**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

** **

**FORM 10-K**

 

**x****      ANNUAL REPORT PURSUANT TOSECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For the fiscal yearended December 31, 2009**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934**

** **

**forthe transition period from            to            **

** **

**Commissionfile number 001-34228**

** **

**GENERAL MARITIME CORPORATION**

(Exact name of registrant as specified in itscharter)

 

| **Republic of the Marshall Islands**                            | ** ** | **66-0716485**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |
| ** **                                                      | ** ** | ** **                            |
| **299 Park Avenue, New York, New York**                         | ** ** | **10171**                             |
| (Address of principal executive office)                         |       | (Zip Code)                            |

 

Registrant’s telephone number, including area code:**(212) 763-5600**

 

Securities of the Registrantregistered pursuant to Section 12(b) of the Act:

 

Title of Each Class

**Common Stock, par value$.01 per share**

 

Name of Each Exchange on Which Registered

**New York Stock Exchange**

** **

Securities of the Registrantregistered pursuant to Section 12(g) of the Act:  **None**

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  

Yes  o  No  x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or15(d) of the Act.  

Yes  o  No  x

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports) and (2) has been subject to such filing requirements for thepast 90 days.  

Yes  x  No  o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). 

Yes o No o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.x

 

Indicate by check markwhether registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company (See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act). (Check one):

 

| Large Accelerated Filer x |   | Accelerated Filer o         |
|---------------------------|--------|-----------------------------|
| Non-Accelerated Filer o   |   | Smaller Reporting Company o |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  

Yeso No x

 

The aggregate market value of the voting stock of theregistrant held by non-affiliates of the registrant as of June 30, 2009was approximately $508.2 million, based on the closing price of $9.89 pershare.

 

The number of sharesoutstanding of the registrant’s common stock as of February 26, 2010 was58,248,189 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Proxy Statement for the 2009Annual Meeting of Stockholders, to be filed with the Securities and ExchangeCommission not later than 120 days after December 31, 2009, isincorporated by reference in Part III herein.

 

 

 

----

 

**PART I**

 

**ITEM 1.  BUSINESS**

** **

**OVERVIEW**

** **

We believe that we are aleading provider of international seaborne crude oil transportationservices.  We also provide transportationservices for refined petroleum products. As of February 26, 2010, our fleet consists of 31 wholly owned vessels:  two VLCCs, 11 Suezmax vessels, 12 Aframaxvessels, two Panamax vessels and four Handymax vessels.  The weighted average age of our fleet as of December 31,2009 was 9.6 years.  These vessels have atotal of 3.9 million dwt carrying capacity on a combined basis and all aredouble-hulled.  Many of the vessels inour fleet are “sister ships”, which provide us with operational and schedulingflexibility, as well as economies of scale in their operation andmaintenance.  Our customers include majorinternational oil companies and vessel owners such as Chevron Corporation,CITGO Petroleum Corp., ConocoPhillips, Exxon Mobil Corporation, HessCorporation, Lukoil Oil Company, Stena AB and Sun International Ltd.

 

On December 16, 2008,pursuant to an Agreement and Plan of Merger and Amalgamation, dated as of August 5,2008, by and among the General Maritime Corporation (the “Company”), ArlingtonTankers Ltd. (“Arlington”), Archer Amalgamation Limited (“Amalgamation Sub”),Galileo Merger Corporation (“Merger Sub”) and General Maritime SubsidiaryCorporation (formerly General Maritime Corporation) (“General MaritimeSubsidiary”), Merger Sub merged with and into General Maritime Subsidiary, withGeneral Maritime Subsidiary continuing as the surviving entity (the “Merger”),and Amalgamation Sub amalgamated with Arlington (the “Amalgamation” and,together with the Merger, collectively, the “Arlington Acquisition”).  As a result of the Arlington Acquisition,General Maritime Subsidiary and Arlington each became a wholly-owned subsidiaryof the Company and General Maritime Subsidiary changed its name to GeneralMaritime Subsidiary Corporation.  Inaddition, upon the consummation of the Arlington Acquisition, the Companyexchanged 1.34 shares of its common stock for each share of common stock heldby shareholders of General Maritime Subsidiary and exchanged one share of itscommon stock for each share held by shareholders of Arlington.  We acquired our two VLCCs, two Panamaxvessels and four Handymax vessels (the “Arlington Vessels”) pursuant to theArlington Acquisition.  We refer to the11 Suezmax vessels and 12 Aframax vessels which we owned prior to suchacquisition as the General Maritime Subsidiary Vessels.

 

General Maritime Subsidiaryis the predecessor of the Company for purposes of U.S. securities regulationsgoverning financial statement filing. The Arlington Acquisition is accounted for as an acquisition by GeneralMaritime Subsidiary of Arlington. Therefore, the disclosures throughout this Annual Report on Form 10-Kand the accompanying Consolidated Financial Statements, unless otherwisenoted,  reflect the results of operationsof General Maritime Subsidiary for the year ended December 31, 2007 andthe period January 1, 2008 through December 15, 2008.  The Company had separate operations for theperiod beginning December 16, 2008, the effective date of the ArlingtonAcquisition, and disclosures and references to amounts for periods after thatdate relate to the Company unless otherwise noted.  Arlington’s results have been included in thedisclosures throughout this Annual Report on Form 10-K and theaccompanying Consolidated Statements of Operations, unless otherwise noted,from the effective date of acquisition and thereafter (see “ArlingtonAcquisition” in Note 2 to the Consolidated Financial Statements).

 

All share and per shareamounts presented throughout this Annual Report on Form 10-K, unlessotherwise noted, have been adjusted to reflect the exchange of 1.34 shares ofour common stock for each share of common stock held by shareholders of GeneralMaritime Subsidiary in connection with the Arlington Acquisition.

 

We employ one of the largestfleets in the Atlantic basin. Vessels owned by us operate in ports in theCaribbean, South and Central America, the United States, West Africa, theMediterranean, Europe and the North Sea. We have focused our operations in theAtlantic because we believe that our stringent operating and safety standardsrepresent a potential competitive advantage. Transportation of crude oil to theU.S. Gulf Coast and other refining centers in the United States requiresvessel owners and operators to meet more stringent environmental regulationsthan in other regions of the world. Although the majority of our vesselsoperate in the Atlantic, we also currently operate vessels in the Black Sea andin other regions. We believe this enables us to take advantage of marketopportunities and helps us to position our vessels in anticipation ofdrydockings.

 

We actively monitor marketconditions and changes in charter rates, and manage the deployment of ourvessels between spot market voyage charters, which generally last from severaldays to several weeks, and time charters, which generally last one to threeyears.  Our strategy is intended to providegreater cash flow stability through the use of time charters for part of ourfleet, while maintaining the flexibility to benefit from improvements in marketrates by deploying the balance of our vessels in the spot market.

 

Our net voyage revenues,which are voyage revenues minus voyage expenses, have grown from $12.0 millionin 1997 to $291.6 million in 2009.  Netvoyage revenues increased by $19.9 million, or 7.4% to $291.6 million for theyear ended December 31, 2009 compared to $271.7 million for the year endedDecember 31, 2008 primarily due to our operation of a larger fleetincluding the Arlington Vessels for the entire fiscal year of 2009. During thefourth quarter of 2008, General Maritime Subsidiary took delivery of twoAframax vessels.  During December 2008,pursuant to the Arlington Acquisition, we acquired the Arlington Vessels andtheir results are included in our net voyage revenues for 2009.  As a result, we believe that our fleetprofile has become more attractive to

 

2

----

 

our customers.  We have also generated additional capitalwhich we have used to repay indebtedness and pay dividends and which we may useto support potential future growth or other transactions that we believe wouldcreate value for our shareholders.

 

**AVAILABLE INFORMATION**

** **

We file annual, quarterly,and current reports, proxy statements, and other documents with the Securitiesand Exchange Commission, or the SEC, under the Securities Exchange Act of 1934,or the Exchange Act.  The public may readand copy any materials that we file with the SEC at the SEC’s Public Reference Room at100 F Street, NE, NW, Washington, DC 20549. The public may obtain information on the operation of the PublicReference Room by calling the SEC at 1-800-SEC-0330.  Also, the SEC maintains an Internet websitethat contains reports, proxy and information statements, and other informationregarding issuers, including us, that file electronically with the SEC.  The public can obtain any documents that wefile with the SEC at www.sec.gov.

 

In addition, our companywebsite can be found on the Internet at www.generalmaritimecorp.com.  The website contains information about us andour operations.  Copies of each of ourfilings with the SEC on Form 10-K, Form 10-Q and Form 8-K, andall amendments to those reports, can be viewed and downloaded free of charge assoon as reasonably practicable after the reports and amendments areelectronically filedwith or furnished to the SEC.  To viewthe reports, access www.generalmaritimecorp.com, click on Press Releases, andthen SEC Filings.

