-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KeE2ljPV51aDZSEox45+pEochuc1xZyooM3W+d5EQREaHIPB3dinFTdP6GHRDZYy IPwvitRjKwsgY/mvyPeZqQ== 0000725457-96-000002.txt : 19960315 0000725457-96-000002.hdr.sgml : 19960315 ACCESSION NUMBER: 0000725457-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19951229 FILED AS OF DATE: 19960314 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PRESIDENT COMPANIES LTD CENTRAL INDEX KEY: 0000725457 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 942911022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08544 FILM NUMBER: 96534958 BUSINESS ADDRESS: STREET 1: 1111 BROADWAY CITY: OAKLAND STATE: CA ZIP: 94607 BUSINESS PHONE: 4152718000 10-K 1 1995 FORM 10-K FOR APC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended December 29, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from __________________ to __________________ Commission File Number 1-8544 AMERICAN PRESIDENT COMPANIES, LTD. (Exact name of registrant as specified in its charter) Delaware 94-2911022 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1111 Broadway Oakland, CA 94607 (Address of principal executive offices) Registrant's telephone number: (510) 272-8000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, Par New York Stock Exchange Value $.01 Pacific Stock Exchange Rights to Purchase Series A New York Stock Exchange Junior Participating Preferred Stock Pacific Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None ______________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) ______________ At March 1, 1996 the number of shares of Common Stock outstanding was 25,696,015. Based solely upon the closing price of the New York Stock Exchange on such date, the aggregate market value of Common Stock held by non-affiliates of the registrant was approximately $533.2 million. Documents Incorporated by Reference Portions of registrant's Proxy Statement for its 1996 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. ______________ TABLE OF CONTENTS Page PART I Items 1. and 2. BUSINESS AND PROPERTIES 3-13 Item 3. LEGAL PROCEEDINGS 14-15 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS 15 Item 6. SELECTED FINANCIAL DATA 15-16 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17-28 Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 28-52 Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 53 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 53 Item 11. EXECUTIVE COMPENSATION 54 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 54 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 54 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 54-61 SIGNATURES 62-63 PART I ITEMS 1. AND 2. BUSINESS AND PROPERTIES American President Companies, Ltd. and its subsidiaries (the "company") provide container transportation and related services in the Americas, Asia, the Middle East and Europe, through an intermodal system combining ocean, rail and truck transportation. The company's international transportation operations are conducted through American President Lines, Ltd., an ocean common carrier with operations in the Pacific Basin, Europe and Latin America. Another operating unit, American Consolidation Services, Ltd., provides cargo distribution, warehousing and freight consolidation services. Stevedoring and terminal operations on the U.S. West Coast are conducted through Eagle Marine Services, Ltd. American President Business Logistics Services, Ltd. provides logistical consulting and management services. The company's North America transportation operations are conducted through APL Land Transport Services, Inc., which provides intermodal transportation, freight brokerage and over- the-road truck transportation. The company was engaged in real estate operations through Natomas Real Estate Company until 1994, when its remaining real estate holdings were sold. TRANSPORTATION International The company provides ocean-going containerized cargo transportation services primarily in the trans-Pacific market, as well as in the intra-Asia, Asia-Europe and Asia-Latin America markets. The company offers six scheduled trans-Pacific services per week between key ports in Asia and four U.S. ports and one Canadian port. The company provides scheduled service between over 60 ports in the Pacific and Indian Oceans and in the Arabian Gulf. In the intra-Asia market, the company provides service between over 400 Asian cities and commercial centers. The companyOs trans-Pacific services are provided between Asia and over 3,300 cities in North America via eight West Coast ports and three East Coast ports. In addition, service is provided between Asia and Europe to over 2,500 cities in Europe which are served through five northern European ports. Also, in the market between Asia and the Caribbean, Latin America, Central and South America, over 50 ports and cities are served. The company's ocean transportation business maintains 333 offices and agencies located in 13 countries in North and South America, 26 countries in Asia and the Middle East, 13 countries in Europe, two countries in Africa, and in Australia. Since 1991, the company and Orient Overseas Container Line ("OOCL") have been parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. These agreements permit both companies to offer faster transit times and more frequent sailings between key markets in Asia and the U.S. West Coast, and to share terminals and several feeder operations within Asia. In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers commenced service under this agreement in January 1996. The agreement between the company and OOCL is suspended so long as the agreement between the company, OOCL and MOL is in effect. The three carriers and Nedlloyd Lines B.V. ("NLL") are also parties to a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-Latin America trade for a minimum of three years. The four carriers initiated service under this agreement in March 1995. Additionally, the four carriers and Malaysian International Shipping Corporation BHD ("MISC") have an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001, with early termination rights upon six months notice to the other parties beginning January 1, 1998. The carriers commenced service under the agreement in January 1996. The company entered the Asia-Europe trade in March 1995 by chartering vessel space through MOL. The Asia-U.S. West Coast, Asia-Latin America and Asia-Europe alliance agreements are all currently scheduled to be fully operational by the end of the first quarter of 1996. In 1994, the company and Transportacion Maritima Mexicana ("TMM"), a Mexican transportation company, entered into an agreement enabling them to reciprocally charter vessel space for a period of three years between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. This agreement was terminated in September 1995, and the company and TMM have entered into a memorandum of understanding with respect to negotiation of a new three-year agreement for reciprocal charters of lesser amounts of vessel space beginning in March or April 1996 and a possible joint service. However, no assurances can be given as to whether those negotiations will be successful. The company and TMM have agreed to continue to exchange vessel space pending finalization of a new agreement. In October 1995, the company and Matson Navigation Company, Inc. ("Matson") signed an agreement for a 10-year alliance, which commenced in February 1996. Pursuant to the terms of this alliance, the company sold Matson six of its ships (three C9- class vessels and three C8-class vessels) and certain of its assets in Guam for approximately $163 million in cash. One of the ships was sold in December 1995, and the remaining five vessels were sold in January 1996. Four of these vessels, together with a fifth Matson vessel, are being used in the alliance. Matson is operating the vessels in the alliance, which serves the U.S. West Coast, Hawaii, Guam, Korea and Japan, and has the use of substantially all the westbound capacity. The company has the use of substantially all the vessels' eastbound capacity. The following tables show the company's line haul capacity provided to and available from alliance partners (OOCL, MOL, Nedlloyd, MISC, TMM and Matson) under the company's alliance agreements for 1995 and as estimated for 1996, in thousands of twenty-foot equivalent units ("TEUs"): Capacity provided by the company to the alliances: 1995 1996(1)(2) Trans-Pacific Eastbound 472.7 615.1 Westbound 345.1 371.6 Capacity available to the company from the alliances: 1995 1996(1)(2) Trans-Pacific Eastbound 491.4 521.8 Westbound 352.8 311.0 Asia-Europe Eastbound 21.4 42.8 Westbound 30.4 53.5 Asia-Latin America Eastbound 16.1 27.9 Westbound 9.5 19.8 (1)Capacity for 1996 is based upon the current schedule for delivery and deployment of newly constructed vessels and implementation of the alliances and assumes currently allocated vessel space which is subject to adjustment. (2)Excludes TMM, pending finalization of a new agreement. Under the alliance agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The agreements provide for, among other things, settlement of the difference between the value of vessel space provided by each partner and the value of vessel space available to that partner, at specified vessel costs per TEU per day. The value of vessel space provided by the company to the alliances is less than the value of the total capacity allocated to it through the alliances, resulting in an annual net cash payment from the company to its alliance partners. The amount paid to alliance partners was $45 million in 1995, and currently is estimated to be $32 million in 1996. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the commitment of the alliance partners, including the company, for these services cannot be determined at this time. International container transportation operations are seasonal and subject to economic cycles and the growth of local economies in the markets served, fluctuations in the relative values of the U.S. dollar and various foreign currencies and resulting changes in demand for transportation of import and export products. The second and third quarters of each year generally have been the company's strongest in terms of volume, primarily due to the export of seasonal refrigerated goods from the U.S. in both of these quarters and increased imports of consumer goods to the U.S. in the third quarter for the Christmas buying season. The following table sets forth the amount and source of the company's ocean shipping revenues for the past five years, in millions of dollars. 1995 1994 1993 1992 1991 U.S. Import (1) $ 843 $ 896 $ 880 $ 829 $ 775 U.S. Export (1) 560 494 498 500 498 Intra-Asia (2) 369 352 329 296 280 Asia-Europe 49 Desert Storm 103 Total $1,821 $1,742 $1,707 $1,625 $1,656 (1) Includes Asia-Latin America revenues in 1995. (2) Includes Desert Storm revenues in 1991, which were not segregated from normal operations in this market. The company transports imports into North America that include higher value goods such as clothing, electronics, automotive and manufacturing components and other consumer items. Generally, higher value cargo is transported at higher rates due to its value, time sensitivity or need for specialized services. U.S. export cargoes transported by the company include refrigerated goods, military shipments and lower value, semi- processed and raw materials, as well as auto parts, oil field supplies and other higher value finished products. In the intra-Asia market, the industrialized economies import food, raw materials and semi-processed goods from developing Asian nations and export auto parts, electronics and other technological and capital-intensive finished products. The Asia-Europe trade is similar in cargo mix to the trades between North America and Asia. Shipments from Asia to Northern Europe include higher value goods such as electronic goods. Trade from Europe to Asia includes many lower value, semi- processed and raw materials, as well as carpet and floor coverings and chemicals. Exports from Asia to Latin America and the Caribbean include consumer products, auto parts, motorcycles and other high value goods. Cargoes moving from Latin America to Asia include raw materials such as coffee and cocoa, resins, chemicals, and processed goods including foods and beverages. The single largest customer of the company's international transportation operations is the U.S. government, which ships military and other cargo and accounted for approximately 2%, 3% and 3% of consolidated revenues in 1995, 1994 and 1993, respectively. Historically, the company has bid competitively for contracts to transport military and other cargo for the U.S. government. In recent years, the U.S. military has been closing bases and reducing the number of U.S. military personnel overseas. The extent to which future U.S. military base closures and rollback of personnel may impact shipments of U.S. military cargo by the company cannot be estimated. In 1991, the company transported military cargo related to Operation Desert Storm. Export shipments of Desert Storm cargo began in the fourth quarter of 1990 and continued through the first quarter of 1991 during the build-up of U.S. military equipment and supplies. The company also returned military equipment from this region to the U.S. during the second and third quarters of 1991. In addition to military freight revenues, the company collected detention charges from the U.S. government for containers transported for Operation Desert Storm and held beyond an allowed time, which contributed $10 million, $6 million and $41 million to operating income in 1994, 1993 and 1992, respectively. All detention claims were settled during 1994. The following table shows the company's total international transportation volumes in forty-foot equivalent units ("FEU") for the past five years: Year Volumes 1995 570,000 1994 558,000 1993 543,000 1992 501,000 1991 513,000 The company is a participant in freight conferences, which are groups of carriers that may jointly establish common tariffs and common rate levels in certain markets. Conferences in trades from and to the U.S. are exempt from U.S. anti-trust laws under the Shipping Act of 1984 (the "Shipping Act"). Conferences have historically been effective in establishing and maintaining a stable rate environment for their members. Recently, however, carriers which are members of freight conferences, including the company, have been losing market share to carriers which are not members of the conferences. The company's share of the trans- Pacific market was approximately 8%, 9% and 11% in 1995, 1994 and 1993, respectively. Non-conference carriers have been increasing their capacity, improving their services and charging rates for transporting cargo at increasingly lower levels than conference carriers. In the fourth quarter of 1995, independent pricing actions which reduced shipping rates were taken by conference carriers, including the company, as a means to recapture market share in the U.S. import market. These actions have resulted in rate instability in this market. The company is unable to predict the extent to which this rate instability will continue or its magnitude; however, such instability could have a material adverse impact on carriers in the U.S. import market, including the company. Since 1989, the company and 13 other shipping companies, representing approximately 83% of total trans-Pacific U.S. import capacity, have been parties to the Trans-Pacific Stabilization Agreement. Among other things, the agreement limits import capacity of participating companies by amounts mutually determined from time to time in an attempt to improve the balance of supply and demand in the U.S. import market. The agreement may be terminated upon the unanimous written consent of the companies. The company's ability to be a party to this agreement is based upon the Shipping Act. During 1995, legislation was introduced in the U.S. House of Representatives that would have substantially modified the Shipping Act, which, in its present form, among other things, provides the company with certain immunity from anti-trust laws and requires the company and other carriers in the U.S. foreign commerce to file tariffs. Changes proposed in the legislation as originally drafted, if enacted, would have eliminated government tariff filing and enforcement, allowed confidential and independent contracts between shippers and ocean carriers and strengthened provisions that prohibit predatory activities by foreign carriers. While the legislation was not enacted, it would not have affected the anti-trust immunity provided by the Shipping Act. The company is unable to predict whether this or other proposed legislation will be introduced in 1996 or enacted or whether, if enacted, it will contain terms similar to those originally proposed. Depending on its terms, enactment of such legislation modifying the Shipping Act could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations. The following table shows the company's utilization of its containership capacity during the past five years, which for 1991 includes the effects of shipments related to Operation Desert Storm: 1995 1994 1993 1992 1991 U.S. Import 80% 89% 89% 89% 93% U.S. Export 93% 94% 92% 90% 95% The company provides cargo distribution and warehousing services in the U.S. and freight consolidation services in Asia, the Middle East, Europe, Mexico and Africa through its subsidiary, American Consolidation Services, Ltd. ("ACS"). ACS also provides freight deconsolidation services in several U.S. locations and acts as a non-vessel operating common carrier in the intra-Asia market and from Asia to Europe and Australia. Freight consolidators combine various shipments from multiple vendors into a single container load for delivery to a single destination. The company also serves shippers of less-than- containerload cargoes by combining their shipments with others bound for the same or proximate geographic locations. The company has port terminal facilities in Oakland and Los Angeles, California, Seattle, Washington and Dutch Harbor, Alaska and major inland terminal facilities at Chicago, Illinois, Atlanta, Georgia and South Kearny, New Jersey. Each port terminal facility is operated under a long-term use agreement providing for preferential, although non-exclusive, use of the facility by the company. The company also operates major port terminal facilities in Asia under long-term lease agreements in Kobe and Yokohama, Japan and Kaohsiung, Taiwan. The company incurred incremental operating expenses and a loss of ocean freight revenues during the first half of 1995 resulting from the earthquake in Kobe, Japan, in January 1995, in which the ocean terminal leased by the company was extensively damaged. The company expects substantially all of these expenses and lost revenues to be recovered through its business interruption insurance and is in the process of finalizing its claim. Management has recorded its best estimate of the recovery. The company and OOCL have resumed service to Kobe and have adjusted their shared trans-Pacific schedule to and from Japan. In 1993, the company entered into a contract with the Port of Los Angeles to lease a new 226-acre terminal facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon completion of construction. Additionally, in 1994, the company and the Port of Seattle signed a lease amendment for the improvement and expansion of its existing terminal facility. Under the amended lease, the facility will be expanded from 83 acres to approximately 160 acres. The expansion is expected to be completed during 1997, and the lease term will be 30 years from completion. In addition, the company has the option to expand the terminal by an additional 30 acres. In March 1995, the company and a Philippine terminal developer and operator entered into a letter of intent with an agency of the Republic of Pakistan regarding the possible construction and operation of a container terminal at the Port of Karachi. The parties are negotiating the terms for the implementation of the project. In January 1996, the company, together with a major U.S. engineering and construction firm and MOL and NLL, entered into a memorandum of understanding with an agency of the Republic of Indonesia to cooperate in exploring the feasibility of developing an international container terminal to be located in Kabil, Batam Island, Indonesia, for operations by the company and its partners under a long-term concession. The company is unable to predict whether negotiations on the Port of Karachi project will be successful or such project will be completed, or whether the proposed Batam project is feasible or will be completed. In addition to performing stevedoring and terminal services for the company's own operations, Eagle Marine Services, Ltd., a subsidiary of the company, provides these services to third parties at the company's U.S. port facilities. On December 29, 1995, the company operated 19 U.S.-flag containerships and five foreign-flag containerships. Of the U.S.- flag containerships, six were chartered under operating lease agreements and the remainder were owned by the company. In addition, the company owned three U.S.-flag vessels that were chartered to another carrier. The following table sets forth the vessels deployed by the company in its trans-Pacific and intra- Asia services at December 29, 1995: Maximum Type of Number of Date Placed Capacity Service Speed Vessel Vessels in Service (in TEUs) (in knots) C-11 5 1995 4,800 24.6 C-10 5 1988 4,300 24.0 C-9* 3 1982-1983 2,900 23.5 L-9 4 1987 2,800 21.0 J-9 2 1984 2,700 22.5 C-8* 4 1979 & 1986 2,000 22.0 Pacesetter 1 1973 1,400 23.5 * In December 1995, one C-8 was sold to Matson and chartered back through the end of 1995. In January 1996, the three C-9s and two C-8s were sold to Matson. The company has the authority from the United States Maritime Administration ("MarAd") to operate up to 28 foreign- flag-feeder vessels in its intra-Asia service. At December 29, 1995, the company operated 21 such vessels, which are leased by it for terms of up to three years. The company took delivery of and made final payments on five C11-class vessels in 1995 and one C11-class vessel in 1996, built pursuant to construction contracts with Howaldtswerke-Deutsche Werft AG, of Germany and Daewoo Shipbuilding and Heavy Machinery, Ltd. of Korea. The total cost of the six C11-class vessels was $529 million, including total payments to the shipyards of $503 million, of which $62 million was paid in January 1996. OOCL has placed orders to purchase six vessels similar in size and speed to the company's C11-class vessels. Four of OOCLOs vessels have been delivered, and the final two vessels are scheduled to be delivered in March 1996. The company and OOCL have agreed to operate six and five of their C11-class vessels, respectively, under their Asia-U.S. West Coast alliance agreement with MOL. The deployment of the 11 new C11-class vessels by the company and OOCL, replacing 14 older vessels, will increase the combined trans-Pacific capacity of the company and OOCL by approximately 15%. The company currently expects growth in demand in the trans-Pacific market in the foreseeable future but believes that, because a number of other competing ocean carriers are also constructing significant numbers of new vessels, growth in capacity in that market will be significantly greater than growth in demand. No assurances can be given with respect to anticipated growth in demand, utilization of the company's increased capacity or the potential negative impact of the increased capacity on rates or the company's market share. Such growth and utilization will depend upon demand for U.S. import and U.S. export cargo in this market, economic conditions in the U.S. and other Pacific Basin countries, the effects of implementation of the company's alliances, and whether and when additional new vessels are delivered to competing carriers, among other factors. Additionally, modification of the Shipping Act, which is under consideration as referred to above, could have a material adverse impact on the company's rates and volumes. In September 1995, the company sold its construction contract for three K10-class vessels, which it had entered into in 1993, and recognized a pre-tax gain of $1.6 million. In conjunction with the sale, the company, MOL, OOCL and NLL formed a joint venture company, in which their respective shares are each 25%, and agreed to charter back these vessels, when delivered, for seven years for use in the Asia-Europe trade. Prior to the sale of the construction contract, the company made progress payments of $30 million for these vessels, including payments of $12 million in 1995, for which it received reimbursement. At December 29, 1995, the company operated 129,200 dry containers consisting of 20-, 40-, 45-, 48-, and 53-foot containers, 43,700 of which were owned and 85,500 leased under operating lease agreements. At that date, the company also operated 8,900 refrigerated containers, 3,700 of which were owned and 5,200 leased under operating leases. In addition, the company operated 54,500 chassis for the carriage of containers, 35,100 of which were owned and 19,400 leased under capital and operating leases. North America The company provides intermodal transportation and freight brokerage services to North American and international shippers, as well as time-critical cargo transportation and just-in-time delivery (principally to the automotive manufacturing industry). These services are provided through an integrated system of contracted rail and truck transportation, the primary element of which is a train system utilizing double-stack rail cars. The company's double-stack train system principally serves the North American long-haul truck and piggyback rail freight markets, and the international (export-import) intermodal market, through more than 30 U.S., Canadian and Mexican inland terminal facilities. The company has agreements with certain railroads under which those railroads serve as the company's rail carriers, providing locomotive power, rail cars, trackage, terminal services and labor to transport the company's containers on individual double-stack rail cars and on dedicated unit trains. The following table shows the company's total North America stacktrain volumes (in FEUs): Year Volumes 1995 599,000 1994 594,000 1993 538,000 1992 508,000 1991 509,000 A stacktrain comprises up to 28 double-stack rail cars and has a capacity of up to 280 FEUs. At December 29, 1995, the company controlled 390 such rail cars, 220 of which were owned and 170 of which were leased. In addition, as part of agreements with certain railroads, the company utilizes additional rail cars owned or leased and operated by the railroads. The company controlled 930 and 1,100 double-stack rail cars in 1994 and 1993, respectively. The significant reduction in the number of rail cars under direct company control in 1995 was made pursuant to the companyOs agreement with the railroads. Information Systems The company manages its fleet of containers and chassis using its computer systems and specialized software, linked through a telecommunications network with the company's ships and offices. The company's cargo and container management system processes cargo bookings, generates bills of lading, expedites U.S. customs clearance and facilitates the management of rail cars, containers and other equipment. The company has also developed computer systems designed to optimize the loading of containers onto ships and to facilitate the planning of ship, rail and truck moves. The company's communications system permits its customers to access information regarding the location and status of their cargo via touch-tone telephone, personal computer or computer-facsimile link. Real Estate In 1994, the company sold its remaining 86 acres of land. COMPETITION AND REGULATION International Transportation The company is a U.S.-flag and foreign-flag carrier. It faces vigorous competition, principally on the basis of price and service, on all of its trade routes from approximately 19 major U.S.-flag and foreign-flag operators, some of which are owned by foreign governments. Foreign-flag competitors generally have cost and operating advantages over U.S.-flag carriers. The timing of increases in capacity in the ocean transportation industry can result in imbalances in industry-wide supply and demand, which causes volatility in rates. The carriage of U.S. military cargo is reserved for U.S.- flag shipping companies, and this trade is also subject to vigorous competition among such carriers. The carriage of this cargo is awarded in accordance with competitive bidding procedures under which the low bidder wins the right to carry a substantial portion of such cargo for a period of up to 12 months. The process by which military cargo is awarded to shippers is in the process of being revised. Under a new proposed program, the company would share equally in military cargo volumes with one competitor. No assurances can be given that this program will become effective. In July 1995, legislation was introduced in the U.S. House of Representatives that would substantially modify the Shipping Act, which, among other things, provides the company with certain immunity from antitrust laws and requires the company and other carriers in U.S. foreign commerce to file tariffs. The legislation, which was not enacted in 1995, would have been phased in during 1997 and 1998 and would have eliminated government tariff filing and enforcement, allowed confidential and independent contracts between shippers and ocean carriers and strengthened provisions that prohibit predatory activities by foreign carriers. The company is unable to predict whether this or other proposed legislation will be introduced in 1996 or enacted or, whether, if enacted, it will contain terms similar to those proposed. Enactment of legislation modifying the Shipping Act, depending upon its terms, could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations. A substantial portion of the company's transportation operations is subject to regulation by agencies of the U.S. government that have jurisdiction over shipping practices, maintenance and safety standards and other matters. The company's wholly-owned subsidiary, American President Lines, Ltd. ("APL") and MarAd are parties to a 20-year Operating-Differential Subsidy Agreement ("ODS Agreement") expiring December 31, 1997. This agreement provides for payments by the U.S. government to partially compensate APL for the greater expense of operating vessels under U.S. rather than foreign registry. Under APL's ODS Agreement, APL must be controlled by U.S. citizens and its vessels must be registered and built in the U.S. (except as noted below) and manned by U.S. crews. Under its ODS Agreement, APL also is required, among other things, to operate vessels on designated trade routes in the foreign commerce of the U.S. and to replace the capacity of its existing vessels as they reach the end of their statutory lives (generally 25 years) if construction differential subsidy, provided by the U.S. government, is made available. This subsidy has not been made available since 1981. In addition, APL is required to serve such trade routes within designated minimum and maximum numbers of annual sailings, and, except for over-age vessels, APL may not, without prior government approval, remove any of its vessels from operation under its ODS agreement. Since 1981, Congress has twice passed legislation permitting U.S.-flag carriers to acquire a limited number of foreign-built vessels and thereafter to operate such vessels under existing subsidy agreements under U.S. flag. Under such laws, APL had five C10-class vessels constructed in Germany which are currently operated under this legislation. In June 1993, MarAd awarded APL contracts to manage 12 Ready Reserve Force vessels for a period of five years. APL receives a per diem fee based upon the operating status of each vessel. In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994, referred to as the Maritime Security Program, was not enacted. The Administration's proposal included a 10-year subsidy program with up to $100 million in annual payments to be requested and appropriated on a year-to-year basis. Congress has appropriated $46 million for fiscal 1996, or $2.3 million per vessel. This compares with subsidy of approximately $3.1 million per vessel under ODS. Maritime support legislation incorporating the Administration's program has recently passed the U.S. House of Representatives and is currently awaiting consideration before the U.S. Senate, but has not yet been approved. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted. While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with MarAd to operate under foreign flag its six C11-class containerships, delivered to the company in 1995 and January 1996, and to transfer to foreign flag seven additional U.S.-flag containerships in its trans-Pacific fleet. In 1994, MarAd issued a waiver to allow the company to operate its six C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted. Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner vessels. The company continues to evaluate its strategic alternatives in light of the pending expiration of its ODS agreement and the uncertainties as to whether an acceptable new U.S. government maritime support program will be enacted, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support. In January 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia has agreed to provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice. North America Transportation The company's stacktrain operations compete with eight trans- Pacific containership companies and three West Coast railroads offering double-stack train service. In addition, the company's stacktrain operations, together with its contracted trucking services, compete with long-haul trucking companies for truckload shipments. The company's brokerage operations compete for available business with over 150 shippers' agents. Competition among shippers' agents is based principally on the types and timeliness of services provided. EMPLOYEES At December 29, 1995, the company and its subsidiaries employed 464 seagoing and 4,710 shoreside personnel. The seagoing personnel and 274 of the shoreside personnel were employed under collective bargaining agreements with several unions. Certain of the company's collective bargaining agreements covering seagoing and shoreside unions in the U.S. expire in June and July 1996. The company currently expects that new agreements will be negotiated with the respective unions prior to the expiration of the current contracts, although no assurances can be given to that effect. Failure to reach agreement with a union on an acceptable labor contract could result in a strike or other labor difficulties, which could have a material adverse effect on the company's operating results. ITEM 3. LEGAL PROCEEDINGS The company is a party to various pending legal proceedings, claims and assessments arising in the course of its business activities, including actions relating to trade practices, personal injury or property damage, alleged breaches of contracts, torts, labor matters, employment practices, tax matters and miscellaneous other matters. Some of these proceedings involve claims for punitive damages, in addition to other specific relief. Among these actions are approximately 2,290 cases pending against the company, together with numerous other ship owners and equipment manufacturers, involving injuries or illnesses allegedly caused by exposure to asbestos or other toxic substances on ships. The company insures its potential liability for bodily injury to seamen through mutual insurance associations. Industry- wide resolution of asbestos-related claims and resolutions of claims against bankrupt shipping companies at higher than expected amounts could result in additional contributions to those associations by the company and other association members. In December 1989, the government of Guam filed a complaint with the Federal Maritime Commission ("FMC") alleging that American President Lines, Ltd. and an unrelated company charged excessive rates for carrying cargo between the U.S. and Guam, in violation of the Shipping Act and the Intercoastal Shipping Act of 1933, and seeking an undetermined amount of reparations. Three private shippers are also complainants in this proceeding. Evidentiary hearings have been concluded and an initial decision by the FMC administrative law judge is expected in June 1996. In April 1994, a lawsuit, Hockert Pressman & Flohr Money Purchase Plan, et. al. vs. American President Companies, Ltd., et. al., was filed against the company and certain of its officers in United States District Court for the Northern District of California. The suit alleged that the company and certain officers made false and misleading statements about the company's operating and financial performance in violation of federal securities laws, and sought unspecified damages on behalf of a purported class of stockholders who purchased shares of the company's common stock during the period October 7, 1993 through March 30, 1994. The action was voluntarily dismissed without prejudice to the purported class and without payment of consideration, and the dismissal was approved by the Court on November 22, 1995. In October 1991, the California Department of Motor Vehicles (the "DMV") assessed the company approximately $4.2 million in additional chassis registration fees. The company was required to pay the assessment and, in 1993, filed a mandamus action, as well as a suit for refund. The company prevailed in the mandamus action, but was denied a summary judgment motion in the refund action. The parties appealed both decisions to the California Court of Appeals. In October 1995, the California Court of Appeals ordered the DMV to repay $4.2 million plus interest to the company, and payment has been received. In 1995, lawsuits were filed against the company and the U.S. Department of Transportation by certain of the company's unions and union members challenging MarAd's November 15, 1994 action granting the company the waiver allowing it to operate the C11-class vessels under foreign flag. On June 29, 1995, the U.S. District Court granted summary judgment in favor of MarAd and the company, which the unions have appealed. While no assurances can be given, management believes the unions' appeal will not be successful. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the company, management does not expect the legal proceedings described, individually or in the aggregate, to have a material adverse impact on the company's consolidated financial position or operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the company's security holders during the fourth quarter of 1995. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The company's Common Stock is listed on the New York and Pacific Stock Exchanges using the symbol APS. The reported high and low closing sales prices per share of the company's Common Stock and cash dividends declared for the preceding eight fiscal quarters are set forth in Note 13 to the consolidated financial statements, Part II, Item 8, on page 51 and are incorporated herein by reference. On March 1, 1996, the company had 3,409 common stockholders of record. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data for the ten years ending December 29, 1995 are derived from the consolidated financial statements of the company, which have been examined and reported upon by the company's independent public accountants as set forth in their report included elsewhere herein. This information should be read in conjunction with the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. TEN-YEAR FINANCIAL REVIEW
(Dollars in millions, except per share amounts) 1995 1994 1993 1992 1991 Results of Operations (1) Revenues Transportation International $2,133 $2,017 $1,930 $1,878 $1,791 North America 763 761 660 632 645 Real Estate 16 16 6 17 Total Revenues 2,896 2,794 2,606 2,516 2,453 Operating Income (Loss) Transportation 68 114 123 137 131 Real Estate 9 10 3 12 Total Operating Income (Loss) 68 123 133 140 143 Income (Loss) Before Taxes 53 110 131 122 107 Income (Loss) Before Cumulative Effect of Accounting Changes 30 74 80 78 66 Net Income (Loss) 30 74 80 56 56 Earnings (Loss) Per Common Share, Fully Diluted Before Cumulative Effect of Accounting Changes (2) 0.99 2.30 2.50 2.34 1.85 Earnings (Loss) Per Common Share, Fully Diluted (2) 0.99 2.30 2.50 1.69 1.56 Cash Dividends Per Common Share (2) 0.40 0.40 0.30 0.30 0.30 Financial Position Cash, Cash Equivalents & Short-Term Investments $ 136 $ 255 $ 84 $ 132 $179 Working Capital 65 206 51 (16) 159 Total Assets 1,879 1,664 1,454 1,436 1,541 Net Capital Expenditures 456 128 156 66 20 Long-Term Debt 686 373 250 222 251 Capital Lease Obligations 1 13 17 20 193 Redeemable Preferred Stock 75 75 75 75 Stockholders' Equity 469 541 475 397 426 Capital 1,168 1,007 822 829 955 Book Value Per Common Share (2) 18.28 19.82 17.72 15.25 14.48 Financial Ratios Return on Equity (3) 5.6% 12.7% 15.7% 11.6% 10.7% Cash Flow to Average Total Debt (4) 30.1% 53.3% 53.7% 43.4% 44.0% Return on Average Assets 1.7% 4.8% 5.5% 3.8% 3.5% Total Debt to Equity (3) 149.0% 63.4% 49.4% 75.5% 90.4% Total Debt to Capital (3) 59.8% 38.8% 33.0% 43.0% 47.5% Current Ratio 1.1 1.5 1.1 1.0 1.5
TEN-YEAR FINANCIAL REVIEW
(Dollars in millions, except per share amounts) 1990 1989 1988 1987 1986 Results of Operations (1) Revenues Transportation International $1,590 $1,579 $1,436 $1,271 $ 945 North America 669 637 650 540 469 Real Estate 15 21 45 14 26 Total Revenues 2,274 2,237 2,131 1,825 1,440 Operating Income (Loss) Transportation (64) 51 129 162 50 Real Estate 8 9 33 7 13 Total Operating Income (Loss) (56) 60 162 169 63 Income (Loss) Before Taxes (93) 22 136 149 41 Income (Loss) Before Cumulative Effect of Accounting Changes (62) 13 81 79 18 Net Income (Loss) (62) (16) 81 79 18 Earnings (Loss) Per Common Share, Fully Diluted Before Cumulative Effect of Accounting Changes (2) (1.78) 0.16 1.63 1.62 0.35 Earnings (Loss) Per Common Share, Fully Diluted (2) (1.78) (0.57) 1.63 1.62 0.35 Cash Dividends Per Common Share (2) 0.30 0.29 0.25 0.25 0.25 Financial Position Cash, Cash Equivalents & Short-Term Investments $ 118 $ 127 $ 186 $ 287 $276 Working Capital 112 128 178 261 237 Total Assets 1,608 1,683 1,711 1,599 1,343 Net Capital Expenditures 39 111 379 155 75 Long-Term Debt 279 303 317 138 151 Capital Lease Obligations 202 208 224 234 244 Redeemable Preferred Stock 75 75 75 Stockholders' Equity 459 567 617 705 641 Capital 1,022 1,169 1,254 1,089 1,049 Book Value Per Common Share (2) 12.44 14.18 15.26 14.44 12.98 Financial Ratios Return on Equity (3) (10.5%) (2.4%) 11.6% 11.8% 3.0% Cash Flow to Average Total Debt (4) 21.0% 20.3% 38.6% 50.9% 36.0% Return on Average Assets (3.7%) (1.0%) 4.9% 5.4% 1.5% Total Debt to Equity (3) 91.3% 82.2% 81.2% 54.5% 63.8% Total Debt to Capital (3) 47.7% 45.1% 44.8% 35.3% 38.9% Current Ratio 1.3 1.4 1.6 2.0 2.0
(1) The company's fiscal year ends on the last Friday in December. All years presented above were 52 weeks, except for 1993 and 1988 which were 53-week years. (2)Earnings Per Common Share, Cash Dividends Per Common Share and Book Value Per Common Share have been computed for all periods retroactively reflecting the effect of a 3-for-2 stock split effected on May 30, 1985, and a 2-for-1 stock split effected on December 31, 1993. Earnings Per Common Share also reflect the 1995 conversion of the Redeemable Preferred Stock into 4.0 million shares of Common Stock and the repurchase of 6.0 million, 3.7 million, 7.8 million, 2.9 million, 1.0 million and 8.8 million shares of the company's common stock during 1995, 1992, 1991, 1990, 1989 and 1988, respectively, on a post-split basis. In 1989, 2.0 million shares of the company's Series B Preferred Stock were converted into common stock. (3)Redeemable Preferred Stock, which was converted into Common Stock in 1995, is included in Equity for the purpose of calculating these ratios. (4)Cash Flow represents Cash Flows from Operating Activities. ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (In millions) 1995 Change 1994 Change 1993 Revenues International Transportation $ 2,133 6% $ 2,017 4% $ 1,930 North America Transportation 763 0% 761 15% 660 Real Estate (100%) 16 1% 16 Operating Income $ 68 (44%) $ 123 (7%) $ 133 Pretax Income $ 53 (52%) $ 110 (15%) $ 131 In 1995, the company recorded a pretax restructuring charge of $48 million related to the accelerated completion of its reengineering program and other organizational changes. Operating income for 1995 was $105 million, excluding the restructuring charge, $6 million in gains from vessel sales and $5 million in liquidated damages from delayed vessel deliveries. This compares with operating income of $98 million in 1994, excluding $10 million related to the collection of Desert Storm detention charges, $9 million in gains from the sale of the company's remaining real estate holdings and $6 million in gains from crane and container sales. In 1993, operating income was $107 million, excluding $6 million of Desert Storm detention collections, $11 million in gains from real estate sales and $9 million in gains from the sales of vessels and containers. In 1995, the company's earnings were impacted by a decline in volumes in the company's U.S. import market, which resulted from continuing competitive pressure and a significant reduction in demand for U.S. imports compared with 1994. This decline was offset by growth in volumes in the companyOs U.S. export market and an improvement in average revenue per forty-foot equivalent unit ("FEU") in the company's U.S. import, U.S. export and intra- Asia markets, and lower land transportation costs per FEU in 1995 compared with 1994. In 1994, the company benefited from improvements in its North America stacktrain volumes and increased volumes of the company's U.S. import and intra-Asia cargo, all as compared with 1993. Additionally, the company's 1993 income and volumes were positively impacted by the 1993 fiscal year having 53 weeks, compared with 52 weeks in 1994 and 1995. These improvements were partially offset by higher transportation operating expenses per FEU in 1994 compared with 1993, primarily due to higher stevedoring and fuel costs and an unfavorable currency exchange rate in Japan. INTERNATIONAL TRANSPORTATION (1) 1995 Change 1994 Change 1993 (Volumes in thousands of FEUs) Import Volumes 200.8 (8%) 217.8 2% 214.3 Average Revenue per FEU $4,198 2% $4,112 0% $4,107 Export Volumes 169.2 9% 155.5 0% 155.5 Average Revenue per FEU $3,310 4% $3,174(1%) $3,200 Intra-Asia Volumes 179.7 (3%) 184.6 6% 173.3 Average Revenue per FEU $2,054 8% $1,909 1% $1,899 Asia-Europe Volumes 19.9 Average Revenue per FEU $2,467 (1) Volumes and average revenue per FEU data are based upon shipments originating during the period, which differs from the percentage-of-completion method used for financial reporting purposes. The company's U.S. import volumes declined in 1995 compared with last year due to increased competitive pressure from non- conference carriers and lower demand in this market. Volumes of the company's U.S. export cargo increased in 1995 compared with 1994, primarily due to increased shipments of commercial dry and refrigerated cargo. Partially offsetting the increase in U.S. export volume was a 33% decrease in the company's military volumes in this market. The company carried approximately 75% of the military cargo in the Pacific from January to June 1994, and approximately 25% for the remainder of 1994 and throughout 1995. The overall amount of military cargo has declined in recent years, which has also contributed to the decline in military cargo volumes carried by the company. The company's intra-Asia volumes declined in 1995 compared with 1994 because of fewer shipments to and from Kobe, Japan as a result of the earthquake in January 1995, poor cotton harvests in India and Pakistan, and efforts by the company to reduce its shipments of lower-margin cargo in this market. Volumes of refrigerated cargo carried by the company in its intra-Asia market increased, which partially offset the decline in commercial dry cargo. Asia-Europe service by the company began in March 1995 with shipments to Denmark, the United Kingdom and the Netherlands primarily from Hong Kong, the People's Republic of China and Taiwan. Shipments from the Netherlands, Belgium and Germany to Asia began in April 1995. The company's U.S. import volumes increased in 1994 compared with 1993 primarily due to service enhancements in the People's Republic of China that resulted in higher volumes from that country, and higher volumes of refrigerated and military cargo. Volumes of U.S. export cargo were unchanged in 1994 from 1993. Volumes of refrigerated cargo in the company's U.S. export market improved, but were offset by a decline in military dry volumes. Intra-Asia volumes in 1994 increased compared with 1993 as a result of the company's expanded service to and from China and the growing economies in Southeast and West Asia and the Middle East. Additionally, volumes of refrigerated cargo in this market grew substantially from 1993 to 1994. Utilization of the company's containership capacity in 1995 was 80% and 93% for import and export shipments, respectively, compared with 89% and 94% in 1994, and 89% and 92% in 1993. Changes in utilization rates in 1995 as compared to 1994 are related to changes in volumes carried by the company in these markets due to competitive and market factors. Import capacity was increased in 1994 by additional vessel space purchased by the company from Orient Overseas Container Line ("OOCL"), a Hong Kong shipping company. Average revenue per FEU for the company's U.S. import shipments increased in 1995 compared with 1994 primarily due to a general rate increase established by conference carriers that became effective May 1, 1995, and currency adjustments in Japan and Singapore. In late 1995, the company initiated pricing actions for specific commodities in specific trade lanes in response to competitive conditions and loss of market share in its U.S. import market. Subsequently, competitors and the company have lowered rates, and considerable rate instability in the U.S. import market continues to exist. The company cannot predict whether additional pricing actions may be taken by the company or its competitors. Destabilization of rates, if extensive, could have a material adverse impact on carriers, including the company. Average revenue per FEU in the company's U.S. export market increased in 1995 from last year due to rate increases and an increase in the proportion of higher-rated refrigerated cargo carried by the company. Average revenue per FEU in the company's intra-Asia market increased in 1995 compared with 1994, attributable to a general rate increase and an increase in the proportion of higher-rated refrigerated cargo carried by the company. Average revenue per FEU for the company's U.S. import shipments was relatively unchanged in 1994 compared with 1993, reflecting competitive pressures. In 1994, average revenue per FEU in the company's U.S. export market was lower than 1993 due to reduced rates in the first half of the year resulting from weak market conditions and increased competition. Average revenue per FEU in the company's intra-Asia market increased slightly in 1994 compared with 1993, primarily attributable to an increase in higher-rated refrigerated cargo, partially offset by competitive rate pressures in this market. Other international transportation revenues, which include cargo handling, freight consolidation, logistics services and charter hire revenues, totaled $319 million, $281 million and $254 million in 1995, 1994 and 1993, respectively. Included in the amounts for 1994 and 1993 were collections of Desert Storm detention charges of $10 million and $6 million, respectively. The increase in other transportation revenues in 1995 compared with 1994 resulted from increased cargo handling revenues in Asia and increased charter hire revenues. In addition, freight consolidation and logistics services revenues increased due to higher volumes. The increase in other international transportation revenues in 1994 compared with 1993 was primarily due to increases in Asia cargo handling related to the OOCL and Transportacion Maritima Mexicana ("TMM") alliance agreements and an increase in feeder services in Asia provided to other carriers. The company incurred incremental operating expenses and a loss of ocean freight revenues during the first half of 1995 resulting from the earthquake in Kobe, Japan, in January 1995, in which the ocean terminal leased by the company was extensively damaged. The company expects substantially all of these expenses and lost revenues to be recovered through its business interruption insurance and is in the process of finalizing its claim. Management has recorded its best estimate of the recovery. The company and OOCL have resumed service to Kobe and have adjusted their shared trans-Pacific schedule to and from Japan. In October 1995, Lykes Steamship Company, Inc. ("Lykes") filed a petition seeking protection from its creditors under Chapter 11 of the U.S. Bankruptcy laws. At present, the company charters its four L9-class vessels from Lykes under charters that expire in early 1996. The L9-class vessels are used in the company's West Asia/Middle East service. In addition, the company charters to Lykes three of its Pacesetter vessels under charters that also expire in early 1996. The potential consequences of Lykes' petition on the company's operations and financial condition, and possible steps the company may take to mitigate any resulting adverse effects, are being evaluated by management. The company is currently unable to predict the extent of such consequences. Since 1991, the company and OOCL have been parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. These agreements permit both companies to offer faster transit times and more frequent sailings between key markets in Asia and the U.S. West Coast, and to share terminals and several feeder operations within Asia. In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers commenced service under this agreement in January 1996. The agreement between the company and OOCL is suspended so long as the agreement between the company, OOCL and MOL is in effect. The three carriers and Nedlloyd Lines B.V. ("NLL") are also parties to a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-Latin America trade for a minimum of three years. The four carriers initiated service under this agreement in March 1995. Additionally, the four carriers and Malaysian International Shipping Corporation BHD have an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001, with early termination rights upon six months notice to the other parties beginning January 1, 1998. The carriers commenced service under the agreement in January 1996. The company entered the Asia-Europe trade in March 1995 by chartering vessel space through MOL. Under the alliance agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The agreements provide for, among other things, settlement of the difference between the value of vessel space provided by each partner and the value of vessel space available to that partner, at specified vessel costs per TEU per day. The value of vessel space provided by the company to the alliances is less than the value of the total capacity allocated to it through the alliances, resulting in an annual net cash payment from the company to its alliance partners. The amount paid to alliance partners was $45 million in 1995, and is currently estimated to be $32 million in 1996. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the commitment of the alliance partners, including the company, for these services cannot be determined at this time. In 1994, the company and TMM entered into an agreement enabling them to reciprocally charter vessel space for a period of three years between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. This agreement was terminated in September 1995, and the company and TMM have entered into a memorandum of understanding with respect to the negotiation of a new three-year agreement for reciprocal charters of lesser amounts of vessel space beginning in March or April 1996 and a possible joint service. However, no assurances can be given as to whether those negotiations will be successful. The company and TMM have agreed to continue to exchange vessel space pending finalization of a new agreement. In October 1995, the company and Matson Navigation Company, Inc. ("Matson") signed an agreement for a 10-year alliance, which commenced in February 1996. Pursuant to the terms of this alliance, the company sold Matson six of its ships (three C9- class vessels and three C8-class vessels) and certain of its assets in Guam for approximately $163 million in cash. One of the ships was sold in December 1995 and resulted in a gain of $2 million. The remaining five vessels were sold in January 1996. Four of these vessels, together with a fifth Matson vessel, are being used in the alliance. The net gain on the sale of the four vessels used in the alliance and the assets in Guam, after deducting costs associated with the agreement, is estimated to be $6 million, and will be deferred and amortized over the 10-year term of the alliance. Matson is operating the vessels in the alliance, which serves the U.S. West Coast, Hawaii, Guam, Korea and Japan, and has the use of substantially all the westbound capacity. The company has the use of substantially all the vessels' eastbound capacity. The gain on the sale of the fifth vessel was $2 million. The company is party to an Operating-Differential Subsidy ("ODS") agreement with the U.S. government, expiring on December 31, 1997, which provides for payment by the U.S. government to partially compensate the company for the relatively greater expense of vessel operation under U.S. registry. ODS payments to the company were approximately $62 million, $61 million and $65 million in 1995, 1994 and 1993, respectively. The company expects ODS payments in 1996 to be between $30 million and $35 million as a result of its sale of six vessels to Matson. In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994, referred to as the Maritime Security Program, was not enacted. The Administration's proposal included a 10-year subsidy program with up to $100 million in annual payments to be requested and appropriated on a year-to-year basis. Congress has appropriated $46 million in fiscal 1996, or $2.3 million per vessel. This compares with subsidy of approximately $3.1 million per vessel under ODS. Maritime support legislation incorporating the Administration's program has recently passed the U.S. House of Representatives and is currently awaiting consideration before the U.S. Senate, but has not yet been approved. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted. While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with the United States Maritime Administration ("MarAd") to operate under foreign flag its six C11-class containerships, delivered to the company in 1995 and January 1996, and to transfer to foreign flag seven additional U.S.-flag containerships in its trans-Pacific fleet. In 1994, MarAd issued a waiver to allow the company to operate its six C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted. Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner vessels. The company continues to evaluate its strategic alternatives in light of the pending expiration of its ODS agreement and the uncertainties as to whether an acceptable new U.S. government maritime support program will be enacted, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support. In July 1995, legislation was introduced in the U.S. House of Representatives that would substantially modify the Shipping Act, which, among other things, provides the company with certain immunity from antitrust laws and requires the company and other carriers in U.S. foreign commerce to file tariffs. The legislation, which was not enacted in 1995, would have been phased in during 1997 and 1998 and would have eliminated government tariff filing and enforcement, allowed confidential and independent contracts between shippers and ocean carriers and strengthened provisions that prohibit predatory activities by foreign carriers. The company is unable to predict whether this or other proposed legislation will be introduced in 1996 or enacted or, whether, if enacted, it will contain terms similar to those proposed. Enactment of legislation modifying the Shipping Act, depending upon its terms, could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations. The company currently expects challenging conditions for the company and the shipping industry in 1996. Whether these conditions materialize, and the severity of the challenge the company faces, depends upon developments such as, but not limited to, the timing and extent of industry deregulation, the changes in market growth rates, the amount and timing of the anticipated significant increase in industry capacity, the extent of rate cutting in its markets and successful implementation of the company's alliances. NORTH AMERICA TRANSPORTATION (1) (Volumes in thousands of FEUs) 1995 Change 1994 Change 1993 Revenues (2) (In millions) Stacktrain $ 525 0% $ 523 15% $ 455 Non-Stacktrain 238 0% 238 16% 205 Stacktrain Volumes North America 413.2 4% 398.5 15% 345.6 International 186.2 (5%) 195.5 2% 192.6 Stacktrain Average Revenue per FEU (2) $1,271 (3%) $1,313 (0%) $1,315 (1)Volumes and revenue per FEU data are based upon shipments originating during the period, which differs from the percentage-of-completion method used for financial reporting purposes. (2)In addition to third party business, which is referred to above as North America Volumes, the transportation of containers for the company's international customers is a significant component of its stacktrain operations. These shipments are referred to above as International Stacktrain Volumes and, since they are eliminated in consolidation, are excluded from Revenues and Stacktrain Average Revenue per FEU. North America transportation revenues were relatively unchanged in 1995 compared with 1994, primarily as a result of higher stacktrain volumes from increased automotive shipments between the U.S. and Mexico, offset by a decline in stacktrain average revenue per FEU due primarily to lower rates as a result of increased competition. The company's North America non- stacktrain revenues were unchanged in 1995 compared with last year, primarily due to an increase in automotive volumes and rates from lanes added to this market since 1994, offset by lower volumes in the company's other non-stacktrain markets as a result of increased competition from trucking companies and the loss of several major customers. Revenues from the company's North America transportation operations increased in 1994, compared with 1993, as a result of higher North America stacktrain volumes. The increase in stacktrain volumes in 1994 was due to the improvement in the U.S. economy, increases in Mexican and Canadian shipments, particularly automotive shipments between the U.S. and Mexico, and competitor equipment shortages. The company added 1,800 containers to its fleet during 1994, which enabled it to meet increasing demand. The company's North America non-stacktrain revenues also improved in 1994 compared with 1993, primarily due to increased volumes resulting from an improved U.S. economy. In June 1995, the company and Burlington Motor Carriers, Inc. ("BMC") signed an agreement whereby the company's U.S. trucking operations, including related employees and leased equipment and facilities, were transferred to BMC in consideration of the sublease by BMC (and, in certain instances, a third party) of such equipment and facilities. In connection with the transfer, the company entered into a service agreement with BMC, expiring in December 1997, whereby BMC agreed to provide trucking services to the company and the company agreed to provide certain minimum cargo volumes to BMC through October 1, 1997. The transaction did not have a material effect on the company's other operations or operating results. In December 1995, Burlington Motor Holdings, Inc., the parent company of BMC, filed a petition seeking protection from its creditors under Chapter 11 of the U.S. Bankruptcy laws. The company currently cannot assess the impact of this filing, if any, on its operations, but does not expect the impact to be material. In 1996, the company expects modest growth in demand in the North America stacktrain market. Demand for automotive shipments is expected to remain strong but is dependent upon conditions in the U.S. and Mexican economies and the extent to which U.S. automakers continue to operate in Mexico, among other factors. No assurances can be given that growth in these markets will materialize. TRANSPORTATION OPERATING EXPENSES (In millions, except Operating Cost per FEU) 1995 Change 1994 Change 1993 Land Transportation $1,010 0% $1,010 8% $ 934 Cargo Handling 602 9% 552 7% 516 Vessel, Net 390 16% 335 9% 308 Transportation Equipment 214 6% 202 9% 184 Information Systems 49 1% 48 (2%) 49 Other 325 (2%) 332 10% 303 Total $2,590 4% $2,479 8% $2,294 Operating Cost Per FEU (1) $2,635 2 $2,592 0% $2,581 Percentage of Transportation Revenues 89% 89% 89% (1)Operating expenses used in this calculation include costs associated with certain International and North America revenues that are not volume related. Land transportation expenses were unchanged in 1995 from 1994. North America conventional rail expenses declined in 1995, due to the company's lower volumes in these markets. This decline was offset by higher third party intermodal, rail and truck costs in the company's international business. Cargo handling expenses increased in 1995 compared with 1994 due to higher stevedoring labor rates in Asia, increased cargo handling volumes in Asia, and the start-up of the Europe and Latin America services in 1995. In 1995, cargo handling expenses were also impacted by the weakness of the U.S. dollar relative to the Japanese yen in the first half of the year. Vessel expenses increased in 1995 compared with last year primarily due to increased charter hire costs in the Asia-Latin America and Asia- Europe markets, in which the company purchases vessel space through alliance partners. Additionally, vessel fuel costs increased in 1995 compared with 1994 due to the five C11-class vessels placed in service during 1995 and an increase in the average fuel price per barrel from $13.75 in 1994 to $15.63 in 1995. Transportation equipment costs increased in 1995 compared with 1994 due to increased container leasing and repair and maintenance costs. The increase in information systems costs for 1995 compared with 1994 was due to increased telecommunications costs. Other operating expenses are net of $6 million of gains from sales of vessels and $5 million in liquidated damages from delayed vessel deliveries in 1995, and gains of $6 million from sales of a crane and certain containers in 1994. Partially offsetting these gains in 1995, was a 23% increase in agency fees incurred by the company from 1994, primarily as a result of the company's entrance into the Asia-Europe market. Land transportation expenses increased in 1994 from 1993, due to higher North America stacktrain volumes in 1994. The increase in cargo handling expenses in 1994 compared with 1993 is attributable to increased stevedoring costs, which were impacted by higher labor rates in Asia and the U.S. and handling of increased cargo to and from China, West Asia and Southeast Asia. The weakening of the U.S. dollar relative to Asian currencies, particularly the Japanese yen, also resulted in higher cargo handling expenses in 1994. These increases were partially offset by a favorable land rent reduction in Taiwan. Vessel expenses increased in 1994 compared with 1993 due to increased charter hire activity resulting from expanded service to China, an increase in Latin American activity and additional vessel space purchased from OOCL and TMM in 1994. Vessel expenses were also impacted by a 6% increase in fuel cost in 1994 and the collision of one of the company's vessels during 1994, the self- insured portion of the cost of which was approximately $2 million. Transportation equipment costs increased in 1994 compared with 1993 due to the addition of 1,800 leased containers during 1994 for use in North America stacktrain operations, and increased repair and maintenance costs. Other operating expenses increased in 1994 compared with 1993 due to an increase of $9 million in the provision for potentially uncollectible accounts receivable, primarily in the People's Republic of China. Also contributing to the increase in other operating expenses were higher employee and telecommunications costs, particularly in Asia. Other operating expenses for 1994 are net of gains of $6 million from sales of a crane and certain containers, and for 1993, are net of gains of $9 million from sales of three vessels and certain containers. Certain of the company's collective bargaining agreements covering seagoing and shoreside unions in the U.S. expire in June and July 1996. The company currently expects that new agreements will be negotiated with the respective unions prior to the expiration of the current contracts, although no assurances can be given to that effect. Failure to reach agreement with a union on an acceptable labor contract could result in a strike or other labor difficulties, which could have a material adverse effect on the company's operating results. General and administrative expenses decreased 1% in 1995 compared with 1994. The decrease was due primarily to lower spending on corporate initiatives to improve the company's processes in 1995 compared with 1994. Expenditures for corporate initiatives were approximately $25 million for 1995 and $31 million for 1994. The decline in initiative spending in 1995 compared with 1994 was partially offset by higher employee relocation expenses and ongoing support costs related to new financial systems. General and administrative expenses increased 21% in 1994 compared with 1993, primarily due to expenditures of $31 million in 1994 on corporate initiatives. During the fourth quarter of 1995, the company recorded a pretax restructuring charge of $48 million for the accelerated completion of its reegineering program and other organizational changes. The charge includes $36 million in costs associated with the elimination of approximately 950 positions in company operations which are being reorganized or reduced in size. The remainder of the charge represents costs associated with office closures and projects that were eliminated as a result of the acceleration of the reengineering program. The company estimates that it will realize savings in operating expenses of approximately $48 million in 1996 as a result of its reegineering program and organizational changes. The company also expects significant incremental savings in future years and anticipates that the savings it realizes will offset the total costs of the reengineering program and organizational changes of $58 million by mid-1997. Whether and to what extent the company realizes such savings in 1996 and beyond, and the timing of such savings, will depend upon the actual timing of position eliminations and office closures, among other factors. No assurances can be given as to the timing or amount of these savings or as to whether they will be realized in 1996 or thereafter. Depreciation and amortization expense increased 6% in 1995 compared with 1994 primarily as a result of the delivery of five of the six C11-class vessels during the year, and other capital spending. Depreciation and amortization expense decreased 3% in 1994 from 1993 as certain assets reached the end of their depreciable lives in 1994. Net interest expense increased to $15 million in 1995 from $13 million in 1994, primarily due to interest expense on the debt related to the C11-class vessels purchased during 1995, which was partially offset by higher interest income resulting from higher interest rates in 1995. Net interest expense increased to $13 million in 1994 from $11 million in 1993, due to interest expense on two public debt offerings totaling $300 million in November 1993 and January 1994, which was partially offset by increased interest income on higher cash balances and higher interest rates in 1994. The effective tax rates applicable to the company were 43%, 33% and 39% in 1995, 1994 and 1993, respectively. The 1995 effective tax rate includes the increased effect of nondeductible items on lower income. The 1994 effective tax rate includes the effect of revisions of prior years' estimated tax liabilities. The 1993 effective tax rate includes an adjustment of $2.7 million to reflect the effect of an increase in the maximum corporate federal income tax rate to 35%. The effective tax rate for 1996 is expected to be approximately 38%, depending upon the level of actual earnings and changes, if any, in the tax laws, among other factors. LIQUIDITY AND CAPITAL RESOURCES (In millions) 1995 1994 1993 Cash, Cash Equivalents and Short-term Investments $ 136 $ 255 $ 84 Working Capital 65 206 51 Total Assets 1,879 1,664 1,454 Long-term Debt and Capital Lease Obligations (1) 699 391 272 Cash Provided by Operations 164 177 169 Net Capital Expenditures Ships $ 392 $ 38 $ 93 Containers, Chassis and Rail Cars 23 57 41 Leasehold Improvements and Other 41 33 22 Total $ 456 $ 128 $ 156 Financing Activities Borrowings $ 340 $ 147 $ 664 Repayment of Debt and Capital Leases (32) (28) (748) Common Stock Repurchases (170) Dividend Payments (14) (18) (15) (1) Includes current and long-term portions. The company took delivery of and made final payments on five C11-class vessels in 1995 and one C11-class vessel in 1996, built pursuant to construction contracts with Howaldtswerke-Deutsche Werft AG, of Germany and Daewoo Shipbuilding and Heavy Machinery, Ltd. of Korea. The total cost of the six C11-class vessels was $529 million, including total payments to the shipyards of $503 million, of which $62 million was paid in January 1996. To finance a portion of the purchase of the five vessels delivered in 1995, the company borrowed approximately $340 million in the form of vessel mortgage notes under a loan agreement with European banks. The company borrowed $62 million under this agreement to finance a portion of the vessel delivered in January 1996. During 1995, the company entered into three interest rate swap agreements to exchange the variable interest rates on certain vessel mortgage notes for fixed rates for periods of 10 and 12 years. OOCL has placed orders to purchase six vessels similar in size and speed to the company's C11-class vessels. Four of OOCLOs vessels have been delivered, and the final two vessels are scheduled to be delivered in March 1996. The company and OOCL have agreed to operate six and five of their C11-class vessels, respectively, under their Asia-U.S. West Coast alliance agreement with MOL. The deployment of the 11 new C11-class vessels by the company and OOCL, replacing 14 older vessels, will increase the combined trans-Pacific capacity of the company and OOCL by approximately 15%. The company currently expects growth in demand in the trans-Pacific market in the foreseeable future but believes that, because a number of other competing ocean carriers are also constructing significant numbers of new vessels, growth in capacity in that market will be significantly greater than growth in demand. No assurances can be given with respect to anticipated growth in demand, utilization of the company's increased capacity or the potential negative impact of the increased capacity on rates or the company's market share. Such growth and utilization will depend upon demand for U.S. import and U.S. export cargo in this market, economic conditions in the U.S. and other Pacific Basin countries, the effects of implementation of the company's alliances, and whether and when additional new vessels are delivered to competing carriers, among other factors. Additionally, modification of the Shipping Act, which is under consideration as referred to above, could have a material adverse impact on the company's rates and volumes. In September 1995, the company sold its construction contract for three K10-class vessels, which it had entered into in 1993, and recognized a pretax gain of $1.6 million. In conjunction with the sale, the company, MOL, OOCL and NLL formed a joint venture company, in which their respective shares are each 25%, and agreed to charter back these vessels, when delivered, for seven years for use in the Asia-Europe trade. Prior to the sale of the construction contract, the company made progress payments of $30 million for these vessels, including payments of $12 million in 1995, for which it received reimbursement. In addition to vessel expenditures of $392 million, the company made capital expenditures in 1995 of $64 million primarily for purchases of chassis, containers and terminal and leasehold improvements. In 1994, in addition to vessel progress payments of $31 million, the company's capital expenditures totaled $97 million and were primarily for purchases of chassis and terminal and leasehold improvements. In 1993, the company made $70 million in progress payments on the C11s and K10s. Additionally, the company purchased the remaining two vessels previously leased under leveraged leases and retired the related debt guaranteed by MarAd, eliminating MarAd's restrictions on the payment of dividends to the company by its wholly-owned subsidiary, American President Lines, Ltd. The purchase price of these vessels was $131 million, $110 million of which retired the related capital lease obligations. Capital expenditures in 1996 are expected to be approximately $235 million, including $62 million related to the final payment for the last C11-class vessel which was delivered in January 1996. The balance will be spent primarily on terminal equipment in North America and Asia, terminal improvements in North America and chassis and computer systems. The company has outstanding purchase commitments to acquire cranes, facilities, equipment and services totaling $72.9 million. In July 1995, the company issued a notice of redemption for all $75 million of its 9% Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock"). At the election of the holders, the 1.5 million shares of Series C Preferred Stock were converted into approximately 4 million shares of common stock. Also in July 1995, the Board of Directors authorized the repurchase of up to 6 million shares of the company's common stock. In August 1995, the company repurchased 2 million shares from the former holders of the Series C Preferred Stock at a purchase price of $27 per share. In addition, in September 1995, the company repurchased 2.8 million shares through a Dutch Auction self-tender offer at a purchase price of $30 per share, plus expenses. The company repurchased an additional 1.2 million shares of its common stock through open market transactions at an average price of $25.81 per share, plus expenses, which completed the repurchase of the 6 million shares authorized. All repurchased shares were retired. In November 1993, the company issued $150 million of 10-year Senior Notes and, in January 1994, issued $150 million of 30-year Senior Debentures. A portion of the proceeds from the issuance of this debt was used to repay $72 million of bank borrowings from 1993, and the remainder was used to finance vessel purchases, other capital expenditures and for general corporate purposes. Also, in January 1993, the company retired $95 million of 11% Notes. The company has a credit agreement with a group of banks which provides for an aggregate commitment of $200 million through March 1999. As an alternative to borrowing under its credit agreement, the company has an option under that agreement to sell up to $150 million of certain of its accounts receivable to the banks. The company believes its existing resources, cash flows from operations and borrowing capacity under its existing credit facilities will be adequate to meet its liquidity needs for the foreseeable future. Certain Factors That May Affect Operating Results Statements prefaced with "expects", "anticipates", "estimates", "believes" and similar words are forward looking statements based on the company's current expectations as to prospective events, circumstances and conditions over which it may have little or no control and as to which it can give no assurances. All forward looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those projected. The severity of the challenging conditions expected for the company and the shipping industry generally, and the impact of those conditions on the company's operating results, will depend on factors such as the timing and extent of an anticipated slowing of market growth in certain markets served by the company, the amount and timing of an anticipated significant increase in industry capacity due to new vessel deliveries to competing carriers, rate cutting in some market segments due to this additional capacity and other factors, successful implementation and continuation of the company's alliances, which comprise a significant factor in the company's long-term strategy to remain competitive, and the pace and degree of industry deregulation, including whether an acceptable maritime support program and proposed amendments to the Shipping Act of 1984 are enacted. Demand in the trans-Pacific market is dependent on factors such as the quantity of available import and export cargo in this market and economic conditions in the U.S. and other Pacific Basin countries. The magnitude of the impact on the company of any growth or contraction in the trans-Pacific market will depend on whether and when new vessels ordered by competing carriers are delivered and where they are ultimately deployed and further vessel orders, if any, by competing carriers. Because a number of competing ocean carriers have placed orders for the construction of a significant number of new vessels, growth in capacity in the trans-Pacific market is expected to be significantly greater than growth in demand. Growth in demand in the North America stacktrain market and demand for automotive shipments will depend on conditions in the U.S. and Mexican economies, including the relative values of the U.S. Dollar and the Mexican Peso, and the extent to which U.S. automakers continue to operate in Mexico, among other factors. Savings in operating expenses, if any, in connection with the company's reengineering program and organizational changes will depend on the ultimate future effectiveness and results of those efforts. There can be no assurance that the company will be able to realize these savings, and changes in the timing of any anticipated savings by the company, or the failure to realize some or all of these savings, could materially and adversely affect the company's operating results. Other risks and uncertainties include the degree and rate of market growth or contraction in other markets served by the company and the company's ability to respond in mitigation of any contraction or to take advantage of such growth, changes in the cost of fuel, the status of labor relations, the amplitude of recurring seasonal business fluctuations and the continuation and effectiveness of the Trans-Pacific Stabilization Agreement and the various shipping conferences to which the company belongs. The inability of the company to negotiate acceptable labor agreements could result in work stoppages, strikes or other labor difficulties or in higher labor costs, which could have a material adverse affect on the company's operating results. The company has in the past experienced such difficulties and there can be no assurance that any such difficulties will not occur in the future. Also, the company is subject to inherent risks of conducting business internationally, including unexpected changes in, or imposition of, legislative or regulatory requirements, fluctuations in the relative values of the U.S. Dollar and the various foreign currencies with which the company is paid and funds its local operations, tariffs and other trade barriers and restrictions affecting its customers, potentially longer payment cycles, potentially greater difficulty in accounts receivable collection, potentially adverse taxes and the burden of complying with a variety of foreign laws. In addition, in connection with its international operations, the company is subject to general geopolitical risks, such as political and economic instability and changes in diplomatic and trade relationships affecting it or its customers. The company expressly disclaims any obligation or undertaking to update any forward looking statements contained herein in the event of any change in the company's expectations with regard thereto or with regard to current or prospective conditions or circumstances on which any such statement is based. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Report of Management 29 Report of Independent Public Accountants 30 Consolidated Financial Statements Statement of Income 31 Balance Sheet 32 Statement of Cash Flows 33 Statement of Changes in Stockholders' Equity 34 Notes to Consolidated Financial Statements 35-51 Financial Statement Schedule Schedule II 52 REPORT OF MANAGEMENT To the Stockholders of American President Companies, Ltd.: The financial statements have been prepared by the company, and we are responsible for their content. They are prepared in accordance with generally accepted accounting principles, and in this regard we have undertaken to make informed judgments and estimates, where necessary, of the expected effect of future events and transactions. The other financial information in the annual report is consistent with that in the consolidated financial statements. The company maintains and depends upon a system of internal controls designed to provide reasonable assurance that our assets are safeguarded, that transactions are executed in accordance with management's intent and the law, and that the accounting records fairly and accurately reflect the transactions of the company. The company has an internal audit program which reviews the adequacy of the internal controls and compliance with them. The company engaged Arthur Andersen LLP as independent public accountants to provide an objective, independent audit of our financial statements. There is an Audit Committee of the Board of Directors which is composed solely of outside directors. The committee meets whenever necessary to monitor and review with management, the internal auditors and the independent public accountants, the company's financial statements and accounting controls. Both the independent public accountants and the internal auditors have access to the Audit Committee, without management being present, to discuss internal controls, auditing and financial reporting matters. To help assure that its affairs are properly conducted, management has established policies regarding standards of corporate behavior. The company regularly reminds its key employees of significant policies and requires them to confirm their compliance. /s/ Timothy J. Rhein Timothy J. Rhein President and Chief Executive Officer /s/ L. Dale Crandall L. Dale Crandall Executive Vice President and Chief Financial Officer /s/ William J. Stuebgen William J. Stuebgen Vice President, Controller and Chief Accounting Officer Oakland, California February 9, 1996 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of American President Companies, Ltd.: We have audited the accompanying consolidated balance sheet of American President Companies, Ltd. (a Delaware corporation) and subsidiaries as of December 29, 1995 and December 30, 1994, and the related consolidated statements of income, cash flows and changes in stockholders' equity for each of the three years in the period ended December 29, 1995. These consolidated financial statements and the schedule referred to below are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American President Companies, Ltd. and subsidiaries as of December 29, 1995 and December 30, 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 29, 1995, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Arthur Andersen LLP San Francisco, California February 9, 1996 American President Companies, Ltd. CONSOLIDATED STATEMENT OF INCOME Year Ended December 29 December 30 December 31 (In thousands, except 1995 1994 1993 per share amounts) Revenues $2,895,982 $2,793,468 $2,606,220 Expenses Operating, Net of Operating- Differential Subsidy 2,589,924 2,486,360 2,299,872 General and Administrative 76,895 77,686 64,281 Depreciation and Amortization 112,418 106,274 109,127 Restructuring Charge 48,372 Total Expenses 2,827,609 2,670,320 2,473,280 Operating Income 68,373 123,148 132,940 Interest Income 23,098 16,150 6,290 Interest Expense (38,318) (28,994) (17,663) Gain on Sale of Investment 8,934 Income Before Taxes 53,153 110,304 130,501 Federal, State and Foreign Tax Expense 22,856 36,106 50,392 Net Income $ 30,297 $ 74,198 $ 80,109 Less Dividends on Preferred Stock 3,375 6,750 6,750 Net Income Applicable to Common Stock $ 26,922 $ 67,448 $ 73,359 Earnings Per Common Share Primary $ 0.95 $ 2.38 $ 2.65 Fully Diluted $ 0.99 $ 2.30 $ 2.50 Dividends Per Common Share $ 0.40 $ 0.40 $ 0.30 See notes to consolidated financial statements. American President Companies, Ltd. CONSOLIDATED BALANCE SHEET December 29 December 30 (In thousands, except share amounts) 1995 1994 ASSETS Current Assets Cash and Cash Equivalents $ 76,564 $ 39,754 Short-Term Investments 59,086 214,898 Trade and Other Receivables, Net 245,490 280,736 Fuel and Operating Supplies 40,358 36,549 Prepaid Expenses and Other Current Assets 80,840 37,135 Total Current Assets 502,338 609,072 Property and Equipment Ships 1,091,991 678,453 Containers, Chassis and Rail Cars 801,274 781,100 Leasehold Improvements and Other 284,850 260,699 Construction in Progress 25,333 116,845 2,203,448 1,837,097 Accumulated Depreciation and Amortization (961,971) (896,802) Property and Equipment, Net 1,241,477 940,295 Investments and Other Assets 134,968 114,590 Total Assets $1,878,783 $1,663,957 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current Liabilities Current Portion of Long-Term Debt and Capital Leases $ 11,810 $ 4,797 Accounts Payable and Accrued Liabilities 425,378 397,969 Total Current Liabilities 437,188 402,766 Deferred Income Taxes 157,480 139,955 Other Liabilities 127,858 118,603 Long-Term Debt 685,954 373,142 Capital Lease Obligations 1,133 13,108 Total Long-Term Debt and Capital Lease Obligations 687,087 386,250 Commitments and Contingencies Redeemable Preferred Stock, $.01 Par Value, Stated at $50.00, Authorized-2,000,000 Shares Series C, Shares Issued and Outstanding-1,500,000 in 1994 75,000 Stockholders' Equity Common Stock $.01 Par Value, Stated at $1.00 Authorized-60,000,000 Shares Shares Issued and Outstanding-25,669,000 in 1995 and 27,318,000 in 1994 25,669 27,318 Additional Paid-In Capital 1,943 70,853 Retained Earnings 441,558 443,212 Total Stockholders' Equity 469,170 541,383 Total Liabilities, Redeemable Preferred Stock and Stockholders' Equity $1,878,783 $1,663,957 See notes to consolidated financial statements. American President Companies, Ltd. CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 29 December 30 December 31 (In thousands) 1995 1994 1993 Cash Flows from Operating Activities Net Income $30,297 $ 74,198 $ 80,109 Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 112,418 106,274 109,127 Noncash Restructuring Charge 43,510 Deferred Income Taxes (13,134) 14,865 6,633 Change in Receivables 4,118 (42,216) (37,915) Issuance of Notes Receivable on Sales of Real Estate (7,470) (4,170) Change in Fuel and Operating Supplies (3,809) (1,195) (469) Change in Prepaid Expenses and Other Current Assets (4,116) 8,335 3,055 Gain on Sale of Assets (5,660) (5,583) (17,577) Change in Accounts Payable and Accrued Liabilities (11,456) 18,844 18,543 Other 11,941 10,519 11,285 Net Cash Provided by Operating Activities 164,109 176,571 168,621 Cash Flows from Investing Activities Capital Expenditures (455,721) (127,757) (156,270) Proceeds from Sale of Long-Term Investment 11,310 Proceeds from Sales of Property and Equipment 44,937 9,297 8,955 Purchase of Short-Term Investments (99,975) (453,870) Proceeds from Sales of Short-Term Investments 255,787 238,972 38,846 Transfer from Capital Construction Fund 8,843 Deposits to Capital Construction Fund (6,140) Other 2,261 1,649 5,036 Net Cash Used in Investing Activities (252,711) (331,709) (89,420) Cash Flows from Financing Activities Repurchase of Common Stock (170,364) Issuance of Debt 339,897 147,348 663,571 Repayments of Capital Lease Obligations (3,877) (3,278) (113,465) Repayments of Debt (28,357) (24,897) (634,932) Dividends Paid (14,359) (17,651) (14,725) Debt Issue Costs (4,980) Other 7,213 9,383 12,841 Net Cash Provided by (Used in) Financing Activities 125,173 110,905 (86,710) Effect of Exchange Rate Changes on Cash 239 (66) (1,273) Net Increase (Decrease) in Cash and Cash Equivalents 36,810 (44,299) (8,782) Cash and Cash Equivalents at Beginning of Year 39,754 84,053 92,835 Cash and Cash Equivalents at End of Year $76,564 $ 39,754 $ 84,053 SUPPLEMENTAL DATA: Cash Paid for: Interest, Net of Capitalized Interest $34,570 $ 24,158 $ 26,232 Income Taxes, Net of Refunds $31,459 $ 15,848 $ 32,370 Noncash Investing Activities: Change in Trade Receivables Invested in the Capital Construction Fund $27,178 $ 37,773 Noncash Financing Activities: Conversion of Redeemable Preferred Stock $75,000
See notes to consolidated financial statements. American President Companies, Ltd. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Year Ended December 29 December 30 December 31 (In thousands, except share amounts) 1995 1994 1993 Common Stock Beginning Balance $27,318 $ 26,837 $ 13,022 Stock Awards and Options Exercised, Net 390 481 397 Stock Split 13,418 Conversion of Redeemable Preferred Stock 3,962 Repurchase and Retirement of Common Stock (6,001) Ending Balance 25,669 27,318 26,837 Additional Paid-In Capital Beginning Balance 70,853 61,656 62,023 Stock Awards and Options Exercised, Net 6,837 9,197 13,051 Stock Split (13,418) Conversion of Redeemable Preferred Stock 71,038 Repurchase and Retirement of Common Stock (146,785) Ending Balance 1,943 70,853 61,656 Retained Earnings Beginning Balance 443,212 386,960 322,183 Net Income 30,297 74,198 80,109 Cash Dividends Common (10,984) (10,901) (7,975) Series C Redeemable Preferred (3,375) (6,750) (6,750) Repurchase and Retirement of Common Stock (17,578) Other (14) (295) (607) Ending Balance 441,558 443,212 386,960 Total Stockholders' Equity $469,170 $541,383 $475,453 See notes to consolidated financial statements. American President Companies, Ltd. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Fiscal Year The consolidated financial statements include the accounts of American President Companies, Ltd. and its majority-owned subsidiaries (the "company"), after eliminating intercompany accounts and transactions. The company's fiscal year ends on the last Friday in December. The company's 1995 and 1994 fiscal years were 52 weeks, and the 1993 fiscal year was 53 weeks. Nature of Operations The company provides transportation services for containerized cargo in the trans-Pacific, intra-Asia, Asia- Europe, Asia-Latin America and North American markets. Certain of the services are provided through alliances with other transportation companies. In addition, the company provides cargo distribution and warehousing services in the U.S. and freight consolidation services in Mexico, Asia, the Middle East, Europe and Africa. The company also provides freight deconsolidation services in several U.S. locations and acts as a non-vessel operating common carrier in the intra-Asia market and from Asia to Europe and Australia. The company provides intermodal transportation and freight brokerage services to North American and international shippers as well as time-critical cargo transportation and just-in-time delivery (principally to the automotive manufacturing industry). These services are provided through an integrated system of rail and truck transportation, the primary element of which is a train system utilizing double-stack rail cars. The operations of the company in any one country, type of cargo or customer are not significant in relation to the companyOs overall operations. In late 1995, the company initiated pricing actions for specific commodities in specific trade lanes in response to competitive conditions and loss of market share in its U.S. import market. Subsequently, competitors and the company have lowered rates, and considerable rate instability in the U.S. import market continues to exist. The company cannot predict whether additional pricing actions may be taken by the company or its competitors. Destabilization of rates, if extensive, could have a material adverse impact on carriers, including the company. Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenues and Expenses The company recognizes revenues on a percentage-of- completion basis and expenses as incurred. Detention revenue is recognized when cash is received. Foreign Currency Transactions The company's primary functional currency is the U.S. dollar. Foreign entities translate monetary assets and liabilities at period-end exchange rates while nonmonetary items are translated at historical rates. Income and expense accounts are translated at the average rates in effect during the year. Net gains or (losses) from changes in exchange rates are included in Operating Income on the accompanying Consolidated Statement of Income and for 1995, 1994 and 1993 were $(1.7) million, $0.5 million and $(1.1) million, respectively. Cash, Cash Equivalents and Short-Term Investments Cash and Cash Equivalents comprise cash balances and investments with maturities of three months or less at the time of purchase. Short-Term Investments consist of commercial paper, auction rate preferred stock and other cash instruments and are carried at cost, which approximates fair value. Allowance for Doubtful Accounts The provision for doubtful accounts, included in Operating Expenses on the accompanying Consolidated Statement of Income, for 1995, 1994 and 1993 was $14.9 million, $13.2 million and $4.3 million, respectively. At December 29, 1995 and December 30, 1994 the allowance for doubtful accounts, included in Trade and Other Receivables on the accompanying Consolidated Balance Sheet, was $22.5 million and $21.9 million, respectively. Property and Equipment Property and Equipment are recorded at historical cost. For assets financed under capital leases, the present value of the future minimum lease payments is recorded at the date of acquisition as Property and Equipment with a corresponding amount recorded as a capital lease obligation. Depreciation and amortization are computed using the straight-line method based upon the following estimated useful lives: Classification Estimated Useful Life Ships 15 to 25 Years Containers, Chassis and Accessories 5 to 15 Years Rail Cars 5 to 10 Years Other Property and Equipment Various Assets Under Capital Lease Arrangements Term of Lease Maintenance and repair expenditures of $126.3 million, $117.3 million and $110.3 million have been charged to expense in 1995, 1994 and 1993, respectively, as they were incurred. At December 29, 1995 and December 30, 1994, the balance of deferred costs for major periodic dry dockings and rail car overhauls, which are amortized over two to five years, was $6.3 million and $12.6 million, respectively. Long-Term Investments The company has certain investments, long-term deposits and receivables, which are included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. The fair value of these assets approximates their carrying value at December 29, 1995. Software Costs Costs related to internally developed software are charged to expense as incurred. Purchases of major integrated software systems are capitalized and amortized using the straight-line method over five years. Capitalized Interest Interest costs of $8.4 million, $6.3 million and $1.5 million relating primarily to cash paid for the construction of vessels were capitalized in 1995, 1994 and 1993, respectively. Insurance Reserves The company is self-insured for a significant portion of its cargo, vessel, and personal injury exposures. Insurance reserves are determined using actuarial estimates. These estimates are based on historical information along with certain assumptions about future events. NOTE 2. UNITED STATES MARITIME AGREEMENTS AND LEGISLATION Operating-Differential Subsidy Agreement The company and the United States Maritime Administration ("MarAd") are parties to an Operating-Differential Subsidy ("ODS") agreement expiring December 31, 1997, which provides for payment by the U.S. government to partially compensate the company for the relatively greater expense of vessel operation under United States registry. The ODS amounts for 1995, 1994 and 1993 were $61.5 million, $60.8 million and $64.7 million, respectively, and have been included as a reduction of operating expenses. In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994, referred to as the Maritime Security Program, was not enacted. The Administration's proposal included a 10-year subsidy program with up to $100 million in annual payments to be requested and appropriated on a year-to-year basis. Congress has appropriated $46 million in fiscal 1996, or $2.3 million per vessel. This compares with subsidy of approximately $3.1 million per vessel under ODS. Maritime support legislation incorporating the Administration's program has recently passed the U.S. House of Representatives and is currently awaiting consideration before the U.S. Senate, but has not yet been approved. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted. While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with MarAd to operate under foreign flag its six C11-class containerships, delivered to the company in 1995 and January 1996, and to transfer to foreign flag seven additional U.S.-flag containerships in its trans-Pacific fleet. In 1994, MarAd issued a waiver to allow the company to operate its six C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether or when the authority will be granted. Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner vessels. The company continues to evaluate its strategic alternatives in light of the pending expiration of its ODS agreement and the uncertainties as to whether an acceptable new U.S. government maritime support program will be enacted, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support. Capital Construction Fund The company also has an agreement with MarAd pursuant to which the company has established a Capital Construction Fund ("CCF") to which the company makes contributions to provide funding for certain U.S.-built assets and for the repayment of certain vessel acquisition debt. In 1995 and 1994, the company made deposits, which were concurrently invested in the company's trade accounts receivable, of $23.3 million and $36.9 million, respectively, to its CCF. At December 29, 1995 and December 30, 1994, the CCF, consisted of an investment of $71.1 million and $40.0 million, respectively, in the company's trade accounts receivable and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. The company receives a federal income tax deduction for deposits made to the CCF, subject to certain restrictions. Withdrawals from the CCF for investment in vessels or related assets do not give rise to a tax liability, but reduce the depreciable bases of the assets for income tax purposes. At December 29, 1995, the total tax basis of assets purchased with CCF funds was approximately $44.7 million less than net book value. Deferred income taxes have been provided for CCF amounts on deposit or invested in vessels or related equipment. Shipping Act of 1984 In July 1995, legislation was introduced in the U.S. House of Representatives that would substantially modify the Shipping, which, among other things, provides the company with certain immunity from antitrust laws and requires the company and other carriers in U.S. foreign commerce to file tariffs. The legislation, which was not enacted in 1995, would have been phased in during 1997 and 1998 and would have eliminated government tariff filing and enforcement, allowed confidential and independent contracts between shippers and ocean carriers and strengthened provisions that prohibit predatory activities by foreign carriers. The company is unable to predict whether this or other proposed legislation will be introduced in 1996 or enacted or, whether, if enacted, it will contain terms similar to those proposed. Enactment of legislation modifying the Shipping Act, depending upon its terms, could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations. NOTE 3. RESTRUCTURING CHARGE During the fourth quarter of 1995, the company recorded a one-time charge of $48.4 million related to the accelerated completion of its reengineering program and other organizational changes. The charge includes $36.4 million related to the elimination of approximately 950 positions in company operations that are being reorganized or reduced in size. Of this amount, $4.9 million related to payments to approximately 147 employees terminated in the fourth quarter of 1995, when the acceleration of the company's reengineering program began. Additionally, equipment and leasehold improvements totaling $4.6 million were written off in the fourth quarter of 1995 for closed offices and projects that were eliminated as a result of the acceleration of the reengineering program. NOTE 4. INCOME TAXES The company records income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires the company to compute deferred taxes based upon the amount of taxes payable in future years, after considering known changes in tax rates and other statutory provisions that will be in effect in those years. The reconciliation of the company's effective tax rate to the federal statutory tax rate is as follows: 1995 1994 1993 U.S. Federal Statutory Rate 35% 35% 35% Increases (Decreases) in Rate Resulting from: State Taxes, Net of Federal Benefit 3% 3% 3% Effect of Federal Tax Rate Change on Prior Years 2% Revisions of Prior Years' Tax Estimate s (6%) Permanent Book/Tax Differences and Other 5% 1% (1%) Net Effective Tax Rate 43% 33% 39% The following is a summary of the company's provision for income taxes: (In thousands) 1995 1994 1993 Current Federal $24,798 $20,441 $30,164 State 2,455 2,865 3,291 Foreign 8,008 6,746 6,684 35,261 30,052 40,139 Deferred Federal (11,108) 5,358 7,664 State (1,297) 696 (160) Change in Federal Tax Rate 2,749 (12,405) 6,054 10,253 Total Provision $22,856 $36,106 $50,392 The following table shows the tax effect of the company's cumulative temporary differences and carryforwards included on the company's Consolidated Balance Sheet at December 29, 1995 and December 30, 1994: (In thousands) 1995 1994 Excess of Tax Over Book Depreciation $(128,147) $(111,613) Tax Deductions for CCF Deposits in Excess of Book Depreciation of CCF Assets (39,734) (48,756) Net Tax Deduction for Rent Differential on Capital Leases (28,190) (26,879) Pension and Postretirement Benefits 23,297 20,692 Excess Insurance Reserves Over Claims Paid 18,566 20,340 Restructuring Charge Accrual 16,379 Allowance for Doubtful Accounts 8,998 8,664 Accrued Liabilities 6,024 6,440 Other 6,700 1,871 Total Net Deferred Tax Liability $(116,107) $(129,241) The amount of deferred tax assets and liabilities at December 29, 1995 and December 30, 1994 were as follows: (In thousands) 1995 1994 Deferred Tax Assets $ 85,032 $ 67,339 Deferred Tax Liabilities (201,139) (196,580) Total Net Deferred Tax Liability (116,107) (129,241) Less Net Current Deferred Tax Asset (41,373) (10,714) Deferred Income Taxes $(157,480) $(139,955) The net current deferred tax asset is included in Prepaid Expenses and Other Current Assets on the accompanying Consolidated Balance Sheet. NOTE 5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts Payable and Accrued Liabilities at December 29, 1995 and December 30, 1994 were as follows: (In thousands) 1995 1994 Accounts Payable $ 58,144 $ 54,009 Accrued Liabilities 243,228 259,933 Current Portion of Insurance Claims 19,564 24,468 Income Taxes 5,855 2,883 Unearned Revenue 59,722 56,676 Restructuring Charge 38,865 Total Accounts Payable and Accrued Liabilities $ 425,378 $397,969 NOTE 6. LONG-TERM DEBT Long-term debt at December 29, 1995 and December 30, 1994 consisted of the following: (In thousands) 1995 1994 Vessel Mortgage Notes Due Through 2007 (1) $ 338,044 8% Senior Debentures $150 Million Face Amount, Due on January 15, 2024 (2) 147,169 $147,144 7 1/8% Senior Notes $150 Million Face Amount, Due on November 15, 2003 (2) 148,227 148,065 Series I 8% Vessel Mortgage Bonds, Due Through 1997 (3) 33,353 57,176 8% Refunding Revenue Bonds, Due on November 1, 2009 (4) 12,000 12,000 Other 7,161 9,842 Total Debt 685,954 374,227 Current Portion (1,085) Long-Term Debt $ 685,954 $373,142 (1)In 1995, the company took delivery of five of the six new C11- class vessels. To finance a portion of the purchase of these vessels, the company borrowed approximately $340 million under a loan agreement with European banks pursuant to vessel mortgage notes due through 2007. Principal payments are due in semiannual installments over a 12-year period commencing six months after the delivery of the respective vessels. The interest rates on the notes are based upon various margins over LIBOR or the banks' cost of funds, as elected by the company. Until the sixth anniversary of the delivery date, the company may defer up to four principal payments. Aggregate deferred payments are due at the end of the term of the notes. Principal payments on this debt are classified as long-term on the basis that the company has the ability to defer at least two payments. The notes issued under this loan agreement are collateralized by the C11-class vessels, which had a net book value of $437.2 million at December 29, 1995. In 1995, the company entered into interest rate swap agreements on three of the vessel mortgage notes with a notional amount of $213.7 million to exchange the variable interest rates on certain of the vessel mortgage notes for fixed rates for periods of 10 and 12 years. The current variable interest rates for all the vessel mortgage notes range between 6.615% and 6.84%. As a result of the swaps, the effective interest rates range between 6.81% and 7.531% for the first five years after inception, and 6.935% and 7.656% for the remaining terms of the swaps. Net payments or receipts under the agreements will be included in interest expense. The company is exposed to credit losses in the event of counterparty nonperformance, but does not anticipate any such losses. Based on quoted dealer prices, immediate termination of the interest rate swaps would result in a loss of approximately $6.0 million. (2)Pursuant to a shelf registration statement the company issued 7 1/8% Senior Notes and 8% Senior Debentures in November 1993 and January 1994, respectively. Interest payments are due semiannually. The Senior Notes had an effective interest rate of 7.325%, and an unamortized discount of $1.8 million and $1.9 million at December 29, 1995 and December 30, 1994, respectively. The Senior Debentures had an effective interest rate of 8.172%, and an unamortized discount of $2.8 million and $2.9 million at December 29, 1995 and December 30, 1994, respectively. Fair value of the Senior Notes and Senior Debentures was approximately $152 million and $151 million, respectively, at December 29, 1995 based on quoted dealer prices for similar issues. (3)Principal payments are due in equal semiannual installments totaling $23.8 million per year. The company has the option to issue Series II Bonds due sequentially in semiannual payments at the end of the term of the Series I Bonds in lieu of up to three of the remaining cash payments, which it has not yet exercised. Principal amounts are classified as long- term debt based on the company's ability to issue Series II Bonds in lieu of the remaining semiannual cash payments. The bonds issued under this loan agreement are collateralized by the five C10-class vessels, which had a net book value of $168 million at December 29, 1995. Fair value of this debt is approximately $48 million at December 29, 1995 assuming a current interest rate of 6.15%. (4)The Bonds are redeemable on or after November 1, 1999 at a redemption price of 102% of the principal amount, reducing to 100% of the principal amount on or after November 1, 2001. Carrying value of significant issues of long-term debt, other than the Series I Bonds, Senior Notes and Senior Debentures, approximates fair value because the interest rates on outstanding debt approximate current interest rates that would be offered to the company for similar debt. Principal payments scheduled on long-term debt during the next five years, assuming the company exercises its options to defer payments on the Vessel Mortgage Notes and Series I Bonds, are as follows: (In thousands) 1996 $ 0 1997 26,243 1998 35,234 1999 22,672 2000 24,488 The company has a credit agreement with a group of banks which provides for an aggregate commitment of $200 million through March 1999. The credit agreement, as amended in 1995, contains, among other things, various financial covenants that require the company to meet certain levels of interest and fixed charge coverage, leverage and net worth. The borrowings bear interest at rates based upon various indices as elected by the company. There have been no borrowings under this agreement. As an alternative to borrowing under its credit agreement, the company has an option under that agreement to sell up to $150 million of certain of its accounts receivable to the banks. This alternative is subject to less restrictive financial covenants than the borrowing option. NOTE 7. LEASES The company leases equipment under capital leases expiring in one to five years. Assets under capital lease included in Property and Equipment on the accompanying Consolidated Balance Sheet at December 29, 1995 and December 30, 1994 are as follows: (In thousands) 1995 1994 Containers, Chassis and Rail Cars $ 37,982 $ 38,003 Other Property and Equipment 938 938 38,920 38,941 Accumulated Depreciation (36,578) (32,955) Total $ 2,342 $ 5,986 The following is a schedule of future minimum lease payments required under the company's leases that have initial noncancelable terms in excess of one year at December 29, 1995: Capital Operating (In thousands) Leases Leases 1996 $ 12,543 $222,427 1997 414 124,072 1998 414 113,149 1999 414 100,915 2000 45 91,918 Later Years 1,468,278 Total Minimum Payments Required $ 13,830 $2,120,759 Amount Representing Interest (887) Present Value of Minimum Lease Payments 12,943 Current Portion (11,810) Long-Term Portion $ 1,133 The above schedule of operating leases includes minimum payments under 30 year leases for terminal facilities in Los Angeles and Seattle, which are scheduled for occupancy upon completion of construction in 1997. Total rental expense for operating leases and short-term rentals was $328.2 million, $334.3 million and $289.5 million in 1995, 1994 and 1993, respectively. NOTE 8. EMPLOYEE BENEFIT PLANS Pension Plans The company has defined benefit pension plans covering most of its employees, which generally call for benefits to be paid to eligible employees at retirement based on years of credited service and average monthly compensation during the five years of employment with the highest rate of pay. The company's general policy is to fund pension costs at no less than the statutory requirement. Certain non-qualified plans are secured through a grantor trust. The investment in this trust at December 29, 1995 was $16.6 million and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. The investments in the trust consist of life insurance policies and other cash instruments, which are carried at fair value. The following table sets forth the pension plans' funded status and amounts recognized in the accompanying Consolidated Balance Sheet at December 29, 1995 and December 30, 1994: 1995 1994 Assets in Accumulated Assets in Accumulated Excess of Benefits Excess of Benefits Accumulated in Excess Accumulated in Excess (In thousands) Benefits of Assets Benefits of Assets Actuarial Present Value of: Vested Benefit Obligation $(108,061) $ (10,149) $ (94,408) $ (8,082) Accumulated Benefit Obligation (116,458) (10,932) (103,079) (8,837) Actuarial Present Value of Projected Benefit Obligation $(161,224) $ (17,922) $(139,993) $ (13,252) Plan Assets at Fair Value 152,169 765 131,590 Funded Status (9,055) (17,157) (8,403) (13,252) Unrecognized Net Loss (Gain) 10,438 330 15,422 (1,631) Unrecognized Prior Service (Credit) Cost (14,998) 3,528 (16,049) 3,915 Unrecognized Transition (Asset) Obligation (8,850) 829 (9,940) 829 Net Pension Liability $ (22,465) $ (12,470) $ (18,970) $ (10,139) The following assumptions were made in determining the company's net pension liability: (Weighted Average of All Plans) 1995 1994 1993 Discount Rate 7.5% 7.9% 7.1% Rate of Increase in Compensation Levels 5.2% 5.2% 5.2% Expected Long-Term Rate of Return on Plan Assets 8.2% 8.2% 8.2% Net pension cost related to the company's pension plans included the following components: (In thousands) 1995 1994 1993 Service Cost $ 8,333 $ 9,144 $ 7,858 Interest Cost on Projected Benefit Obligation 12,357 11,228 10,138 Actual Return on Plan Assets (25,019) 414 (14,354) Net Amortization and Deferral 12,648 (12,971) 2,453 Net Pension Cost $ 8,319 $ 7,815 $ 6,095 The company also participates in collectively bargained, multi-employer plans that provide pension and other benefits to certain union employees. The company contributed $5.8 million in 1995, $5.3 million in 1994, and $5.2 million in 1993 to such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked and are expensed as incurred. Under certain of the multi-employer pension plans in which the company participates, the company has withdrawal liabilities of $12.5 million for unfunded vested benefits at December 31, 1994, the latest valuation date. However, the company has no present intention of withdrawing from the plans, nor has the company been informed that there is any intention to terminate the plans. There are no other significant withdrawal liabilities attributable to the company for multi-employer pension plans. Postretirement Benefits Other than Pensions The company shares the cost of its health care benefits with the majority of its domestic shoreside retired employees and recognizes the cost of providing health care and other benefits to retirees over the term of employee service. Postretirement benefit costs in the accompanying Consolidated Statement of Income were as follows: (In thousands) 1995 1994 1993 Interest Cost $ 1,266 $ 1,380 $ 1,573 Service Cost 795 1,117 1,033 Amortization of Gains (477) (117) (117) Total Postretirement Benefit Cost $ 1,584 $ 2,380 $ 2,489 The following table sets forth the postretirement benefit obligation recognized in the accompanying Consolidated Balance Sheet at December 29, 1995 and December 30, 1994: (In thousands) 1995 1994 Accumulated Postretirement Benefit Obligation Retirees $ 7,489 $6,975 Active Employees - Fully Eligible 604 462 Active Employees - Not Fully Eligible 8,483 7,925 Unrecognized Net Gain 7,505 7,671 Unamortized Prior Service Cost 1,834 1,952 Total $25,915 $24,985 The expected cost of the company's postretirement benefits is assumed to increase at an annual rate of 9.3% in 1996. This rate is assumed to decline approximately 1% per year to 5% in the year 1999 and remain level thereafter. The health care cost trend rate assumption has a significant impact on the amounts reported. An increase in the rate of 1% in each year would increase the accumulated postretirement benefit obligation at December 29, 1995 by $2.7 million and the aggregate of the service and interest cost for 1995 by $0.5 million. The weighted average discount rate used to determine the accumulated postretirement benefit obligation was 7.5%. The company has not funded the liability for these benefits. Profit-Sharing Plans The company has defined contribution profit-sharing plans covering certain non-union employees. Under the terms of these plans, the company has agreed to make matching contributions equal to those made by the participating employees up to a maximum of 6% of each employee's base salary. The company's total contributions to the plans amount to $6.3 million for 1995 and 1994, and $6.0 million for 1993. NOTE 9. REDEEMABLE PREFERRED STOCK On July 14, 1995, the company issued a notice of redemption for all $75 million of its 9% Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock"). On July 28, 1995, at the election of the holders, the 1,500,000 shares of Series C Preferred Stock were converted into 3,961,498 shares of common stock, or 2.641 shares of common stock for each share of Series C Preferred Stock (a conversion price of $18.93 per share of common stock). NOTE 10. STOCKHOLDERS' EQUITY Common Stock Repurchase On July 21, 1995, the Board of Directors authorized the repurchase of up to 6 million shares of the company's common stock. On August 8, 1995, the company repurchased 2 million shares from the former holders of the Series C Preferred Stock at a purchase price of $27 per share. In addition, on September 18, 1995, the company repurchased 2,820,499 shares through a Dutch Auction self-tender offer at a purchase price of $30 per share, plus expenses. The company repurchased an additional 1,180,000 shares of its common stock through open market transactions at an average price of $25.81 per share, plus expenses, which on October 25, 1995, completed the repurchase of the 6 million shares authorized. All repurchased shares were retired. The excess of the purchase price of the common stock over its stated value has been reflected as a decrease in Additional Paid-In Capital and Retained Earnings on the accompanying Consolidated Balance Sheet. Earnings Per Common Share For the years presented, primary earnings per common share were computed by dividing net income, reduced by the amount of preferred stock dividends, by the weighted average number of common shares and common equivalent shares outstanding during the year. Common equivalent shares consist of stock options granted. Fully diluted earnings per common share were computed based on the assumption that the Series C Preferred Stock was converted at the beginning of the year. The number of shares used in these computations was as follows: Weighted Average Number of Common and Common Equivalent Shares (In millions) 1995 1994 1993 Primary 28.2 28.3 27.7 Fully Diluted 30.6 32.3 32.1 Supplementary Earnings Per Common Share Data On July 28, 1995, the Series C Preferred Stock was converted into 3,961,498 shares of common stock. The effect of the conversion of the Series C Preferred Stock on primary and fully diluted earnings per share, assuming the conversion occurred at the beginning of each year, is as follows: 1995 1994 1993 Primary Earnings per Common Share As Stated $0.95 $ 2.38 $2.65 Assuming Shares Converted at the Beginning of the Period $0.99 $ 2.30 $2.53 Fully Diluted Earnings per Common Share As Stated (1) $0.99 $ 2.30 $2.50 Assuming Shares Converted at the Beginning of the Period $0.99 $ 2.30 $2.50 (1)Fully diluted earnings per share "As Stated" reflects the conversion of the Series C Preferred Stock as though such conversion occurred at the beginning of each period. Stockholder Rights Plan The company's stockholder rights agreement provides that rights become exercisable when a person acquires 20% or more of the companyOs common stock or announces a tender offer which would result in the ownership of 20% or more of the companyOs common stock, or if a person who has been declared "adverse" by the independent directors of the company exceeds a threshold stock ownership established by the Board, which may not be less than 10%. The rights will be attached to all common stock. Once exercisable, each right entitles its holder to purchase two one- hundredths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $130 per unit, subject to adjustment. Upon the occurrence of certain other events related to changes in the ownership of the company's outstanding common stock, each holder of a right would be entitled to purchase shares of the company's common stock or an acquiring corporation's common stock having a market value of two times the exercise value of the right. Rights that are, or were, beneficially owned by an acquiring or adverse person will be null and void. In addition, the Board of Directors may, in certain circumstances, require the exchange of each outstanding right for common stock or other consideration with a value equal to the exercise price of the rights. The company has reserved 500,000 shares of preferred stock for issuance pursuant to the exercise of the rights in the future. The rights expire November 29, 1998 and, subject to certain conditions, may be redeemed by the Board of Directors at any time at a price of $0.025 per right. Stock Incentive Plans The Compensation Committee of the Board of Directors approved stock option grants under the company's 1989 Stock Incentive Plan (the "Plan") for shares of the company's common stock beginning in July 1993 to key employees of the company. The options have an exercise price of the greater of the fair market value on the date of grant or $22.38 per share, a term expiring July 26, 2003 and vest between 1996 and 2002 based upon the achievement of stock price appreciation targets. The percentage of the options that vest during specified time periods will depend on the amount of stock price appreciation in those time periods. In 1998, the options will vest as to 60% of the covered shares if not otherwise vested, and in 2002, the options will vest as to the remaining 40% if not otherwise vested. Previous stock option grants under the Plan become exercisable in three to four equal annual installments commencing one year after grant. The Plan also provides for awards of restricted shares of common stock to officers and other key employees. All restricted shares were vested at December 29, 1995. The 1992 Directors Stock Option Plan provides for the granting of options to purchase shares of common stock to non- employee members of the company's Board of Directors. The aggregate number of options which may be granted under this plan is 200,000. Options become exercisable in three equal installments on the first three anniversaries of the date of grant. In 1995, the Board of Directors adopted the companyOs 1995 Stock Bonus Plan ("Stock Bonus Plan"). The Stock Bonus Plan permits executives and key employees, as selected by the Compensation Committee of the Board of Directors, to receive all or part of their bonuses in the form of shares of common stock or phantom shares. In addition, non-employee directors may elect to receive all or part of their annual retainers and/or meeting fees in the form of shares of common stock or phantom shares. Participants receive a premium in the form of additional shares equal to 17.6% which vest over a two year period. The Stock Bonus Plan is effective for amounts payable in 1996. The following is a summary of the transactions in the plans during 1995: Stock Options Restricted Shares Average Shares Price Outstanding at December 30, 1994 4,920,871 $ 19.63 3,000 Granted 292,447 23.32 Exercised (390,932) 13.68 Vested (3,000) Canceled (373,373) 22.29 Outstanding at December 29, 1995 4,449,013 $ 20.17 0 Exercisable at December 29, 1995 1,219,624 $ 14.29 Exercised in 1994 516,614 $ 12.07 Exercised in 1993 833,834 $ 11.54 At December 29, 1995, a total of 983,862 shares were available for future grants of stock options, restricted shares and stock units under these plans. NOTE 11. COMMITMENTS AND CONTINGENCIES Commitments Ship Purchases and Ship Management The company took delivery of and made final payments on five C11-class vessels in 1995 and one C11-class vessel in 1996, built pursuant to construction contracts with Howaldtswerke-Deutsche Werft AG, of Germany and Daewoo Shipbuilding and Heavy Machinery, Ltd., of Korea. The total cost of the six C11-class vessels was $529 million, including total payments to the shipyards of $503 million, of which $62 million was paid in January 1996. In connection with the construction and purchase of the ships from HDW, the company entered into foreign currency contracts to buy Deutsche marks to lock in the U.S. dollar cost of the Deutsche- mark denominated price of the vessels. Gains or losses on these contracts were recognized as adjustments to the cost basis of the ships when the related payments were made. At December 29, 1995, all contracts were settled. On January 5, 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia would provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice. Alliances Since 1991, the company and Orient Overseas Container Line ("OOCL") have been parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. These agreements permit both companies to offer faster transit times and more frequent sailings between key markets in Asia and the U.S. West Coast, and to share terminals and several feeder operations within Asia. In September 1994, the company, Mitsui OSK Lines, Ltd.("MOL"), and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers commenced service under this agreement in January 1996. The agreement between the company and OOCL is suspended so long as the agreement between the company, OOCL and MOL is in effect. The three carriers and Nedlloyd Lines B.V. ("NLL") are parties to a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-Latin America trade for a minimum of three years. The four carriers initiated service under this agreement in March 1995. Additionally, the four carriers and Malaysian International Shipping Corporation BHD have an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001, with early termination rights upon six months notice to the other parties beginning January 1, 1998. The carriers commenced service under the agreement in January 1996. The company entered the Asia-Europe trade in March 1995 by chartering vessel space through MOL. Under the alliance agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The agreements provide for, among other things, settlement of the difference between the value of vessel space provided by each partner and the value of vessel space available to that partner, at specified vessel costs per TEU per day. The value of vessel space provided by the company to the alliances is less than the value of the total capacity allocated to it through the alliances, resulting in an annual net cash payment from the company to its alliance partners. The amount paid to alliance partners was $45 million in 1995, and is currently estimated to be $32 million in 1996. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the commitment of the alliance partners, including the company, for these services cannot be determined at this time. In September 1995, the company sold a construction contract for three K10-class vessels, which it had entered into in 1993, and recognized a pretax gain of $1.6 million. In conjunction with the sale, the company, MOL, OOCL and NLL, formed a joint venture company, in which their respective shares are each 25%, and agreed to charter back these vessels, when delivered, for seven years for use in the Asia-Europe trade. Prior to the sale of the construction contract, the company made progress payments of $30 million for these vessels, including payments of $12 million in 1995, for which it received reimbursement. In October 1995, the company and Matson Navigation Company, Inc. ("Matson") signed an agreement for a 10-year alliance, which commenced in February 1996. Pursuant to the terms of this alliance, the company sold Matson six of its ships (three C9- class vessels and three C8-class vessels) and certain of its assets in Guam for approximately $163 million in cash. One of the ships was sold in December 1995 and resulted in a gain of $2.4 million. The remaining five vessels were sold in January 1996. Four of these vessels, together with a fifth Matson vessel, are being used in the alliance. The net gain on the sale of the four vessels used in the alliance and the assets in Guam, after deducting costs associated with the agreement, is estimated to be $6 million, and will be deferred and amortized over the 10- year term of the alliance. Matson is operating the vessels in the alliance, which serves the U.S. West Coast, Hawaii, Guam, Korea and Japan, and has the use of substantially all the westbound capacity. The company has the use of substantially all the vessels' eastbound capacity. The gain on the sale of the fifth vessel was $1.6 million. Facilities, Equipment and Services The company had outstanding purchase commitments to acquire cranes, facilities, equipment and services totaling $72.9 million at December 29, 1995. In addition, the company has commitments to purchase terminal services for its major Asian operations. These commitments range from one to ten years, and the amounts of the commitments under these contracts are based upon the actual services performed. At December 29, 1995, the company had outstanding letters of credit totaling $27.3 million, which guarantee the company's performance under certain of its commitments. In June 1995, the company and Burlington Motor Carriers, Inc. ("BMC") signed an agreement whereby the company's U.S. trucking operations, including related employees and leased equipment and facilities, were transferred to BMC in consideration of the sublease by BMC (and, in certain instances, a third party) of such equipment and facilities. In connection with the transfer, the company entered into a service agreement with BMC, expiring in December 1997, whereby BMC agreed to provide trucking services to the company and the company agreed to provide certain minimum cargo volumes to BMC through October 1, 1997. The transaction did not have a material effect on the company's other operations or operating results. In December 1995, Burlington Motor Holdings, Inc., the parent company of BMC, filed a petition seeking protection from its creditors under Chapter 11 of the U.S. Bankruptcy laws. The company currently cannot assess the impact of this filing, if any, on its operations, but does not expect the impact to be material. Employment Agreements The company has entered into employment agreements with certain of its executive officers. The agreements provide for certain payments to each officer upon termination of employment, other than as a result of death, disability in most cases, or justified cause, as defined. The aggregate estimated commitment under these agreements was $13.4 million at December 29, 1995. Certain of the company's collective bargaining agreements covering seagoing and shoreside unions in the U.S. expire in June and July 1996. The company currently expects that new agreements will be negotiated with the respective unions prior to the expiration of the current contracts, although no assurances can be given to that effect. Failure to reach agreement with a union on an acceptable labor contract could result in a strike or other labor difficulties, which could have a material adverse effect on the company's operating results. Contingencies In October 1995, Lykes Steamship Company, Inc. ("Lykes") filed a petition seeking protection from its creditors under Chapter 11 of the U.S. Bankruptcy laws. At present, the company charters its four L9-class vessels from Lykes under charters that expire in early 1996. The L9-class vessels are used in the company's West Asia/Middle East service. In addition, the company charters to Lykes three of its Pacesetter vessels under charters that also expire in early 1996. The potential consequences of Lykes' petition on the company's operations and financial condition, and possible steps the company may take to mitigate any resulting adverse effects, are being evaluated by management. The company is currently unable to predict the extent of such consequences. The company is a party to various legal proceedings, claims and assessments arising in the course of its business activities. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the company, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the company's consolidated financial position or operations. NOTE 12. BUSINESS SEGMENT INFORMATION The company provides container transportation services in North America, Asia and the Middle East through an intermodal system combining ocean, rail and truck transportation. In addition, the company was engaged in real estate operations until 1994, when its remaining real estate holdings were sold. (In millions) 1995 1994 1993 Revenues Transportation $ 2,896.0 $2,777.3 $ 2,590.2 Real Estate 16.2 16.0 Total $ 2,896.0 $2,793.5 $ 2,606.2 Operating Income Transportation $ 68.4 $ 114.2 $ 122.9 Real Estate 9.0 10.0 Total $ 68.4 $ 123.2 $ 132.9 Identifiable Assets Transportation $ 1,877.6 $1,658.0 $ 1,442.0 Real Estate 1.2 6.0 12.4 Total $ 1,878.8 $1,664.0 $ 1,454.4 Depreciation expense and capital expenditures were related only to transportation operations in 1995, 1994 and 1993. The following table shows the percentage of ocean transportation revenues by country: 1995 1994 1993 Origin Destination Origin Destination Origin Destination United States 27% 41% 26% 44% 27% 44% Hong Kong 13 5 14 4 12 4 People's Republic of China 10 3 10 3 8 1 Japan 8 10 9 11 10 12 Taiwan 8 3 9 3 9 4 India 5 3 5 2 5 3 Korea 4 3 4 3 5 2 Indonesia 4 2 4 1 4 1 Philippines 4 3 3 3 4 2 Other 17 27 16 26 16 27 Operating income, net income and identifiable assets cannot be allocated on a geographic basis due to the nature of the companyOs business. NOTE 13. QUARTERLY RESULTS (Unaudited) (In millions, except per share amounts)
1995 1994 Quarter December September June April December September July April Ended 29 22 30 7 30 23 1 8 Revenues $ 769.9 $ 711.1 $ 674.3 $ 740.7 $ 764.7 $ 672.1 $ 653.6 $ 703.1 Operating Income (Loss) Transportation (13.4) 53.5 24.7 3.6 34.3 37.2 26.1 16.6 Real Estate 6.4 2.6 Total Operating Income (Loss) (1),(2) (13.4) 53.5 24.7 3.6 34.3 37.2 32.5 19.2 Income (Loss)Before Taxes (21.3) 49.8 23.0 1.7 32.2 34.0 28.8 15.3 Net Income (Loss) $ (15.9) $ 30.9 $ 14.2 $ 1.1 $ 22.5 $ 22.5 $ 19.0 $ 10.2 Earnings (Loss) Per Common Share Primary $(0.61) $ 1.02 $ 0.45 $(0.02) $ 0.74 $ 0.74 $ 0.62 $ 0.30 Fully Diluted $(0.61) $ 0.97 $ 0.44 $(0.02) $ 0.69 $ 0.70 $ 0.60 $ 0.30 Cash Dividends Per Common Share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10 Market Price Per Common Share High $29 3/4 $31 1/2 $24 3/8 $24 1/4 $26 7/8 $27 1/8 $23 1/8 $34 Low 22 1/4 23 1/2 22 1/4 21 1/8 21 1/4 20 7/8 19 22 1/8
(1)Collections of detention charges related to the company's containers used to transport Operation Desert Storm cargo contributed $0.7 million, $0.5 million, $0.7 million and $8.3 million to Operating Income for the fourth, third, second and first quarters of 1994, respectively. (2)In the fourth quarter of 1995, the company recorded a restructuring charge of $48.4 million. Additionally, in the fourth and third quarters of 1995, the company received liquidated damages from the delayed delivery of two of its C11-class vessels of $2 million and $3.5 million, respectively, and sold ships for gains of $2.5 million and $3.7 million, respectively. SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS (In thousands) Description Balance at Charged To Charged To Deductions- Balance at Beginning Cost and Other Describe (1) End of Year of Year Expense Accounts- Describe (2) Allowance for Doubtful Accounts December 29, 1995 $21,908 14,937 (14,314) $22,531 December 30, 1994 $10,359 13,217 2,295 (3,963) $21,908 December 31, 1993 $13,237 4,324 (764) (6,438) $10,359 (1)Uncollectible receivables written off, net of recoveries. (2)Reclassifications from/(to) other Balance Sheet accounts. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information with respect to Directors and certain executive officers of the company appearing under the caption "Election of Directors - Information With Respect to Nominees and Directors" and in footnote 2 on page 6 in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 30, 1996 is hereby incorporated herein by reference. The following sets forth certain information with respect to the remaining executive officers of the company: John G. Burgess, age 51, was elected Executive Vice President of the company in May 1995. He has also served as Executive Vice President of American President Lines, Ltd. ("APL") since December 1992. Prior to that, he served as Executive Vice President and Chief Operating Officer APL from May 1990 to November 1992. Maryellen B. Cattani, age 52, was elected Executive Vice President of the company in March 1995. She has also served as General Counsel and Secretary of the company since July 1991 and as a Senior Vice President from July 1991 to March 1995. Prior to joining the company, she was a partner in the law firm of Morrison & Foerster from 1989 to 1991. L. Dale Crandall, age 54, was elected Executive Vice President and Chief Financial Officer of the company in March 1995 and Treasurer of the company in September 1995. Prior to that, Mr. Crandall was managing partner of Price Waterhouse Los Angeles office since 1990. Michael Diaz, age 47, was elected Executive Vice President of the company in May 1995. He has also served as Executive Vice President of APL since December 1992. Prior to that, he served as President, Asia Division of APL from August 1992 to November 1992, and Executive Vice President and Chief Operating Officer of APL Land Transport Services, Inc. from July 1990 to July 1992. Michael Goh, age 46, was elected Senior Vice President of the company in March 1996. Prior to that, he served as Senior Vice President of APL from January 1996 and in various capacities with APL Land Transport Services, Inc., including Senior Vice President from May 1992 to July 1994 and Vice President from May 1989 to April 1992. James S. Marston, age 62, was elected Executive Vice President and Chief Information Officer of the company in May 1995. He served as Senior Vice President and Chief Information Officer of the company from September 1987 to May 1995. William J. Stuebgen, age 48, has served as Vice President, Controller of the company since October 1990. The executive officers of the company are elected by the Board of Directors. Each officer holds office until his or her successor has been duly elected and qualified, or until the earliest of his or her death, resignation, retirement or removal by the Board. ITEM 11. EXECUTIVE COMPENSATION The information appearing under the caption "Compensation of Executive Officers and Directors" and in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 30, 1996, is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information appearing under the captions "Election of Directors-Stock Ownership of Directors and Executive Officers" and "Certain Beneficial Ownership of Securities" in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 30, 1996, is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information appearing under the captions "Compensation of Executive Officers and Directors -- Employment Agreements, Termination of Employment and Change-in-Control Arrangements and Certain Transactions" in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 30, 1996, is hereby incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1. Financial Statements and Schedules The following report of independent public accountants, consolidated financial statements and notes to the consolidated financial statements of American President Companies, Ltd. and subsidiaries are contained in Part II, Item 8: a. Report of Independent Public Accountants b. Consolidated Statement of Income c. Consolidated Balance Sheet d. Consolidated Statement of Cash Flows e. Consolidated Statement of Changes in Stockholders' Equity f. Notes to Consolidated Financial Statements 2. The following schedules are contained in Part II, Item 8: a. Schedule II - Valuation and Qualifying Accounts 3.Exhibits required by Item 601 of Regulation S-K The following documents are exhibits to this Form 10-K Exhibit No. Description of Document 3.1* Integrated copy of the amended Certificate of Incorporation, filed as Exhibit 3.1 to the company's Form 10-Q (File No. 1-8544), dated November 1, 1995. 3.2 Integrated copy of the amended By-Laws, dated December 27, 1995. 4.1* Amended and Restated Rights Agreement dated October 22, 1991, between the company and The First National Bank of Boston, as Rights Agent, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated October 22, 1991. 4.2* Trust Indenture between American President Lines, Ltd., Issuer, and Security Pacific National Bank, Trustee, dated as of April 22, 1988, President Truman Issue, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 4.3* Forms of Series I and Series II Bonds, filed as part of Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 4.4* Registration Rights Agreement, among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated as of August 3, 1988, as amended (without exhibits), filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated February 17, 1989. 4.5* Indenture, dated as of November 1, 1993, between American President Companies, Ltd. and The First National Bank of Boston as Trustee, filed as Exhibit 4.1 to the company's Form 8K (File No. 1-8544), dated November 29, 1993. 4.6* Form of 7-1/8% Senior Note Due 2003 of American President Companies, Ltd., filed as Exhibit 4.2 to the company's Form 8K (File No. 1-8544) dated November 29, 1993. 4.7* Form of 8% Senior Debentures Due 2024 of American President Companies, Ltd., filed as Exhibit 4.20 to the company's Form 10K (File No. 1-8544), dated March 9, 1994. 10.1* Operating-Differential Subsidy Agreement (No. MA/MSB-417), effective as of January 1, 1978, between the United States and American President Lines, Ltd., filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated March 17, 1992. 10.2* Lease Agreement, dated June 1, 1988, between Monsanto Company and American President Intermodal Company, Ltd., filed as Exhibit 10.14 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 10.3* Lease Agreement, dated June 1, 1988, between Consolidated Rail Corporation and American President Intermodal Company, Ltd., filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March 14, 1990. 10.4* Lease and Preferential Assignment Agreement dated January 6, 1971, and First Supplemental Agreement dated February 24, 1971, between the City of Oakland and Seatrain Terminals of California, Inc., filed as Exhibit 10.32 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.5* Second Supplemental Agreement to Lease and Preferential Assignment Agreement, dated May 3, 1988, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 14, 1990. 10.6* Preferential Assignment dated February 23, 1972, between the City of Oakland and Seatrain Terminals of California, Inc., filed as Exhibit 10.33 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.7* Assignment, Designation of Secondary Use and Consent, dated December 11, 1974, among Seatrain Terminals of California, Inc., American President Lines, Ltd., the City of Oakland and Seatrain Lines, Inc., filed as Exhibit 10.34 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.8* Acknowledgment of Termination of Consent to Secondary Use and Sublease and Assumption of Entire Combined Premises and Cranes dated December 18, 1981, between the City of Oakland and American President Lines, Ltd., filed as Exhibit 10.35 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.9* Supplemental Agreement dated July 6, 1982, between the City of Oakland and American President Lines, Ltd., filed as Exhibit 10.36 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.10*Permit No. 441, dated November 26, 1980, Second Amendment to Permit No. 441, dated February 7, 1983, and Third Amendment to Permit No. 441, dated May 10, 1984, between the City of Los Angeles and American President Lines, Ltd., filed as Exhibit 10.37 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.11*Fourth Amendment to Permit No. 441, dated as of October 29, 1986 between the City of Los Angeles and American President Lines, Ltd., filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 23, 1987. 10.12 Sixth Amendment to Permit No. 441, dated as of August 30, 1993, between the City of Los Angles and American President Lines, Ltd. 10.13*Financing and Security Agreement, dated March 27, 1984, between American President Lines, Ltd. and the City of Los Angeles, California, filed as Exhibit 10.38 to the company's Registration Statement on Form S-1, Registration No. 2-93718, which became effective on November 1, 1984. 10.14*Lease, dated July 31, 1972, Lease Agreement, dated September 1, 1980, Memorandum, dated September 1, 1980, and two letters dated July 3, 1981 and July 14, 1981, respectively, between Hanshin Port Development Authority and American President Lines, Ltd., filed as Exhibit 10.39 to the company's Registration Statement on Form S-1, Registration No. 2-93718, which became effective on November 1, 1984. 10.15*Pre-engagement Agreement for Lease dated March 17, 1983, Supplemental Agreement dated March 17, 1983 and form of Wharf Lease Agreement between Yokohama Port Terminal Corporation and American President Lines, Ltd., filed as Exhibit 10.41 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.16*Lease Contract of Wharves Nos. 68 & 69 of Container Terminal No. 3 Kaohsiung Harbor, Taiwan, Republic of China, dated December 31, 1987 and Equipment Agreement between the Kaohsiung Harbor Bureau and APL, dated December 31, 1987, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 11, 1988. 10.17*Lease dated April 28, 1978, Memorandum of Understanding, Addendum to Lease dated May 9, 1978, Addendum No. 2 to Lease dated July 28, 1978, and Addendum No. 3 to Lease dated March 27, 1984, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.44 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.18*Addendum No. 4 dated April 19, 1985 to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated December 12, 1985. 10.19*Addendum No. 5 dated July 25, 1986 to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated March 11, 1988. 10.20*Addendum No. 6, dated May 1, 1988, to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.13 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 10.21*Lease Agreement between Port of Seattle and American President Lines, Ltd. at Terminal 5 dated September 26, 1985, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated December 12, 1985. 10.22*Amendment No. 6 to the Lease Agreement between Port of Seattle and American President Lines, Ltd. at Terminal 5, and assignment of the lease from American President Lines, Ltd. to Eagle Marine Services, Ltd. dated June 1, 1994, excluding exhibits and other related agreements, filed as Exhibit 10.1 to the company's Form 10-Q (File No. 1-8544), dated August 12, 1994. 10.23*Lease Agreement between the company and Bramalea Pacific, Inc. dated April 18, 1988, and Amendments 1 through 5, filed as Exhibit 10.3 to the company's Form SE (File No. 1- 8544), dated March 27, 1991. 10.24*Grantor Trust Agreement with U.S. Trust Company of California, N.A., effective April 10, 1989, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated August 1, 1989. 10.25*Assignment Agreement from United States Lines, Inc. to American President Lines, Ltd. with attached supplements, dated September 16, 1987, filed as Exhibit 10.8 to the company's Form SE (File No. 1- 8544), dated March 14, 1990. 10.26*Permit No. 733, dated September 10, 1993, between the City of Los Angeles and Eagle Marine Services, Ltd., and the Guaranty of Agreement made by American President Lines, Ltd., excluding exhibits, filed as Exhibit 10.1 to the company's Form 10-Q (File No. 1-8544), dated November 18, 1993. 10.27*Loan Agreement dated March 14, 1994 by and among Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate); and American President Lines, Ltd. (as Borrower); including Appendices and Schedules thereto, filed as Exhibit 10.4 to the company's Form 10-Q (File No. 1-8544), dated May 20, 1994 and as Exhibit 10.4a to the company's Form 10-K/A (file No. 1-8544), dated December 6, 1994. 10.28 Amendment No. 1 dated May 19, 1995 to the Loan Agreement dated March 14, 1994 by and among Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank- Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate); and American President Lines, Ltd. (as Borrower).*** 10.29 Amendment No. 2 dated September 1, 1995 to the Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 to the Loan Agreement dated May 19, 1995, by and among Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs- Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate); and American President Lines, Ltd. (as Borrower); including exhibits thereto or a description thereof.*** 10.30 Amended and Restated Guarantee dated as of May 19, 1995 by American President Companies, Ltd. (as Guarantor); in favor of Kreditanstalt fur Wiederaufbau (as Agent and Lender); and Commerzbank AG Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs- Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate). 10.31 Acknowledgment and Consent of Guarantor dated September 1, 1995 by the company (as Guarantor) in favor of Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate). 10.32 Amendment No. 1 to the First Preferred Ship Mortgage dated September 1, 1995 given by M.V. President Kennedy, Ltd. (as Shipowner) to Kreditanstalt fur Wiederaufbau (as Mortgagee).*** 10.33 Amendment No. 1 to the Bareboat Charter Party dated September 1, 1995 by M.V. President Kennedy, Ltd. (as Shipowner) and American President Lines, Ltd. (as Charterer).*** 10.34 Second Amended and Restated Agreement to Acquire and Charter dated September 1, 1995 by and among American President Companies, Ltd. (as Transferor), of M.V. President Kennedy, Ltd., of M.V. President Adams, Ltd., of M.V. President Kennedy, Ltd., of M.V. President Kennedy, Ltd. and of M.V. President Kennedy, Ltd. (Transferees), Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate); including exhibits thereto or a description thereof.*** 10.35 Charter Hire Guarantee dated as of May 19, 1995 by American President Companies, Ltd. (as Guarantor); in favor of M.V. President Kennedy, Ltd. (as the Obligee). 10.36*Credit Agreement, dated March 25, 1994 among American President Companies, Ltd., borrower, and Morgan Guaranty Trust Company of New York, J.P. Morgan Delaware, Bank of America National Trust and Savings Association, The First National Bank of Boston, Barclays Bank PLC, ABN AMRO Bank N.V., The First National Bank of Chicago and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.1 to the company's Form 10-Q (File No. 1-8544), dated May 20, 1994. 10.37*Amendments Nos. 1 and 2 dated May 10, 1995 and July 12, 1995, respectively, to the Credit Agreement among American President Companies, Ltd., borrower, and Morgan Guaranty Trust Company of New York (as agent and participant), Bank of America National Trust and Savings Association, The First National Bank of Boston, The Industrial Bank of Japan, Limited, ABN AMRO Bank N.V. and The First National Bank of Chicago, filed as Exhibit 10.1 to the company's Form 10-Q (File No. 1-8544), dated August 4, 1995. 10.38*Deferred Compensation Plan For Directors of the company, filed as Exhibit 10.49 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.** 10.39*Executive SurvivorsO Benefits Plan, dated November 29, 1988, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 17, 1992.** 10.40*Amendment No. 1 to the Executive SurvivorsO Benefits Plan, effective December 4, 1992, filed as Exhibit 10.10 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.41*1988 Deferred Compensation Plan dated November 29, 1988, filed as Exhibit 10.5 to the company's Form SE (File No. 1- 8544), dated February 17, 1989.** 10.42*Amendment No. 1 to the 1988 Deferred Compensation Plan, effective January 1, 1992, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.43*1992 DirectorsO Stock Option Plan, dated March 17, 1992, filed as Exhibit 10.06 to the company's Form SE (File No. 1-8544), dated May 5, 1992.** 10.44*Amended and Restated Retirement Plan for the Directors of American President Companies, Ltd., dated September 15, 1992, filed as Exhibit 10.01 to the company's Form SE (File No. 1-8544), dated October 20, 1992.** 10.45*American President Companies, Ltd. Retirement Plan, second amendment and restatement effective January 1, 1993, filed as Exhibit 10.2 to the company's Form 10-Q (File No. 1- 8544), dated May 17, 1995.** 10.46*First Amendment to the American President Companies, Ltd. Retirement Plan (Second Amendment and Restatement Effective January 1, 1993), effective January 1, 1993, filed as Exhibit 10.1 to the company's Form 10-Q (File No. 1-8544), dated November 1, 1995.** 10.47*1989 Stock Incentive Plan of the company, as amended and restated effective April 28, 1994, filed with the company's Proxy Statement (File No. 1-8544) for the Annual Meeting of Shareholders held on April 28, 1994.** 10.48*American President Companies, Ltd. SMART Plan, second amendment and restatement effective January 1, 1993, filed as Exhibit 10.45 to the company's Form 10-K (File No. 1- 8544), dated March 10, 1995.** 10.49*Excess-Benefit Plan of the company, amended and restated effective December 31, 1994, filed as Exhibit 10.46 to the company's Form 10-K (File No. 1-8544), dated March 10, 1995.** 10.50*1995 Deferred Compensation Plan of the company, effective January 1, 1995, filed as Exhibit 10.47 to the company's Form 10-K (File No. 1-8544), dated March 10, 1995.** 10.51 1995 Supplemental Executive Retirement Plan of the company, amended and restated effective January 1, 1996.** 10.52*1995 Stock Bonus Plan of the company, effective January 1, 1996, filed with the company's Proxy Statement (File No. 1- 8544) for the Annual Meeting of Shareholders held on May 2, 1995.** 10.53*Employment Agreement between the company and Maryellen B. Cattani dated April 28, 1994, filed as Exhibit 10.10 to the company's Form 10-Q (File No. 1-8544), dated May 20, 1994.** 10.54*Employment Agreement between the company and Timothy J. Rhein dated July 28, 1992, filed as Exhibit 10.1 to the company's Form 10-Q (File No. 1-8544), dated November 4, 1994.** 10.55*Employment Agreement between the company and Joji Hayashi dated July 28, 1992, filed as Exhibit 10.2 to the company's Form 10-Q (File No. 1-8544), dated November 4, 1994.** 10.56*Amendment No. 1 dated September 7, 1995 to the Employment Agreement as amended, between the company and Joji Hayashi, filed as Exhibit 10.2 to the company's Form 10-Q (File No. 1-8544), November 1, 1995.** 10.57*Employment Agreement between the company and James S. Marston dated July 28, 1992, filed as Exhibit 10.3 to the company's Form 10-Q (File No. 1-8544), dated November 4, 1994.** 10.58*Employment Agreement between the company and John G. Burgess dated July 28, 1992, filed as Exhibit 10.4 to the company's Form 10-Q (File No. 1-8544), dated November 4, 1994.** 10.59*Employment Agreement between the company and Michael Diaz dated July 28, 1992, filed as Exhibit 10.5 to the company's Form 10-Q (File No. 1-8544), dated November 4, 1994.