $100 million aggregate principal
amount of such notes, which are subject to exchange pursuant to this offering.
The terms and conditions of those notes are substantially identical to the terms
and conditions of the exchange notes being offered hereby as described in
"Description of Notes."
36
Bona Shipholding Ltd. has a revolving credit facility with 15 commercial
banks which, as of September 30, 2001, provided for borrowings of up to $397
million. This facility is secured by first priority mortgages granted on 22 Bona
and Teekay vessels. In connection with the Bona acquisition, Teekay agreed to
guarantee all of Bona's obligations under this facility. The facility was
amended in September 2001. The facility is subject to a financial covenant that
requires Teekay to maintain a minimum level of free cash based on its
consolidated financial statements. As of September 30, 2001, Teekay was in
compliance with this covenant. Interest payments are based on LIBOR plus a
specified margin that depends on Teekay's capital structure as calculated on a
quarterly basis. At September 30, 2001, the margin was 0.75%. The amount
available under the facility reduces by approximately $19 million semi-annually
with a final balloon reduction in December 2008.
At September 30, 2001, UNS had a number of single and multi-ship mortgage
loans totaling $311 million. Teekay currently does not guarantee any of the
obligations under these facilities. UNS term loans are collateralized by first
priority mortgages granted on the 14 vessels to which the loans relate
(including two newbuildings), together with certain other related collateral,
and guarantees from UNS. UNS credit facilities are subject to certain financial
covenants which include specified minimum levels of (1) free cash, (2) equity
(based on book value), (3) working capital, (4) value adjusted equity or total
value adjusted assets, (5) committed capital and a minimum earnings to interest
ratio. As of September 30, 2001, UNS was in compliance with all such covenants.
The indenture relating to our 8.32% First Preferred Ship Mortgage Notes due
2008 and certain of the credit agreements governing our (and our subsidiaries')
credit facilities provide that our ability to pay dividends is subject to
limitations based upon our cumulative net income plus certain additional
amounts, including the proceeds received by us from any issuance of our capital
stock. In addition, credit agreements to which some of our subsidiaries are
parties, and guarantees executed by us in connection with them, contain various
covenants which restrict our operations and those of our subsidiaries. These
credit agreements and guarantees contain covenants that require those
subsidiaries or us, as the case may be, to conduct their or our operations,
including, for those subsidiaries, the operations of their respective vessels,
in accordance with certain standards set forth in the credit agreements or
guarantees. Certain credit agreements related to our secured debt contain "hull
covenants" that require the applicable subsidiaries to deliver additional
collateral to the lenders under the applicable credit agreement, or prepay a
certain amount of the debt, in the event that the value of the subject vessels
falls below a fixed percentage of the amount of the debt then outstanding under
the credit agreement. The minimum combined value of the subject vessels must
remain at levels ranging between 125% and 133% of the outstanding debt under our
revolving credit agreements. We believe that as of September 30, 2001 we were in
compliance with all of the covenants in effect at that time.
37
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the outstanding notes, we entered into an
exchange and registration rights agreement with the initial purchaser of the
outstanding notes. In that agreement, we agreed to use our best efforts to file
and have declared effective within 180 days of the sale of the outstanding notes
this registration statement relating to an offer to exchange the exchange notes
for the outstanding notes. We also agreed to use our best efforts to complete
the exchange offer for the outstanding notes within 60 days after the effective
date of this registration statement. We are offering the exchange notes under
this prospectus in the exchange offer for the outstanding notes to satisfy our
obligations under the exchange and registration rights agreement. We refer to
our offer to exchange the exchange notes for the outstanding notes as the
"exchange offer."
RESALE OF EXCHANGE NOTES
Based on interpretations of the SEC staff in no-action letters issued to
third parties, we believe that each exchange note issued in the exchange offer
may be offered for resale, resold and otherwise transferred by you without
compliance with the registration and prospectus delivery provisions of the
Securities Act of 1933 if, among other things:
- you are acquiring the exchange notes in the ordinary course of your
business;
- you are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of the exchange notes; and
- you are not an affiliate of Teekay.
If you tender your outstanding notes in the exchange offer with the
intention of participating in any manner in a distribution of the exchange notes
or you are an affiliate of Teekay, you:
- cannot rely on such interpretations by the SEC staff, and
- must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction
of the exchange notes and such secondary resale transaction must be
covered by an effective registration statement under the Securities Act
of 1933 containing the selling security holder's information required by
Item 507 or Item 508, as applicable, of Regulation S-K under the
Securities Act.
This prospectus may be used for an offer to resell, resale or otherwise
transfer exchange notes only as specifically described in this prospectus. Only
those broker-dealers that acquired outstanding notes as a result of
market-making activities or other trading activities may participate in the
exchange offer. Each broker-dealer that receives exchange notes for its own
account in exchange for outstanding notes, where that broker-dealer acquired
such outstanding notes as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. Please read "Plan of Distribution" for
more details regarding the transfer of exchange notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
notes properly tendered and not withdrawn prior to the expiration date of the
exchange offer. We will issue $1,000 principal amount of exchange notes in
exchange for each $1,000 principal amount of outstanding notes surrendered under
the exchange offer. Outstanding notes may be tendered only in integral multiples
of $1,000.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
38
As of the date of this prospectus, $350 million principal amount of notes
is outstanding ($100 million of which is subject to exchange pursuant to the
exchange offer). This prospectus and the letter of transmittal are being sent to
all registered holders of outstanding notes. There will be no fixed record date
for determining registered holders of outstanding notes entitled to participate
in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the exchange and registration rights agreement, the applicable requirements
of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
rules and regulations of the SEC. Outstanding notes that are not tendered for
exchange in the exchange offer:
- will remain outstanding,
- will continue to accrue interest, and
- will be entitled to the rights and benefits that holders have under the
indenture relating to the outstanding notes and, under limited
circumstances, the exchange and registration rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent and complied with the applicable provisions of the exchange
and registration rights agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the exchange notes from us.
If you tender outstanding notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. It is
important that you read "-- Fees and Expenses" for more details about fees and
expenses incurred in the exchange offer.
We will return any outstanding notes that we do not accept for exchange for
any reason without expense to the tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time, on
February , 2002, unless in our sole discretion we extend it.
EXTENSIONS, DELAY IN ACCEPTANCE, TERMINATION OR AMENDMENT
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. We may delay
acceptance for exchange of any outstanding notes by giving oral or written
notice of the extension to their holders. During any such extensions, all
outstanding notes you have previously tendered will remain subject to the
exchange offer for that series, and we may accept them for exchange.
To extend the exchange offer, we will notify the exchange agent orally or
in writing of any extension. We also will make a public announcement of the
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
If any of the conditions described below under "-- Conditions to the
Exchange Offer" have not been satisfied with respect to the exchange offer, we
reserve the right, in our sole discretion:
- to delay accepting for exchange any outstanding notes,
- to extend the exchange offer, or
- to terminate the exchange offer.
39
We will give oral or written notice of such delay, extension or termination
to the exchange agent. Subject to the terms of the exchange and registration
rights agreement, we also reserve the right to amend the terms of the exchange
offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly
disclose that amendment by means of a prospectus supplement. We will distribute
the supplement to the registered holders of the outstanding notes. Depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, we will extend the exchange offer if the exchange offer
would otherwise expire during such period.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for any outstanding notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange, if in our reasonable judgment:
- the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC, or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us:
- the representations described under "-- Your Representations to Us."
- such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make available
to us an appropriate form for registering the exchange notes under the
Securities Act of 1933.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange in the exchange offer, upon the occurrence of any of the conditions to
the exchange offer specified above. We will give oral or written notice of any
extension, amendment, nonacceptance or termination to the holders of the
outstanding notes as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole discretion.
Our failure at any time to exercise any of these rights will not mean that we
have waived our rights. Each right will be deemed an ongoing right that we may
assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue exchange notes in exchange for any such outstanding
notes, if at such time any stop order has been threatened or is in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.
40
EXCHANGE AGENT
We have appointed The Bank of New York as exchange agent for the exchange
offer. Please direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent. If you are
not tendering under DTC's automated tender offer program, you should send the
letter of transmittal and any other required documents to the exchange agent as
follows:
BY HAND DELIVERY TO 4:30 P.M.
The Bank of New York
c/o United States Trust Company of New York
30 Broad Street, B-Level
New York, NY 10004-2304
BY OVERNIGHT COURIER AND BY HAND
DELIVERY AFTER 4:30 P.M. ON EXPIRATION DATE
The Bank of New York
c/o United States Trust Company of New York
30 Broad Street, 14th Floor
New York, NY 10004-2304
BY REGISTERED OR CERTIFIED MAIL
The Bank of New York
c/o United States Trust Company of New York
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):
The Bank of New York
c/o United States Trust Company of New York
FAX: (646) 458-8111
CONFIRM BY TELEPHONE:
(800) 548-6565
PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must either (1) comply
with the procedures for physical tender, described below, or (2) comply with the
automated tender offer program procedures of The Depository Trust Company, or
"DTC," described below.
The tender by a holder that is not withdrawn prior to the expiration date
and our acceptance of that tender will constitute an agreement between the
holder and us in accordance with the terms and subject to the conditions
described in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION
41
AND RISK. RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT
OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT
SEND THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY REQUEST YOUR
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE
ABOVE TRANSACTIONS FOR YOU.
HOW TO TENDER IF YOU ARE A BENEFICIAL OWNER
If you beneficially own outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender those notes, you should contact the registered holder as soon as
possible and instruct the registered holder to tender on your behalf. If you are
a beneficial owner and wish to tender on your own behalf, you must, prior to
completing and executing the letter of transmittal and delivering your
outstanding notes, either:
- make appropriate arrangements to register ownership of the outstanding
notes in your name, or
- obtain a properly completed bond power from the registered holder of
your outstanding notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
PROCEDURES FOR PHYSICAL TENDER
To complete a physical tender, a holder must:
- complete, sign and date the letter of transmittal or a facsimile of the
letter of transmittal,
- have the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires,
- mail or deliver or facsimile the letter of transmittal to the exchange
agent prior to the expiration date, and
- deliver the outstanding notes to the exchange agent prior to the
expiration date or comply with the guaranteed delivery procedures
described below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address provided above under "-- Exchange Agent" prior to the expiration date.
SIGNATURES AND SIGNATURE GUARANTEES
You must have signatures on a letter of transmittal or a notice of
withdrawal described below under "-- Withdrawal of Tenders" guaranteed by an
eligible institution unless the outstanding notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal, or
- for the account of an eligible institution.
An eligible institution is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States, or an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, that is a member of one of
the recognized signature guarantee programs identified in the letter of
transmittal.
WHEN ENDORSEMENTS OR BOND POWERS ARE NEEDED
If a person other than the registered holder of any outstanding notes signs
the letter of transmittal, the outstanding notes must be endorsed or accompanied
by a properly completed bond power. The
42
registered holder must sign the bond power as the registered holder's name
appears on the outstanding notes. An eligible institution must guarantee that
signature.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact, or
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive this
requirement, they also must submit evidence satisfactory to us of their
authority to deliver the letter of transmittal.
TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Accordingly, participants in the program may, instead of
physically completing and signing the letter of transmittal and delivering it to
the exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing DTC to transfer the outstanding notes
to the exchange agent in accordance with its procedures for transfer. DTC will
then send an agent's message to the exchange agent.
An agent's message is a message transmitted by DTC to and received by the
exchange agent and forming part of the book-entry confirmation, stating that:
- DTC has received an express acknowledgment from a participant in DTC's
automated tender offer program that is tendering outstanding notes that
are the subject of such book-entry confirmation,
- the participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, the participant has received and agrees to be bound
by the applicable notice of guaranteed delivery, and
- we may enforce the agreement against such participant.
To complete a tender through DTC's automated tender offer program, the
exchange agent must receive, prior to the expiration date, a timely confirmation
of book-entry transfer of such outstanding notes into the exchange agent's
account at DTC according to the procedure for book-entry transfer described
below or a properly transmitted agent's message.
DETERMINATIONS UNDER THE EXCHANGE OFFER
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes and
withdrawal of tendered outstanding notes. Our determination will be final and
binding. We reserve the absolute right to reject any outstanding notes not
properly tendered or any outstanding notes our acceptance of which, in the
opinion of our counsel, might be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of the exchange offer as to particular
outstanding notes. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of transmittal, will be
final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
outstanding notes must be cured within such time as we determine. Neither we,
the exchange agent nor any other person will be under any duty to give
notification of defects or irregularities with respect to tenders of outstanding
notes, nor will we or those persons incur any liability for failure to give such
notification. Tenders of outstanding notes will not be deemed made until such
defects or irregularities have been cured or waived. Any outstanding notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned to
the tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
43
WHEN WE WILL ISSUE EXCHANGE NOTES
In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange in the exchange offer only after the exchange agent
timely receives:
- outstanding notes or a timely book-entry confirmation of transfer of
such outstanding notes into the exchange agent's account at DTC, and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
RETURN OF OUTSTANDING NOTES NOT ACCEPTED OR EXCHANGED
If we do not accept any tendered outstanding notes for exchange for any
reason described in the terms and conditions of the exchange offer or if
outstanding notes are submitted for a greater principal amount than the holder
desires to exchange, we will return the unaccepted or nonexchanged outstanding
notes without expense to their tendering holder. In the case of outstanding
notes tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described below, such nonexchanged outstanding notes
will be credited to an account maintained with DTC. These actions will occur as
promptly as practicable after the expiration or termination of the exchange
offer.