 

Any of the above documents can also be obtained inprint by any shareholder upon request to our Investor Relations Department atthe following address:

 

Corporate InvestorRelationsGeneral Maritime Corporation299 Park AvenueNew York, NY 10171

 

**BUSINESS STRATEGY**

** **

Our strategy is to employ our existing competitivestrengths to enhance our position within the industry and maximize long-termcash flow.  Our strategic initiativesinclude:

 

·                  *Managing our fleet in adisciplined manner.* Wehave been an industry consolidator focused on opportunistically acquiringhigh-quality mid-sized vessels or newbuilding contracts for such vessels. Weare continuously and actively monitoring the market in an effort to takeadvantage of expansion and growth opportunities. We completed thestock-for-stock acquisition of Arlington in December 2008, which resultedin our acquisition of eight vessels. We also evaluate opportunities to monetizeour investment in vessels by selling them when conditions are favorable andhave a track record of vessel acquisitions and divestitures. From our foundingin 1997, our fleet size increased to 47 vessels in 2004. Between 2005 and2006, we sold 26 vessels when we believed asset values were favorable todo so and modernized our fleet. As tanker rates eased and economic fundamentalssoftened beginning at the end of 2006, we entered into contracts for long termrevenue through time charters. Other than the Arlington Acquisition, we havenot contracted to acquire any vessels since May 2008 in an effort topreserve liquidity and to position us for future vessel acquisitionopportunities.

 

·                  *Balancing vessel deployment tomaximize fleet utilization and cash flows*. We actively manage the deployment of our fleetbetween time charters and spot market voyage charters. Our vessel deploymentstrategy is designed to provide greater cash flow stability through the use oftime charters for part of our fleet, while maintaining the flexibility tobenefit from improvements in market rates by deploying the balance of ourvessels in the spot market. Our goal is to be the first choice of our customersfor the transportation of crude oil and refined petroleum products. Weconstantly monitor the market and seek to anticipate our customers’transportation needs and to respond quickly when we recognize attractivechartering opportunities. Part of our deployment strategy centers aroundthe use of “sister ships” within our fleet. Sister ships enhance our revenuegenerating potential by providing operational and scheduling flexibility. Theuniform nature of many vessels in our fleet also provides us with cost efficienciesin maintaining, supplying and crewing our tankers.

 

·                  *Managing environmentally safe,yet cost efficient operations*. We aggressively manage our operating andmaintenance costs. At the same time, our fleet has a strong safety andenvironmental record that we maintain through acquisitions of high-qualityvessels and regular maintenance and inspection of our fleet. We maintainoperating standards for all of our vessels that emphasize operational safety,quality maintenance, continuous training of our officers and crews andcompliance with U.S. and international environmental and safetyregulations. Our in-house safety staff oversees many of these services. Inaddition, we periodically outsource various aspects of our technical managementoperations to ensure that we are performing at the highest standards.  We believe the age and quality of the vesselsin our fleet, coupled with our safety and environmental record, position usfavorably within the sector with our customers and for future businessopportunities.

 

3

----

 

·                  *Maintaining a PrudentCapital Structure.* We are committed to maintaining prudentfinancial policies aimed at preserving financial stability and appropriateleverage and increasing long-term cash flow. As of December 31, 2009, our debt to capitalization ratio was71.5%.  As of December 31, 2009 wehad the ability to draw down an additional $18.8 million on our 2005 CreditFacility.

 

**OUR FLEET**

** **

Our current fleet consists of 31 vessels and iscomprised of two VLCCs, 12 Aframax vessels, 11 Suezmax vessels, two Panamaxvessels and four Handymax vessels.  The followingchart provides information regarding our 31 vessels.

 
| **Vessel**             | ** ** | **Yard**                          | ** ** | **Year  built** | ** ** | **Year  acquired** | ** ** | **DWT**   | ** ** | **Current  employment  status** | ** ** | **Flat**         | ** ** | **Sister  ships(2)** | ** ** |
|------------------------|------------|-----------------------------------|------------|-----------------|------------|--------------------|------------|-----------|------------|---------------------------------|------------|------------------|------------|----------------------|------------|
| ***Crude Tankers***    |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| **V-Max VLCC**         |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| Stena  Victory         |       | Hyundai H.I. Co  Ltd., Korea      |       | 2001            |       | 2008               |       | 314,000   |       | Spot                            |       | Bermuda          |       | A                    |       |
| Stena  Vision          |       | Hyundai H.I. Co  Ltd., Korea      |       | 2001            |       | 2008               |       | 314,000   |       | Spot                            |       | Bermuda          |       | A                    |       |
|                   |       |                              |       |            |       |               |       | 628,000   |       |                            |       |             |       |                 |       |
| **Suezmax**            |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| Genmar  St. Nikolas(1) |       | TSU                               |       | 2008            |       | 2008               |       | 149,876   |       | TC                              |       | Marshall Islands |       | B                    |       |
| Genmar  George T(1)    |       | TSU                               |       | 2007            |       | 2007               |       | 149,847   |       | TC                              |       | Marshall Islands |       | B                    |       |
| Genmar  Kara G(1)      |       | TSU                               |       | 2007            |       | 2007               |       | 150,296   |       | TC                              |       | Liberia          |       | C                    |       |
| Genmar  Harriet G(1)   |       | TSU                               |       | 2006            |       | 2006               |       | 150,205   |       | TC                              |       | Liberia          |       | C                    |       |
| Genmar  Orion(1)       |       | Samsung                           |       | 2002            |       | 2003               |       | 159,992   |       | TC                              |       | Marshall Islands |       |                 |       |
| Genmar  Argus(1)       |       | Hyundai                           |       | 2000            |       | 2003               |       | 164,097   |       | Spot                            |       | Marshall Islands |       | D                    |       |
| Genmar  Spyridon(1)    |       | Hyundai                           |       | 2000            |       | 2003               |       | 153,972   |       | Spot                            |       | Marshall Islands |       | D                    |       |
| Genmar  Hope(1)        |       | Daewoo                            |       | 1999            |       | 2003               |       | 153,919   |       | Spot                            |       | Marshall Islands |       | E                    |       |
| Genmar  Horn(1)        |       | Daewoo                            |       | 1999            |       | 2003               |       | 159,475   |       | Spot                            |       | Marshall Islands |       | E                    |       |
| Genmar  Phoenix(1)     |       | Halla                             |       | 1999            |       | 2003               |       | 149,999   |       | Spot                            |       | Marshall Islands |       |                 |       |
| Genmar  Gulf(1)        |       | Daewoo                            |       | 1991            |       | 2003               |       | 149,803   |       | Spot                            |       | Marshall Islands |       |                 |       |
|                   |       |                              |       |            |       |               |       | 1,691,481 |       |                            |       |             |       |                 |       |
| **Aframax**            |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| Genmar  Strength(1)    |       | Sumitomo                          |       | 2003            |       | 2004               |       | 105,674   |       | TC                              |       | Liberia          |       | F                    |       |
| Genmar  Daphne(1)      |       | Tsuneishi                         |       | 2002            |       | 2008               |       | 106,560   |       | TC                              |       | Marshall Islands |       | G                    |       |
| Genmar  Defiance(1)    |       | Sumitomo                          |       | 2002            |       | 2004               |       | 105,538   |       | Spot                            |       | Liberia          |       | F                    |       |
| Genmar  Ajax(1)        |       | Samsung                           |       | 1996            |       | 1998               |       | 96,183    |       | TC                              |       | Liberia          |       | H                    |       |
| Genmar  Agamemnon(1)   |       | Samsung                           |       | 1995            |       | 1998               |       | 96,214    |       | TC                              |       | Liberia          |       | H                    |       |
| Genmar  Minotaur(1)    |       | Samsung                           |       | 1995            |       | 1998               |       | 96,226    |       | Spot                            |       | Liberia          |       | H                    |       |
| Genmar  Revenge(1)     |       | Samsung                           |       | 1994            |       | 2004               |       | 96,755    |       | Spot                            |       | Liberia          |       |                 |       |
| Genmar  Constantine(1) |       | S. Kurushima                      |       | 1992            |       | 1998               |       | 102,335   |       | Spot                            |       | Liberia          |       | I                    |       |
| Genmar  Alexandra(1)   |       | S. Kurushima                      |       | 1992            |       | 2001               |       | 102,262   |       | Spot                            |       | Marshall Islands |       | I                    |       |
| Genmar  Princess(1)    |       | Sumitomo                          |       | 1991            |       | 2003               |       | 96,648    |       | Spot                            |       | Liberia          |       | J                    |       |
| Genmar  Progress(1)    |       | Sumitomo                          |       | 1991            |       | 2003               |       | 96,765    |       | Spot                            |       | Liberia          |       | J                    |       |
| Genmar  Elektra(1)     |       | Tsuneishi                         |       | 2002            |       | 2008               |       | 106,548   |       | TC                              |       | Marshall Islands |       | G                    |       |
|                   |       |                              |       |            |       |               |       | 1,207,708 |       |                            |       |             |       |                 |       |
| **Panamax**            |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| Stena  Companion(1)    |       | Dalian Shipyard  Ltd., China      |       | 2004            |       | 2008               |       | 72,750    |       | Spot                            |       | Bermuda          |       | K                    |       |
| Stena  Compatriot(1)   |       | Dalian Shipyard  Ltd., China      |       | 2004            |       | 2008               |       | 72,750    |       | TC                              |       | Bermuda          |       | K                    |       |
|                   |       |                              |       |            |       |               |       | 145,500   |       |                            |       |             |       |                 |       |
| ***Product tankers***  |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| **Handymax**           |       |                              |       |            |       |               |       |      |       |                            |       |             |       |                 |       |
| Stena  Concept         |       | Uljanik  Brodogradiliste, Croatia |       | 2005            |       | 2008               |       | 47,400    |       | TC                              |       | Bermuda          |       | L                    |       |
| Stena  Contest         |       | Uljanik  Brodogradiliste, Croatia |       | 2005            |       | 2008               |       | 47,400    |       | TC                              |       | Bermuda          |       | L                    |       |
| Stena  Concord         |       | Uljanik  Brodogradiliste, Croatia |       | 2004            |       | 2008               |       | 47,400    |       | TC                              |       | Bermuda          |       | L                    |       |
| Stena  Consul(1)       |       | Uljanik  Brodogradiliste, Croatia |       | 2004            |       | 2008               |       | 47,400    |       | TC                              |       | Bermuda          |       | L                    |       |
|                   |       |                              |       |            |       |               |       | 189,600   |       |                            |       |             |       |                 |       |
|                   |       |                              |       |            |       | Total DWT          |       | 3,862,289 |       |                            |       |             |       |                 |       |