** 10.60*Employment Agreement between the company and L. Dale Crandall dated February 1, 1995, filed as Exhibit 10.3 to the company's Form 10-Q (File No. 1-8544), May 17, 1995.** 10.61 Agreement between the company and John M. Lillie dated October 13, 1995.** 10.62*Form of Indemnity Agreements dated March 11, 1988 between the company and Charles S. Arledge, John H. Barr, J. Hayashi, Forrest N. Shumway and Barry L. Williams, filed as Exhibit 10.3 to the company's Form SE (File No. 1- 8544), dated February 17, 1989.** 10.63*Form of Indemnity Agreements dated April 25, 1991 between the company and F. Warren Hellman and Timothy J. Rhein, filed as Exhibits 10.3 and 10.5 to the company's Form SE (File No. 1-8544), dated May 8, 1991.** 10.64*Indemnity Agreement dated October 5, 1993 between the company and Toni Rembe, filed as Exhibit 10.74 to the company's Form 10K (File No. 1-8544), dated March 9, 1994.** 10.65*Form of Indemnity Agreement dated April 28, 1994 between the company and G. Craig Sullivan, filed as Exhibit 10.62 to the company's Form 10-K (File No. 1-8544), dated March 10, 1995.** 10.66*Form of Indemnity Agreement dated June 20, 1994 between the company and Tully M. Friedman, filed as Exhibit 10.63 to the company's Form 10-K (File No. 1-8544), dated March 10, 1995.** 11.1 Computation of Earnings Per Share. 21.1 Subsidiaries of the company. 23.1 Consent of Independent Public Accountants. 24.1 Powers of Attorney. 27 Financial Data Schedules filed under Article 5 of Regulation S-X for the year ended December 29, 1995. * Incorporated by Reference ** Denotes management contract or compensatory plan. *** Application to be filed with the Securities and Exchange Commission, pursuant to Exchange Act Rule 24b-2, for confidential treatment of certain portions of this exhibit. Pursuant to Item 601 (b)(4)(iii)(A) of Regulation S-K, certain instruments defining the rights of holders of the long- term debt of the company and its consolidated subsidiaries have not been filed because the amount of securities authorized under each such instrument does not exceed ten percent of the total assets of the company and its subsidiaries on a consolidated basis. A copy of any such instrument will be furnished to the Commission upon request. (b) Reports on Form 8-K during the fourth quarter: No current report on Form 8-K was filed during the quarter for which this report on Form 10-K is filed. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN PRESIDENT COMPANIES, LTD. (Registrant) By /s/ William J. Stuebgen William J. Stuebgen Vice President, Controller and Chief Accounting Officer March 14, 1996 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Joji Hayashi* March 14, 1996 Joji Hayashi Chairman of the Board /s/ Timothy J. Rhein* March 14, 1996 Timothy J. Rhein President, Chief Executive Officer and Director /s/ Charles S. Arledge* March 14, 1996 Charles S. Arledge Director /s/ John H. Barr* March 14, 1996 John H. Barr Director /s/ Tully M. Friedman* March 14, 1996 Tully M. Friedman Director /s/ F. Warren Hellman* March 14, 1996 F. Warren Hellman Director /s/ Toni Rembe* March 14, 1996 Toni Rembe Director /s/ Forrest N. Shumway* March 14, 1996 Forrest N. Shumway Director /s/ G. Craig Sullivan* March 14, 1996 G. Craig Sullivan Director /s/ Barry L. Williams* March 14, 1996 Barry L. Williams Director *By: /s/ Maryellen B. Cattani March 14, 1996 Maryellen B. Cattani Attorney-in-fact EX-3.2 2 EXHIBIT 3.2 TO THE 1995 FORM 10K FOR APC BY-LAWS of AMERICAN PRESIDENT COMPANIES, LTD. ARTICLE I Offices Section 1. Registered Office. The registered office of the Company in the State of Delaware and the name of the resident agent in charge thereof is The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover, Delaware 19901. Section 2. Other Offices. The Company shall have its principal office at 1111 Broadway, Oakland, California 94607 and shall also have offices at such other places as the President and the Board of Directors may from time to time designate or appoint, or as the business of the Company may require. ARTICLE II Directors Section 1. Powers. The corporate powers, business and property of the Company shall be vested in and exercised, conducted and controlled by the Board of Directors which may exercise all said powers of the Company and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. Section 2. Determination of Number. The exact number of Directors who shall constitute the Board of Directors shall be determined by resolution adopted by the affirmative vote of a majority of the entire Board of Directors at any regular or special meeting of said Board; provided, that notice of such proposed action shall have been given in the notice for such regular or special meeting; and provided, further, however, that in no event shall the number of directors be less than five. No decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director. Section 3. Nominations. Nominations for election to the Board of Directors of the Company at a meeting of stockholders may be made by the Board or on behalf of the Board by the Nominating Committee appointed by the Board, or by any stockholder of the Company entitled to vote for the election of Directors at such meeting. Such nominations, other than those made by or on behalf of the Board, shall be made by notice in writing delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Company, and received by him not less than thirty (30) days nor more than sixty (60) days prior to any meeting of stockholders called for the election of Directors; provided, however, that if less than thirty-five (35) days' notice of the meeting is given to stockholders, such nomination shall have been mailed or delivered to the Secretary of the Company not later than the close of business on the seventh (7th) day following the day on which the notice of meeting was mailed. Such notice shall set forth as to each proposed nominee who is not an incumbent Director (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of stock of the Company which are beneficially owned by each such nominee and by the nominating stockholder, and (iv) any other information concerning the nominee that must be disclosed of nominees in proxy solicitations Regulation 14A of the Securities Exchange Act of 1934. The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE III Meetings of Directors Section 1. Place of Meetings. Meetings of the Board of Directors of the Company whether regular, special or adjourned shall be held at the principal office of the Company, as specified in Section 2 of Article I hereof, or at any other place within or without the State of Delaware which has been designated from time to time by resolution of the Board or by written consent of all members of the Board. Any meeting shall be valid wherever held, if held upon the written consent of all members of the Board of Directors given either before or after the meeting and filed with the Secretary of the Company. Section 2. Regular Meetings. Regular meetings of the Board of Directors shall be held immediately following the adjournment of each annual meeting of the stockholders, every second month thereafter and at such other times as may be designated from time to time by resolution of the Board of Directors. Section 3. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman or the President of the Company or by any four Directors. Section 4. Notice of Meetings. Written notice of the time and place of special meetings of the Board of Directors shall be delivered at least two (2) days before the meeting personally to each Director, or sent in writing, by mail addressed to such Director, at his address as it appears on the records of the Company, with postage thereon prepaid; such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail; provided, however, that if a special meeting is called by the Chairman or the President or by any four Directors because the need for urgent action exists, then each Director shall be given not less than three (3) hours' notice, and such notice shall be deemed given once it has been conveyed to a Director in person or by telephone or an attempt has been made to give such notice by telephoning a Director at his home telephone number and his business office telephone number as such numbers are shown in the Secretary's records. Notice to Directors may also be given by telex or telegram. Whenever any such notice is required to be given, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. If the address of a Director is not shown on the records and is not readily ascertainable, notice shall be addressed to him at the city or place in which the meetings of the Directors are regularly held. Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place be fixed at the meeting adjourned. Section 5. Quorum. A majority of the authorized number of Directors shall constitute a quorum of the Board of Directors for the transaction of business. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors. In the absence of a quorum, a majority of the Directors present may adjourn from time to time, without notice other than an announcement at the meeting, until a quorum shall be present. Section 6. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 7. Telephone Meetings. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. ARTICLE IV Officers Section 1. Officers. The officers of the Company shall consist of a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers and a Controller. The salary which each said officer shall receive, and the manner and times of its payment, shall be fixed and determined by the Board of Directors upon the advice of the Compensation Committee and may be altered by said Board from time to time at its discretion. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The officers of the Company shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Company shall be filled by the Board of Directors. Section 2. Chairman of the Board. The Chairman of the Board shall, when present, preside at all meetings of the Board of Directors and the stockholders and shall do and perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 3. President. The President shall be the Chief Executive Officer of the Company. He shall be a member of the Board of Directors and of the Executive Committee thereof and, except for the Compensation Committee and the Audit Committee, an ex officio member of all other committees thereof, and he shall have responsibility for the general management and direction of the business of the Company, subject to control and direction of the Board of Directors. In the absence or disability of the Chairman, he shall perform the duties of the Chairman of the Board and, when so acting, shall have all of the powers of and be subject to all the restrictions upon the Chairman of the Board. The President shall, in the absence of the Chairman of the Board, preside at meetings of the Board of Directors and the stockholders, and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 4. Vice Presidents. In the event of the absence or disability of the Chairman of the Board and the President, the Vice Presidents, in the order designated by the Directors or, in the absence of any designation, then in the order of their election, shall perform the duties of the Chairman of the Board and the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board and the President. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 5. The Secretary and Assistant Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Company and of the Board of Directors in a book to be kept for that purpose and shall perform similar duties for the committees of the Board when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, or the President, under whose supervision such officer shall be. The Secretary shall have custody of the corporate seal of the Company and shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the Secretary's signature. The Board of Directors may give general authority to any other officer to affix the seal of the Company and to attest the affixing by his signature. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 6. The Treasurer and Assistant Treasurers. The Treasurer shall have the custody of the corporate funds and securities and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Company as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 7. Controller. The Controller shall have charge of the Company's books of accounts, records and auditing, and generally do and perform all such other duties as pertain to such office, and as may be required by the Board of Directors. The Controller shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, a report on the financial condition of the Company. Section 8. Powers of Attorney. Whenever an applicable statute, decree, rule or regulation requires a document to be subscribed by a particular officer of the Company, such document may be signed on behalf of such officer by a duly appointed attorney-in-fact, except as otherwise directed by the Board of Directors or limited by law. ARTICLE V Meetings of Stockholders Section 1. Meetings. Annual meetings of stockholders shall be held in the City of Oakland, State of California, at the principal office of the Company, as specified in Section 2 of Article I hereof, or at such other place either within or without the State of Delaware as shall be designated from time to time by resolution of the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting. At the annual meeting the stockholders shall elect by a plurality vote the number of Directors equal to the number of Directors of the class whose term expires at such meeting (or, if fewer, the number of Directors properly nominated and qualified for election) to hold office until the third succeeding annual meeting of stockholders after their election and shall transact such other business as may properly be brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before the meeting by a stockholder, the Secretary of the Company must have received notice in writing from the stockholder not less than thirty (30) days nor more than sixty (60) days prior to the meeting; provided, however, that if less than thirty-five (35) days' notice of the meeting is given to stockholders, such notice shall have been received by the Secretary of the Company not later than the close of business on the seventh (7th) day following the day on which the notice of meeting was mailed. Such written notice to the Secretary shall set forth, as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business, (ii) the name and address, as they appear on the Company's books, of the stockholder proposing such business, (iii) the class and number of shares of stock of the Company beneficially owned by such stockholder, and (iv) any material interest of such stockholder in such business. Notwithstanding any other provision in these By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2. Section 3. Stockholder List. The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, may be called by the Board of Directors or by the President. Section 5. Notice of Meeting. Written notice of any annual or special meeting stating the place, date and hour of the meeting and, in the case of a special meeting, stating the purpose or purposes for which the meeting is called, shall be given not less than ten (l0) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Whenever notice is required to be given to any stockholder, such notice shall be given in writing, by mail, addressed to each stockholder at his address as it appears on the records of the Company, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Whenever any such notice is required to be given, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Section 6. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 7. Conduct of Meetings. The Chairman of the Board, or such other officer as may preside at any meeting of the stockholders, shall have the authority to establish from time to time, such rules for tile conduct of such meetings, and to take such action, as may in his judgment be necessary or proper for the conduct of the meeting and in the best interests of the Company and the stockholders in attendance in person or by proxy. ARTICLE VI Committees of the Board of Directors Section 1. Executive Committee. The Board of Directors shall appoint an Executive Committee to consist of the President and not less than two (2) nor more than six (6) other Directors of the Company. The Executive Committee shall meet at such times and places as it may determine. The Executive Committee shall have and may exercise when the Board is not in session all the powers of the Board in the management of the business and affairs of the Company, without limitation, except as set forth in Section 9 below. Section 2. Nominating Committee. The Board of Directors shall appoint a Nominating Committee consisting of three Directors of the Company who shall not be officers of the Company. The Nominating Committee shall recommend to the Board the number of Directors which best meets the requirements of the Company; identify, evaluate, review and recommend to the Board qualified candidates to fill vacancies on the Board and any newly created directorships resulting from an increase in the number of Directors; recommend to the Board the individuals to constitute the nominees of the Board for election as directors at the annual meeting of stockholders; recommend to the Board a list of Directors selected as members of each committee of the Board; and perform such other duties as may be assigned by the Board. Section 3. Compensation Committee. The Board shall appoint a Compensation Committee consisting of three (3) or more Directors of the Company. The Compensation Committee shall review annually and recommend to the Board of Directors the level of compensation of the Chairman of the Board and the President, giving consideration for each to the amount and composition of his total compensation in terms of salary, stock options and other benefits; review annually the recommendations of the Chairman of the Board and the President concerning salaries and other compensation of all senior officers reporting to each of them, as well as review from time to time other conditions of employment; administer the 1989 Stock Incentive Plan, the 1992 Directors' Stock Option Plan, the 1995 Stock Bonus Plan and year-end bonus plans; review and make recommendations to the Board of Directors for changes in the Company's compensation and benefit plans and practices; and administer other compensation plans that may be adopted from time to time as authorized by the Board of Directors. Section 4. Audit Committee. The Board of Directors shall appoint an Audit Committee of three or more Directors of the Company who shall not be officers of the Company. The Audit Committee shall receive from and review with the Company's independent auditors the annual report of such auditors; review with the independent auditors the scope of the succeeding annual examination; nominate the independent auditors to be appointed each year by the Board; review consulting services made by the Company's independent auditors and evaluate the possible effect on the auditors' independence of performing such services; ascertain the existence of adequate internal accounting and control systems; and review with management and the Company's independent auditors current and emerging accounting and financial reporting requirements and practices affecting the Company. Section 5. Quorum and Vacancies. A majority of the members of the committee (which majority shall, in the case of the Executive Committee, include the President) shall constitute a quorum for the transaction of business. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Section 6. Notice and Emergency Action. Notice of the time and place of committee meetings shall be given in writing or by telephone or in person, by any member of the committee, to all members of the committee at least two (2) days' prior to the time of holding such meeting; provided, however, that such notice requirement shall not be applicable if any member of the Executive Committee deems it necessary to cause the Executive Committee to act on an urgent basis. In the event a member of the Executive Committee deems such urgent action necessary, such member shall attempt to contact each other member of the Executive Committee by telephone for the purpose of having each such member consider and act upon the urgent matter or matters presented. Such consideration and action may take place by telephone without convening in meeting. The quorum and voting requirements set forth in Section 5 above shall pertain to such urgent action, and for this purpose all persons reached by telephone shall be deemed to be present. The member of the Executive Committee who calls for urgent action in the manner described herein, immediately following the approval or disapproval of any action thereby proposed, shall report such action to the Secretary of the Company for the purpose of having it described in the minutes of the Executive Committee. Such report and minutes shall also include a recitation of all efforts made by the member calling for such action to contact other Executive Committee members by telephone. Section 7. Minutes; Reports to Board. Each committee shall keep regular minutes of its meetings. All actions of the committees shall be reported to the Board of Directors at the meeting of the Board of Directors next succeeding such action. Section 8. Other Committees. The Board of Directors, from time to time, may appoint other committees for any purpose or purposes, and any such committee shall have such powers as shall be specified in the resolution of its appointment. Section 9. Duties. Any committee, including the Executive Committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Company's property and assets, recommending to the stockholders a dissolution of the Company or a revocation of a dissolution, or amending the By-Laws of the Company; and, unless the resolution of the Board expressly provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. ARTICLE VII Certificates for Stock Section 1. Certificates. Every holder of stock in the Company shall be entitled to have a certificate signed by, or in the name of the Company by the Chairman of the Board, or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company, certifying the number of shares owned by him in the Company. Section 2. Signatures. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. Foreign Owners. The outstanding shares of the Company shall at all times be owned by citizens of the United States to such extent as will, in the judgment of the Board of Directors, reasonably assure the preservation of the Company's status as a United States citizen within the provisions of Section 2 of the Shipping Act, 1916, as amended, or any successor statute applicable to the business being conducted by the Company (the "Citizenship Provisions"). The Board of Directors may restrict any original issuance of shares of the Company to citizens of the United States as such term is defined in the Citizenship Provisions ("United States Citizens"), and, in any event, shall from time to time establish, as a condition to the issuance or transfer of shares of the Company to non-United States Citizens, the minimum percentage of the total outstanding shares of the Company which shall be owned by United States Citizens, which minimum percentage may, in the discretion of the Board of Directors, exceed the minimum percentage required by law (the "Minimum Percentage"). Nothing herein shall be deemed to preclude ownership by United States Citizens of shares of the Company in excess of the Minimum Percentage. Certificates evidencing shares of stock of the Company may be issued in separate series, denominated respectively "Domestic Share Certificates" and "Foreign Share Certificates." Domestic Share Certificates shall be issued in respect of shares owned of record and beneficially by United States Citizens; Foreign Share Certificates shall be issued in respect of shares owned of record or beneficially by non-United States Citizens. Holders of Domestic Share Certificates and of Foreign Share Certificates shall have in all respects the same corporate status and corporate rights, share for share, except that transfers of Domestic Share Certificates to non-United States Citizens shall be restricted and, in certain circumstances, the rights of holders of Foreign Share Certificates shall be restricted, both as herein provided. If any shares evidenced by Domestic Share Certificates or Foreign Share Certificates shall be transferred to United States Citizens, the share certificates issued to the transferee in respect of the shares transferred shall be Domestic Share Certificates. If any shares evidenced by Domestic Share Certificates shall be proposed to be transferred to non-United States Citizens, the share certificates issued to the transferee in respect of the shares transferred shall be Foreign Share Certificates; provided, however, if the stock records of the Company shall disclose immediately prior to the time of such proposed transfer that (i) the maximum percentage of outstanding shares of voting stock of any class allowed to be owned by non-United States Citizens has been met or has been exceeded or (ii) the maximum percentage of outstanding shares of voting stock of any class allowed to be owned by non-United States Citizens would be exceeded as a result of such proposed transfer, no transfer of shares of such class represented by Domestic Share Certificates shall be made to non-United States Citizens. If it shall be found by the Company that stock represented by a Domestic Share Certificate is, in fact, owned of record or voted by or for the account of a non-United States Citizen, the holder of such stock shall, upon the request of the Secretary or the transfer agent of the Company, surrender such Domestic Share Certificate for cancellation in exchange for the issuance of a Foreign Share Certificate for such stock; provided, however, if the stock records of the Company shall disclose immediately prior to the time of such proposed exchange that (i) the maximum percentage of outstanding shares of voting stock of any class allowed to be owned by non-United States Citizens has been met or has been exceeded or (ii) the maximum percentage of outstanding shares of voting stock of any class allowed to be owned by non-United States Citizens would be exceeded as a result of such proposed exchange, then the exchange shall not be made and the holder of such stock represented by a Domestic Share Certificate shall not be entitled to receive dividends or to have any other rights, except the right to transfer such stock to a United States Citizen. The Board may establish from time to time reasonable procedures for establishing the citizenship of stockholders of the Company and, without limiting the foregoing, may require that in connection with each issue or transfer of shares of the Company the purchaser or transferee shall certify his citizenship status and such matters relevant thereto as the Board may require. The Board may also establish from time to time such other reasonable procedures as it may deem desirable for the purposes of implementing these provisions. Section 4. New Certificates. The Board of Directors may, or may designate certain persons to, authorize the issuance of a new certificate or certificates to replace any certificate or certificates theretofore issued by the Company alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors or such designated person may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Company a bond indemnity sufficient to indemnify it against any claim that may be made against the Company on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 5. Transfer of Stock. Upon surrender to the Company or the transfer agent of the Company of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Company to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. Fixing Record Date. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to such other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 7. Registered Stockholders. The Company shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VIII Dividends Section 1. Dividends upon the capital stock of the Company, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company, or for such other purpose as the Directors shall think conducive to the interest of the Company, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE IX Indemnification Section 1. The Company shall indemnify any person who was or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a Director, officer or employee of the Company, or is or was serving at the request of the Company as a Director, officer or employee of another company, 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, to the extent and under the circumstances permitted by the General Corporation Law of the State of Delaware. Such indemnification (unless ordered by a court) shall be made as authorized in a specific case upon a determination that indemnification of the Director, officer or employee is proper in the circumstances because he has met the applicable standards of conduct set forth in the General Corporation Law of the State of Delaware. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. The foregoing right of indemnification shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any By-Law, agreement, vote of stockholders or disinterested Directors or otherwise and shall continue as to a person who has ceased to be a Director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 2. Insurance. The Board of Directors shall have the power to authorize to the extent permitted by the General Corporation Law of the State of Delaware the purchase and maintenance of insurance on behalf of any person who is or was a Director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a Director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against any liability asserted against him or incurred by him in such capacity or arising out of his status as such whether or not the Company would have the power to indemnify him against such liability under the provisions of the General Corporation Law of the State of Delaware. ARTICLE X Corporate Seal The Corporate seal shall have inscribed thereon the name of the Company and the words "Incorporated July l4, 1983, Delaware." ARTICLE XI Amendments Any of these By- Laws may be altered, a mended or repealed by the affirmative vote of at least two thirds of the Directors of the Company, which shall include the affirmative vote of at least one Director of each class of the Board of Directors if the Board shall then be divided into classes or by the affirmative vote of the holders of seventy-five percent (75 %) of the shares of the Company entitled to vote in the election of Directors, voting as one class. 12/27/95 EX-10.12 3 EXHIBIT 10.12 TO THE 1995 FORM 10K FOR APC Sixth Amendment to Permit No. 441 This Sixth Amendment to Permit No. 441 is entered into as of the 30th day of August, 1993 between the City of Los Angeles, a municipal corporation (the "City") acting by and through its Board of Harbor Commissioners (the "Board"), and American President Lines, Ltd., a Delaware corporation having its principal office at 1111 Broadway, Oakland, CA 94607 (the "Permittee"). Whereas, the parties entered into an agreement relating to terminal facilities granted to Permittee by City dated as of November 26, 1980, as amended by the First through Fifth Amendments ("Permit No. 441"), and Whereas, City and Permittee's subsidiary corporation Eagle Marine Services, Ltd. ("Eagle Marine") have concurrently herewith entered into an agreement relating to terminal facilities granted to Eagle Marine by City at Pier 300 ("Permit No. 733") at which facilities Permittee intends to relocate as an invitee of Eagle Marine, and Whereas, Permittee and City wish to provide for the sale or lease of certain Permittee-owned container gantry cranes located at the Permit No. 441 premises, and for early termination of Permit No. 441 in connection with such relocation; Therefore, the Parties agree as follows: Article 1. Effective Date. This Sixth Amendment shall become effective concurrently with Permit No. 733 on the thirty-first (31st) day after publication of the Order of the Board approving this Amendment following City Council approval of the Amendment and shall continue in effect until discharged by full performance. Article 2. Amendments to Permit No. 441. Section 2.1. Paragraph (a) of Section 3 of Permit No. 441 is hereby amended to read as follows: (a) The term of this Permit shall be twenty years from the date this Permit becomes effective; provided however, this Permit shall terminate at 2400 hours on the 60th day following the Occupancy Date, as defined in Permit No. 733 of Eagle Marine at the Pier 300 premises; provided further, that any undischarged obligations arising under this Permit on the part of either party on the date of termination shall continue in effect under the terms hereof until discharged. Section 2.2. Section 4 is hereby amended by adding the following new paragraphs (m) and (n): (m) In the event that this agreement has not terminated under the provisions of paragraph 3(a) as amended by the Sixth Amendment, on or before December 31, 1996, then the provisions of Article 3 of the Fifth Amendment of Permit No. 441 shall continue to apply after December 31, 1996 until such time as the Occupancy Date of the Pier 300 premises under the Permit No. 733 occurs. In no event, however, shall such continuation extend past the twenty year term hereof. During any such extension of the provisions of Section 3.2 after December 31, 1996, the provisions of section 5 of the Permit shall not apply to the fourth quarter of the term of this Permit. In the event that Eagle Marine terminates Permit No. 733 pursuant to Section 9(f) thereof, Permittee and City shall immediately commence to negotiate compensation to be paid for each compensation period of the fourth quarter of the term hereof, pursuant to the procedure established in Section 4B of the Permit, as amended by the Fourth Amendment to this Permit No. 441. The provisions of article 3 of the Fifth Amendment of Permit No. 441, as extended under subsection (m) above, shall cease to apply on the date following Eagle Marine's termination of Permit No. 733 and the compensation determined under Section 4B shall apply from and after such date. (n) Permittee's obligation to pay compensation based on minimum guaranteed throughput as specified in this Section 4 for the year in which the Occupancy Date (as defined in Agreement No. 733) occurs shall be prorated in the proportion that the number of days from January 1st to the Occupancy Date of the year of termination bears to 365. Section 2.3. Exchange of C-10 Cranes. (a) Not later than 24 months prior to the then scheduled Delivery Date (as that term is defined in Permit No. 733) of the Pier 300 Premises, Permittee shall notify City whether the C-10 cranes identified in Agreement No. 1404 dated October 29, 1986, as amended and in effect between the parties (the "Crane Agreement") are available for purchase as of the Occupancy Date of the Pier 300 premises. City shall have a preferential right to purchase the C-10 cranes over all other persons; provided, City shall give notice to Permittee of its election to purchase the C-10 cranes within 45 days of the giving of Permittee's notice of availability. Upon such election, Permittee shall, on the Occupancy Date, convey all of its right, title and interest in and to the C-10 cranes concurrently with payment by City to Permittee in immediately available funds of the then fair market value of said cranes in their then existing condition. Permittee shall continue to maintain said cranes as required in said Crane Agreement until title is conveyed to City. (b) If City does not elect to purchase the C-10 cranes, or if Permittee does not offer the cranes for purchase, as provided in paragraph (a) above, City shall have the option to lease the C-10 cranes from Permittee under terms and conditions to be agreed between the parties at the time of the lease. At the end of said lease, if any, City shall have the option, exercisable upon one year's prior written notice, to purchase the cranes at their then fair market value. (c) In the event that the parties are unable to agree upon the fair market value of the cranes under the provisions of paragraphs (a) or (b) above, the parties shall jointly appoint an independent appraiser to determine such fair market value, or, failing such joint appointment within fifteen (15) calendar days of a receipt by a party of a written proposal to jointly appoint an independent appraiser by the other party, the parties shall each designate an independent appraiser who together shall jointly designate a third. The failure of one party to appoint an appraiser within thirty (30) calendar days of receipt of the other party's proposal of a joint appraiser shall be deemed a joint appointment of such proposed appraiser. The appraisal of a jointly appointed appraiser or two or more of a panel of three appraisers shall be binding and conclusive on both the City and Permittee; provided however, if a majority of a panel do not concur, the appraisal which is neither highest nor lowest shall be conclusive. The parties hereby jointly instruct such appraiser(s) to render any appraisal within sixty (60) days following their appointment or as soon thereafter as practicable. The parties shall share appraisers' fees equally. City shall pay the fair market value as determined by such appraisal within 60 days of such appraisal, plus a late payment charge accruing from the Occupancy Date or the end of any lease term, as applicable, at the rate of 10% per annum. (d) At the time of any conveyance of title of the C-10 cranes to the City under this article 2, the City shall cooperate with Permittee to permit it to derive certain federal income tax benefits pursuant to section 1031 and other sections of the Internal Revenue Code of 1986, as amended; provided, in no event shall City be required to incur any expense (other than City employee time and effort) or undertake any liability or obligation that would be greater than that incurred or undertaken if the cranes were purchased directly from APL and APL shall indemnify City therefrom. Article 3. Continuing Effect. Except as expressly amended herein above, all of the terms and conditions of Permit No. 441, as amended, shall continue in effect. In witness whereof, the parties have executed this Sixth Amendment to Permit No. 441 by their authorized representatives. THE CITY OF LOS ANGELES, BY ITS BOARD OF HARBOR COMMISSIONERS ATTEST: September 1, 1993 By: /s/ Tay Yoshitani /s/ Audrey H. Yamaki Board Secretary Title: Executive Director AMERICAN PRESIDENT LINES, LTD. ATTEST: /s/ David V. Ainsworth By: /s/ John G. Burgess David V. Ainsworth John G. Burgess Asst. Secretary Title: Executive Vice President Approved as to form: /s/ June 29, 1993 James K. Hahn, City Attorney By: /s/ Catherine H. Mee , Assistant EX-10.28 4 EXHIBIT 10.28 TO THE 1995 FORM 10K FOR APC * Application to be filed with the Securities and Exchange Commission, pursuant to Exchange Act Rule 24b-2, for confidential treatment of certain portions of this exhibit. EXECUTION VERSION AMENDMENT NO. 1 DATED MAY 19, 1995 By and Among KREDITANSTALT FUR WIEDERAUFBAU (as Agent and Lender) COMMERZBANK AG, HAMBURG (as Syndicate Agent) COMMERZBANK AG (KIEL BRANCH) DRESDNER BANK AG in HAMBURG VEREINS- und WESTBANK AG DEUTSCHE SCHIFFSBANK AG NORDDEUTSCHE LANDESBANK-GIROZENTRALE DEUTSCHE VERKEHRS-BANK AG (HAMBURG BRANCH) BANQUE INTERNATIONALE A LUXEMBOURG S.A. (as the Syndicate) THE CORPORATIONS LISTED IN SCHEDULE A and AMERICAN PRESIDENT LINES, LTD. to LOAN AGREEMENT DATED MARCH 14, 1994 Loan Facility -in respect of the purchase financing- six (6) container vessels three (3) contracted with Howaldtswerke-Deutsche Werft AG three (3) contracted with Daewoo Shipbuilding & Heavy Machinery, Ltd. THIS AMENDMENT NO. 1 TO LOAN AGREEMENT is made this __ of May, 1995 by and among KREDITANSTALT FUR WIEDERAUFBAU, a public law Corporation incorporated in the Federal Republic of Germany, whose address is Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW"); COMMERZBANK AG, Hamburg, a banking corporation incorporated in the Federal Republic of Germany whose address is Ness 7-9, D-20457 Hamburg (the "Syndicate Agent"); the banks listed in Schedule 1 which is attached hereto (each a "Syndicate Member" and, collectively, the "Syndicate"); each of the corporations listed in Schedule A hereto whose address is 1111 Broadway, Oakland, California 94607, and AMERICAN PRESIDENT LINES, LTD., a Delaware corporation, whose address is 1111 Broadway, Oakland, California 94607 ("APL"). W I T N E S S E T H: A. Reference is made to that certain Loan Agreement dated March 14, 1994 among KfW, the Syndicate Agent, the Syndicate and APL (the "Loan Agreement"). Capitalized terms used herein and not otherwise defined have the meanings provided therefor in the Loan Agreement as amended by this Amendment No. 1. B. The three (3) HDW Vessels will be named as follows: (i) APL CHINA (Builder's Hull No. 297), (ii) APL JAPAN (BuilderOs Hull No. 298) and (iii) APL THAILAND (BuilderOs Hull No. 299). C. The three (3) Daewoo Vessels will be named as follows: (i) APL KOREA (Builder's Hull No. 4028), (ii) APL PHILIPPINES (Builder's Hull No. 4033) and (iii) APL SINGAPORE (Builder's Hull No. 4029). D. With respect to APL PHILIPPINES, APL desires to provide for the transfer of that Vessel, by way of a partial assignment of the Daewoo Shipbuilding Agreement (to the extent such Shipbuilding Agreement relates to APL PHILIPPINES), to APL M.V. Philippines, Ltd., a Delaware corporation and a wholly-owned Subsidiary of APL ("APL-Philippines"), such that APL-Philippines would acquire the Vessel directly from Daewoo, whereupon APL-Philippines would be the "Transferee" with respect to that vessel hereunder. E. With respect to the Vessels other than APL PHILIPPINES, APL desires instead to provide: (1) for the partial assignment of the Vessels to five wholly- owned Subsidiaries of the Guarantor (each an "Original Owner" and, collectively, the "Original Owners"), of the appropriate Shipbuilding Agreement(in each case to the extent such Shipbuilding Agreement relates to the Vessel in question), as follows, such that each of the Original Owners would acquire its Vessel directly from HDW or Daewoo, as the case may be: (a) APL CHINA to be Transferred to APL Newbuildings, Ltd., a Delaware corporation; (b) APL JAPAN to be transferred to APL M.V. Japan, Ltd., a Delaware corporation; (c) APL KOREA to be transferred to APL M.V. Korea, Ltd., a Delaware corporation; (d) APL SINGAPORE to be transferred to APL M.V. Singapore, Ltd., a Delaware corporation; and (e) APL THAILAND to be transferred to APL M.V. Thailand, Ltd., a Delaware corporation; and (2) thereafter, on each Delivery Date, following the acquisition of the Vessel in question by the appropriate Original Owner, for the transfer of such Vessel by such Original Owner to one of the following five wholly-owned Subsidiaries of APL pursuant to an Exchange Agreement dated the date hereof between the Original Owner and the Transferee of the Vessel (the "Exchange Agreement") (such Subsidiaries, together with APL Philippines, being referred to collectively as the "Transferees" and, individually, as a "Transferee"), whereupon the Transferee acquiring the Vessel in question would be the "Transferee" with respect to that Vessel hereunder: (a) M.V. President Kennedy, Ltd., a Delaware corporation; (b) M.V. President Adams, Ltd., a Delaware corporation; (c) M.V. President Jackson, Ltd., a Delaware corporation; (d) M.V. President Polk, Ltd., a Delaware corpo- ration; and (e) M.V. President Truman, Ltd., a Delaware corporation. F. Concurrently with the execution and delivery of this Amendment, APL, the Transferees and the Lenders are entering into an Amended and Restated Agreement to Acquire and Charter dated as of the date hereof, respecting, among other things, (i) the assignment of the Shipbuilding Agreements to the Original Owners and to APL-Philippines, (ii) the transfer of the Vessels to the Transferees as set forth in Recitals D and E above, (iii) each TransfereeOs liability for Vessel Indebtedness hereunder and (iv) AFL's obligation to charter any Vessel transferred to a Transferee from such Transferee. G. Notwithstanding the intended Vessel transfers from the Transferor to APL-Philippines and the Original Owners stated in Recitals D and E above, APL shall retain the right under the Loan Agreement to take delivery itself of any of the Vessels from HDW or Daewoo, as the case may be, and to draw down the applicable Subportion. H. As more particularly provided herein: (1) each of the Transferees, upon its execution of a Note hereunder: (a) if it acquires a Daewoo Vessel, will be jointly and severally liable as a co-Borrower, together with all of the other Transferees that have or thereafter shall execute a Note hereunder, for all Vessel Indebtedness respecting any or all of the Daewoo Vessels and the HDW Vessels, and (b) if it acquires an HDW Vessel, will be jointly and severally liable as a co-Borrower, together with all of the other Transferees that have or thereafter shall execute an HDW Note hereunder, for all Vessel Indebtedness respecting any or all of the HDW Vessels; and (2) each Transferee's obligation to repay Vessel Indebtedness under the Note executed by it or as a joint and several co-Borrower under the terms hereof shall be a non-recourse obligation, and shall be limited to such Transferee's interest in the Vessel acquired by it and the other assets and property covered by the Security Documents to which such Transferee is a party. I. Concurrently with the execution and delivery of this Amendment, the Guarantor will execute and deliver to the Lenders an Amended and Restated Guarantee, amending and restating in its entirety the Guarantee dated March 14, 1994, pursuant to which, as more particularly provided therein, the Guarantor will guarantee the obligations of APL and each of the Transferees, in each case under the Loan Agreement, as amended hereby, and the Security Documents to which it shall become a party. J. In light of the foregoing, KfW, the Syndicate Agent, the Syndicate, APL and the Transferees wish to make certain amendments to the Loan Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: Section 1. The following defined term is added to Section 1 of the Loan Agreement: "Transferees" means the following six (6) corporations: (1) M.V. President Kennedy, Ltd.; a Delaware corporation; (2) M.V. President Adams, Ltd., a Delaware corporation; (3) M.V. President Jackson, Ltd., a Delaware corporation; (4) M.V. President Polk, Ltd., a Delaware corporation; (5) M.V. President Truman, Ltd., a Delaware corporation; and (6) APL M.V. Philippines, Ltd., a Delaware corporation. and "Transferee" means, in respect of any Vessel, the corporation named above that acquires that Vessel pursuant to an Exchange Agreement or, in the case of APL PHILIPPINES, the Agreement to Acquire and Charter. This defined term shall supersede and replace the definition of "Transferee" contained in Section 1 of the Loan Agreement. Section 2. The following definitions in Section 1 of the Loan Agreement are amended to read as follows: "Agreement to Acquire and Charter" means the Amended and Restated Agreement to Acquire and Charter dated May 19, 1995 among APL, KfW, the Syndicate Agent, the Syndicate Members and the Transferees respecting each TransfereeOs liability for the Vessel Indebtedness for any of the Vessels delivered to such Transferee and APL's obligation to charter any such Vessel from such Transferee, together with all Exhibits thereto. "Borrower" shall have the following meanings: (i) Prior to any transfer of the Vessels pursuant to the Agreement to Acquire and Charter, APL shall be the Borrower; and (ii) From and after the acquisition of any Vessel by a Transferee pursuant to an Exchange Agreement or, in the case of APL PHILIPPINES, the Agreement to Acquire and Charter, the related Transferee shall be the Borrower with respect to all payment and performance obligations relating to Vessel Indebtedness of that Vessel (including but not limited to, Sections 2.02(d), 3, 4, 5, 6, 10, 11, 12 and 15.09 of this Agreement), and references to the Borrower in any of such Sections shall be construed to mean such related Transferee as Borrower, except that (x) references to the "Borrower" in Section 11.03 shall mean the Borrowers jointly and severally and (y) references to the "Borrower" in Section 12.01 shall mean any of the Borrowers. APL shall be the Borrower with respect to all other provisions of this Agreement (including but not limited to, Sections 8, 9 and 13.03). "Delivery Date" means, in respect of each Vessel, the date on which that Vessel is either delivered to and accepted by APL pursuant to the relevant Shipbuilding Agreement or ownership of that Vessel is acquired by a Transferee in accordance with an Exchange Agreement or, in the case of APL PHILIPPINES, the Agreement to Acquire and Charter. "Guarantee" shall have the following meanings: (i) Prior to any transfer of the Vessels pursuant to the Agreement to Acquire and Charter, the "Guarantee" shall mean the Guarantee dated March 14, 1994 by the Guarantor guaranteeing APL's obligations under the Loan Agreement and the Security Documents to which it shall become a party substantially in the form of Appendix E; and (ii) From and after the transfer of any Vessel pursuant to the Agreement to Acquire and Charter, "Guarantee" shall mean the Amended and Restated Guarantee dated the first Delivery Date on which a Transferee shall acquire a Vessel by the Guarantor guaranteeing the obligations of APL and the Transferees, in each case under the Loan Agreement and the Security Documents to which it shall become a party, substantially in the form of Appendix E. "Loan Documents" means this Agreement, the Agreement to Acquire and Charter, each of the Notes, *, the HDW Security Documents and the Daewoo Security Documents. "Obligors" means APL, the Transferees (as such or as Borrowers) and the Guarantor, and "Obligor" means any of them. "Operative Documents" shall mean the Loan Documents and the Charter Documents, collectively. "Vessel Indebtedness" means, in respect of the HDW Vessels and Daewoo Vessels, respectively, all sums owing, actually or contingently, by the related Borrowers, jointly and severally, to the relevant Lender(s) in respect of the Subportions which relates to such Vessels under this Agreement; whether by way of repayment of principal, payment of commitment commission, payment of interest or default interest, payment upon any indemnity, reimbursement for costs or otherwise howsoever). Section 3. Section 2.01(a) of the Loan Agreement is amended to read as follows: 2.01 The HDW Tranche (a) The HDW Subportion. Upon the terms and subject to the conditions set forth in this Agreement, KfW agrees to make available to APL or up to three of the Transferees (not including APL M.V. PHILIPPINES, Ltd.) as its Commitment up to three (3)advances (one per Transferee) on a joint and several liability basis in the aggregate principal amount of up to the lesser of (i) * or (ii) * of the Total Contract Price * of the three (3) HDW Vessels based on the Contract Price of each such Vessel calculated as of each VesselOs Delivery Date using the USD Exchange Rate (the "HDW Tranche"). Such maximum loan amounts may be reduced from time to time to take into account any reductions in the Contract Price of any HDW Vessel calculated using the USD Equivalent at the request of APL prior to delivery of the Vessel, but any reductions made in loan amounts shall not thereafter be eligible for borrowing. The joint and several obligation of each Borrower to repay each of the three (3) advances (the "HDW Subportions A-C") under the HDW Tranche shall be evidenced by the HDW Notes. It is expressly understood and agreed that a Borrower shall have no right to receive, and KfW shall have no obligation to disburse, any amount in respect of any HDW Subportion greater than the lesser of (i) * or (ii) * of the * Contract Price of a Vessel calculated as of such Vessel's Delivery Date. Section 4. The second paragraph of Section 2.01(b) of the Loan Agreement is amended to read as follows: Not later than 11:00 a.m. (New York City time) on the Delivery Date, and upon the fulfillment of the conditions in Section 7 hereof, the Agent will make such HDW Subportion available to APL or the related Transferee, as the case may be, in same day funds at the account specified in the HDW Notice of Drawdown. Section 5. Section 2.02(a) of the Loan Agreement is amended to read as follows: 2.02 The Daewoo Tranche. (a) The Daewoo Subportions. Upon the terms and subject to the conditions set forth in this Agreement, each Syndicate Member agrees severally but not jointly, to make available to APL or up to three of the Transferees (including APL PHILIPPINES, Ltd.) on a joint and several liability basis as its Commitment up to three (3) advances (one per Transferee), which together with the advances made by the other Syndicate Members, shall be the lesser of (i) an aggregate principal amount of up to * or (ii) * of the Total Contract Price of the three Daewoo Vessels based on the Contract Price of each such Vessel (the "Daewoo Tranche"); provided, however, that the maximum Subportion in each case shall not exceed the sum of * of the Contract Price of each Daewoo Vessel as of its Delivery Date. Such maximum loan amounts may be reduced from time to time to take into account any reductions in such Contract Price at the request of APL, but any reductions made in loan amounts shall not thereafter be eligible for borrowing. The total amount of each Loan to be made available by each Syndicate Member in respect of a Daewoo Subportion shall not exceed at any time the Aggregate Amount for such Syndicate Member and shall be equal to such MemberOs Percentage Interest of the Daewoo Tranche. The joint and several obligation of each Borrower to repay each of the three advances (the "Daewoo Subportions A-C") under the Daewoo Tranche shall be evidenced by the Daewoo Notes. It is expressly understood and agreed that a Borrower shall have no right to receive, and no Syndicate Member shall have any obligation to disburse, any amount in respect of any Daewoo Subportion greater than such Member's Percentage Interest of the Contract Price for each Daewoo Vessel. The failure of any Syndicate Member to advance any amount which it is obligated to advance hereunder in respect of any Daewoo Subportion shall not relieve it or any other Syndicate Member of the obligation to make such advances, but no Syndicate Member or the Syndicate Agent shall be responsible for the failure of any other Syndicate Member to advance its Aggregate Amount to the Borrower in respect of any Daewoo Subportion. Section 6. Section 3.05(c) of the Loan Agreement to amended to read as follows: * Section 7. Sections 5.03 and 5.04 of the Loan Agreement are amended to read as follows: * 5.04 Prepayment. (a) Voluntary Prepayment. Subject to no Event of Default, or Incipient Default, having occurred and being continuing, each Borrower may prepay at its option the outstanding principal amount of any Subportion, in accordance with Section 5.06 or 5.07, as applicable, in whole or in part, but any partial prepayment may be made only in inverse order of maturity; * on the date set for such repayment set forth below, together with (i) interest accrued thereon to such date; (ii) a prepayment commission of * of the principal amount of each such Subportion so prepaid in respect of any * Notes and/or * Notes during the period running from the Delivery Date of the related Vessel and ending on the sixth anniversary thereof with no such commission to be charged thereafter; and (iii) any amounts owed under Section 11 hereof, with respect to the Subportion being prepaid; provided that, unless the Agent or the Syndicate Agent, as the case may be, shall otherwise agree, partial prepayments may only be made in amounts aggregating not less than * or integral multiples thereof. If a Borrower shall elect to make any such optional prepayment, such Borrower shall deliver a notice conforming to the requirements of Section 15.04, at least ten (10) Business Days prior to the date it selects for such prepayment, to the Agent and the Syndicate Agent. If prepayment is made in respect of any Daewoo Subportion, the Commitment of each Syndicate Member shall be reduced pro rata by the amount of such prepayment, and each one of the Dollar amounts set forth in Schedule 3 hereto shall be reduced accordingly. Any notice of prepayment given as aforesaid shall be irrevocable and shall oblige the Borrower to make such prepayment on the date specified in the notice. Any Note or part thereof so prepaid may not be reissued. (b) Mandatory Prepayment. (i) If an Event of Loss shall occur with respect to any Vessel after its delivery, the related Borrower shall give prompt written notice thereof to the Agent or the Syndicate Agent, as the case may be, and as soon as practicable thereafter, such Borrower shall give such parties written notice of the date on which all of the Notes pertaining to that Subportion shall be redeemed (the "Redemption Date"), which date shall be a Business Day and shall be not earlier than ten (10) Business Days after the date notice of the Redemption Date is given and not later than the one hundred eightieth (180th) day after the date of such Event of Loss; provided, however, that for purposes of a requisition of use, confiscation, seizure or forfeiture of such Vessel as set forth in clause (iv) of the definition for "Event of Loss," the Redemption Date shall be no later than the sixtieth (60th) day after the date of such Event of Loss. (ii) On the Redemption Date, the Borrower shall pay to the Agent or the Syndicate Agent, as the case may be, funds equal to the (x) principal amount outstanding under the relevant Subportion plus interest accrued thereon, and (y) any amounts owed under Section 11 hereof, with respect to the Subportion relating to the Vessel having suffered an Event of Loss. (iii) All monies received under this Section 5.04(b) prior to the Redemption Date by the Agent, the Syndicate Agent or any Lender shall be credited against the payment obligations of the Borrower under Section 5.04(b)(ii) hereof. (iv) Subject to no Event of Default, or Incipient Default, having occurred and being continuing, if any of the Lenders receives any proceeds from insurance or compensation as to such Event of Loss, in excess of the payment obligations to it of the Borrower under Section 5.04(b)(ii) hereof, the balance of such proceeds shall be paid to the Borrower. (c) Release of Mortgage After Prepayment. Upon prepayment by the Borrower of any HDW or Daewoo Subportion in full, the Agent and/or the Syndicate Agent, as the case may be, shall release the Mortgage(s) on the Vessel relating to such Subportion so long as no Event of Default or Incipient Default shall have then occurred and be continuing. All costs and expenses reasonably incurred by the Agent, the Syndicate Agent and any Lender (excluding any legal fees and expenses by any Lender other than the Agent or the Syndicate Agent) in connection with such release and discharge of such Mortgage(s), including, but not limited to, any indemnity payments set forth in Section 11 hereof then due and payable, shall be for the account of, and payable by, the related Borrower. * Section 8. Section 7 of the Loan Agreement is amended to read as follows: 7. CONDITIONS PRECEDENT TO ADVANCE Each Lender's obligation to make its part of the HDW and the Daewoo Subportions available to APL or the related Transferee on each Delivery Date is expressly conditioned upon the following preconditions being satisfied and upon receipt by the Agent or the Syndicate Agent, as the case may be, of the following documents and evidence, as the case may be, on or before a closing to be held on the Delivery Date at the offices of Height, Gardener, Poor & Havens, 195 Broadway, New York, New York 10007, or at such other place as may be agreed upon by the Borrower, the Agent and the Syndicate Agent: (a) Each of APL, such Transferee and the Guarantor shall be a corporation duly organized and existing in good standing under the laws of the jurisdiction of its incorporation; each of APL, such Transferee and the Guarantor shall have full corporate power and authority to own its assets, conduct its business as then being conducted, and enter into and consummate the transactions contemplated hereby and by the other Loan Documents and Charter Documents to which it is a party, and the Agent or the Syndicate Agent, as the case may be, shall have received (i) a certified copy of the certificate of incorporation of each of APL, such Transferee and the Guarantor, (ii) a certificate of the Secretary of each of APL, such Transferee and the Guarantor attaching the minutes or resolutions of its Board of Directors authorizing the transactions contemplated herein, (iii) a certificate from the Secretary of each of APL, such Transferee and the Guarantor or evidencing the authority of the persons executing the Loan Documents and Charter Documents, to which it is a party, to execute and deliver such Loan Documents and Charter Documents and such Obligor to perform under the Loan Documents and Charter Documents to which it is a party, and (iv) a certificate of good standing as to each of APL, such Transferee and the Guarantor, all in form and substance reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be, and its special counsel; (b) not less than five (5) days (or such shorter period as the Agent or the Syndicate Agent, as the case may be, may agree) before the proposed date for the making of each such Subportion, the Agent or the Syndicate Agent, as the case may be, shall have received an HDW or a Daewoo Notice of Drawdown, as the case may be, from APL and the Transferee if it is to be the owner of the related Vessel; (c) no Event of Default shall have occurred and be continuing and no Incipient Default shall have occurred and be continuing and APL, the related Transferee and the Guarantor shall provide an officer's certificate to such effect in form and substance reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be, and its special counsel; (d) there shall not have occurred any material adverse change in the financial condition of any of APL, the related Transferee or the Guarantor which in the reasonable opinion of the Agent and/or the Syndicate Agent would materially and adversely affect the ability of (x) the Transferees and the Borrowers, individually and collectively to perform its obligations as to the repayment of the Facility by the installments together with interests thereon herein set out or to perform any of their respective obligations under the Loan Agreement, the Charter Documents and the Security Documents to which any of them is or will become a party, or (y) the Guarantor to perform its obligations under the Guarantee; (e) all representations and warranties of each of the Obligors contained in this Agreement, the Charter Documents and each of the Loan Documents to which each of them is, respectively, a party being true and correct in all material respects on that Delivery Date, except insofar as they relate exclusively to an earlier date, and each Obligor shall provide officer's certificates confirming such matters; (f) all governmental and other consents, licenses, approvals and authorizations, if any, required with respect to the performance of APL, the related Transferee and the Guarantor under the Loan Documents and Charter Documents to which it is a party shall have been obtained and shall not have been revoked and, if requested by the Agent or the Syndicate Agent or its special counsel, true and complete copies of any of the same shall be provided; (g) all Uniform Commercial Code financing statements or other document necessary, or reasonably requested by the Agent or the Syndicate Agent, to perfect its security interests under any of the Security Documents in the United States of America, the Republic of The Marshall Islands or any other relevant jurisdiction; (h) certificate of APL or the related Transferee that it has delivered to each of the Agent and the Syndicate Agent a complete copy of the relevant Shipbuilding Agreement to the relevant Vessel including any subsequent amendments or supplements thereto not previously furnished; (i) copies of the Bill of Sale and the Builder's Commercial Invoice and the Builder's Certificate to the relevant Vessel from HDW or Daewoo, as the case may be; (j) all fees under Section 13 hereof accrued and due to the relevant Lenders have been paid in full and confirmation from HDW or Daewoo, as the case may be, of payment as to all amounts then due under the relevant Shipbuilding Contract as to the Vessel being delivered; (k) (x) if the Vessel is to be transferred to a Transferee pursuant to an Exchange Agreement or, in the case of APL PHILIPPINES, the Agreement to Acquire and Charter, then evidence that such Vessel is duly registered in the name and ownership of the Transferee under the law and flag of the Republic of The Marshall Islands, free of registered liens except the relevant Mortgage(s); and (y) if the Vessel is not to be transferred to the Transferee, then evidence that such Vessel is duly registered in the name and ownership of APL under the laws and flag of its registry, free of registered liens except the relevant Mortgage(s); provided that, notwithstanding anything to the contrary in this Loan Agreement or any other Loan Document, any Vessel may be initially documented upon its Delivery Date under the laws and flag of the United States, if written notice of the intention to so document such Vessel is given to the Agent or the Syndicate Agent, as the case may be, not less than sixty (60) days prior to such Delivery Date, and the parties hereto shall make such changes to the Loan Documents and take such action (including, but not limited to, the selection of an approved trustee to act as mortgagee for the relevant Lenders and appropriate modification of the Loan Documents) which are consistent with the Loan Documents and which such parties may reasonably deem necessary to effectuate this proviso clause, and provided further that, notwithstanding anything to the contrary in this Loan Agreement or any other Loan Document, APL may, prior to the Delivery Date of such Vessel, assign the related HDW Shipbuilding Agreement or Daewoo Shipbuilding Agreement, as the case may be, to the extent the same relates to such Vessel, to the Transferee; (l) each Loan Document and Charter Document, in respect of such Vessel duly executed, delivered and, where appropriate, registered or recorded (together with any documents to be executed pursuant to the terms thereof, including without limitation, notices of the Assignment(s) of Insurances); (m) unless the mortgagor under the related mortgage is not the party accepting delivery under the Shipbuilding Agreement, confirmation from HDW or Daewoo, as the case may be, in the form set forth in Schedule 5-A or 5-B, respectively; (n) confirmation from the Borrower in the form set forth in Schedules 5-C or 5-D, as the case may be; (o) Protocol of Delivery and Acceptance of the relevant Vessel as required under the related Shipbuilding Agreement, and, if the mortgagor under the related mortgage is not the party accepting delivery under the Shiphuilding Agreement, a certificate of acceptance executed by the related Transferee; (p) an independent broker's report, in form and substance reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be, describing all insurance then carried and maintained with respect to the Vessel and the expiration date thereof, together with certificates of insurance in accordance with Section 29(f)(i) of the Vessel's Mortgage(s), including a written confirmation from such broker in a form and substance reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be, that such insurance complies with the terms of Section 29 of the Vessel's Mortgage(s); (q) Interim class certificate (dated not more than then (10) days prior to the relevant Delivery Date) evidencing chat such Vessel is in class and classed in the highest classification for vessels of the same age and type by the Classification Society; (r) copies of all documents to be delivered by HDW or Daewoo, as the case may be, under Article 17(a)(ii) of the relevant Shipbuilding Agreement; (s) each of the Lenders shall have received executed originals of the opinions set forth as Schedules 4A and 4B hereto as well as such other opinions from such counsel as each Lender shall reasonably request and each of the Lenders shall have received from its special counsel, Haight, Gardner, Poor & Havens, a favorable opinion, in form and substance satisfactory to the Lenders, as to such matters incident to the transactions contemplated hereby as any such Lender may reasonably request; and (t) if the Vessel is to be transferred to a Transferee pursuant to the Agreement to Acquire and Charter, then all conditions precedent to such Transferee's obligations on the related Delivery Date set forth in Section 3 of the Agreement to Acquire and Charter shall have been satisfied. Section 9. The following new Sections 2.03 and 2.04 are hereby added to the Loan Agreement, immediately following Section 2.02 thereof: 2.03 Joint and Several Liability. Notwithstanding anything herein or in any other Loan Document to the contrary, each of the Transferees agrees that, upon its execution of a Note: (i) if the Transferee acquires a Daewoo Vessel, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or thereafter shall execute a Note hereunder, for payment in full of all Vessel Indebtedness respecting any or all of the Daewoo Vessels and the HDW Vessels, and (ii) if the Transferee acquires an HDW Vessel, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or thereafter shall execute an HDW Note hereunder for payment in full of all Vessel Indebtedness respecting any or all of the HDW Vessels. In order to evidence its joint and several liability, each Transferee agrees that, on the related Delivery Date, it shall execute an endorsement to then outstanding Notes upon which it is jointly and severally liable. The liability of each Transferee shall be independent of the duties, obligations and liabilities of each and all of the other joint and several Transferees. The Lenders (subject to the provisions hereof) may bring a separate action or actions on each, any or all of the Vessel Indebtedness against each, any or all of the Transferees liable therefor hereunder, whether action is brought against any other or all of such Transferees, or any one or more of the Transferees is or is not joined therein. 