YOUR REPRESENTATIONS TO US
By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
- any exchange notes you receive will be acquired in the ordinary course
of your business,
- you have no arrangement or understanding with any person to participate
in the distribution of the outstanding notes or the exchange notes
within the meaning of the Securities Act of 1933,
- you are not our affiliate, as defined in Rule 405 under the Securities
Act, or, if you are our affiliate, you will comply with the applicable
registration and prospectus delivery requirements of the Securities Act,
- if you are not a broker-dealer, you are not engaged in and do not intend
to engage in the distribution of the exchange notes, and
- if you are a broker-dealer that will receive exchange notes for your own
account in exchange for outstanding notes that you acquired as a result
of market-making activities or other trading activities, you will
deliver a prospectus in connection with any resale of such exchange
notes.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus. Any financial institution participating in
DTC's system may make book-entry delivery of outstanding notes by causing DTC to
transfer such outstanding notes into the exchange agent's account at DTC in
accordance with DTC's procedures for transfer. If you are unable to deliver
confirmation of the book-entry tender of your outstanding notes into the
exchange agent's account at DTC or all other documents required by the letter of
transmittal to the exchange agent on or prior to the expiration date, you must
tender your outstanding notes according to the guaranteed delivery procedures
described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your outstanding notes but they are not immediately
available or if you cannot deliver your outstanding notes, the letter of
transmittal or any other required documents to the
44
exchange agent or comply with the applicable procedures under DTC's automated
tender offer program prior to the expiration date, you may tender if:
- the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an eligible guarantor
institution,
- prior to the expiration date, the exchange agent receives from such
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., commercial bank or
trust company having an office or correspondent in the United States, or
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery by facsimile transmission, mail
or hand delivery or a properly transmitted agent's message and notice of
guaranteed delivery:
- stating your name and address, the registered number(s) of your
outstanding notes and the principal amount of outstanding notes
tendered,
- stating that the tender is being made thereby,
- guaranteeing that, within three New York Stock Exchange trading days
thereof or agent's message in lieu thereof, together with the
outstanding notes or a book-entry confirmation, and any other
documents required by the letter of transmittal will be deposited by
the eligible guarantor institution with the exchange agent, and
- the exchange agent receives such properly completed and executed letter
of transmittal or facsimile or agent's message, as well as all tendered
outstanding notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the letter of
transmittal, within three New York Stock Exchange trading days after the
expiration date.
Upon request to the exchange agent, the exchange agent will send a notice
of guaranteed delivery to you if you wish to tender your outstanding notes
according to the guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to 5:00 p.m., New York City time, on the expiration
date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at one of
the addresses listed above under "-- Exchange Agent," or
- the withdrawing holder must comply with the appropriate procedures of
DTC's automated tender offer program.
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding notes to be
withdrawn,
- identify the outstanding notes to be withdrawn, including the
registration number and the principal amount of such outstanding notes,
- be signed by the person who tendered the outstanding notes in the same
manner as the original signature on the letter of transmittal used to
deposit those outstanding notes or be accompanied by documents of
transfer sufficient to permit the trustee to register the transfer in
the name of the person withdrawing the tender, and
- specify the name in which such outstanding notes are to be registered,
if different from that of the person who tendered the outstanding notes.
45
If outstanding notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn outstanding notes
and otherwise comply with the procedures of DTC.
We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any outstanding notes so withdrawn not
to have been validly tendered for exchange for purposes of the exchange offer.
Any outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of outstanding notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described above,
such outstanding notes will be credited to an account maintained with DTC for
the outstanding notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding notes by following one of
the procedures described under "-- Procedures for Tendering" above at any time
on or prior to 5:00 p.m., New York City time, on the expiration date.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
facsimile, email, telephone or in person by our officers and regular employees
and those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, letters of transmittal
and related documents to the beneficial owners of the outstanding notes and in
handling or forwarding tenders for exchange.
We will pay the cash expenses to be incurred in connection with the
exchange offer. These expenses include:
- SEC registration fees for the exchange notes,
- fees and expenses of the exchange agent and trustee,
- accounting and legal fees,
- printing costs, and
- related fees and expenses.
TRANSFER TAXES
If you tender your outstanding notes for exchange, you will not be required
to pay any transfer taxes. We will pay all transfer taxes, if any, applicable to
the exchange of outstanding notes in the exchange offer. The tendering holder
will, however, be required to pay any transfer taxes, whether imposed on the
registered holder or any other person, if:
- certificates representing exchange notes or outstanding notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than
the registered holder of outstanding notes tendered,
- tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal, or
- a transfer tax is imposed for any reason other than the exchange of
exchange notes for outstanding notes in the exchange offer.
46
If satisfactory evidence of payment of any transfer taxes payable by a
tendering holder is not submitted with the letter of transmittal, the amount of
such transfer taxes will be billed directly to that tendering holder. The
exchange agent will retain possession of exchange notes with a face amount equal
to the amount of the transfer taxes due until it receives payment of the taxes.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your outstanding notes for exchange notes in the
exchange offer, you will remain subject to the existing restrictions on transfer
of the outstanding notes. In general, you may not offer or sell the outstanding
notes unless either they are registered under the Securities Act of 1933 or the
offer or sale is exempt from or not subject to registration under the Securities
Act and applicable state securities laws. Except as required by the exchange and
registration rights agreement, we do not intend to register resales of the
outstanding notes under the Securities Act.
The tender of outstanding notes in the exchange offer will reduce the
outstanding principal amount of the outstanding notes. Due to the corresponding
reduction in liquidity, this may have an adverse effect upon, and increase the
volatility of, the market price of any outstanding notes that you continue to
hold.
ACCOUNTING TREATMENT
We will amortize (1) our expenses of the exchange offer and the offering of
the outstanding notes and (2) the premiums on original issue of the outstanding
notes over the term of the exchange notes under accounting principles generally
accepted in the United States.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your decision on what action, if any, to take. In the future,
we may seek to acquire untendered outstanding notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. We
have no present plan to acquire any outstanding notes that are not tendered in
the exchange offer or to file a registration statement to permit resales of any
untendered outstanding notes, except as required by the exchange and
registration rights agreement.
47
DESCRIPTION OF THE NOTES
In this section, "Teekay" or the "Company" means Teekay Shipping
Corporation and not any of its subsidiaries. The outstanding notes were issued,
and the exchange notes will be issued, by Teekay under a first supplemental
indenture dated as of December 6, 2001, to the indenture dated as of June 22,
2001 between Teekay and The Bank of New York Trust Company of Florida, N.A.
(formerly U.S. Trust Company of Texas, N.A.), as trustee (the indenture, as
supplemented, the "Indenture"). Such indenture dated as of June 22, 2001,
originally related to our outstanding $250 million aggregate principal amount of
8.875% senior notes due July 15, 2011. In this section, the outstanding notes
and the exchange notes are referred to collectively as the "additional notes,"
unless the context otherwise requires. The $250 million aggregate principal
amount of notes issued on June 22, 2001 and the additional notes are
collectively referred to as the "notes," unless the context otherwise requires.
The notes will be consolidated with and form a single series and shall have the
same terms as to status, redemption or otherwise as described herein. You may
obtain a copy of the Indenture from Teekay upon request. The Indenture has been
filed as an exhibit to the registration statement of which this prospectus is
part.
The Indenture is subject to and governed by the U.S. Trust Indenture Act of
1939. The statements under this section of this prospectus are summaries of the
material terms and provisions of the Indenture and the notes. They do not
purport to be complete and are qualified in their entirety by reference to all
the provisions in the Indenture. Therefore, we urge you to read the Indenture
because it, and not this description, defines your rights as holders of the
additional notes. Definitions relating to certain capitalized terms are set
forth under "-- Certain Definitions" and throughout this description.
Capitalized terms that are used but not otherwise defined in this description
have the meanings ascribed to them in the Indenture.
The notes will constitute a single series of debt securities under the
Indenture. If the exchange offer is consummated, any holders of outstanding
notes who do not exchange their outstanding notes for exchange notes will vote
together with all other holders of the notes for all relevant purposes under the
Indenture. Accordingly, in determining whether the required holders have given
any notice, consent or waiver or taken any other action permitted under the
Indenture, any outstanding notes that remain outstanding after the exchange
offer will be aggregated with the other notes, and the holders of the
outstanding notes and the other notes will vote together as a single series. All
references in this prospectus to specified percentages in aggregate principal
amount of the notes mean, at any time after the exchange offer is consummated,
the percentages in aggregate principal amount of the outstanding notes, the
exchange notes, and all other notes collectively then outstanding.
GENERAL
The additional notes:
- are general unsecured obligations of Teekay,
- rank equally and ratably in right of payment with all existing and
future unsecured senior debt of Teekay, including our outstanding $250
million aggregate principal amount of 8.875% senior notes due July 15,
2011,
- are senior in right of payment to all existing and future subordinated
debt of Teekay,
- are effectively subordinated to all of Teekay's secured debt to the
extent of the collateral securing such debt, and
- are effectively subordinated to all existing and future debt and other
liabilities and commitments of Teekay's subsidiaries because Teekay is a
holding company and the additional notes will not be guaranteed by any
of its subsidiaries.
The Indenture does not limit the ability of Teekay or its subsidiaries to
incur debt. At September 30, 2001, after giving effect to the issuance of the
outstanding notes and the application of the estimated
48
net proceeds to repay certain of our outstanding secured revolving debt, the
consolidated debt of Teekay and its subsidiaries would have been approximately
$949 million, of which $596 million would have been secured debt that
represented the obligations of, or was guaranteed by, certain of Teekay's
subsidiaries. In addition, the outstanding notes are, and the exchange notes
will be, effectively junior to $89 million of debt of joint ventures that are
50% owned by certain of Teekay's subsidiaries, which debt is guaranteed by such
subsidiaries. On October 1, 2001, we borrowed $50 million that was available
under our revolving secured credit facilities for general liquidity purposes,
which amount we repaid in December 2001.
PRINCIPAL, MATURITY AND INTEREST
In this exchange offer, Teekay will issue up to $100 million aggregate
principal amount of exchange notes. The Indenture provides for the issuance of
other notes having identical terms and conditions to the notes. The additional
notes and the $250 million aggregate principal amount of notes issued on June
22, 2001, and any other notes subsequently issued under the Indenture would be
treated as a single class for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
Teekay will issue exchange notes in denominations of $1,000 and integral
multiples of $1,000. The exchange notes will mature on July 15, 2011.
Interest on the additional notes will accrue at the rate of 8.875% per
annum and will be payable semi-annually in arrears on January 15 and July 15,
commencing on January 15, 2002. Teekay will make each interest payment to the
holders of record on the immediately preceding January 1 and July 1.
Interest on the additional notes will accrue from June 22, 2001 or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
OPTIONAL REDEMPTION
At Teekay's option, Teekay may redeem the notes in whole or in part at any
time before their maturity date at a redemption price equal to the greater of
(i) 100% of the principal amount of the notes to be redeemed and (ii) the sum of
the present values of the remaining scheduled payments of principal and interest
on the notes to be redeemed (excluding the portion of any such interest accrued
to the redemption date) discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Yield (as defined below), plus 50 basis points, plus, in each case, accrued and
unpaid interest to the redemption date. For this purpose, the following terms
have the following meanings:
"Treasury Yield" means, with respect to any redemption date, the rate per
year equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 Quotations for U.S. Government
Securities" or (ii) if such release (or any successor release) is not published
or does not contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the
49
highest and lowest such Reference Treasury Dealer Quotations for such redemption
date, or (B) if the trustee obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.
"Independent Investment Banker" means Goldman, Sachs & Co. or its successor
or, if such firm is unwilling or unable to select the Comparable Treasury Issue,
one of the remaining Reference Treasury Dealers appointed by Teekay.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co. and any
other primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer") designated by, and not affiliated with, Goldman, Sachs & Co.;
provided, however, that if Goldman, Sachs & Co. or any of its designees shall
cease to be a Primary Treasury Dealer, Teekay will appoint another Primary
Treasury Dealer as a substitute for such entity and (ii) any other Primary
Treasury Dealer selected by Teekay.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed, in each case, as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
At least 30 days but not more than 60 days before the relevant redemption
date, Teekay will send notice of redemption to each holder of notes to be
redeemed. If less than all of the notes are to be redeemed, the trustee will
select, by such method as it will deem fair and appropriate, the notes to be
redeemed in whole or in part.
Unless Teekay defaults in payment of the redemption price, no interest will
accrue on the notes called for redemption for the period from and after the
redemption date.
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
The notes will be subject to redemption in whole, but not in part, at the
option of Teekay, at any time at 100% of the principal amount thereof, together
with accrued and unpaid interest thereon to the Redemption Date, and any other
amounts owed to the holders of the notes under the terms of the Indenture or the
notes, if (i) Teekay becomes obligated to pay, on the next date on which any
amount would be payable with respect to the notes, any Additional Amounts as a
result of any generally applicable change in the laws or regulations of a Taxing
Jurisdiction which becomes effective after the date of the original issuance of
any of such notes and (ii) Teekay cannot avoid its obligations to pay such
Additional Amounts by taking reasonable measures available to Teekay. However,
any such notice of redemption must be given within 60 calendar days of the
earliest date on which Teekay would be obligated to pay such Additional Amounts
if a payment in respect of the notes were then due. Prior to the giving of any
notice of redemption described in this paragraph, Teekay will deliver to the
trustee an officer's certificate stating that Teekay is entitled to redeem the
notes in accordance with the terms in the Indenture and stating the facts
relating to such redemption. See "-- Additional Amounts."
MANDATORY REDEMPTION
Except as set forth below under "Covenants -- Repurchase of Notes upon a
Change of Control Triggering Event" Teekay is not required to make sinking fund
payments or mandatory redemption payments prior to maturity with respect to the
notes.
COVENANTS
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL TRIGGERING EVENT
The Indenture provides that upon the occurrence of a Change of Control
Triggering Event, each holder of notes will have the right to require Teekay to
repurchase such holder's notes, in whole or in
50
part, in integral multiples of $1,000, at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture.
A "Change of Control" also constitutes an event of default under several of
Teekay's other debt agreements. There can be no assurance that Teekay will have
sufficient funds to pay the purchase price referred to above at the time of the
Change of Control Triggering Event. The existence of a holder's right to require
Teekay to repurchase notes upon the occurrence of a Change of Control Triggering
Event may deter a third party from acquiring Teekay in a transaction which would
constitute a Change of Control.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Teekay may not, in a single transaction or a series of related
transactions:
(1) consolidate with or merge with or into any other person or permit any
other person to consolidate with or merge with or into Teekay, or
(2) directly or indirectly, transfer, sell, lease or otherwise dispose of
all or substantially all of its assets, unless, in the case of
clauses (1) or (2) of this covenant:
(A) in a transaction in which Teekay does not survive or in which
Teekay sells, leases or otherwise disposes of all or
substantially all of its assets, the successor entity to Teekay
is organized under (i) the laws of the United States or any
State thereof or the District of Columbia, (ii) the laws of the
Republic of Liberia, (iii) the laws of the Commonwealth of the
Bahamas, (iv) the laws of the Republic of the Marshall Islands
or (v) the laws of any other country recognized by the United
States of America and which, in the case of any of events under
subclause (i), (ii), (iii), (iv) or (v) of this subclause A,
shall expressly assume, by a supplemental Indenture executed and
delivered to the trustee in form satisfactory to the trustee,
all of the Company's obligations under the Indenture;
(B) immediately before and after giving effect to such transaction,
no Default or Event of Default shall have occurred and be
continuing; and
(C) certain other conditions are met.