 

TC = Time Chartered (see “—Our Charters”)

 

4

----

 

----

(1)   Vessel is currently collateral for our 2005 CreditFacility.

 

(2)   Each vessel with the same letter is a “sistership” of each other vessel with the same letter.

 

During April 2004 and July 2004,we acquired nine vessels, consisting of three Aframax vessels, two Suezmaxvessels and four Suezmax newbuilding contracts, and a technical managementcompany from Soponata SA, an unaffiliated entity, for an aggregate purchaseprice of $248.1 million in cash.  Thesefour newbuilding Suezmax vessels were delivered between March 2006 and February 2008.  The acquisitions were financed through theuse of cash and borrowings under our revolving credit facilities.

 

During December 2008,pursuant to the Arlington Acquisition, we acquired two VLCCs, two Panamaxvessels and four Handymax vessels along with Arlington’s other assets andliabilities in exchange for 15.5 million shares of our common stock.

 

All of our vessels in ourcurrent fleet are double-hull.

 

Commercial management forour vessels is provided through our wholly-owned subsidiary, General MaritimeManagement LLC.

 

**FLEET DEPLOYMENT**

** **

We strive to optimize thefinancial performance of our fleet by deploying our vessels on time chartersand in the spot market.  We believe thatour fleet deployment strategy provides us with the ability to benefit fromincreases in tanker rates while at the same time maintaining a measure ofstability through cycles in the industry. The following table details the percentage of our fleet operating ontime charters and in the spot market during the past four years.

 
| ** **                   | ** ** | **TIME CHARTER VS.SPOT MIX (as % of operating days)  YEAR ENDED DECEMBER 31,** | ** ** |
|------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **2009**                                                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Percent in Time Charter Days |       | 73.8                                                                           | %          | 74.9 | % | 70.3 | % |
| Percent in Spot Days         |       | 26.2                                                                           | %          | 25.1 | % | 29.7 | % |
| Total Vessel Operating Days  |       | 10,681                                                                         |       | 7,568 |   | 6,599 |   |

 

Vessels operating on time charters may be chartered for several monthsor years whereas vessels operating in the spot market typically are charteredfor a single voyage that may last up to several weeks.  Vessels operating in the spot market maygenerate increased profit margins during improvements in tanker rates, whilevessels operating on time charters generally provide more predictable cashflows.  Accordingly, we actively monitormacroeconomic trends and governmental rules and regulations that mayaffect tanker rates in an attempt to optimize the deployment of our fleet.

 

5

----

** **

**OUR CHARTERS**

** **

As of December 31, 2009, our fleet of 31 vessels has 15 vessels ontime charter contracts expiring on dates between January 2010 and July 2011shown as follows:

 
| **Vessel**          | ** ** | **Vessel Type**  | ** ** | **Expiration Date**        | ** ** | **Daily Rate (1)** | ** ** |
|---------------------|------------|------------------|------------|----------------------------|------------|--------------------|------------|
| ** **          | ** ** | ** **       | ** ** | ** **                 | ** ** | ** **         | ** ** |
| Genmar  Agamemnon   |       | Aframax          |       | March 3, 2010         |       | $                  | 13,750     |   |
| Genmar  Ajax        |       | Aframax          |       | October 23, 2010      |       | $                  | 17,500     |   |
| Genmar  Daphne      |       | Aframax          |       | March 28, 2010        |       | $                  | 18,461     |   |
| Genmar  Elektra     |       | Aframax          |       | February 28, 2010     |       | $                  | 17,950     |   |
| Genmar  George T.   |       | Suezmax          |       | August 28, 2010       |       | $                  | 39,000     |   |
| Genmar  Harriet G.  |       | Suezmax          |       | June 1, 2010          |       | $                  | 38,000     |   |
| Genmar  Kara G.     |       | Suezmax          |       | June 1, 2010          |       | $                  | 38,000     |   |
| Genmar  Orion       |       | Suezmax          |       | June 1, 2010          |       | $                  | 38,000     |   |
| Genmar  St. Nikolas |       | Suezmax          |       | February 7, 2011      |       | $                  | 39,000     |   |
| Genmar  Strength    |       | Aframax          |       | August 29, 2010       |       | $                  | 18,500     |   |
| Stena  Compatriot   |       | Panamax          |       | November 10, 2010 (2) |       | $                  | 18,639     |   |
| Stena  Concept      |       | Product carriers |       | July 4, 2011 (2)      |       | $                  | 17,942     | (3) |
| Stena  Concord      |       | Product carriers |       | January 19, 2010      |       | $                  | 16,642     |   |
| Stena  Consul       |       | Product carriers |       | November 10, 2010 (2) |       | $                  | 16,642     |   |
| Stena  Contest      |       | Product carriers |       | July 4, 2011 (2)      |       | $                  | 17,942     | (3) |

 

----

(1)                    Before brokers’ commissions.

 

(2)                    Charter end date excludes periods that are at theoption of the charterer.  See below fordescriptions of these option periods.

 

(3)                    Rate adjusts as follows: $18,264 per day from January 5,2010 through January 4, 2011 and $18,603 per day from January 5, 2011through July 4, 2011.

 

Our time charters on our vessels are for fixed rates per day with noadditional hire earned, except for time charters on one Panamax vessel (*Stena Compatriot*) and three Handymax vessels (*Stena Consul*, *Stena Concept*and *Stena Contest*), the terms of which aredescribed below.

 

Our time charters on the *Stena Compatriot*,*Stena Consul*, *StenaConcept* and *Stena Contest*are for fixed rates per day and also have the potential to earn additionalhire.  Under these charters, we arerequired to keep the vessels seaworthy, and to crew and maintain them.  Northern Marine performs those duties for usunder the ship management agreements described below.  If a structural change or new equipment isrequired due to changes in law, classification society or regulatoryrequirements, the charterers will be required to pay for such changes if thecost is less than $100,000 per year per vessel. Otherwise the cost of any suchimprovement or change will be shared between us and the charterer of the vesselbased on the remaining charter period and the remaining depreciation period ofthe vessel.  The charterers are notobligated to pay us charter hire for off-hire days of fewer than five days pervessel per year, which include days a vessel is unable to be in service due to,among other things, repairs or drydockings. Each charter also provides that the Basic Hire will be reduced if thevessel does not achieve the performance specifications set forth in thecharter.  However, under the shipmanagement agreements described below, Northern Marine will reimburse us forany loss of or reduction in Basic Hire, in excess of five days during anytwelve-month period following the date the vessels are delivered to us, net ofany proceeds we receive from our off-hire insurance.

 

The terms of the charters do not provide the charterers with an optionto terminate the charter before the end of its term except in the event of thetotal loss or constructive total loss of a vessel.  In addition, each charter provides that wemay not sell the related vessel without the charterer’s consent, which consentmay be withheld in the charterer’s sole discretion.