2.04 Nonrecourse Liability. Notwithstanding anything herein, in the Notes or in any other Loan Document to the contrary, the Lenders agree that they will look solely to the assets and property covered by the Security Documents (collectively, the "Recourse Assets") for all amounts coming due from the Transferees (or any Transferee) hereunder, under the Notes or under any of the other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Transferees (or any Transferee) hereunder or under the Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by any Transferee as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Transferees' (or any Transferee's) obligations under this Agreement, the Notes, any other Loan Document or any such other certificate or document: (a) against any Transferee in its individual or personal capacity, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of any Transferee other than the Recourse Assets; provided, however, that nothing in this Section shall (x) limit or otherwise prejudice in any way the rights of the Lenders to proceed against the Guarantor under the Guarantee or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the Security Documents, or to restrict the remedies available to the Lenders to realize upon the Security Documents or enforce the Guarantee. Section 10. Section 12.02(a) of the Loan Agreement is amended to read as follows: (a) any Obligor fails to pay to the Agent or the Syndicate Agent, as the case may be, on the due date for payment thereof in the currency and in the manner specified herein or therein any sum of principal, interest, commission or fees payable by the Borrower under the terms of this Agreement or under any of the Notes and such default remains unremedied for three (3) Business Days after the due date; or Section 11. Sections 12.02(d) and (e) of the Loan Agreement are amended to read as follows: (d) any of the Obligors is in breach in the performance or observance of any other terms or conditions of this Agreement or in any of the Loan Documents, the Charter Documents or the Security Documents (other than the Mortgage(s) to which any of them is a party (not being a default which falls within paragraphs (a), (b) or (c) of this Section) and if it is capable of being remedied such breach is not remedied within thirty (30) days after receipt by the Borrower of notice of such breach from the Agent or the Syndicate Agent, as the case may be; provided, however, that an Event of Default under Section 24(a)(i) of the Charter caused by the failure of the Charterer to pay Additional Charter Hire shall not be an Event of Default under this Agreement; or (e) there occurs any event which constitutes an Event of Default under any Mortgage on any Vessel under any of the Charters; or Section 12. Appendix A-1A, Appendix A-1B, Appendix A-2A and Appendix A-2B of the Loan Agreement (forms of Notes) are each amended and restated as set forth in Exhibits A-1, A-2, A-3 and A-4 hereto, respectively. Section 13. Appendix B-1 and Appendix B-2 of the Loan Agreement (forms of Mortgages) are each amended by (i) replacing the existing recitals B and C with the following recitals B, C and D (and changing recitals D and E to E and F, respectively): B. This Mortgage is granted to secure certain obligations of the Borrower under that certain Loan Agreement dated March 14, 1994, as amended by Amendment No.1 thereto, dated May 19, 1995, among American President Lines, Ltd. ("APL"), the Borrower, the other Transferees, the Mortgagee and other lenders (the "Loan Agreement"; terms used herein without definition shall have the respective meanings provided in the Loan Agreement) (a copy of which without Exhibits is attached hereto as Exhibit A). C. The Mortgagee has agreed to make loans with respect to three (3) vessels [insert names and official numbers], including the Vessel, one of which is to be owned by the Borrower, pursuant to the Loan Agreement and that certain Amended and Restated Agreement to Acquire and Charter, dated May 19, 1995, among APL, the Borrower, the other Transferees, the Mortgagee and the other Lenders named therein (a copy of which is attached hereto as Exhibit A-1), such loans to be in an aggregate amount not to exceed _____________ United States Dollars (USD _______________) (collectively, the "Loans"). The total amount of the Loans is or shall be evidenced by the [HDW] [Daewoo] Notes. The portion of the Loans relating to the acquisition of the Vessel is in the principal amount of United States Dollars (USD ), which portion is evidenced by the specific [HDW] [Daewoo] Notes dated May 19, 1995 (the "[HDW] [Daewoo Notes"), (a form of which without Exhibits is attached hereto as Exhibit B), and in order to induce the Mortgagee to make the Loans, the Borrower has agreed to grant this Mortgage to the Mortgagee to secure the [HDW] [Daewoo] Notes and the Borrower's joint and several liability under the Loan Agreement for the repayment of the remaining [HDW] [Daewoo] Notes issued or to be issued by APL or any remaining Transferee and the other obligations stated in paragraph D below with respect to the acquisition of the other [HDW] [Daewoo] Vessels other than the Vessel. D. The term "Obligations" shall mean all of the obligations of the Borrower to pay any amount to the Mortgagee under this Mortgage, the [HDW] [Daewoo] __________ Notes and the Loan Agreement insofar as it relates to the [HDW] [Daewoo] Tranche Loans (including, without limitation, the Borrower's joint and several liability under the Loan Agreement for the repayment of the remaining [HDW] [Daewoo] Notes), whether by reason of reimbursement, interest, indemnity or for any other reasons whatsoever. and (ii) adding the following paragraph after clause (55): (56) Notwithstanding anything herein, in the [HDW] [Daewoo]__________ Notes or in any other Loan Document to the contrary, by acceptance of this Mortgage, the Mortgagee agrees that it will look solely to the Vessel and the other assets and property covered by this Mortgage and the other [HDW] [Daewoo] Security Documents (collectively, the "Recourse Assets") for all amounts coming due from the Borrower under this Mortgage, the [HDW] [Daewoo] _____ Notes or any other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Borrower hereunder or under the [HDW] [Daewoo] _____ Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Borrower as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Borrower's obligations under this Mortgage, the [HDW] [Daewoo] _____ Notes, any other Loan Document or any such other certificate or document: (a) against the Borrower in its individual or personal capacity, other than in connection with the enforcement of remedies against the Recourse Assets or (b)against any assets or property of the Borrower other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Mortgagee to proceed against the Guarantor under the Guarantee, or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the [HDW] [Daewoo] Security Documents, or to restrict the remedies available to the Mortgagee to realize upon the [HDW] [Daewoo] Security Documents or enforce the Guarantee. Section 14. Appendix E of the Loan Agreement (form of Guarantee) is amended and restated as set forth in Exhibit B hereto. Section 15. Schedules 4A and 4B of the Loan Agreement (forms of legal opinions) are amended and restated as set forth in Exhibits C-1 and C-2 hereto, respectively. Section 16. This Amendment No. 1 shall be governed by and construed in accordance with laws of the State of New York (other than the law of the State of New York governing choice of law). Section 17. Each Transferee hereby submits itself to New York jurisdiction and agrees to observe and perform the agreements and covenants and shall have the rights contained in Section 15.08 of the Loan Agreement, the provisions of which are hereby incorporated herein by reference, to the same extent and under the same terms and conditions so provided in said Section 15.08. Section 18. Except as amended by this Amendment No. 1, all other terms, conditions and covenants of the Loan Agreement are hereby confirmed by the parties hereto and remain unchanged and in full force and effect. From and after the date hereof, all references to the Loan Agreement (i) in the Loan Agreement (including references therein to "this Agreement", "hereof" and "hereunder"), and (ii) in any of the other Loan Documents, shall be deemed to be references to the Loan Agreement as amended by this Amendment No. 1. Section 19. This Amendment No. 1 may be executed in separate counterparts, each of which, when executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, The parties have caused this Amendment No. 1 to be duly executed by their respective officers as the day and year first above written. KREDITANSTALT FUR WIEDERAUFBAU /s/ By: Title: COMMERZBANK AG, HAMBURG /s/ By: Title: /s/ By: Title: COMMERZBANK AG (KIEL BRANCH) /s/ By: Title: /s/ By: Title: [Signature Page to Amendment No. 1 to Loan Agreement] EX-10.29 5 EXHIBIT 10.29 TO THE 1995 FORM 10K FOR APC * Application to be filed with the Securities and Exchange Commission, pursuant to Exchange Act Rule 24-b-2, for confidential treatment of certain portions of this exhibit. EXECUTION VERSION AMENDMENT NO. 2 DATED SEPTEMBER 1, 1995 By and Among KREDITANSTALT FUR WIEDERAUFBAU (as Agent and Lender) COMMERZBANK AG, HAMBURG (as Syndicate Agent) COMMERZBANK AG (KIEL BRANCH) DRESDNER BANK AG in HAMBURG VEREINS- und WESTBANK AG DEUTSCHE SCHIFFSBANK AG NORDDEUTSCHE LANDESBANK-GIROZENTRALE DEUTSCHE VERKEHRS-BANK AG (HAMBURG BRANCH) BANQUE INTERNATIONALE A LUXEMBOURG S.A. (as the Syndicate) THE CORPORATIONS LISTED IN SCHEDULE A and AMERICAN PRESIDENT LINES, LTD. to LOAN AGREEMENT DATED MARCH 14, 1994 AS AMENDED BY AMENDMENT NO. 1 TO LOAN AGREEMENT DATED MAY 19, 1995 Loan Facility -in respect of the purchase financing- six (6) container vessels three (3) contracted with Howaldtswerke-Deutsche Werft AG three (3) contracted with Daewoo Shipbuilding & Heavy Machinery, Ltd. THIS AMENDMENT NO. 2 TO LOAN AGREEMENT is made this 1st day of September, 1995 by and among KREDITANSTALT FUR WIEDERAUFBAU, a public law corporation incorporated in the Federal Republic of Germany, whose address is Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW"); COMMERZBANK AG, Hamburg, a banking corporation incorporated in the Federal Republic of Germany whose address is Ness 7-9, D-20457 Hamburg (the "Syndicate Agent"); the banks listed in Schedule 1 which is attached hereto (each a "Syndicate Member" and, collectively, the "Syndicate"); each of the corporations listed in Schedule A hereto whose address is 1111 Broadway, Oakland, California 94607; and AMERICAN PRESIDENT LINES, LTD., a Delaware corporation, whose address is 1111 Broadway, Oakland, California 94607 ("APL"). W I T N E S S E T H: A. Reference is made to that certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 ("Amendment No. 1"), among the parties hereto (the "Old Loan Agreement". Capitalized terms used herein and not otherwise defined have the meanings provided therefor in the Loan Agreement. B. On May 19, 1995, pursuant to the Old Loan Agreement, APL CHINA was delivered by HDW to APL Newbuildings, Ltd., and, on the same date, APL CHINA was transferred by APL Newbuildings, Ltd. to one of the Transferees, namely M.V. President Kennedy, Ltd., as part of an exchange for a C-10 conbulk vessel, PRESIDENT KENNEDY, owned by such Transferee, prior to the draw down by M.V. President Kennedy, Ltd. of the Subportion relating to APL CHINA. C. With respect to the five remaining Vessels, APL desires to provide for the partial assignment of the appropriate Shipbuilding Agreement (in each case to the extent such Shipbuilding Agreement relates to the Vessel in question) to five wholly-owned subsidiaries of the Guarantor (each an "Original Owner" and, collectively, the "Original Owners"), as follows, such that each of the Original Owners would acquire its Vessel directly from HDW or Daewoo, as the case may be: (1) APL JAPAN to be transferred to APL M.V. Japan, Ltd., a Delaware corporation; (2) APL KOREA to be transferred to APL M.V. Korea, Ltd., a Delaware corporation; (3) APL SINGAPORE to be transferred to APL M.V. Singapore, Ltd., a Delaware corporation; (4) APL THAILAND to be transferred to APL M.V. Thailand, Ltd. a Delaware corporation; and (5) APL PHILIPPINES to be transferred to APL M.V. Philippines, a Delaware corporation. D. The parties to the Old Loan Agreement wish to amend the Loan Agreement to permit each of the Vessels (other than APL CHINA) to be transferred by the Original Owner thereof to APL as part of an exchange for a C-10 conbulk vessel owned by APL, whereupon APL would execute and deliver the First Mortgage and (in the case of a Daewoo Vessel) the Second Mortgage, and thereafter APL would transfer the Vessel in question to the appropriate Transferee, which would assume such Mortgage(s) in connection with the draw down of the Subportion relating to such Vessel by such Transferee. E. Notwithstanding the intended Vessel transfers referred to in Recital D above, APL shall retain the right under the Loan Agreement to take delivery itself of any of the remaining Vessels from HDW or Daewoo, as the case may be, and to draw down the applicable Subportion. F. As more particularly described herein: (1) each of the Transferees, upon its execution of a Note hereunder: (a) if it acquires a Daewoo Vessel, will be jointly and severally liable as a co-Borrower, together with all of the other Transferees that have or thereafter shall execute a Note hereunder, for all Vessel Indebtedness respecting any of all of the Daewoo Vessels and the HDW Vessels, and (b) if it acquires an HDW Vessel, will be jointly and severally liable as a co-Borrower, together with all of the other Transferees that have or thereafter shall execute an HDW Note hereunder, for all Vessel Indebtedness respecting any or all of the HDW Vessels; and (2) each Transferee's obligation to repay Vessel Indebtedness under the Note executed by it or as a joint and several co-Borrower under the terms hereof shall be a non-recourse obligation, and shall be limited to such Transferee's interest in the Vessel acquired by it and the other assets and property covered by the Security Documents to which such Transferee in a party. G. Concurrently with the execution and delivery of this Amendment, APL, the Transferees and the Lenders are entering into a Second Amended and Restated Agreement to Acquire and Charter dated as of the date hereof, respecting, among other things, the permitted exchange and transfer of each of the Vessels as set forth above. H. In light of the foregoing, KfW, the Syndicate Agent, the Syndicate, APL and the Transferees wish to make certain amendments to the Old Loan Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: Section 1. The following defined term is amended as follows: "Transferees" means the following six (6) corporations: (1) M.V. President Kennedy, Ltd., a Delaware corporation; (2) M.V. President Adams, Ltd., a Delaware corporation; (3) M.V. President Jackson, Ltd., a Delaware corporation; (4) M.V. President Polk, Ltd., a Delaware corporation; (5) M.V. President Truman, Ltd., a Delaware Corporation; and (6) APL Shipholdings, Ltd., a Delaware corporation. and "Transferee" means, in respect of any Vessel, the corporation named above that acquires that Vessel pursuant to an Exchange Agreement (or from APL following APL's acquisition of that Vessel pursuant to an Exchange Agreement). This defined term shall supersede and replace the definition of "Transferees" contained in Section 1 of the Old Loan Agreement. Section 2. The following definitions in Section 1 of the Old Loan Agreement are amended to read as follows: "Agreement to Acquire and Charter" means the Second Amended and Restated Agreement to Acquire and Charter dated September 1, 1995, among APL, KfW, the Syndicate Agent, the Syndicate Members and the Transferees respecting each Transferee's liability for the Vessel Indebtedness for any of the Vessels delivered to such Transferee and APL's obligation to charter any such Vessel from such Transferee, together with all Exhibits thereto. "Borrower" shall have the following meanings: (i) Prior to any transfer of the Vessels pursuant to the Agreement to Acquire and Charter, APL shall be the Borrower; and (ii) From and after the acquisition of any Vessel by a Transferee which does not involve APL in the prior chain of title, in accordance with the Agreement to Acquire and Charter, such Transferee shall be the Borrower with respect to all payment and performance obligations relating to the Vessel Indebtedness of that Vessel (including but not limited to, Sections 2.02(d), 3, 4, 5, 6, 10, 11, 12 and 15.09 of this Agreement), and references to the Borrower in any of such Sections shall be construed to mean such related Transferee as Borrower, except that (x) references to the "Borrower" in Section 11.03 shall mean the Borrowers jointly and severally and (y) references to the "Borrower" in Section 12.01 shall mean any of the Borrowers. APL shall be the Borrower with respect to all other provisions of this Agreement (including but not limited to, Sections 8, 9 and 13.03); and (iii) From and after the acquisition of any Vessel by a Transferee from APL following APL's acquisition of that Vessel pursuant to an Exchange Agreement, both APL and the related Transferee shall be deemed to be Borrowers (jointly and severally) with respect to all payment and performance obligations relating to the Vessel Indebtedness of that Vessel (including but not limited to, Sections 2.02(d), 3, 4, 5, 6, 10, 1l, 12 and 15.09 of this Agreement), and references to the Borrower in any of such Sections shall be construed to mean APL and such related Transferee as Borrower, except that (x) references to the "Borrower" in Section 11.03 shall mean the Borrowers jointly and severally and (y) references to the "Borrower" in Section 12.01 shall mean any of the Borrowers. APL shall be the only Borrower with respect to all other provisions of this Agreement (including but not limited to, Sections 8, 9 and 13.03). "Delivery Date" means, in respect of each Vessel, the date on which that Vessel is either delivered to and accepted by APL pursuant to the relevant Shipbuilding Agreement or ownership of that Vessel is acquired by a Transferee in accordance with the Agreement to Acquire and Charter. "Vessel Indebtedness" means, in respect of each Vessel, all sums owing, actually or contingently, by the related Borrower or Borrowers, whether individually or jointly or severally, to the relevant Lender(s) in respect of that Subportion which relates to that Vessel under this Agreement (whether by way of repayment of principal, payment of commitment commission, payment of interest or default interest, payment upon any indemnity, reimbursement for costs or other). Section 3. The following new definitions are added to Section 1 of the Old Loan Agreement as follows: "Assumption of First Mortgage" means the assumption of a First Mortgage entered into by APL and a Transferee contemplated by Section 2.03(b) of this Loan Agreement, pursuant to which a Transferee assumes the payment and performance obligations under the related First Mortgage. "Assumption of Second Mortgage" means the assumption of a Second Mortgage entered into by APL and a Transferee contemplated by Section 2.03(b) of this Loan Agreement, pursuant to which a Transferee assumes the payment and performance obligations under the related Second Mortgage. "Original Owner" has the meaning set forth in Recital C hereto. Section 4. Section 7(k) of the Old Loan Agreement is amended to read as follows: (k) (x) if the Vessel is to be transferred to a Transferee pursuant to an Exchange Agreement (in the case of APL CHINA) or from APL following APL's acquisition of the Vessel pursuant to an Exchange Agreement, then evidence that such Vessel (other than APL CHINA) is duly registered in the name and ownership of, first, the Original Owner (if applicable), second, APL (if applicable), and then the Transferee under the law and flag of the Republic of The Marshall Islands, free of registered liens except the relevant Mortgage(s); and (y) if the Vessel is not to be transferred to the Transferee, then evidence that such Vessel is duly registered in the name and ownership of APL under the laws and flag of its registry, free of registered liens except the relevant Mortgage(s); provided that, notwithstanding anything to the contrary in this Loan Agreement or any other Loan Document, any Vessel may be initially documented upon its Delivery Date under the laws and flag of the United States, if written notice of the intention to so document such Vessel is given to the Agent or the Syndicate Agent, as the case may be, not less than sixty (60) days prior to such Delivery Date, and the parties hereto shall make such changes to the Loan Documents and take such action (including, but not limited to, the selection of an approved trustee to act as mortgagee for the relevant Lenders and appropriate modification of the Loan Documents) which are consistent with the Loan Documents and which such parties may reasonably deem necessary to effectuate this proviso clause; provided further that, notwithstanding anything to the contrary in this Loan Agreement or any other Loan Document, APL may, prior to the Delivery Date of such Vessel, assign the related HDW Shipbuilding Agreement or Daewoo Shipbuilding Agreement, as the case may be, to the extent the same relates to such Vessel, to the Transferee (or to an entity with which APL or the Transferee shall enter into an Exchange Agreement in respect of the Vessel) and provided finally that, notwithstanding anything to the contrary in this Loan Agreement or in any other Loan Document, APL may transfer any Vessel to an Original Owner as a "Transferee" and a "Borrower" pursuant to, and for all purposes of this Agreement and the parties shall make such changes to the Operative Documents which the parties and such Original Owner may reasonably deem necessary to effectuate this "provided finally" clause. Section 5. Section 2.03 of the Old Loan Agreement is amended by designating existing Section 2.03 as "2.03(a)" and by adding a new Section 2.03(b) as follows: (b) Notwithstanding anything herein or in any other Loan Document to the contrary, APL agrees that, in the event a Vessel is acquired by APL (following a Vessel Exchange between APL and an Original Owner), APL shall be jointly and severally, primarily and directly liable as a co-Borrower together with all of the other Transferees similarly liable for payment in full of the Vessel Indebtedness respecting that Vessel, it being expressly understood, however, that APL shall not be liable hereunder for payment of the Vessel Indebtedness respecting any Vessel not so acquired by APL (including APL CHINA). In order to evidence its joint and several liability, APL agrees that, on the related Delivery Date, it shall execute, deliver and record a First Mortgage and, if the Vessel is a Daewoo Vessel, a Second Mortgage substantially in the form attached to this Agreement. Upon transfer to, and registration of the Vessel in the name of, the Transferee, APL and the related Transferee shall execute, deliver and record an Assumption of First Mortgage and, if the Vessel is a Daewoo Vessel, an Assumption of Second Mortgage substantially in the form attached to this Agreement. The liability of APL hereunder shall be independent of the duties, obligations and liabilities of each and all of the Transferees with which it is jointly and severally liable as provided herein. The Lenders (subject to the provisions hereof) may bring a separate action or actions on each, any or all of the Vessel Indebtedness against APL on each, any or all of the Vessel Indebtedness as to which it is jointly and severally liable as provided herein, whether action is brought against any other or all of the Transferees with which APL is jointly and severally liable, or whether any one or more of such Transferees is or is not joined therein. Section 6. Section 12.02 (d) of the Old Loan Agreement is amended to read as follows: (d) any of the Obligors is in breach in the performance or observance of any other terms or conditions of this Agreement or in any of the Loan Documents, the Charter Documents or the Security Documents (other than the Mortgage(s) to which any of them is a party (not being a default which falls within paragraphs (a), (b) or (c) of this Section) and if it is capable of being remedied such breach is not remedied within thirty (30) days after receipt by the Borrower of notice of such breach from the Agent or the Syndicate Agent, as the case may be; provided, however, that, in the case of a Vessel subject to a Charter substantially in the form of Exhibit A to the Agreement to Acquire and Charter, an Event of Default under Section 24(a)(i) of such Charter caused by the failure of the Charterer to pay Additional Charter Hire shall not be an Event of Default under this Agreement; or Section 7. Appendix A of the Loan Agreement (forms of Notes) is amended to add, as Appendix A-3A, Appendix A-3B, Appendix A-4A and Appendix A-4B, the forms of Notes required under Section 2.03(b), as set forth in Exhibits A-1, A-2, A-3 and A-4 hereto, respectively. Section 8. Appendix B of the Loan Agreement (forms of Mortgages) is amended to add, as Appendix B-3 and Appendix B-4, the forms of the First Preferred Ship Mortgage and the Second Preferred Ship Mortgage to be executed and delivered by APL as contemplated by Section 2.03(b) of this Agreement, as set forth in Exhibits B-1 and B-2 hereto, respectively. Appendix B of the Loan Agreement is further amended to add, as Appendix B-5 and Appendix B-6, the forms of the Assumption of First Preferred Ship Mortgage and the Assumption of Second Preferred Ship Mortgage to be executed by the appropriate Transferee as contemplated by Section 2.03(b) of this Agreement, as set forth in Exhibits C-1 and C-2 hereto, respectively. Section 9. This Amendment No. 2 shall be governed by and construed in accordance with laws of the State of New York (other than the law of the State of New York governing choice of law). Section 10. Except as amended by this Amendment No. 2, all other terms, conditions and covenants of the Loan Agreement are hereby confirmed by the parties hereto and remain unchanged and in full force and effect. From and after the date hereof, all references to the Loan Agreement (i) in the Loan Agreement (including references therein to "this Agreement", "hereof" and "hereunder"), and (ii) in any of the other Loan Documents, shall be deemed to be references to the Loan Agreement as amended by this Amendment No. 2. Section 11. This Amendment No. 2 may be executed in separate counterparts, each of which, when executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Amendment No, 2 to be duly executed by their respective officers as the day and year first above written. KREDITANSTALT FUR WIEDERAUFBAU By: /s/ Name: Title: COMMERZBANK AG, HAMBURG By: /s/ Name: Title: By: /s/ Name: Title: COMMERZBANK AG (KIEL BRANCH) By: /s/ Name: Title By: /s/ Name: Title: DRESDNER BANK AG in HAMBURG By: /s/ Name: Title: By: /s/ Name: Title: [Signature Page to Amendment No. 2 to Loan Agreement] BANQUE INTERNATIONALE A LUXEMBOURG S.A. By: /s/ Name: Jean-Pierre Vernier Title: Directeur-adjoint AMERICAN PRESIDENT LINES, LTD. By: /s/ Name: Thomas R. Meier Title: Assistant Treasurer M.V. PRESIDENT KENNEDY, LTD. M.V. PRESIDENT ADAMS, LTD. M.V. PRESIDENT JACKSON, LTD. M.V. PRESIDENT POLK, LTD. M.V. PRESIDENT TRUMAN, LTD. APL SHIPHOLDING, LTD. By: /s/ Name: Thomas R. Meier Title: Assistant Treasurer [Signature Page to Amendment No. 2 to Loan Agreement] EXHIBIT A-1 to Amendment No. 2 to Loan Agreement [Schedules to be added to Notes] APPENDIX A-3A FORM OF FIXED RATE NOTES [HDW Vessel] NOTE No.________________ $______________ [ ] Issued in connection with the purchase financing of three (3) container vessels INTEREST RATE MATURITY DATE ISSUE DATE [ ] (together, the "Companies"), for value received, hereby jointly and severally promise to pay to [ ] or registered assigns the principal sum of ____________________________ DOLLARS (USD ___________) on the maturity date specified above. This Note shall bear interest at the rate specified above on the unpaid principal amount thereof from time to time outstanding from the date thereof to but excluding the date due at the Interest Rate for each Interest Period beginning on or after the Fixed Rate Conversion Date (as defined in the Loan Agreement referred to below) and shall be payable in arrears on each Interest Payment Date on a basis of the actual number of days elapsed over a year of three hundred sixty (360) days including the first day of the relevant Interest Period or portion thereof but excluding such Interest Payment Date. Principal on this Note shall be payable on each Repayment Date in the amounts set forth in Schedule 1 attached hereto subject to any HDW * exercised by the Companies pursuant to Section 5.03 of the Loan Agreement. Capitalized terms contained herein and not defined herein shall have the meanings specified in a certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 dated May 19, 1995 as further amended by Amendment No. 2 thereto dated September 1, 1995 (the "Loan Agreement"), by and among American President Lines, Ltd. ("APL"), the corporations listed in Schedule A to Amendment No. 2, Kreditanstalt fur Wiederaufbau, Commerzbank AG, Hamburg, Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs- Bank AG (Hamburg Branch) and Banque Internationale a Luxembourg S.A. The interest so payable, and punctually paid or duly provided for, on any such Interest Payment Date will, as provided in the Loan Agreement, be paid by the Companies to the Syndicate Agent for payment to the Person in whose name this Note is registered at the close of business on the date for payment of such interest. Any such interest not so punctually paid or duly provided for shall be paid together with default interest which shall accrue on the amount of such overdue sum in the case of payments due as more fully provided in the Loan Agreement. Under the Loan Agreement, the Companies are obligated to pay interest on and the principal of this Note to the Syndicate Agent in the manner as provided therein, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. This Note is subject to prepayment and acceleration as more fully described in the Loan Agreement. This Note is one of a duly authorized issue of Notes issued and to be issued under the Loan Agreement. Reference is made to the Loan Agreement and all supplements and amendments thereto (a copy of which is on file with each of the Companies at its principal corporate office) for a more complete statement of the terms and provisions thereof, including a statement of the properties thereby conveyed, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Companies and the Holders of the Notes, and the terms upon which the Notes are, and are to be, executed and delivered, to all of which terms and conditions in the Loan Agreement each Holder hereof agrees by its acceptance of this Note. On a LIBO Rate Conversion Date, the Interest Rate on this Note shall be converted to a LIBO Rate. Upon such conversion, the Holders shall exchange this Note for a new LIBO Rate Note or Notes by delivery of this Note to the principal office of the Registrar or at an KREDITANSTALT FUR WIEDERAUFBAU By: /s/ Name: Title: COMMERZBANK AG, HAMBURG By: /s/ Name: Title: By: /s/ ment. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is transferable, and upon surrender of this Note for registration of transfer at the principal office of the Registrar, or at the office or agency maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder or his attorney duly authorized in writing, one or more new Notes of the same maturity and type and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Loan Agreement and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of the same maturity and type and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal office of the Registrar, or at an office or agency maintained for such purpose. Prior to due presentment for registration of exchange or transfer of this Note, the Syndicate Agent, the Paying Agent and the Registrar may deem and treat the Person in whose name this Note is registered as the absolute owner hereof for the purpose of receiving payment of the principal of and interest on this Note and for all other purposes whatsoever whether or not this Note be overdue, and neither the Syndicate Agent, the Paying Agent nor the Registrar shall be affected by notice to the contrary. This Note shall not be entitled to any benefit under the Loan Agreement or be valid or obligatory for any purpose unless this Note has been executed on behalf of the Companies by the manual signature of an authorized officer of each of the Companies. Notwithstanding anything herein or in any other Loan Document to the contrary, the Companies (other than APL) agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or shall have executed a Note under the Loan Agreement for payment in full of all Vessel Indebtedness respecting any or all of the HDW Vessels and the HDW Vessels. APL agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable, with the Transferees also liable therefor, with respect to any HDW Note executed by APL as co- Borrower under the Loan Agreement for payment in full of the Vessel Indebtedness relating to the related HDW Vessel or Vessels. The liability of the Companies shall be independent of the duties, obligations and liabilities of each and all of the other joint and several Transferees. Any Holder (subject to the provisions of the Loan Agreement) may bring a separate action or actions on each, any or all of such Vessel Indebtedness against each, any or all of such Transferees liable therefor and APL (to the extent it is or becomes a co-Borrower), whether action is brought against any other or all of such Transferees and APL (as provided herein), or any one or more of the Transferees or APL (as provided herein) is or is not joined therein. Notwithstanding anything herein, in the HDW Notes or in any other Loan Document to the contrary, except with respect to APL, by acceptance of this Note the Holder agrees that it will look solely to the Recourse Assets for all amounts coming due from the Transferees (or any Transferee) under the Loan Agreement, under the HDW Notes or under any of the other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Companies (other than APL) (or any Transferee) under the Loan Agreement or under the HDW Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Companies (other than APL) as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Companies' (other than APL's) (or any Transferee's) obligations under the Loan Agreement, the HDW Notes, any other Loan Document or any such other certificate or document: (a) against the Companies (other than APL) in their individual or personal capacities, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of the Companies (other than APL) other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Holders to proceed against the Guarantor under the Guarantee or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the Security Documents, or to restrict the remedies available to Holders to realize upon the Security Documents or enforce the Guarantee. AS PROVIDED IN THE LOAN AGREEMENT, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE LAW OF THE STATE OF NEW YORK GOVERNING CHOICE OF LAW). IN WITNESS WHEREOF, the Companies have caused this instrument to be duly executed under its corporate seal. [ ] By:___________________ [Title] Attest: By:_____________________ [Title] Issue Date: SCHEDULE 1 Maturity Dates, Principal Amounts and Initial Interest Rates of Notes Principal Maturity Date Amount Interest Rate EXHIBIT A-2 to Amendment No. 2 to Loan Agreement APPENDIX A-3B FORM OF LIBO RATE NOTE [HDW Vessel] NOTE No.____________________ $_________________ [ ] Issued in connection with the purchase financing of three (3) container vessels Issue Date: _____________, ____ MATURITY DATE _________, ____ [ ] (together, the "Companies"), for value received, hereby jointly and severally promise to pay to the order of [ ] or registered assigns the principal sum of _______________________________ DOLLARS (USD ___________) on the maturity date specified above. This Note shall bear interest on the unpaid principal amount hereof from time to time outstanding from the date hereof to but excluding the date due at the Interest Rate for each Interest Period (as such term is defined in the Loan Agreement referred to below) and shall be payable in arrears on each Interest Payment Date on a basis of the actual number of days elapsed over a year of three hundred sixty (360) days including the first day of the relevant Interest Period or portion thereof but excluding such Interest Payment Date), until the principal hereof is paid. Principal on this Note shall be payable on each Repayment Date in the amounts set forth in Schedule 1 attached hereto subject to any HDW * exercised by the Companies pursuant to Section 5.03 of the Loan Agreement. Capitalized terms contained herein and not defined herein, shall have the meanings specified in a certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 and further amended by Amendment No. 2 thereto dated September 1, 1995 (the "Loan Agreement"), by and among American President Lines, Ltd. ("APL"), the corporations listed in Schedule A to Amendment No. 2, Kreditanstalt fYr Wiederaufbau, Commerzbank AG, Hamburg, Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG (Hamburg Branch) and Banque Internationale e Luxembourg S.A. The interest so payable, and punctually paid or duly provided for, on any such Interest Payment Date will, as provided in the Loan Agreement, be paid by the Companies to the Syndicate Agent for payment to the Person in whose name this Note is registered at the close of business on the date for payment of such interest. Any such interest not so punctually paid or duly provided for shall be paid together with default interest which shall accrue on the amount of such overdue sum in the case of payments due as more fully provided in the Loan Agreement. Under the Loan Agreement, the Companies are obligated to pay interest on and the principal of this Note to the Syndicate Agent in the manner as provided therein, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. This Note is subject to prepayment and acceleration as more fully described in the Loan Agreement. This Note is one of a duly authorized issue of Notes issued and to be issued under the Loan Agreement. Reference is made to the Loan Agreement and all supplements and amendments thereto (a copy of which is on file with each of the Companies at its principal corporate office) for a more complete statement of the terms and provisions thereof, including a statement of the properties thereby conveyed, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Companies, and the Holders of the Notes, and the terms upon which the Notes are, and are to be, executed and delivered, to all of which terms and conditions in the Loan Agreement each Holder hereof agrees by its acceptance of this Note. On a Fixed Rate Conversion Date, the Interest Rate on this Note shall be converted to a Fixed Rate. Upon such conversion, the Holders shall exchange this Note for a new Fixed Rate Note or Notes by delivery of this Note to the principal office of the Registrar or at an office or agency maintained for that purpose. If an Event of Default shall occur and be continuing, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement and the Syndicate Agent may exercise whatever rights and remedies provided for therein. The right of the Holder of this Note to institute action for any remedy under the Loan Agreement, including the enforcement of payment of any amount due hereon, is subject to certain restrictions specified in the Loan Agreement. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is transferable, and upon surrender of this Note for registration of transfer at the principal office of the Registrar, or at the office or agency maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder or his attorney duly authorized in writing, one or more new Notes of the same maturity and type and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is exchangeable for a like aggregate principal amount of LIBO Rate Notes of the same maturity and type and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal office of the Registrar, or at an office or agency maintained for such purpose. Prior to due presentment for registration of exchange or transfer of this Note, the Syndicate Agent, the Paying Agent and the Registrar may deem and treat the Person in whose name this Note is registered as the absolute owner hereof for the purpose of receiving payment of the principal of and interest on this Note and for all other purposes whatsoever whether or not this Note be overdue, and neither the Syndicate Agent, the Paying Agent nor the Registrar shall be affected by notice to the contrary. This Note shall not be entitled to any benefit under the Loan Agreement or be valid or obligatory for any purpose unless this Note has been executed pursuant to the provisions in the Loan Agreement. Notwithstanding anything herein or in any other Loan Document to the contrary, each of the Companies (other than APL) agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or shall have executed a Note under the Loan Agreement for payment in full of all Vessel Indebtedness respecting any or all of the HDW Vessels and the HDW Vessels. APL agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable, with the Transferees also liable therefor, with respect to any HDW Note executed by APL as co-Borrower under the Loan Agreement for payment in full of the Vessel Indebtedness relating to the related HDW Vessel or Vessels. The liability of the Companies shall be independent of the duties, obligations and liabilities of each and all of the other joint and several Transferees. Any Holder (subject to the provisions of the Loan Agreement) may bring a separate action or actions on each, any or all of such Vessel Indebtedness against each, any or all of such Transferees liable therefor and APL (to the extent it is or becomes a co-Borrower), whether action is brought against any other or all of such Transferees and APL (as provided herein), or any one or more of the Transferees or APL (as provided herein) is or is not joined therein. Notwithstanding anything herein, in the HDW Notes or in any other Loan Document to the contrary, except with respect to APL, by acceptance of this Note the Holder agrees that it will look solely to the Recourse Assets for all amounts coming due from the Transferees (or any Transferee) under the Loan Agreement, under the HDW Notes or under any of the other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Companies (other than APL) (or any Transferee) under the Loan Agreement or under the HDW Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Companies (other than APL) as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Companies' (other than APL's) (or any Transferee's) obligations under the Loan Agreement, the HDW Notes, any other Loan Document or any such other certificate or document: (a) against the Companies (other than APL) in their individual or personal capacities, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of the Companies (other than APL) other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Holders to proceed against the Guarantor under the Guarantee or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the Security Documents, or to restrict the remedies available to Holders to realize upon the Security Documents or enforce the Guarantee. AS PROVIDED IN THE LOAN AGREEMENT, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE LAW OF THE STATE OF NEW YORK GOVERNING CHOICE OF LAW). IN WITNESS WHEREOF, the Companies have caused this instrument to be duly executed under its corporate seal. [ ] By:_________________ Title: Attest: By:___________________ Title: EXHIBIT A-3 to Amendment No. 2 to Loan Agreement [Schedules to be added to Notes] APPENDIX A-4A FORM OF FIXED RATE NOTES [Daewoo Vessel] NOTE No.________________ $______________ [ ] Issued in connection with the purchase financing of three (3) container vessels INTEREST RATE MATURITY DATE ISSUE DATE [ ] (together, the "Companies"), for value received, hereby jointly and severally promise to pay to [ ] or registered assigns the principal sum of ____________________________ DOLLARS (USD ___________) on the maturity date specified above. This Note shall bear interest at the rate specified above on the unpaid principal amount thereof from time to time outstanding from the date thereof to but excluding the date due at the Interest Rate for each Interest Period beginning on or after the Fixed Rate Conversion Date (as defined in the Loan Agreement referred to below) and shall be payable in arrears on each Interest Payment Date on a basis of the actual number of days elapsed over a year of three hundred sixty (360) days including the first day of the relevant Interest Period or portion thereof but excluding such Interest Payment Date. Principal on this Note shall be payable on each Repayment Date in the amounts set forth in Schedule 1 attached hereto subject to any Daewoo * exercised by the Companies pursuant to Section 5.03 of the Loan Agreement. Capitalized terms contained herein and not defined herein shall have the meanings specified in a certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 dated May 19, 1995 as further amended by Amendment No. 2 thereto dated September 1, 1995 (the "Loan Agreement"), by and among American President Lines, Ltd. ("APL"), the corporations listed in Schedule A to Amendment No. 2, Kreditanstalt fur Wiederaufbau, Commerzbank AG, Hamburg, Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs- Bank AG (Hamburg Branch) and Banque Internationale a Luxembourg S.A. The interest so payable, and punctually paid or duly provided for, on any such Interest Payment Date will, as provided in the Loan Agreement, be paid by the Companies to the Syndicate Agent for payment to the Person in whose name this Note is registered at the close of business on the date for payment of such interest. Any such interest not so punctually paid or duly provided for shall be paid together with default interest which shall accrue on the amount of such overdue sum in the case of payments due as more fully provided in the Loan Agreement. Under the Loan Agreement, the Companies are obligated to pay interest on and the principal of this Note to the Syndicate Agent in the manner as provided therein, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. This Note is subject to prepayment and acceleration as more fully described in the Loan Agreement. This Note is one of a duly authorized issue of Notes issued and to be issued under the Loan Agreement. Reference is made to the Loan Agreement and all supplements and amendments thereto (a copy of which is on file with each of the Companies at its principal corporate office) for a more complete statement of the terms and provisions thereof, including a statement of the properties thereby conveyed, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Companies and the Holders of the Notes, and the terms upon which the Notes are, and are to be, executed and delivered, to all of which terms and conditions in the Loan Agreement each Holder hereof agrees by its acceptance of this Note. On a LIBO Rate Conversion Date, the Interest Rate on this Note shall be converted to a LIBO Rate. Upon such conversion, the Holders shall exchange this Note for a new LIBO Rate Note or Notes by delivery of this Note to the principal office of the Registrar or at an office or agency maintained for that purpose. If an Event of Default shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Loan Agreement and the Syndicate Agent may exercise the rights and remedies provided for therein. The right of the Holder of this Note to institute action for any remedy under the Loan Agreement, including the enforcement of payment of any amount due hereon, is subject to certain restrictions specified in the Loan Agreement. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is transferable, and upon surrender of this Note for registration of transfer at the principal office of the Registrar, or at the office or agency maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder or his attorney duly authorized in writing, one or more new Notes of the same maturity and type and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Loan Agreement and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of the same maturity and type and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal office of the Registrar, or at an office or agency maintained for such purpose. Prior to due presentment for registration of exchange or transfer of this Note, the Syndicate Agent, the Paying Agent and the Registrar may deem and treat the Person in whose name this Note is registered as the absolute owner hereof for the purpose of receiving payment of the principal of and interest on this Note and for all other purposes whatsoever whether or not this Note be overdue, and neither the Syndicate Agent, the Paying Agent nor the Registrar shall be affected by notice to the contrary. This Note shall not be entitled to any benefit under the Loan Agreement or be valid or obligatory for any purpose unless this Note has been executed on behalf of the Companies by the manual signature of an authorized officer of each of the Companies. Notwithstanding anything herein or in any other Loan Document to the contrary, the Companies (other than APL) agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or shall have executed a Note under the Loan Agreement for payment in full of all Vessel Indebtedness respecting any or all of the Daewoo Vessels and the HDW Vessels. APL agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable, with the Transferees also liable therefor, with respect to any Daewoo Note executed by APL as co- Borrower under the Loan Agreement for payment in full of the Vessel Indebtedness relating to the related Daewoo Vessel or Vessels. The liability of the Companies shall be independent of the duties, obligations and liabilities of each and all of the other joint and several Transferees. Any Holder (subject to the provisions of the Loan Agreement) may bring a separate action or actions on each, any or all of such Vessel Indebtedness against each, any or all of such Transferees liable therefor and APL (to the extent it is or becomes a co-Borrower), whether action is brought against any other or all of such Transferees and APL (as provided herein), or any one or more of the Transferees or APL (as provided herein) is or is not joined therein. Notwithstanding anything herein, in the Daewoo Notes or in any other Loan Document to the contrary, except with respect to APL, by acceptance of this Note the Holder agrees that it will look solely to the Recourse Assets for all amounts coming due from the Transferees (or any Transferee) under the Loan Agreement, under the Daewoo Notes or under any of the other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Companies (other than APL) (or any Transferee) under the Loan Agreement or under the Daewoo Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Companies (other than APL) as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Companies' (other than APL's) (or any Transferee's) obligations under the Loan Agreement, the Daewoo Notes, any other Loan Document or any such other certificate or document: (a) against the Companies (other than APL) in their individual or personal capacities, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of the Companies (other than APL) other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Holders to proceed against the Guarantor under the Guarantee or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the Security Documents, or to restrict the remedies available to Holders to realize upon the Security Documents or enforce the Guarantee. AS PROVIDED IN THE LOAN AGREEMENT, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE LAW OF THE STATE OF NEW YORK GOVERNING CHOICE OF LAW). IN WITNESS WHEREOF, the Companies have caused this instrument to be duly executed under its corporate seal. [ ] By:___________________ [Title] Attest: By:_____________________ [Title] Issue Date: SCHEDULE 1 Maturity Dates, Principal Amounts and Initial Interest Rates of Notes Principal Maturity Date Amount Interest Rate EXHIBIT A-4 to Amendment No. 2 to Loan Agreement APPENDIX A-4B FORM OF LIBO RATE NOTE [Daewoo Vessel] NOTE No.____________________ $_________________ [ ] Issued in connection with the purchase financing of three (3) container vessels Issue Date: _____________, ____ MATURITY DATE _________, ____ [ ] (together, the "Companies"), for value received, hereby jointly and severally promise to pay to the order of [ ] or registered assigns the principal sum of _______________________________ DOLLARS (USD ___________) on the maturity date specified above. This Note shall bear interest on the unpaid principal amount hereof from time to time outstanding from the date hereof to but excluding the date due at the Interest Rate for each Interest Period (as such term is defined in the Loan Agreement referred to below) and shall be payable in arrears on each Interest Payment Date on a basis of the actual number of days elapsed over a year of three hundred sixty (360) days including the first day of the relevant Interest Period or portion thereof but excluding such Interest Payment Date), until the principal hereof is paid. Principal on this Note shall be payable on each Repayment Date in the amounts set forth in Schedule 1 attached hereto subject to any Daewoo * exercised by the Companies pursuant to Section 5.03 of the Loan Agreement. Capitalized terms contained herein and not defined herein, shall have the meanings specified in a certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 and further amended by Amendment No. 2 thereto dated September 1, 1995 (the "Loan Agreement"), by and among American President Lines, Ltd. ("APL"), the corporations listed in Schedule A to Amendment No. 2, Kreditanstalt fur Wiederaufbau, Commerzbank AG, Hamburg, Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG (Hamburg Branch) and Banque Internationale a Luxembourg S.A. The interest so payable, and punctually paid or duly provided for, on any such Interest Payment Date will, as provided in the Loan Agreement, be paid by the Companies to the Syndicate Agent for payment to the Person in whose name this Note is registered at the close of business on the date for payment of such interest. Any such interest not so punctually paid or duly provided for shall be paid together with default interest which shall accrue on the amount of such overdue sum in the case of payments due as more fully provided in the Loan Agreement. Under the Loan Agreement, the Companies are obligated to pay interest on and the principal of this Note to the Syndicate Agent in the manner as provided therein, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. This Note is subject to prepayment and acceleration as more fully described in the Loan Agreement. This Note is one of a duly authorized issue of Notes issued and to be issued under the Loan Agreement. Reference is made to the Loan Agreement and all supplements and amendments thereto (a copy of which is on file with each of the Companies at its principal corporate office) for a more complete statement of the terms and provisions thereof, including a statement of the properties thereby conveyed, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Companies, and the Holders of the Notes, and the terms upon which the Notes are, and are to be, executed and delivered, to all of which terms and conditions in the Loan Agreement each Holder hereof agrees by its acceptance of this Note. On a Fixed Rate Conversion Date, the Interest Rate on this Note shall be converted to a Fixed Rate. Upon such conversion, the Holders shall exchange this Note for a new Fixed Rate Note or Notes by delivery of this Note to the principal office of the Registrar or at an office or agency maintained for that purpose. If an Event of Default shall occur and be continuing, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement and the Syndicate Agent may exercise whatever rights and remedies provided for therein. The right of the Holder of this Note to institute action for any remedy under the Loan Agreement, including the enforcement of payment of any amount due hereon, is subject to certain restrictions specified in the Loan Agreement. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is transferable, and upon surrender of this Note for registration of transfer at the principal office of the Registrar, or at the office or agency maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder or his attorney duly authorized in writing, one or more new Notes of the same maturity and type and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is exchangeable for a like aggregate principal amount of LIBO Rate Notes of the same maturity and type and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal office of the Registrar, or at an office or agency maintained for such purpose. Prior to due presentment for registration of exchange or transfer of this Note, the Syndicate Agent, the Paying Agent and the Registrar may deem and treat the Person in whose name this Note is registered as the absolute owner hereof for the purpose of receiving payment of the principal of and interest on this Note and for all other purposes whatsoever whether or not this Note be overdue, and neither the Syndicate Agent, the Paying Agent nor the Registrar shall be affected by notice to the contrary. This Note shall not be entitled to any benefit under the Loan Agreement or be valid or obligatory for any purpose unless this Note has been executed pursuant to the provisions in the Loan Agreement. Notwithstanding anything herein or in any other Loan Document to the contrary, each of the Companies (other than APL) agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or shall have executed a Note under the Loan Agreement for payment in full of all Vessel Indebtedness respecting any or all of the Daewoo Vessels and the HDW Vessels. APL agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable, with the Transferees also liable therefor, with respect to any Daewoo Note executed by APL as co- Borrower under the Loan Agreement for payment in full of the Vessel Indebtedness relating to the related Daewoo Vessel or Vessels. The liability of the Companies shall be independent of the duties, obligations and liabilities of each and all of the other joint and several Transferees. Any Holder (subject to the provisions of the Loan Agreement) may bring a separate action or actions on each, any or all of such Vessel Indebtedness against each, any or all of such Transferees liable therefor and APL (to the extent it is or becomes a co-Borrower), whether action is brought against any other or all of such Transferees and APL (as provided herein), or any one or more of the Transferees or APL (as provided herein) is or is not joined therein. Notwithstanding anything herein, in the Daewoo Notes or in any other Loan Document to the contrary, except with respect to APL, by acceptance of this Note the Holder agrees that it will look solely to the Recourse Assets for all amounts coming due from the Transferees (or any Transferee) under the Loan Agreement, under the Daewoo Notes or under any of the other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Companies (other than APL) (or any Transferee) under the Loan Agreement or under the Daewoo Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Companies (other than APL) as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Companies' (other than APL's) (or any Transferee's) obligations under the Loan Agreement, the Daewoo Notes, any other Loan Document or any such other certificate or document: (a) against the Companies (other than APL) in their individual or personal capacities, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of the Companies (other than APL) other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Holders to proceed against the Guarantor under the Guarantee or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the Security Documents, or to restrict the remedies available to Holders to realize upon the Security Documents or enforce the Guarantee. AS PROVIDED IN THE LOAN AGREEMENT, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE LAW OF THE STATE OF NEW YORK GOVERNING CHOICE OF LAW). IN WITNESS WHEREOF, the Companies have caused this instrument to be duly executed under its corporate seal. [ ] By:_________________ Title: Attest: By:___________________ Title: EXHIBIT B-1 to Amendment No. 2 to Loan Agreement FIRST PREFERRED SHIP MORTGAGE ON THE "[ ]" TO [ ] THIS FIRST PREFERRED SHIP MORTGAGE dated this ___ day of __________ 199_, made and given by American President Lines, Ltd., a Delaware corporation (the "Borrower"), to [Kreditanstalt fur Wiederaufbau, a public law company incorporated in the Federal Republic of Germany (the "Mortgagee", which term shall include the Mortgagee's successors and assignees)] [Commerzbank AG, Hamburg, a public law company incorporated in the Federal Republic of Germany (the "Syndicate Agent") and Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins- und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG (Hamburg Branch) and Banque Internationale a Luxembourg S.A. (collectively, the "Syndicate" and, together with the Syndicate Agent, the "Mortgagee", which term shall include any successors and assignees of each)]. WHEREAS: A. The Borrower is the sole owner of the Republic of The Marshall Islands flag vessel, "APL [ ]", Official No. MI [ ], of [ ] Gross Tons and [ ] Net Tons (the "Vessel", which term shall include all of the boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, anchors, cables, apparel, furniture, fitting, equipment and all other appurtenances to the Vessel appertaining or belonging, whether now owned or hereafter acquired, whether on board or not, and all additions, improvements and replacements hereafter made in or to the Vessel, or any part thereof, or in or to the equipment and appurtenances aforesaid, but shall exclude any leased equipment). B. This Mortgage is granted to secure, among other things, certain obligations of the Borrower under that certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 and as further amended by Amendment No. 2 thereto dated September 1, 1995, among the Borrower, [ ] ("[ ]"), the other Transferees, the Mortgagee and [ ] (" ") (the "Loan Agreement"). Terms used herein without definition shall have the respective meanings provided in the Loan Agreement (a copy of which without attachments (other than the forms of [HDW] [Daewoo] Notes) is attached hereto as Exhibit A). C. The Mortgagee has agreed to make loans with respect to three (3) vessels (the Marshall Islands flag vessels [ ] (Official Number [ ]), [ ] (Official Number [ ]) and [ ] (Official Number [ ])), pursuant to the Loan Agreement and that certain Second Amended and Restated Agreement to Acquire and Charter dated September 1, 1995 among the parties to the Loan Agreement (the "Acquisition Agreement") (a copy of which is attached hereto as Exhibit B), such loans to be in an aggregate amount not to exceed [ ] United States Dollars (USD[ ]) (collectively, the "Loans"'). The total amount of the Loans is or shall be evidenced by the [HDW] [Daewoo] Notes. The portion of the Loans relating to the acquisition of the Vessel is in the principal amount of [ ] United States Dollars (USD [ ]), which portion has been advanced by the Mortgagee on the date hereof, for which the Borrower is justly indebted and is evidenced by the specific [HDW] [Daewoo] Notes dated ______, 199_ (the "[HDW] [Daewoo] [ ] Notes") (a copy of which is attached hereto as Exhibit C), and in order to induce the Mortgagee to make the Loans, the Borrower has agreed to grant this Mortgage to the Mortgagee to secure the [HDW] [Daewoo] [ ] Notes and the Borrower's joint and several liability under the Loan Agreement for the repayment of the [HDW] [Daewoo] Notes issued or to be issued by the Borrower or any remaining Transferee (which shall be the owner[s] of the Vessel[s] [ ]) [(such Notes, together with the [HDW] [Daewoo] [ ] Notes are referred to herein for purposes of this Mortgage as the "[HDW] [Daewoo] Notes")] and the other obligations stated in Paragraph D below with respect to the acquisition [and financing] of the other [HDW] [Daewoo] Vessels other than the Vessel. D. The term "Obligations" shall mean [(i)] all of the obligations of the Borrower to pay any amount to the Mortgagee under (A) this Mortgage, (B) the [HDW] [Daewoo] Notes and (C) the Loan Agreement insofar as it relates to the [HDW] [Daewoo] Notes, [and (ii) all payment and performance obligations of the Borrower under that certain Bareboat Charter Party dated May 19, 1995 between the Borrower, as charterer, and M.V. President Kennedy, Ltd., assigned by M.V. President Kennedy, Ltd. to the Mortgagee pursuant to that certain APL China Charter Assignment dated May 19, 1995,] whether by reason of reimbursement, interest, indemnity or for any other reasons whatsoever. E. To secure payment of the Obligations to the Mortgagee, the Borrower has duly authorized the execution, delivery and recording of this First Preferred Ship Mortgage under and pursuant to the laws of the Republic of The Marshall Islands. F. Upon transfer of the Vessel, the Borrower will, on the date hereof, enter into that certain Bareboat Charter Party dated the date hereof (the "Charter") with [ ]. NOW, THEREFORE, THIS DEED, WITNESSETH: That the Borrower, in consideration of the premises and other valuable consideration, the receipt whereof is hereby acknowledged, and for the purpose of securing payment and performance of the Obligations and to secure the performance, observance and accuracy of and compliance with all the covenants, representations, warranties, terms and conditions in the [HDW] [Daewoo] Notes, the Loan Agreement insofar as it relates to the [HDW] [Daewoo] Notes, in favor of the Mortgagee and in this Mortgage expressed, for the benefit of the Mortgagee, has granted, conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed and does by these presents grant, convey, mortgage, pledge, assign, transfer, set over and confirm unto the Mortgagee the whole of the Vessel; TO HAVE AND TO HOLD the same unto the Mortgagee forever in accordance with the terms herein set forth for the enforcement of the payment and performance of the Obligations and to secure the performance, observance and accuracy of and compliance with all the covenants, representations, warranties, terms and conditions contained in the [HDW] [Daewoo] Notes, the Loan Agreement insofar as it relates to the [HDW] [Daewoo] Notes, the Loans and this Mortgage expressed, for the benefit of the Mortgagee; PROVIDED ONLY and the conditions of these presents are such that if and when the Mortgagee shall have received (i) the full amount and full performance of the Obligations or (ii) the full amount required to be paid in respect of the Subportion of the [HDW] [Daewoo] Tranche relating to the Vessel evidenced by the [HDW] [Daewoo] [ ] Notes in accordance with the provisions of Section 5.04 of the Loan Agreement, together with payment of all other amounts then due and owing and secured by this Mortgage, these presents and the rights of the Mortgagee hereunder shall cease, determine and be void, otherwise to be and remain in full force and effect. The Borrower for itself, its successors and assignees, hereby covenants and agrees with the Mortgagee that the Vessel is to be held by the Mortgagee as long as the Obligations and obligation of the Borrower under the [HDW] [Daewoo] Notes, the Loan Agreement (to the extent it relates to the [HDW] [Daewoo] Notes) and this Mortgage remains in force, subject to the further covenants, conditions, provisions, terms and uses hereinafter set forth. ARTICLE I REPRESENTATIONS OF THE BORROWER (1) The Borrower is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to conduct its business as the same is presently conducted; (2) the Borrower has legal power and authority to enter into and carry out the terms of this Mortgage; (3) this Mortgage has been duly authorized by all necessary action, corporate or other, on the part of the Borrower, and this Mortgage constitutes, and upon due execution and delivery by the Borrower this Mortgage will constitute, in accordance with its respective terms, a legal, valid and binding instrument enforceable against the Borrower, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights from time to time in effect; (4) except as previously disclosed to the Mortgagee in writing, there are no actions, suits or proceedings pending or, to the Borrower's knowledge, threatened against the Borrower or any of its properties affecting this Mortgage which would materially and adversely affect the ability of the Borrower to perform its obligations hereunder; (5) the consummation of the transactions contemplated by, and compliance by the Borrower with all the terms and provisions of, this Mortgage will not violate any provisions of the Certificate of Incorporation or Bylaws of the Borrower and will not result in a breach of the terms and provisions of, or constitute a default under, any other agreement or undertaking by the Borrower or by which it or any of its property is bound or any order of any court or administrative agency entered in any proceedings binding on the Borrower, or violate any applicable statute, rule or regulation; (6) the Borrower is not in default and no condition exists which with notice or lapse of time or both would constitute a default by the Borrower, in any respect which would materially and adversely affect the ability of the Borrower to perform its obligations under this Mortgage, under any mortgage, loan agreement, deed of trust, indenture or other agreement with respect thereto or evidence of indebtedness to which it is a party or by which it is bound, and is not in violation of or in default, in any respect which would materially and adversely affect the ability of the Borrower to perform its obligations under this Mortgage, under any order, writ, judgment or decree of any court, arbitrator or governmental authority, commission, board, agency or instrumentality, domestic or foreign; (7) the Borrower has more than one place of business and the location of the place of business which is its chief executive office is 1111 Broadway, Oakland, California 94607; (8) all taxes (other than taxes based on or measured by income), liability for the payment of which has been incurred by the Borrower in connection with the execution, delivery and performance by it of this Mortgage, have been paid (or provided for in its accounts if not payable on or prior to the delivery date of the Vessel); (9) all governmental consents, licenses, permissions, approvals, registrations or authorizations or declarations required (i) to enable it lawfully to enter into and perform its respective obligations under this Mortgage, (ii) to ensure that its respective obligations hereunder and thereunder are legal, valid and enforceable and (iii) to make this Mortgage admissible in evidence in the Republic of The Marshall Islands, and the United States of America has been obtained or made and are in full force and effect; (10) it has not taken any corporate action nor to its knowledge have any other steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or reorganization or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of any or all of its respective assets and revenues; (11) except for registration of this Mortgage in accordance with the provisions of the Republic of The Marshall Islands' Maritime Act of 1990, as amended, it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Mortgage in the country of the Borrower or the United States of America, or the flag of its registry or, to the best of its knowledge, elsewhere, that it be filed, recorded or enrolled with any governmental authority or agency in the country of the Borrower or, to the best of its knowledge, elsewhere, or that it be stamped with any stamp, registration or similar transaction tax in the country of the Borrower or the United States of America, or the flag of its registry or to the best of its knowledge, elsewhere; (12) the Vessel is duly documented in the name of the Borrower under the flag of the Republic of The Marshall Islands; and (13) the Vessel is in the absolute and unencumbered ownership of the Borrower except as contemplated by this Mortgage [and the Second Preferred Ship Mortgage dated the date hereof (the "Second Mortgage") in favor of KfW (the "Second Mortgagee")]. ARTICLE II COVENANTS OF THE BORROWER (14) The Borrower represents and warrants that it lawfully owns and possesses the Vessel free from any mortgage, security interest, lien or charge whatsoever other than this Mortgage and covenants with the Mortgagee that it shall warrant and defend the title to and lawful possession of the Vessel and every part thereof for the benefit of the Mortgagee, and shall hold harmless and indemnify the Mortgagee against the claims and demands of all Persons whomsoever arising as the result of any mortgage, security interest, lien or charge whatsoever on the Vessel; provided that the Borrower's foregoing obligations (other than its agreements to defend title and indemnify and hold the Mortgagee harmless) shall not apply to the following: (a) liens for crew's wages ("Crew's Wages") and salvage (including contract salvage) which shall not have been due and payable for more than ten (10) days after termination of a voyage or which shall then be contested in good faith by the Borrower or any permitted charterer in appropriate proceedings diligently prosecuted and shall not subject the Vessel or any part thereof to risk, forfeiture or loss, or in any material way prejudice or impair the Mortgagee's rights or interest in or under the Mortgage; (b) liens for Crew's Wages and salvage (including contract salvage) and general average which are either unclaimed or covered by insurance; (c) liens incident to current operations (except for Crew's Wages, salvage and general average) not more than thirty (30) days past due, liens for the wages of a stevedore when employed directly by the Shipowner or the operator, master or any agent of the Vessel, or liens covered by insurance and any deductible applicable thereto; (d) liens for repairs or with respect to changes made in the Vessel pursuant to Section 25(b) hereof; (e) in the event the use of or title to the Vessel is requisitioned by any government or any agency thereof insofar as it relates to possession of the Vessel; (f) [Reserved] [the Second Mortgage]; (g) liens for taxes or assessments or other governmental charges and levies not yet due and payable, or the validity of which is being contested by the Borrower or any permitted charterer in good faith by appropriate proceedings upon stay of execution of the enforcement thereof and for which adequate reserves in accordance with generally accepted accounting principles or other appropriate provision has been made; (h) in the case of any actual or constructive total loss or an agreed or compromised total loss of the Vessel insofar as it relates to possession of the Vessel; and (i) insofar as it relates to possession of the Vessel, to charters permitted by the terms of this Mortgage, the Loan Agreement and the Acquisition Agreement, and by applicable law and to subcharters permitted by the terms of the Charter; provided that any liens described in paragraphs (c), (d) and (g) hereof shall be permitted only to the extent they are subordinate to lien of the Mortgage. (15)(a) Neither the Borrower, any charterer, the master of the Vessel nor any other Person has or shall have any right, power or authority to create, incur or permit to be placed or imposed upon the Vessel any lien whatsoever, other than this Mortgage [, the Second Mortgage] and the liens referred to in Section 14 hereof. (b) The Borrower shall forthwith remove or cause to be removed within thirty (30) days of its knowledge thereof any lien or encumbrance (other than the items referred to in Section 14(e), (h) and (i) of this Article II) which shall be filed against the Vessel, unless the same is being contested by appropriate proceedings in good faith and (i) such proceedings shall suspend the collection of the related claim from the Vessel, (ii) neither the Vessel nor any interest therein would be in any danger of being sold, forfeited or lost during the pendency of such proceedings, and (iii) the Borrower or any permitted charterer shall have furnished such security, if any, or cause or make adequate provision for release prior to foreclosure, sale, or similar disposition as may be required in such proceedings. (16) If the Vessel shall be attached, levied upon or taken into custody by virtue of any legal proceeding in any court or tribunal or by any government or other authority, the Borrower or any permitted charterer shall promptly notify the Mortgagee thereof by telex and within fifteen (15) days after any such arrest (except in the case of requisition or other taking by any government or governmental body) shall cause the Vessel to be released within thirty (30) days and shall promptly notify the Mortgagee thereof in the manner aforesaid. (17) Except as provided in the Granting Clause hereof the Borrower has not assigned, pledged or otherwise granted a security interest in or lien on, and shall not assign, pledge or otherwise grant a security interest in or lien on, the whole or any part of, any rights assigned by the Granting Clause hereof [, except the Second Mortgage]. (18) Upon the occurrence of any Event of Default, the Borrower shall promptly notify the Mortgagee by telex or telecopy, confirmed by letter, unless such Event of Default shall have been cured. (19) The Borrower shall make all payments of principal and interest on the [HDW] [Daewoo] [ ] Notes and the other [HDW] [Daewoo] Notes and shall perform in full its obligations and liabilities under this Mortgage and the Loan Agreement to the extent it relates to the [HDW] [Daewoo] [ ] Notes, the other [HDW] [Daewoo] Notes and the [HDW] [Daewoo] Security Documents to which it is a party. (20) (a) The Borrower represents and warrants that on the date hereof the Vessel is, and the Borrower covenants with the Mortgagee that it shall (subject to clauses (b) and (c) below) hereafter remain, documented under the laws of the Republic of The Marshall Islands. (b) The Borrower shall have the right to change the registry and flag of the Vessel to the registry and flag of the Republic of Panama, the Republic of Liberia, the Republic of Vanuatu and the Commonwealth of The Bahamas. Prior to any such change in registry and flag, the Borrower shall (i) obtain all necessary approvals of governmental authorities including, without limitation, those of the then current country of the Vessel's registry and the jurisdiction of its incorporation, if any, and otherwise comply with all applicable law if any, (ii) execute and deliver to the Mortgagee, in form and substance reasonably satisfactory to the Mortgagee, and after execution by the Mortgagee and immediately after the registration of the Vessel, file for recordation, a replacement mortgage for this Mortgage (the "Replacement Mortgage"), with terms and conditions substantially similar to the terms and conditions of this Mortgage, which Replacement Mortgage shall constitute a first priority lien on the Vessel and shall be in compliance with all applicable laws and regulations of any such country where the Vessel is re-registered and re-flagged, and immediately after the filing of the Replacement Mortgage for recordation deliver to the Mortgagee (A) an opinion of counsel reasonably satisfactory to the Mortgagee confirming that any Replacement Mortgage constitutes such a first priority lien under the laws and regulations of such country and is a "preferred mortgage" within the meaning of 46 U.S.C. Section 31301(b)(B), and that, if there shall have been any change in the applicable laws and regulations of such country of re-registration and re-flagging after March 14, 1994, such change does not materially adversely affect the interests of the Mortgagee with respect to the Vessel, and (B) a certificate of the Borrower that the Vessel is duly documented under the laws of the country where the Vessel is re-registered and re-flagged, and that the Vessel is free of any claim, lien, charge, mortgage or other encumbrance of any character (except the Replacement Mortgage [and the Second Mortgage]). In connection with any such change of registry and flag, the Mortgagee shall, at the request of the Borrower and at the Borrower's cost and expense, and upon compliance with subclauses (i) and (ii) of this clause (b), execute and deliver to the Borrower the Replacement Mortgage, an instrument in recordable form duly acknowledging the satisfaction and discharge of this Mortgage, and any other instrument or document necessary or appropriate for the orderly consummation of the change in registry and flag and replacement of the Mortgage. Notwithstanding the foregoing, no such reflagging shall be permitted (x) if an Event of Default or Incipient Default shall have occurred and be continuing or (y) if in the sole opinion of the Mortgagee such reflagging will, or may be expected to, adversely affect the rights or remedies of the Mortgagee under the Loan Documents, the value of the Vessel, or will be or may otherwise be expected to be, disadvantageous to the Mortgagee. (c) The Borrower shall have the right to change the registry and flag of the Vessel to the registry and flag of the United States of America. Prior to any such change in registry and flag, the Borrower shall (i) obtain all necessary approvals of governmental authorities including, without limitation, those of the then current country of the Vessel's registry and the jurisdiction of its incorporation, if any, and otherwise comply with all applicable law, if any, (ii) execute and deliver to the Mortgagee (or an approved trustee to act as mortgagee), a replacement mortgage with terms and conditions substantially the same as the terms and conditions of this Mortgage, in form and substance reasonably satisfactory to the Mortgagee (the "Replacement Mortgage"), and after execution by the Mortgagee and immediately after the registration of the Vessel, file for recordation, the Replacement Mortgage for this Mortgage, which Replacement Mortgage shall constitute a first priority lien on the Vessel and shall be in compliance with all applicable laws and regulations of the United States of America, and, immediately after the filing of the Replacement Mortgage for recordation, deliver to the Mortgagee (A) an opinion of counsel reasonably satisfactory to the Mortgagee confirming that any Replacement Mortgage constitutes such a first "preferred" ship mortgage under the laws and regulations of the United States of America and (B) a certificate of the Borrower that the Vessel is duly documented under the laws of the United States of America, and that the Vessel is free of any claim, lien, charge, mortgage or other encumbrance of any character (except the Replacement Mortgage [, the Second Mortgage] and the Charter). In connection with any such change of registry and flag, the Mortgagee shall, at the request of the Borrower and at the Borrower's cost and expense, and upon compliance with subclauses (i) and (ii) of this clause (c), execute and deliver to the Borrower the Replacement Mortgage, an instrument in recordable form duly acknowledging the satisfaction and discharge of this Mortgage, and any other instrument or document necessary or appropriate for the orderly consummation of the change in registry and flag and replacement of the Mortgage. Notwithstanding the foregoing, no such reflagging shall be permitted if, an Event of Default or Incipient Default shall have occurred and be continuing. (21) The Borrower (x) shall not cause or permit the Vessel to be operated in any manner contrary to applicable law except to the extent that such provision shall have been contested or caused to be contested in good faith by the Borrower in appropriate proceedings diligently prosecuted and shall not subject the Vessel to risk, forfeiture or loss, or in any material way prejudice or impair the Mortgagee's rights or interests in or under the Mortgage, (y) shall not operate the Vessel in any way contrary to any of the terms or conditions of the insurance required by Section 29 hereof (unless it shall first have arranged for continuation of the coverage afforded thereby), and (z) shall not abandon the Vessel in any foreign port unless (i) there shall have been an actual or constructive total loss or an agreed or compromised total loss of the Vessel; or (ii) there has been any other loss with respect to the Vessel and the Borrower shall not have had reasonable time to repair or rectify the same; or (iii) the use or title of the Vessel has been taken or requisitioned by any government or governmental authority; provided, however, that if an Event of Default shall have occurred and be continuing, the Borrower shall not abandon the Vessel unless it shall have first received the written consent of the Mortgagee. (22) The Borrower shall pay and discharge or cause to be paid and discharged when due and payable all claims against, and taxes, assessments, governmental charges, fines and penalties imposed on, the Vessel or the Vessel's cargo; provided, however, that the Borrower shall have the right to contest or cause to be contested, in good faith and by appropriate proceedings, any such claim, tax, assessment, governmental charge, fine or penalty and, pending such contest, may defer the payment thereof so long as such contest or deferment in payment shall not subject the Vessel or any part thereof to risk or forfeiture or loss, or in any material way prejudice or impair the Mortgagee's rights or interests in or under the Mortgage. (23) The Borrower shall, at its expense and at no cost to the Mortgagee, comply with and satisfy all of the provisions of the flag of the Republic of The Marshall Islands, in order to establish, record and maintain this Mortgage as a preferred mortgage thereunder on the Vessel until it is re-registered, reflagged and this Mortgage is replaced by a Replacement Mortgage as provided in Section 20(b) or (c) hereof. (24) The Borrower shall place and at all times and places shall retain a properly certified copy of this Mortgage on board the Vessel with her papers and shall cause such certified copy and such papers to be exhibited to any and all Persons having business with the Vessel and to any representative of the Mortgagee. The Borrower shall also place and keep prominently displayed on the Vessel a framed printed or typewritten notice in plain type which shall cover a space of not less than six inches wide by nine inches high (or of such other dimensions as may be required by law) reading substantially as follows: "NOTICE OF FIRST PREFERRED SHIP MORTGAGE" "This Vessel is owned by American President Lines, Ltd., a Delaware corporation (the "Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of [Kreditanstalt fur Wiederaufbau] [Commerzbank AG, Hamburg, Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins- und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG (Hamburg Branch) and Banque Internationale a Luxembourg S.A.], under authority of the Republic of The Marshall Islands. Under the terms of said Mortgage, neither the Shipowner, any charterer, the master of the Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien whatsoever other than the lien of said Mortgage and liens for wages of a stevedore when employed directly by the Shipowner, operator, master, or any agent of the Vessel, for Crews' Wages, for general average, for salvage, and, to the extent subordinate to the lien of said Mortgage, for certain liens incident to current operations or for repairs or changes permitted by the Mortgage [and a Second Preferred Ship Mortgage in favor of Kreditanstalt fur Wiederaufbau]." (25)(a) The Borrower shall at all times and without cost or expense to the Mortgagee (i) maintain and preserve, or cause to be maintained and preserved, the Vessel in good running order and repair, so that the Vessel shall be, insofar