LIMITATION ON LIENS
Teekay may not create, incur, assume or suffer to exist any Lien on or with
respect to any property or assets now owned or hereafter acquired to secure any
present or future Relevant Debt of Teekay without making effective provision for
securing the notes:
(1) in the event such debt is pari passu with the notes, equally and
ratably with such debt as to such property or assets for so long as
such debt will be so secured, or
(2) in the event such debt is subordinate in right of payment to the
notes, prior to such debt as to such property or assets for so long
as such debt will be so secured.
The term "Relevant Debt" shall be defined in the Indenture as meaning any
debt for borrowed money in the form of bonds, notes, debentures or other debt
securities issued by way of public offering or private placement, including any
guarantee or indemnity given in respect of debt of any third party for money
borrowed in the form of bonds, notes, debentures or other debt securities issued
by way of a public offering or private placement, but, for greater clarity,
shall not include loans (or collateral debt securities relating to such loans)
made by banks or other financial institutions, customers or strategic partners.
PAYMENTS FOR CONSENT
Teekay may not, and may not permit any of its Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of notes for or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of the
Indenture
51
or the notes unless such consideration is offered to be paid or is paid to all
holders of the notes that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
PROVISION OF FINANCIAL INFORMATION
So long as any notes are outstanding, whether or not Teekay is subject to
Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto,
Teekay shall file with the Securities and Exchange Commission ("SEC") within the
filing time periods specified by the SEC (the "Required Filing Date") copies of
the annual reports, quarterly reports and other documents which Teekay would
have been required to file pursuant to Section 13(a) or 15(d) of the Exchange
Act or any successor provision thereto. In addition, Teekay will:
(1) within 15 days of each Required Filing Date (A) transmit by mail to
all holders, as their names and addresses appear in the security
register of Teekay without cost to such holders, and (B) file with
the trustee, copies of the annual reports, quarterly reports and
other documents which Teekay files with the SEC pursuant to Section
13(a) or 15(d) or any successor provision thereto or would have been
required to file with the SEC pursuant to such Section 13(a) or 15(d)
or any successor provisions thereto; and
(2) if filing such documents with the SEC is not permitted under the
Exchange Act, promptly upon written request, Teekay will supply
copies of such documents to any prospective holder.
ADDITIONAL AMOUNTS
All payments made by Teekay under or with respect to the notes will be made
free and clear of and without withholding or deduction for or on account of any
present or future tax, duty, levy, impost, assessment or other governmental
charge (hereinafter "Taxes") imposed or levied by or on behalf of any Taxing
Jurisdiction, unless Teekay is required to withhold or deduct Taxes by law or by
the interpretation or administration thereof. If Teekay is so required to
withhold or deduct any amount of interest for or on account of Taxes from any
payment made under or with respect to the notes, Teekay will pay such additional
amounts of interest ("Additional Amounts") as may be necessary so that the net
amount received by each holder (including Additional Amounts) after such
withholding or deduction will not be less than the amount the holder would have
received if such Taxes had not been withheld or deducted; provided that Teekay
will not pay Additional Amounts in connection with any Taxes that are imposed
due to any of the following ("Excluded Additional Amounts"):
(1) the holder or beneficial owner has some connection with the Taxing
Jurisdiction other than merely holding the notes or receiving
principal or interest payments on the notes (such as citizenship,
nationality, residence, domicile, or existence of a business, a
permanent establishment, a dependent agent, a place of business or a
place of management present or deemed present within the taxing
jurisdiction);
(2) any tax imposed on or measured by net income;
(3) the holder or beneficial owner fails to comply with any
certification, identification or other reporting requirements
concerning its nationality, residence, identity or connection with
the Taxing Jurisdiction, if (A) such compliance is required by
applicable law, regulation, administrative practice or treaty as a
precondition to exemption from all or a part of the tax duty
assessment or other governmental charge, (B) the holder or beneficial
owner is able to comply with such requirements without undue hardship
and (C) at least 30 calendar days prior to the first payment date
with respect to which such requirements under the applicable law,
regulation, administrative practice or treaty shall apply. Teekay has
notified such holder that such holder will be required to comply with
such requirements;
52
(4) the holder fails to present (where presentation is required) its note
within 30 calendar days after Teekay has made available to the holder
a payment of principal or interest, provided that Teekay will pay
Additional Amounts which a holder would have been entitled to had the
note owned by such holder been present on any day (including the last
day) within such 30-day period;
(5) any estate, inheritance, gift, value added, use or sales taxes or any
similar taxes, assessments or other governmental charges;
(6) where any Additional Amounts are imposed on a payment on the notes to
an individual and are required to be made pursuant to any European
Union Directive on the taxation of savings implementing the
conclusions of the Economic and Financial Council of Ministers of the
member states of the European Union (ECOFIN) Council meeting of
November 26-27, 2000, or any law implementing or complying with, or
introduced in order to conform to, such Directive; or
(7) where the holder or beneficial owner could avoid any Additional
Amounts by requesting that a payment on the notes be made by, or
presenting the relevant notes for payment to, another paying agent
located in a Member State of the European Union.
Teekay will also (1) make such withholding or deduction and (2) remit the
full amount deducted or withheld to the relevant authority in accordance with
applicable law. Teekay will furnish to the holders of the notes, within 30 days
after the date the payment of any Taxes is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by Teekay.
Teekay will indemnify and hold harmless each holder for the amount (other
than Excluded Additional Amounts) of (1) any Taxes not withheld or deducted by
Teekay and levied or imposed by a Taxing Jurisdiction and paid by such holder as
a result of payments made under or with respect to the notes, (2) any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, and (3) any Taxes imposed by a Taxing Jurisdiction with respect to any
reimbursement under clause (1) or (2) of this paragraph.
At least 30 days prior to each date on which any payment under or with
respect to the notes is due and payable, if Teekay is aware that it will be
obligated to pay Additional Amounts with respect to such payment, Teekay will
deliver to the trustee an officers' certificate stating the fact that such
Additional Amounts will be payable, the amounts so payable and such other
information necessary to enable the trustee to pay such Additional Amounts to
holders on the payment date. Whenever in the Indenture there is mentioned, in
any context, the payment of principal (and premium, if any), interest or any
other amount payable under or with respect to any note, such mention (except
where expressly mentioned) shall be deemed to include mention of the payment of
Additional Amounts provided for in this section to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
Teekay will pay any stamp, administrative, court, documentary, excise or
property taxes arising in a Taxing Jurisdiction in connection with the
Additional Amounts and will indemnify the holders of the notes for any such
taxes paid by the holders of the notes.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture:
(1) Teekay defaults in the payment of principal of (or premium, if any,
on) any notes when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(2) Teekay defaults in the payment of interest on any notes when the same
become due and payable, and such default continues for a period of 30
days;
(3) Teekay defaults in the payment of principal and interest on notes
required to be purchased upon the occurrence of a Change of Control
Triggering Event when due and payable;
53
(4) Teekay defaults in the performance of or breaches any other covenant
or agreement of Teekay in the Indenture or under the notes and such
default or breach continues for a period of 30 consecutive days after
the date on which written notice of such default or breach requiring
Teekay to remedy the same, shall have been given to Teekay by the
trustee, or to Teekay and the trustee by the holders of at least 25%
in aggregate principal amount of the notes;
(5) there occurs with respect to any issue or issues of Debt of Teekay or
any of its Subsidiaries having an outstanding aggregate principal
amount of $10 million or more individually or $20 million or more in
the aggregate for all such issues of all such Persons, whether such
Debt now exists or shall hereafter be created, an event of default
that has caused the holder thereof to declare such Debt to be due and
payable prior to its Stated Maturity and such Debt has not been
discharged in full or such acceleration has not been rescinded or
annulled (by cure, waiver or otherwise) within 30 days of such
acceleration; provided, however, that any secured Debt in excess of
the limits set forth above shall be deemed to have been declared due
and payable if the lender in respect thereof takes any action to
enforce a security interest against, or an assignment of, or to
collect on, seize, dispose of or apply any assets of Teekay or its
Subsidiaries (including lock-box and other similar arrangements)
securing such Debt, or to set off against any bank account of Teekay
or its Subsidiaries in excess of $10 million;
(6) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million individually or $20 million
in the aggregate for all such final judgments or orders against all
such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against Teekay or any Subsidiary
and shall not be paid or discharged, and there shall be any period of
60 consecutive days following entry of the final judgment or order in
excess of $10 million individually or that causes the aggregate
amount for all such final judgments or orders outstanding and not
paid or discharged against all such Persons to exceed $20 million
during which a stay of enforcement of such final judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect;
(7) Teekay or any Subsidiary shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against
Teekay or any Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against
it (but not instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 60 days, or any of the
actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for
any substantial part of its property) shall occur; or Teekay or any
Subsidiary shall take any corporate action to authorize any of the
actions set forth above in this subsection (7); or
(8) Teekay and/or one or more Subsidiaries fails to make (A) at the final
(but not any interim) fixed maturity of any issue of Debt a principal
payment of $10 million or more or (B) at the final (but not any
interim) fixed maturity of more than one issue of such Debt principal
payments aggregating $20 million or more and, in the case of clause
(A), such defaulted payment shall not have been made, waived or
extended within 30 days of the payment default and, in the case of
clause (B), all such defaulted payments shall not have been made,
waived or extended within 30 days of the payment default that causes
the amount described in clause (B) to exceed $20 million.
54
If an Event of Default (other than an Event of Default specified in clause
(7) above) occurs and is continuing under the Indenture, the trustee or the
holders of at least 25% in aggregate principal amount of the notes then
outstanding, by written notice to Teekay (and to the trustee if such notice is
given by the holders (the "Acceleration Notice")), may, and the trustee at the
request of the holders shall, declare the entire unpaid principal of, premium,
if any, and accrued interest on the notes to be immediately due and payable.
Upon a declaration of acceleration, such principal of, premium, if any, and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (4)
or (8) above has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event triggering such Event
of Default pursuant to clause (4) or (8) shall be remedied or cured by Teekay
and/or the relevant Subsidiaries or waived by the holders of the relevant Debt
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (7) above occurs, all unpaid principal of,
premium, if any, and accrued interest on the notes then outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the trustee or any holder. The holders of at least a majority
in principal amount of the outstanding notes by written notice to Teekay and to
the trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if:
(1) Teekay has paid or deposited with the trustee a sum sufficient to pay
(A) all sums paid or advanced by the trustee under the Indenture and
the reasonable compensation, expenses, disbursements and advances of
the trustee, its agents and counsel, (B) all overdue interest on all
notes, (C) the principal of and premium, if any, on, any notes that
have become due otherwise than by such declaration or occurrence of
acceleration and interest thereon at the rate prescribed therefor by
such notes, and (D) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate prescribed
therefor by such notes,
(2) all existing Events of Default, other than the non-payment of the
principal of the notes that have become due solely by such
declaration of acceleration, have been cured or waived, and
(3) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
For information as to the waiver of defaults, see "-- Modification and
Waiver."
The holders of at least a majority in aggregate principal amount of the
outstanding notes may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee. However, the trustee may refuse to follow any
direction that conflicts with law or the Indenture or that may expose the
trustee to personal liability. A holder may not pursue any remedy with respect
to the Indenture or the notes unless:
(1) the holder gives to the trustee written notice of a continuing Event
of Default;
(2) the holders of at least 25% in aggregate principal amount of
outstanding notes make a written request to the trustee to pursue the
remedy;
(3) such holder or holders offer to the trustee indemnity reasonably
satisfactory to the trustee against any costs, liabilities or
expenses to be incurred in compliance with such request;
(4) the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the holders of a majority in aggregate
principal amount of the outstanding notes do not give the trustee a
direction that is inconsistent with the request.
However, such limitations do not apply to the right of any holder of a note
to receive payment of the principal of, premium, if any, or interest on, such
note or to bring suit for the enforcement of any such payment on or after the
due dates expressed in the notes, which right shall not be impaired or affected
without the consent of the holder.
55
The Indenture requires certain officers of Teekay to certify, on or before
a date not more than 120 days after the end of each fiscal year, that a review
has been conducted of the activities of Teekay and its Subsidiaries and Teekay's
and its Subsidiaries' performance under the Indenture and that Teekay has
fulfilled all obligations thereunder, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature
and status thereof. Teekay is also obligated to notify the trustee of any
default or defaults in the performance of any covenants or agreements under the
Indenture.
DEFEASANCE
DEFEASANCE AND DISCHARGE
The Indenture provides that Teekay will be deemed to have paid and will be
discharged from any and all obligations in respect of the notes and the
provisions of the Indenture will no longer be in effect with respect to the
notes (except for, among other matters, certain obligations to register the
transfer or exchange of the notes, to replace stolen, lost or mutilated notes,
to maintain paying agencies and to hold monies for payment in trust), on the
123rd day after the date referred to below if, among other things:
(1) Teekay has deposited with the trustee, in trust, money and/or U.S.