 

6

----

 

The following table sets forth the daily Basic Hire and base operatingcosts for two vessels- the *Stena Compatriot*,a Panamax vessel, and the *Stena Consul*, aHandymax vessel:

 
| ** **                                      | ** ** | **Stena Compatriot** | ** ** | **Stena Consul**          | ** ** |
|-------------------------------------------------|------------|----------------------|------------|---------------------------|------------|
| **Period**                                      | ** ** | **Basic Hire  (1)**  | ** ** | **Base Operating  Costs** | ** ** | **Basic Hire  (1)** | ** ** | **Base Operating  Costs** | ** ** |
| Nov. 11, 2009 - Nov. 10, 2010         |       | $                    | 18,989     |                      | $          | 7,339 |   | $ | 16,964 |   | $ | 6,764 |   |
| Nov. 11, 2010 - Nov. 10, 2011 **(2)** |       | 19,356               |       | 7,706                     |       | 17,303 |   | 7,103 |   |
| Nov. 11, 2011 - Nov. 10, 2012 **(2)** |       | 19,741               |       | 8,091                     |       | 17,658 |   | 7,458 |   |
| Nov. 11, 2012 - Nov. 10, 2013 **(2)** |       | 20,145               |       | 8,495                     |       | 18,031 |   | 7,831 |   |
|                                                 |            |                      |            |                           |            |  |  |  |  |  |  |  |  |

 

----

(1)          Each vessel is entitled toreceive Additional Hire, the methodology for its calculation is describedbelow.  However, to the extent thecharterer has subchartered the vessel, the amount on which additional hire iscalculated is based on the subcharter rate. The *Stena Compatriot* is subchartered at adaily rate of $27,000 through January 8, 2010.  Additional hire for periods in which thissubcharter is in effect is fixed at $3,499 per day through January 8,2010.

 

(2)          Represents options for thecharterer to extend the charter for additional one year periods.  There can be no assurance that the chartererwill exercise any of these options.

 

The following table sets forth the daily Basic Hire and base operatingcosts for two Handymax vessels- the *Stena Concept*andthe *Stena Contest*:

 
| **Period**                                    | ** ** | **Basic Hire  (1)** | ** ** | **Base Operating  Costs** | ** ** |
|-----------------------------------------------|------------|---------------------|------------|---------------------------|------------|
| Jan. 5, 2009 - Jan. 4, 2010         |       | $                   | 17,942     |                      | $          | 6,442 |   |
| Jan. 5, 2010 - Jan. 4, 2011         |       | 18,264              |       | 6,764                     |       |
| Jan. 5, 2011 - July 4, 2011         |       | 18,603              |       | 7,103                     |       |
| July 5, 2011 - July 4, 2012 **(2)** |       | 21,158              |       | 7,458                     |       |
| July 5, 2012 - July 4, 2013 **(2)** |       | 21,531              |       | 7,831                     |       |
|                                               |            |                     |            |                           |            |  |  |

 

----

(1)          Through July 4, 2011,each vessel is entitled to receive Additional Hire, the methodology for itscalculation is described below.  However,to the extent the charterer has subchartered the vessel, the amount on whichadditional hire is calculated is based on the subcharter rate.

 

(2)          Represents options for thecharterer to extend the charter for additional one year periods.  There will be no Additional Hire for theseoption periods. There can be no assurance that the charterer will exercise anyof these options.

 

***Additional Hire Under CertainCharters for our Arlington Vessels***

*** ***

Under the charters for four of our Arlington Vessels,the *Stena Compatriot*, *StenaConsul, Stena Concept* and *Stena Contest*,in addition to the fixed rate basic hire, each vessel has the possibility ofreceiving Additional Hire from the charterers through profit sharingarrangements related to the performance of the tanker markets on specifiedgeographic routes, or from actual time charter rates.  The Additional Hire, if any, is payable onthe 25th day following the end of each calendar quarter. Additional Hire is notguaranteed under our charters.

 

The Additional Hire, if any, for any calendar quarter is an amountequal to 50% of the weighted average hire, calculated as described below, forthe quarter after deduction of the Basic Hire in effect for that quarter.  The weighted average hire is a daily rateequal to the weighted average of the following amounts:

 

·                  a weighted average of thetime charter hire per day received by the Charterer for any periods during thecalculation period, determined as described below, that the vessel is sub-charteredby the Charterer under a time charter, less ship broker commissions paid by theCharterer in an amount not to exceed 2.5% of such time charter hire andcommercial management fees paid by the Charterer in an amount not to exceed1.25% of such time charter hire; and

 

·                  the time charter equivalenthire for any periods during the calculation period that the vessel is notsub-chartered by the charterer under a time charter.

 

The calculation period is the 12-month period ending on the last day ofeach calendar quarter, except that in the case of the first three full calendarquarters following the date of commencement of a charter, the calculationperiod is the three, six and nine month periods,

 

7

----

 

respectively, ending on the last day of such calendar quarter and thefirst calendar quarter also includes the period from the date of thecommencement of our charters to the commencement of the first full calendarquarter.

 

The Time Charter Equivalent Hire referred to above is a weightedaverage of day rates calculated using the parameters set forth below, which wecall the Daily Value.  The Daily Value iscalculated using average spot rates expressed in Worldscale Points determinedby a shipbrokers panel for the routes specified below which are the routes onwhich our vessel types generally trade. We refer to these rates as the Average Spot Rates and we refer to theseroutes as the Notional Routes.  DailyValue is determined as follows:

 

·                  multiplying the Average SpotRate expressed in Worldscale Points by the applicable Worldscale flat rate andmultiplying that product by the cargo size for each vessel type to calculatefreight income;

 

·                  subtracting voyage costsconsisting of brokerage commissions of 2.5% and commercial management fees of1.25%, bunker costs and port charges to calculate voyage income; and

 

·                  dividing voyage income byvoyage duration, including time in port, to calculate the Daily Value.

 

The shipbrokers panel, which we call the Brokers Panel, is theAssociation of Shipbrokers and Agents Tanker Broker Panel.  We can change the panel of brokers to a newpanel mutually acceptable to us and the Charterer.  On the last day of each calendar quarter andon the expiration date of the Charter, we and the Charterer will instruct theBrokers Panel to determine for each Notional Route the Average Spot Rate overany periods during the Calculation Period that a Vessel is not sub-chartered bythe Charterer under a time charter.  IfWorldscale ceases to be published, the Brokers Panel will use its best judgmentin determining the nearest alternative method of assessing the market rates onthe specified voyages.

 

We instruct the Brokers Panel to deliver their determination of theAverage Spot Rates no later than the fifth business day following theinstruction to make such determination. The costs of the Brokers Panel are shared equally between us and theCharterer.  For each Calculation Period,the Charterer will calculate the amount of Time Charter Equivalent Hire and theamount of Additional Hire payable, if any, and deliver such calculation to usno later than the fifth business day following the date on which the Chartererreceives the determination of Average Spot Rates from the Brokers Panel.  These determinations of the Brokers Panel arebinding on us and the Charterer.

 

The Notional Routes and the weighting to be applied to each route incalculating the Time Charter Equivalent Hire is as follows:

 
| *Handymax vessels:* |   | Rotterdam  to New York with 37,000 tons clean (40% weight) Curacao to New York with  38,000 tons clean (60% weight) |
|---------------------|--------|---------------------------------------------------------------------------------------------------------------------|
| * *            |   |                                                                                                                |
| *Panamax vessel:*   |   | Curacao  to New York with 50,000 tons dirty (50% weight) Augusta to Houston with  50,000 tons dirty (50% weight)    |

 
| Additional  terms used in the calculation of Time Charter Equivalent Hire are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
| ·      *Calculation of freight  income.* The freight income for each Notional Route is  calculated by multiplying the Average Spot Rate for such route, as supplied  by the Brokers Panel, by the Worldscale flat rate for such route as set forth  in the New Worldwide Tanker Nominal Freight Scale issued by the Worldscale  Association and current for the relevant period and then multiplying such  product by the cargo size for such route.                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
| ·      *Calculation of voyage  income.* The voyage income for each Notional Route is  calculated by deducting from the freight income for such route ship broker  commissions equal to 2.5% of the freight income, commercial management fees  equal to 1.25% of the freight income, the port charges and bunker costs  (equal to the bunkers used multiplied by the bunkers prices) specified below  for each Vessel. Bunkers used are determined based on speed, distance and  consumption of bunkers at sea and in port. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
| ·      *Calculation of voyage duration.* The voyage duration for  each Notional Route is calculated using the distance, speed and time in port  specified below for each Vessel.                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
| ·      *Data  used in calculations.* The following data is used by the  Charterer in the above calculations:                                                                                                                                                                                                                                                                                                                                                                                                                |

 

8

----

 
| · Bunkers in  port |   |                                                                                                                                                                                                                                                                                                                                                                                      |
|-------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |   | For  Handymax vessels: 40 tons per voyage all-inclusive loading and discharging  ports.                                                                                                                                                                                                                                                                                                   |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                    |   | For  Panamax vessels: 65 tons per port call all-inclusive loading and discharging  ports.                                                                                                                                                                                                                                                                                                 |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · Bunker  prices   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                    |   | For  Product tankers and Panamax tankers: the mean of the average prices during  the quarter for Marine Fuel Oil grade IFO 380 CST prevailing at Houston, New  York and Curacao as published by Platts Bunkerwire, or similar publication,  plus barge delivery charges in amount equal to the average barge delivery  charges in the applicable port over the prior twelve-month period. |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · Port charges     |   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                    |   | The  port charges for loading and discharging ports on each Notional Route are  equal to the published tariffs and exchange rates in effect on the last  calendar day of the quarter and include all vessel costs for port calls.                                                                                                                                                         |
| · Time in port     |   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                    |   | For  Handymax vessels and Panamax vessels: 5.5 days, which are split 2 days  loading, 2 days discharging and the balance of the time idling.                                                                                                                                                                                                                                              |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · Distance         |   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                    |   | The  distance for each Notional Route is determined according to the “World-Wide  Marine Distance Tables” published by Veson Nautical Distance Tables.                                                                                                                                                                                                                          |

 

The Notional Routes are intended to represent routes on which Handymaxand Panamax vessels are typically used. If during the term of the charter, in the charterer’s reasonableopinion, these routes cease to be used by Handymax or Panamax vessels, or theassumptions regarding bunkering ports for purposes of determining bunker pricescease to be applicable, the charterer may, with our consent, which we may notunreasonably withhold, instruct the Brokers Panel to substitute alternativenotional routes and bunkering ports that most closely match the routes andbunkering ports typically used by Product tankers or Panamax tankers and toapply appropriate weights to such routes.