as due diligence can make her so, strong and well and sufficiently tackled, appareled, furnished, equipped and in every respect seaworthy and in good operating condition, ordinary wear and tear and depreciation excepted; and (ii) keep the Vessel, or cause her to be kept, in such condition as will entitle her to the highest classification and rating for vessels of the same age and type of The American Bureau of Shipping, and annually shall furnish to the Mortgagee a certificate by The American Bureau of Shipping that such classification is maintained; provided that in any event the Borrower shall notify the Mortgagee of any change in the classification of the Vessel; and provided, further, that the foregoing shall not apply if there shall have been an Event of Loss or during such period as (1) the Vessel has been taken or requisitioned by any government or governmental body or (2) there has been any other loss with respect to the Vessel and the Borrower shall not have had a reasonable time to repair the same. The Borrower shall furnish from time to time upon reasonable demand of the Mortgagee such information and documents as the Mortgagee may require concerning the classification of the Vessel. Except during any period in which the provided further proviso in the first sentence of this paragraph shall apply, the Vessel shall, and the Borrower covenants that she will, at all times comply with all applicable laws, treaties and conventions of the Republic of The Marshall Islands and all rules and regulations issued thereunder, and shall have on board as and when required thereby valid certificates showing compliance therewith except to the extent that such provision shall have been contested in good faith by the Borrower in appropriate proceeding diligently prosecuted, so long as such proceeding shall not subject the Vessel or any part thereof to risk orforfeiture or loss, or in any material way prejudice or impair the Mortgagee's rights or interests in or under the Mortgage. (b) The Borrower shall not make, or permit to be made, any substantial change in the structure, type or speed of the Vessel or change in her rig unless it shall have received the Mortgagee's prior written approval thereto, which approval shall not be unreasonably withheld or delayed; provided, however, that no such approval need be obtained in respect of any change which shall be necessary to comply with the requirements of the United States Coast Guard, the Republic of The Marshall Islands or The American Bureau of Shipping in order to entitle the Vessel to the classification and rating required by paragraph (a) hereof. (c) Until an Event of Default shall occur, the Borrower (i) shall be suffered and permitted to retain actual possession and use of the Vessel and (ii) shall have the right, from time to time, in its discretion, and without application to the Mortgagee, and without obtaining a release thereof by the Mortgagee, to dispose of, free from the lien hereof, any boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, anchors, apparel, furniture, equipment or any other appurtenances to the Vessel that are no longer useful, necessary, profitable or advantageous in the operation of the Vessel, first or simultaneously replacing the same by new boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, anchors, apparel, furniture, fittings, equipment or other appurtenances of at least equal value to the Borrower which shall forthwith become subject to the lien of this Mortgage. (26) The Borrower shall at all reasonable times afford the Mortgagee or its authorized representatives full and complete access to the Vessel for the purpose of inspecting or surveying the same and her papers and, at the request and expense of the Mortgagee, the Borrower shall deliver or cause to be delivered for inspection by such parties copies of any and all contracts and documents relating to the Vessel, whether on board or not. (27) The Borrower shall not sell, demise charter, except for the Charter, mortgage (except for this Mortgage [and the Second Mortgage]) or transfer the Vessel (except any sale of the Vessel after repayment of the amounts of the related Subportion of the [HDW] [Daewoo] Tranche in accordance with Section 5.04 of the Loan Agreement or by way of requisition or other governmental taking by the United States of America or the Republic of The Marshall Islands or in accordance with Section 9.02(b) of the Loan Agreement) without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Any such written consent to any one sale, demise charter, mortgage or transfer shall not be construed to be a waiver of this provision with respect to any subsequent proposed sale, demise charter, mortgage or transfer. Any sale, demise charter, mortgage or transfer of the Vessel shall be subject to the provisions of this Mortgage and the lien thereof. (28) The Borrower will reimburse the mortgagee promptly for any and all expenditures which the Mortgagee may from time to time make, lay out or expend in providing protection in respect of insurance, discharge or purchase of any liens, taxes, dues, assessments, governmental charges, tolls, fines and penalties imposed, repairs, attorneys' fees and other matters as the Borrower is obligated herein to provide but fails to provide. Such obligation of the Borrower to reimburse the Mortgagee shall constitute Obligations secured by this Mortgage, and shall be payable by the Borrower on demand, together with interest thereon from the date of demand until the date of payment (both before and after judgment) at the Default Interest Rate (as such rate is set forth in Section [3.08(a)] [3.08(b)] of the Loan Agreement). The Mortgagee, though privileged so to do, shall be under no obligation to the Borrower to make any such expenditures, nor shall the making thereof relieve the Borrower of any default in that respect. (29)(a) The Borrower shall, at its own expense, provide and maintain insurance on or with respect to the Vessel and the operation thereof, as follows: (1) Marine navigating risk hull and machinery insurance and marine war navigating risk hull and machinery insurance, together with, at the Borrower's option, such amounts of increased value and total loss only insurance as are permitted by such hull and machinery insurance policies. While the Vessel is idle or laid up, at the option of the Borrower and in lieu of the coverage described in the immediately preceding sentence, port risk hull and machinery insurance may be taken out on the Vessel by the Borrower. The foregoing insurance shall be in aggregate amounts equal at all times to the greater of (a) one hundred ten percent (110%) of the aggregate amount of the [HDW] [Daewoo] [ ] Notes outstanding and (b) the full commercial value of the Vessel. Any of the foregoing may provide for a deductible amount approved by the Mortgagee, but no consent or approval of the Mortgagee shall be required for a deductible amount of up to One Million United States Dollars (USD1,000,000) with respect to any one accident, occurrence or event. The preceding sentence shall not apply in the event of an actual, constructive, compromised or agreed total loss of the Vessel. All policies of insurance required under this Section 29(a)(1) shall, unless the Mortgagee shall otherwise consent in writing, be under the broadest forms which are carried by prudent shipowners for similar vessels engaged in similar trades (at the time of issue of the policies in question) and approved by the Mortgagee. The Borrower shall have the right to procure in excess of the above requirements for its own sole benefit. (2) Marine and war risk, full form protection and indemnity insurance with such clubs or insurance companies acceptable to the Mortgagee, for such amounts as the Mortgagee may require or approve. Such protection and indemnity insurance shall be maintained in the broadest forms generally available in the United States/United Kingdom markets and shall include a cross liability endorsement, if obtainable. The Borrower shall have the right to carry, for its own benefit, excess protection and indemnity insurance and marine multiliability insurance. The Mortgagee shall have the right to approve the amounts of deductibles; provided, however, that no approval of the Mortgagee shall be required if such deductibles aggregate not more than Five Hundred Thousand United States Dollars (USD500,000) with respect to any single accident, occurrence or event excluding cargo and Five Hundred Thousand United States Dollars (USD500,000) per vessel voyage with respect to total cargo or property carried on such voyage. (3) Insurance against liability under law or international convention arising out of pollution, spillage or leakage in an amount not less than the greater of: (y) the maximum amount available, as that amount may from time to time change, from the International Group of Protection and Indemnity Associations or alternatively such sources of pollution, spillage or leakage coverage as are commercially available in any absence of such coverage by the International Group as shall be carried by prudent shipowners for similar vessels engaged in similar trades plus amounts available from customary excess insurers of such risks as excess amounts shall be carried by prudent shipowners for similar vessels engaged in similar trades; and (z) the amounts required by the laws or regulations of the United States of America and any applicable jurisdiction in which the Vessel may be trading from time to time except to the extent that any such laws or regulations shall have been contested in good faith by the Borrower or any permitted charterer in appropriate proceedings diligently prosecuted, as long as such proceedings or the failure to provide such insurance shall not subject the Vessel or any part thereof to risk, forfeiture or loss, or in any material way prejudice or impair the Mortgagee's rights or interests in or under this Mortgage. The foregoing insurance shall be against such risks and in such form as are in the reasonable opinion of the Mortgagee, necessary or advisable for the protection of the interests of the Mortgagee. (4) Single interest mortgagee's insurance covering the Mortgagee against any acts or omissions of the Borrower whereby marine and war risk hull and machinery insurance covered by this paragraph (a) shall or may be suspended, impaired or defeated; and any loss under such insurance shall be payable directly to the Mortgagee. Such single interest mortgagee's insurance may, at the option of the Mortgagee, be placed by the Mortgagee at the expense of the Borrower, unless the Borrower can arrange coverage acceptable to the Mortgagee at cheaper rates which can be directly placed by the Mortgagee. (5) Mortgagee's additional perils insurance (pollution), and any loss under such insurance shall be payable directly to the Mortgagee. Such additional perils insurance may, at the option of the Mortgagee, be placed by the Mortgagee at the expense of the Borrower, unless the Borrower can arrange acceptable coverage to the Mortgagee at cheaper rates which can be directly placed by the Mortgagee. (6) The Borrower shall carry at its own expense, for the benefit of the Mortgagee, (i) in connection with any voyage outside the territorial waters of the United States of America, such insurance against political risks of confiscation and expropriation by any government (except the United States of America and the country of registry) as would be carried by prudent owners and operators on similar voyages, (ii) additional insurance in such amounts and against such risks arising from or connected with the ownership or operation of the Vessel as from time to time may be commonly insured against and may be reasonably required by the Mortgagee and (iii) such other insurance as may at the time be required by applicable law except to the extent that such law shall have been contested in good faith by the Borrower or any permitted charterer in appropriate proceedings diligently prosecuted as long as such proceedings or the failure to provide such insurance shall not subject the Vessel or any part thereof to risk, forfeiture or loss, or in any material way prejudice or impair the Mortgagee's rights or interests in or under this Mortgage. (b) (1) All insurance required to be taken out and maintained pursuant to the terms of this Mortgage (except insurance pursuant to Section 29(a)(4) and (5) of this Article II) shall name the Mortgagee (as Mortgagee), [the Second Mortgagee,] the Borrower and any permitted charterer, as named insured or additional named insured, and the policies or certificates of insurance shall provide that there shall be no recourse against the Mortgagee for the payment of premiums, commissions, club calls, assessments or advances. (2) All insurance carried pursuant to paragraph (a) of this Section 29 shall contain provisions or endorsements stating that such insurance is primary insurance without any right of contribution with respect to any insurance carried by or on behalf of the Mortgagee [or the Second Mortgagee] other than as provided pursuant to this Section 29 on the same interest insured. (3) The policies in respect of insurance carried pursuant to paragraph (a) hereof shall provide that at least ten (10) days' prior written notice shall be given to the Mortgagee and the Borrower by the underwriters of any cancellation for the nonpayment of premiums, commissions, club calls, assessments or advances. Each policy in respect of such insurance shall further provide that (except in the case of automatic termination and cancellation clauses pursuant to the terms of the war risk policies other than for nonpayment of premium) at least ten (10) days' prior written notice shall be given to the Mortgagee [and the Second Mortgagee] and the Borrower by the underwriter of any termination, cancellation, lapse or material modification of the terms of such policy. Each policy in respect of such insurance shall contain provisions waiving underwriters' rights of subrogation thereunder against any assured named in such policy. The Mortgagee shall have the right, but not the obligation, to pay any such amounts on behalf of the Borrower which shall not have been timely paid by the Borrower and to recover such amounts together with interest pursuant to this Section 29. (c) All policies of insurance in respect of insurance required to be taken out and maintained pursuant to the terms of this Mortgage or other evidence thereof (except policies taken out pursuant to Sections 29(a)(4) and (a)(5) of this Article II) shall provide that losses thereunder shall be payable (i) until this Mortgage shall have been discharged, first to the Mortgagee for application pursuant to this Mortgage; [and] (ii) [and after underwriters shall have been given notice by the Mortgagee of discharge of this Mortgage, to the Second Mortgagee for application pursuant to the Second Mortgage; and (iii)] thereafter, to the Borrower; provided, however, that such policies of insurance or other evidence thereof shall provide that: (1) In the case of insurance carried pursuant to paragraph (a)(1) of this Section 29 (to the extent liability insurances are afforded thereunder) or pursuant to paragraph (a)(2) of this Section: (i) if the Borrower shall not have incurred the loss, damage or expense in question, any loss under such insurance may be paid directly to the Person by whom such liability covered by such policies has been incurred (whether or not an Incipient Default or an Event of Default then exists); and (ii) if the Borrower shall have incurred the loss, damage or expense in question or if the Borrower shall have paid the loss, damage or expense in question and shall have presented to the underwriters satisfactory evidence that the liability insured against has been discharged or is being discharged simultaneously with such payment, any such loss under such insurance shall be paid to the Borrower or to its order in reimbursement if there is not then an existing Event of Default or Incipient Default of which the underwriter has written notice from the Mortgagee, or, if there is such an existing Event of Default or Incipient Default, to the Mortgagee to apply such amounts in accordance with Section 39 hereof, or (y) if such Event of Default or Incipient Default shall have been cured or waived, in which case such amounts shall be applied as otherwise provided in this Section 29, and if this Mortgage shall have been discharged, such loss shall be paid to the Borrower; and (iii) upon the occurrence of an Event of Loss, all insurance payments and other compensation therefor shall be paid to the Mortgagee for application in accordance with Section 5.04(b) of the Loan Agreement. (2) In the case of insurance carried pursuant to paragraph (a)(1) of this Section (to the extent liability insurances are not afforded thereunder), so long as the accident, occurrence or event does not result in an Event of Loss, payment of all losses up to Two Million United States Dollars (USD2,000,000) (or such higher figure as the Mortgagee may from time to time approve) by all insurance underwriters with respect to any one accident, occurrence or event may be made (i) directly for the repair or other charges involved, (ii) directly to the Borrower or to its order as reimbursement if the Borrower or any permitted charterer shall have first fully repaired the damage and paid the cost thereof and any other charges involved, and the underwriters shall have received evidence that such repair and payment have been made or will be made simultaneously with the payment by the underwriters; provided that if such loss exceeds Two Million United States Dollars (USD2,000,000), the underwriters shall not make payment without first obtaining the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld, and provided, further, that if the underwriters shall have received written notice from the Mortgagee as to the occurrence of an Event of Default or Incipient Default, unless the underwriters shall thereafter have been notified by the Mortgagee in writing that such Event of Default or Incipient Default has been cured or waived, in which event all such payments shall be made to the Mortgagee for application in accordance with Section 39 hereof, and after this Mortgage has been satisfied and discharged, to the Borrower or to its order. (d) In the event that a claim is made against the Vessel for loss, damage or expense which is covered by insurance, and it is necessary for the Borrower to obtain a bond or to supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim, the Mortgagee, on written request of the Borrower, shall assign to any Person executing a surety or guaranty bond or other agreement to save or release the Vessel from such arrest all right, title and interest of the Mortgagee in and to such insurance proceeds covering such loss, damage or expense as collateral security to indemnify against liability under such bond or other agreement. (e) The Borrower shall have the duty and responsibility to make all proofs of loss and taken any and all other steps necessary to effect collections from underwriters for any loss under any insurance carried pursuant to paragraph (a) of this Section 29. (f)(1) The Borrower shall furnish, or cause to be furnished, to the Mortgagee [and the Second Mortgagee] on the date hereof and annually (between each January 15th and no later than March 15th) thereafter, copies of (i) cover notes, (ii) policies of insurance, (iii) letters of undertaking, if any, and (iv) a detailed report signed by independent marine insurance brokers designated by the Borrower and satisfactory to the Mortgagee describing the insurance carried on or with respect to the Vessel and the operation thereof and stating, in effect, that such insurance complies in all respects with the applicable requirements of this Section. (2) Such report shall state that, in the opinion of such insurance broker, the forms of policies or other evidence of such insurance and the amounts of insurance and other terms are (i) not less than what is necessary or advisable for the protection of the interests of the Mortgagee and (ii) are customary at the time for vessels of similar size, type, trade and cargo. Such report shall set forth any recommendations such insurance broker may have for additional or reduced insurance which prudent shipowners or operators of vessels of similar size, type, trade and cargo are then carrying. Such report shall further state that, in the opinion of such independent insurance broker, all insurance carried pursuant to paragraph (a) of this Section 29 is underwritten by insurance companies, underwriters' associations or underwriting funds which should be satisfactory to the Mortgagee. (3) The Borrower shall cause such independent insurance broker to agree (i) to advise the Mortgagee [and the Second Mortgagee] promptly of any default in the payment of any premium, commission, club call, assessment or advance required (whether for new insurance or for insurance replacing, renewing or extending existing insurance) and of any other act, omission or event of which such independent insurance broker has knowledge and which in its sole judgment (A) might invalidate or render unenforceable, or cause the cancellation or lapse or prevent the renewal or extension of, in whole or in part, any insurance carried pursuant to paragraph (a) of this Section, (B) has resulted or might result in any material modification of the terms of any such insurance or (C) has or might result in any such insurance not being in compliance with the applicable requirements of this Section and (ii) to furnish the Mortgagee [and the Second Mortgagee] from time to time, upon request, detailed information with respect to any of the insurance carried on or with respect to the Vessel or the operation thereof. (g) In addition, upon request from time to time, the Borrower shall deliver, or cause or be delivered to the Mortgagee evidence satisfactory to the Mortgagee that the insurance required to be provided and maintained pursuant to this Section 29 has been issued and is then in full force and effect. (h) The Borrower shall cause all insurance required to be provided and maintained by this Mortgage to be carried with marine insurance companies, underwriters' associations or underwriting funds approved by the Mortgagee, which approval shall not be unreasonably withheld or delayed. (i) The Borrower shall not declare or agree upon a compromised, constructive or agreed total loss of the Vessel without the prior written consent of the Mortgagee which approvals shall not be unreasonably withheld. (j) The Borrower agrees that it will not do any act or voluntarily suffer or permit any act to be done whereby any insurance shall or may be suspended, impaired or defeated and will not suffer or permit the Vessel to engage in any voyage or to carry out any operations not permitted under the insurance policies in effect without first covering the Vessel to the amount herein provided with insurance satisfactory to the Mortgagee in all other respects for such voyage or such operations. ARTICLE III EVENTS OF DEFAULT AND REMEDIES (30) The term "Event of Default", whenever used herein, means any one of the following events: (a) Default by the Borrower in the due and punctual observance and performance of any provisions of Sections 14, 15(b) 16, 17, 20, 21(y) and (z), 23, 27 and 29(a), (b), (f) and (j) hereof (and, to the extent that such default exposes the Vessel to forfeiture, Sections 21(x) and 22 hereof); or (b) Default (other than as specified in paragraph (a) or (b) of this Section 30) in the due and punctual observance and performance of any of the covenants of the Borrower herein and continuance of such default for thirty (30) days after written notice thereof from the Mortgagee to the Borrower or the Guarantor, as the case may be; or (c) An Event of Default shall have occurred under the Loan Agreement. (31) If an Event of Default shall have occurred and be continuing, the Mortgagee shall be entitled to, without further notice or demand, declare the whole or any part of the Obligations to be forthwith due and payable, upon which declaration the principal of and interest on the [HDW] [Daewoo] [ ] Notes shall become immediately due and payable together with interest thereafter on overdue principal at the Default Interest Rate; provided that the occurrence of an Event of Default under Sections 12.02(m) and (n) of the Loan Agreement shall be deemed to be a declaration by the Mortgagee as aforesaid, whereupon the Mortgagee may: (a) Enforce and exercise all or any of its rights and powers as a secured party or mortgagee under and in accordance with the [HDW] [Daewoo] Security Documents at law, in equity, or in admiralty; (b) Exercise all the rights and remedies in foreclosure and otherwise given to mortgagees by the country of its registry, or by the applicable laws of any jurisdiction where the Vessel or other security may be found, and initiate and prosecute such other judicial, extra-judicial, or administrative proceedings as it may consider appropriate to recover any or all sums due, or declared due, on the Obligations, with the right to enforce payment of said sum against any assets of the Borrower, whether they are covered by any [HDW] [Daewoo] Security Document or otherwise, and in connection therewith obtain a decree ordering the sale of the Vessel in accordance with paragraph (e) of this Section 31; (c) Have a receiver of the Vessel appointed as a matter of right in any suit under this Section (and any such receiver may have the rights of the Mortgagee under paragraphs (e) and (f) of this Section 31); (d) Take possession of the Vessel, with or without legal proceedings, at any place where the Vessel may be found (and the Borrower or other Person in possession of the Vessel shall forthwith surrender possession of the Vessel to the Mortgagee on demand), and the Mortgagee shall, subject to any governmental approval required under the country of its registry, or any other applicable law, have the right, but shall not be obligated, to manage, insure, maintain, repair, employ, lay up, hold, charter, lease, operate or otherwise use the Vessel for such period and under such terms as it may reasonably deem most expedient for its interest, accounting only for the net profits, if any, arising from such use and charging against all receipts from such use of the Vessel, all reasonable charges and expenses in connection with such use; (e) Sell the Vessel at public sale with sealed bids, on such terms and conditions as it deems best, free of any claim of the Borrower and, except as provided by law, any other Person, upon advance notice of ten (10) consecutive days published in a newspaper authorized to publish legal notices of that kind in San Francisco, California, and by sending notice of such sale no later than the date of first publication, by telegraph, cable, telecopy or telex, to the Borrower as provided in Section 49 hereof. Any such sale may be held at such place and at such time as the Mortgagee by notice may have specified, or may be adjourned by the Mortgagee from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice or publication the Mortgagee may make any such sale at the time and place to which the same shall be so adjourned. Any such sale may be conducted without bringing the Vessel to the place designated for such sale. The Mortgagee or (subject to the provisions of the laws of the country of its registry and any other applicable law) any Holder may become the purchaser at any such sale, and shall have the right to credit on the purchase price any and all sums of money due in respect of the [HDW] [Daewoo] Notes or other Obligations; and (f) Accept a conveyance of title to, and to take without legal process (and the Borrower or other Person in possession shall forthwith surrender possession to the Mortgagee), the whole or any part of the Vessel wherever the same may be, and to take possession of and hold the same. (32) The Borrower hereby irrevocably appoints the Mortgagee the true and lawful attorney of the Borrower, in its name and stead, to make all necessary transfers of the whole or any part of the Vessel in connection with a sale, use or other disposition pursuant to Section 31 hereof, and for that purpose to execute all necessary instruments of assignment and transfer. Nevertheless, the Borrower shall, if so requested by the Mortgagee, ratify and confirm any sale, assignment, transfer or delivery by executing and delivering such proper bill of sale, assignment, conveyance, instrument of transfer or other instrument as may be designated in such request. (33) A sale of the Vessel made pursuant hereto whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest all right, title and interest of any nature whatsoever of the Borrower therein and thereto, and shall bar the Borrower, its successors and assigns, and all Persons claiming by, through or under them. No purchaser shall be bound to inquire whether notice has been given or whether any Event of Default has occurred, or as to the propriety of the sale, or as to application of the proceeds thereof. (34)(a) In the event that the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country of the world or by any government or other authority and shall not be released from arrest or detention within thirty (30) days from the date of arrest or detention, the Borrower hereby authorizes the Mortgagee, in the name of the Borrower, to apply for and receive possession of and to take possession of the Vessel with all of the rights and powers that the Borrower might have, possess and exercise in any such event. This authorization is irrevocable. (b) The Borrower irrevocably authorizes the Mortgagee or its appointees (with full power of substitution) to appear in the name of the Borrower in any court of any country or nation of the world where a suit is pending against the Vessel because of or on account of any alleged lien or claim against the Vessel from which the Vessel shall not have been released in accordance with Section 16 hereof. (35) The Mortgagee is hereby appointed as attorney-infact of the Borrower, during the continuance of any Event of Default, in the name of the Borrower to demand, collect, receive, compromise and sue for, so far as may be permitted by law, all freights, hire, earnings, issues, revenues, compensation, income and profits of the Vessel, and all amounts due from underwriters under any insurance thereon as payment of losses or as return premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise, and to make, give and execute in the name of the Borrower acquittances, receipts, releases or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Borrower all checks, notes, drafts, warrants, agreements and all other instruments in writing with respect to the foregoing. (36)(a) The Borrower covenants that upon acceleration of maturity pursuant to Section 31 hereof, the Borrower will pay to the Mortgagee the whole amount then due and payable on the Obligations plus an amount calculated in accordance with Section 11 of the Loan Agreement. If the Borrower fails to pay such amount forthwith upon receipt of such notice, the Mortgagee, in its own name and as agent, may institute a judicial proceeding for the collection of the amount so due and unpaid, and prosecute such proceeding to judgment or final decree, and may enforce the same against the Borrower or any other obligor in respect of the Obligations and the [HDW] [Daewoo] Notes and collect the money adjudged or decreed to be payable in the manner provided by law out of the property of the Borrower or any other obligor in respect of the Obligations and the [HDW] [Daewoo] Notes, wherever situated. All monies collected by the Mortgagee under this Section shall be applied by the Mortgagee in accordance with the provisions of Section 39 hereof. (b) If an Event of Default shall occur and be continuing, irrespective of whether notice of acceleration shall have been given pursuant to Section 31 hereof, the Mortgagee may in its discretion proceed to protect its rights and the rights of the Holders of the [HDW] [Daewoo] [ ] Notes by such appropriate judicial proceedings as the Mortgagee shall deem most effectual to protect any such rights, or to protect any other proper right, power or remedy then available to the Mortgagee under any [HDW] [Daewoo] Security Document. (37) In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Borrower or any other obligor in respect of the Obligations and the [HDW] [Daewoo] Notes under the Bankruptcy Code of the United States of America or any other applicable law or in connection with the insolvency of the Borrower or any other obligor in respect of the Obligations and the [HDW] [Daewoo] Notes or in case a receiver or trustee shall have been appointed for its property, or any other obligor on the [HDW] [Daewoo] [ ] Notes, its creditors or its property, the Mortgagee, irrespective of whether any amount of the Obligations shall then be due and payable as therein expressed or by declaration or otherwise, shall be entitled and empowered to intervene in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of the Obligations, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Mortgagee and of the Holders allowed in any judicial proceeding relative to the Borrower, the Obligations or any obligor on such [HDW] [Daewoo] Notes, its creditors, or its property, and to collect and receive any money or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amount payable to the Mortgagee under Section 39 hereof. Nothing contained in this Mortgage shall be deemed to give the Mortgagee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Holder or to constitute a waiver by the Borrower of its right to contest the validity of any claim made against it. (38) All rights of action and claims under this Mortgage, the [HDW] [Daewoo] [ ] Notes or the other Obligations may be prosecuted and enforced by the Mortgagee without the possession of the [HDW] [Daewoo] [ ] Notes or any other evidence of such indebtedness or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Mortgagee shall be brought in its own name as agent, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Mortgagee, its agents and counsel, be for the benefit of the Holders of the [HDW] [Daewoo] [ ] Notes and the other Obligations. (39) Any monies collected by the Mortgagee pursuant to any sale of the Vessel or other enforcement of any of its rights hereunder or under any other [HDW][Daewoo] Security Document on account of the occurrence of an Event of Default or Incipient Default by the Mortgagee shall be distributed in accordance with Section 5.09 (a) of the Loan Agreement. (40) No Holder shall have any right to institute any independent proceeding, judicial or otherwise, with respect to this Mortgage and the other [HDW] [Daewoo] Security Documents or for any other remedy hereunder or thereunder except the Mortgagee. (41) Notwithstanding any other provision of this Article III, each Holder of an [HDW] [Daewoo] [ ] Note or any other Obligation shall have the right which is absolute and unconditional to receive payment (whether directly or through its agent) of the principal of and interest on such Holder's [HDW] [Daewoo] [ ] Notes or other Obligations, as and when the same shall become due, and to demand payment thereof, and such right shall not be impaired or affected without the consent of such Holder. (42) No right or remedy herein conferred upon or reserved to the Mortgagee or such Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or under the other [HDW] [Daewoo] Security Documents or now or hereafter existing at law, in equity, in admiralty, by statute or otherwise. The assertion or employment of any right or remedy hereunder or otherwise shall not prevent the concurrent or subsequent assertion or employment of any other right or remedy hereunder or otherwise. (43) No delay or omission of the Mortgagee or any Holder to exercise any right or remedy accruing upon any Event of Default nor any course of dealings between the Mortgagee, the Holders (or any of them) and, the Borrower shall impair any such right or remedy or constitute a waiver of any Event of Default or an acquiescence therein nor shall any single exercise or partial exercise of any such right or remedy preclude any other exercise thereof or any exercise of any other or further right or remedy; nor shall the acceptance by the Mortgagee of any security or any payment of any part of the Obligations maturing after any Event of Default or of any payment on account of any past default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby. Every right or remedy given by this Mortgage or any other [HDW] [Daewoo] Security Document or by law to the Mortgagee or the Holders may be exercised from time to time, and as often and in such order as may be deemed expedient, by the Mortgagee or the Holders, as the case may be. (44) In case the Mortgagee shall have proceeded to enforce any right, power or remedy under this Mortgage or under any other [HDW] [Daewoo] Security Document by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been adversely determined to the Mortgagee, then, and in every such case, the Borrower and the Mortgagee shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Mortgage or any other [HDW] [Daewoo] Security Document, as the case may be, and all rights, remedies and powers of the Mortgagee shall continue as if no such proceedings had been taken. (45) Subject to the provisions of Section 31 hereof, the Mortgagee shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Mortgagee under this Mortgage or any other [HDW] [Daewoo] Security Document or exercising any trust or power conferred on the Mortgagee herein or therein. ARTICLE IV SUNDRY PROVISIONS (46) For the purposes of recording this First Preferred Mortgage as required by the Republic of The Marshall Islands' Maritime Act of 1990, as amended, the aggregate of all possible advances and other outstanding obligations that may be made under, or otherwise secured by, this Mortgage is (i) [ ] United States Dollars (USD[ ]), and (ii) interest and performance of mortgage covenants. The discharge amount is the same as the total amount. (47) All the covenants, promises, stipulations and agreements of the Borrower contained in this Mortgage shall bind the Borrower, its successors and assignees, and shall inure to the benefit of the Mortgagee. (48) Wherever and whenever herein any right, power or authority is granted or given to the Mortgagee, such right, power or authority may be exercised in all cases by the Mortgagee or such agent or agents as it may appoint; and the authorized acts of such agent or agents when taken shall constitute the act of the Mortgagee hereunder. (49) Any notice or demand or other communication to the Borrower or the Mortgagee under this Mortgage shall be made in accordance with Section 15.04 of the Loan Agreement. (50) The Borrower will pay to the Mortgagee on demand: (a) All monies whatsoever which the Mortgagee reasonably and in good faith shall or may expend, be put to or become liable for in or about the protection, maintenance or enforcement of the security created by this Mortgage or in or about the exercise by the Mortgagee of any of the powers vested in it hereunder; and (b) The amount of all expenses of any kind whatsoever, stamp duties (if any), registration fees and any other charges incurred by the Mortgagee in connection with the registration of this Mortgage. (51) The Mortgagee shall, without prejudice to its other rights and powers hereunder, be entitled (but not bound) at any time and from time to time, to take any such action as it may in its discretion think fit for the purpose of protecting the security created by this Mortgage, and each and every expense or liability reasonably and in good faith so incurred by the Mortgagee in or about the protection of the security shall be repayable to it by the Borrower on demand. (52) The Mortgagee shall be entitled at any time and from time to time to delegate all or any of the powers and discretions vested in it by this Mortgage (including, without limitation, the power vested in it by virtue of Section 32 hereof) in such manner, upon such terms and to such persons as the Mortgagee in its absolute discretion may think fit. (53) The provisions of this Mortgage shall, with respect to its validity, effect, recordation and enforcement, be governed by and construed in accordance with the applicable Laws of the Republic of The Marshall Islands. Where, however, rules of interpretation, construction or usage, with respect to the internal provisions of this Mortgage, may be made subject to the decisional law of a jurisdiction other than that of the Republic of The Marshall Islands, the parties hereto hereby agree that the provisions of this Mortgage shall be governed by the decisions of the courts of the State of New York. (54) No course of dealing between the Mortgagee and the Borrower or any delay or failure on the part of the Mortgagee thereof in exercising any rights hereunder shall operate as a waiver of any rights of the Mortgagee thereof or of the preferred status of this Mortgage. [(55) Deutsche Schiffsbank AG may not without the prior written consent of its public trustee (TreuhSnder) sell, assign, waive or encumber its interest in this Mortgage until the Loans and all interest on the Loans have been repaid in full.] IN WITNESS WHEREOF, the Borrower has caused this Mortgage to be duly executed by its authorized representative the day and year first above written. AMERICAN PRESIDENT LINES, LTD. ______________________________ Name: Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this _____ day of ____________, 199_, before me personally appeared ___________________, known to me, and known to be the person who executed the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at ______________________; that he is ________________ of American President Lines, Ltd., a Delaware corporation, the party described in and which executed the foregoing instrument; that he signed his name thereto by authority of the Board of Directors of said corporation and as the free act and deed of such corporation. __________________________ Notary Public EXHIBIT B-2 TO AMENDMENT N0. 2 TO LOAN AGREEMENT Omitted pursuant to Instruction 2 to Item 601 of Regulation S-K. Same as Exhibit B-1 hereto together with the subordination provisions of Appendix B-2 to Exhibit 10.4 to Registrant's Form 10-Q for the quarter ended April 8, 1994. EXHIBIT B-3 to Amendment No. 2 to Loan Agreement ASSUMPTION OF FIRST PREFERRED SHIP MORTGAGE THIS ASSUMPTION OF FIRST PREFERRED SHIP MORTGAGE dated ___________, 199_ (this "Assumption"), supplements the First Preferred Ship Mortgage dated _____________, 199_ (the "Mortgage"; capitalized terms used herein without definition shall have the respective meanings provided in the Mortgage), with respect to the vessel [ ], Official Number MI [ ] (the "Vessel"), by American President Lines, Ltd., a Delaware corporation (the "Original Mortgagor"), in favor of [Kreditanstalt fur Wiederaufbau, a public law corporation incorporated in the Federal Republic of Germany (the "Mortgagee")] [Commerzbank AG, Hamburg, a banking corporation incorporated in the Federal Republic of Germany (the "Syndicate Agent") and Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins- und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG (Hamburg Branch) and Banque Internationale a Luxembourg S.A., (the "Syndicate and, collectively with the Syndicate Agent, the "Mortgagee")]. The Mortgage was recorded at the office of the Deputy Commissioner of Maritime Affairs of the Republic of The Marshall Islands in New York, New York on ____________, 199_, at _________ _.m., in book PM ____ at Page __. By this Assumption, [ ], a Delaware corporation (the "Additional Mortgagor"), assumes all of the rights and obligations of the Original Mortgagor under the Mortgage, jointly and severally with the Original Mortgagor. WHEREAS: A. The Original Mortgagor and the Additional Mortgagor are jointly and severally liable to the Mortgagee for certain obligations pursuant to the Loan Agreement. B. The Original Mortgagor, as sole owner of the Vessel, has heretofore executed and delivered the Mortgage to the Mortgagee to secure payment and performance of the Obligations referred to therein and payment and performance of all other obligations secured by the Mortgage (the "Secured Obligations"). C. The Original Mortgagor has transferred all of its right, title and interest in and to the Vessel to the Additional Mortgagor and concurrently therewith has bareboat chartered the Vessel from the Additional Mortgagor; D. The Vessel has been duly documented in the name of the Additional Mortgagor as the owner thereof in the office of the Deputy Commissioner of Maritime Affairs of the Republic of The Marshall Islands in New York, New York; and E. The execution and delivery of this instrument has been duly authorized and all conditions and requirements necessary to make this instrument a valid and binding agreement and to effect the assumption of the Mortgage provided herein and to continue that Mortgage, as assumed by this instrument, as a valid, binding and legal first preferred ship mortgage as security for the due payment and performance of the Secured Obligations. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: Section 1. The Additional Mortgagor hereby assumes all the obligations and duties of the Original Mortgagor under the Mortgage. The Additional Mortgagor hereby promises an agreement to pay, jointly and severally with the Original Mortgagor, in accordance with and subject to the terms of the Loan Agreement, the Acquisition Agreement and the [HDW] [Daewoo] [ ] Notes, the unpaid principal of and interest on the [HDW] [Daewoo] [ ] Notes and agrees to observe each and every covenant, agreement and condition of the Mortgage which, by the terms thereof, is to be performed or observed, or both, by the mortgagor thereunder. The Mortgagee hereby consents to the transfer of the Vessel from the Original Mortgagor to the Additional Mortgagor and to the assumption of the Mortgage by the Additional Mortgagor. Section 2. All of the covenants and agreements on the part of the Original Mortgagor which are set forth in, and all the rights, privileges, powers and immunities of the Mortgagee which are provided for in the Mortgage are incorporated herein and shall apply to the Additional Mortgagor with the same force and effect as though set forth in their entirety in this Assumption. Section 3. Except as amended by this Assumption, the Mortgage is in all respects ratified and confirmed and all the terms, provisions and conditions thereof shall be and remain in full force and effect. Section 4. Notwithstanding anything herein, in the Mortgage, in the [HDW] [Daewoo] [ ] Notes or in any other Loan Document to the contrary, by acceptance of this Assumption, the Mortgagee agrees that it will look solely to the Vessel and the other assets and property covered by the Mortgage and the other [HDW] [Daewoo] Security Documents (collectively, the "Recourse Assets") for all amounts coming due from the Additional Mortgagor hereunder, under the Mortgage, the [HDW] [Daewoo] [ ] Notes or any other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Additional Mortgagor hereunder, under the Mortgage or under the [HDW] [Daewoo] [ ] Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Original Mortgagor or the Additional Mortgagor as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the obligations of the Additional Mortgagor hereunder, under the Mortgage, the [HDW] [Daewoo [ ] Notes, any other Loan Document or any such other certificate or document: (a) against the Additional Mortgagor, in its individual or personal capacity, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of the Additional Mortgagor other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Mortgagee to proceed against the Guarantor under the Guarantee, or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the [HDW] [Daewoo] Security Documents, or to restrict the remedies available to the Mortgagee to realize upon the [HDW] [Daewoo] Security Documents or enforce the Guarantee. Section 5. For the purposes of recording this Assumption of First Preferred Mortgage as required by the Republic of The Marshall IslandsO Maritime Act of 1990, as amended, the aggregate of all possible advances and other outstanding obligations that may be made under or otherwise secured by the Mortgage as supplemented hereby is (i) __________ ______________________ United States Dollars (USD_________________), and (ii) interest and performance of mortgage covenants, The discharge amount is the same as the total amount. Section 6. This instrument may be executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an original. Section 7. Any notice or demand or other communication to the Original Mortgagor under the Mortgage shall be sent to both the Original Mortgagor and the Additional Mortgagor and made in accordance with Section 15.04 of the Loan Agreement. [Remainder of this page intentionally left blank.] IN WITNESS WHEREOF, this instrument has been executed and delivered the day and year first above written. AMERICAN PRESIDENT LINES, LTD By ________________________________ Name: Title: [ ] By ________________________________ Name: Title: [ ] By ________________________________ Name: Title: EXHIBIT B-4 TO AMENDMENT NO. 2 TO LOAN AGREEMENT Omitted pursuant to Instruction 2 to Item 601 of Regulation S- K. Differs from Exhibit B-3 hereto only in that the assumption is of a second mortgage rather than a first mortgage. EX-10.30 6 EXHIBIT 10.30 TO THE 1995 FORM 10K FOR APC EXECUTION COPY AMENDED AND RESTATED GUARANTEE dated as of May 19, 1995 by AMERICAN PRESIDENT COMPANIES, LTD. (as Guarantor) in favor of KREDITANSTALT FUR WIEDERAUFBAU (as Agent and Lender) and COMMERZBANK AG, HAMBURG (as Syndicate Agent) COMMERZBANK AG (KIEL BRANCH) DRESDNER BANK AG IN HAMBURG VEREINS- und WESTBANK AG DEUTSCHE SCHIFFSBANK AG NORDDEUTSCHE LANDESBANK-GIROZENTRALE DEUTSCHE VERKEHRS-BANK AG (HAMBURG BRANCH) BANQUE INTERNATIONALE A LUXEMBOURG S.A. (as the Syndicate) AMENDED AND RESTATED GUARANTEE, dated as of May 19, 1995, by AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation (the "Guarantor"), in favor of Kreditanstalt fur Wiederaufbau, a corporation organized and existing under the laws of the Federal Republic of Germany whose address is Palmengartenstrasse 5-9, Postfach 11-11-41, D-60325 Frankfurt am Main ("KfW"), COMMERZBANK AG (HAMBURG), a banking corporation incorporated in the Federal Republic of Germany whose address is Ness 7-9, D-20457 Hamburg, (the "Syndicate Agent") and the banks listed in Schedule 1 which is attached hereto (KfW, the Syndicate Agent and such banks hereinafter referred to as the "Obligees"). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 (the "Loan Agreement"), by and among the Obligees, the corporations listed as Transferees therein (the "Transferees") and American President Lines, Ltd., a Delaware corporation ("APL") (the Transferees and APL are hereinafter referred to individually as an "Obligor" and collectively as the "Obligors"). This Amended and Restated Guarantee amends, restates and supersedes in its entirety that certain Guarantee dated as of March 14, 1994 from the Guarantor in favor of the Obligees. W I T N E S S E T H: WHEREAS, pursuant to the Loan Agreement and the Amended and Restated Agreement to Acquire and Charter dated May 19, 1995 by and among APL, the Transferees and the Obligees, the Transferees will be obligated for any Notes issued by them under the Loan Agreement and related Vessel Indebtedness with respect to the purchase financing of certain of the HDW or Daewoo Vessels; WHEREAS, the registered owners of the HDW Vessels in accordance with the Loan Documents shall be jointly and severally liable under all Notes issued by them under the Loan Agreement, and all related Vessel Indebtedness, with respect to the purchase financing of the HDW Vessels; WHEREAS, the registered owners of the Daewoo Vessels in accordance with the Loan Documents shall be jointly and severally liable under all Notes issued by them and by the owners of the HDW Vessels under the Loan Agreement, and all related Vessel Indebtedness, with respect to the purchase financing of the Daewoo Vessels and the HDW Vessels; WHEREAS, the Guarantor is entering into this Guarantee in consideration of the Obligees entering into the Loan Agreement and purchasing the Notes. Accordingly, the Guarantor hereby agrees with the Obligees as follows: SECTION 1. GUARANTEE 1.1 The Guarantee. The Guarantor hereby guarantees as primary obligor and not as a surety the full and punctual payment and, to the fullest extent permitted by applicable law, performance when due of all amounts payable and actions required by the Obligors under the Loan Documents. Upon failure by any Obligor to pay punctually any such payment required by it to be paid within any applicable grace periods permitted under such agreements and documents, the Guarantor shall forthwith on demand pay the amount not so paid in immediately available funds as specified in the Loan Agreement. Upon payment or performance by the Guarantor of any obligation of any Obligor pursuant to this Section 1.1, such Obligor's obligation with respect to such payment or performance under the Loan Agreement or any Loan Document as the case may be shall terminate. 1.2 Guarantee Unconditional. The obligations of the Guarantor hereunder shall be irrevocable, unconditional and absolute without regard to: (a) any amendment, consent or release in respect of any of the terms of any of the Loan Documents or of the obligations under any thereof of any Person (provided only that such amendment, consent or release is effected in accordance with the terms of such Loan Documents); or (b) any taking, holding, exchange, release, non- perfection or invalidity of any direct or indirect security for any obligation of any Obligor under the Loan Documents; or (c) any change in the corporate existence, structure or ownership of any Obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Obligor or its assets; or (d) the existence of any claim, setoff or other rights which the Guarantor may have at any time against any Obligor, HDW or Daewoo; or (e) any defense arising by reason of any invalidity, unenforceability or other defense of any Obligor, or other defense of the Guarantor or by reason of the cessation from any cause whatsoever of the liability either in whole or in part of any Obligor to pay any amount payable by such Obligor under the Loan Documents; or (f) any consent, release, renewal, refinancing, refunding, amendment or modification of or addition or supplement to or waiver of any of the terms of any of the Loan Documents or of any other agreement which may be made relating to any of the Loan Documents or of the obligations under any thereof of any Person (provided only that such consent, release, renewal, refinancing, refunding, amendmentor modification of or addition or supplement to or waiver is effected in accordance with the terms of such Loan Documents); or (g) any exercise or non-exercise of any right, power, privilege or remedy under or in respect of this Guarantee or any other Loan Document, or any waiver of any such right, power, privilege or remedy or of any default in respect of any Loan Document, or any receipt of any collateral security or any sale, exchange, surrender, release, discharge, failure to perfect or to continue perfected, loss, abandonment or alteration of, or other dealing with, any collateral security by whomsoever at any time pledged or mortgaged to secure, or however securing any of the Guarantor's obligations or any liabilities (including liabilities of any Guarantor hereunder) incurred directly or indirectly in respect thereof. 1.3 Discharge Only Upon Payment in Full: Reinstatement in Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the amounts payable by the Obligors under the Loan Documents shall have been paid in full or the obligations of the Obligors thereunder have otherwise terminated, whichever is earlier. If at any time any amount payable by any Obligor under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had not been made. 1.4 Waiver. The Guarantor irrevocably waives acceptance of this Guarantee, presentment, demand except as required pursuant to Section 1.1 hereof, protest, and notice, as well as any requirement that at any time any action be taken by any Person against any Obligor or any other Person. 1.5 Subrogation. Upon making any payment hereunder, the Guarantor shall be subrogated to the rights of the Obligees under the Loan Documents against any Obligor with respect to such payment; provided that the Guarantor shall have no right of subrogation and waives, to the fullest extent permitted by applicable law, any right to any security in any right or property which is the subject of any Loan Document and to exercise any remedy which the Obligees have or may hereafter have against any Obligor for payment of money under the Loan until all amounts payable by such Obligor under the Loan Documents have been paid in full or the obligations of such Obligor thereunder have otherwise terminated, whichever is earlier. Nothing contained in this Guarantee shall preclude the Guarantor from causing such Obligor to make payments or perform such actions as are required to be performed by such Obligor under the Loan Documents. 1.6 Payment and Performance Guarantee: No Set-Off or Deductions: No Waiver. The Guarantor hereby agrees that (a) this Guarantee is a guarantee of payment and performance and not of collection, and shall continue in full force and effect and be binding upon the Guarantor, its successors and assigns; and (b) amounts payable hereunder shall be paid when due without set- off or reduction for any reason whatsoever; provided, however, that nothing contained in this Section shall be construed to be a waiver, modification, alteration or release of any claims which the Guarantor may have for damages or equitable relief for any breach by the Obligees of any provision of the Loan Agreement or any other Loan Document or for any loss due to any acts taken by the Obligees thereunder. 1.7 Obligations Unaffected. Any Obligee may, at any time and from time to time, without the consent of, or notice to, the Guarantor, without incurring responsibility to the Guarantor and without impairing, diminishing, or discharging, releasing, suspending, prejudicing or terminating the obligations of the Guarantor hereunder, in accordance with the terms and conditions of the Loan Documents and in whole or in part, take or refrain from taking (either directly or indirectly) any and all actions with respect to the Guarantor's obligations, this Guarantee, the other Loan Documents, any collateral security at any time granted or received for any of the Guarantor's obligations, or any Person (including any Guarantor) that such Obligee determines in its sole discretion to be necessary or appropriate, whether or not such action or refraining from action varies or increases the risk of, such Guarantor; provided, however, that any amount received by any such Obligee as a result of any such action shall correspondingly reduce the Guarantor's obligations hereunder. No right of any Obligee hereunder, and no obligation of the Guarantor hereunder, shall be in any way limited or otherwise impaired by the failure of any Obligee (i) to commence any action or obtain any judgment against the Obligors or any Obligor; (ii) to seek recourse against, or to perfect or enforce any rights in and to, any collateral; (iii) to proceed against any other guarantee relating to all or any of the obligations guaranteed hereunder or (iv) to exercise any other right, remedy, power or privilege hereunder or otherwise. The Guarantor waives and agrees not to assert (a) any right to require any Obligee to take any action described in clauses (i) to (iv) of the immediately preceding sentence and (b) any defense based upon an election of remedies which destroys or impairs the subrogation rights of any Obligee or the right of any Obligee to proceed against the Guarantor hereunder or any Obligor in respect of the obligations guaranteed hereunder. SECTION 2. Representations and Warranties of the Guarantor. The Guarantor represents and warrants to each Obligee that: 2.1 the Guarantor is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to conduct its business as the same is presently conducted; 2.2 the Guarantor has legal power and authority to enter into and carry out the terms of this Guarantee; 2.3 this Guarantee has been duly authorized by all necessary action, corporate or other, on the part of the Guarantor, and this Guarantee constitutes in accordance with its terms, a legal, valid and binding instrument enforceable against the Guarantor, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights from time to time in effect; 2.4 except as previously disclosed to the Syndicate Agent and the Agent in writing, there are no actions, suits or proceedings pending or, to the Guarantor's knowledge, threatened against the Guarantor, which question the validity of this Guarantee or action taken or to be taken by the Guarantor pursuant to this Guarantee which would, if adversely determined, materially and adversely affect the performance by the Guarantor of its obligations hereunder; 2.5 the execution and delivery of this Guarantee by the Guarantor and the performance by the Guarantor of its obligations under this Guarantee will not violate any provisions of the Certificate of Incorporation or Bylaws of the Guarantor and will not result in a breach of the terms and provisions of, or constitute a default under, any other agreement or undertaking by the Guarantor or by which it or any of its property is bound or any order of any court or administrative agency entered in any proceedings binding on the Guarantor, or violate any applicable statute, rule or regulation; 2.6 the Guarantor is not in default and no Incipient Default has occurred, in any respect which would materially and adversely affect the ability of the Guarantor to perform its obligations under this Guarantee, under any mortgage, loan agreement, deed of trust, indenture or other agreement with respect thereto or evidence of indebtedness to which it is a party or by which it is bound, and is not in violation of or in default, in any respect which would materially and adversely affect the ability of the Guarantor to perform its obligations under this Guarantee, under any order, writ, judgment or decree of any court, arbitrator or governmental authority, commission, board, agency or instrumentality, domestic or foreign; 2.7 the Guarantor has more than one place of business and the present location of the place of business which is its chief executive office is 1111 Broadway, Oakland, California 94607; 2.8 the Guarantor has no knowledge of any actual or proposed deficiency or additional assessment in connection with any Taxes which either in any case or in the aggregate would be materially adverse to the Guarantor and which would materially and adversely affect the ability of the Guarantor to perform its obligations hereunder; 2.9 all Taxes (other than taxes based on or measured by income and withholding taxes), liability for the payment of which has been incurred by the Guarantor in connection with the execution, delivery and performance by it of each Loan Document to which it is or will be a party, have been paid (or provided for in its accounts if not payable on or prior to the delivery date of the respective Vessel); 2.10 all governmental consents, licenses, permissions, approvals, registrations or authorizations or declarations required (i) to enable it lawfully to enter into and perform its payment obligations under this Guarantee and to require each of the Obligors to perform its other obligations under each of the Loan Documents to which such Obligor is a party, (ii) to ensure that its respective obligations under clause (i) hereunder are legal, valid and enforceable and (iii) to make this Guarantee admissible in evidence have been obtained or made and are in full force and effect; 2.11 it has not taken any corporate action nor to its knowledge have any other steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or reorganization or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of any or all of its respective assets and revenues; 2.12 (i) no written representation, warranty or statement made or other document provided by the Guarantor in connection with the negotiation of this Guarantee at the time when given is or was untrue or contains or contained any misrepresentation of a material fact or omits or omitted to state any material fact necessary to make any such statement herein or therein not misleading and (ii) all financial projections, if any, prepared by the Borrower or the Guarantor and made available to any Lender have been prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrower's and the Guarantor's control, and that no assurances can be given that any such projections will be realized); 2.13 ERISA. To the best knowledge of the Guarantor (i) each Plan maintained by the Guarantor and each ERISA Affiliate is in substantial compliance in all material respects with ERISA; (ii) no Plan maintained by the Guarantor or any ERISA Affiliate is insolvent or in reorganization; (iii) no Insufficiency or Termination Event has occurred or is reasonably expected to occur, and no "accumulated funding deficiency" exists and no "variance" from the "minimum funding standard" has been granted (each such term as defined in Part III, Subtitle B, of Title I of ERISA) with respect to any Plan in which the Guarantor or any of its Subsidiaries, or any ERISA Affiliate is a participant; (iv) neither the Guarantor nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan; (v) neither the Guarantor, its Subsidiaries, nor any ERISA affiliate has received any notification that any Multiemployer Plan in which it is a participant is in reorganization or has been terminated, within the meaning of Title IV of ERISA and no such Multiemployer Plan is reasonably expected to be in reorganization or terminated within the meaning of Title IV of ERISA; (vi) no lien imposed under the Code or ERISA on the assets of the Guarantor or any Subsidiary or any ERISA Affiliate exists or is reasonably expected to arise on account of any Plan; (vii) no material liability will be incurred by the Guarantor, its Subsidiaries, or any ERISA Affiliate if any of them should terminate contributions to any other employee benefit plan maintained by them; 2.14 it is not an "investment company" or a company "controlled" by an "investment company" (as each of such terms is defined or used in the Investment Company Act of 1940, as amended). SECTION 3. Covenants of the Guarantor. The Guarantor covenants to each Obligee that: 3.1 The Guarantor will not consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets, including, but not limited to, by dividend (whether by one transaction or a series of transactions and whether related or not); provided, however, that it may consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets if the buyer, assignee or transferee corporation (the "Assignee") shall be a solvent corporation organized and existing under the laws of the United States of America or any state thereof following such transaction and shall have executed and delivered an agreement, in form and substance reasonably satisfactory to the Obligees, containing an assumption by the Assignee of the due and punctual performance and observance of all covenants and obligations of the Guarantor hereunder, and confirming the accuracy of any representations and warranties made herein as of the date hereof required with respect to such Assignee; and provided further that immediately following such transaction, no Incipient Default or Event of Default shall have occurred and be continuing. SECTION 4. Financial Statements. 4.1 The Guarantor shall, as soon as possible, provide to the Agent and the Syndicate Agent (a) but in no event later than one hundred twenty (120) days after the end of each fiscal year, its consolidated audited accounts of all consolidated financial statements of the Guarantor, such financial statements to be prepared in accordance with generally accepted United States of America accounting principles at such time consistently applied and a report thereon by Arthur Andersen & Co. or other independent public auditors of internationally recognized standing as may be acceptable to the Agent and the Syndicate Agent, (b) copies of all quarterly reports filed with the Securities and Exchange Commission and, within seventy-five (75) days after the end of the first three (3) quarters of its fiscal year, unaudited consolidated statements of income and changes in financial position of the Guarantor and related balance sheets for each such period, all certified as true and correct by a financial officer of the Guarantor, (c) as soon as the same is instituted (or, to the knowledge of the Guarantor threatened), details of any litigation, arbitration or administrative proceedings against or involving the Guarantor, any Obligor or the Vessels which if adversely determined would have a material adverse effect on the Guarantor, any Obligor and any of its subsidiaries on a consolidated basis, or construction of the Vessels, and (d) from time to time, and on demand, such additional financial or other information relating to the Guarantor as may be reasonably requested by the Agent or the Syndicate Agent. SECTION 5. Miscellaneous 5.1 No failure on the part of any Obligee to exercise, no delay in exercising, and no course of dealing with respect to, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial exercise of any right or remedy hereunder preclude any other further exercise of any other right or remedy. This Guarantee may not be amended or modified except by written agreement of the Guarantor and the Obligees. 5.2 All notices or other communications required under the terms and provisions hereof shall be made in the manner provided in Section 15.04 of the Loan Agreement addressed as follows: to (i) Kreditanstalt fYr Wiederaufbau at: Palmengartenstrasse 5-9, D-60325 Frankfurt am Main (if by hand), Postfach 11-11-41, D-60046 Frankfurt am Main (if by mail), Federal Republic of Germany, Telefax No.: 7431-2944 or 7431-2198; {ii) to Commerzbank AG at: Ness 7-9, D-20457 Hamburg, Federal Republic of Germany, Attention: Stefan E. Kuch, Telefax No.: 49-40-3683-4068; (iii) to the other Obligees to the addresses as set forth in Schedule 1; and (iv) to the Guarantor at: 1111 Broadway, Oakland, California 94607; Attention: Treasurer, Telefax No.: (510) 272-8931 5.3 The terms of this Guarantee shall be binding upon, and inure to the benefit of, the Guarantor and the Obligees and their respective successors and assigns. 5.4 No recourse shall be had for the payment of any amount payable hereunder against any incorporator, stockholder, officer or director, as such, past, present or future, of the Guarantor or of any successor corporation, either directly or through the Guarantor or any successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Guarantee is solely a corporate obligation, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder officer or director, as such, past, present or future, of the Guarantor or of any successor corporation, because of the incurring of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants, promises or agreements contained in this Guarantee or to be implied herefrom, and that all liability, if any, of that character against every such incorporator, stockholder, officer and director is, by the acceptance of this Guarantee and as a condition of, and as part of the consideration for, the execution of this Guarantee, expressly waived and released. 5.5 This Guarantee shall be construed in accordance with and governed by the laws of the State of New York (other than the law of the State of New York governing choice of law). 5.6 The Guarantor (a) hereby irrevocably submits itself to the jurisdiction of the Supreme Court of the State of New York, New York County and to the jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or any other Loan Document referred to therein, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby, brought by any of the Obligees or their respective successors, subrogees or assigns, (b) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined, in such New York State or Federal court, and (c) to the extent that it has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process, hereby waives such immunity, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, (i) any claim that it is not personally subject to the jurisdiction of the above-named New York State or Federal courts, (ii) that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or (iii) that this Guarantee or the subject matter hereof may not be enforced in or by such courts or under any applicable law. The Guarantor hereby consents to service of process in any suit, action or other proceeding arising out of this Guarantee or the subject matter hereof or any of the transactions contemplated hereby and hereby appoints the Person set forth in Schedule 7 of the Loan Agreement as Process Agent for the Borrower (the "Process Agent") as its attorneys-in-fact to receive service of process in such action, suit or proceeding, it being agreed that service upon the Process Agent shall constitute valid service upon the Guarantor and its successors and assigns. The Guarantor agrees that (x) the sole responsibilities of the Process Agent shall be (i) to receive such process, (ii) to send a copy of any such process so received to the Guarantor, by registered airmail, return receipt requested, at its address set forth in Section 5.2 hereof, or at the last address filed in writing by it with the Process Agent and (iii) to give prompt telegraphic notice of receipt thereof to the Guarantor at such address and (y) the Process Agent shall have no responsibility for the receipt or nonreceipt by the Guarantor of such process, nor for any performance or nonperformance by it or its respective successors or assigns. The Guarantor hereby agrees to pay to the Process Agent such compensation as shall be agreed upon from time to time by it and the Process Agent for the Process Agent's services hereunder. The Guarantor hereby agrees that its submission to jurisdiction and its designation of the Process Agent set forth above is made for the express benefit of each of the Obligees and their respective successors, subrogees and assigns. The Guarantor agrees that it will at all times continuously maintain a Process Agent to receive service of process in the City of New York or San Francisco, California on behalf of itself and its properties with respect to this Agreement, and in the event that, for any reason, the Process Agent named pursuant to this Section 5.6 shall no longer serve as Process Agent to receive service of process on the Guarantor's behalf, the Guarantor shall promptly appoint a successor Process Agent. The Guarantor further agrees that a final judgment against the Guarantor in any such action or proceeding shall be conclusive, and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law, a certified or true copy of which final judgment shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of the Guarantor therein described; provided that nothing in this Section 5.6 shall affect the right of the Guarantor or the Obligees or their respective successors, subrogees or assigns to serve legal process in any other manner permitted by law or affect the right of the Guarantor or the Obligees or their respective successors, subrogees or assigns to bring any action or proceeding against the Guarantor or the Obligees, as the case may be, or its property in the courts of other jurisdictions. In the event of the transfer of all or substantially all the assets and business of the Process Agent to any other corporation, by consolidation, merger, sale of assets or otherwise, such other corporation shall be substituted hereunder for the Process Agent with the same effect as if named herein in place of the Process Agent. THE GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY OTHER LOAN DOCUMENT REFERRED TO THEREIN, OR THE RELATIONSHIP ESTABLISHED HEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE AND PERFORMANCE IN FULL OF THE GUARANTOR'S OBLIGATIONS UNDER THIS AGREEMENT. 5.7 Currency of Account. (a) The Dollar is the currency of account or each and every sum due from the Guarantor to the Obligees under this Guarantee in respect of any of the Obligations. (b) If after the occurrence of any Event of Default, any sum is due from the Guarantor under this Guarantee or if any order or judgment given or made in relation hereto has to be converted from the currency ("the first currency") in which the same is payable hereunder or under such order or judgment into another currency ("the second currency") for the purpose of: (i) making or filing a claim or proof against the Guarantor; (ii) obtaining an order or judgment in any court or tribunal; or (iii) enforcing any order or judgment given or made in relation hereto. (c) The Guarantor shall indemnify and hold harmless the Obligees from and against any damages or losses suffered as a result of any discrepancy between (A) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (B) the rate or rates of exchange at which any Obligee may in the ordinary course of business purchase the first currency with the second currency in the Frankfurt foreign exchange market upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The above indemnity shall constitute a separate and independent obligation of the Guarantor from its other obligations and shall apply irrespective of any indulgence granted by such Obligee. 5.8 If any term of this Guarantee and any other application thereof shall be invalid or unenforceable, the remainder of this Guarantee and any other application of such terms shall not be affected thereby. 5.9 This Guarantee shall be binding upon, inure to the benefit of, and be enforceable by, the Guarantor and each of the Obligees and their respective successors and assigns. IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed as of the date first set forth herein. AMERICAN PRESIDENT COMPANIES, LTD. By: /s/ Title: SCHEDULE 1 NAMES AND ADDRESSES OF SYNDICATE MEMBERS Syndicate Member Address Commerzbank AG (Kiel Branch) Holstenstrasse 64 D-24103 Kiel Federal Republic of Germany Attention: Mr. Claes Telex: 292898 CBKD Telecopy: 49-431-9974-372 Dresdner Bank AG in Hamburg Jungfernstieg 22 D-20354 Hamburg Federal Republic of Germany Attention: Mr. Eggert Mr. Bsttcher Telex: 2157170 DR D Telecopy: 49-40-3501-3818 Vereins- und Westbank AG Alter Wall 22 D-20457 Hamburg Federal Republic of Germany Attention: Mr. Kspcke Telex: 215164 VH D Telecopy: 49-40-3692-3696 Deutsche Schiffsbank AG Domshof 17 D-28195 Bremen Federal Republic of Germany Attention: Mr. Pieper Mr. Onnen Telex: 244870 DSBR D Telecopy: 49-421-323539 Norddeutsche Landesbank - Georgsplatz 1 Girozentrale D-30159 Hannover Federal Republic of Germany Attention: Mr. Hartmann Telex: 921634 GZH D Telecopy: 49 511 36 14785 Deutsche verkehrs-Bank AG Filiale Hamburg (Hamburg Branch) Ballindamm 6 D-20095 Hamburg Federal Republic of Germany Attention: Mr. Spincke Telex: 402077 DVB Telecopy: 49-40-308004-12 Banque Internationale a 2 Boulevard Royal Luxembourg S.A. L-2953 Luxembourg Attention: Mr. Jean Pierre Vernier Telex: 3326 BIL LU Telecopy: 35-2-4590-2010 EX-10.31 7 EXHIBIT 10.31 TO THE 1995 FORM 10K FOR APC ACKNOWLEDGMENT AND CONSENT OF GUARANTOR THIS ACKNOWLEDGMENT AND CONSENT OF GUARANTOR is made as of this 1st day of September, 1995, by AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation (the "Guarantor"), with reference to the following facts and circumstances: RECITALS A. Reference is made to that certain Amended and Restated Guarantee dated as of May 19, 1995 by the Guarantor in favor of Kreditanstalt fur Wiederaufbau, Commerzbank AG, Hamburg and the banks listed in Schedule 1 attached thereto (the "Guarantee"). Capitalized terms used herein and not otherwise defined have the meanings provided therefor in the Guarantee. B. Concurrently herewith, the Obligees, the Transferees and APL are entering into (i) that certain Amendment No. 2 to Loan Agreement of even date herewith (the "Loan Amendment"), which shall modify certain provisions of, and certain Exhibits to, the Loan Agreement referenced in the Guarantee, and (ii) that certain Second Amended and Restated Agreement to Acquire and Charter dated as of September 1, 1995 (the "AAC Amendment"), which shall amend and restate in its entirety the Agreement to Acquire and Charter referred to in the Loan Agreement. C. To induce the Obligees to enter into the Loan Amendment and the AAC Amendment, the Guarantor wishes to confirm (i) its consent to the Loan Amendment and the AAC Amendment and the transactions contemplated thereby and (ii) that the Guarantee remains in full force and effect. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby acknowledges and agrees for the benefit of the Obligees as follows: 1. The Guarantee is amended to reflect that: (a) from and after the date hereof, as used in the Guarantee the term "Loan Agreement" means the Loan Agreement referred to in the Guarantee, as the same has been amended by the Loan Amendment, and as the same may be further amended or supplemented from time to time in accordance with its terms, and (b) as of the date hereof, the Amended and Restated Agreement to Acquire and Charter referred to in the first "WHEREAS" clause of the Guarantee has been amended and restated in its entirety pursuant to the AAC Amendment. 2. The Guarantor hereby consents to the Loan Amendment, the AAC Amendment and each of the transactions contemplated thereby. 3. The Guarantor hereby confirms and reaffirms the full force, continuing effect and ongoing applicability of its obligations under the Guarantee. IN WITNESS WHEREOF, the Guarantor has executed this Acknowledgment and Consent of Guarantor as of the date and year first above written. AMERICAN PRESIDENT COMPANIES, LTD. By:__/s/____________________________ Name: Peter A. V. HYegel Title: Assistant Secretary EX-10.32 8 EXHIBIT 10.32 TO THE 1995 FORM 10K FOR APC ^DOCNUM^ * Application to be filed with the Securities and Exchange Commission, pursuant to Exchange Act Rule 24b-2, for confidential treatment of certain portions of this exhibit. AMENDMENT NO. 1 TO FIRST PREFERRED SHIP MORTGAGE APL CHINA Official No. MI 1092 Amendment No. 1 dated the 1st day of September, 1995 (the "Amendment") to First Preferred Mortgage dated May 19, 1995 (the "Mortgage") given by M.V. President Kennedy, Ltd., a Delaware corporation (the "Shipowner"), to Kreditanstalt fur Wiederaufbau, a public law company incorporated in the Federal Republic of Germany (the "Mortgagee"). WHEREAS: A. The Shipowner is the sole owner of the whole of the Marshall Islands flag vessel APL CHINA, Official No. MI 1092, of 64,502 gross and 33,003 net tons (the "Vessel"), duly documented in the name of the Shipowner, with her home port at the port of Majuro, The Marshall Islands, having been built in Kiel by Howaldtswerke-Deutsche Werft AG in 1995; B. The Mortgage was recorded at the Office of the Deputy Commissioner of Maritime Affairs of the Republic of The Marshall Islands at the Port of New York on May 19, 1995 in Book PM 6 at Page 23; C. The Mortgage secures indebtedness of the Shipowner to the Mortgagee in the maximum aggregate principal amount of * (the "Loans") and interest and the performance of mortgage covenants, such Loans having been or to be made pursuant to the terms of a Loan Agreement dated as of March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 and as further amended by Amendment No. 2 thereto dated September 1, 1995, by and among the Mortgagee, the Lenders named therein, American President Lines, Ltd. ("APL"), the Shipowner and the other Transferees named therein (the "Loan Agreement"); D. The Shipowner, together with M.V. President Jackson, Ltd., has executed an Amended and Restated HDW China Note dated the date hereof (a copy of which is attached hereto as Exhibit A), amending and restating in its entirety the HDW China Note dated May 19, 1995 (a copy of which is attached as Exhibit C to the Mortgage); E. The Shipowner and the Mortgagee have agreed, inter alia, to substitute the Amended and Restated HDW China Note for the HDW China Note attached as Exhibit C to the Mortgage, and to revise Recital C of the Mortgage to reflect the correct dollar amount for the portion of the Loans relating to the acquisition of the Vessel. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Shipowner and the Mortgagee hereby covenant and agree as follows: 1. The Amended and Restated HDW China Note attached hereto as Exhibit A shall be substituted for the HDW China Note attached as Exhibit C to the Mortgage. 2. The third sentence of Recital C of the Mortgage is amended and restated to read as follows: "The portion of the Loans relating to the acquisition of the Vessel is in the principal amount of *, which portion has been advanced by the Mortgagee on the date hereof, for which the Borrower is justly indebted and is evidenced by the specific HDW Notes dated May 19, 1995 (the "HDW China Notes") a copy of which is attached hereto as Exhibit C), and in order to induce the Mortgagee to make the Loans, the Borrower has agreed to grant this Mortgage to the Mortgagee to secure the HDW China Notes and the Borrower's joint and several liability under the Loan Agreement for the repayment of the remaining HDW Notes evidencing the Loans issued or to be issued by APL or any remaining Transferee (who shall be the owners of the Vessel, the APL JAPAN and the APL THAILAND) and the other obligations stated in ParagraphED below with respect to the acquisition of the other HDW Vessels other than the Vessel." 3. This Amendment amends the Mortgage. Wherever the term "Mortgage" is used in the Mortgage or the Loan Agreement, it shall be deemed to refer to the Mortgage as amended hereby, and the term "Loan Agreement" as used in the Mortgage or the Loan Agreement shall be deemed to mean and refer to the Loan Agreement as amended by Amendment No. 2 to Loan Agreement in the form attached hereto. 4. Except as specifically amended hereby, all the terms, covenants and conditions of the Mortgage remain unchanged and in full force and effect. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Shipowner and the Mortgagee have executed this Amendment the year and day first above written. M.V. PRESIDENT KENNEDY, LTD. By: /s/ Peter A.V. Huegel Name: Peter A.V. Huegel Title: Vice President KREDITANSTALT FUR WIEDERAUFBAU By: /s/ Ron D. Franklin Attorney-in Fact STATE OF NEW YORK ) :ss .: COUNTY OF NEW YORK ) On this 1st day of September, 1995 before me personally appeared Peter A.V. Huegel, known to me, and known to be the person who executed the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at 3368 Harlan Drive, Redding, California 96003; that he is Vice President of M.V. President Kennedy, Ltd., a Delaware corporation, the party described in and which executed the foregoing instrument; that he signed his name thereto by authority of the Board of Directors of said corporation and as the free act and deed of such corporation. /s/ Carla L. Clarke Notary Public CARLA L CLARKE Notary Public. State of New York No. 31-4848091 Qualified in New York County Commission Expires April 30, 1997 STATE OF NEW YORK ) :ss .: COUNTY OF NEW YORK ) On this 1st day of September, 1995 before me personally appeared Ron D. Franklin, known to me, and known to be the person who executed the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at 120 Central Park South, New York, New York 10019; that he is Attorney-in-Fact of Kreditanstalt fur Wiederaufbau, a public law company incorporated in the Federal Republic of Germany, the party described in and which executed the foregoing instrument; that he signed his name thereto by authority of the Board of Directors of said corporation and as the free act and deed of such corporation. /s/ Carla L. Clarke Notary Public CARLA L CLARKE Notary Public State of New York No 3i-484E091 Qualified in New York County Commission Expires April 30, 1997 EXHIBIT A to Amendment No. 1 AMENDED AND RESTATED HDW CHINA NOTE No.1 * LIBO RATE NOTE Issued in connection with the purchase financing of three (3) container vessels Original Issue Date: May 19, 1995 Amendment and Restatement Date: September 1, 1995 MATURITY DATE May 19, 2007 M.V. PRESIDENT KENNEDY, LTD. and M.V. PRESIDENT JACKSON, LTD. (together, the "Companies"), for value received, hereby jointly and severally promise to pay to the order of KREDITANSTALT FUR WEIDERAUFBAU or registered assigns the principal sum of * on the maturity date specified above. This Note shall bear interest on the unpaid principal amount hereof from time to time outstanding from the date hereof to but excluding the date due at the Interest Rate for each Interest Period (as such term is defined in the Loan Agreement referred to below) and shall be payable in arrears on each Interest Payment Date on a basis of the actual number of days elapsed over a year of three hundred sixty (360) days including the first day of the relevant Interest Period or portion thereof but excluding such Interest Payment Date), until the principal hereof is paid. Principal on this Note shall be payable on each Repayment Date in the amounts set forth in Schedule 1 attached hereto subject to any HDW * exercised by the Companies pursuant to Section 5.03 of the Loan Agreement. Capitalized terms contained herein and not defined herein, shall have the meanings specified in a certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 and as further amended by Amendment No. 2 thereto dated September 1, 1995 (the "Loan Agreement"), by and among American President Lines, Ltd. ("APL"), the corporations listed in Schedule A to Amendment No. 2, Kreditanstalt fur Wiederaufbau, Commerzbank AG, Hamburgt Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank- Girozentrale, Deutsche Verkehrs-Bank AG and Banque Internationale a Luxembourg S.A. The interest so payable, and punctually paid or duly provided for, on any such Interest Payment Date will, as provided in the Loan Agreement, be paid by the Companies to the Agent for payment to the Person in whose name this Note is registered at the close of business on the date for payment of such interest. Any such interest not so punctually paid or duly provided for shall be paid together with default interest which shall accrue on the amount of such overdue sum in the case of payments due as more fully provided in the Loan Agreement. Under the Loan Agreement, the Companies are obligated to pay interest on and the principal of this Note to the Agent in the manner as provided therein, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. This Note is subject to prepayment and acceleration as more fully described in the Loan Agreement. This Note is one of a duly authorized issue of Notes issued and to be issued under the Loan Agreement. Reference is made to the Loan Agreement and all supplements and amendments thereto (a copy of which is on file with each of the Companies at its principal corporate office) for a more complete statement of the terms and provisions thereof, including a statement of the properties thereby conveyed, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Companies, and the Holders of the Notes, and the terms upon which the Notes are, and are to be, executed and delivered, to all of which terms and conditions in the Loan Agreement each Holder hereof agrees by its acceptance of this Note. On the Fixed Rate Conversion Date, the Interest Rate on this Note shall be converted to the Fixed Rate. Upon such conversion, the Holders shall exchange this Note for a new Fixed Rate Note or Notes by delivery of this Note to the principal office of the Registrar or at an office or agency maintained for that purpose. If an Event of Default shall occur and be continuing, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement and the Agent may exercise whatever rights and remedies provided for therein. The right of the Holder of this Note to institute action for any remedy under the Loan Agreement, including the enforcement of payment of any amount due hereon, is subject to certain restrictions specified in the Loan Agreement. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is transferable, and upon surrender of this Note for registration of transfer at the principal office of the Registrar, or at the office or agency maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder or his attorney duly authorized in writing, one or more new Notes of the same maturity and type and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Loan Agreement and subject to certain limitations therein set forth, this Note is exchangeable for a like aggregate principal amount of LIBO Rate Notes of the same maturity and type and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal office of the Registrar, or at an office or agency maintained for such purpose. Prior to due presentment for registration of exchange or transfer of this Note, the Agent, the Paying Agent and the Registrar may deem and treat the Person in whose name this Note is registered as the absolute owner hereof for the purpose of receiving payment of the principal of and interest on this Note and for all other purposes whatsoever whether or not this Note be overdue, and neither the Agent, the Paying Agent nor the Registrar shall be affected by notice to the contrary. This Note shall not be entitled to any benefit under the Loan Agreement or be valid or obligatory for any purpose unless this Note has been executed pursuant to the provisions in the Loan Agreement. Notwithstanding anything herein or in any other Loan Document to the contrary, each of the Companies agrees that, upon its execution of this Note, it shall be jointly and severally, directly and primarily liable as a co-Borrower, together with all of the other Transferees that have or shall have executed an HDW Note under the Loan Agreement for payment in full of all Vessel Indebtedness respecting any or all of the HDW Vessels. The liability of the Companies shall be independent of the duties, obligations and liabilities of each and all of the other joint and several Transferees. Any Holder (subject to the provisions of the Loan Agreement) may bring a separate action or actions on each, any or all of such Vessel Indebtedness against each, any or all of such Transferees liable therefor, whether action is brought against any other or all of such Transferees, or any one or more of the Transferees is or is not joined therein. Notwithstanding anything herein, in the HDW Notes or in any other Loan Document to the contrary, by acceptance of this Note the Holder agrees that it will look solely to the Recourse Assets for all amounts coming due from the Transferees (or any Transferee) under the Loan Agreement, under the HDW Notes or under any of the other Loan Documents, and for the performance of all covenants, agreements and obligations and for the breach of representations and warranties or covenants of the Companies (or any Transferee) under the Loan Agreement or under the HDW Notes or any of the other Loan Documents, or under any certificate or other documents executed and delivered by the Companies as contemplated by the Loan Documents, and, therefore, notwithstanding anything contained in any of the aforesaid documents, no judgment or recourse (except a judgment against the Recourse Assets or any of them) shall be sought or enforced for the payment or performance of the Companies' (or any Transferee's) obligations under the Loan Agreement, the HDW Notes, any other Loan Document or any such other certificate or document: (a) against the Companies in their individual or personal capacities, other than in connection with the enforcement of remedies against the Recourse Assets or (b) against any assets or property of the Companies other than the Recourse Assets; provided, however, that nothing in this paragraph shall (x) limit or otherwise prejudice in any way the rights of the Holders to proceed against the Guarantor under the Guarantee or (y) constitute or be deemed to be a release of the obligations secured by, or impair the enforceability of, the liens, mortgage interests or other security interests created by the Security Documents, or to restrict the remedies available to the Holders to realize upon the Security Documents or enforce the Guarantee. This Note amends and restates in its entirety the HDW China Note dated May 19, 1995 made by M.V. President Kennedy, Ltd. in favor of Kreditanstalt fur Wiederaufbau. AS PROVIDED IN THE LOAN AGREEMENT, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, each of the Companies has caused this instrument to be executed by its duly authorized representative. M.V. PRESIDENT KENNEDY, LTD. By:_________________________ Name: Peter A.V. Huegel Title: Vice President M.V. PRESIDENT JACKSON, LTD. By:____________________________ Name: Peter A.V. Huegel Title: Vice President Attest: By:___________________________ Title: Consented and agreed to as of the date first above written: KREDITANSTALT FUR WIEDERAUFBAU By:___________________________ Title: Attorney-in-Fact SCHEDULE 1 Repayment Dates and Principal Amounts * EX-10.33 9 EXHIBIT 10.33 TO THE 1995 FORM 10K FOR APC ^DOCNUM^ * Application to be filed with the Securities and Exchange Commission, pursuant to Exchange Act Rule 24b-2, for confidential treatment of certain portions of this exhibit. AMENDMENT NO. 1 TO BAREBOAT CHARTER PARTY Amendment No. 1 (this "Amendment") made the 1st day of September, 1995 by M.V. President Kennedy, Ltd. ("Owner") and American President Lines, Ltd. ("Charterer") WHEREAS, M.V. Kennedy, Ltd., a Delaware corporation, as Owner, and American President Lines, Ltd., as Charterer, entered into that certain Bareboat Charter Party dated May 19, 1995 (the "Charter") relating to the vessel known as "APL CHINA; and WHEREAS, the Charter was assigned by Owner to Kreditanstalt fur Wiederaufbau, a public law company incorporated in the Federal Republic of Germany ("the Assignee") pursuant to the APL China Charter Assignment dated May 19, 1995. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Charter as follows: 1. Section 2(b) the Charter is amended with effect commencing May 19, 1995 by deleting it in its entirety and by substituting the following therefor: (b) Subject to the provisions of Section 24(b)(i) hereof, Charter hire ("Charter Hire") shall, subject to the provisions of this Section 2(b), be paid by Charterer to, or for the account of, Owner in the following two components: (i) "Basic Hire" consisting of (x) principal and interest due with respect to the Subportion relating to the Vessel from the Borrower to the Agent pursuant to Sections 3, 4, 5, 6 and 12 of the Loan Agreement, and the HDW Notes related to such Subportion issued by Owner pursuant to Section 4 of the Loan Agreement, at the times and places, in the manner and to the parties set forth in said sections and such Notes, including without limitation the provisions of Section 3.05 with respect to *, Section 3.08 with respect to default interest, Section 5.03 with respect to *, and Section 5.04 with respect to prepayment and (y) all indemnity payments required under Section 11 of the Loan Agreement when due and payable, and (ii) "Additional Charter Hire" payable semi-annually at the time of payment of Basic Hire for such semi-annual period calculated at the rate of * ; provided that (A), if Basic Hire exceeds Additional Charter Hire for any such semi-annual period no Additional Charter Hire shall be payable for such period and (B), if Additional Charter Hire exceeds Basic Charter Hire for any such semiannual period, Additional Charter Hire shall be payable in an amount equal to the difference between Basic Hire and the amount of Additional Charter Hire for such period; provided further, that Charter Hire shall always be in an amount sufficient to cover Basic Hire and Supplemental Charter Hire. 2. Except as amended hereby, the terms and provisions of the Charter remain in full force and effect. IN WITNESS WHEREOF, Owner and Charterer have caused this Amendment to be duly executed as of the day and year first above written. M.V. PRESIDENT KENNEDY, LTD., By:/s/ Peter A.V. Huegel Name: Peter A.V. Huegel Title: Vice President AMERICAN PRESIDENT LINES, LTD., as Charterer By:/s/ Thomas R. Meier Name: Thomas R. Meier Title: Assistant Treasurer Consented to: KREDITANSTALT FUR WIEDERAUFBAU By:Ron Franklin Its: Attorney-in-Fact CONSENT TO AMENDMENT TO CHARTER Reference is made to that certain Bareboat Charter Party (the "Charter") dated May 19,1995 between M.V. President Kennedy, Ltd., a Delaware corporation, as owner, and American President Lines, Ltd., a Delaware corporation, as charterer which was assigned to Kreditanstalt fYr Wiederaufbau (the "Assignee") pursuant to that certain APL Charter Assignment between M.V. President Kennedy, Ltd. dated May 19, 1995 (the "Assignment"). Pursuant to Section 2(f) of the Assignment, the Assignee hereby consents to Amendment No. 1 to Bareboat Charter Party in the form annexed hereto as Exhibit A. Dated this 1st day of September, 1995. KREDITANSTALT FUR WIEDERAUFBAU, as Assignee By: /s/ Ron Franklin Name: Ron Franklin Title: Attorney-in-Fact EX-10.34 10 EXHIBIT 10.34 TO THE 1995 FORM 10K FOR APC * Application to be filed with the Securities and Exchange Commission, pursuant to Exchange Act Rule 24b-2, for confidential treatment of certain portions of this exhibit. EXECUTION COPY ___________________________________________________________________ SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER By and Among AMERICAN PRESIDENT LINES, LTD., Transferor, M.V. PRESIDENT KENNEDY, LTD., M.V. PRESIDENT ADAMS, LTD., M.V. PRESIDENT JACKSON, LTD., M.V. PRESIDENT POLK, LTD., M.V. PRESIDENT TRUMAN, LTD., APL SHIPHOLDINGS, LTD., Transferees, KREDITANSTALT FUR WIEDERAUFBAU (as Agent and Lender), COMMERZBANK AG, HAMBURG (as Syndicate Agent), COMMERZBANK AG (KIEL BRANCH), DRESDNER BANK AG (HAMBURG), VEREINS-und WEST BANK AG, DEUTSCHE SCHIFFSBANK AG NORDDEUTSCHE LANDESBANK-GIROZENTRALE and DEUTSCHE VERKEHRS-BANK AG (HAMBURG BRANCH) BANQUE INTERNATIONALE A LUXEMBOURG S.A. (as the Syndicate) Dated September 1, 1995 ________________________________________________________________ TABLE OF CONTENTS Page RECITALS 1 SECTION 1. DEFINITIONS 4 SECTION 2. TRANSFER AND CHARTER OF THE VESSELS 6 SECTION 3. CONDITIONS PRECEDENT TO A TRANSFEREE'S OBLIGATIONS ON A DELIVERY DATE 7 SECTION 4. REPRESENTATIONS AND WARRANTIES OF TRANSFEREES 10 SECTION 5. COVENANTS 14 SECTION 6. RELEASE OF A TRANSFEREE 18 SECTION 7. THIRD PARTY VESSEL EXCHANGE 18 SECTION 8. NOTICES 19 SECTION 9. COUNTERPARTS 19 SECTION 10. MODIFICATION 19 SECTION 11. SUCCESSORS AND ASSIGNS 19 SECTION 12. GOVERNING LAW 19 SECTION 13. ASSIGNMENT 20 SECTION 14. SEVERABILITY 20 SECTION 15. TABLE OF CONTENTS; HEADINGS 20 SCHEDULE 1 List of Transferees SCHEDULE 2 List of Syndicate Banks EXHIBIT A Form of Charter (Vessel transferred to Transferee by Original Owner) EXHIBIT A-1 Form of Charter (Vessel transferred to Transferee by Transferor) EXHIBIT B-l Form of HDW Certificate of Delivery and Acceptance EXHIBIT B-2 Form of Daewoo Certificate of Delivery and Acceptance EXHIBIT C Form of Charter Assignment/Second Charter Assignment and Consent EXHIBIT D Form of Charter Guarantee SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER THIS SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER (this "Acquisition Agreement") is made and entered into as of this 1st day of September, 1995 by and among (i) AMERICAN PRESIDENT LINES, LTD., a Delaware corporation (the "Transferor"); (ii) the six corporations listed on Schedule 1 attached hereto (collectively, the "Transferees" and each, individually, a "Transferee"); (iii) KREDITANSTALT FUR WIEDERAUFBAU ("KfW"), a public law corporation incorporated in the Federal Republic of Germany; (iv) COMMERZBANK AG, HAMBURG, a banking corporation incorporated in the Federal Republic of Germany (the "Syndicate Agent)"; and (v) the banks listed in Schedule 2 attached hereto (each a "Syndicate Member" and, collectively, the "Syndicate"). This Acquisition Agreement amends, restates and supersedes in its entirety that certain Agreement to Acquire and Charter dated March 14, 1994 among the parties hereto, which Agreement was previously amended and restated in its entirety pursuant to that certain Amended and Restated Agreement to Acquire and Charter dated May 19, 1995 among the parties hereto and acknowledged by APL Newbuildings, Ltd., a Nevada corporation (collectively, the "Old AAC"). RECITALS: A. The Transferor has contracted to purchase three (3) container vessels (the "HDW Vessels") from Howaldeswerke- Deutsche Werft AG ("HDW'') as is more specifically set forth in a certain Shipbuilding Agreement dated May 10, 1993, as amended (the OHDWO Shipbuildinq Agreement"), between the Transferor and HDW. B. The three (3) HDW Vessels have been or will be named as follows: (i) APL CHINA (Builder's Hull No. 297), (ii) APL JAPAN (Builder's Hull No. 298) and (iii) APL THAILAND (Builder's Hull No. 299). C. The Transferor has also contracted to purchase three (3) container vessels (the "Daewoo Vessels") from Daewoo Shipbuilding & Heavy Machinery Ltd. ("Daewoo") as is more specifically set forth in a certain Shipbuilding Agreement dated May 10, 1993, as amended (the "Daewoo Shipbuilding Agreement"), between the Transferor and Daewoo (the HDW Vessels and the Daewoo Vessels being individually referred to as a Vessel and, collectively, as the OVesselsO). D. The three (3) Daewoo Vessels have been or will be named as follows: (i) APL KOREA (Builder's Hull No. 4028), (ii) APL SINGAPORE (Builder's Hull No. 4029) and (iii) APL PHILIPPINES (Builder's Hull No. 4033). E. The Transferor, KfW, the Syndicate Agent and the Syndicate entered into a Loan Agreement dated March 14, 1994, providing a loan facility in respect of the HDW Vessels and the Daewoo Vessels under which the Transferor may borrow from KfW up to * (the "HDW Tranche") for the purchase of the HDW Vessels; and may borrow from the Syndicate up to * (the "Daewoo Tranche") for the purchase of the Daewoo Vessels (said Loan Agreement, as amended by Amendment No. 1 thereto dated as of May 19, 1995 and Amendment No. 2 thereto of even date herewith, and as the same may be further amended and supplemented from time to time in accordance with its terms, being hereinafter referred to as the "Loan Agreement"). F. The parties hereto wish to allow the Transferor to make partial assignments of the HDW Shipbuilding Agreement or the Daewoo Shipbuilding Agreement to up to six separate Delaware corporations, each to be a wholly-owned subsidiary of American President Companies, Ltd., a Delaware corporation (the "Charter Guarantor") (such subsidiaries being referred to, collectively, as the "Original Owners" and, individually, as an "Original Owner"), each Original Owner to be partially assigned the HDW Shipbuilding Agreement or the Daewoo Shipbuilding Agreement, as the case may be, only insofar as such Agreement relates to a single Vessel; provided, however, that, as provided in the Loan Agreement, the Transferor reserves the right not to assign any Shipbuilding Agreement, but to take title directly to the relevant Vessel and either to draw down the applicable Subportion under the Loan Agreement or to transfer the Vessel to a Transferee following the Transferor's acquisition of a Vessel pursuant to an Exchange Agreement. G. The Original Owners, each of which is to be a Delaware corporation, will acquire the Vessels from the respective Builders as follows (if at all): (1) APL Newbuildings, Ltd., a Delaware corporation, to acquire APL CHINA; (2) APL M.V. Korea, Ltd., a Delaware corporation, to acquire APL KOREA; (3) APL M.V. Japan, Ltd., a Delaware corporation, to acquire APL JAPAN; (4) APL M.V. Singapore, Ltd., a Delaware corporation, to acquire APL SINGAPORE; (5) APL M.V. Thailand, Ltd., a Delaware corporation, to acquire APL Thailand; and (6) APL M.V. Philippines, Ltd., a Delaware corporation, to acquire APL PHILIPPINES. H. On May 19, 1995, pursuant to the Old AAC, APL CHINA was delivered by the Builder to APL Newbuildings, Ltd., and, on the same date, APL CHINA was transferred by APL Newbuildings, Ltd. to one of the Transferees, M.V. President Kennedy, Ltd., as part of an exchange for a C-10 conbulk vessel owned by such Transferee, prior to the draw down of the Subportion relating to such Vessel by such Transferee. I. With respect to any of the remaining Vessels, if the Transferor so requests, the parties desire to permit the Vessel to be delivered by the applicable Builder to such Original Owner, which Original Owner would remain the owner of the Vessel and would become a "Transferee" authorized to draw down the Subportion relating to that Vessel, subject however to the execution of amendments to the Operative Documents mutually acceptable to the Transferor, such Original Owner and the Lenders as provided in Section 7(k) of the Loan Agreement. J. The parties also desire to permit, upon the terms and conditions set forth herein, title to each of the Vessels (other than APL CHINA) to be transferred by the Original Owner thereof to the Transferor as part of an exchange for a C-10 conbulk vessel owned by the Transferor, whereupon the Transferor would transfer the Vessel in question to the appropriate Transferee, in connection with the draw down of the Subportion relating to such Vessel by such Transferee, and such Transferee shall be permitted to draw down the Subportion applicable to its Vessel upon such transfer of the Vessel by the Transferor. K. Concurrently with any transfer of each Vessel to a Transferee in accordance with the terms hereof, the Transferor shall enter into a Charter for such Vessel to be so transferred, as evidenced by the execution of an HDW Charter, if the Vessel is one of the Vessels being financed under the HDW Tranche, or a Daewoo Charter, if the Vessel is one of the Vessels being financed under the Daewoo Tranche, each Charter to be in the form of (i) Exhibit A hereto, if Vessel in question is being transferred to the Transferee by the Original Owner, or (ii) Exhibit A-1 hereto, if the Vessel in question is being transferred to the Transferee by the Transferor. L. Concurrently with the execution of each Charter in the form of Exhibit A hereto, the Charter Guarantor shall execute and deliver to the relevant Transferee a guarantee of payment obligations of the Transferor as charterer under such Charter (it being understood that no such guarantee shall be required with respect to Charters in the form of Exhibit A-1 hereto). M. Concurrently with the execution and delivery of each Charter, the Transferee will assign all of its right, title and interest in and to such Charter (and, if there is one, the guarantee by the Charter Guarantor of the charter payment obligations of the Transferor) to: (i) KfW if it relates to an HDW Vessel, (ii) the Syndicate Agent and the Syndicate if it relates to a Daewoo Vessel, and (iii) KfW (as a second priority assignment) if it relates to a Daewoo Vessel, in each case as security for the Transferee's obligations under the Loan Documents. N. Pursuant to the Loan Agreement, the Charter Guarantor has executed and delivered to the Lenders an Amended and Restated Guarantee dated May 19, 1995, which guarantees all obligations of the Transferor and each Transferee as Borrower under the Loan Agreement and Security Documents. NOW, THEREFORE, in consideration of mutual agreements herein contained, the parties hereto agree as follows: SECTION 1. Definitions. A. The terms "hereof", "herein", "hereby", "hereto", "hereunder" and "herewith" refer to this Agreement as the same may be supplemented or amended. B. Reference to a given agreement or instrument is a reference to that agreement or instrument as originally executed, and as modified, amended, supplemented and restated through the date as of which reference is made to that agreement or instrument. C. All capitalized terms used in this Acquisition Agreement including the Whereas clauses hereof which are not defined herein shall have the meanings ascribed to them in the Loan Agreement and in the Schedules and Appendices to the Loan Agreement. In addition, the following capitalized terms shall have the meanings set forth below: "Certificate of Delivery and Acceptance" means, with respect to a given Vessel, a certificate in the form of Exhibit B-1 or Exhibit B-2, as the case may be, to this Acquisition Agreement dated on the Vessel's Delivery Date, evidencing the delivery of that Vessel to the designated Transferee and the acceptance by such Transferee. "Charter Assignment" means each, and "Charter Assignments" means every, first priority assignment of each HDW Charter and each Daewoo Charter by the appropriate Transferee of the Vessel relating thereto to KfW and to the Syndicate Agent and the Syndicate, respectively, as security for such Transferee's obligations as provided under the Loan Documents and in the form of Exhibit C to this Acquisition Agreement. "Charter Documents" means this Acquisition Agreement, the *, the Bills of Sale from the appropriate Original Owner (if applicable) and the Transferor (following a vessel exchange between the Transferor and an Original Owner), as the case may be, to the Transferee, the Certificates of Delivery and Acceptance, the Charters, the Charter Hire Guarantees, the Charter Assignments and the Second Charter Assignments; provided, however, that, if a Vessel is transferred by the Transferor (following a vessel exchange between the Transferor and an Original Owner) directly to the Transferee in accordance with the terms hereof, there shall be no Charter Hire Guarantee in respect of such Vessel. "Charter Hire Guarantee" means each, and "Charter Guarantees" means every, guarantee by the Charter Guarantor of the payment obligations of the Transferor under a Charter, in the form of Exhibit D to this Acquisition Agreement; provided, however, that, if a Vessel is transferred by the Transferor (following a vessel exchange between the Transferor and an Original Owner) directly to the Transferee in accordance with the terms hereof, there shall be no Charter Hire Guarantee in respect of such Vessel. * "Second Charter Assignment and Consent" means each, and "Second Charter Assignments" means every, second priority assignment of a Daewoo Charter and, if applicable, the related Charter Hire Guarantee by the Transferee of the Vessel relating thereto to KfW as security for such Transferee's obligations under the Loan Documents with respect to the Vessel Indebtedness under the HDW Tranche in the form of Exhibit C to this Acquisition Agreement. "Solvent" means, with respect to any Transferee on a Delivery Date, that on such date each of the following is true as determined under generally accepted accounting principles: (i) the fair market value of the assets of the Transferee is greater than the total amount of liabilities (including contingent liabilities) of the Transferee, (ii) the present fair salable value of the assets of the Transferee is greater than the amount that will be required to pay the probable liabilities of the Transferee for its debts as they become absolute and matured, (iii) the Transferee is able to realize upon its assets and pay its debts and any other liabilities, including contingent obligations, as they mature and (iv) the Transferee does not have unreasonably small capital. SECTION 2. Transfer and Charter of the Vessels. With respect to any acquisition of a Vessel by a Transferee: A. On the Delivery Date for such Vessel, upon the satisfaction of all conditions precedent set forth in Section 7 of the Loan Agreement and Sections 2 and 3 of this Acquisition Agreement, the Transferee shall acquire such Vessel from the Original Owner or the Transferor (following a vessel exchange between the Transferor and an Original Owner), and the Lenders shall make their Commitment available to the Transferee. B. The Vessel will have been registered in the name of the initial owner thereof (i.e., the Original Owner or the Transferor following a vessel exchange between the Transferor and an Original Owner, as the case may be) under the laws of the Republic of The Marshall Islands and then reregistered in the name of the Transferee under the laws of the Republic of The Marshall Islands free and clear of all liens, claims and encumbrances; provided, however, that, if such Vessel is transferred by the Original Owner to the Transferor (following a vessel exchange between the Transferor and an Original Owner), then, immediately prior to the transfer of the Vessel by the Transferor to the Transferee, the Vessel shall also have been reregistered in the name of the Transferor under the laws of the Republic of The Marshall Islands. C. Upon its acquisition of any Vessel pursuant to the terms hereof (following a vessel exchange between the Transferor and an Original Owner), the Transferor will execute, deliver and record a first preferred mortgage, and with respect to the Daewoo Vessels a second preferred mortgage, in substantially the form attached to the Loan Agreement, covering the Vessel in favor of the relevant Lenders. D. Following the acquisition of any Vessel by the relevant Transferee from the Transferor (following a vessel exchange between the Transferor and an Original Owner), and in connection with the drawdown of the relevant Subportion under the Loan Agreement, the Transferee will execute, deliver and record an assumption of the first preferred mortgage executed by the Transferor, and with respect to the Daewoo Vessels an assumption of the second preferred mortgage executed by the Transferor, in substantially the form attached to the Loan Agreement. E. Simultaneously with the actions specified in Section 2.C and Section 2.D, the Transferor shall charter such Vessel from the Transferee, the Transferee shall charter such Vessel to the Transferor, pursuant to the relevant Charter (it being understood that if the Vessel is transferred to the Transferee by the Transferor (following a vessel exchange between the Transferor and an Original Owner) in accordance with the terms hereof, the Charter shall be in the form of Exhibit A-1 hereto, instead of Exhibit A hereto), and the Charter Guarantor shall execute and deliver the related Charter Hire Guarantee; provided, however, that, if the Vessel is transferred by the Transferor (following a vessel exchange between the Transferor and an Original Owner) to the Transferee in accordance with the terms hereof, it is understood that no Charter Hire Guarantee shall be required. F. In connection with the actions specified in Sections 2.A, 2.B, 2.C and 2.D, the Transferees shall, as required in the Loan Agreement (i) execute and deliver one or more HDW Note(s) (in the case of an HDW Vessel) or one or more Daewoo Note(s) (in the case of a Daewoo Vessel), (ii) undertake all obligations as a co-borrower with joint and several liability with the other Transferees, with respect to the HDW Tranche and/or the Daewoo Tranche, as the case may be, as evidenced by the execution and delivery of Note endorsements, and (iii) undertake all other obligations the Transferee may have under the Loan Documents. G. Delivery and presentation of all documents to complete the transactions contemplated herein shall be made at the Closings to be held on the Delivery Dates convened pursuant to the Loan Agreement. SECTION 3. Conditions Precedent to a Transferee's Obligations on a Delivery Date. A Transferee's right to receive a Loan in respect of its Vessel is expressly conditioned upon the following preconditions being satisfied and upon receipt by the Agent or the Syndicate Agent, as the case may be, of the following documents and evidenced on or before a closing to be held on the Delivery Date at the offices of Haight, Gardner, Poor & Havens, 195 Broadway, New York, New York 10007, or at such other place as may be agreed upon by the Transferor, such Transferee, the Agent and the Syndicate Agent: (a) the Transferee shall be a corporation duly organized and existing in good standing under the laws of the jurisdiction of its incorporation; the Transferee shall have full corporate power and authority to own its assets, conduct its business as then being conducted, and enter into and consummate the transactions contemplated hereby and by the Charter Documents and the Security Documents to which it is a party, and the Agent or the Syndicate Agent, as the case may be, shall have received (1) a certified copy of the certificate of incorporation of the Transferee, (2) a certificate of the Secretary of the Transferee attaching the minutes or resolutions of its Board of Directors authorizing the transactions contemplated herein, (3) a certificate from the Secretary of the Transferee or evidencing the authority of the persons executing the Loan Documents and the Charter Documents to which it is a party, to execute and deliver such Loan Documents and Charter Documents and the Transferee to perform under the Loan Documents and Charter Documents to which it is a party, and (4) a certificate of good standing as to the Transferee, all in form and substance reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be, and its special counsel; (b) the Agent and the Syndicate Agent shall have received no later than sixty (60) days prior to the above-referenced closing, written notice from the Transferor of its intention to cause such Vessel to be acquired by the Transferee in accordance with the provisions of this Acquisition Agreement; (c) the Transferor and the Original Owner, if any, acquiring such Vessel, shall have entered into an assignment and assumption agreement pursuant to which the Transferor shall have assigned to such Original Owner, and such Original Owner shall have assumed, all of the Transferor's right, title and interest in and to, and all of the Transferor's obligations under, the related HDW Shipbuilding Agreement or Daewoo Shipbuilding Agreement, as the case may be, to the extent the same relates to such Vessel; (d) concurrently with the Transferor's acquisition of any Vessel (following a vessel exchange between the Transferor and an Original Owner), the Transferor and the Original Owner shall have entered into an assignment agreement, pursuant to which such Original Owner shall have assigned to the Transferor all of such Original Owner's right, title and interest in and to the related HDW Shipbuilding Agreement or Daewoo Shipbuilding Agreement, as the case may be to the extent the same relates to such Vessel; (e) no Event of Default shall have occurred and be continuing and no Incipient Default shall have occurred and be continuing and the Transferee shall provide an officer's certificate to such effect in form and substance reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be, and its special counsel; (f) there shall not have occurred any material adverse change in the financial condition of the Transferee (or any other Transferee that has already received a Loan that remains outstanding in whole or in part) which in the reasonable opinion of the Agent and/or the Syndicate would materially and adversely affect the ability of any such Transferee to perform its obligations as to the repayment of the Facility by the installments together with interest thereon as herein set out or to perform its obligations under the Loan Documents to which it is or will become a party; (g) all representations and warranties of the Transferee (and any other Transferee that has already received a Loan that remains outstanding in whole or in part) contained in this Acquisition Agreement and of the Charter Guarantor in the Charter Hire Guarantee (if a Charter Hire Guarantee is required hereunder) being true and correct in all material respects on that Delivery Date, except insofar as they relate exclusively to an earlier date, and the Transferee shall provide officer's certificates confirming such matters; (h) all governmental and other consents, licenses, approvals and authorizations, if any, required with respect to the performance of (i) the Transferee under this Acquisition Agreement and the other Loan Documents and Charter Documents to which it is a party, and (ii) the Transferor and the Charter Guarantor (if a Charter Hire Guarantee is required hereunder) under this Acquisition Agreement and the other Loan Documents and Charter Documents to which it is a party shall have been obtained and shall not have been revoked and, if requested by the Agent or the Syndicate Agent or its special counsel, copies of any of the same shall be provided; (i) all Uniform Commercial Code financing statements or other document necessary, or reasonably requested by the Agent or the Syndicate Agent to perfect its security interests under any of the Security Documents and the Charter Documents in the United States of America, the jurisdiction of registration of such Vessel or any other relevant jurisdiction; (j) evidence that such Vessel has been duly registered (i) first in the name and ownership of the Transferor and (ii) then in the name and ownership of the Transferee, in each case under the laws and flag of the Republic of The Marshall Islands, free of registered liens except the relevant Mortgage(s); (k) each Loan Document and Charter Document in respect of such Vessel shall have been duly executed, delivered and, where appropriate, registered or recorded (together with any documents to be executed pursuant to the terms thereof, including without limitation, notices of the Assignment(s) of Insurance); (l) each of the Lenders shall have received executed originals of the opinions as to the Transferee substantially in the form attached as Schedule 4 to the Loan Agreement as well as such other opinions from such counsel as each Lender shall reasonably request and each of the Lenders shall have received from its special counsel, Haight, Gardner, Poor & Havens, a favorable opinion, in form and substance satisfactory to the Lenders, as to such matters incident to the transactions contemplated hereby as any such Lender may reasonably request; and (m) all conditions precedent as set forth in Section 7 of the Loan Agreement shall have been satisfied. SECTION 4. Representations and Warranties of Transferees. Each of the Transferees represents and warrants to each of the Lenders that: (a) the Transferee is a corporation duly organized and validly existing in good standing under the laws of its jurisdiction of incorporation with full corporate power and authority to conduct its business as the same is presently conducted; (b) the Transferee has legal power and authority to enter into and carry out the terms of this Acquisition Agreement and each of the other Loan Documents and the Charter Documents to which the Transferee will be a party; (c) each of this Acquisition Agreement, the other Loan Documents and the Charter Documents to which the Transferee will be a party has been (or prior to the execution thereof will have been) duly authorized by all necessary action, corporate or other, on the part of the Transferee, and this Acquisition Agreement constitutes, and, upon due execution and delivery by the Transferee, each of the other Loan Documents and the Charter Documents to which the Transferee is or will be a party will constitute, in accordance with their respective terms, legal, valid and binding instruments enforceable against the Transferee, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws of general application relating to or affecting the enforcement of creditors, rights from time to time in effect; (d) except as previously disclosed to the Syndicate Agent and the Agent in writing, there are no actions, suits or proceedings pending or, to the Transferee's knowledge, threatened against the Transferee, any of its properties affecting this Acquisition Agreement, the other Loan Documents or the Charter Documents to which the Transferee is or will be a party or the transactions contemplated thereby which would materially and adversely affect the performance of the Transferee of its obligations (if any) thereunder; (e) the consummation of the transactions contemplated by, and compliance by the Transferee with all the terms and provisions of, this Acquisition Agreement, the other Loan Documents and the Charter Documents to which the Transferee is or will be a party will not violate any provisions of the Certificate of Incorporation or Bylaws of the Transferee and will not result in a breach of the terms and provisions of, or constitute a default under, any other agreement or undertaking by the Transferee or by which it or any of its property is bound or any order of any court or administrative agency entered in any proceedings binding on the Transferee, or violate any applicable statute, rule or regulation; (f) the Transferee is not in default and no condition exists which with notice or lapse of time or both would constitute a default by the Transferee, in any respect which would materially and adversely affect the ability of the Transferee to perform its obligations under this Acquisition Agreement, any other Loan Document, any Charter Document; under any mortgage, loan agreement, deed of trust, indenture or other agreement with respect thereto or evidence of indebtedness to which it is a party or by which it is bound, and is not in violation of or in default, in any respect which would materially and adversely affect the ability of the Transferee to perform its obligations under this Acquisition Agreement, any other Loan Document, or any Charter Document, under any order, writ, judgment or decree of any court, arbitrator or governmental authority, commission, board, agency or instrumentality, domestic or foreign; (g) the Transferee has only one place of business (which is also the location of the place of business that is its chief executive office), which is 1111 Broadway, Oakland, California 94607; (h) the Transferee has no knowledge of any actual or proposed deficiency or additional assessment in connection with any Taxes which either in any case or in the aggregate would be materially adverse to the Transferee and which would materially and adversely affect the ability of the Transferee to perform its obligations under this Acquisition Agreement, any of the other Loan Documents or any of the Charter Documents; (i) all Taxes (other than taxes based on or measured by income and withholding taxes), liability for the payment of which has been incurred by the Transferee in connection with the execution, delivery and performance by it of this Acquisition Agreement, each other Loan Document and Charter Document to which it is or will be a party, have been paid (or provided for in its accounts if not payable on or prior to the Delivery Date of the respective Vessel); (j) all governmental consents, licenses, permissions, approvals, registrations or authorizations or declarations required (i) to enable it lawfully to enter into and perform its respective obligations under this Acquisition Agreement, each of the other Loan Documents and each of the Charter Documents to which it is or will be a party and (ii) to ensure that its respective obligations hereunder and thereunder are legal, valid and enforceable have been obtained or made and are in full force and effect or will be obtained or made and be in full force and effect on the date any such document is executed and delivered; and all governmental consents, licenses, permissions, approvals, registrations or authorizations or declarations of the country of registry of each vessel required (A) to enable it lawfully to enter into and perform its obligations under the Mortgage(s) to which it will be a party, (B) to ensure that its obligations thereunder are legal, valid and enforceable and (C) to make the Mortgage(s) to which it will be a party admissible in evidence in the country in which each Vessel is registered and the United States of America, will be obtained or made and be in full force and effect on the date any such Mortgage is executed and delivered; (k) it has not taken any corporate action nor, to its knowledge, have any other steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or reorganization or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of any or all of its respective assets and revenues; (l) except as provided by applicable laws of bankruptcy, insolvency, liquidation or similar laws of general application, its obligations under this Acquisition Agreement, each of the other Loan Documents, and, except as otherwise contemplated by the Charter Documents, each of the Charter Documents rank and will rank at least pari passu in priority of payment, and as to security having the priority contemplated by the Loan Documents and in all other respects with all its respective other indebtedness; (m) except for registration of the First Mortgage on each Vessel (and the assumption of such Mortgage, as required) and the Second Mortgage on each Daewoo Vessel (and the assumption of such Mortgage, as required) under the laws and flag of the Republic of The Marshall Islands (including any other Loan Document or Charter Document required by the laws of the country of the mortgaged vessel's registry to be filed with such Mortgages), it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Acquisition Agreement, any of the other Loan Documents or any of the Charter Documents to which it is or will be a party in the United States of America or, to the best of its knowledge, elsewhere or that it be filed, recorded or enrolled with any governmental authority or agency in the United States of America or, to the best of its knowledge, elsewhere, that it be stamped with any stamp, registration or similar transaction tax in the United States of America or, to the best of its knowledge, elsewhere; (n) each Transferee is a wholly-owned Subsidiary of the Transferor; the Transferor is a wholly-owned Subsidiary of the Charter Guarantor; (o) the Transferee does not maintain any Plans; (p) none of the proceeds of the Loans will be used to purchase or carry margin stock within the meanings of Regulations G, T, U and X of the Board of Governors of the Federal Reserve System; the Transferee is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System; (q) it is not an "investment company" or a company "controlled" by an "investment company" (as each of such terms is defined or used in the Investment Company Act of 1940, as amended); (r) the Vessel acquired by the Transferee will be duly documented in the name of the Transferee under the flag of the Republic of The Marshall Islands; (s) the Vessel acquired by the Transferee will be in the absolute and unencumbered ownership of the Transferee except as contemplated by this Acquisition Agreement, the other Loan Documents and the Charter Documents; (t) the Transferee is, and immediately after the relevant Lender advances its Commitment will be, Solvent; and (u) the Transferor is a wholly-owned Subsidiary of the Charter Guarantor. SECTION 5. Covenants. A. Affirmative Covenants. Each of the Transferees covenants with each of the Lenders that it shall: (1) do all that is necessary to maintain in full force and effect its corporate existence in good standing under the laws of its jurisdiction of incorporation and use its best efforts to obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by the laws of its jurisdiction of incorporation and the United States of America and any other relevant jurisdiction to enable the Transferee to enter into and perform its obligations under the Loan Documents and the Charter Documents to which the Transferee is or will become a party and to ensure the legality, validity, enforceability or admissibility in evidence in the United States of America of the Loan Documents and the Charter Documents to which the Transferee is or will become a party and to comply with the terms of and to do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by the national laws of the Republic of The Marshall Islands to enable the Transferee to enter into and perform its obligations under the Mortgages to which it is or will become a party and to ensure the legality, validity, enforceability and admissibility in evidence in such country of each such Mortgage; (2) from time to time on the request of the Lenders, but at the expense of the Transferee, do all such acts and execute or procure the execution of all such assurances and documents as the Agent or the Syndicate Agent may reasonably consider necessary for giving full effect to the Loan Documents and the Charter Documents to which it is or will become a party or for more effectively subjecting the security interests under the Security Documents and Charter Documents to which it is or will be a party to the liens of such Security Documents or more effectively subject such security interests to the performance of the provisions thereof; (3) promptly inform the Agent and the Syndicate Agent of the occurrence of any Incipient Default or an Event of Default and upon receipt of a written request from the Agent or the Syndicate Agent to do so, confirm to the Agent or the Syndicate Agent, as the case may be, that save as previously notified to the Agent or the Syndicate Agent, as the case may be, to the best of the knowledge of the Transferee, no Event of Default has occurred; (4) if the Transferee's agent for service of process referred to in Section 11 shall for any reason cease to be validly appointed, ensure that another such agent is appointed (and ensure that such agent acknowledges such appointment to the Agent or Syndicate Agent, as the case may be) in a manner reasonably satisfactory to the Agent or the Syndicate Agent, as the case may be; and (5) the Transferee shall send to the Agent and the Syndicate Agent (i) as soon as possible, but in no event later than one hundred twenty (120) days after the end of each fiscal year, its accounts of all financial statements of the Transferee, such financial statements to be prepared in accordance with generally accepted United States of America accounting principles at such time consistently applied all certified as true and correct by a senior financial officer of the Transferee, (ii) as soon as the same is instituted (or, to the knowledge of the Transferee threatened), details of any litigation, arbitration or administrative proceedings against or involving it or the Vessels which if adversely determined would have a material adverse effect on the Transferee, or operation of the Vessels, (iii) together with the annual financial statements to be provided in accordance with clause (i) above a certificate of a financial officer of the Transferee that no Event of Default and Incipient Default has occurred and is continuing, and (iv) from time to time, and on demand, such additional financial or other information relating to the Transferee and the Vessels as may be reasonably requested by the Agent or the Syndicate Agent. B. Negative Covenants. Each of the Transferees covenants with each of the Lenders as follows: (1) The Transferee shall not without prior consent of the Agent and the Syndicate Agent consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets, including, but not limited to, by dividend (whether by one transaction or a series of transactions and whether related or not); provided, however, that it may consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets if the buyer, assignee or transferee corporation (the "Assignee") shall be a solvent corporation organized and existing under the laws of the United States of America or any state thereof following such transaction and shall have executed and delivered an agreement, in form and substance reasonably satisfactory to the Agent and the Syndicate Agent, containing an assumption by the Assignee of the due and punctual performance and observance of all covenants and obligations of the Transferee hereunder and under the other Loan Documents and the Charter Documents to which it is or shall be a party, and confirming the accuracy of any representations and warranties made herein and in each such other Loan Document and Charter Document as of the dates herein or therein required with respect to such Assignee; and provided further, that immediately following such transaction, no Incipient Default or Event of Default shall have occurred and be continuing. (2) Except for the Charter, the Transferee shall not charter any HDW Vessel or Daewoo Vessel without the prior written approval of the Agent and the Syndicate Agent, respectively. (3) The Transferee will not create or permit to subsist any lien on the whole or any part of its present or future assets except for liens permitted under Section 14 of the Mortgage to which it is a party. (4) The Transferee shall not make or threaten to make any substantial changes in its business as presently conducted, namely that of a single purpose corporation owning one of the HDW or Daewoo Vessels and chartering such Vessel to the Transferor, and the Transferee shall not form any subsidiaries. (5) The Transferee will not create, incur, assume or allow to exist any Financial Indebtedness, nor enter into any financing lease or undertake any material capital commitment (including but not limited to the purchase of any capital asset), except as contemplated hereby, without the prior written consent of the Agent, in the case of the HDW Vessels, and the Agent and the Syndicate Agent, in the case of the Daewoo Vessels. (6) The Transferee will not make any loan or advance or extend credit to any Person or issue or enter into any guarantee or indemnity or otherwise become directly or contingently liable for the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations or securities of, or any other interest in, or make any capital contribution to, or any other investment in, any Person, firm or corporation. The Transferee will not issue any capital stock or any options, warrants or other rights with respect to, or securities convertible into! its capital stock, except to the Transferor. (7) The Transferee will not acquire any equity, share capital, assets or obligations of any corporation or other entity, except as contemplated hereby, and it will not permit any of its voting shares or capital stock to be held by any party other than the Transferor. (8) Without the consent of the Agent in the case of the HDW Vessels and the Syndicate Agent in the case of the Daewoo Vessels, the Transferee will not amend, repeal or modify its Articles of Incorporation or other similar documents relating to the governance of the Transferee. C. Negative Covenant of Transferor. Without the prior written consent of the Agent or the Syndicate Agent, the Transferor shall not transfer the legal or beneficial ownership, or the control, of any Transferee or, except as provided in this Acquisition Agreement and subject to the preceding clause, permit the consolidation, amalgamation or merger of any Transferee with or into another corporation or entity. SECTION 6. Release of a Transferee. As provided in Section 5.04(c) of the Loan Agreement, if any HDW or Daewoo Subportion is paid in full and the Transferee owning the Vessel financed by that Subportion has the right to have the Mortgage or Mortgages thereon released, that Transferee shall cease being a party to this Acquisition Agreement and shall no longer be bound by any terms and conditions hereof. SECTION 7. Third Party Vessel Exchange The parties recognize that, in lieu of delivery of APL THAILAND or APL PHILIPPINES to an Original Owner, the Transferor may wish to acquire title to such Vessel from the applicable Builder following or incident to a vessel exchange involving the Transferor and an unaffiliated third party, whereupon (i) APL THAILAND or APL PHILIPPINES, as the case may be, would be transferred by the Transferor to APL Shipholdings, Ltd. (formerly named APL M.V. Philippines, Ltd.), a Delaware corporation ("Shipholdings"), which is one of the "Transferees" party to the Loan Agreement, and (ii) following transfer of that Vessel to Shipholdings, the Subportion applicable to that Vessel would be drawn down by Shipholdings. As part of such vessel exchange the Shipbuilding Agreement or the Daewoo Shipbuilding Agreement, as applicable, may be partially assigned (insofar as the Agreement relates to the Vessel in question) to a financial institution acting as a qualified intermediary, provided that, notwithstanding such partial assignment, the Vessel shall be delivered by the applicable Builder directly to the Transferor. Notwithstanding anything herein or in the Loan Agreement to the contrary, it shall be a condition precedent to the right of Shipholdings to draw down the Subportion applicable to APL THAILAND or APL PHILIPPINES (following consummation by the Transferor of a vessel exchange transaction involving an unaffiliated third party and the subsequent transfer of the Vessel in question by the Transferor to Shipholdings) that each of the Lenders shall have consented to such vessel exchange transaction and each of the Lenders, the Transferor and the Transferees shall have entered into any amendments to this Acquisition Agreement and/or the other Operative Documents as may reasonably be required by the Lenders, and the Transferor and the Transferees shall have furnished to the Lenders (subject to confidentiality agreements, as the Transferor or such unaffiliated third party may reasonably require) copies of documents relating to such vessel exchange transaction as may reasonably be requested by the Lenders or their counsel. SECTION 8. Notices. Notices required or permitted by the terms of this Acquisition Agreement or any other Loan Document or Charter Document shall be made in accordance with Section 15.04 of the Loan Agreement. Each such notice, if to a Transferee, shall be sent to the Transferee at the following address (or such other address as that Transferee hereafter shall designate in a writing delivered to the other parties): 1111 Broadway Oakland, California 94607 Attn: President SECTION 9. Counterparts. This agreement may be executed in separate counterparts, each of which, when executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 10. Modification. Neither this Acquisition Agreement nor any of its terms may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by the party against which the enforcement of the termination, amendment, supplement, waiver or modification is sought. So long as any Vessel is subject to a Mortgage, neither this Acquisition Agreement nor any of its terms as the same relate to that Vessel may be terminated, amended, supplemented, waived or modified without the prior written consent of KfW or the Syndicate Agent or the Syndicate, as the case may be. SECTION 11. Successors and Assigns. The terms of this Acquisition Agreement shall be binding upon, and inure to the benefit of, each of the parties hereto, and their respective successors and assigns. SECTION 12. Governing Law. This Acquisition Agreement shall be construed and enforced in accordance with and governed by the applicable law of the State of New York (other than the law of the State of New York governing choice of law), and each Transferee hereby submits itself to New York jurisdiction and agrees to observe and perform the agreements and covenants and shall have the rights contained in Section 15.08 of the Loan Agreement, the provisions of which are hereby incorporated herein by reference, to the same extent and under the same terms and conditions so provided in said Section 15.08. SECTION 13. Assignment. The rights of any Party hereunder may not be assigned, whether by operation of law or otherwise, except to the extent permitted by Sections 5.B.(1) of this Acquisition Agreement and Section 10 of the Loan Agreement, without the consent of the other parties hereto. SECTION 14. Severabilitv. If any provision hereof is invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions, and of such provisions in other jurisdictions, shall not be affected or impaired thereby. SECTION 15. Table of Contents; Headings. The Table of Contents and the headings of the Sections herein are for convenience only and shall not affect the construction or meaning of any provision of this Acquisition Agreement. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties have caused this Acquisition Agreement to be duly executed by their respective officers as of the day and year first above written. KREDITANSTALT FUR WIEDERAUFBAU By:_/s/_________________________ Name: Uibeleisen Pfisterer Title (Director) (Vice President) COMMERZBANK AG, HAMBURG By:_/s/_________________________ Name: Kuch Title: Vice President By:_/s/_________________________ Name: J. Hagemann Title: Senior Vice President COMMERZBANK AG (KIEL BRANCH) By:_/s/_________________________ Name: Bahlert Title By:_/s/_________________________ Name: Dr. Plate Title: DRESDNER BANK AG in HAMBURG By:_/s/_________________________ Name: B. Sorge Title: Assistant Manager By:_/s/_________________________ Name: R. Eggert Title: Senior Manager VEREINS-und WESTBANK AG By:_/s/_________________________ Name: VP Title: By:_/s/_________________________ Name: AVP Title: DEUTSCHE SCHIFFSBANK AG By:_/s/__________________________ Name: Klaus Pieper Title:Gen. Manager By:_/s/_________________________ Name: Wolf Jurgen Onnen Title:Ass. Gen. Mgr. NORDDEUTSCHE LANDESBANK - GIROZENTRALE By:_/s/___________________________ Name: Huack Title:Sen. Vice Pres. By:_/s/_________________________ Name: Hartmann Title: Vice Pres. DEUTSCHE VERKEHRS-BANK AG (HAMBURG BRANCH) By:_/s/____________________________ Name: Spincke Title: Director By:__________________________ Name: Title: BANQUE INTERNATIONALE A LUXEMBOURG S.A. By:_/s/_______________/s/___________ Name: Jean-Pierre Vernier Claude Lehnertz Title:Directeur-adjoint Vice President AMERICAN PRESIDENT LINES, LTD. By:_/s/_____________________________ Name: Thomas R. Meier Title: Assistant Treasuter M.V. PRESIDENT KENNEDY, LTD. M.V. PRESIDENT ADAMS, LTD. M.V. PRESIDENT JACKSON, LTD. M.V. PRESIDENT POLK, LTD. M.V. PRESIDENT TRUMAN, LTD. APL SHIPHOLDINGS, LTD. By:_/s/____________________________ Name: Thomas R. Meier Title: Assistant Treasurer SCHEDULE 1 LIST OF TRANSFEREES 1. M.V. PRESIDENT KENNEDY, LTD., a Delaware corporation 2. M.V. PRESIDENT ADAMS, LTD., a Delaware corporation 3. M.V. PRESIDENT JACKSON, LTD., a Delaware corporation 4. M.V. PRESIDENT POLK, LTD., a Delaware corporation 5. M.V. PRESIDENT TRUMAN, LTD., a Delaware corporation 6. APL SHIPHOLDIDNGS, LTD., a Delaware corporation EXHIBIT A TO SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER TO THE EXTENT THAT THIS BAREBOAT CHARTER PARTY CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS BAREBOAT CHARTER PARTY MAY BE CREATED OR PERFECTED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE ACKNOWLEDGMENT THEREOF EXECUTED BY KREDITANSTALT FUR WIEDERAUFBAU AS AGENT ON THE SIGNATURE PAGE THEREOF. BAREBOAT CHARTER PARTY THIS BAREBOAT CHARTER PARTY (the "Charter") dated this __th day of __________, 199_, between [ ], a corporation organized and existing under the laws of Delaware (hereinafter "Owner") and American President Lines, Ltd., a corporation organized and existing under the laws of Delaware (hereinafter called "Charterer" or "APL"). W I T N E S S E T H: WHEREAS, APL has heretofore entered into that certain Loan Agreement dated March 14, 1994, as amended by Amendment No. 1 thereto dated May 19, 1995 and as further amended by Amendment No. 2 thereto dated September 1, 1995 (the "Loan Agreement"), by and among APL, Owner, as Borrower, the other "Transferees," as defined in the Loan Agreement, Kreditanstalt fur Wiederaufbau (["Vessel Lender" or] "Agent")], Commerzbank AG (Hamburg) (the OSyndicate AgentO [or OVessel LenderO]), and the banks listed on Schedule 1 thereto (each a OSyndicate MemberO and collectively the OSyndicateO), as Lenders, with respect to the purchase financing of six (6) container vessels, including the Vessel described below, and American President Companies, Ltd. (the OCharter GuarantorO) has entered into that certain Amended and Restated Guarantee dated May 19, 1995 (the OGuaranteeO), relating to Owner's obligations under the Loan Agreement as established pursuant to the below-defined Acquisition Agreement; WHEREAS, the date hereof is the Delivery Date of the below-described Vessel pursuant to the Loan Agreement; WHEREAS, as contemplated by Section 7(k) of the Loan Agreement, APL has entered into that certain Second Amended and Restated Agreement to Acquire and Charter (the OAcquisition AgreementO) among Owner, the other corporations identified as Transferees therein and the parties to the Loan Agreement, pursuant to which Owner has, by an Exchange Agreement dated as of the date hereof between Owner and the Original Owner (OExchange AgreementO), accepted title to, and is currently the registered owner of, the Republic of The Marshall Islands flag vessel [ ], Official Number [ ] (the "Vessel") which term shall include all the boilers, engines, machinery, bowsprits, masts, spars, sails, riggings, boats, anchors, cables, apparel, furniture, fittings, equipment and all other appurtenances to the Vessel appertaining or belonging, whether now owned or hereafter acquired, whether on board or not on board, and all additions, improvements and replacements hereafter made in and to the Vessel, or any part thereof, or in or to the appurtenances and equipment aforesaid, but shall exclude leased equipment), and Owner has undertaken all of the payment and certain of the performance obligations relating to Vessel Indebtedness in respect of the Vessel under the Loan Agreement, as Borrower (as such term is defined in the Loan Agreement) together with its joint and several obligations to pay all other Loans made under the [HDW] [Daewoo] Tranche (as such term is defined in the Loan Agreement) (collectively, the "Owner Obligations"); WHEREAS, pursuant to the Exchange Agreement, Owner has taken title to the Vessel, on its Delivery Date; WHEREAS, Owner has simultaneously herewith entered into a First Mortgage on the Vessel in favor of the Vessel Lender, in substantially the form of the First Mortgage set forth in Appendix B-1 to the Loan Agreement ("Mortgage") as security for the Owner Obligations; WHEREAS, Owner has agreed to let and demise the Vessel and Charterer has agreed to hire the Vessel from Owner, on the terms and conditions set forth in this Charter, such charter of the Vessel to be effective upon the execution and delivery of this Charter; WHEREAS, Charter Guarantor simultaneously herewith is entering into a guarantee of the payment obligations of Charterer under this Charter in favor of Owner (the "Charter Hire Guarantee"); WHEREAS, simultaneously herewith Owner is entering into the [ ] Charter Assignment (the "Charter Assignment") relating to the Charter and the Charter Hire Guarantee in favor of the Vessel Lender, and Charterer is consenting to such Charter Assignment pursuant to this Charter and Charter Guarantor is consenting to such Charter Assignment in the Charter Hire Guarantee; WHEREAS, capitalized terms used herein but not defined herein shall have the meanings assigned to them in the Loan Agreement and the Acquisition Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the receipt and adequacy of which is hereby acknowledged, Owner and Charterer hereby agree as follows: 1. REPRESENTATIONS OF CHARTERER. (a) Charterer is a corporation duly organized and validly existing in good standing under the laws of Delaware with full corporate power and authority to conduct its business as the same is presently conducted. (b) Charterer has legal power and authority to enter into and carry out the terms of this Charter. (c) This Charter has been duly authorized by all necessary action, corporate or other, on the part of Charterer, and this Charter constitutes, and upon due execution and delivery by Charterer, the Charter will constitute, in accordance with its respective terms, a legal, valid and binding instrument enforceable against Charterer, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights from time-to-time in effect. (d) Except as previously disclosed to Owner, the Agent and the Syndicate Agent in writing, there are no actions, suits or proceedings pending or, to Charterer's knowledge, threatened against Charterer, or any of its properties affecting the Charter or the transactions contemplated thereby which would, if adversely determined, materially and adversely affect the performance of Charterer of its obligations hereunder. (e) The consummation of the transactions contemplated by, and compliance by Charterer with all the terms and provisions of, the Charter will not violate any provisions of the Certificate of Incorporation or bylaws of Charterer and will not result in a breach of the terms and provisions of, or constitute a default under, any other agreement or undertaking by Charterer or by which it or any of its property is bound or any order of any court or administrative agency entered in any proceedings binding on Charterer, or violate any applicable statute, rule or regulation. (f) Charterer is not in default and no condition exists which with notice or lapse of time or both would constitute a default by Charterer, in any respect which would materially and adversely affect the ability of Charterer to perform its obligations under this Charter, under any mortgage, loan agreement, deed of trust, indenture or other agreement with respect thereto or evidence of indebtedness to which it is a party or by which it is bound, and is not in violation of or in default, in any respect which would materially and adversely affect the ability of Charterer to perform its obligations under this Charter, under any order, writ, judgment or decree of any court, arbitrator or governmental authority, commission, board, agency or instrumentality, domestic or foreign. (g) Charterer has more than one place of business and the location of the place of business which is its chief executive office is 1111 Broadway, Oakland, California 94607. (h) All taxes (other than taxes based on or measured by income and withholding taxes), liability for the payment of which has been incurred by Charterer as such in connection with the execution, delivery and performance by it of the Charter, have been paid (or provided for in its accounts if not payable) on or prior to the delivery date of the Vessel. (i) All consents, licenses, permissions, approvals, registrations or authorizations or declarations required by United States of America federal, state and local governments and the government of the jurisdiction of incorporation of Charterer and any applicable foreign jurisdiction (1) to enable it lawfully to enter into and perform its respective obligations under this Charter, (2) to ensure that its obligations hereunder are legal, valid and enforceable, and (3) to make this Charter admissible in evidence in the United States of America and such country of Charterer's incorporation have been obtained or made and are in full force and effect. (j) It has not taken any corporate action nor to its knowledge has any other steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or reorganization or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of any or all of its respective assets and revenues. (k) Charterer represents and warrants that any representation and warranty made on or prior to the date hereof by any of its Subsidiaries which is a party to a Charter in this Charter or in any of the Operative Documents or by any such Subsidiary in any certificate, statement or other document issued by and on behalf of any such Subsidiary is not or was not incorrect or misleading in any material respect when made or deemed made. 2. PERIOD OF CHARTER AND BASIS OF CHARTER HIRE. (a) Owner agrees to charter and Charterer agrees to hire the Vessel delivered hereunder on the terms and conditions herein set forth for a period of fifteen years from the date hereof with respect to the Vessel, unless earlier terminated in accordance with the terms hereof upon payment of all such principal and interest and such other amounts (said period with respect to each Vessel hereinafter referred to as its OCharter PeriodO). (b) Subject to the provisions of Section 24(b)(i) hereof, Charter hire ("Charter Hire") shall be paid by Charterer to, or for the account of, Owner in the following two components: (i) "Basic Hire" consisting of (x) principal and interest due with respect to the Subportion relating to the Vessel from the Borrower to the Agent pursuant to Sections 3, 4, 5, 6 and 12 of the Loan Agreement, and the [HDW] [Daewoo] Notes related to such Subportion issued by Owner pursuant to Section 4 of the Loan Agreement, at the times and places, in the manner and to the parties set forth in said sections and such Notes, including without limitation the provisions of Section 3.05 with respect to *, Section 3.08 with respect to default interest, Section 5.03 with respect to *, and Section 5.04 with respect to prepayment and (y) all indemnity payments required under Section 11 of the Loan Agreement when due and payable, and (ii) "Additional Charter Hire" payable semi-annually at the time of payment of Basic Hire in an amount equal to the difference between Basic Hire and an amount for such semi-annual period calculated at the rate of * per day for such period; provided that Charter Hire shall always be in an amount sufficient to cover Basic Hire and Supplemental Charter Hire. At the end of the fifteen-year charter term provided in Section 2(a) above, Charterer shall have the right to extend the Charter for up to three additional one-year periods. To extend the Charter, Charterer must give prior written notice of the one-year extension at least 60 days prior to the end of the Charter, and, with respect to subsequent periods, at least 60 days prior to the end of each one-year extended period. The extension will be on the same terms and conditions as the Charter; provided, however, that the amount of Charter Hire shall be equal to the fair market charter hire of the Vessel as determined in good faith by the parties within 30 days prior to the commencement of any one-year extension. (c) This Charter may not be canceled or terminated, except in accordance with the expressed provisions hereof, for any reason whatsoever and Charterer shall have no right to be relieved or discharged from obligation or liability under this Charter except as otherwise expressly provided herein for any reason whatsoever. Charterer hereby waives, to the extent permitted by applicable law, any and all rights which it may now have or which at any time hereafter may be conferred upon it by statute or otherwise, to terminate, cancel, quit or surrender this Charter except as otherwise expressly provided herein. Charterer acknowledges and agrees that its obligation to pay all Basic Hire and Supplemental Charter Hire pursuant to this Section 2 and all other amounts payable on behalf of Owner to the Agent pursuant to the terms of this Charter shall be absolute and unconditional under any and all circumstances, shall not be subject to any counterclaim, set-off, deduction, abatement or defense based upon any claim Charterer may have against Owner, the Agent, the Syndicate Agent or any other Lender or any other Person whatsoever, and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way effected by any circumstance or condition (whether or not Charterer shall have knowledge or notice thereof), including, without limitation: (i) any amendment or modification of this Charter, the Loan Agreement, any agreements relating to any thereof or any other instrument or agreement applicable to the Vessel or any part thereof or any assignment or transfer of any thereof or any furnishing or acceptance of additional security, or any release of any security, or any failure or inability to perfect any security; (ii) any failure on the part of Owner to perform or comply with any term of this Charter or any failure on the part of the Agent, the Syndicate Agent or any other Lender to perform or comply with the terms of the Loan Agreement or any other instrument agreement applicable thereto; (iii) any waiver, consent, change, extension, indulgence or other action or inaction under or in respect to this Charter or any other such instrument or agreement, or any exercise or nonexercise of any right, remedy, power or privilege under or in respect of any such instrument or agreement; (iv) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding with respect to Owner, the Agent, the Syndicate Agent, Charter Guarantor, any Lender or any affiliate of any of them, or their respective properties or creditors, or any action taken by any court, trustee, receiver or liquidating agent in any such proceeding, including, without limitation, any termination or rejection of this Charter or any assignment of either thereof by any court, trustee, receiver or liquidating agent of Charterer or Owner or of any of their respective properties in any such proceeding; (v) limitation on the liability or obligations of Charterer under this Charter or any termination, or cancellation (except as expressly provided in this Charter), frustration, invalidity, irregularity or unenforceability, in whole or in part, of this Charter or any term hereof or any lack of power or authority of Charterer or Owner to enter into this Charter; (vi) any assignment or other transfer of this Charter by Owner (whether pursuant to Section 30 hereof or otherwise) or any lien, charge or encumbrance, from whatever source arising, on or affecting Charterer's estate in, or any subchartering of, all or any part of the Vessel (whether or not pursuant to the express provisions of this Charter or otherwise); (vii) any damage to, or loss, destruction, requisition, seizure, forfeiture or marshal's or other sale of, the Vessel or any exercise of rights with respect to the Vessel under the Mortgage; (viii) any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel, or any interruption or prevention of or restriction on or interference with the use or possession of the Vessel; (ix) any title defect or encumbrance or any dispossession from the Vessel by title paramount or otherwise; (x) any act, omission, misrepresentation or breach on the part of Owner under this Charter or any other agreement at any time existing between Owner and Charterer, or under any statute, law or governmental regulation; (xi) any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a charterer and irrespective of any other circumstance which might otherwise limit the recourse against Charterer; (xii) any defect in the seaworthiness, condition, design, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade; or (xiii) any other occurrence or condition whatsoever, foreseen or unforeseen, whether similar or dissimilar to the foregoing, now existing or hereafter occurring. Even though Charterer shall be deprived of or limited in the use of the Vessel in any respect or for any length of time, whether or not by reason of some act, omission or breach on the part of Owner, Charterer or any other party, whether or not resulting from accident and whether or not without fault on the part of Charterer, Charterer will continue to make all payments required of Charterer by the terms of this Charter, whether for Basic Hire, Supplemental Charter Hire or otherwise, without interruption or abatement, unless and until this Charter shall have terminated with respect to the Vessel in accordance with the express provisions hereof. If, for any reason whatsoever, this Charter shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, Charterer nonetheless agrees to pay an amount equal to each payment of Basic Hire, Supplemental Charter Hire or other amounts, at the time such payment would have become due and payable in accordance with the terms hereof had this Charter not been terminated in whole or in part. Nothing contained in this clause (c) shall be construed to be a waiver, modification, alteration or release of any claims which Charterer may have at any time during the Charter Period or subsequent thereto for damages or equitable relief, for breach by Owner or APL of any provisions in any of the Charter Documents or the Loan Documents, or by the Vessel Lender of any provisions in any of the Loan Documents, or for any loss due to any acts taken by any of the parties hereto or thereto. (d) As supplemental charter hire (OSupplemental Charter HireO), Charterer shall pay as and when due any and all amounts (other than principal and interest on the [HDW] [Daewoo] Notes in respect of the Subportion relating to the Vessel, including interest at the Default Interest Rate) payable by Owner pursuant to the Loan Agreement with respect to the Subportion relating to each Vessel, at the times and places, and in the manner and to the parties set forth in such agreements. 