Government Securities that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of,
premium, if any, and accrued interest on the notes on the Stated
Maturity of such payments in accordance with the terms of the
Indentures and the notes;
(2) Teekay has delivered to the trustee (A) either (i) an Opinion of
Counsel to the effect that holders will not recognize income, gain or
loss for federal income tax purposes as a result of Teekay's exercise
of its option under this "Defeasance" provision and will be subject
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel
must be based upon (and accompanied by copy of) a ruling of the
Internal Revenue Service to the same effect or based upon a change in
applicable federal income tax law after the date of the Indenture or
(ii) a ruling directed to the trustee received from the Internal
Revenue Service to the same effect as the aforementioned Opinion of
Counsel and (B) an Opinion of Counsel to the effect that the creation
of the defeasance trust does not violate the Investment Company Act
of 1940, as amended, and, after the passage of 123 days following the
deposit, the trust fund will not be subject to the effect of Section
547 of the United States Bankruptcy Code or Section 15 of the New
York Debtor and Creditor Law;
(3) immediately after giving effect to such deposit on a pro forma basis,
no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have
occurred and be continuing on the date of such deposit or during the
period ending on the 123rd day after the date of such deposit, and
such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to
which Teekay is a party or by which Teekay is bound; and
(4) if at such time the notes are listed on a national securities
exchange, Teekay has delivered to the trustee an Opinion of Counsel
to the effect that the notes will not be delisted as a result of such
deposit, defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Indenture provides that certain provisions of the Indenture will no
longer be in effect upon, among other things, the deposit with the trustee, in
trust, of money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
56
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the notes, the satisfaction of
the provisions described in clauses (2)(B), (3) and (4) of the preceding
paragraph and the delivery by Teekay to the trustee of an Opinion of Counsel to
the effect that, among other things, the holders will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
In the event Teekay exercises its option to omit compliance with certain
covenants and provisions of the Indenture with respect to the notes as described
in the immediately preceding paragraph and the notes are declared due and
payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the trustee will be sufficient to pay amounts due on the notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
notes at the time of the acceleration resulting from such Event of Default.
However, Teekay will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by Teekay and the
trustee with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding notes; provided, however, that no such
modification or amendment may, without the consent of each holder affected
thereby:
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any note,
(2) reduce the principal amount of, or premium, if any, or interest on,
any note,
(3) change the place or currency of payment of principal of, or premium,
if any, or interest on, any note,
(4) impair the right to institute suit for the enforcement of any payment
on or with respect to any note,
(5) reduce the percentage of aggregate principal amount of outstanding
notes the consent of whose holders is necessary to modify or amend
the Indenture,
(6) modify any provisions of the Indenture relating to the modification
and amendment of the Indenture, except as otherwise specified in the
Indenture, or
(7) reduce the percentage of aggregate principal amount of outstanding
notes, the consent of whose holders is necessary for waiver of
compliance with certain provisions of such Indenture or for waiver of
certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS,
SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on, any of the notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of Teekay in the Indenture, or in any of the
notes, or because of the creation of any Debt represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee, Affiliate or
controlling person of Teekay or of any successor person thereof. Each holder, by
accepting such notes, waives and releases all such liability.
57
THE TRUSTEE
The trustee under the Indenture will be the registrar and paying agent with
regard to the notes. The Indenture provides that, except during the continuance
of an Event of Default, the trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
GOVERNING LAW
The Indenture is governed by the laws of the State of New York.
CONSENT TO JURISDICTION AND SERVICE
Teekay has irrevocably appointed Watson, Farley & Williams, New York, New
York, as its agent for service of process in any suit, action or proceeding with
respect to the Indenture or the notes brought in any federal or state court
located in New York City and has submitted to such jurisdiction.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control,"
as used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Capital Stock" is defined to mean, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such person's capital stock or ownership
interests, whether outstanding prior to or issued after the date of the
Indenture, including, without limitation, all common stock and preferred stock.
"Capitalized Lease" is defined to mean, as applied to any person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such person, as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Change of Control" is defined to mean such time as:
(1) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than any Permitted Holder,
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act and including by reason of any change in the
ultimate "beneficial ownership" of the Capital Stock of Teekay) of
more than 50% of the total voting power of the Voting Stock of Teekay
(calculated on a fully diluted basis); or
(2) individuals who at the beginning of any period of two consecutive
calendar years constituted the board of directors of Teekay (together
with any new directors whose election by such board of directors or
whose nomination for election was approved by a vote of at least
58
two-thirds of the members of such board of directors then still in
office who either were members of such board of directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute at least
50% of the members of such board of directors then in office.
"Change of Control Triggering Event" is defined to mean the occurrence of a
Change of Control and a Rating Decline.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect Teekay or any of its Subsidiaries against fluctuations in currency
values to or under which Teekay or any of its Subsidiaries is a party or a
beneficiary on the date of this Indenture or becomes a party or a beneficiary
thereafter.
"Debt" is defined to mean, with respect to any person at any date of
determination (without duplication):
(1) all debt of such person for borrowed money,
(2) all obligations of such person evidenced by bonds, debentures, notes
or other similar instruments,
(3) all obligations of such person in respect of letters of credit or
other similar instruments (including reimbursement obligations with
respect thereto),
(4) all obligations of such person to pay the deferred purchase price of
property or services, which purchase price is due more than six
months after the date of placing such property in service or taking
delivery thereto or the completion of such services, except trade
payables,
(5) all obligations of such person as lessee under Capitalized Leases,
(6) all Debt of persons other than such person secured by a Lien on any
asset of such person, whether or not such Debt is assumed by such
person; provided that the amount of such Debt shall be the lesser of
(A) the fair market value of such asset at such date of determination
and (B) the amount of such Debt,
(7) all Debt of persons other than such person guaranteed by such person
to the extent such Debt is guaranteed by such person, and
(8) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements.
The amount of Debt of any person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided that the
amount outstanding at any time of any Debt issued with original issue discount
is the face amount of such Debt less the remaining unamortized portion of the
original issue discount of such Debt at such time as determined in conformity
with GAAP; and provided further that Debt shall not include any liability for
federal, state, local, foreign or other taxes.
"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Event of Default" has the meaning set forth under "-- Events of Default."
"GAAP" is defined to mean generally accepted accounting principles in the
United States of America as in effect as of the date of the Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be
59
computed in conformity with GAAP, except that calculations made for purposes of
determining compliance with the terms of the covenants and with other provisions
of the Indenture shall be made without giving effect to:
(1) except as otherwise provided, the amortization of any amounts
required or permitted by Accounting Principles Board Opinion Nos. 16
and 17; and
(2) any non-recurring charges associated with the adoption, after the
date of the Indenture, of Financial Accounting Standard Nos. 106 and
109.
"Governing Board Members" means the individuals serving as members of the
protectorate or governing boards of (x) the Trusts or their respective trustees
or (y) if the individuals serving as members of the protectorate or governing
boards of the Trusts or their respective trustees immediately prior to any
restructuring or dissolution of the Trusts or any transfer of Capital Stock of
Teekay held directly or indirectly thereby represent at least a majority of the
members of the protectorate or governing board of the trust (or trustee thereof)
or other entity replacing the Trusts as a direct or indirect owner of all, or
substantially all, of the Capital Stock of Teekay held directly or indirectly by
the Trusts immediately prior to such restructuring, dissolution or transfer,
such replacement trust (or its trustee) or entity, together with any new members
whose election or appointment was approved by at least two-thirds of the members
of such boards or board.
"Gradation" is defined to mean a gradation within a Rating Category or a
change to another Rating Category, which shall include:
(1) "+" and "-" in the case of S&P's current Rating Categories (e.g., a
decline from BB+ to BB would constitute a decrease of one gradation),
(2) 1 and 2 in the case of Moody's current Rating Categories (e.g., a
decline from B1 to B2 would constitute a decrease of one gradation),
or
(3) the equivalent in respect of successor Rating Categories of S&P or
Moody's or Rating Categories used by Rating Agencies other than S&P
and Moody's.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement designed
to protect Teekay or any of its Subsidiaries against fluctuations in interest
rates to or under which Teekay or any of its Subsidiaries is a party or a
beneficiary on the date hereof or becomes a party or a beneficiary hereafter.
"Investment Grade" is defined to mean:
(1) BBB- or above in the case of S&P (or its equivalent under any
successor Rating Categories of S&P);
(2) Baa3 or above, in the case of Moody's (or its equivalent under any
successor Rating Categories of Moody's); and
(3) the equivalent in respect of the Rating Categories of any Rating
Agencies substituted for S&P or Moody's.
"Lien" is defined to mean any mortgage, lien, pledge, security interest,
encumbrance or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Moody's" is defined to mean Moody's Investors Service, Inc. and its
successors.
"Permitted Holder" is defined to mean the Trusts, a majority of the
Governing Board Members (each in his or her capacity as a Governing Board
Member), or any holding company, more than 50% of
60
the total voting power of the Voting Stock of which is, at the time of any
transfer of Capital Stock of Teekay by the Trusts or any such other holding
company, "beneficially owned" by the Trusts or a majority of the Governing Board
Members (each in his or her capacity as a Governing Board Member).
"Rating Agencies" is defined to mean:
(1) S&P and Moody's; or
(2) if S&P or Moody's or both of them are not making ratings of the notes
publicly available, a nationally recognized U.S. rating agency or
agencies, as the case may be, selected by Teekay, which will be
substituted for S&P or Moody's or both, as the case may be.
"Rating Category" is defined to mean:
(1) with respect to S&P, any of the following categories (any of which
may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC, CC, C and D
(or equivalent successor categories);
(2) with respect to Moody's, any of the following categories: Aaa, Aa, A,
Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and
(3) the equivalent of any such categories of S&P or Moody's used by
another Rating Agency, if applicable.
"Rating Decline" is defined to mean that at any time within 90 days (which
period shall be extended so long as the rating of the notes is under publicly
announced consideration for possible downgrade by any Rating Agency) after the
date of public notice of a Change of Control, or of the intention of Teekay or
of any person to effect a Change of Control, the rating of the notes is
decreased by both Rating Agencies by one or more Gradations and the rating by
such Rating Agencies on the notes following such downgrade is below Investment
Grade.
"Redemption Date," when used with respect to any note to be redeemed, is
defined to mean the date fixed for such redemption by or pursuant to the
Indenture.
"S&P" is defined to mean Standard & Poor's Ratings Group, a division of
McGraw Hill Inc., a New York Corporation, and its successors.
"Stated Maturity" is defined to mean (1) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (2) with
respect to any scheduled installment of principal or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" is defined to mean, with respect to Teekay, any business
entity of which more than 50% of the outstanding Voting Stock is owned directly
or indirectly by Teekay and one or more other Subsidiaries of Teekay.
"Taxing Jurisdiction" is defined to mean the Republic of the Marshall
Islands or any jurisdiction from or through which payment on the notes is made,
or any political subdivision thereof, or by any authority or agency therein or
thereof having power to tax.
"Trusts" is defined to mean, collectively, the Cirrus Trust, a trust
organized under the laws of the Turks and Caicos Islands, and the JTK Trust, a
trust organized under the laws of the Bahamas, which as of December 31, 2001,
owned (indirectly through wholly owned subsidiaries) approximately 33.5% and
7.2% of the outstanding Common Stock of Teekay, respectively.
"U.S. Government Securities" is defined to mean securities that are direct
obligations of the United States of America, direct obligations of the Federal
Home Loan Mortgage Corporation, direct obligations of the Federal National
Mortgage Association, securities which the timely payment of whose principal and
interest is unconditionally guaranteed by the full faith and credit of the
United States of
61
America, trust receipts or other evidence of indebtedness of a direct claim upon
the instrument described above and money market mutual funds that invest solely
in such securities.
"Voting Stock" of any person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the board of
directors or similar governing body of such person.
62
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
We will issue the exchange notes by one or more notes in registered, global
form (collectively, the "Restricted Global Notes"). The Restricted Global Notes
will be deposited on issuance with the trustee as custodian for DTC, in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as described
below.
The Global Notes will be deposited on behalf of the acquirers of the
exchange notes for credit to the respective accounts of the acquirers or to such
other accounts as they may direct at DTC. Except as set forth below, the Global
Notes may be transferred, in whole and not in part, only to another nominee of
DTC or to a successor of DTC or its nominee. Beneficial interests in the Global
Notes may not be exchanged for notes in certificated form except in the limited
circumstances described below. See "-- Exchange of Book-Entry Notes for
Certificated Notes."
DEPOSITARY PROCEDURES
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodian relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and any
transfer of ownership interest of each actual purchaser of each security held by
or on behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised us that, pursuant to procedures established by it,
ownership of interests in the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or records maintained by the Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
the Global Notes).
Except as described below, owners of interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Payments in respect of the Global Notes registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, the trustee will treat
the persons in whose names the notes, including the Global Notes, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the trustee nor any agent
thereof has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes, or
(2) maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Notes, or
(3) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the notes, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the relevant security as shown on the records of DTC. Payments by
the Participants and the Indirect Participants to the beneficial owners of the
notes will be governed by standing instructions and
63
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the trustee or
us. Neither we nor the trustee will be liable for any delay by DTC or any of its
Participants identifying the beneficial owners of the notes, and we and the
trustee may conclusively rely on, and will be protected in relying on,
instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Clearstream participants,
interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. Transfers between participants in
Euroclear and Clearstream will be effected in the ordinary way in accordance
with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described in this section of this prospectus, cross-market transfers
between the Participants in DTC, on the one hand, and Euroclear or Clearstream
participants, on the other hand, will be effected through DTC in accordance with
DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or Clearstream, as the case may be, by the
counter party in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Clearstream, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary or take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Notes in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Clearstream participants may deliver instructions
directly to the depositaries for Euroclear or Clearstream.
Because of the time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of an interest in a Global Note by
or through a Euroclear or Clearstream participant to a Participant in DTC will
be received with value on the settlement date of DTC but will be available in
the relevant Euroclear or Clearstream cash account only as of the business day
for Euroclear or Clearstream following DTC's settlement date.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account with DTC interests in the Global Notes are credited and only in respect
to such portion of the principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the indenture, DTC reserves the right to exchange
the Global Notes for legended notes in certificated form and to distribute such
notes to its Participants.
The information in this section of this prospectus concerning DTC,
Euroclear and Clearstream and their book-entry systems has been obtained from
sources that Teekay believes to be reliable, but Teekay takes no responsibility
for the accuracy thereof.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interest in the Global Notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
64
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A beneficial interest in a Global Note may not be exchanged for a security
in certificated form unless:
(1) DTC:
(A) notifies Teekay that it is unwilling or unable to continue as
depositary for such Global Notes, or
(B) has ceased to be a clearing agency registered under the
Securities Exchange Act of 1934,
and in either case Teekay thereupon fails to appoint a successor
depositary,
(2) Teekay, at its option, notifies the trustee in writing that it elects
to cause the issuance of the notes in certificated form, or
(3) there shall have occurred and be continuing an Event of Default with
respect to the notes.