 

If in the charterer’s reasonable opinion it becomes impractical ordangerous, due to war, hostilities, warlike operations, civil war, civilcommotion, revolution or terrorism for Handymax and Panamax vessels to operateon the Notional Routes, the charterer may request our agreement, which we maynot unreasonably refuse, for the Daily Value to be determined during the periodof such danger or restriction of trading using Average Spot Rates determined bythe Brokers Panel for alternative notional routes proposed by the Charterer thatreasonably reflect realistic alternative round voyage trade for Handymax  and Panamax vessels during the period of suchdanger or restriction of trading.  Insuch event, the Time Charter Equivalent Hire will be calculated using the DailyValue for such alternative routes and applying such weights as determined bythe charterer.

 

**OPERATIONS AND SHIP MANAGEMENT**

** **

***General Maritime Subsidiary ManagedVessels***

*** ***

We employ experienced management in all functions critical to ouroperations, aiming to provide a focused marketing effort, tight quality andcost controls and effective operations and safety monitoring.  Through our wholly owned subsidiaries,General Maritime Management LLC and General Maritime Management (Portugal) Lda,we currently provide the commercial and technical management necessary for theoperations of our General Maritime Subsidiary Vessels, which include shipmaintenance, officer staffing, crewing, technical support, shipyardsupervision, and risk management services through our wholly owned subsidiaries.

 

Our crews inspect our vessels and perform ordinary course maintenance,both at sea and in port.  We regularlyinspect our vessels.  We examine eachvessel and make specific notations and recommendations for improvements to theoverall condition of the vessel, maintenance of the vessel and safety andwelfare of the crew.  We have an in-housesafety staff to oversee these functions and retain Admiral Robert North (Ret.),formerly of the U.S. Coast Guard, as a safety and security consultant.

 

9

----

 

The following services are performed by General Maritime Management LLCand General Maritime Management (Portugal) Lda with respect to our GeneralMaritime Subsidiary Vessels:

 

·                  supervision of routinemaintenance and repair of the vessel required to keep each vessel in good andefficient condition, including the preparation of comprehensive drydockingspecifications and the supervision of each drydocking;

 

·                  oversight of maritime andenvironmental compliance with applicable regulations, including licensing andcertification requirements, and the required inspections of each vessel toensure that it meets the standards set forth by classification societies andapplicable legal jurisdictions as well as our internal corporate requirementsand the standards required by our customers;

 

·                  engagement and provision ofqualified crews (masters, officers, cadets and ratings) and attendance to allmatters regarding discipline, wages and labor relations;

 

·                  arrangement to supply thenecessary stores and equipment for each vessel; and

 

·                  continual monitoring offleet performance and the initiation of necessary remedial actions to ensurethat financial and operating targets are met.

 

Our chartering staff, which is located in New York City, monitors fleetoperations, vessel positions and spot market voyage charter rates worldwidewith respect to our General Maritime Subsidiary Vessels.  We believe that monitoring this informationis critical to making informed bids on competitive brokered charters.

 

***Third-Party Managed Vessels***

* *

Our Arlington Vessels are party to technical management agreements withthird parties.

 

One Panamax vessel (*Stena Compatriot*)and three Handymax vessels (*Stena Consul*, *Stena Concept* and *Stena Contest*)are party to fixed-rate ship management agreements with Northern Marine.  The *Stena Victory, StenaVision, Stena Companion* and *Stena Concord*were party to similar agreements with Northern Marine which expired in October andNovember 2009. Under the ship management agreements, Northern Marine isresponsible for all technical management of the vessels, including crewing,maintenance, repair, drydockings, vessel taxes and other vessel operating andvoyage expenses.  Northern Marine hasoutsourced some of these services to third-party providers.  We have agreed to guarantee the obligationsof each of our vessel subsidiaries under the ship management agreements.

 

Additionally, under the terms of the ship management agreements, alldrydockings during the term of the ship management agreements are to be at thesole cost and expense of Northern Marine. In addition, Northern Marine agreed to conduct at least one mid-perioddrydocking for each Handymax vessel and Panamax vessel prior to redelivery ofsuch vessels.  Under the terms of theship management agreements, the cost of these intermediate and special surveysis covered by the management fees that we pay to Northern Marine.  Upon redelivery of the vessels to us at theexpiration of the ship management agreements, Northern Marine has agreed torepay to us any drydocking provision accrued, but not used, from the completionof the last drydocking during the term of the applicable Ship ManagementAgreement (or if no drydocking occurs during the term of such agreement, fromthe date of commencement of such agreement), to the date of redelivery at thedaily rates specified in the ship management agreements.

 

Under the ship management agreements, Northern Marine has agreed toreturn these four vessels in-class and in the same good order and condition aswhen delivered, except for ordinary wear and tear.

 

Northern Marine is also obligated under the ship management agreementsto maintain insurance for each of these four Arlington Vessels, includingmarine hull and machinery insurance, protection and indemnity insurance(including pollution risks and crew insurances), war risk insurance andoff-hire insurance.  Under the shipmanagement agreements, we pay Northern Marine a fixed fee per day per ArlingtonVessel for all of the above services, which increases 5% per year, for so longas the relevant charter is in place. Under the ship management agreements, Northern Marine has agreed toindemnify us for the loss of the Basic Hire for each of these Arlington Vesselsin the event, for circumstances specified under the charters, the ArlingtonVessel is off-hire or receiving reduced hire for more than five days during anytwelve-month period, net of amounts received by us from off-hireinsurance.  Stena has agreed to guaranteethis indemnification by Northern Marine. Both we and Northern Marine have the right to terminate any of the shipmanagement agreements if the relevant charter has been terminated.  Tables setting forth the daily base operatingcosts for each of these four Arlington Vessels can be found above in thesection entitled “Our Charters.”

 

10

----

 

We have also agreed to pay to Northern Marine an incentive fee for eachday an Arlington Vessel is on hire for over 360 days during any twelve-monthperiod following the date the applicable Arlington Vessel was delivered to usin amount equal to the daily Basic Hire for such Arlington Vessel.  If we terminate the ship managementagreements with Northern Marine because Northern Marine has failed to performits obligations under such agreements, Stena has agreed to provide areplacement ship manager to perform the obligations set forth in the shipmanagement agreements on the same terms and for the same fixed amounts payableto Northern Marine.

 

We recently signed new shipmanagement agreements with Northern Marine for *Stena**Victory*and *Stena Vision*and with Anglo Eastern for *StenaCompanion* and *Stena Concord*afterthe expiration of the time charters to which they were party when we acquiredthem and the termination of the related fixed-rate management agreements forthese vessels. These new agreements began on a mutually-agreed date after theexpiration of the ship management agreements and have renewable terms of twoyears with respect to the new agreements with Northern Marine. The terms ofeach of these four new agreements are substantially different from those of theprior management agreements for these vessels, including the removal of certainprovisions relating to coverage of costs for drydocking, return of vesselsin-class, incentive fees, indemnification and insurance mentioned above.

 

**CREWING AND EMPLOYEES**

** **

As of December 31,2009, we employed approximately 97 office personnel. Approximately 45 of theseemployees manage the commercial operations of our business, and are located inNew York City.  We have 40 employeeslocated in Lisbon, Portugal, who manage the technical operations of ourbusiness, and are subject to a local company employment collective bargainingagreement which covers the main terms and conditions of their employment.  We have 11 employees who procure crews formost of our vessels, three of which are located in Novorossiysk, Russia andeight of which are located in Mumbai, India. We also have one employee located in Piraeus, Greece who is subject toGreece’s national employment collective bargaining agreement which covers theterms and conditions of her employment.

 

As of December 31,2009, we employed approximately 1,035 seaborne personnel to crew our GeneralMaritime Subsidiary Vessels who are staffed by our offices in India, Russia andPortugal.  Crews for our ArlingtonVessels are provided by Northern Marine as described above.

 

We place great emphasis onattracting qualified crew members for employment on our vessels.  Recruiting qualified senior officers hasbecome an increasingly difficult task for vessel operators.  We pay competitive salaries and providecompetitive benefits to our personnel. We believe that the well-maintained quarters and equipment on ourvessels help to attract and retain motivated and qualified seamen and officers.  Our crew management services contractors havecollective bargaining agreements that cover all the junior officers and seamenwhom they provide to us.