3. DELIVERY AND ACCEPTANCE. Owner hereby lets, demises and delivers the Vessel to Charterer and Charterer hereby accepts delivery of the Vessel, pursuant to the terms of this Charter. IT IS AGREED THAT OWNER MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO TITLE TO, AS TO THE DESIGN, CONDITION, MERCHANTABILITY OR SEAWORTHINESS OF, AS TO THE QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN OR AS TO THE CONSUMABLE STORES ON BOARD THE VESSEL, OR AS TO THE FITNESS OF THE VESSEL FOR ANY PARTICULAR PURPOSE OR AS TO THE ELIGIBILITY OF THE VESSEL FOR ANY PARTICULAR TRADE, OR ANY OTHER WARRANTY OR REPRESENTATION WHATSOEVER. 4. REDELIVERY. At the expiration of its Charter Period, the Vessel (unless lost) shall be redelivered by Charterer to Owner at the end of the voyage then in progress at a safe berth to be selected by Owner at a port to be designated by Owner or another mutually agreed port. 5. OPERATING LIMITS. Charterer shall have the full use of the Vessel, and may operate the Vessel throughout the world, for the carriage of any lawful cargoes in any lawful trade on voyages for which the Vessel is suitable and for which insurance is procured by Charterer and in effect prior to entering such trades. All necessary insurance required for the trades in which the Vessel is engaged will be procured by Charterer pursuant to Section 17 hereof and paid for by Charterer. 6. CONDITION OF VESSEL ON DELIVERY. (a) The Vessel, upon its delivery hereunder, shall be documented under the laws of the Republic of The Marshall Islands. No change will be made in the registry of the Vessel without the approval of Owner and compliance by Owner with the terms of Section (20)(b) of the applicable Mortgage. (b) On its delivery, the Vessel is classed by the American Bureau of Shipping in the highest classification and rating for vessels of her age and type. On its delivery, the Vessel shall be in good running order and repair, and will be, insofar as due diligence shall make it so, strong and well and sufficiently tackled, apparelled, furnished, equipped and in good operating condition, ordinary wear and tear and depreciation excepted. (c) By its acceptance of delivery of the Vessel, Charterer acknowledges that the Vessel is in all respects satisfactory to Charterer and such delivery shall constitute full performance by Owner of all of Owner's obligations hereunder, relating to the condition of the Vessel, required to be performed by Owner prior to the delivery. 7. INSPECTIONS. (a) Owner and Charterer shall agree on a single surveyor appointed for the purpose of determining and stating in writing the condition of the Vessel at the time of redelivery. If not less than ten (10) days prior to redelivery, Owner and Charterer shall fail to have agreed on the surveyor to be appointed for such purpose, either party may request The American Bureau of Shipping, New York, to make such appointment, and the surveyor so appointed shall perform such survey. The expense of the aforesaid surveyor shall be shared equally by Owner and Charterer. Owner and Charterer may have their own representative in attendance at all surveys. (b) Prior to redelivery of the Vessel, the auxiliary machinery, generators, main propulsion units and boilers may be opened for inspection only by mutual agreement between Owner and Charterer, in which event any damage disclosed shall be repaired as may be required prior to redelivery. The expense of repair shall be paid by Charterer. If no repairs are found necessary as a result of opening said machinery, the cost of opening will be borne by the party requesting the opening. 8. MAINTENANCE AND CLASSIFICATION. Charterer shall be charged with full responsibility for maintenance and repair of the Vessel throughout the Charter Period and shall at all times, without expense to Owner, maintain and preserve the Vessel in good running order and repair, so that the Vessel shall be, insofar as due diligence can make it so, strong and well and sufficiently tackled, apparelled, furnished, equipped and supplied and in every respect seaworthy and good operating condition, ordinary wear and tear excepted. Furthermore, Charterer shall maintain the Vessel so as to enable it to the highest classification and rating of The American Bureau of Shipping for vessels of the same age and type. On redelivery, any outstanding requirements shall be taken care of by Charterer, or as Charterer may otherwise mutually agree with Owner in respect thereto. Owner will authorize The American Bureau of Shipping to release all records to Charterer relating to the Vessel. 9. INVENTORY. A complete inventory of the Vessel's entire outfit, equipment, furniture, furnishings, appliances, spare and replacement parts whether owned, pooled or shared with other operators, and of all unbroached consumable stores and slop chest is warranted by Owner at delivery. An inventory shall be taken and mutually agreed upon by representatives of Charterer and Owner at the time of redelivery. The cost of taking such inventory shall be borne equally by Charterer and Owner. Charterer shall pay all shortfalls from the delivery inventory at the current market prices at the port of redelivery, except as may be otherwise mutually agreed. 10. FUEL AND LUBRICANTS. Charterer shall accept and pay for all fuel and lubricants in storage tanks on board at the time of the Vessel's delivery hereunder and, correspondingly, Owner shall accept and pay for all such fuel and lubricants in storage tanks left on board at the time of redelivery. Each shall pay for fuel and lubricants in storage tanks at the last invoiced price paid therefor. 11. USE OF EQUIPMENT. (a) Charterer shall have the use of the Vessel and its outfit, equipment (including cabin, crew, galley and container lashing equipment), furniture, furnishings, appliances, spare and replacement parts on board the Vessel or ashore as available and shown in the inventory at delivery under this Charter, and Charterer shall at all times, and at its own expense, comply with and discharge Owner's obligations, and shall be entitled to all the benefits and rights of Owner, under Section (25)(a) of the Mortgage as to maintenance of the Vessel and its classification and compliance with all applicable laws, treaties, conventions, rules and regulations of the Republic of The Marshall Islands, all in accordance with the terms of said Section (25)(a). (b) Charterer furnished outfit, equipment (including cabin, crew, galley and container lashing equipment), furniture, furnishings, appliances, spare and replacement parts on board the Vessel and not shown in the inventory or supplemental inventories as Owner furnished at the time of delivery shall remain the property of Charterer, and Charterer at the time of redelivery shall have the right to remove such items or at its option may leave such items on board the Vessel. All items left aboard the Vessel at the termination of the Charter with respect to the Vessel shall be deemed abandoned to Owner. (c) Charterer shall be at liberty to fit any additional equipment required for the services of Charterer, beyond what is on board at commencement of Charter with respect to the Vessel, such work to be done at its time and expense, and such equipment to be considered its property, and Charterer shall be at liberty to remove such equipment at its time and expense during or prior to the expiry of this Charter with respect to the Vessel; provided that such removal shall in no way significantly alter the condition of the Vessel at the time of its redelivery to Owner. All additional equipment left aboard the Vessel at the termination of the Charter shall be deemed abandoned to Owner. Charterer shall make no substantial change in the structure, type or speed of the Vessel or change its rig without first obtaining the written approval of Owner and the Vessel Lender; provided, however, that no such approval need be obtained in respect of any change which shall be necessary to comply with the requirements of the United States Coast Guard, the Republic of The Marshall Islands, or The American Bureau of Shipping in order to entitle the Vessel to the classification and rating required above. 12. WARRANTY CLAIMS. Owner hereby assigns to Charterer Owner's rights to the extent assignable, under the [HDW] [Daewoo] Shipbuilding Agreement with respect to the Vessel with [ ] (the OShipbuilderO) relating to the condition and performance of the Vessel, including its replacement and repair warranty rights under said contract, and, if not assignable, then Charterer shall be subrogated to all such rights of Owner, and Owner hereby assigns to Charterer all Owner's rights with respect to the standby letter of credit relating to such warranty rights, and it is agreed that: (a) Charterer may negotiate and process all warranty claims directly with the Shipyard and shall provide Owner with prior notice of all warranty claims whenever reasonably practicable; (b) Owner will cooperate with Charterer in processing all Vessel warranty claims against the Shipyard if requested by Charterer; and (c) All fees and expenses incurred to prosecute or litigate Vessel warranty claims against the Shipyard shall be borne by Charterer. 13. OWNER AND VESSEL LENDER INSPECTIONS. Charterer shall at all reasonable times afford Owner and the Vessel Lender, or their respective authorized representatives, full and complete access to the Vessel for the purpose of inspecting or surveying the same and its papers and, at the request and expense of Owner or the Vessel Lender, Charterer shall deliver for inspection by such requesting party copies of any and all contracts and documents relating to the Vessel, whether on board or not on board. 14. LAY-UP. Notwithstanding anything to the contrary in this Charter, Charterer may at any time during the period of this Charter, lay-up the Vessel at a safe place so long as permitted by the applicable Mortgage in which case Charterer's obligations under this Charter shall include, during the period of lay-up, taking the customary precautions for the maintenance and safety of the Vessel and of paying, in addition to all other amounts required under this Charter, all other expenses attributable to such precautions and to the laying-up of the Vessel. 15. CHARTERER TO MAN. During the period of this Charter, Charterer shall at its expense, and by its own procurement, man, victual, navigate, operate, supply, and fuel the Vessel and shall pay all charges and expenses of every kind and nature whatsoever incident to the use and operation of the Vessel under this Charter. 16. CONDITION ON REDELIVERY OF VESSEL. (a) The Vessel shall be redelivered to Owner (unless lost) pursuant to the terms of this Charter in all respects in the same condition of operation and repair as when delivered, except as otherwise provided herein or mutually agreed, ordinary wear and tear not affecting class excepted. Unless otherwise agreed between the parties and, except as provided in paragraph (b) of this Section 16, Charterer shall repair all damages to the Vessel occurring during the Charter Period, and shall replace all lost, worn out or otherwise non-operating items, to the extent necessary to put each Vessel in all respects in the same condition of operation and repair as when delivered, ordinary wear and tear not affecting class excepted. If, at the time of redelivery, repairs, renewals, replacements or other obligations for which Charterer is liable remain to be accomplished and it is mutually agreed between the parties that such items need not be accomplished before redelivery, Charterer shall pay the agreed upon cost of such items. At the redelivery survey provided for in Section 7 hereof, the surveyor representing both Charterer and Owner shall determine and state the repairs or work necessary to place the Vessel on the date of redelivery in the condition and class required in this Charter, which statement shall include all repairs or work required by outstanding classification requirements of The American Bureau of Shipping or marine inspection requirements of the United States Coast Guard, if applicable, in effect with respect to the Vessel as of the date of the redelivery to place it in such condition. (b) Owner agrees that upon the redelivery Charterer shall have no obligation to renew or repair the Vessel's cell guides, which shall be returned in Oas is, where isO condition. 17. RISK OF LOSS, INSURANCE. Charterer hereby assumes all of the risks and liability resulting from or arising out of Charterer's possession, use, operation or storage of the Vessel, and Charterer shall at all times, at its own expense, comply with and discharge Owner's obligations under Section (29) of the Mortgage as to the maintenance of insurance on the Vessel, and shall be entitled to all the benefits and rights of Owner under said section, during the Charter Period (and shall, along with Owner and the Vessel Lender, be named as an assured, additional assured, and loss payee, as applicable), all in accordance with the provisions of said section. In any case where Charterer shall be obligated to give notice to the Vessel Lender pursuant to this Section 17, Charterer shall also give simultaneous notice to Owner. 18. ACTUAL OR CONSTRUCTIVE TOTAL LOSS. If an Event of Loss shall occur, Charterer shall (i) give prompt written notice thereof to Owner and the Vessel Lender, (ii) deposit with the Vessel Lender for the account of Owner, on or before the Redemption Date, all amounts required to be paid by Owner to the Vessel Lender on such date pursuant to Section 5.04(b)(ii) of the Loan Agreement, (iii) pay to Owner any insurance proceeds or other compensation, in excess of its payment obligations pursuant to subclause (ii) hereof, and (iv) be entitled to the credit referred to in Section 5.04(b)(iii) with respect to its payment obligations pursuant to subclause (ii) hereof. Upon Charterer's payment pursuant to subclause (ii) hereof (to the extent modified by subclause (iv) hereof), this Charter shall terminate. 19. BILLS OF LADING. Charterer shall utilize its customary contracts of affreightment, including its long form and short form bills of lading, the standard form of Military Sealift Command Shipping Agreement, and cargo charter parties all of which foregoing documents shall include Clause Paramount, Liberties Clause, General Average Clause, New Jason Clause, and Both-to-Blame Collision Clause. 20. GENERAL AND PARTICULAR AVERAGE. Average adjusters, appointed by Charterer from a list of adjusters satisfactory to Owner, shall attend to the settlement and collection of both general and particular average losses subject to the customary charges. Charterer agrees to assist the adjuster in preparing the average statement and to take all other possible measures to protect the interests of the Vessel and Owner. 21. SALVAGE. All earned salvage will be for Charterer's account. 22. LIENS. (a) Neither Charterer nor the Master of the Vessel nor any other Person shall have the right, power, or authority to create, incur or permit to be placed upon the Vessel any liens whatsoever other than those permitted by Section 14 of the Mortgage, and shall hold harmless and indemnify Owner and the Vessel Lender against the claims and demands of all Persons whomsoever arising as a result of any mortgage, security interest, lien or charge whatsoever on the Vessel, except that such undertaking by Charterer shall not apply to the lien of the Mortgage. (b) Charterer shall at all times, at its own cost and expense, comply with and discharge Owner's obligations under Sections (15), (16) and (22) of the Mortgage with respect to the release and discharge of any lien or levy against the Vessel, and shall give notice to Owner if it shall be required to give notice to the Vessel Lender pursuant to said Section (16). (c) Charterer agrees to carry a properly certified copy of this Charter and the Mortgage with the ship's papers on board the Vessel, and agrees to exhibit the same to any person having business with such Vessel and to any representative of the Vessel Lender, and agrees also to exhibit the same to any representative of Owner on demand. (d) Charterer further agrees to fasten in the Vessel in a prominent place, and to maintain during the Charter Period a framed printed or typewritten notice in plain type and which shall cover a space of not less than six (6) inches wide by nine (9) inches high (or of such other dimensions as may be required by law) reading substantially as follows: ONOTICE OF FIRST PREFERRED SHIP MORTGAGE AND CHARTER THIS VESSEL IS OWNED BY M.V. PRESIDENT KENNEDY, LTD., A DELAWARE CORPORATION (THE OSHIPOWNERO), AND IS CHARTERED BY AMERICAN PRESIDENT LINES, LTD., A DELAWARE CORPORATION, AND IS COVERED BY A FIRST PREFERRED SHIP MORTGAGE IN FAVOR OF KREDITANSTALT FUR WIEDERAUFBAU, UNDER AUTHORITY OF THE REPUBLIC OF THE MARSHALL ISLANDS. UNDER THE TERMS OF SAID MORTGAGE AND CHARTER, NEITHER THE SHIPOWNER, ANY CHARTERER, THE MASTER OF THE VESSEL NOR ANY OTHER PERSON, HAS ANY RIGHT, POWER OR AUTHORITY TO CREATE, INCUR OR PERMIT TO BE PLACED OR IMPOSED UPON THIS VESSEL ANY LIEN WHATSOEVER OTHER THAN THE LIEN OF SAID MORTGAGE AND LIENS FOR WAGES OF A STEVEDORE WHEN EMPLOYED DIRECTLY BY THE SHIPOWNER, OPERATOR, MASTER, OR ANY AGENT OF THE VESSEL, FOR CREW'S WAGES, FOR GENERAL AVERAGE, FOR SALVAGE, AND, TO THE EXTENT SUBORDINATE TO THE LIEN OF SAID MORTGAGE, FOR CERTAIN LIENS INCIDENT TO CURRENT OPERATIONS OR FOR REPAIRS OR CHANGES PERMITTED BY THE MORTGAGE.O 23. TRANSFER OF ASSIGNMENT. Charterer shall not, without Owner's and the Vessel Lender's prior written consent, sell, demise, charter, transfer, or assign this Charter or any interest therein, or, without such consent, make any arrangement whereby the maintenance, management, or operation of the Vessel is to be performed by any other person, except with respect to requisition or other governmental taking, and except that Charterer may subcharter the Vessel on a time basis as long as Charterer shall, at its own cost and expense, comply with Section 9.02(b) of the Loan Agreement; provided that, notwithstanding such subcharter, Charterer remains fully liable for all of its obligations under the Charter Documents. Charterer shall have the right to voyage charter the Vessel, or to arrange for space or slot charters of a portion of the Vessel in connection with Charterer's normal liner service. 24. EVENTS OF DEFAULT AND REMEDIES. (a) The following shall constitute an event of default under this Charter (hereinafter called a OEvent of DefaultO): (i) Charterer's failure to pay the whole or any part of any Charter Hire or Supplemental Charter Hire under the terms of this Charter and such default remains unremedied for three (3) Business Days after the due date thereof; or (ii) default by Charterer in the due and punctual observance and performance of Charterer's obligations under SECTION 22, the third sentence of SECTION 25, SECTION 26(b), c), (d) or (g) of this Charter, Sections 15(b), 16, 21(y) and (z), 23, 29(a), (b), (f) and (j) of the Mortgage (and to the extent that such default exposes the Vessel to forfeiture, Sections 21(x) and 22 of the Mortgage); or (iii) any insurance on the Vessel required to be maintained by Charterer in performance of Owner's obligations is canceled due to non- payment of premiums and otherwise not immediately replaced or the Vessel otherwise ceases to be insured in accordance with the provisions of the Mortgage on the Vessel; or (iv) default by Charterer (other than as specified in paragraphs (ii) and (iii) of this SECTION 24(a) in the due and punctual performance of Owner's obligations under SECTION 26(e), (f), (g), (h) and (i) of this Charter and Charter's performance of Owner's obligations under Sections 18, 21, 22, 24, 25, 26, 28, 50(a) and (b) and 51 of the Mortgage, in each case, which shall continue for thirty (30) days after written notice from the Agent, Owner or Charter Guarantor. (v) an "Event of Default" under any other [HDW] [Daewoo] Charter or under any [HDW] [Daewoo] Charter. (vi) Charterer or Charter Guarantor is in breach in the performance or observance of this Charter, the Charter Hire Guarantee or any other of the Operative Documents to which either of them is a party (not being a default which falls within paragraphs (i), (ii), (iii), (iv) or (v) of this SECTION 24(a)) and if it is capable of being remedied and such breach is not remedied within thirty (30) days after receipt by Charterer of notice of such breach from Owner or (so long as the Mortgage is in effect), the Agent; or (vii) Charterer or any of its Subsidiaries which is a party to a Charter or Charter Guarantor is in default in the payment when due of any sum or sums which aggregate in excess of Five Million Dollars (USD5,000,000) at any one time under any documentation relating to any other Financial Indebtedness whatsoever (excluding for this purpose the HDW Tranche and the Daewoo Tranche), and such Financial Indebtedness shall have been accelerated in accordance with the terms thereof; or (viii) there is a final, unappealable and enforceable judgment made against Charterer, any of Charterer's Subsidiaries which is a party to a Charter or Charter Guarantor greater than 5% of the Tangible Net Worth of Charter Guarantor; or (ix) any representation or warranty made by or on behalf of Charterer or Charter Guarantor in this Charter or in any of the Operative Documents or by Charterer or Charter Guarantor in any certificate, statement or other document issued by or on behalf of Charterer or Charter Guarantor pursuant to any of the Operative Documents shall prove to have been incorrect or misleading in any material respect when made or deemed made; or (x) without the prior written consent of Owner and (so long as the Mortgage remains in effect) the Agent, there is a merger of Charterer or Charter Guarantor otherwise than as permitted under the Operative Documents; or (xi) any license, authorization, consent or approval at any time necessary to enable Charterer or Charter Guarantor to comply with its obligations under this Charter, the Charter Guarantee or any of the other Operative Documents is revoked or not granted or fails to remain in full force and effect for a period of thirty (30) days after notice thereof from Owner and (while the Mortgage is in effect) the Agent with respect to the Vessel; or (xii) Charterer or Charter Guarantor shall (i) file, or consent by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or seek any relief or forbearance under any bankruptcy or insolvency or other similar law, (ii) make an assignment for the benefit of creditors, or (iii) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to itself or any substantial part of its property; or (xiii) a court or governmental authority of competent jurisdiction in an involuntary case under applicable bankruptcy laws, as now or hereafter constituted, or any insolvency or similar law, shall enter an order appointing, without consent by Charterer or Charter Guarantor, a custodian, receiver, trustee or other officer with similar powers with respect to Charterer or Charter Guarantor or with respect to any substantial part of Charterer's or Charter Guarantor's property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of Charterer or Charter Guarantor, and any such order or petition is not dismissed or stayed within sixty (60) days after the earlier of the entering of any such order or the approval of any such petition; or (xiv) default by Charterer of its obligations under SECTION 26(a) of this Charter. (b) If an Event of Default shall have occurred and be continuing: (i) Upon declaration by Owner by notice in writing to Charterer, Owner shall be immediately entitled to payment of all amounts which are due and payable under this Charter and, as damages for loss of a bargain and not as a penalty, whichever in the following amounts Owner, in its sole discretion, shall specify: (A) that sum with respect to the Vessel which shall be equal to the excess, if any, of (1) the present value of the unpaid balance of total Charter Hire which would otherwise have been paid over the Charter Period but for such declaration by Owner, discounted a rate of 6% per annum over (2) the fair market rental value of the Vessel, as determined by Owner, for the period from the date of such Owner's declaration to the date the Charter would have terminated but for such declaration, or (B) that sum with respect to the Vessel which shall be equal to the excess, if any, of (1) the amount specified in subclause A (1) above over (2) the amount Owner estimates to be the fair market sale value of the Vessel; provided that, (C) in the event Owner shall have sold the Vessel, in lieu of collecting any amounts payable to Owner by Charterer pursuant to the preceding clauses (A) or (B) of this Section 24(b)(i), Owner, if it shall so elect, may demand that Charterer pay Owner, as liquidated damages for loss of a bargain and not as a penalty, an amount equal to the excess, if any, of (1) the amount specified in subclause A(1) above over (2) the net proceeds of such sale, plus interest on the unpaid balance of any such excess amounts immediately payable to Owner by Charterer pursuant to clauses (A), (B) or (C) at the Default Interest Rate commencing on the date of such declaration by Owner to the date of payment; provided, further, if an Event of Default hereunder shall have occurred and be continuing hereunder and if the Vessel Lender shall have declared or shall have been deemed to have declared the whole or any part of the outstanding principal amount of the [HDW] [Daewoo] Notes with respect to the Subportion relating to the Vessel to be immediately due and payable by Owner pursuant to Section 12.01 of the Loan Agreement and Section (31) of the Mortgage, the amount immediately payable hereunder shall in all events be not less than the principal amount and interest on such accelerated [HDW] [Daewoo] Notes together with interest from the date of such declaration to the date of payment on overdue principal at the Default Interest Rate plus any other amounts comprising Basic Hire due and payable; (ii) Upon such declaration or deemed declaration of acceleration pursuant to clause (i) hereof, Owner may: (A) Institute and prosecute any judicial, extra judicial, or administrative proceedings as it may consider appropriate to recover any or all sums due, or declared due, with respect to Charter Hire and with respect to any Supplemental Charter Hire due, with the right to enforce payment of said sums against any assets of Charterer; (B) Owner may take possession of the Vessel, with or without legal proceedings, at any place where the Vessel may be found (and Charterer shall forthwith surrender possession of the Vessel to Owner on demand); and (C) Owner may terminate Charterer's rights under this Charter. (c) In case there shall be pending proceedings for the bankruptcy or for the reorganization of Charterer under any applicable law or in connection with the insolvency of Charterer or in case a receiver or trustee shall have been appointed for its property or its creditors, Owner, irrespective of whether Charter Hire shall then be due and payable as herein expressed or by declaration of acceleration or otherwise, shall be entitled and empowered to intervene in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of Charter Hire or Supplemental Charter Hire owing and unpaid, and to file such other papers or documents as may be necessary or advisable in order to have the claims of Owner allowed in any judicial proceeding relative to Charterer, its creditors, or its property, and to collect and receive any money or other property payable or deliverable on any such claims. Nothing contained in this Charter shall be deemed to give Owner any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Holder. (d) No right or remedy herein conferred upon or reserved to Owner is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and, in addition to every other right and remedy given hereunder or under the other Charter Documents or now or hereafter existing at law, in equity, in admiralty, by statute or otherwise. The assertion or employment of any right or remedy hereunder or otherwise shall not prevent the concurrent or subsequent assertion or employment of any other right or remedy hereunder or otherwise. (e) No delay or omission of Owner to exercise any right or remedy accruing upon any Event of Default nor any course of dealings between Owner and Charterer shall impair any such right or remedy or constitute a waiver of any Event of Default or an acquiescence therein nor shall any single exercise or partial exercise of any such right or remedy preclude any other exercise thereof or any exercise of any other or further right or remedy; nor shall the acceptance by Owner of any security or any payment of any part of Charter Hire or Supplemental Charter Hire maturing after any Event of Default or of any payment on account of any past default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby. Every right or remedy given by this Charter or any other Charter Document or by law to Owner may be exercised from time-to-time, and as often and in such order as may be deemed expedient, by Owner. (f) In case Owner shall have proceeded to enforce any right, power or remedy under this Charter or under any other Charter Document, and such proceeding shall have been discontinued or abandoned for any reason or shall have been adversely determined to Owner, then, and in every such case, Charterer and Owner shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Charter or any other Charter Documents, as the case may be, and all rights, remedies and powers of Owner shall continue as if no such proceedings had been taken. (g) Subject to the provisions of Section 24(b) hereof, Owner shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to Owner under this Charter or any other Charter Document. (h) Charterer hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, bringing of suit, and diligence in taking any action to collect amounts called for under this Charter at any time in connection herewith. (i) No right or remedy herein conferred upon or reserved to Owner is intended to be exclusive, but cumulative and in addition to any other right and remedy given hereunder or under the other Charter Documents. 25. SPECIAL CONDITIONS; SUBORDINATION TO THE LIEN OF THE MORTGAGE. (a) During the period of this Charter, Charterer may substitute its own stack marks and insignia for those of Owner on the Vessel. (b) Owner shall effect initial registry of the Vessel in the official name designated by Charterer. (c) This Charter and each and every provision hereof shall be subject and subordinate to each and every provision of the Mortgage in each and every right and any remedy of any party hereto is subject and subordinate to each and every right and remedy of any party to the Mortgage. Any lien of Charterer against the Vessel for breach of this Charter (whether pleaded and proved as a tort or otherwise) shall be subject and subordinate to the lien of the Mortgage. Charterer agrees not to take any action under this Charter or otherwise which would violate, or cause Owner to violate, any provisions of the Mortgage. Charterer shall establish and maintain, or if appropriate, require Owner to establish and maintain (i) the Mortgage and any Replacement Mortgage(s) to be valid and enforceable and duly registered on the Vessel having the priority of record required under the terms of the Operative Documents, (ii) each Security Document, and the liens or security interests created or intended to be created thereunder to be and remain in full force and effect. Owner agrees to execute such documents and furnish such information as Charterer may request in order to assist Charterer in the discharge of Charterer's obligations as set forth in the preceding sentence of this Section 25. In addition to all other obligations assumed by Charterer hereunder, Charterer will at all times, and at its own expense, comply with and discharge Owner's obligations, and shall be entitled to all the benefits and rights of Owner, under the following sections of the Mortgage, all in accordance with the provisions of said sections: (i) Section (18) with respect to notice of Events of Default, (ii) Section (21) with respect to operation of the Vessel in accordance with law, (iii) Section (23) with respect to the maintenance of the Mortgage, (iv) Section 25(c) with respect to dealing with the Vessel's equipment (in connection with which Charterer may act without Owner's consent whenever Mortgagee consent is not required), and (v) Sections (28), (50)(a) and (b) and (51) with respect to the payment or reimbursement of expenses. 26. COVENANTS OF CHARTERER. Charterer shall take whatever action is necessary (not contrary to applicable law and not contrary to the maintenance of the separate corporate status of each of such Subsidiaries) as to any of its Subsidiaries which is a party to a Charter, to: (a) prevent any of such Subsidiaries from voluntarily or involuntarily committing or being subjected to an OEvent of BankruptcyO and will not suffer any of such Subsidiaries voluntarily or involuntarily to commit or be subjected to an Event of Bankruptcy. For the purposes of this SECTION 26(a), an "Event of Bankruptcy" shall mean any of the events relating to such Subsidiaries described in SECTION 24(a)(xii) and (xiii) of this Charter; (b) cause any of such Subsidiaries not to breach any of its representations and warranties as to ownership, possession, mortgages, security interests and lien status and its obligations to defend and hold harmless the Mortgagee of such Vessels in respect thereof as required under the first paragraph of Section 14 of the Mortgages; (c) prevent, and not suffer any of such Subsidiaries to, breach any of such Subsidiaries' obligations under Section 17 of the Mortgage; (d) prevent, and not suffer any of such Subsidiaries, to breach any of such Subsidiaries' representations and warranties under Section 20(a) of the Mortgage; (e) cause such Subsidiaries faithfully to observe all covenants and conditions set forth in Section 20(b) and (c) of the Mortgage; (f) cause such Subsidiaries to comply faithfully with the provisions of Section 25 of the Mortgage; (g) cause such Subsidiaries to comply faithfully with the provisions of Section 27 of the Mortgage; (h) cause such Subsidiaries to obtain and maintain in full force and effect all licenses, authorizations, consents and approvals to enable them to comply with their obligations under this Charter and the other Operative Documents; (i) cause such Subsidiaries to remedy any breach of any of the Operative Documents not mentioned in paragraphs (a) through (h) of this SECTION 26, except the failure or breach of any of such Subsidiaries to pay Vessel Indebtedness in respect of any Vessel. 27. OWNERSHIP. So long as this Charter shall be in effect, Charterer's interest in the Vessel shall be solely that of a bareboat charterer. There shall be no option to purchase or other right to acquire a legal or equitable ownership interest in the Vessel permitted or impled so long as this Charter shall be in effect. Any contract or implied right of Charterer to a legal or equitable interest in the Vessel made or given while this Charter is in effect shall be void and unenforceable. 28. AMENDMENT. This Charter shall be binding upon, in or to the benefit of and enforceable by the parties hereto and their respective successors and assigns. Neither this Charter nor any provision hereof may be amended, modified, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the amendment, modification, waiver, discharge or termination is sought; provided that no such amendment, modification, waiver, discharge or termination shall be made without the prior written consent of the Vessel Lender. 29. APPLICABLE LAW. This Charter shall be construed and governed in accordance with the admiralty and maritime law of the United States of America and where applicable the law of the State of New York (other than the law of the State of New York governing choice of law). 30. NOTICES. All notices or other communications by either party to the other shall be in writing. If such notice is to Charterer, it shall be addressed to: American President Lines, Ltd. 1111 Broadway Oakland, CA 94607 Telephone: (510) 272-8000 Facsimile: (510) 272-8932 Telex: 671 4840 Answerback: APL OAK Attention: Treasurer If to Owner, it shall be addressed to: M.V. President Kennedy, Ltd. 1111 Broadway Oakland, CA 94607 Telephone: (510) 272-8000 Facsimile: (510) 272-8932 Telex: 671 4840 Answerback: APL OAK Attention: Treasurer Any notices or communications provided for herein shall be deemed to have been given, unless otherwise expressly provided herein, at the time of mailing when (in the case of telex) the addressee's answerback shall have been received at the end of the transmission thereof or (in the case of any letter) when delivered to that address by facsimile or personally) or when actually received by the relevant party after being deposited in the post, first class, postage prepaid, in an envelope addressed as above. Any party shall have the right to change the address at which it is to receive notices upon fifteen (15) days prior written notice. 31. CONSENT TO ASSIGNMENT. Charterer hereby consents to the assignment of all of Owner's rights, title and interest in and to this Charter to the Vessel Lender pursuant to the [ ] Charter Assignment as security for the payment and performance of the Owner Obligations with respect to the Vessel and agrees to make all payments due hereunder to the accounts specified and otherwise in accordance with Section 5.06 of the Loan Agreement, except that so long as no Event of Default shall have occurred and be continuing, Charterer may make payments of Additional Charter Hire directly to Owner. IN WITNESS WHEREOF, the parties hereto have caused this Charter to be executed the day and year first above written. [ ], as Owner By: __________________________ Title: AMERICAN PRESIDENT LINES, LTD., as Charterer By: ___________________________ Title: RECEIPT OF ORIGINAL EXECUTED COUNTERPART ACKNOWLEDGED: [ ] By: _______________________________ EXHIBIT A-1 TO SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER Omitted pursuant to Instruction 2 to Item 601 of Regulation S-K. Same as Exhibit I to Exhibit A to the Agreement to Acquire and Charter filed as Exhibit 10.6 with Registrant's Form 10-Q for the quarter ended April 8, 1994, except the recitals refer to the Second Amended and Restated Agreement to Acquire and Charter dated September 1, 1995 and related documents. EXHIBIT B-1 TO SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER __________, 199 _ Kreditanstalt fur Wiederaufbau Palmengartenstrasse 5-9 60325 Frankfurt am Main Federal Republic of Germany RE: Container Vessel Named __________, Identified by Howaldtswerke-Deutsche Werft AG (the OContractorO) as Contractor's Hull No. [297] [298] [299] (the "Vessel") - B IV a F(W) 753 Dear Sirs: We refer to a Second Amended and Restated Agreement to Acquire and Charter (the OAcquisition AgreementO) dated as of September 1, 1995, and made between yourselves as Agent and Lender and ourselves as Transferee (among other parties). Terms defined in the Acquisition Agreement have the same meanings herein. In relation to the Vessel, we hereby confirm that we are ready to take delivery of and accept the Vessel pursuant to [the Acquisition Agreement] [that certain Exchange Agreement dated as of the date hereof between __________ and ourselves]. We also confirm that the Vessel is recommended for class "__________" with The American Bureau of Shipping as per the photocopy or duplicate interim classification certificate attached hereto, and that there is no lien or encumbrance on the Vessel. Yours faithfully, [NAME OF TRANSFEREE] By: ___________________________ Name: Title: Attachment EXHIBIT B-2 TO SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER __________, 199 _ Commerzbank AG Ness 7-9 D-20457 Hamburg Federal Republic of Germany RE: Container Vessel Named __________, Identified by Daewoo Shipbuilding & Heavy Machinery, Ltd. (the OContractorO) as Contractor's Hull No. [4028] [4029] [4033] (the OVesselO) - B IV a F(W) 753 Dear Sirs: We refer to a Second Amended and Restated Agreement to Acquire and Charter (the "Acquisition Agreement") dated as of September l, 1995, and made between yourselves as Syndicate Agent and ourselves as Transferee (among other parties). Terms defined in the Acquisition Agreement have the same meanings herein. In relation to the Vessel, we hereby confirm that we are ready to take delivery of and accept the Vessel pursuant to the [Acquisition Agreement] [that certain Exchange Agreement dated as of the date hereof between __________ and ourselves]. We also confirm that the Vessel is recommended for class "__________" with The American Bureau of Shipping as per the photocopy or duplicate interim classification certificate attached hereto, and that there is no lien or encumbrance on the Vessel. Yours faithfully, [NAME OF TRANSFEREE] By: ____________________________ Name: Title: Attachment EXHIBIT C TO SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER [HDW] [DAEWOO] [SECOND] CHARTER ASSIGNMENT From [ ], Assignor To [ ], Assignee Dated: ____________, 199_ [HDW] [DAEWOO] [SECOND] CHARTER ASSIGNMENT This [Second] Charter Assignment dated , 199_ is made between (i) [ ], a Delaware corporation (the "Assignor") and (ii) [ ], a [ ] (the "Assignee"). W I T N E S S E T H: WHEREAS, American President Lines, Ltd. ("APL"), a wholly-owned subsidiary of American President Companies, Ltd. ("APC"), has heretofore entered into that certain Loan Agreement dated March 14, 1994, as amended by Amendment No.1 thereto dated May 19, 1995, as further amended by Amendment No. 2 thereto dated September 1, 1995 (as the same may be further amended or supplemented in accordance with its terms, the "Loan Agreement"), by and among APL, the Assignor, the other corporations identified as Transferees therein, the Assignee, [Kreditanstalt fur Wiederaufbau ("KfW")] [Commerzbank AG, Hamburg (the Syndicate Agent)], and the banks listed on Schedule I thereto (each a "Syndicate Member" and collectively the "Syndicate") with respect to the purchase financing of six (6) container vessels, including the Vessel described below; WHEREAS, in accordance with the Loan Agreement and that certain Second Amended and Restated Agreement to Acquire and Charter dated September 1, 1995 (as the same may be further amended or supplemented in accordance with its terms, the "Acquisition Agreement"), among the parties to the Loan Agreement, APL has assigned its rights to receive delivery of the Vessel described below from [HDW] [Daewoo] to [ ] (the "Original Owner"); WHEREAS, on the date hereof, the Original Owner acquired the Vessel from [HDW] [Daewoo]; WHEREAS, in accordance with that certain Exchange Agreement dated as of the date hereof between APL and the Original Owner, APL has acquired the Vessel described below on the date hereof from the Original Owner; WHEREAS, APL has [simultaneously herewith] entered into a First Mortgage on the Vessel in favor of the Assignee as security for the Owner Obligations referred to [below in respect of the Vessel] [therein] [and has also entered into a Second Mortgage on the Vessel in favor of KfW as security for the Obligations referred to [therein] [below]]; WHEREAS, APL has transferred the Vessel to the Assignor and the Assignor has assumed the above- referenced First Mortgage pursuant to that certain Assumption of First Preferred Ship Mortgage dated the date hereof between APL and the Assignor [and has assumed the above-referenced Second Mortgage pursuant to that certain Assumption of Second Preferred Ship Mortgage dated the date hereof between APL and the Assignor]; WHEREAS, the Assignor has accepted title to, and is currently the registered owner of, the Republic of The Marshall Islands flag vessel [ ], Official Number [ ] (the "Vessel") [and the Assignor has undertaken all of the payment and certain of the performance obligations relating to Vessel Indebtedness in respect of the Vessel under the Loan Agreement (the "Owner Obligations")]; WHEREAS, the Assignor has let and demised the Vessel to APL as charterer (the "Charterer") and the Charterer has hired the Vessel from the Assignor on the terms and conditions set forth in the Bareboat Charter Party dated the date hereof (the "Charter"), such charter of the Vessel being effective upon the execution and delivery of the Charter; [WHEREAS, pursuant to that certain Charter Hire Guarantee executed by APC in favor of the Assignor (the "Charter Hire Guarantee"), APC has guaranteed the Charterer's obligations to pay Charter Hire and Supplemental Charter Hire under the Charter;] [WHEREAS, as contemplated by the Acquisition Agreement, the Assignor is entering into a Charter Assignment relating to the Charter in favor of the Syndicate Agent (the "Charter Assignment");] WHEREAS, as contemplated by the Acquisition Agreement, the Assignor is entering into this [Second] Charter Assignment relating to the Charter in favor of the Assignee, and the Charterer is consenting to such [Second] Charter Assignment pursuant to the Charter; WHEREAS, capitalized terms used herein but not defined herein shall have the meanings assigned to them in the Loan Agreement and the Acquisition Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. The Assignor hereby sells, pledges, hypothecates, assigns, transfers and sets over unto the Assignee and unto the Assignee's successors and assigns, not absolutely but as security only for the payment and performance [by the Assignor] of the [Owner Obligations] [Obligations (as defined in the Second Mortgage) and any other obligations secured by the Second Mortgage (the "Owner Obligations")], and grants to the Assignee a [first] [second] priority security interest in all right, title and interest of the Assignor in and to (i) the Charter [and the Charter Hire Guarantee], all monies due and to become due and claims for monies due and to become due, and all claims for damages arising out of the breach of, the Charter [and the Charter Hire Guarantee], together with any extensions, renewal modifications, changes or amendments of the Charter [and the Charter Hire Guarantee], (ii) the rights, if any, of the Assignor as a secured party in and to the Vessel under the Charter, and (iii) any and all proceeds of the foregoing [; provided, however, that until an Event of Default (as that term is defined in the Loan Agreement and the First Mortgage) shall have occurred and be continuing and an Event of Default under the Charter (as defined therein) has occurred and is continuing all payments of Additional Charter Hire payable under the Charter may be made directly to the Assignor]. 2. The Assignor hereby agrees, represents and warrants that: (a) [Each of] the Charter [and the Charter Hire Guarantee] is in full force and effect and enforceable in accordance with its terms; (b) The Assignor is not in default of any of the terms of the Charter; (c) Neither the whole nor any part of the right, title and interest hereby assigned are the subject of any present assignment or pledge other than the assignment contained herein [and the Second Charter Assignment in favor of Kreditanstalt fur Wiederaufbau], and so long as this [Second] Charter Assignment shall remain in effect, the Assignor will not, without the prior written consent thereto of the Assignee, assign or pledge the whole or any part of the right, title and interest hereby assigned to anyone other than the Assignee, its successors or assigns; (d) The Assignor will not take or omit to take any action, the taking or omission of which might result in any alteration or impairment of the Charter[, the Charter Hire Guarantee] or this [Second] Charter Assignment or any of the rights created by the Charter[, the Charter Hire Guarantee] or this [Second] Charter Assignment; (e) To the knowledge of the Assignor, the Charterer is not in default of any of the terms of the Charter; (f) [Subject to the rights of the Syndicate Agent under the Charter Assignment] [The] Assignor will not enter into or consent to any amendment, modification or other alteration of the Charter [or the Charter Hire Guarantee] without first obtaining the prior written consent of the Assignee. Any amendment, modification or other alteration made without the written consent of the Assignee shall be null and void. (g) In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Charterer under any applicable law or in connection with the insolvency of the Charterer, its property or its creditors, the Assignee, irrespective of whether Charter Hire (as defined in the Charter) shall then be due and payable as provided in the Charter or by declaration of acceleration or otherwise, shall be entitled and empowered to intervene in such proceedings or otherwise, to file and prove a claim or claims for all amounts required to be paid by Charterer under the Charter following such declaration owing and unpaid, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Assignor allowed in any judicial proceeding relative to the Charterer, its creditors, or its property, and to collect and receive any money or other property payable or deliverable on any such claims, and to have the same applied pursuant to Section [5.09(a)] [5.09(b)] of the Loan Agreement. Nothing contained in this [Second] Charter Assignment shall be deemed to give the Assignee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Holder. (h) Any monies collected by the Assignor pursuant to enforcement of any of its rights under the Charter[, the Charter Hire Guarantee] or under any other Charter Document on account of the occurrence of an Event of Default by or on behalf of the Assignor shall be payable to the Assignee and distributed in accordance with Section [5.09(a)] [5.09(b)] of the Loan Agreement. 3. Notwithstanding this Assignment, it is acknowledged, understood and agreed that: (a) The Assignor will remain liable to perform all of the owner's obligations and duties under the Charter. (b) The Assignor will be deemed the owner under the Charter except as expressly set forth herein. (c) The Assignee shall have no obligation or liability under or pursuant to the Charter by reason of or arising out of this Assignment, nor to present or file any claim, nor to take any other action to collect or enforce the performance obligations of the Charterer or payment of any amounts which have been assigned to the Assignee or to which the Assignee may be entitled under this [Second] Charter Assignment at any time or times; (d) So long as no Event of Default (as that term is defined in the Loan Agreement and the First Mortgage [and the Second Mortgage]) has occurred, is continuing and shall not have been cured and waived and no Event of Default under the Charter (as defined therein) has occurred and is continuing, neither the Assignee, the Assignor nor any successor thereof shall interfere with the Charterer's possession and its peaceful and quiet enjoyment of the Vessel. 4. The Assignor confirms to the Assignee its authorization and direction to the Charterer in the Charter to make payment of all monies due and to become due under or arising out of the Charter at the time and in the manner set forth in Section 2(b) of the Charter. 5. The Assignor does hereby constitute the Assignee, its successors and assigns, the Assignor's true and lawful attorneys, irrevocably, with full power (in the name of the Assignor or otherwise), upon an Event of Default under the Loan Agreement or the First Mortgage [or the Second Mortgage], and in accordance therewith, to ask, require, demand, receive, compound and give acquittance for any and all monies, and claims for monies and rights hereby assigned, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Assignee may deem to be necessary or advisable in the premises. 6. The Assignor hereby irrevocably authorizes the Assignee, at the Assignor's expense, to file such financing and continuation statements relating to this [Second] Charter Assignment without the Assignor's signature, as the Assignee at its option may deem appropriate and appoints the Assignee as the Assignor's attorney-in-fact to execute any such statements in the Assignor's name and to perform all other acts which the Assignee may deem appropriate to perfect and continue the security interest conferred hereby. 7. The assignment of the Charter [and the Charter Hire Guarantee] to the Assignee provided for herein shall take effect immediately upon the execution hereof and the powers and authorities granted to the Assignee, its successors or assigns herein, having been given for valuable consideration, are hereby declared to be irrevocable. 8. The Assignor hereby agrees that at any time and from time to time, upon the written request of the Assignee, its successors and assigns, it will promptly and duly execute and deliver any and all such further instruments and documents as the Assignee, its successors or assigns, may reasonably require in order to obtain the full benefits of this [Second] Charter Assignment and of the rights and powers herein granted. 9. This [Second] Charter Assignment shall be governed by the laws of the State of New York (other than the law of the State of New York governing choice of law) and may not be amended or changed except by an instrument in writing signed by the party against whom enforcement is sought. 10. The Assignor hereby authorizes the Assignee to execute and file financing statements and amendments thereto as provided in Article 9 of the Uniform Commercial Code. 11. Notwithstanding any other provision of this [Second] Charter Assignment, this [Second] Charter Assignment shall terminate, be void and of no further effect upon the payment in full of the Owner Obligations, together with payment of all other amounts then due and owing secured by the First Mortgage [and the Second Mortgage; provided, however, that, in any event, this Second Charter Assignment shall terminate upon termination of the Second Mortgage in accordance with its terms]. IN WITNESS WHEREOF, the Assignor has caused this instrument to be duly executed as of the day and year first above written. [ ] By:____________________ Title: EXHIBIT D TO SECOND AMENDED AND RESTATED AGREEMENT TO ACQUIRE AND CHARTER CHARTER HIRE GUARANTEE dated as of , 199_ by AMERICAN PRESIDENT COMPANIES, LTD. (as Guarantor) in favor of [_____________________________] (as Obligee) CHARTER HIRE GUARANTEE, dated as of [ ], l99_, by AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation (the "Guarantor"), in favor of [ ] (the "Obligee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Second Amended and Restated Agreement to Acquire and Charter dated September 1, 1995 (the "Acquisition Agreement"), by and among Kreditanstalt fur Wiederaufbau, a corporation organized and existing under the laws of the Federal Republic of Germany whose address is Palmengartenstrasse 5- 9, Postfach 11-11-41, D-60325 Frankfurt am Main ("KfW"), COMMERZBANK AG (HAMBURG), a banking corporation incorporated in the Federal Republic of Germany whose address is Ness 7- 9, D-20457 Hamburg, (the "Syndicate Agent") and the banks listed in Schedule 1 which is attached hereto (KfW, the Syndicate Agent, and the banks listed in such Schedule 1 are hereinafter referred to collectively as the "Banks"), the corporations listed as Transferees therein (the "Transferees") and American President Lines, Ltd., a Delaware corporation (the "Charterer"). W I T N E S S E T H: WHEREAS, in accordance with the Acquisition Agreement, APL has assigned its rights to receive delivery of the Vessel described below from [HDW] [Daewoo] to [ ] (the "Original Owner"); WHEREAS, the Obligee has accepted title to, and is currently the registered owner of, The Republic of The Marshall Islands flag vessel [________], Official Number [_______] (the "Vessel"), and the Obligee has undertaken all of the payment and certain of the performance obligations relating to Vessel Indebtedness in respect of the Vessel under the Loan Agreement, (the "Owner Obligations"); WHEREAS, in accordance with that certain Exchange Agreement dated as of the date hereof between the Obligee and the Original Owner (the "Exchange Agreement"), the Obligee has acquired the Vessel described below on the date hereof from the Original Owner; WHEREAS, the Obligee has simultaneously herewith entered into a First Mortgage on the Vessel in favor of [KfW] [the Syndicate] (the "Vessel Lender"), as security for the Owner Obligations in respect of the Vessel; [WHEREAS, the Obligee has simultaneously herewith entered into a Second Mortgage on the Vessel in favor of KfW, as security for the Obligations of the Obligee referred to therein;] WHEREAS, the Obligee has let and demised the Vessel to the Charterer and the Charterer has hired the Vessel from the Obligee on the terms and conditions set forth in the Bareboat Charter Party, dated the date hereof (the "Charter"), such charter of the Vessel being effective upon the execution and delivery of the Charter; WHEREAS, the Guarantor is entering into this Guarantee in consideration of the Banks entering into the Acquisition Agreement and purchasing the Notes. Accordingly, the Guarantor hereby agrees with the Obligees as follows: SECTION 1. GUARANTEE 1.1 The Guarantee. The Guarantor hereby guarantees as primary obligor and not as a surety the full and punctual payment of all amounts payable by the Charterer under the Charter. Upon failure by the Charterer to pay punctually any such payment required by it to be paid within any applicable grace periods permitted under the Charter, the Guarantor shall forthwith on demand pay the amount not so paid in immediately available funds as specified therein. Upon payment by the Guarantor of any obligation of the Charterer pursuant to this Section 1.1, such obligation with respect to such payment under the Charter shall terminate. 1.2 Guarantee Unconditional. The obligations of the Guarantor hereunder shall be irrevocable, unconditional and absolute without regard to: (a) any amendment, consent or release in respect of any of the terms of the Charter or of the obligations under any thereof of any Person (provided only that such amendment, consent or release is effected in accordance with the terms of the Charter); or (b) any taking, holding, exchange, release, non-perfection or invalidity of any direct or indirect security for any obligation of the Charterer under the Charter; or c) any change in the corporate existence, structure or ownership of the Charterer, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Charterer or its assets; or (d) the existence of any claim, setoff or other rights which the Guarantor may have at any time against the Charterer; or (e) any defense arising by reason of any invalidity, unenforceability or other defense of the Charterer, or other defense of the Guarantor or by reason of the cessation from any cause whatsoever of the liability either in whole or in part of the Charterer to pay any amount payable by it under the Charter; or (f) any consent, release, renewal, refinancing, refunding, amendment or modification of or addition or supplement to or waiver of any of the terms of the Charter or of any other agreement which may be made relating to the Charter or of the obligations under any thereof of any Person (provided only that such consent, release, renewal, refinancing, refunding, amendment or modification of or addition or supplement to or waiver is effected in accordance with the terms of the Charter); or (g) any exercise or non-exercise of any right, power, privilege or remedy under or in respect of this Guarantee or the Charter, or any waiver of any such right, power, privilege or remedy or of any default in respect of the Charter, or any receipt of any collateral security or any sale, exchange, surrender, release, discharge, failure to perfect or to continue perfected, loss, abandonment or alteration of, or other dealing with, any collateral security by whomsoever at any time pledged or mortgaged to secure, or however securing, any of the Guarantor's obligations or any liabilities (including liabilities of the Guarantor hereunder) incurred directly or indirectly in respect thereof. 1.3 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the amounts payable by the Charterer under the Charter shall have been paid in full or the obligations of the Charterer thereunder have otherwise terminated, whichever is earlier. If at any time any amount payable by the Charterer under the Charter is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Charterer or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had not been made. 1.4 Waiver. The Guarantor irrevocably waives acceptance of this Guarantee, presentment, demand except as required pursuant to Section 1.1 hereof, protest, and notice, as well as any requirement that at any time any action be taken by any Person against the Charterer or any other Person. 1.5 Subrogation. Upon making any payment hereunder, the Guarantor shall be subrogated to the rights of the Obligee under the Charter against the Charterer with respect to such payment; provided that the Guarantor shall have no right of subrogation and waives, to the fullest extent permitted by applicable law, any right to any security in the Vessel which is the subject of the Charter and to exercise any remedy which the Obligee has or may hereafter have against the Charterer for payment of money until all amounts payable by the Charterer under the Charter have been paid in full or the obligations of the Charterer thereunder have otherwise terminated, whichever is earlier. Nothing contained in this Guarantee shall preclude the Guarantor from causing the Charterer to make payments required by the Charterer under the Charter. 1.6 Payment Guarantee: No Set-Off or Deductions: No Waiver. The Guarantor hereby agrees that (a) this Guarantee is a guarantee of payment and not of collection, and shall continue in full force and effect and be binding upon the Guarantor, its successors and assigns; and (b) amounts payable hereunder shall be paid when due without set-off or reduction for any reason whatsoever; provided, however, that nothing contained in this Section shall be construed to be a waiver, modification, alteration or release of any claims which the Guarantor may have for damages or equitable relief for any breach by the Obligee of any provision of the Charter or for any loss due to any acts taken by the Obligee thereunder. 1.7 Obligations Unaffected. The Obligee may, at any time and from time to time, without the consent of, or notice to, the Guarantor, without incurring responsibility to the Guarantor and without impairing, diminishing, or discharging, releasing, suspending, prejudicing or terminating the obligations of the Guarantor hereunder, in accordance with the terms and conditions of the Charter and in whole or in part, take or refrain from taking (either directly or indirectly) any and all actions with respect to the Guarantor's obligations, this Guarantee, the Charter, any collateral security at any time granted or received for any of the Guarantor's obligations, or any Person (including any Guarantor) that the Obligee determines in its sole discretion to be necessary or appropriate, whether or not such action or refraining from action varies or increases the risk of, the Guarantor; provided, however, that any amount received by the Obligee as a result of any such action shall correspondingly reduce the Guarantor's obligations hereunder. No right of the Obligee hereunder, and no obligation of the Guarantor hereunder, shall be in any way limited or otherwise impaired by the failure of the Obligee (i) to commence any action or obtain any judgment against the Charterer; (ii) to seek recourse against, or to perfect or enforce any rights in and to, any collateral; (iii) to proceed against any other guarantee relating to all or any of the obligations guaranteed hereunder or (iv) to exercise any other right, remedy, power or privilege hereunder or otherwise. The Guarantor waives and agrees not to assert (a) any right to require the Obligee to take any action described in clauses (i) to (iv) of the immediately preceding sentence and (b) any defense based upon an election of remedies which destroys or impairs the subrogation rights of the Obligee or the right of the Obligee to proceed against the Guarantor hereunder or the Charterer in respect of the obligations guaranteed hereunder. SECTION 2. Representations and Warranties of the Guarantor. The Guarantor represents and warrants to the Obligee that: 2.1 the Guarantor is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to conduct its business as the same is presently conducted; 2.2 the Guarantor has legal power and authority to enter into and carry out the terms of this Guarantee; 2.3 this Guarantee has been duly authorized by all necessary action, corporate or other, on the part of the Guarantor, and this Guarantee constitutes in accordance with its terms, a legal, valid and binding instrument enforceable against the Guarantor, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights from time to time in effect; 2.4 except as previously disclosed to the Syndicate Agent and the Agent in writing, there are no actions, suits or proceedings pending or, to the Guarantor's knowledge, threatened against the Guarantor, which question the validity of this Guarantee or action taken or to be taken by the Guarantor pursuant to this Guarantee which would, if adversely determined, materially and adversely affect the performance by the Guarantor of its obligations hereunder; 2.5 the execution and delivery of this Guarantee by the Guarantor and the performance by the Guarantor of its obligations under this Guarantee will not violate any provisions of the Certificate of Incorporation or Bylaws of the Guarantor and will not result in a breach of the terms and provisions of, or constitute a default under, any other agreement or undertaking by the Guarantor or by which it or any of its property is bound or any order of any court or administrative agency entered in any proceedings binding on the Guarantor, or violate any applicable statute, rule or regulation; 2.6 the Guarantor is not in default and no Incipient Default has occurred, in any respect which would materially and adversely affect the ability of the Guarantor to perform its obligations under this Guarantee, under any mortgage, loan agreement, deed of trust, indenture or other agreement with respect thereto or evidence of indebtedness to which it is a party or by which it is bound, and is not in violation of or in default, in any respect which would materially and adversely affect the ability of the Guarantor to perform its obligations under this Guarantee, under any order, writ, judgment or decree of any court, arbitrator or governmental authority, commission, board, agency or instrumentality, domestic or foreign; 2.7 the Guarantor has more than one place of business and the present location of the place of business which is its chief executive office is 1111 Broadway, Oakland, California 94607; 2.8 the Guarantor has no knowledge of any actual or proposed deficiency or additional assessment in connection with any Taxes which either in any case or in the aggregate would be materially adverse to the Guarantor and which would materially and adversely affect the ability of the Guarantor to perform its obligations hereunder; 2.9 all Taxes (other than taxes based on or measured by income and withholding taxes), liability for the payment of which has been incurred by the Guarantor in connection with the execution, delivery and performance by it of each Loan Document to which it is or will be a party, have been paid (or provided for in its accounts if not payable on or prior to the delivery date of the respective Vessel); 2.10 all governmental consents, licenses, permissions, approvals, registrations or authorizations or declarations required (i) to enable it lawfully to enter into and perform its payment obligations under this Guarantee and to require the Charterer to perform its other obligations under the Charter, (ii) to ensure that its respective obligations under clause (i) hereunder are legal, valid and enforceable and (iii) to make this Guarantee admissible in evidence have been obtained or made and are in full force and effect; 2.11 it has not taken any corporate action nor to its knowledge have any other steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or reorganization or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of any or all of its respective assets and revenues; 2.12 (i) no written representation, warranty or statement made or other document provided by the Guarantor in connection with the negotiation of this Guarantee at the time when given is or was untrue or contains or contained any misrepresentation of a material fact or omits or omitted to state any material fact necessary to make any such statement herein or therein not misleading and (ii) all financial projections, if any, prepared by the Guarantor and made available to the Obligee have been prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Guarantor's control, and that no assurances can be given that any such projections will be realized); 2.13 ERISA. To the best knowledge of the Guarantor (i) each Plan maintained by the Guarantor and each ERISA Affiliate is in substantial compliance in all material respects with ERISA; (ii) no Plan maintained by the Guarantor or any ERISA Affiliate is insolvent or in reorganization; (iii) no Insufficiency or Termination Event has occurred or is reasonably expected to occur, and no "accumulated funding deficiency" exists and no "variance" from the "minimum funding standard" has been granted (each such term as defined in Part III, Subtitle B, of Title I of ERISA) with respect to any Plan in which the Guarantor or any of its Subsidiaries, or any ERISA Affiliate is a participant; (iv) neither the Guarantor nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan; (v) neither the Guarantor, its Subsidiaries, nor any ERISA affiliate has received any notification that any Multiemployer Plan in which it is a participant is in reorganization or has been terminated, within the meaning of Title IV of ERISA and no such Multiemployer Plan is reasonably expected to be in reorganization or terminated within the meaning of Title IV of ERISA; (vi) no lien imposed under the Code or ERISA on the assets of the Guarantor or any Subsidiary or any ERISA Affiliate exists or is reasonably expected to arise on account of any Plan; (vii) no material liability will be incurred by the Guarantor, its Subsidiaries, or any ERISA Affiliate if any of them should terminate contributions to any other employee benefit plan maintained by them; 2.14 it is not an "investment company" or a company "controlled" by an "investment company" (as each of such terms is defined or used in the Investment Company Act of 1940, as amended). SECTION 3. Covenants of the Guarantor. The Guarantor covenants to the Obligee that: 3.1 The Guarantor will not consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets, including, but not limited to, by dividend (whether by one transaction or a series of transactions and whether related or not); provided, however, that it may consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets if the buyer, assignee or transferee corporation (the "Assignee") shall be a solvent corporation organized and existing under the laws of the United States of America or any state thereof following such transaction and shall have executed and delivered an agreement, in form and substance reasonably satisfactory to the Obligees, containing an assumption by the Assignee of the due and punctual performance and observance of all covenants and obligations of the Guarantor hereunder, and confirming the accuracy of any representations and warranties made herein as of the date hereof required with respect to such Assignee; and provided further that immediately following such transaction, no Incipient Default or Event of Default shall have occurred and be continuing. SECTION 4. Financial Statements. 