In all cases, certificated notes delivered in exchange for any Global Note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures). Any such exchange will be effected
through the DTC Deposit/Withdraw at Custodian ("DWAC") system and an appropriate
adjustment will be made in the records of the applicable security registrar to
reflect a decrease in the principal amount of the relevant Global Note.
65
REGISTRATION RIGHTS
We entered into an exchange and registration rights agreement with the
initial purchaser of the outstanding notes pursuant to which we agreed, for the
benefit of the holders of the outstanding notes, at our cost:
(1) to use our best efforts to file with the SEC within 60 days following
the date of issuance of the outstanding notes a registration
statement on the appropriate form relating to a registered exchange
offer for the outstanding notes under the Securities Act of 1933.
(2) to use our best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act within
180 days following the issuance of the outstanding notes; and
(3) to use our best efforts to consummate the exchange offer within 60
days after the exchange offer registration statement has been
declared effective.
Upon the exchange offer registration statement being declared effective, we
will offer the exchange notes in exchange for the surrender of the outstanding
notes. We will keep the exchange offer open for not less than 30 calendar days
(or longer if required by applicable law) after the date notice of the exchange
offer is mailed to the holders of the outstanding notes. For each outstanding
note surrendered to us pursuant to the exchange offer, the holder of such
outstanding note will receive an exchange note having a principal amount equal
to that of the surrendered note. The exchange notes will have terms identical in
all material aspects to the outstanding notes (except that the exchange notes
will not contain terms with respect to transfer restrictions).
Under existing interpretations of the staff of the SEC contained in several
no-action letters to third parties, the exchange notes would in general be
freely tradable after the exchange offer without further registration under the
Securities Act of 1933. However, any purchaser of notes who is our affiliate (as
such term is defined in the indenture -- See "Description of the Notes --
Certain Definitions") or who intends to participate in the exchange offer for
the purpose of distributing the exchange notes:
(1) will not be able to rely on the interpretation of the staff of the
SEC;
(2) will not be able to tender its notes in the exchange offer; and
(3) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or
transfer of the notes unless such sale or transfer is made pursuant
to an exemption from such requirements.
Each holder of the outstanding notes (other than certain specified holders)
who wishes to exchange outstanding notes for exchange notes in the exchange
offer will be required to represent that:
(1) any exchange notes that it will receive will be acquired in the
ordinary course of its business,
(2) it has no arrangement or understanding with any person to participate
in the distribution of the outstanding notes or the exchange notes,
(3) it is not our "affiliate," as defined in Rule 405 of the Securities
Act of 1933, or, if it is our affiliate, it will comply with any
applicable registration and prospectus delivery requirements of the
Securities Act,
(4) if it is a broker-dealer, it is not engaged in and does not intend to
engage in the distribution of the exchange notes, and
(5) if it is a broker-dealer (a "Participating Broker-Dealer") that will
receive exchange notes for its own account in exchange for
outstanding notes that it acquired as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the Securities Act of 1933 in connection
with any resale of such exchange notes.
66
The SEC has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to the exchange
notes (other than a resale of an unsold allotment from the original sale of the
outstanding notes) with the prospectus contained in the exchange offer
registration statement. Under the exchange and registration rights agreement, we
are required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the exchange offer registration statement in connection with the
resale of such exchange notes.
In the event that any changes in law or the applicable interpretations of
the staff of the SEC do not permit us to effect the exchange offer, or if for
any reason the exchange offer is not consummated within 240 days following the
date of issuance of the outstanding notes, or the exchange offer is not
available to any holder of the outstanding notes, we will, at our cost:
- as promptly as practicable, but no later than 30 days after the time
such obligation arises, file a shelf registration statement covering
resales of the outstanding notes;
- use our best efforts to cause the shelf registration statement to be
declared effective under the Securities Act of 1933 within 120 days
after such shelf registration statement is filed; and
- use our best efforts to keep effective the shelf registration statement
until two years after its effective date or such shorter period that
will terminate when all outstanding notes covered by the shelf
registration statement have been sold pursuant to the shelf registration
statement.
We will, in the event of the filing of a shelf registration statement,
provide to each holder of the outstanding notes copies of the prospectus which
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement for the outstanding notes has become effective and
take certain other actions as are required to generally permit unrestricted
resales of the outstanding notes. A holder of notes that sells such notes
pursuant to the shelf registration statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act of 1933 in connection with such sales and
will be bound by the provisions of the exchange and registration rights
agreement which are applicable to such holder (including certain indemnification
obligations). In addition, each holder of the outstanding notes will be required
to deliver information to be used in connection with the shelf registration
statement and to provide comments on the shelf registration statement within the
time periods set forth in the exchange and registration rights agreement in
order to have its notes included in the shelf registration statement and to
benefit from the provisions regarding liquidated damages set forth in the
following paragraph.
In the event that:
(1) the exchange offer registration statement is not filed with the SEC
on or prior to the 60th day following the date of issuance of the
outstanding notes or the shelf registration statement is not filed
with the SEC on or prior to the 30th day following the date an
obligation to file arises;
(2) such exchange offer registration statement or shelf registration
statement is not declared effective on or prior to the 180th day
following the date of issuance of the outstanding notes or the 120th
day after such shelf registration statement is filed, respectively;
(3) the exchange offer is not completed within 60 days after the initial
effective date of the exchange registration statement; or
(4) the exchange offer registration statement or shelf registration
statement is declared effective but thereafter ceases to be effective
or usable (each such event referred to in clauses (1) through (4)
above, a "Registration Default"),
then special interest, in addition to the interest set forth on the cover
hereof, shall accrue at a per annum rate of 0.5% for the first 90-day period
immediately following the occurrence of the first Registration
67
Default, and the per annum interest rate will increase by an additional 0.5% for
each subsequent 90-day period during which the Registration Default remains
uncured, up to a maximum additional interest rate of 1.5% per annum in excess of
the interest rate on the cover of this prospectus. Upon the cure of the
Registration Default, the special interest shall no longer accrue and the notes
will bear interest at the original rate, provided, however, that if, after any
such cure, a different Registration Default occurs, then special interest shall
again accrue in accordance with the foregoing provisions.
The summary herein of certain provisions of the exchange and registration
rights agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the exchange
and registration rights agreement, a copy of which is available upon request to
Teekay. The exchange and registration rights agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part.
68
TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary describes the material United States federal income
tax consequences relevant to the purchase, ownership, and disposition of the
exchange notes. Except where indicated, this summary deals only with notes held
as capital assets by purchasers of the notes at the initial issue price in the
offering thereof and does not purport to be a complete analysis of all the
potential tax considerations that may be relevant to such holders. The
discussion does not include special rules that might apply to certain holders
such as dealers in securities or currencies, financial institutions, investors
in pass-through entities, tax-exempt organizations or pension plans, life
insurance companies, persons holding notes as a part of a hedging or conversion
transaction or a straddle or United States holders whose "functional currency"
is not the U.S. dollar. In addition, the following discussion, as well as the
conclusions regarding certain issues of United States federal income tax law
that are reflected in that discussion, are based upon the provisions of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and
related regulations, rulings and judicial decisions existing as of the date of
this prospectus, and upon the advice received by us from special U.S. tax
counsel. Changes in existing laws or regulations or their interpretation may
occur, which could be retroactive. Applicable authorities may be repealed,
revoked or modified so as to result in United States federal income tax
consequences different from those discussed below. Our and our special U.S. tax
counsel's views have no binding effect or official status of any kind, and no
assurance can be given that the conclusions discussed below would be sustained
by a court if challenged by the Internal Revenue Service.
THE DISCUSSION BELOW IS A SUMMARY FOR GENERAL INFORMATION ONLY AND DOES NOT
ADDRESS ALL POTENTIAL TAX CONSIDERATIONS THAT DEPEND UPON CIRCUMSTANCES SPECIFIC
TO EACH INVESTOR. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF
NOTES SHOULD SATISFY THEMSELVES AS TO THE OVERALL TAX CONSEQUENCES OF THEIR
OWNERSHIP OF THE NOTES, INCLUDING STATE, LOCAL AND NON-UNITED STATES TAX
CONSEQUENCES THEREOF (WHICH ARE NOT REVIEWED IN THIS DISCUSSION) AND CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES.
As used in this section of the prospectus, a "United States holder" of a
note means a holder that is an individual citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision, 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 supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust, or a trust that was in existence on August 20, 1996, was
treated as a United States person on August 19, 1996 and elected to be treated
as a United States person at all times thereafter. A "Non-United States holder"
of a note is a holder that is not a United States holder.
THE EXCHANGE OFFER
The exchange of an outstanding note for an exchange note in the exchange
offer will not constitute a significant modification of the outstanding note for
United States federal income tax purposes. Therefore, the exchange note received
will be treated as a continuation of the outstanding note in your hands. As a
result, there will be no United States federal income tax consequences to you
upon the exchange of an outstanding note for an exchange note in the exchange
offer and you will have the same adjusted tax basis and holding period in the
exchange note as you had in the outstanding note immediately before the
exchange.
69
UNITED STATES HOLDER
PAYMENTS OF INTEREST
We expect that the interest (including Additional Amounts, if any) on the
notes will be "qualified stated interest." Qualified stated interest is
generally defined as stated interest that is unconditionally payable in cash or
other property (other than debt instruments of the issuer) or that will be
constructively received, at least annually or at a single fixed rate. We expect
that the notes will not be issued with "original issue discount" within the
meaning of Section 1273 of the Code and the Treasury Department Regulations
issued under that section and other related sections of the Code relating to
original issue discount. Thus, any payment of interest on a note will generally
be taxable to a United States holder as ordinary income at the time it is paid
or accrued in accordance with the United States holder's regular method of
accounting for tax purposes. Thus, to the extent that amounts are withheld and
Additional Amounts are paid on the notes, a United States holder will be
required to report income in an amount greater than cash received on the
payments.
Interest income from the notes will constitute foreign source income for
United States federal income tax purposes and, with certain exemptions, will be
treated separately, together with other items of "passive income" or, in the
case of certain holders, "financial services income" for purposes of computing
the foreign tax credit allowable under the Code. A United States holder may be
eligible, subject to a number of limitations, for a foreign tax credit or
deduction against such United States holder's United States federal income tax
liability for taxes withheld on the notes.
AMORTIZABLE BOND PREMIUM
A United States holder who purchases a note for an amount in excess of the
principal amount will be considered to have purchased the note at a "premium." A
United States holder may elect to amortize the premium over the remaining term
of the note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the United States person's foreign source income from
the note. A United States holder who elects to amortize the premium on a note
must reduce its tax basis in the note by the amount of premium amortized in any
year. An election to amortize bond premium applies to all taxable instruments
then owned and thereafter acquired by the taxpayer and may be revoked only with
the consent of the Internal Revenue Service.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A United States holder's tax basis in a note generally will be the United
States holder's cost for the note. Upon the sale, exchange or retirement of a
note, a United States holder will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange or retirement (less any
accrued interest, which will be taxable as such) and the adjusted tax basis of
the note. In general, such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the note has been held for more than one year. Under current law, net capital
gains of individuals are, under certain circumstances, taxed at lower rates than
items of ordinary income. The deductibility of capital losses is subject to
significant limitations. Capital gain or loss realized by a United States holder
generally will be treated as United States source income for United States
foreign tax credit limitation purposes.
The exchange of the notes for registered notes pursuant to the exchange
offer will not constitute a material modification of the terms of the notes and
therefore will not constitute a taxable event for United States federal income
tax purposes. In that event, the exchange would have no United States federal
income tax consequences to a United States holder, so that the United States
holder's holding period and adjusted tax basis for a note would not be affected
and the United States holder would continue to take into account income in
respect of a note in the same manner as before the exchange.
70
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting will apply to certain payments of
principal and interest on the notes and to the proceeds from the sale of a note
paid to United States holders other than certain exempt recipients.
Additionally, a 30.5% backup withholding tax currently will apply to such
payments if the United States holder fails to provide a correct taxpayer
identification number or certification of exempt status or fails to report in
full dividend and interest income or otherwise fails to comply with applicable
requirements of the backup withholding rules. The rate of backup withholding is
scheduled to be reduced over time to 28% in 2006.
If the 30.5% backup withholding tax applies to a United States holder, the
United States holder may use the amounts withheld as a refund or credit against
the United States holder's United States federal income tax liability as long as
the United States holder provides certain information to the Internal Revenue
Service.
NON-UNITED STATES HOLDER
PAYMENTS OF INTEREST
Payments of principal and interest on the notes will not be subject to
United States federal income tax, including United States withholding tax, if
paid to a non-United States holder, unless, in the case of interest, the
non-United States holder is: (1) a corporation that is an insurance company
carrying on a United States trade or business to which the interest is
attributable within the meaning of the Code; or (2) an individual or corporation
with an office or other fixed place of business in the United States to which
the interest is attributable, the interest either is derived in the active
conduct of a banking, financing or similar business within the United States or
is received by a corporation, the principal business of which is trading in
stock or securities for its own account, and certain other conditions exist.
SALE, EXCHANGE AND RETIREMENT OF NOTES
Gain, realized on the sale, retirement or other disposition of notes by a
non-United States holder, generally will not be subject to United States federal
income tax, including withholding tax, unless the gain is effectively connected
with the conduct by such holder of a trade or business within the United States;
or in the case of an individual, the non-United States holder has been present
in the United States for 183 days or more during the taxable year of the sale or
retirement and certain other conditions are satisfied.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting and backup withholding generally will not apply to
payments of principal and interest on the notes made by a United States paying
agent to a non-United States holder of a note, provided that: (1) the beneficial
owner of such note certifies, under penalties of perjury, that it is not a
United States holder and provides its name and address; or (2) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business and holds the notes
certifies, under penalties of perjury, that such statement has been received
from the beneficial owner of such note by it or by a financial institution
between it and the beneficial owner and furnishes such paying agent with a copy
thereof. Additionally, such paying agent must not have actual knowledge that
such beneficial owner is a United States person.