 

**CUSTOMERS**

** **

Ourcustomers include most oil companies, as well as oil producers, oil traders,vessel owners and others.  During theyear ended December 31, 2009, Eiger Shipping, S.A., a subsidiary of Lukoilaccounted for 35.8% of our voyage revenues and we expect Eiger Shipping, S.A.to account for a significant portion of our voyage revenues in the future.  Five of our 15 time charters are with EigerShipping, S.A.  We also derive asignificant portion of our voyage revenues from time charters by subsidiariesof Concordia and Stena.  During the yearended December 31, 2009, these customers accounted for 22.0% of our voyagerevenues.  Four of our Arlington Vesselsare on time charters with the Concordia and Stena subsidiaries.  Our revenues other than from Eiger Shipping,S.A revenues, Concordia and Stena, are also derived from a limited number ofcustomers.

 

**COMPETITION**

** **

International seabornetransportation of crude oil and other petroleum products is provided by twomain types of operators: fleets owned by independent companies and fleetsoperated by oil companies (both private and state-owned).  Many oil companies and other oil tradingcompanies, the primary charterers of the vessels we own, also operate their ownvessels and transport oil for themselves and third party charterers in directcompetition with independent owners and operators.  Competition for charters is intense and isbased upon price, vessel location, the size, age, condition and acceptabilityof the vessel, and the quality and reputation of the vessel’s operator.

 

Other significant operatorsof vessels carrying crude oil and other petroleum products include AmericanEagle Tankers Inc. Limited, Frontline, Ltd., Overseas Shipholding Group, Inc.,Teekay Shipping Corporation and Tsakos Energy Navigation.  There are also numerous, smaller vesseloperators.

 

11

----

 

**INSURANCE**

** **

The operation of anyocean-going vessel carries an inherent risk of catastrophic marine disastersand property losses caused by adverse weather conditions, mechanical failures,human error, war, terrorism and other circumstances or events.  In addition, the transportation of crude oilis subject to the risk of spills, and business interruptions due to politicalcircumstances in foreign countries, hostilities, labor strikes and boycotts.  The U.S. Oil Pollution Act of 1990, or OPAhas made liability insurance more expensive for ship owners and operatorsimposing potentially unlimited liability upon owners, operators and bareboatcharterers for oil pollution incidents in the territorial waters of the UnitedStates.  We believe that our currentinsurance coverage is adequate to protect us against the principalaccident-related risks that we face in the conduct of our business.

 

Our protection and indemnityinsurance, or P&I insurance, covers, subject to customary deductibles,policy limits and extensions, third-party liabilities and other relatedexpenses from, among other things, injury or death of crew, passengers andother third parties, claims arising from collisions, damage to cargo and otherthird-party property and pollution arising from oil or other substances.  Our current P&I insurance coverage forpollution is the maximum commercially available amount of $1.0 billion pertanker per incident and is provided by mutual protection and indemnityassociations.  Our current P&I Insurancecoverage for non-pollution losses is $3.05 billion.  Each of the vessels currently in our fleet isentered in a protection and indemnity association which is a member of theInternational Group of Protection and Indemnity Mutual Assurance Associations.  The 13 protection and indemnity associationsthat comprise the International Group insure approximately 90% of the world’scommercial tonnage and have entered into a pooling agreement to reinsure eachassociation’s liabilities.  Eachprotection and indemnity association has capped its exposure to this poolingagreement at $4.3 billion.  As a memberof protection and indemnity associations, which are, in turn, members of theInternational Group, we are subject to calls payable to the associations basedon its claim records as well as the claim records of all other members of theindividual associations and members of the pool of protection and indemnityassociations comprising the International Group.

 

Our hull and machineryinsurance covers actual or constructive total loss from covered risks ofcollision, fire, heavy weather, grounding and engine failure or damages fromsame.  Our war risk insurance coversrisks of confiscation, seizure, capture, vandalism, sabotage and otherwar-related risks.  Our loss-of-hireinsurance covers loss of revenue for up to 90 days resulting from vessel offhire for each of our vessels, with a 20 day deductible.

 

**ENVIRONMENTAL REGULATION AND OTHERREGULATIONS**

** **

Government regulations and laws significantlyaffect the ownership and operation of our vessels. We are subject tointernational conventions, national, state and local laws and regulations inforce in the countries in which our vessels may operate or are registered andcompliance with such laws, regulations and other requirements may entailsignificant expense.

 

Our vessels are subject to both scheduled andunscheduled inspections by a variety of government, quasi-governmental andprivate organizations, including local port authorities, national authorities,harbor masters or equivalent, classification societies, flag stateadministrations (countries of registry) and charterers. Our failure to maintainpermits, licenses, certificates or other approvals required by some of theseentities could require us to incur substantial costs or temporarily suspendoperation of one or more of our vessels.

 

We believe that the heightened levels ofenvironmental and quality concerns among insurance underwriters, regulators andcharterers have led to greater inspection and safety requirements on allvessels and may accelerate the scrapping of older vessels throughout theindustry. Increasing environmental concerns have created a demand for vesselsthat conform to stricter environmental standards.  We believe that the operation of our vesselsis in substantial compliance with applicable environmental laws and regulationsand that our vessels have all material permits, licenses, certificates or otherauthorizations necessary for the conduct of our operations; however, becausesuch laws and regulations are frequently changed and may impose increasinglystricter requirements, we cannot predict the ultimate cost of complying withthese requirements, or the impact of these requirements on the resale value oruseful lives of our vessels. In addition additional legislation or regulationapplicable to the operation of our vessels that may be implemented in thefuture could negatively affect our profitability.

 

***International MaritimeOrganization***

 

The International Maritime Organization, theUnited Nations agency for maritime safety and the prevention of pollution byships, or the IMO, has adopted several international conventions that regulatethe international shipping industry, including the International Convention onCivil Liability for Oil Pollution Damage, the International Convention on CivilLiability for Bunker Oil Pollution Damage, and the International Convention forthe Prevention of Pollution from Ships, or the MARPOL Convention. The MARPOLConvention establishes environmental standards relating to oil leakage orspilling, garbage management, sewage, air emissions, handling and disposal ofnoxious liquids and the handling of harmful substances in packaged forms.

 

12

----

 

The operation of our vessels is also affectedby the requirements contained in the International Safety Management Code forthe Safe Operation of Ships and for Pollution Prevention, or ISM Code,promulgated by the IMO under the International Convention for the Safety ofLife at Sea, or SOLAS. The ISM Code requires the party with operational controlof a vessel to develop an extensive safety management system that includes,among other things, the adoption of a safety and environmental protectionpolicy setting forth instructions and procedures for operating its vesselssafely and describing procedures for responding to emergencies. We intend torely upon the safety management system that we have developed.

 

Noncompliance with the ISM Code or with otherIMO regulations may subject a shipowner or bareboat charterer to increasedliability, may lead to decreases in available insurance coverage for affectedvessels and may result in the denial of access to, or detention in, some ports,including United States and European Union Ports.

 

***United States***

 

*The U.S. Oil Pollution Act of1990 and the Comprehensive Environmental Response, Compensation and LiabilityAct*

 

The U.S. Oil Pollution Act of 1990, or OPA,is an extensive regulatory and liability regime for environmental protectionand cleanup of oil spills. OPA affects all owners and operators whose vesselstrade with the United States or its territories or possessions, or whosevessels operate in the waters of the United States, which include the U.S.territorial sea and the 200 nautical mile exclusive economic zone around theUnited States. The Comprehensive Environmental Response, Compensation andLiability Act, or CERCLA, imposes liability for cleanup and natural resourcedamage from the release of hazardous substances (other than oil) whether onland or at sea. Both OPA and CERCLA impact our operations.

 

Under OPA, vessel owners, operators andbareboat charterers are responsible parties who are jointly, severally andstrictly liable (unless the spill results solely from the act or omission of athird party, an act of God or an act of war) for all containment and clean-upcosts and other damages arising from oil spills from their vessels.

 

OPA limits the liability of responsibleparties with respect to tankers over 3,000 gross tons to the greater of $2,000per gross ton or $17.088 million per double hull tanker, and permits individualstates to impose their own liability regimes with regard to oil pollutionincidents occurring within their boundaries. Some states have enacted legislation providing for unlimited liabilityfor discharge of pollutants within their waters, however, in some cases, stateswhich have enacted this type of legislation have not yet issued implementingregulations defining tanker owners’ responsibilities under these laws.  CERCLA, which applies to owners and operatorsof vessels, contains a similar liability regime and provides for cleanup,removal and natural resource damages. Liability under CERCLA is limited to the greater of $300 per gross tonor $5.0 million for vessels carrying a hazardous substance as cargo and thegreater of $300 per gross ton or $0.5 million for any other vessel.

 

These limits of liability do not apply,however, where the incident is caused by violation of applicable U.S. federalsafety, construction or operating regulations, or by the responsible party’sgross negligence or willful misconduct. These limits also do not apply if theresponsible party fails or refuses to report the incident or to cooperate andassist in connection with the substance removal activities. OPA and CERCLA eachpreserve the right to recover damages under existing law, including maritimetort law. We believe that we are in substantial compliance with OPA, CERCLA andall applicable state regulations in the ports where our vessels call.