4.1 The Guarantor shall, as soon as possible, provide to the Agent and the Syndicate Agent (a) but in no event later than one hundred twenty (120) days after the end of each fiscal year, its consolidated audited accounts of all consolidated financial statements of the Guarantor, such financial statements to be prepared in accordance with generally accepted United States of America accounting principles at such time consistently applied and a report thereon by Arthur Andersen & Co. or other independent public auditors of internationally recognized standing as may be acceptable to the Agent and the Syndicate Agent, (b) copies of all quarterly reports filed with the Securities and Exchange Commission and, within seventy-five (75) days after the end of the first three (3) quarters of its fiscal year, unaudited consolidated statements of income and changes in financial position of the Guarantor and related balance sheets for each such period, all certified as true and correct by a financial officer of the Guarantor, (c) as soon as the same is instituted (or, to the knowledge of the Guarantor threatened), details of any litigation, arbitration or administrative proceedings against or involving the Guarantor, the Charterer or the Vessel which if adversely determined would have a material adverse effect on the Guarantor, any Charterer and any of its subsidiaries on a consolidated basis, or construction of the Vessel, and (d) from time to time, and on demand, such additional financial or other information relating to the Guarantor as may be reasonably requested by the Agent or the Syndicate Agent. SECTION 5. Miscellaneous 5.1 No failure on the part of any Obligee to exercise, no delay in exercising, and no course of dealing with respect to, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial exercise of any right or remedy hereunder preclude any other further exercise of any other right or remedy. This Guarantee may not be amended or modified except by written agreement of the Guarantor and the Obligee. 5.2 All notices or other communications required under the terms and provisions hereof shall be made in the manner provided in Section 15.04 of the Loan Agreement addressed as follows: to (i) Kreditanstalt fYr Wiederaufbau at: Palmengartenstrasse 5-9, D-60325 Frankfurt am Main (if by hand), Postfach 11-11-41, D-60046 Frankfurt am Main (if by mail), Federal Republic of Germany, Telefax No.: 7431- 2944 or 7431-2198; (ii) to Commerzbank AG at: Ness 7-9, D- 20457 Hamburg, Federal Republic of Germany, Attention: Stefan E. Kuch, Telefax No.: 49-40-3683-4068; (iii) to the Guarantor at: 1111 Broadway, Oakland, California 94607; Attention: Treasurer, Telefax No.: (510) 272-8931; and (iv) to the Obligee at: 111 Broadway, Oakland, California 94607. 5.3 The terms of this Guarantee shall be binding upon, and inure to the benefit of, the Guarantor and the Obligee and their respective successors and assigns. 5.4 No recourse shall be had for the payment of any amount payable hereunder against any incorporator, stockholder, officer or director, as such, past, present or future, of the Guarantor or of any successor corporation, either directly or through the Guarantor or any successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Guarantee is solely a corporate obligation, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future, of the Guarantor or of any successor corporation, because of the incurring of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants, promises or agreements contained in this Guarantee or to be implied herefrom, and that all liability, if any, of that character against every such incorporator, stockholder, officer and director is, by the acceptance of this Guarantee and as a condition of, and as part of the consideration for, the execution of this Guarantee, expressly waived and released. 5.5 This Guarantee shall be construed in accordance with and governed by the laws of the State of New York (other than the law of the State of New York governing choice of law). 5.6 The Guarantor (a) hereby irrevocably submits itself to the jurisdiction of the Supreme Court of the State of New York, New York County and to the jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Guarantee or the Charter, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby, brought by the Obligee or its successors, subrogees or assigns, (b) hereby irrevocably agrees that, all claims in respect of such action or proceeding may be heard and determined, in such New York State or Federal court, and (c) to the extent that it has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process, hereby waives such immunity, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, (i) any claim that it is not personally subject to the jurisdiction of the above-named New York State or Federal courts, (ii) that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or (iii) that this Guarantee or the subject matter hereof may not be enforced in or by such courts or under any applicable law. The Guarantor hereby consents to service of process in any suit, action or other proceeding arising out of this Guarantee or the subject matter hereof or any of the transactions contemplated hereby and hereby appoints the Person set forth in Schedule 7 of the Loan Agreement as Process Agent for the Borrower (the "Process Agent") as its attorneys-in-fact to receive service of process in such action, suit or proceeding, it being agreed that service upon the Process Agent shall constitute valid service upon the Guarantor and its successors and assigns. The Guarantor agrees that (x) the sole responsibilities of the Process Agent shall be (i) to receive such process, (ii) to send a copy of any such process so received to the Guarantor, by registered airmail, return receipt requested, at its address set forth in Section 5.2 hereof, or at the last address filed in writing by it with the Process Agent and (iii) to give prompt telegraphic notice of receipt thereof to the Guarantor at such address and (y) the Process Agent shall have no responsibility for the receipt or nonreceipt by the Guarantor of such process, nor for any performance or nonperformance by it or its respective successors or assigns. The Guarantor hereby agrees to pay to the Process Agent such compensation as shall be agreed upon from time to time by it and the Process Agent for the Process Agent's services hereunder. The Guarantor hereby agrees that its submission to jurisdiction and its designation of the Process Agent set forth above is made for the express benefit of the Obligee and its successors, subrogees and assigns. The Guarantor agrees that it will at all times continuously maintain a Process Agent to receive service of process in the City of New York or San Francisco, California on behalf of itself and its properties with respect to this Agreement, and in the event that, for any reason, the Process Agent named pursuant to this Section 5.6 shall no longer serve as Process Agent to receive service of process on the Guarantor's behalf, the Guarantor shall promptly appoint a successor Process Agent. The Guarantor further agrees that a final judgment against the Guarantor in any such action or proceeding shall be conclusive, and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law, a certified or true copy of which final judgment shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of the Guarantor therein described; provided that nothing in this Section 5.6 shall affect the right of the Guarantor or the Obligee or their respective successors, subrogees or assigns to serve legal process in any other manner permitted by law or affect the right of the Guarantor or the Obligee or their respective successors, subrogees or assigns to bring any action or proceeding against the Guarantor or the Obligee, as the case may be, or its property in the courts of other jurisdictions. In the event of the transfer of all or substantially all the assets and business of the Process Agent to any other corporation, by consolidation, merger, sale of assets or otherwise, such other corporation shall be substituted hereunder for the Process Agent with the same effect as if named herein in place of the Process Agent. THE GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS GUARANTEE, THE CHARTER, OR THE RELATIONSHIP ESTABLISHED HEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE AND PERFORMANCE IN FULL OF THE GUARANTOR'S OBLIGATIONS UNDER THIS GUARANTEE. 5.7 Currency of Account. (a) The Dollar is the currency of account or each and every sum due from the Guarantor to the Obligee under this Guarantee in respect of any of the obligations guaranteed hereunder. (b) If after the occurrence of any Event of Default, any sum is due from the Guarantor under this Guarantee or if any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or under such order or judgment into another currency (the "second currency") for the purpose of: (i) making or filing a claim or proof against the Guarantor; (ii) obtaining an order or judgment in any court or tribunal; or (iii) enforcing any order or judgment given or made in relation hereto. (c) The Guarantor shall indemnify and hold harmless the Obligee from and against any damages or losses suffered as a result of any discrepancy between (A) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (B) the rate or rates of exchange at which the Obligee may in the ordinary course of business purchase the first currency with the second currency in the Frankfurt foreign exchange market upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The above indemnity shall constitute a separate and independent obligation of the Guarantor from its other obligations and shall apply irrespective of any indulgence granted by the Obligee. 5.8 If any term of this Guarantee and any other application thereof shall be invalid or unenforceable, the remainder of this Guarantee and any other application of such terms shall not be affected thereby. 5.9 This Guarantee shall be binding upon, inure to the benefit of, and be enforceable by, the Guarantor and the Obligee and their respective successors and assigns. 5.10 The Guarantor hereby acknowledges and consents to the assignment of this Guarantee pursuant to the terms of the Charter Assignment dated the date hereof between the Obligee and [KfW] [the Syndicate]. IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed as of the date first set forth herein. AMERICAN PRESIDENT COMPANIES, LTD. By:_________________________________ Title: SCHEDULE 1 page 1 of 2 NAMES AND ADDRESSES OF SYNDICATE MEMBERS Commerzbank AG (Kiel Branch) Holstenstrasse 64 D-24103 Kiel Federal Republic of Germany Attention: Mr. Claes Telex: 292898 CBKD Telecopy: 49-431-9974-372 Dresdner Bank AG in Hamburg Jungfernstieg 22 D-20354 Hamburg Federal Republic of Germany Attention: Mr. Eggert Mr. Bottcher Telex: 2157170 DR D Telecopy: 49-40-3501-3818 Vereins- und Westbank AG Alter Wall 22 D-20457 Hamburg Federal Republic of Germany Attention: Mr. Kopcke Mrs. Mertens Telex: 215164 VH D Telecopy: 49-40-3692-3696 Deutsche Schiffsbank AG Domshof 17 D-28195 Bremen Federal Republic of Germany Attention: Mr. Pieper Mr. Onnen Telex: 244870 DSBR D Telecopy: 49-421-323539 Norddeutsche Landesbank -Girozentrale Georgsplatz 1 D-30159 Hannover Federal Republic of Germany Attention: Mr. Hartmann Telex: 921634 GZH D Telecopy: 49 511 36 14785 Schedule 1 Page 2 of 2 Deutsche verkehrs-Bank AG (Hamburg Branch) Filiale Hamburg Ballindamm 6 D-20095 Hamburg Federal Republic of Germany Attention: Mr. Spincke Telex: 402077 DVB Telecopy: 49-40-308004-12 Banque Internationale a Luxembourg S.A. 2 Boulevard Royal L-2953 Luxembourg Attention: Mr. Jean Pierre Vernier Telex: 3326 BIL LU Telecopy: 35-2-4590-2010 EX-10.35 11 EXHIBIT 10.35 TO THE 1995 FORM 10K FOR APC EXECUTION COPY CHARTER HIRE GUARANTEE dated as of May 19, 1995 by AMERICAN PRESIDENT COMPANIES, LTD. (as Guarantor) in favor of M.V. PRESIDENT KENNEDY, LTD. (as Obligee) CHARTER HIRE GUARANTEE, dated as of May 19, 1995, by AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation (the "Guarantor"), in favor of M.V. PRESIDENT KENNEDY, LTD., a Delaware corporation (the "Obligee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Amended and Rested Agreement to Acquire and Charter dated May 19, 1995 (the "Acquisition Agreement"), by and among Kreditanstalt fur Wiederaufbau, a corporation organized and existing under the laws of the Federal Republic of Germany whose address is Palmengartenstrasse 5-9, Postfach 11-11-41, D-60325 Frankfurt am Main ("KfW"), COMMERZBANK AG (HAMBURG), a banking corporation incorporated in the Federal Republic of Germany whose address is Ness 7-9, D-20457 Hamburg, (the "Syndicate Agent") and the banks listed in Schedule 1 which is attached hereto (KfW, the Syndicate Agent, and the banks listed in such Schedule 1 are hereinafter referred to collectively as the "Banks"), the corporations listed as Transferees therein (the "Transferees") and American President Lines, Ltd., a Delaware corporation (the "Charterer"). W I T N E S S E T H: WHEREAS, in accordance with the Acquisition Agreement, APL has assigned its rights to receive delivery of the Vessel described below from HDW to APL Newbuildings, Ltd. (the "Original Owner"); WHEREAS, the Obligee has accepted title to, and is currently the registered owner of, The Republic of The Marshall Islands flag vessel APL CHINA, Official Number MI 1092 (the "Vessel"), and the Obligee has undertaken all of the payment and certain of the performance obligations relating to Vessel Indebtedness in respect of the Vessel under the Loan Agreement, (the "Owner Obligations"); WHEREAS, in accordance with that certain Exchange Agreement dated as of the date hereof between the Obligee and the Original Owner (the "Exchange Agreement"), the Obligee has acquired the Vessel described below on the date hereof from the Original Owner; WHEREAS, the Obligee has simultaneously herewith entered into a First Mortgage on the Vessel in favor of KfW, as security for the Owner Obligations in respect of the Vessel; WHEREAS, the Obligee has let and demised the Vessel to the Charterer and the Charterer has hired the Vessel from the Obligee on the terms and conditions set forth in the Bareboat Charter Party, dated the date hereof (the "Charter"), such charter of the Vessel being effective upon the execution and delivery of the Charter; WHEREAS, the Guarantor is entering into this Guarantee in consideration of the Banks entering into the Acquisition Agreement and purchasing the Notes. Accordingly, the Guarantor hereby agrees with the Obligees as follows: SECTION 1. Guarantee Section 1.1 The Guarantee. The Guarantor hereby guarantees as primary obligor and not as a surety the full and punctual payment of all amounts payable by the Charterer under the Charter. Upon failure by the Charterer to pay punctually any such payment required by it to be paid within any applicable grace periods permitted under the Charter, the Guarantor shall forthwith on demand pay the amount not so paid in immediately available funds as specified therein. Upon payment by the Guarantor of any obligation of the Charterer pursuant to this Section 1.1, such obligation with respect to such payment under the Charter shall terminate. Section 1.2 Guarantee Unconditional. The obligations of the Guarantor hereunder shall be irrevocable, unconditional and absolute without regard to: (a) any amendment, consent or release in respect of any of the terms of the Charter or of the obligations under any thereof of any Person (provided only that such amendment, consent or release is effected in accordance with the terms of the Charter); or (b) any taking, holding, exchange, release, nonperfection or invalidity of any direct or indirect security for any obligation of the Charterer under the Charter; or (c) any change in the corporate existence, structure or ownership of the Charterer, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Charterer or its assets; or (d) the existence of any claim, setoff or other rights which the Guarantor may have at any time against the Charterer; or (e) any defense arising by reason of any invalidity, unenforceability or other defense of the Charterer, or other defense of the Guarantor or by reason of the cessation from any cause whatsoever of the liability either in whole or in part of the Charterer to pay any amount payable by it under the Charter; or (f) any consent, release, renewal, refinancing, refunding, amendment or modification of or addition or supplement to or waiver of any of the terms of the Charter or of any other agreement which may be made relating to the Charter or of the obligations under any thereof of any Person (provided only that such consent, release, renewal, refinancing, refunding, amendment or modification of or addition or supplement to or waiver is effected in accordance with the terms of the Charter); or (g) any exercise or non-exercise of any right, power, privilege or remedy under or in respect of this Guarantee or the Charter, or any waiver of any such right, power, privilege or remedy or of any default in respect of the Charter, or any receipt of any collateral security or any sale, exchange, surrender, release, discharge, failure to perfect or to continue perfected, loss, abandonment or alteration of, or other dealing with, any collateral security by whomsoever at any time pledged or mortgaged to secure, or however securing, any of the Guarantor's obligations or any liabilities (including liabilities of the Guarantor hereunder) incurred directly or indirectly in respect thereof. Section 1.3 Discharge Only Upon Payment in Full: Reinstatement in Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the amounts payable by the Charterer under the Charter shall have been paid in full or the obligations of the Charterer thereunder have otherwise terminated, whichever is earlier. If at any time any amount payable by the Charterer under the Charter is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Charterer or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had not been made. Section 1.4 Waiver. The Guarantor irrevocably waives acceptance of this Guarantee, presentment, demand except as required pursuant to Section 1.1 hereof, protest, and notice, as well as any requirement that at any time any action be taken by any Person against the Charterer or any other Person. Section 1.5 Subrogation. Upon making any payment hereunder, the Guarantor shall be subrogated to the rights of the Obligee under the Charter against the Charterer with respect to such payment; provided that the Guarantor shall have no right of subrogation and waives, to the fullest extent permitted by applicable law, any right to any security in the Vessel which is the subject of the Charter and to exercise any remedy which the Obligee has or may hereafter have against the Charterer for payment of money until all amounts payable by the Charterer under the Charter have been paid in full or the obligations of the Charterer thereunder have otherwise terminated, whichever is earlier. Nothing contained in this Guarantee shall preclude the Guarantor from causing the Charterer to make payments required by the Charterer under the Charter. Section 1.6 Payment Guarantee: No Set-Off or Deductions: No Waiver. The Guarantor hereby agrees that (a) this Guarantee is a guarantee of payment and not of collection, and shall continue in full force and effect and be binding upon the Guarantor, its successors and assigns; and (b) amounts payable hereunder shall be paid when due without set-off or reduction for any reason whatsoever; provided, however, that nothing contained in this Section shall be construed to be a waiver, modification, alteration or release of any claims which the Guarantor may have for damages or equitable relief for any breach by the Obligee of any provision of the Charter or for any loss due to any acts taken by the Obligee thereunder. Section 1.7 Obligations Unaffected. The Obligee may, at any time and from time to time, without the consent of, or notice to, the Guarantor, without incurring responsibility to the Guarantor and without impairing, diminishing, or discharging, releasing, suspending, prejudicing or terminating the obligations of the Guarantor hereunder, in accordance with the terms and conditions of the charter and in whole or in part, take or refrain from taking (either directly or indirectly) any and all actions with respect to the Guarantor's obligations, this Guarantee, the Charter, any collateral security at any time granted or received for any of the Guarantor's obligations, or any Person (including any Guarantor) that the Obligee determines in its sole discretion to be necessary or appropriate, whether or not such action or refraining from action varies or increases the risk of, the Guarantor; provided, however, that any amount received by the Obligee as a result of any such action shall correspondingly reduce the Guarantor's obligations hereunder. No right of the Obligee hereunder, and no obligation of the Guarantor hereunder, shall be in any way limited or otherwise impaired by the failure of the Obligee (i) to commence any action or obtain any judgment against the Charterer; (ii) to seek recourse against, or to perfect or enforce any rights in and to, any collateral; (iii) to proceed against any other guarantee relating to all or any of the obligations guaranteed hereunder or (iv) to exercise any other right, remedy, power or privilege hereunder or otherwise. The Guarantor waives and agrees not to assert (a) any right to require the Obligee to take any action described in clauses (i) to (iv) of the immediately preceding sentence and (b) any defense based upon an election of remedies which destroys or impairs the subrogation rights of the Obligee or the right of the Obligee to proceed against the Guarantor hereunder or the Charterer in respect of the obligations guaranteed hereunder. SECTION 2. Representations and Warranties of_the Guarantor. The Guarantor represents and warrants to the Obligee that: Section 2.1 the Guarantor is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to conduct its business as the same is presently conducted; Section 2.2 the Guarantor has : legal power and authority to enter into and carry out the terms of this Guarantee; Section 2.3 this Guarantee has been duly authorized by all necessary action, corporate or other, on the part of the Guarantor, and this Guarantee constitutes in accordance with its terms, a legal, valid and binding instrument enforceable against the Guarantor, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights from time to time in effect; Section 2.4 except as previously disclosed to the Syndicate Agent and the Agent in writing, there are no actions, suits or proceedings pending or, to the Guarantor's knowledge, threatened against the Guarantor, which question the validity of this Guarantee or action taken or to be taken by the Guarantor pursuant to this Guarantee which would, if adversely determined, materially and adversely affect the performance by the Guarantor of its obligations hereunder; Section 2.5 the execution and delivery of this Guarantee by the Guarantor and the performance by the Guarantor of its obligations under this Guarantee will not violate any provisions of the Certificate of Incorporation or Bylaws of the Guarantor and will not result in a breach of the terms and provisions of, or constitute a default under, any other agreement or undertaking by the Guarantor or by which it or any of its property is bound or any order of any court or administrative agency entered in any proceedings binding on the Guarantor, or violate any applicable statute, rule or regulation; Section 2.6 the Guarantor is not in default and no Incipient Default has occurred, in any respect which would materially and adversely affect the ability of the Guarantor to perform its obligations under this Guarantee, under any mortgage, loan agreement, deed of trust, indenture or other agreement with respect thereto or evidence of indebtedness to which it is a party or by which it is bound, and is not in violation of or in default, in any respect which would materially and adversely affect the ability of the Guarantor to perform its obligations under this Guarantee, under any order, writ, judgment or decree of any court, arbitrator or governmental authority, commission, board, agency or instrumentality, domestic or foreign; Section 2.7 the Guarantor has more than one place of business and the present location of the place of business which is its chief executive office is 1111 Broadway, Oakland, California 94607; Section 2.8 the Guarantor has no knowledge of any actual or proposed deficiency or additional assessment in connection with any Taxes which either in any case or in the aggregate would be materially adverse to the Guarantor and which would materially and adversely affect the ability of the Guarantor to perform its obligations hereunder; Section 2.9 all Taxes (other than taxes based on or measured by income and withholding taxes), liability for the payment of which has been incurred by the Guarantor in connection with the execution, delivery and performance by it of each Loan Document to which it is or will be a party, have been paid (or provided for in its accounts if not payable on or prior to the delivery date of the respective Vessel); Section 2.10 all governmental consents, licenses, permissions, approvals, registrations or authorizations or declarations required (i) to enable it lawfully to enter into and perform its payment obligations under this Guarantee and to require the Charterer to perform its other obligations under the Charter, (ii) to ensure that its respective obligations under clause (i) hereunder are legal, valid and enforceable and (iii) to make this Guarantee admissible in evidence have been obtained or made and are in full force and effect; Section 2.11 it has not taken any corporate action nor to its knowledge have any other steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or reorganization or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of any or all of its respective assets and revenues; Section 2.12 (i) no written representation, warranty or statement made or other document provided by the Guarantor in connection with the negotiation of this Guarantee at the time when given is or was untrue or contains or contained any misrepresentation of a material fact or omits or omitted to state any material fact necessary to make any such statement herein or therein not misleading and (ii) all financial projections, if any, prepared by the Guarantor and made available to the Obligee have been prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Guarantor's control, and that no assurances can be given that any such projections will be realized); Section 2.13 ERISA. To the best knowledge of the Guarantor (i) each Plan maintained by the Guarantor and each ERISA Affiliate is in substantial compliance in all material respects with ERISA; (ii) no Plan maintained by the Guarantor or any ERISA Affiliate is insolvent or in reorganization; (iii) no Insufficiency or Termination Event has occurred or is reasonably expected to occur, and no "accumulated funding deficiency" exists and no "variance" from the "minimum funding standard" has been granted (each such term as defined in Part III, Subtitle B, of Title I of ERISA) with respect to any Plan in which the Guarantor or any of its Subsidiaries, or any ERISA Affiliate is a participant; (iv) neither the Guarantor nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan; (v) neither the Guarantor, its Subsidiaries, nor any ERISA affiliate has received any notification that any Multiemployer Plan in which it is a participant is in reorganization or has been terminated, within the meaning of Title IV of ERISA and no such Multiemployer Plan is reasonably expected to be in reorganization or terminated within the meaning of Title IV of ERISA; (vi) no lien imposed under the Code or ERISA on the assets of the Guarantor or any Subsidiary or any ERISA Affiliate exists or is reasonably expected to arise on account of any Plan; (vii) no material liability will be incurred by the Guarantor, its Subsidiaries, or any ERISA Affiliate if any of them should terminate contributions to any other employee benefit plan maintained by them; Section 2.14 it is not an "investment company" or a company "controlled" by an "investment company" (as each of such terms is defined or used in the Investment Company Act of 1940, as amended). SECTION 3. Covenants of the Guarantor The Guarantor covenants to the Obligee that: Section 3.1 The Guarantor will not consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets, including, but not limited to, by dividend (whether by one transaction or a series of transactions and whether related or not); provided, however, that it may consolidate or amalgamate with, or merge into, any other entity, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets if the buyer, assignee or transferee corporation the "Assignee") shall be a solvent corporation organized and existing under the laws of the United States of America or any state thereof following such transaction and shall have executed and delivered an agreement, in form and substance reasonably satisfactory to the Obligees, containing an assumption by the Assignee of the due and punctual performance and observance of all covenants and obligations of the Guarantor hereunder, and confirming the accuracy of any representations and warranties made herein as of the date hereof required with respect to such Assignee; and provided further that immediately following such transaction, no Incipient Default or Event of Default shall have occurred and be continuing. SECTION 4. Financial Statements. Section 4.1 The Guarantor shall, as soon as possible, provide to the Agent and the Syndicate Agent (a) but in no event later than one hundred twenty (120) days after the end of each fiscal year, its consolidated audited accounts of all consolidated financial statements of the Guarantor, such financial statements to be prepared in accordance with generally accepted United States of America accounting principles at such time consistently applied and a report thereon by Arthur Andersen & Co. or other independent public auditors of internationally recognized standing as may be acceptable to the Agent and the Syndicate Agent, (b) copies of all quarterly reports filed with the Securities and Exchange Commission and, within seventy-five (75) days after the end of the first three (3) quarters of its fiscal year, unaudited consolidated statements of income and changes in financial position of the Guarantor and related balance sheets for each such period, all certified as true and correct by a financial officer of the Guarantor, (c) as soon as the same is instituted (or, to the knowledge of the Guarantor threatened), details of any litigation, arbitration or administrative proceedings against or involving the Guarantor, the Charterer or the Vessel which if adversely determined would have a material adverse effect on the Guarantor, any Charterer and any of its subsidiaries on a consolidated basis, or construction of the Vessel, and (d) from time to time, and on demand, such additional financial or other information relating to the Guarantor as may be reasonably requested by the Agent or the Syndicate Agent. SECTION 5. Miscellaneous Section 5.1 No failure on the part of any Obligee to exercise, no delay in exercising, and no course of dealing with respect to, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial exercise of any right or remedy hereunder preclude any other further exercise of any other right or remedy. This Guarantee may not be amended or modified except by written agreement of the Guarantor and the Obligee. Section 5.2 All notices or other communications required under the terms and provisions hereof shall be made in the manner provided in Section 15.04 of the Loan Agreement addressed as follows: to (i) Kreditanstalt fur Wiederaufbau at: Palmengartenstrasse 5-9, D-60325 Frankfurt am Main (if by hand), Postfach 11-11-41, D-60046 Frankfurt am Main (if by mail), Federal Republic of Germany, Telefax No.: 7431-2944 or 7431-2198; (ii) to Commerzbank AG at: Ness 7-9, D-20457 Hamburg, Federal Republic of Germany, Attention: Stefan E. Kuch, Telefax No.: 49- 40-3683-4068; (iii)-to the Guarantor at: 1111 Broadway, Oakland, California 94607; Attention: Treasurer, Telefax No.: (510) 272-8931; and (iv) to the Obligee at: 1111 Broadway, Oakland, California 94607; Attention: Treasurer, Telefax No.: (510) 272-8931. Section 5.3 The terms of this Guarantee shall be binding upon, and inure to the benefit of, the Guarantor and the Obligee and their respective successors and assigns. Section 5.4 No recourse shall be had for the payment of any amount payable hereunder against any incorporator, stockholder, officer or director, as such, past, present or future, of the Guarantor or of any successor corporation, either directly or through the Guarantor or any successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Guarantee is solely a corporate obligation, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future, of the Guarantor or of any successor corporation, because of the incurring of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants, promises or agreements contained in this Guarantee or to be implied herefrom, and that all liability, if any, of that character against every such incorporator, stockholder, officer and director is, by the acceptance of this Guarantee and as a condition of, and as part of the consideration for, the execution of this Guarantee, expressly waived and released. Section 5.5 This Guarantee shall be construed in accordance with and governed by the laws of the State of New York (other than the law of the State of New York governing choice of law). Section 5.6 The Guarantor (a) hereby irrevocably submits itself to the jurisdiction of the Supreme Court of the State of New York, New York County and to the jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Guarantee or the Charter, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby, brought by the Obligee or its successors, subrogees or assigns, (b) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined, in such New York State or Federal court, and (c) to the extent that it has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process, hereby waives such immunity, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, (i) any claim that it is not personally subject to the jurisdiction of the above-named New York State or Federal courts, (ii) that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or (iii) that this Guarantee or the subject matter hereof may not be enforced in or by such courts or under any applicable law. The Guarantor hereby consents to service of process in any suit, action or other proceeding arising out of this Guarantee or the subject matter hereof or any of the transactions contemplated hereby and hereby appoints the Person set forth in Schedule 7 of the Loan Agreement as Process Agent for the Borrower (the "Process Agent") as its attorneys-in-fact to receive service of process in such action, suit or proceeding, it being agreed that service upon the Process Agent shall constitute valid service upon the Guarantor and its successors and assigns. The Guarantor agrees that (x) the sole responsibilities of the Process Agent shall be (i) to receive such process, (ii) to send a copy of any such process so received to the Guarantor, by registered airmail, return receipt requested, at its address set forth in Section 5.2 hereof, or at the last address filed in writing by it with the Process Agent and (iii) to give prompt telegraphic notice of receipt thereof to the Guarantor at such address and (y) the Process Agent shall have no responsibility for the receipt or nonreceipt by the Guarantor of such process, nor for any performance or nonperformance by it or its respective successors or assigns. The Guarantor hereby agrees to pay to the Process Agent such compensation as shall be agreed upon from time to time by it and the Process Agent for the Process Agent's services hereunder. The Guarantor hereby agrees that its submission to jurisdiction and its designation of the Process Agent set forth above is made for the express benefit of the Obligee and its successors, subrogees and assigns. The Guarantor agrees that it will at all times continuously maintain a Process Agent to receive service of process in the City of New York or San Francisco, California on behalf of itself and its properties with respect to this Agreement, and in the event that, for any reason, the Process Agent named pursuant to this Section 5.6 shall no longer serve as Process Agent to receive service of process on the Guarantor's behalf, the Guarantor shall promptly appoint a successor Process Agent. The Guarantor further agrees that a final judgment against the Guarantor in any such action or proceeding shall be conclusive, and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law, a certified or true copy of which final judgment shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of the Guarantor therein described; provided that nothing in this Section 5.6 shall affect the right of the Guarantor or the Obligee or their respective successors, subrogees or assigns to serve legal process in any other manner permitted by law or affect the right of the Guarantor or the Obligee or their respective successors, subrogees or assigns to bring any action or proceeding against the Guarantor or the Obligee, as the case may be, or its property in the courts of other jurisdictions. In the event of the transfer of all or substantially all the assets and business of the Process Agent to any other corporation, by consolidation, merger, sale of assets or otherwise, such other corporation shall be substituted hereunder for the Process Agent with the same effect as if named herein in place of the Process Agent. THE GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS GUARANTEE, THE CHARTER, OR THE RELATIONSHIP ESTABLISHED HEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE AND PERFORMANCE IN FULL OF THE GUARANTOR'S OBLIGATIONS UNDER THIS GUARANTEE. Section 5.7 Currency of Account. (a) The Dollar is the currency of account or each and every sum due from the Guarantor to the Obligee under this Guarantee in respect of any of the obligations guaranteed hereunder. (b) If after the occurrence of any Event of Default, any sum is due from the Guarantor under this Guarantee or if any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or under such order or judgment into another currency (the "second currency") for the purpose of: (i) making or filing a claim or proof against the Guarantor; (ii) obtaining an order or judgment in any court or tribunal; or (iii) enforcing any order or judgment given or made in relation hereto. (c) The Guarantor shall indemnify and hold harmless the Obligee from and against any damages or losses suffered as a result of any discrepancy between (A) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (B) the rate or rates of exchange at which the Obligee may in the ordinary course of business purchase the first currency with the second currency in the Frankfurt foreign exchange market upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The above indemnity shall constitute a separate and independent obligation of the Guarantor from its other obligations and shall apply irrespective of any indulgence granted by the Obligee. Section 5.8 If any term of this Guarantee and any other application thereof shall be invalid or unenforceable, the remainder of this Guarantee and any other application of such terms shall not be affected thereby. Section 5.9 This Guarantee shall be binding upon, inure to the benefit of, and be enforceable by, the Guarantor and the Obligee and their respective successors and assigns. Section 5.10 The Guarantor hereby acknowledges and consents to the assignment of this Guarantee pursuant to the terms of the Charter Assignment dated the date hereof between the Obligee and KfW. IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed as of the date first set forth herein. AMERICAN PRESIDENT COMPANIES, LTD. By: /s/ Peter A.V. Huegel Title: Assistant Secretary EX-10.51 12 EXHIBIT 10.51 TO THE 1995 FORM 10K FOR APC 1995 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF AMERICAN PRESIDENT COMPANIES, LTD. SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN. The Plan was established by the Company effective January 1, 1995, and amended and restated effective January 1, 1996. The purpose of the Plan is to supplement certain benefits under the Retirement Plan. SECTION 2. ELIGIBILITY AND PARTICIPATION. Participation in this Plan shall be limited to participants in the Retirement Plan who are employed by a member of the Affiliated Group on or after January 1, 1995, and who meet one of the following criteria: (a) Their benefits under the Retirement Plan are affected by the limitations imposed under section 401(a)(17) or 415 of the Code; (b) Their benefits under the Retirement Plan are affected by the exclusion of salaries and bonuses deferred under the Deferred Compensation Plan or the Stock Bonus Plan from the compensation taken into account in calculating such benefits; or (c) Both: (i) Their actual benefits under the Retirement Plan, at retirement, are lower than the benefits that they would have received had they separated from employment with the Affiliated Group as of December 31, 1992, absent the modification of the Retirement Plan's benefit formula that was adopted effective June 1, 1989; and (ii) Their "average annual compensation" under the Retirement Plan equals or exceeds $125,000 at any time after May 31, 1989. On June 1 of each year, starting with June 1, 1990, the $125,000 amount set forth in the preceding sentence shall be adjusted for inflation by multiplying it by a fraction. The numerator of such fraction shall be the CPI-W for U.S. Cities on the immediately preceding February 1, and the denominator of such fraction shall be the CPI-W for U.S. Cities on February 1, 1989. SECTION 3. PLAN BENEFITS. (a) Amount of Retirement Plan Supplement. Each Participant whose pension benefits under the Retirement Plan are reduced by section 401(a)(17) or 415 of the Code, by the exclusion of salaries and bonuses deferred under the Deferred Compensation Plan or the Stock Bonus Plan from pension calculations or by the modification of the formula for calculating his or her "retirement income" (not including cost-of-living adjustments) that was adopted on July 10, 1990, effective as of June 1, 1989, shall be entitled to receive a monthly benefit under this Plan. The amount of such benefit shall be equal to: (i) The monthly benefit payment which would be payable to the Participant under the Retirement Plan if the limitations of sections 401(a)(17) and 415 of the Code, such exclusion and such modification (to the extent that such modification results in a benefit reduction) did not apply; minus (ii) The Participant's actual monthly benefit payment under the Retirement Plan; minus (iii) The Participant's actual monthly benefit payment under the Excess-Benefit Plan of American President Companies, Ltd., as amended. For purposes of this Subsection (a), the modification of the Retirement Plan formula that was adopted on July 10, 1990, effective as of June 1, 1989, shall be deemed to have resulted in a benefit reduction only to the extent that a Participant's actual monthly benefit payment under the Retirement Plan is less than the monthly benefit payment that such Participant would have received if such modification had not been adopted and the Participant had separated from employment with all members of the Affiliated Group as of December 31, 1992. The Retirement Plan's Actuarial Equivalency factors shall be used to make this comparison. (b) Payment of Retirement Plan Supplement. A Participant's benefit under Subsection (a) above shall be payable to the Participant or to any other person (including, without limitation, a surviving spouse) who is receiving benefits under the Retirement Plan which are derived from the Participant. Any benefit under Subsection (a) above shall be payable in the same form and at the same times as the Participant's benefit under the Retirement Plan (and in no event earlier), unless the Participant's benefit under the Retirement Plan is paid in the form of a single lump sum. In that event, the benefit under Subsection (a) above shall be payable in the normal form of benefit provided under the Retirement Plan, computed as if the benefit actually paid to the Participant under the Retirement Plan were also payable in the normal form, unless: (i) The Participant requests in writing to receive the benefit under Subsection (a) above in a single lump sum; and (ii) The Committee expressly approves the Participant's request. In the case of a Participant who is entitled to a "COLA-Adjusted Retirement Income" under the Retirement Plan, the amount of any periodic benefit under Subsection (a) above shall be recalculated each year in accordance with the provisions of the Retirement Plan relating to the adjustment of pension benefits to reflect changes in the cost of living. SECTION 4. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee shall make such rules, interpretations and computations as it may deem appropriate. Any decision of the Committee with respect to the Plan, including (without limitation) any determination of eligibility to participate in the Plan and any calculation of benefits hereunder, shall be conclusive and binding on all persons. SECTION 5. CLAIMS AND INQUIRIES. (a) Application for Benefits. Applications for benefits and inquiries concerning the Plan (or concerning present or future rights to benefits under the Plan) shall be submitted to the Company in writing and addressed to the Chair of the Committee. An application for benefits shall be submitted on the prescribed form and shall be signed by the Participant or, in the case of a benefit payable after his or her death, by the beneficiary. (b) Denial of Application. In the event that an application for benefits is denied in whole or in part, the Chair of the Committee shall notify the applicant in writing of the denial and of the right to a review of the denial. The written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the provisions of the Plan on which the denial is based, a description of any information or material necessary for the applicant to perfect the application, an explanation of why the material is necessary, and an explanation of the review procedure under the Plan. The written notice shall be given to the applicant within a reasonable period of time (not more than 90 days) after the Chair of the Committee received the application, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the notice be given more than 180 days after the Chair of the Committee received the application. (c) Review Panel. The Committee shall serve as the "Review Panel" under the Plan. The Review Panel shall have the authority to act with respect to any appeal from a denial of benefits or a determination of benefit rights. (d) Request for Review. An applicant whose application for benefits was denied in whole or in part, or the applicant's duly authorized representative, may appeal from the denial by submitting to the Review Panel a request for a review of the application within 90 days after receiving written notice of the denial from the Chair of the Committee. The Chair of the Committee shall give the applicant or his or her representative an opportunity to review pertinent materials, other than legally privileged documents, in preparing the request for a review. The request for a review shall be in writing and addressed to the Committee. The request for a review shall set forth all of the grounds on which it is based, all facts in support of the request, and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. (e) Decision on Review. The Review Panel shall act on each request for a review within 60 days after receipt, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the decision on review be rendered more than 120 days after the Review Panel received the request for a review. The Review Panel shall give prompt written notice of its decision to the applicant. In the event that the Review Panel confirms the denial of the application for benefits in whole or in part, the notice shall set forth, in a manner calculated to be understood by the applicant, the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based. (f) Rules and Interpretations. The Review Panel shall adopt such rules, procedures and interpretations of the Plan as it deems necessary or appropriate in carrying out its responsibilities under this Section 5. (g) Exhaustion of Remedies. No legal action for benefits under the Plan shall be brought unless and until the claimant (i) has submitted a written application for benefits in accordance with Subsection (a) above, (ii) has been notified by the Chair of the Committee that the application is denied, (iii) has filed a written request for a review of the application in accordance with Subsection (d) above and (iv) has been notified in writing that the Review Panel has affirmed the denial of the application; provided, however, that legal action may be brought after the Chair of the Committee or the Review Panel has failed to take any action on the claim within the time prescribed by Subsections (b) and (e) above, respectively. SECTION 6. AMENDMENT AND TERMINATION. The Company expects to continue the Plan indefinitely. Future conditions, however, cannot be foreseen, and the Company shall have the authority to amend or terminate the Plan at any time. In the event of an amendment or termination of the Plan, a Participant's benefits hereunder shall not be less than the benefits to which the Participant would have been entitled if his or her employment in the Affiliated Group had terminated immediately prior to such amendment or termination. SECTION 7. EMPLOYMENT RIGHTS. Nothing in the Plan shall be deemed to give any person a right to remain in the employ of any Affiliated Group member or affect the right of the Affiliated Group members to terminate such person's employment with or without cause. SECTION 8. NO ASSIGNMENT. The rights of any person to payments or benefits under the Plan shall not be made subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors. Any act in violation of this Section 8, whether voluntary or involuntary, shall be void. SECTION 9. PLAN UNFUNDED. Participants shall have the status of general unsecured creditors of the Company. The Plan constitutes a mere promise by the Company to make benefit payments in the future. It is the Company's intent that the Plan be considered unfunded for tax purposes and for purposes of Title I of ERISA. SECTION 10. CHOICE OF LAW. The validity, interpretation, construction and performance of the Plan shall be governed by ERISA and, to the extent they are not preempted, by the laws of the State of California. SECTION 11. DEFINITIONS. (a) "Affiliated Group" means a group of one or more chains of corporations connected through stock ownership with the Company, if: (i) Stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of each of the corporations, except the Company, is owned by one or more of the other corporations; and (ii) The Company owns stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of at least one of the other corporations excluding, in computing such voting power or value, stock owned directly by such other corporations. In addition, the term "Affiliated Group" includes any other entity which the Company has designated in writing as a member of the Affiliated Group for purposes of this Plan or the Retirement Plan. An entity shall be considered a member of the Affiliated Group only with respect to periods for which such designation is in effect or during which the relationship described in Paragraphs (i) and (ii) above exists. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Committee" means the Benefits Committee appointed by the Company's Board of Directors. (d) "Company" means American President Companies, Ltd., a Delaware corporation. (e) "Deferred Compensation Plan" means the Deferred Compensation Plan of American President Companies, Ltd., as amended, the 1988 Deferred Compensation Plan of American President Companies, Ltd., as amended, and the 1995 Deferred Compensation Plan of American President Companies, Ltd., as amended. (f) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (g) "Participant" means a participant in the Retirement Plan who participates in this Plan under Section2. (h) "Plan" means this 1995 Supplemental Executive Retirement Plan of American President Companies, Ltd. (i) "Retirement Plan" means the American President Companies, Ltd. Retirement Plan, as amended, or its successor. (j) "Stock Bonus Plan" means the American President Companies, Ltd. 1995 Stock Bonus Plan, as it may be amended, or its successor. SECTION 12. EXECUTION. To record the amendment and restatement of the Plan, the Company has caused its duly authorized officer to affix the corporate name hereto. AMERICAN PRESIDENT COMPANIES, LTD. By /s/ Timothy J. Windle EX-10.61 13 EXHIBIT 10.61 TO THE 1995 FORM 10K -1- AGREEMENT THIS AGREEMENT, entered into as of the 13th day of October, 1995, by and between JOHN M. LILLIE (the "Employee") and AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation (the "Company"), W I T N E S S E T H: Whereas the Company is the parent corporation in a group of affiliated corporations (the "Affiliated Group") which includes the Company and all of its direct or indirect subsidiaries; Whereas the Employee has been employed by the Company as Chairman and Chief Executive Officer pursuant to an Employment Agreement dated as of January 29, 1991, as amended by Amendment No. 1 dated July 28, 1992, and Amendment No. 2 dated January 26, 1993 (the Agreement, as so amended, being hereinafter referred to as the "Employment Agreement"), and has served as a member of the Board of Directors of the Company; and Whereas the parties wish to provide for the Employee's resignation from such employment and Board of Directors on mutually satisfactory terms effective October 13, 1995 (the "Termination Date"); N o w, t h e r e f o r e, in consideration of the mutual covenants herein contained, the parties agree as follows: 1. Remaining Term of Employment. (a) Resignation. Effective as of the Termination Date, the Employee shall resign as an employee, officer and director of the Company and as an officer and director of all other members of the Affiliated Group. Employee's resignation is an "Involuntary Termination Without Cause" by the Company under Section 8 of the Employment Agreement. Employee hereby waives the notice requirement set forth in Section 1 of the Employment Agreement. (b) Termination of Agreement. This Agreement shall terminate when all obligations of the parties hereunder have been satisfied. 2. Benefits During Continuation Period. (a) Continuation Period. Following his resignation, the Employee shall be entitled to receive the benefits described in the succeeding subsections of this Section 2. Except as otherwise provided, such benefits shall continue for the period commencing on the Termination Date and ending on the earlier of March 1, 1999 or the date of the Employee's death (the "Continuation Period"). Except as expressly provided herein, the Employee shall not be eligible to participate in any of the Company's executive compensation programs or employee benefit plans after the Termination Date. (b) Compensation. From October 13, 1995, to the earlier of (i) April 12, 1996, or (ii) the date of the Employee's death, the Company shall pay the Employee in approximately equal biweekly installments, compensation at the annual rate of $575,950. The Employee shall be entitled to receive a bonus for fiscal year 1995, payable no later than February 15, 1996, calculated on the basis of a target bonus of 60 percent of base salary (or 60% of $575,950) and the management bonus level approved by the Compensation Committee of the Board of Directors of the Company for bonus-level employees of the Company generally. From April 13, 1996, until the earlier of (i) March 1, 1999, or (ii) the date of the Employee's death, the Company shall pay the Employee, in approximately equal biweekly installments, compensation at the annual rate of $921,520. The Employee shall not be entitled to bonus payments for fiscal year 1996 or subsequent years. (c) Insurance Coverage. During the Continuation Period, the Employee (and, where applicable, his dependents) shall be entitled to continue participation in all insurance or similar plans maintained by the Company, including (without limitation) life, disability, health and accident insurance programs, as if he were still an employee of the Company. Where applicable, the Employee's salary for purposes of such plans shall be deemed to be equal to $575,950. To the extent that the Company finds it impossible to cover the Employee under its group insurance policies during the Continuation Period, the Company (at its own expense) shall provide the Employee with the same level of coverage under individual policies. The period during which the Employee may elect continued insurance coverage in accordance with the requirements of the Consolidated Omnibus Budget Reconciliation Act shall not end until sixty (60) days after the date the Employee's participation in the Company's group insurance plans terminates. (d) Incentive Programs. The Continuation Period shall be counted as employment with the Company for purposes of determining the expiration date of all options granted to the Employee under the Company's stock option plans and for purposes of vesting under all executive compensation programs in which the Employee participated, including (without limitation) stock purchase, stock options, restricted stock or phantom stock plans, incentive or other bonus plans and similar programs, but not including any pension, thrift or profit- sharing plan intended to qualify under section 401(a) of the Internal Revenue Code of 1986, as amended. The occurrence of a Change in Control (as defined in Section 7(a) of the Employment Agreement) during the Continuation Period shall not result in the vesting of any options granted to the Employee under the Company's stock option plans. (e) Supplemental Benefit. The Employee and his surviving spouse (if any) shall be entitled to receive an unfunded supplemental retirement benefit (the "Supplemental Benefit"). The amount of the Supplemental Benefit shall be determined under Subsection (f) below. (f) Amount of Supplemental Benefit. The amount of the Supplemental Benefit shall be equal to the difference between: (i) The amount of the pension benefits actually paid to the Employee or to his surviving spouse, as the case may be, under the American President Companies, Ltd. Retirement Plan (the "Retirement Plan"), the Excess Benefit Plan of American President Companies, Ltd. and the Supplemental Executive Retirement Plan of American President Companies, Ltd. (collectively, the "Retirement Program"), which represent all of the qualified and non-qualified defined benefit pension plans of the Company in which the Employee participates; and (ii) The amount of the hypothetical pension benefit that commences as of the date when the actual pension benefits commence under Paragraph (i) above, and is determined as follows: Such hypothetical pension benefit shall be equal to 40 percent of the Employee's Average Annual Compensation minus 40 percent of his Primary Social Security Benefit. The terms "Average Annual Compensation" and "Primary Social Security Benefit" shall have the meanings given to such terms in the Retirement Plan; provided that for purposes of calculating Average Annual Compensation, the following assumptions shall be made: (a) The projected Continuation Period, determined without regard to the Employee's death, is counted as employment with the Company; and (B) The projected annual compensation to be received by the Employee during the Continuation Period is deemed to be $921,520, and is counted as compensation. For purposes of the Company's Retirement Program, the Company and the Employee agree that the Employee's Retirement Date will be March 1, 1999. The Supplemental Pension payments shall be made in monthly installments, commencing with the month for which the first pension payment is made to the Employee or his surviving spouse under the Retirement Plan and ending with the month for which the last pension payment is made to the Employee or his surviving spouse under the Retirement Plan. The Supplemental Benefit shall be payable in the same form as the pension benefit under the Retirement Plan, unless such pension benefit is paid in the form of a single lump sum. In that event, the Supplemental Benefit shall be payable in the normal form of benefit provided under the Retirement Plan and shall be computed and paid as if the pension benefits actually paid under the Retirement Plan were also payable in the normal form. The amount of the Supplemental Benefit shall be recalculated each year in accordance with any provisions of the Retirement Program which are applicable to the Employee and which provide for the adjustment of pension benefits to reflect changes in the cost of living. (g) Equivalency Subsections (e) and (f) above shall be construed to the greatest extent possible, so as to place the Employee in a position which is at least equivalent to the position in which he would have been if his active participation in the Retirement Program had continued during the Continuation Period. However, any incremental tax costs or benefits associated with the Supplemental Benefit shall be disregarded for this purpose. (h) No Mitigation The Employee shall not be required to mitigate the amount of any payment or benefit contemplated by this Section 2, nor shall any such payment or benefit be reduced by any earnings or benefits that the Employee may receive from any other source. 3. Other Benefits and Payments. (a) Retention of Rights. The Employee shall retain his rights to benefits under the Company's Retirement Program, SMART Plan and Deferred Compensation Plans in accordance with the terms and conditions of such plans and consistent with the termination of his employment effective as of the Termination Date. (b) Automobile. The Employee may purchase his Company automobile for the residual lease value plus tax and license by making payment in such amount to the Company on or before December 31, 1995. 4. Nondisclosure of Confidential Information. (a) Confidential Agreement. The parties agree that the terms and conditions of this Agreement shall be treated as confidential and shall not be disclosed during the term of this Agreement or at any time thereafter, except to the extent required by law in the reasonable opinion of its internal or external legal counsel. The Employee has had an opportunity to review and comment upon the press release to be issued by the Company with respect to his resignation (the "Release"). Any written communications by the Company or the Employee regarding the subject of this Agreement which contains statements inconsistent with those set forth in the Release shall be subject to the prior written approval of the other party. No representative of the Company, other than the Chief Executive Officer, the General Counsel or Mr. F. Warren Hellman may, in response to questions from the media, securities analysts or representatives of trade journals, answer questions about or comment concerning the subject matter of this Agreement or the Employee's resignation prior to February 28, 1996. (b) Return of Documents. The Employee further agrees that all files, records, documents, computer disks, drawings, specifications, equipment and similar items relating to the business of members of the Affiliated Group, whether prepared by the Employee or others, are and shall remain exclusively the property of the members of the Affiliated Group and shall be returned to the Affiliated Group upon the termination of his employment hereunder. (c) Public Information. The provisions of Subsection (b) of this Section 4 shall not apply to information or documents which the Employee can show were previously furnished to the Company's stockholders, available for public inspection through a government agency without making a special request or otherwise made available to the general public by the Company or were matters of public or general knowledge in the industry. 5. Successors. (a) Company's Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets, by an agreement in substance and form satisfactory to the Employee, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this Subsection (a) or which becomes bound by this Agreement by operation of law. (b) Employee's Successors. Except as expressly provided herein, this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its General Counsel. 7. Release. (a) The Employee hereby releases and forever discharges the Company and all other members of the Affiliated Group, and each of their stockholders, directors, officers and employees from any and all demands, claims, causes of action or damages of whatever kind or nature, known or unknown, at law or in equity, which he ever had, now has or may hereafter claim to have had and which arise, directly or indirectly, under the Employment Agreement or from the termination of his employment with the Company or any other member of the Affiliated Group; provided, however, that the Employee is not in any way hereby releasing the Company from its obligations under this Agreement. The Employee recognizes and agrees that such claims include, but are not limited to, claims under Title VII of the Civil Rights Act of 1964, as amended, Section 1981 of Title 42 of the United States Code, the Age Discrimination in Employment Act, as amended, and all other employment laws, whether federal, state or local. (b) Nothing herein constitutes an admission of liability by the Company. (c) The Employee reserves any statutory or other rights to legal representation and indemnification by the Company against any loss, cost, damage or expense that he, as a former director, officer and employee of the Company, has under applicable law, applicable insurance policies, the Company's by-laws or certificate of incorporation or indemnity agreement with the Company, in connection with any demands, claims or actions hereafter made or brought, which rights shall continue after the date hereof and for so long as provided in such documents. Until December 31, 2000, the Employee shall continue to be named as an insured for his acts while a director or officer under any Directors' and Officers' insurance policy maintained by the Company for its directors and officers generally. 8. Miscellaneous Provisions. (a) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by the Company's General Counsel. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (b) Whole Agreement. This Agreement supersedes the Employment Agreement and settles all rights of the parties thereunder. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. (c) Presumption. The Company shall make a payment or transfer described in this Agreement at the time specified herein upon receiving written notice from the Employee describing such payment or transfer, referring to the provisions of this Agreement under which such payment or transfer is claimed and certifying that all conditions for such payment or transfer, as set forth in this Agreement, have been satisfied. The information so furnished to the Company by the Employee shall be presumed to be correct, subject to rebuttal by the Company after making the payment or transfer claimed by the Employee. The Company may seek a refund of such payment or transfer in accordance with subsection (g) below. (d) No Setoff. There shall be no right of setoff or counterclaim, with respect to any claim, debt or obligation, against payments to the Employee under this Agreement. (e) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. (f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (g) Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled exclusively by arbitration in Oakland, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. All fees and expenses of the arbitrator and such Association shall be paid by the Company. (h) No Assignment. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (h) shall be void. (i) Option Exercises and Sales of Securities. After March 1, 1996, the Employee shall not be subject to the Company's "window period" restrictions with respect to exercises of Company options or sales of Company securities. However, the Employee acknowledges that, under Section 10(b) of the Securities Exchange Act of 1934, he may not buy or sell securities of the Company at any time prior to or after March 1, 1996 if he possesses material information about the Company which has not been disclosed to the public. (j) Further Assurances. The Company hereby agrees that it will provide to the Employee documentation regarding his compensation and benefit plans participation upon his reasonable request, including schedules confirming the nature and extent of his participation in such benefit plans and related tax information. (k) Execution of Agreement. The Employee acknowledges that he has consulted with an attorney prior to executing this Agreement, that he has read and understands the terms of this Agreement and that these terms are fully and voluntarily accepted by him. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized director, as of the date first above written. /s/ John M. Lillie John M. Lillie AMERICAN PRESIDENT COMPANIES, LTD. By /s/ F. Warren Hellman F. Warren Hellman Chairman, Compensation Committee Board of Directors MC951012Cemp-0100jf-Lillie EX-11.1 14 EXHIBIT 11.1 TO THE 1995 FORM 10K FOR APC EXHIBIT 11.1 AMERICAN PRESIDENT COMPANIES, LTD. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE
________________________________________________________________________________________________ Year Ended December 29 December 30 December 31 1995 1994 1993 ________________________________________________________________________________________________ (In thousands, except per share amounts) ________________________________________________________________________________________________ PRIMARY EARNINGS PER COMMON SHARE ________________________________________________________________________________________________ Net Income $ 30,297 $ 74,198 $ 80,109 Preferred Dividends Series C (3,375) (6,750) (6,750) ________________________________________________________________________________________________ Earnings Available $ 26,922 $ 67,448 $ 73,359 ________________________________________________________________________________________________ Weighted Average: Common Stock (1) 27,423 27,231 26,559 Common Stock Equivalents (2) 822 1,071 1,147 ________________________________________________________________________________________________ Total Shares 28,245 28,302 27,706 ________________________________________________________________________________________________ ________________________________________________________________________________________________ Primary Earnings Per Common Share $ 0.95 $ 2.38 $ 2.65 ________________________________________________________________________________________________ FULLY DILUTED EARNINGS PER COMMON SHARE ________________________________________________________________________________________________ Net Income $ 30,297 $ 74,198 $ 80,109 ________________________________________________________________________________________________ Weighted Average: Common Stock (1) 29,734 27,231 26,559 Common Stock Equivalents (2) 822 1,100 1,579 Preferred Stock Series C 3,962 3,962 ________________________________________________________________________________________________ Total Shares 30,556 32,293 32,100 ________________________________________________________________________________________________ ________________________________________________________________________________________________ Fully Diluted Earnings Per Common Share $ 0.99 $ 2.30 $ 2.50 ________________________________________________________________________________________________ (1) In July, 1995, 1,500 outstanding shares of the company's 9% Series C Cumulative Convertible Preferred Stock ("Series C Stock") were converted into 3,962 shares of common stock. Primary Earnings Per Share for 1995 includes deductions for the 9% Series C Cumulative Convertible Preferred Stock dividends of $3,375 for preferred dividends through the conversion date. The fully diluted earnings per share calculation for 1995 reflects the conversion of the Series C stock as though it had occurred as of the beginning of the year. Additionally, in August through October 1995, the company repurchased 6,000 shares of its common stock. (2) Assumes conversion of outstanding stock options as determined by application of the treasury stock method.
EX-21.1 15 EXHIBIT 21.1 TO THE 1995 FORM 10K FOR APC EXHIBIT 21.1 AMERICAN PRESIDENT COMPANIES, LTD. SUBSIDIARIES OF THE COMPANY SUBSIDIARY JURISDICTION OF INCORP. ____________________________________________________________________________ ACS CANADA, LTD. CANADA AMERICAN CONSOLIDATION SERVICES OF NORTH AMERICA, LTD. DELAWARE AMERICAN CONSOLIDATION SERVICES, LTD. HONG KONG AMERICAN CONSOLIDATION SERVICES, LTD. TAIWAN AMERICAN CONSOLIDATION SERVICES (AUSTRALIA), PTY. LTD. AUSTRALIA AMERICAN CONSOLIDATION SERVICES (PHILIPPINES), INC. PHILIPPINES AMERICAN CONSOLIDATION SERVICES (KOREA), LTD. KOREA AMERICAN PRESIDENT BUSINESS LOGISTICS SERVICES, LTD. DELAWARE AMERICAN PRESIDENT COMPANIES FOUNDATION CALIFORNIA AMERICAN PRESIDENT LINES CANADA, LTD. CANADA AMERICAN PRESIDENT LINES, LTD. DELAWARE AMERICAN PRESIDENT LINES (CHINA) COMPANY LIMITED PEOPLE'S REPUBLIC OF CHINA AMERICAN PRESIDENT LINES (LANKA) AGENCIES LIMITED SRI LANKA AMERICAN PRESIDENT TRUCKING COMPANY, LTD. DELAWARE APL AGENCIES INDIA PRIVATE LIMITED INDIA APL AGENCIES SDN. BHD. MALAYSIA APL (BANGLADESH) AGENCIES LIMITED BANGLADESH APL CORPORATION DELAWARE APL DE MEXICO, S.A. DE C.V. MEXICO APL EXPRESS LTD. DELAWARE APL EXPRESS TRANSPORTATION, LTD. DELAWARE APL INFORMATION SERVICES, LTD. DELAWARE APL INTERNATIONAL CORPORATION DELAWARE APL LAND TRANSPORT SERVICES, INC. TENNESSEE APL M.V. JAPAN, LTD. DELAWARE APL M.V. KOREA, LTD. DELAWARE APL M.V. SINGAPORE, LTD. DELAWARE APL M.V. THAILAND, LTD. DELAWARE APL NEWBUILDINGS, LTD. DELAWARE APL NEWBUILDINGS, LTD. NEVADA APL SHIPHOLDINGS, LTD. DELAWARE ASIAN-AMERICAN CONSOLIDATION SERVICES, LTD. CALIFORNIA CONTROLADORA APC MEXICANA, S.A. DE C.V. MEXICO EAGLE INTERMODAL, LTD. DELAWARE EAGLE MARINE SERVICES, LTD. DELAWARE EAGLE MARINE SERVICES (INDIA), LTD. DELAWARE EMS DE MEXICO, S.A. DE C.V. MEXICO EMS LOGISTICS (S) PTE. LTD. SINGAPORE EMSM, LIMITED LIABILITY COMPANY DELAWARE GLOBAL ALLIANCE F, LTD. BERMUDA MULTI MODAL TRANSPORT INTERNATIONAL (PVT) LTD. PAKISTAN M.V. PRESIDENT ADAMS, LTD. DELAWARE M.V. PRESIDENT JACKSON, LTD. DELAWARE M.V. PRESIDENT KENNEDY, LTD. DELAWARE M.V. PRESIDENT POLK, LTD. DELAWARE M.V. PRESIDENT TRUMAN, LTD. DELAWARE NATOMAS REAL ESTATE COMPANY CALIFORNIA PIONEER INTERMODAL CONTAINER SERVICES CO., LTD THAILAND PISCES, LIMITED LIABILITY COMPANY CALIFORNIA SIAM INTERMODAL SERVICES LTD. THAILAND SONG-DOR HOLDINGS LIMITED HONG KONG TRADE U.S.A., LTD. DELAWARE VASCOR, LTD. DELAWARE EX-23.1 16 EXHIBIT 23.1 TO THE 1995 FORM 10K FOR APC EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 9, 1996 included in this Form 10-K, into the company's previously filed Registration Statements on Form S-3 No. 33-60893, and Form S-8 Nos. 2-89096, 2-89094, 33-17499, 33-28640, 33-24847, 33-36030, 33-47492, 33-56163 and 33-59441. /s/ Arthur Andersen LLP San Francisco, California March 14, 1996 EX-24.1 17 EXHIBIT 24.1 TO THE 1995 FORM 10K FOR APC POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Charles S. Arledge Charles S. Arledge Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ John H. Barr John H. Barr Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Tully M. Friedman Tully M. Friedman Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Joji Hayashi Joji Hayashi Chairman of the Board and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ F. Warren Hellman F. Warren Hellman Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Timothy J. Rhein Timothy J. Rhein President, Chief Executive Officer and Director (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Toni Rembe Toni Rembe Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Forrest N. Shumway Forrest N. Shumway Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ L. Dale Crandall L. Dale Crandall Executive Vice President Chief Financial Officer and Treasurer (Principal Financial Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ G. Craig Sullivan G. Craig Sullivan Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Barry L. Williams Barry L. Williams Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ William J. Stuebgen William J. Stuebgen Vice President - Controller (Principal Accounting Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint L. Dale Crandall, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 29, 1995, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 13th day of March, 1996. /s/ Maryellen B. Cattani Maryellen B. Cattani Executive Vice President, General Counsel and Secretary EX-27 18 EXHIBIT 27 TO THE 1995 10K FOR APC
5 This Schedule contains summary information extracted from the 10-K of American President Companies, Ltd. for the year ended December 29, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-29-1995 DEC-29-1995 76,564 59,086 245,490 0 40,358 502,338 2,203,448 961,971 1,878,783 437,188 687,087 0 0 25,669 443,501 1,878,783 0 2,895,982 0 2,702,342 48,372 0 38,318 53,153 22,856 0 0 0 0 30,297 0.95 0.99 The Allowance for Doubtful Accounts, included in Receivables, amounted to $22,531 at December 29, 1995. The Provision for Doubtful Accounts, included in Total-Costs, amounted to $14,937 for the 52 weeks ended December 29, 1995. Restructuring charge of 48,372 represents cost associated with the accelerated completion of the reegineering program and other organizational changes.
-----END PRIVACY-ENHANCED MESSAGE-----