Proceeds received from the sale of a note by a non-United States holder to
or through the United States office of a broker generally are subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
Generally, the certification requirements will be satisfied if an
individual or corporation provides the Withholding Agent, as defined below, with
a properly completed Internal Revenue Service Form W-8BEN, or appropriate
successor form. A "Withholding Agent" is the last United States payor
71
(or a non-United States payor who is a qualified intermediary, United States
branch of a foreign person, or withholding foreign partnership) in the chain of
payment prior to payment to a non-United States person (which is itself not a
Withholding Agent).
If backup withholding tax applies to a non-United States holder, the holder
may use the amounts withheld as a refund or credit against the holder's United
States federal income tax liability as long as the non-United States holder
provides certain information to the Internal Revenue Service.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF ANY INVESTMENT IN THE NOTES, INCLUDING
THE APPLICATION OF UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX
LAWS.
72
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for
outstanding notes only where such outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed to make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale for a period of 180 days from the date on
which the exchange offer is consummated, or such shorter period as will
terminate when all outstanding notes acquired by broker-dealers for their own
accounts as a result of market-making activities or other trading activities
have been exchanged for exchange notes and such exchange notes have been resold
by such broker-dealers.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any exchange notes. Any broker-dealer that
resells exchange notes that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such exchange notes may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933 and any profit on any such resale of exchange
notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933.
We have agreed to pay all our expenses incident to the exchange offer,
including reasonable fees of not more than one counsel retained by the holders
of outstanding notes in connection with the filing of a shelf registration
statement, if required, but excluding commissions or concessions of any brokers
or dealers and the fees of any other advisors or experts retained by the holders
of outstanding notes, except as expressly set forth in the exchange and
registration rights agreement, and will indemnify the holders of outstanding
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act of 1933.
73
LEGAL MATTERS
The validity of the exchange notes offered by this prospectus and certain
legal matters will be passed upon for us by Perkins Coie LLP, Portland, Oregon,
as to United States law, and certain other legal matters will be passed upon for
us by Watson, Farley & Williams, New York, New York, as to Marshall Islands law,
by Seward & Kissel, LLP, New York, New York, as to U.S. tax law, by Graham,
Thompson & Co., Nassau, the Bahamas, as to Bahamian law, by Appleby Spurling &
Kempe, Hamilton, Bermuda, as to Bermuda law, and by Bugge, Arentz-Hansen &
Rasmussen, Oslo, Norway, as to Norwegian law.
INDEPENDENT AUDITORS
The consolidated financial statements and schedule of Teekay and its
subsidiaries appearing in Teekay's Annual Report (Form 20-F) filed with the SEC
on April 2, 2001, as at December 31, 2000 and 1999, and for the fiscal year
ended December 31, 2000, the nine months ended December 31, 1999 and the year
ended March 31, 1999, have been audited by Ernst & Young, independent chartered
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of UNS and its subsidiaries as at
December 31, 2000 and 1999, and for the fiscal years ended December 31, 2000 and
1999, included in our Report on Form 6-K with respect to our acquisition of UNS,
filed with the SEC on June 7, 2001, which Report is incorporated by reference
herein, have been audited by Deloitte & Touche Statsautoriserte Revisorer AS,
independent public accountants, as stated in the report included therein.
74
INDEX TO FINANCIAL STATEMENTS
PAGE
----
TEEKAY SHIPPING CORPORATION UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS:
Unaudited Pro Forma Consolidated Condensed Statement of
Income for the nine months ended September 30, 2001....... F-2
Unaudited Pro Forma Consolidated Condensed Statement of
Income for the year ended December 31, 2000............... F-3
Notes to Unaudited Pro Forma Consolidated Condensed
Financial Statements...................................... F-4
F-1
TEEKAY SHIPPING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS OF U.S. DOLLARS)
UNS
(JANUARY 1 - PRO FORMA PRO FORMA
TEEKAY (I) MARCH 5/01) ADJUSTMENTS NOTES CONSOLIDATED
---------- ------------ ----------- ----- ------------
NET VOYAGE REVENUES
Voyage revenues..................... 825,910 17,188 843,098
Voyage expenses..................... 188,637 928 189,565
------- ------ ------ --------
Net voyage revenues................. 637,273 16,260 653,533
------- ------ ------ --------
OPERATING EXPENSES
Vessel operating expenses........... 113,404 4,371 117,775
Time charter hire expense........... 51,477 -- 51,477
Depreciation and amortization....... 97,141 4,206 101,347
Goodwill amortization............... 2,332 -- 1,054 (5a) 3,386
General and administrative.......... 35,572 1,207 36,779
------- ------ ------ --------
299,926 9,784 1,054 310,764
------- ------ ------ --------
Income from vessel operations....... 337,347 6,476 (1,054) 342,769
------- ------ ------ --------
OTHER ITEMS
Interest expense.................... (50,944) (3,717) (3,147) (5b) (57,808)
Interest income..................... 7,867 197 8,064
Equity income....................... 16,292 481 94 (5c) 16,867
Other income (loss)................. (5,241) 455 211 (5d) (4,575)
------- ------ ------ --------
(32,026) (2,584) (2,842) (37,452)
------- ------ ------ --------
NET INCOME.......................... 305,321 3,892 (3,896) 305,317
======= ====== ====== ========
Pro forma Basic Earnings per Common
Share............................. $7.69
Pro forma Diluted Earnings per
Common Share...................... $7.53
Weighted average number of shares
outstanding (thousands)........... 39,698
---------------
(i) Includes results of UNS (64% interest) for the period March 6, 2001 to April
26, 2001 and (100% interest) for the period April 27, 2001 to September 30,
2001.
The accompanying notes are an integral part of the unaudited pro forma
consolidated condensed financial statements
F-2
TEEKAY SHIPPING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS OF U.S. DOLLARS)
PRO FORMA PRO FORMA
TEEKAY UNS ADJUSTMENTS NOTES CONSOLIDATED
------- ------- ----------- ----- ------------
NET VOYAGE REVENUES
Voyage revenues........................ 893,226 69,081 962,307
Voyage expenses........................ 248,957 -- 248,957
------- ------- ------- ---------
Net voyage revenues.................... 644,269 69,081 713,350
------- ------- ------- ---------
OPERATING EXPENSES
Vessel operating expenses.............. 125,415 20,660 146,075
Time charter hire expense.............. 53,547 -- 53,547
Depreciation and amortization.......... 100,153 18,610 118,763
Goodwill amortization.................. -- -- 4,534 (5a) 4,534
General and administrative............. 37,479 5,966 43,445
------- ------- ------- ---------
316,594 45,236 4,534 366,364
------- ------- ------- ---------
Income from vessel operations.......... 327,675 23,845 (4,534) 346,986
------- ------- ------- ---------
OTHER ITEMS
Interest expense....................... (74,540) (16,641) (15,319) (5b) (106,500)
Interest income........................ 13,021 2,069 15,090
Equity income.......................... 9,546 2,240 11,786
Other income (loss).................... (5,682) 3,874 (1,808)
------- ------- ------- ---------
(57,655) (8,458) (15,319) (81,432)
------- ------- ------- ---------
NET INCOME............................. 270,020 15,387 (19,853) 265,554
======= ======= ======= =========
Pro forma Basic Earnings per Common
Share................................ $ 6.90
Pro forma Diluted Earnings per Common
Share................................ $ 6.75
Weighted average number of shares
outstanding (thousands).............. 38,468
The accompanying notes are an integral part of the unaudited pro forma
consolidated condensed financial statements
F-3
TEEKAY SHIPPING CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma consolidated condensed financial statements (the
"Financial Statements") give effect to the acquisition (the "Acquisition") of
100% of the issued and outstanding shares of Ugland Nordic Shipping ASA ("UNS")
by Teekay Shipping Corporation ("Teekay"). The Financial Statements have been
prepared by management in accordance with accounting principles generally
accepted in the United States from the information derived from the audited
historical financial statements of Teekay and UNS for the year ended December
31, 2000, and the unaudited historical interim financial statements of Teekay
and UNS for the nine months ended September 30, 2001. In the opinion of
management, the Financial Statements include all adjustments necessary for fair
presentation.
As of March 31, 2001, Teekay had purchased approximately 64% of the issued
and outstanding shares of UNS. On April 26, 2001, Teekay acquired the remaining
36% of the issued and outstanding shares of UNS. Accordingly, the Financial
Statements contained herein give effect to the acquisition of 100% of the issued
and outstanding shares of UNS.
The unaudited pro forma consolidated condensed statements of income for the
nine months ended September 30, 2001 and the year ended December 31, 2000 give
effect to the Acquisition as though it had taken place on January 1, 2000.
The Financial Statements are not necessarily indicative of what the results
of operations and financial position would have been, nor do they purport to
project Teekay's results of operations for any future periods. The Financial
Statements also do not include any expected benefits or cost savings arising
from the Acquisition. The Financial Statements should be read in conjunction
with the consolidated financial statements of Teekay and UNS referred to above.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed in preparing the Financial Statements are
those used by Teekay as set out in the consolidated financial statements
contained in Teekay's Annual Report on Form 20-F as at and for the year ended
December 31, 2000, and in Teekay's Quarterly Report on Form 6-K for the nine
months ended September 30, 2001.
3. ACCOUNTING TREATMENT FOR THE ACQUISITION
The Acquisition has been accounted for using the purchase method of
accounting. The results of operations of UNS are included from the assumed date
of acquisition. UNS' accounting policies have been adjusted to be consistent
with those of Teekay.
F-4
TEEKAY SHIPPING CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
4. PRO FORMA GENERAL ASSUMPTIONS AND PURCHASE PRICE ALLOCATION
GENERAL ASSUMPTIONS
Teekay purchased all of the issued and outstanding shares of Ugland Nordic
Shipping ASA ("UNS Shares") at an average price per share of Norwegian Kroner
136 in cash or U.S. $15.26 per share. The Financial Statements reflect the
following:
- 100% of outstanding UNS Shares were exchanged for cash;
- total purchase consideration (in millions of U.S. dollars):
Cash paid................................................... $216.3
Estimated transaction and integration costs included in
accounts payable and accrued liabilities.................. 7.0
------
$223.3
======
PURCHASE PRICE ALLOCATION
The excess of the purchase price over the fair market value of the net
assets of UNS has been allocated to goodwill. The purchase price includes an
accrual of $7.0 million for estimated transaction and integration costs.
The following table describes the allocation of the purchase price as at
September 30, 2001 (in millions of U.S. dollars):
TOTAL
------
Net assets acquired......................................... $132.6
Goodwill.................................................... 90.7
------
$223.3
======
5. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
The unaudited pro forma consolidated condensed statements of income
incorporate the following adjustments:
(a) Goodwill amortization related to the Acquisition of UNS is calculated
on a straight-line basis over a 20 year period. As a result, goodwill
amortization increased by $1.1 million for the nine months ended
September 30, 2001 and by $4.5 million for the year ended December
31, 2000.
(b) Interest expense at 6.2% and 7.1% (the average historical cost of
debt on outstanding debt for the period from January 1, 2001 to April
26, 2001 and the year ended December 31, 2000, respectively) has been
increased by $3.1 million for the nine months ended September 30,
2001 and by $15.3 million for the year ended December 31, 2000 to
reflect the additional interest expense that would have been incurred
had the Acquisition occurred on January 1, 2000.
(c) Teekay's equity income for the nine months ended September 30, 2001
has been adjusted to reverse the equity loss earned from the 9%
ownership in UNS for the period from January 1, 2001 to March 5, 2001
so that the results for the nine months ended September 30, 2001 give
effect to the Acquisition as if it had it taken place on January 1,
2000.
F-5
TEEKAY SHIPPING CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Teekay's other income (loss) for the nine months ended September 30,
2001 has been adjusted to reverse the minority interest portion of
UNS' results for the period from March 6, 2001 to April 26, 2001 so
that the results for the nine months ended September 30, 2001 give
effect to the Acquisition as if it had it taken place on January 1,
2000.
6. UNAUDITED PRO FORMA CONSOLIDATED EARNINGS PER SHARE
The unaudited pro forma consolidated earnings per share have been
calculated based upon the weighted average number of Teekay shares outstanding
during the periods presented.
F-6
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER ONLY TO SELL THE NOTES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND
IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information... i
Special Note Regarding Forward-Looking
Statements.......................... ii
Service of Process and Enforcement of
Liabilities......................... iii
Prospectus Summary.................... 1
Risk Factors.......................... 15
Use of Proceeds....................... 24
Capitalization........................ 25
Environmental Regulation.............. 26
Taxation of Teekay.................... 31
Description of Certain Debt........... 36
The Exchange Offer.................... 38
Description of the Notes.............. 48
Form, Denomination, Book-Entry
Procedures and Transfer............. 63
Registration Rights................... 66
Tax Considerations.................... 69
Plan of Distribution.................. 73
Legal Matters......................... 74
Independent Auditors.................. 74
Index to Financial Statements......... F-1
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$100,000,000
------------------------------
TEEKAY LOGO
------------------------------
TEEKAY SHIPPING CORPORATION
OFFER TO EXCHANGE 8.875%
SENIOR NOTES DUE JULY 15, 2011,
FOR 8.875% SENIOR NOTES DUE
JULY 15, 2011, WHICH HAVE
BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
---------------------------
PROSPECTUS
---------------------------
JANUARY , 2002
------------------------------------------------------
------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Teekay Shipping Corporation ("Teekay") is a Marshall Islands corporation.
The Marshall Islands Business Corporations Act ("MIBCA") provides that a
Marshall Islands corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of no contest, or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.
A Marshall Islands corporation also has the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
To the extent that a director or officer of a Marshall Islands corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding paragraph, or in the defense of a claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid in advance of the final disposition of such action, suit
or proceeding as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in the MIBCA.
In addition, a Marshall Islands corporation has the power to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director or officer against any liability asserted against him and incurred by
him in such capacity whether or not the corporation would have the power to
indemnify him against such liability under the provisions of the MIBCA.