 

OPA also requires owners and operators ofvessels to establish and maintain with the U.S. Coast Guard evidence offinancial responsibility sufficient to meet the limit of their potential strictliability under the act.  Under theregulations, evidence of financial responsibility may be demonstrated byinsurance, surety bond, self-insurance or guaranty.  Under OPA regulations, an owner or operatorof more than one tanker is required to demonstrate evidence of financialresponsibility for the entire fleet in an amount equal only to the financialresponsibility requirement of the tanker having the greatest maximum strictliability under OPA and CERCLA.  We haveprovided such evidence and received certificates of financial responsibilityfrom the U.S. Coast Guard for each of our vessels required to have one.

 

*Other U.S. EnvironmentalInitiatives*

 

The U.S. Clean Water Act, or CWA, prohibitsthe discharge of oil, hazardous substances, and ballast water in U.S. navigablewaters unless authorized by a duly-issued permit or exemption, and imposesstrict liability in the form of penalties for any unauthorized discharges. TheCWA also imposes substantial liability for the costs of removal, remediationand damages and complements the remedies available under OPA and CERCLA.Furthermore, most U.S. states that border a navigable waterway have enactedenvironmental pollution laws that impose strict liability on a person forremoval costs and damages resulting from a discharge of oil or a release of ahazardous substance. These laws may be more stringent than U.S. federal law.

 

13

----

 

The U.S. Clean Air Act of 1970, as amended bythe Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA topromulgate standards applicable to emissions of volatile organic compounds andother air contaminants. Our vessels are subject to vapor control and recoveryrequirements for certain cargoes when loading, unloading, ballasting, cleaningand conducting other operations in regulated port areas. Our vessels thatoperate in such port areas with restricted cargoes are equipped with vaporrecovery systems that satisfy these requirements. The CAA also requires statesto draft State Implementation Plans, or SIPs, designed to attain nationalhealth-based air quality standards in primarily major metropolitan and/orindustrial areas. Several SIPs regulate emissions resulting from vessel loadingand unloading operations by requiring the installation of vapor controlequipment. As indicated above, our vessels operating in covered port areas arealready equipped with vapor recovery systems that satisfy these existingrequirements.

 

***European Union***

 

The European Union has adopted legislationthat would: (1) ban manifestly sub-standard vessels (defined as those over15 years old that have been detained by port authorities at least twice in asix month period) from European waters and create an obligation of port statesto inspect vessels posing a high risk to maritime safety or the marine environment;and (2) provide the European Union with greater authority and control overclassification societies, including the ability to seek to suspend or revokethe authority of negligent societies.

 

***Greenhouse Gas Regulation***

 

The IMO is evaluating various mandatorymeasures to reduce greenhouse gas emissions from international shipping, whichmay include market-based instruments or a carbon tax.  Any passage of climate control legislation orother regulatory initiatives by the IMO, EU, the U.S. or other countries wherewe operate that restrict emissions of greenhouse gases could require us to makesignificant financial expenditures that we cannot predict with certainty atthis time.

 

***Vessel Security Regulations***

 

Since the terrorist attacks of September 11,2001, there have been a variety of initiatives intended to enhance vesselsecurity, including the U.S. Maritime Transportation Security Act of 2002, orMTSA, amendments to SOLAS, and a requirement that any vessel tradinginternationally obtain an International Ship Security Certificate from arecognized security organization approved by the vessel’s flag state. Webelieve that our fleet is currently in compliance with applicable securityrequirements.

 

***Inspection by ClassificationSocieties***

 

Every oceangoing vessel must be “classed” bya classification society. The classification society certifies that the vesselis “in-class,” signifying that the vessel has been built and maintained inaccordance with the rules of the classification society and complies withapplicable rules and regulations of the vessel’s country of registry andthe international conventions of which that country is a member. In addition,where surveys are required by international conventions and corresponding lawsand ordinances of a flag state, the classification society will undertake themon application or by official order, acting on behalf of the authoritiesconcerned.

 

Most insurance underwriters make it acondition for insurance coverage that a vessel be certified as “in-class” by aclassification society which is a member of the International Association ofClassification Societies. All our vessels are certified as being “in-class” bya recognized classification society.

 

**Glossary**

** **

The following areabbreviations and definitions of certain terms commonly used in the shippingindustry and this annual report. The terms are taken from the *Marine**EncyclopedicDictionary*(Fifth Edition) published by Lloyd’s of London Press Ltd.and other sources, including information supplied by us.

 

*Aframaxtanker.* Tanker ranging in size from 80,000 dwt to 120,000 dwt.

 

*AmericanBureau of Shipping.* American classification society.

 

*Annualsurvey.* The inspection of a vessel pursuant to international conventions,by a classification society surveyor, on behalf of the flag state, that takesplace every year.

 

*Bareboatcharter.* Contract or hire of a vessel under which theshipowner is usually paid a fixed amount for a certain period of time duringwhich the charterer is responsible for the complete operation and maintenanceof the vessel, including crewing.

 

*BunkerFuel.* Fuel supplied to ships and aircraft in internationaltransportation, irrespective of the flag of the carrier, consisting primarilyof residual fuel oil for ships and distillate and jet fuel oils for aircraft.

 

14

----

 

*Charter.* The hireof a vessel for a specified period of time or to carry a cargo from a loadingport to a discharging port. A vessel is “chartered in” by an end user and “charteredout” by the provider of the vessel.

 

*Charterer.* Theindividual or company hiring a vessel.

 

*Charterhire.* A sum ofmoney paid to the shipowner by a charterer under a charter for the use of avessel.

 

*Classificationsociety.* A private, self-regulatory organization whichhas as its purpose the supervision of vessels during their construction andafterward, in respect to their seaworthiness and upkeep, and the placing ofvessels in grades or “classes” according to the society’s rules for eachparticular type of vessel.

 

*Demurrage.* Thedelaying of a vessel caused by a voyage charterer’s failure to load, unload,etc. before the time of scheduled departure. The term is also used to describethe payment owed by the voyage charterer for such delay.

 

*Det NorskeVeritas.* Norwegian classification society.

 

*Double-hull.* Hullconstruction design in which a vessel has an inner and outer side and bottomseparated by void space, usually several feet in width.

 

*Double-sided.* Hullconstruction design in which a vessel has watertight protective spaces that donot carry any oil and which separate the sides of tanks that hold any oilwithin the cargo tank length from the outer skin of the vessel.

 

*Drydock.* Largebasin where all the fresh/sea water is pumped out to allow a vessel to dock inorder to carry out cleaning and repairing of those parts of a vessel which arebelow the water line.

 

*Dwt.* Deadweightton. A unit of a vessel’s capacity, for cargo, fuel oil, stores and crew,measured in metric tons of 1,000 kilograms. A vessel’s dwt or total deadweightis the total weight the vessel can carry when loaded to a particular load line.

 

*Gross ton.* Unit of100 cubic feet or 2.831 cubic meters.

 

*Handymaxtanker.* Tanker ranging in size from 40,000 dwt to 60,000 dwt.

 

*Hull.* Shell orbody of a vessel.

 

*IMO.* InternationalMaritime Organization, a United Nations agency that sets internationalstandards for shipping.

 

*Intermediatesurvey.* The inspection of a vessel by a classification society surveyorwhich takes place approximately two and half years before and after eachspecial survey. This survey is more rigorous than the annual survey and ismeant to ensure that the vessel meets the standards of the classification society.

 

*Lightering.* To putcargo in a lighter to partially discharge a vessel or to reduce her draft. Alighter is a small vessel used to transport cargo from a vessel anchoredoffshore.

 

*Net voyage revenues.* Voyage revenues minus voyage expenses.

 

*Newbuilding.* A newvessel under construction or just completed.

 

*Off hire.* Theperiod a vessel is unable to perform the services for which it is immediatelyrequired under its contract. Off hire periods include days spent on repairs,drydockings, special surveys and vessel upgrades. Off hire may be scheduled orunscheduled, depending on the circumstances.

 

*Panamaxtanker.* Tanker ranging in size from 60,000 dwt to 80,000 dwt.

 

*P&IInsurance.* Third party indemnity insurance obtainedthrough a mutual association, or P&I Club, formed by shipowners to provideprotection from third-party liability claims against large financial loss toone member by contribution towards that loss by all members.

 

*Scrapping.* Thedisposal of old vessel tonnage by way of sale as scrap metal.

 

*Single-hull.* Hullconstruction design in which a vessel has only one hull.

 

*Sistership. *Ship built to same designand specifications as another.

 

*Specialsurvey.* The inspection of a vessel by a classification society surveyorthat takes place every four to five years.

 

*Spotmarket.* The market for immediate chartering of a vessel, usually onvoyage charters.

 

*Suezmaxtanker.* Tanker ranging in size from 120,000 dwt to 200,000 dwt.

 

*Tanker.* Vesseldesigned for the carriage of liquid cargoes in bulk with cargo space consistingof many tanks. Tankers carry a variety of products including crude oil, refinedproducts, liquid chemicals and liquid gas. Tankers load their cargo by gravityfrom the shore or by shore pumps and discharge using their own pumps.