Section F of Teekay's Articles of Incorporation, as amended, provides that
to the fullest extent permitted under the MIBCA, a director of Teekay shall not
be liable to Teekay or its shareholders for
II-1
monetary damages for breach of fiduciary duty as a director. Section 10.00 of
Teekay's Bylaws provides that any person who is made party to a proceeding by
virtue of being an officer or director of Teekay or, being or having been such a
director or officer or an employee of Teekay, serving at the request of Teekay
as a director, officer, employee or agent of another corporation or other
enterprise, shall be indemnified and held harmless to the fullest extent
permitted by the MIBCA against any and all expense, liability, loss (including
attorneys' fees, judgments, fines or penalties and amounts paid in settlement)
actually incurred or suffered by such person in connection with the proceeding.
In addition, Teekay has entered into separate Indemnification Agreements
with each of Teekay officers and directors listed in the Registration Statement
which provide for indemnification of the director or officer against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative except to the extent that such person is otherwise indemnified,
such action, suit or proceeding arose out of such person's intentional
misconduct, knowing violation of law or out of a transaction in which such
director or officer is finally judicially determined to have derived an improper
personal benefit or if it shall be determined by a final judgment or other final
adjudication that such indemnification was not lawful.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Registration Statement:
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Amended and Restated Articles of Incorporation of Teekay
Shipping Corporation.(1)
3.2 Articles of Amendment of Articles of Incorporation of Teekay
Shipping Corporation.(1)
3.3 Amended and Restated Bylaws of Teekay Shipping
Corporation.(1)
4.1 Registration Rights Agreement among Teekay Shipping
Corporation, Tradewinds Trust Co. Ltd., as Trustee for the
Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee
for the JTK Trust.(2)
4.2 Specimen of Teekay Shipping Corporation Common Stock
Certificate.(2)
4.3 Indenture dated January 29, 1996 among Teekay Shipping
Corporation, VSSI Oceans Inc., VSSI Atlantic Inc., VSSI
Appian Inc., Senang Spirit Inc., Exuma Spirit Inc., Nassau
Spirit Inc., Andros Spirit Inc. and United States Trust
Company of New York, as Trustee.(3)
4.4 Specimen of Teekay Shipping Corporation's 8.32% First
Preferred Ship Mortgage Notes Due 2008.(3)
4.5 Bahamian Statutory Ship Mortgage dated January 29, 1996 by
Nassau Spirit Inc. to United States Trust Company of New
York.(3)(4)
4.6 Deed of Covenants dated January 29, 1996 by Nassau Spirit
Inc. to United States Trust Company of New York.(3)(4)
4.7 First Preferred Ship Mortgage dated January 29, 1996 by VSSI
Oceans Inc. to United States Trust Company of New York, as
Trustee.(5)
4.8 Assignment of Time Charter dated January 29, 1996 by Nassau
Spirit Inc. to United States Trust Company of New York, as
Trustee.(3)(4)
4.9 Assignment of Insurance dated January 29, 1996 by Nassau
Spirit Inc. to United States Trust Company of New York, as
Trustee.(3)(4)
4.10 Pledge Agreement and Irrevocable Proxy dated January 29,
1996 by Teekay Shipping Corporation in favor of United
States Trust Company of New York, as Trustee.(3)
4.11 Guarantee dated January 29, 1996 by Nassau Spirit Inc. in
favor of United States Trust Company of New York, as
Trustee.(3)(4)
4.12 Assignment of Freights and Hires dated January 29, 1996 by
Nassau Spirit Inc. to United States Trust Company of New
York, as Trustee.(3)(4)
4.13 Cash Collateral Account Agreement dated January 29, 1996
between Nassau Spirit Inc. and United States Trust Company
of New York, as Trustee.(3)(4)
4.14 Investment Account Agreement dated January 29, 1996 between
Teekay Shipping Corporation and United States Trust Company
of New York, as Trustee.(3)
4.15 Indenture dated June 22, 2001 among Teekay Shipping
Corporation and U.S. Trust Company of Texas, N.A.(14)
4.16 First Supplemental Indenture dated as of December 6, 2001,
among Teekay Shipping Corporation and The Bank of New York
Trust Company of Florida, N.A. (formerly U.S. Trust Company
of Texas, N.A.).
4.17 Exchange and Registration Rights Agreement dated June 22,
2001 among Teekay Shipping Corporation and Goldman, Sachs &
Co., Morgan Stanley & Co. Incorporated, Salomon Smith Barney
Inc., Deutsche Banc Alex. Brown Inc., J.P. Morgan Securities
Inc., Fleet Securities, Inc. and Scotia Capital (USA)
Inc.(14)
4.18 Exchange and Registration Rights Agreement dated December 6,
2001 between Teekay Shipping Corporation and Goldman, Sachs
& Co.
II-3
EXHIBIT NO. DESCRIPTION
----------- -----------
4.19 Specimen of Teekay Shipping Corporation's 8.875% Senior
Notes due 2011.(14)
5.1 Opinion of Perkins Coie LLP, special counsel to the
registrant, as to the legality under U.S. law of the notes
being offered by Teekay Shipping Corporation.
8.1 Opinion of Perkins Coie LLP, regarding certain U.S. tax
matters (contained in opinion filed as Exhibit 5.1).
8.2 Opinion of Seward and Kissel, LLP, regarding certain U.S.
tax matters.
8.3 Opinion of Watson, Farley & Williams, regarding Marshall
Islands tax matters.
8.4 Opinion of Graham, Thompson & Co., regarding Bahamian tax
matters.
8.5 Opinion of Appleby Spurling & Kempe, regarding Bermuda tax
matters.
8.6 Opinion of Bugge, Arentz-Hansen & Rasmussen, regarding
Norwegian tax matters.
10.1 1995 Stock Option Plan.(2)
10.2 Amendment to 1995 Stock Option Plan.(6)
10.3 Amended 1995 Stock Option Plan.(7)
10.4 Form of Indemnification Agreement between Teekay Shipping
Corporation and each of its officers and directors.(2)
10.5 Charter Party, as amended, dated September 21, 1989 between
Palm Shipping Inc. and BP Shipping Limited.(8)
10.6 Time Charter, as amended, dated July 3, 1995 between VSSI
Oceans Inc. and Palm Shipping Inc.(5)
10.7 Time Charter, as amended, dated January 4, 1994 between VSSI
Atlantic Inc. and Palm Shipping Inc.(5)
10.8 Time Charter, as amended, dated February 1, 1992 between
VSSI Appian Inc. and Palm Shipping Inc.(5)
10.9 Time Charter, as amended, dated December 1, 1993 between
Senang Spirit Inc. and Palm Shipping Inc.(5)
10.10 Time Charter, as amended, dated August 1, 1992 between Exuma
Spirit Inc. and Palm Shipping Inc.(5)
10.11 Time Charter, as amended, dated May 1, 1992 between Nassau
Spirit Inc. and Palm Shipping Inc.(5)
10.12 Time Charter, as amended, dated November 1, 1992 between
Andros Spirit Inc. and Palm Shipping Inc.(5)
10.13 Management Agreement, as amended, dated June 1, 1992 between
Teekay Shipping Limited and Nassau Spirit Inc.(5)(4)
10.14 Agreement, dated October 3, 1996, for a U.S. $90,000,000
Term Loan Facility to be made available to certain
subsidiaries of Teekay Shipping Corporation by Christiania
Bank og Kreditkasse, acting through its New York Branch, The
Bank of Nova Scotia, and Banque Indosuez.(9)
10.15 Agreement, dated October 18, 1996, for a U.S. $120,000,000
Term Loan Facility to be made available to certain
subsidiaries of Teekay Shipping Corporation by Den Norske
Bank ASA, Nederlandse Scheepshypothesbank N.V., The Bank of
New York, and Midland Bank plc.(9)
10.16 Agreement, dated January 26, 1998, for a U.S. $200,000,000
Reducing Revolving Credit Facility to be made available to
certain wholly-owned subsidiaries of Teekay Shipping
Corporation by Den Norske Bank ASA, Christiania Bank og
Kreditkasse ASA, New York Branch, and the Bank of Nova
Scotia.(10)
10.17 Agreement, dated March 26, 1999, for the amalgamation of
Northwest Maritime Inc., a 100% owned subsidiary of Teekay
Shipping Corporation, and Bona Shipholding Ltd.(11)
II-4
EXHIBIT NO. DESCRIPTION
----------- -----------
10.18 Agreement, dated April 16, 1998, for a U.S. $30,000,000 Term
Loan Facility to be made available to VSSI Australia Limited
by Rabo Australia Limited.(1)
10.19 Agreement, dated December 18, 1997, for a U.S. $44,000,000
Term Loan Facility to be made available to Barrington
(Australia) Pty Limited and Palmerston (Australia) Pty
Limited by Rabo Australia Limited.(1)
10.20 Amended and Restated Reimbursement Agreement, dated April
16, 1998, Among Barrington (Australia) Pty Limited,
Palmerston (Australia) Pty Limited, VSSI Australia Limited,
VSSI Transport Inc. and Alliance Chartering Pty Limited and
Nedship Bank (America) N.V., The Bank of New York and
Landesbank Schleswig-Holstein.(1)
10.21 Amendment No. 1, dated May 1999, to Amended and Restated
Reimbursement Agreement dated April 16, 1998 among
Barrington (Australia) Pty Limited, Palmerston (Australia)
Pty Limited, VSSI Australia Limited, VSSI Transport Inc. and
Alliance Chartering Pty Limited and Nedship Bank (America)
N.V., The Bank of New York and Landesbank
Schleswig-Holstein.(1)
10.22 Amended and Restated Agreement, date June 11, 1999, for a
$500,000,000 Revolving Loan between Bona Shipholding Ltd.,
Chase Manhattan plc, Citibank International plc and various
other banks.(1)
10.23 Amendment and Restatement Agreement, dated June 11, 1999,
relating to a U.S. $500,000,000 Revolving Loan Agreement
between Bona Shipholding Ltd., Chase Manhattan plc, Citibank
International plc and various other banks.(1)
10.24 Rights Agreement, dated as of September 8, 2000, between
Teekay Shipping Corporation and The Bank of New York, as
Rights Agent.(12)
10.25 Reimbursement Agreement, dated January 1, 2000, between
Fleet Management Inc. and Teekay Shipping Corporation.(7)
10.26 Reimbursement Agreement, dated February 16, 2001, between
Karratha Spirit Pty Ltd and Nedship Bank (America) N.V.(13)
10.27 Agreement, dated February 16, 2001, for a U.S. $34,000,000
Term Loan Facility to be made available to Karratha Spirit
Pty Ltd by Rabo Australia Limited.(13)
10.28 Form of Exchange Agent Agreement between United States Trust
Company of New York, as exchange agent, and Teekay Shipping
Corporation.*
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for Teekay Shipping Corporation.
15.1 Letter from Ernst & Young LLP, as independent chartered
accountants, regarding unaudited interim financial
information.
21.1 List of Significant Subsidiaries of Teekay Shipping
Corporation.
23.1 Consent of Perkins Coie, LLP (contained in Exhibit 5.1).
23.2 Consent of Seward and Kissel, LLP (contained in Exhibit
8.2).
23.3 Consent of Watson, Farley & Williams (contained in Exhibit
8.3).
23.4 Consent of Graham, Thompson & Co. (contained in Exhibit
8.4).
23.5 Consent of Appleby Spurling & Kempe (contained in Exhibit
8.5)
23.6 Consent of Bugge, Arentz-Hansen & Rasmussen (contained in
Exhibit 8.6)
23.7 Consent of Ernst & Young.
23.8 Consent of Deloitte & Touche Statsautoriserte Revisorer AS.
24.1 Power of Attorney (contained on signature pages).
25.1 Statement of Eligibility of The Bank of New York Trust
Company of Florida, N.A. (formerly U.S. Trust Company of
Texas, N.A.), as trustee.
II-5
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
---------------
* To be filed by amendment.
(1) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on March 30, 2000, and hereby incorporated by
reference to such Annual Report.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form F-1 (Registration No. 33-7573-4), filed with the SEC on July 14,
1995, and hereby incorporated by reference to such Registration Statement.
(3) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on June 4, 1996, and hereby incorporated by
reference to such Annual Report.
(4) A schedule attached to this exhibit identifies all other documents not
required to be filed as exhibits because such other documents are
substantially identical to this exhibit. The schedule also sets forth
material details by which the omitted documents differ from this exhibit.
(5) Previously filed as an exhibit to the Company's Registration Statement on
Form F-3 (Registration No. 33-65139), filed with the SEC on January 19,
1996, and hereby incorporated by reference to such Registration Statement.
(6) Previously filed as an exhibit to the Company's Report on Form 6-K, filed
with the SEC on May 2, 2000, and hereby incorporated by reference to such
Report.
(7) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on April 2, 2001, and hereby incorporated by
reference to such Annual Report.
(8) Previously filed as an exhibit to the Company's Registration Statement on
Form F-1 (Registration No. 33-68680), as declared effective by the SEC on
November 29, 1993, and hereby incorporated by reference to such
Registration Statement.
(9) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on June 11, 1997, and hereby incorporated by
reference to such Annual Report.
(10) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
filed with the SEC on May 20, 1998, and hereby incorporated by reference to
such Annual Report.
(11) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
filed with the SEC on June 11, 1999, and hereby incorporated by reference
to such Annual Report.
(12) Previously filed as an exhibit to the Company's Form 8-A, filed with the
SEC on September 11, 2000, and hereby incorporated by reference to such
filing.
(13) Previously filed as an exhibit to the Company's Report on Form 6-K filed
with the SEC on May 24, 2001, and hereby incorporated by reference to such
report.
(14) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (Registration No. 333-64928), filed with the SEC on July 11, 2001,
and hereby incorporated by reference to such Registration Statement.
II-6
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers for sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3, Form S-8
or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statement required by Item 8.A of Form 20-F at the start of any
delayed offering or throughout a continuous offering. Financial statements
and information otherwise required by Section 10(a)(3) of the Act need not
be furnished, provided that the registrant includes in the prospectus, by
means of a post-effective amendment, financial statements required pursuant
to this paragraph (a)(4) and other information necessary to ensure that all
other information in the prospectus is at least as current as the date of
those financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or sec.210.3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Form F-3.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), that is incorporated by reference in this
registration statement shall be deemed to be a new
II-7
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes: (i) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests. The
undertaking in subparagraph (i) above includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Vancouver,
British Columbia, Canada, on the 16th day of January, 2002.
TEEKAY SHIPPING CORPORATION
/s/ BJORN MOLLER
By:
--------------------------------------
Bjorn Moller, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Bjorn Moller and Peter Antturi, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his or her name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments, and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to 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, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 16th day of January, 2002.
SIGNATURE TITLE
--------- -----
/s/ BJORN MOLLER President, Chief Executive Officer and Director
---------------------------------------------
Bjorn Moller
/s/ PETER ANTTURI Chief Financial Officer, Vice President, Treasurer and
--------------------------------------------- Principal Financial and Accounting Officer
Peter Antturi
/s/ C. SEAN DAY Director and Chairman of the Board
---------------------------------------------
C. Sean Day
/s/ AXEL KARLSHOEJ Director and Authorized Representative in the United
--------------------------------------------- States
Axel Karlshoej
/s/ BRUCE C. BELL Director and Corporate Secretary
---------------------------------------------
Bruce C. Bell
II-9
SIGNATURE TITLE
--------- -----
/s/ DR. IAN D. BLACKBURNE Director
---------------------------------------------
Dr. Ian D. Blackburne
/s/ MORRIS L. FEDER Director
---------------------------------------------
Morris L. Feder
/s/ THOMAS KUO-YUEN HSU Director
---------------------------------------------
Thomas Kuo-Yuen Hsu
/s/ LEIF O. HOEGH Director
---------------------------------------------
Leif O. Hoegh
/s/ EILEEN A. MERCIER Director
---------------------------------------------
Eileen A. Mercier
II-10
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Amended and Restated Articles of Incorporation of Teekay
Shipping Corporation.(1)
3.2 Articles of Amendment of Articles of Incorporation of Teekay
Shipping Corporation.(1)
3.3 Amended and Restated Bylaws of Teekay Shipping
Corporation.(1)
4.1 Registration Rights Agreement among Teekay Shipping
Corporation, Tradewinds Trust Co. Ltd., as Trustee for the
Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee
for the JTK Trust.(2)
4.2 Specimen of Teekay Shipping Corporation Common Stock
Certificate.(2)
4.3 Indenture dated January 29, 1996 among Teekay Shipping
Corporation, VSSI Oceans Inc., VSSI Atlantic Inc., VSSI
Appian Inc., Senang Spirit Inc., Exuma Spirit Inc., Nassau
Spirit Inc., Andros Spirit Inc. and United States Trust
Company of New York, as Trustee.(3)
4.4 Specimen of Teekay Shipping Corporation's 8.32% First
Preferred Ship Mortgage Notes Due 2008.(3)
4.5 Bahamian Statutory Ship Mortgage dated January 29, 1996 by
Nassau Spirit Inc. to United States Trust Company of New
York.(3)(4)
4.6 Deed of Covenants dated January 29, 1996 by Nassau Spirit
Inc. to United States Trust Company of New York.(3)(4)
4.7 First Preferred Ship Mortgage dated January 29, 1996 by VSSI
Oceans Inc. to United States Trust Company of New York, as
Trustee.(5)
4.8 Assignment of Time Charter dated January 29, 1996 by Nassau
Spirit Inc. to United States Trust Company of New York, as
Trustee.(3)(4)
4.9 Assignment of Insurance dated January 29, 1996 by Nassau
Spirit Inc. to United States Trust Company of New York, as
Trustee.(3)(4)
4.10 Pledge Agreement and Irrevocable Proxy dated January 29,
1996 by Teekay Shipping Corporation in favor of United
States Trust Company of New York, as Trustee.(3)
4.11 Guarantee dated January 29, 1996 by Nassau Spirit Inc. in
favor of United States Trust Company of New York, as
Trustee.(3)(4)
4.12 Assignment of Freights and Hires dated January 29, 1996 by
Nassau Spirit Inc. to United States Trust Company of New
York, as Trustee.(3)(4)
4.13 Cash Collateral Account Agreement dated January 29, 1996
between Nassau Spirit Inc. and United States Trust Company
of New York, as Trustee.(3)(4)
4.14 Investment Account Agreement dated January 29, 1996 between
Teekay Shipping Corporation and United States Trust Company
of New York, as Trustee.(3)
4.15 Indenture dated June 22, 2001 among Teekay Shipping
Corporation and U.S. Trust Company of Texas, N.A.(14)
4.16 First Supplemental Indenture dated as of December 6, 2001,
among Teekay Shipping Corporation and The Bank of New York
Trust Company of Florida, N.A. (formerly U.S. Trust Company
of Texas, N.A.).
4.17 Exchange and Registration Rights Agreement dated June 22,
2001 among Teekay Shipping Corporation and Goldman, Sachs &
Co., Morgan Stanley & Co. Incorporated, Salomon Smith Barney
Inc., Deutsche Banc Alex. Brown Inc., J.P. Morgan Securities
Inc., Fleet Securities, Inc. and Scotia Capital (USA)
Inc.(14)
4.18 Exchange and Registration Rights Agreement dated December 6,
2001 between Teekay Shipping Corporation and Goldman, Sachs
& Co.
4.19 Specimen of Teekay Shipping Corporation's 8.875% Senior
Notes due 2011.(14)
EXHIBIT NO. DESCRIPTION
----------- -----------
5.1 Opinion of Perkins Coie LLP, special counsel to the
registrant, as to the legality under U.S. law of the notes
being offered by Teekay Shipping Corporation.
8.1 Opinion of Perkins Coie LLP, regarding certain U.S. tax
matters (contained in opinion filed as Exhibit 5.1).
8.2 Opinion of Seward and Kissel, LLP, regarding certain U.S.
tax matters.
8.3 Opinion of Watson, Farley & Williams, regarding Marshall
Islands tax matters.
8.4 Opinion of Graham, Thompson & Co., regarding Bahamian tax
matters.
8.5 Opinion of Appleby Spurling & Kempe, regarding Bermuda tax
matters.
8.6 Opinion of Bugge, Arentz-Hansen & Rasmussen, regarding
Norwegian tax matters.
10.1 1995 Stock Option Plan.(2)
10.2 Amendment to 1995 Stock Option Plan.(6)
10.3 Amended 1995 Stock Option Plan.(7)
10.4 Form of Indemnification Agreement between Teekay Shipping
Corporation and each of its officers and directors.(2)
10.5 Charter Party, as amended, dated September 21, 1989 between
Palm Shipping Inc. and BP Shipping Limited.(8)
10.6 Time Charter, as amended, dated July 3, 1995 between VSSI
Oceans Inc. and Palm Shipping Inc.(5)
10.7 Time Charter, as amended, dated January 4, 1994 between VSSI
Atlantic Inc. and Palm Shipping Inc.(5)
10.8 Time Charter, as amended, dated February 1, 1992 between
VSSI Appian Inc. and Palm Shipping Inc.(5)
10.9 Time Charter, as amended, dated December 1, 1993 between
Senang Spirit Inc. and Palm Shipping Inc.(5)
10.10 Time Charter, as amended, dated August 1, 1992 between Exuma
Spirit Inc. and Palm Shipping Inc.(5)
10.11 Time Charter, as amended, dated May 1, 1992 between Nassau
Spirit Inc. and Palm Shipping Inc.(5)
10.12 Time Charter, as amended, dated November 1, 1992 between
Andros Spirit Inc. and Palm Shipping Inc.(5)
10.13 Management Agreement, as amended, dated June 1, 1992 between
Teekay Shipping Limited and Nassau Spirit Inc.(5)(4)
10.14 Agreement, dated October 3, 1996, for a U.S. $90,000,000
Term Loan Facility to be made available to certain
subsidiaries of Teekay Shipping Corporation by Christiania
Bank og Kreditkasse, acting through its New York Branch, The
Bank of Nova Scotia, and Banque Indosuez.(9)
10.15 Agreement, dated October 18, 1996, for a U.S. $120,000,000
Term Loan Facility to be made available to certain
subsidiaries of Teekay Shipping Corporation by Den Norske
Bank ASA, Nederlandse Scheepshypothesbank N.V., The Bank of
New York, and Midland Bank plc.(9)
10.16 Agreement, dated January 26, 1998, for a U.S. $200,000,000
Reducing Revolving Credit Facility to be made available to
certain wholly-owned subsidiaries of Teekay Shipping
Corporation by Den Norske Bank ASA, Christiania Bank og
Kreditkasse ASA, New York Branch, and the Bank of Nova
Scotia.(10)
10.17 Agreement, dated March 26, 1999, for the amalgamation of
Northwest Maritime Inc., a 100% owned subsidiary of Teekay
Shipping Corporation, and Bona Shipholding Ltd.(11)
EXHIBIT NO. DESCRIPTION
----------- -----------
10.18 Agreement, dated April 16, 1998, for a U.S. $30,000,000 Term
Loan Facility to be made available to VSSI Australia Limited
by Rabo Australia Limited.(1)
10.19 Agreement, dated December 18, 1997, for a U.S. $44,000,000
Term Loan Facility to be made available to Barrington
(Australia) Pty Limited and Palmerston (Australia) Pty
Limited by Rabo Australia Limited.(1)
10.20 Amended and Restated Reimbursement Agreement, dated April
16, 1998, Among Barrington (Australia) Pty Limited,
Palmerston (Australia) Pty Limited, VSSI Australia Limited,
VSSI Transport Inc. and Alliance Chartering Pty Limited and
Nedship Bank (America) N.V., The Bank of New York and
Landesbank Schleswig-Holstein.(1)
10.21 Amendment No. 1, dated May 1999, to Amended and Restated
Reimbursement Agreement dated April 16, 1998 among
Barrington (Australia) Pty Limited, Palmerston (Australia)
Pty Limited, VSSI Australia Limited, VSSI Transport Inc. and
Alliance Chartering Pty Limited and Nedship Bank (America)
N.V., The Bank of New York and Landesbank
Schleswig-Holstein.(1)
10.22 Amended and Restated Agreement, date June 11, 1999, for a
$500,000,000 Revolving Loan between Bona Shipholding Ltd.,
Chase Manhattan plc, Citibank International plc and various
other banks.(1)
10.23 Amendment and Restatement Agreement, dated June 11, 1999,
relating to a U.S. $500,000,000 Revolving Loan Agreement
between Bona Shipholding Ltd., Chase Manhattan plc, Citibank
International plc and various other banks.(1)
10.24 Rights Agreement, dated as of September 8, 2000, between
Teekay Shipping Corporation and The Bank of New York, as
Rights Agent.(12)
10.25 Reimbursement Agreement, dated January 1, 2000, between
Fleet Management Inc. and Teekay Shipping Corporation.(7)
10.26 Reimbursement Agreement, dated February 16, 2001, between
Karratha Spirit Pty Ltd and Nedship Bank (America) N.V.(13)
10.27 Agreement, dated February 16, 2001, for a U.S. $34,000,000
Term Loan Facility to be made available to Karratha Spirit
Pty Ltd by Rabo Australia Limited.(13)
10.28 Form of Exchange Agent Agreement between United States Trust
Company of New York, as exchange agent, and Teekay Shipping
Corporation.*
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for Teekay Shipping Corporation.
15.1 Letter from Ernst & Young LLP, as independent chartered
accountants, regarding unaudited interim financial
information.
21.1 List of Significant Subsidiaries of Teekay Shipping
Corporation.
23.1 Consent of Perkins Coie, LLP (contained in Exhibit 5.1).
23.2 Consent of Seward and Kissel, LLP (contained in Exhibit
8.2).
23.3 Consent of Watson, Farley & Williams (contained in Exhibit
8.3).
23.4 Consent of Graham, Thompson & Co. (contained in Exhibit
8.4).
23.5 Consent of Appleby Spurling & Kempe (contained in Exhibit
8.5).
23.6 Consent of Bugge, Arentz-Hansen & Rasmussen (contained in
Exhibit 8.6).
23.7 Consent of Ernst & Young.
23.8 Consent of Deloitte & Touche Statsautoriserte Revisorer AS.
24.1 Power of Attorney (contained on signature pages).
25.1 Statement of Eligibility of The Bank of New York Trust
Company of Florida, N.A. (formerly U.S. Trust Company of
Texas, N.A.), as trustee.
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
---------------
* To be filed by amendment.
(1) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on March 30, 2000, and hereby incorporated by
reference to such Annual Report.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form F-1 (Registration No. 33-7573-4), filed with the SEC on July 14, 1995,
and hereby incorporated by reference to such Registration Statement.
(3) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on June 4, 1996, and hereby incorporated by
reference to such Annual Report.
(4) A schedule attached to this exhibit identifies all other documents not
required to be filed as exhibits because such other documents are
substantially identical to this exhibit. The schedule also sets forth
material details by which the omitted documents differ from this exhibit.
(5) Previously filed as an exhibit to the Company's Registration Statement on
Form F-3 (Registration No. 33-65139), filed with the SEC on January 19,
1996, and hereby incorporated by reference to such Registration Statement.
(6) Previously filed as an exhibit to the Company's Report on Form 6-K, filed
with the SEC on May 2, 2000, and hereby incorporated by reference to such
Report.
(7) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on April 2, 2001, and hereby incorporated by
reference to such Annual Report.
(8) Previously filed as an exhibit to the Company's Registration Statement on
Form F-1 (Registration No. 33-68680), as declared effective by the SEC on
November 29, 1993, and hereby incorporated by reference to such
Registration Statement.
(9) Previously filed as an exhibit to the Company's Annual Report on Form
20-F, filed with the SEC on June 11, 1997, and hereby incorporated by
reference to such Annual Report.
(10) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
filed with the SEC on May 20, 1998, and hereby incorporated by reference to
such Annual Report.
(11) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
filed with the SEC on June 11, 1999, and hereby incorporated by reference
to such Annual Report.
(12) Previously filed as an exhibit to the Company's Form 8-A, filed with the
SEC on September 11, 2000, and hereby incorporated by reference to such
filing.
(13) Previously filed as an exhibit to the Company's Report on Form 6-K filed
with the SEC on May 24, 2001, and hereby incorporated by reference to such
report.
(14) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (Registration No. 333-64928), filed with the SEC on July 11, 2001,
and hereby incorporated by reference to such Registration Statement.