 

15

----

 

*TCE.* Timecharter equivalent. TCE is a measure of the average daily revenue performanceof a vessel on a per voyage basis determined by dividing net voyage revenue byvoyage days for the applicable time period.

 

*Time charter.* Contract for hire of avessel under which the shipowner is paid charterhire on a per day basis for acertain period of time. The shipowner is responsible for providing the crew andpaying operating costs while the charterer is responsible for paying the voyageexpenses. Any delays at port or during the voyages.

 

*VLCC*. Acronym forVery Large Crude Carrier, or a tanker ranging in size from 200,000 dwt to320,000 dwt.

 

*Worldscale.* Industry namefor the Worldwide Tanker Nominal Freight Scale published annually by theWorldscale Association as a rate reference for shipping companies, brokers, andtheir customers engaged in the bulk shipping of oil in the internationalmarkets. Worldscale is a list of calculated rates for specific voyageitineraries for a standard vessel, as defined, using defined voyage costassumptions such as vessel speed, fuel consumption and port costs. Actualmarket rates for voyage charters are usually quoted in terms of a percentage ofWorldscale.

 

**ITEM 1A.  RISK FACTORS**

** **

**ADDITIONALFACTORS THAT MAY AFFECT FUTURE RESULTS**

 

This annual report on Form 10-K containsforward-looking statements made pursuant to the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995.  These forward-lookingstatements are based on management’s current expectations andobservations.  Included among the factors that, in our view, could causeactual results to differ materially from the forward looking statementscontained in this annual report on Form 10-K are the following: (i) lossor reduction in business from our significant customers; (ii) the failureof our significant customers to perform their obligations owed to us; (iii) changesin demand; (iv) a material decline or prolonged weakness in rates in thetanker market; (v) changes in production of or demand for oil andpetroleum products, generally or in particular regions; (vi) greater thananticipated levels of tanker newbuilding orders or lower than anticipated ratesof tanker scrapping; (vii) changes in rules and regulationsapplicable to the tanker industry, including, without limitation, legislationadopted by international organizations such as the International MaritimeOrganization and the European Union or by individual countries; (viii) actionstaken by regulatory authorities; (ix) actions by the courts, the U.S.Coast Guard, the U.S. Department of Justice or other governmental authoritiesand the results of the legal proceedings to which we or any of our vessels maybe subject; (x) changes in trading patterns significantly impactingoverall tanker tonnage requirements; (xi) changes in the typical seasonalvariations in tanker charter rates; (xii) changes in the cost of other modes ofoil transportation; (xiii) changes in oil transportation technology; (xiv)increases in costs including without limitation: crew wages, insurance,provisions, repairs and maintenance; (xv) changes in general domestic andinternational political conditions; (xvi) changes in the condition of ourvessels or applicable maintenance or regulatory standards (which may affect,among other things, our anticipated drydocking or maintenance and repaircosts);****(xvii) changes in theitineraries of the our vessels; (xviii) adverse changes in foreign currencyexchange rates affecting our expenses; and (xiv) other factors listed from timeto time in our filings with the Securities and Exchange Commission.

 

Our ability to pay dividends in any period will dependupon factors including applicable provisions of Marshall Islands law and thefinal determination by our Board of Directors each quarter after its review ofour financial performance.  The timing and amount of dividends, if any,could also be affected by factors affecting cash flows, results of operations,required capital expenditures, or reserves.  As a result, the amount ofdividends actually paid may vary.

 

We face a variety of risks that are substantial andinherent in our business, including market, financial, operational, legal andregulatory risks.  Below, we have described certain important risks thatcould affect our business.  These risks and other information included inthis report should be carefully considered.  If any of these risks occur,our business, financial condition, operating results and cash flows could bematerially adversely affected and the trading price of our common stock coulddecline.

 

**RISKFACTORS RELATED TO OUR BUSINESS & OPERATIONS**

 

**We mayincur adverse consequences in connection with our executive transition.**

 

As we previously announced, on October 24, 2008,in connection with the Arlington Acquisition, we entered into a new letteragreement with Peter Georgiopoulos.  Pursuant to its terms, the new letteragreement became effective as of December 16, 2008, the date on which theeffective time of the Arlington Acquisition occurred, the Effective Date. This letter agreement provided that, among other things:  the employmentletter agreement, dated April 5, 2005, between General Maritime Subsidiaryand Peter Georgiopoulos terminated on the Effective Date (and PeterGeorgiopoulos stepped down as President and CEO); and Peter Georgiopoulos willserve as Chairman of the Board of Directors of the new combined company forthree years following the Effective Date, or earlier if he is not nominated tosuch position or if our shareholders decline to re-elect him to, or remove himfrom, our Board

 

16

----

 

of Directors.  On the Effective Date, JohnTavlarios, CEO of our management subsidiary, became President of theCompany.  The loss of Peter Georgiopoulos’ full-time service could have anadverse effect on our operations.

 

**Thecurrent global economic turndown may negatively impact our business.**

 

In recent years, there has been a significant adverseshift in the global economy, with operating businesses facing tighteningcredit, weakening demand for goods and services, deteriorating internationalliquidity conditions, and declining markets.  Lower demand for tankercargoes as well as diminished trade credit available for the delivery of suchcargoes may create downward pressure on charter rates.  If the currentglobal economic environment persists or worsens, we may be negatively affectedin the following ways:

 

·                  We may not be able to employ our vesselsat charter rates as favorable to us as historical rates or operate our vesselsprofitably.

 

·                  The market value of our vessels coulddecrease significantly, which may cause us to recognize losses if any of ourvessels are sold or if their values are impaired.  In addition,  sucha decline in the market value of our vessels could prevent us from borrowingunder our credit facilities or trigger a default under their covenants.

 

·                  Charterers could seek to renegotiate theterms of their charterers with us or have difficulty meeting their paymentobligations to us.

 

If the contraction of the global creditmarkets and the resulting volatility in the financial markets continues orworsens that could have a material adverse impact on our results of operations,financial condition and cash flows, and could cause the market price of ourcommon shares to decline.

 

**The cyclical nature of the tankerindustry may lead to volatility in charter rates and vessel values which mayadversely affect our earnings.**

 

If the tanker market, which has historically beencyclical, is depressed in the future, our earnings and available cash flow maydecrease.  Our ability to employ our vessels profitably will depend upon,among other things, economic conditions in the tanker market. Fluctuations in charter rates and tanker values result from changes in thesupply and demand for tanker capacity and changes in the supply and demand forpetroleum and petroleum products.

 

The factors affecting the supply and demand fortankers are outside of our control, and the nature, timing and degree ofchanges in industry conditions are unpredictable.  The current globalfinancial crisis has intensified this unpredictability.

 

The factors thatinfluence demand for tanker capacity include:

 

·                  demand for and supply of petroleum andpetroleum products,

 

·                  regional availability of refiningcapacity,

 

·                  environmental and other regulatory developments,

 

·                  global and regional economic conditions,

 

·                  the distance petroleum and petroleum products are tobe moved by sea,

 

·                  changes in seaborne and other transportation patterns,and

 

·                  competition from alternative sources of energy.

 

The factors thatinfluence the supply of tanker capacity include:

 

·                  the number of newbuilding deliveries,

 

·                  the scrapping rate of older vessels,

 

·                  conversion of tankers to other uses,

 

17

----

 

·                  the price of steel,

 

·                  the number of vessels that are out of service, and

 

·                  environmental concerns and regulations.

 

Historically, the tanker markets have been volatile asa result of the many conditions and factors that can affect the price, supplyand demand for tanker capacity.  The recent global economic crisis mayfurther reduce demand for transportation of oil over long distances and supplyof tankers that carry oil, which may materially affect our revenues,profitability and cash flows.

 

**Charter rates for vessels maydecrease in the future, which may adversely affect our earnings and ability topay dividends and/or principal, premium, if any, and interest on our SeniorNotes.**

 

We anticipate that future demand for our vessels, andin turn our future charter rates, will be affected by the rate of economicgrowth in the world’s economy as well as seasonal and regional changes indemand and changes in the capacity of the world’s fleet. Seven of our 15current time charter contracts will expire prior to June 30, 2010. If thetanker industry, which has been highly cyclical, continues to be depressed inthe future when our charters expire or at a time when we may want to sell avessel, our earnings and available cash flow may be adversely affected. Wecannot assure you that we will be able to successfully charter our vessels inthe future or renew our existing charters at rates sufficient to allow us tooperate our business profitably, meet our obligations including payment of debtservice to our other lenders, pay dividends to our shareholders, and/or payprincipal, premium, if any, and interest on our 12% senior notes due 2017,which we refer to as our “Senior Notes”. Our ability to renew the charters onour vessels on the expiration or termination of our current charters, thecharter rates payable under any replacement charters and vessel values willdepend upon, among other things, economic conditions in the tanker industry atthat time, changes in the supply and demand for vessel capacity and changes inthe supply and demand for the seaborne transportation of crude oil. A generalglobal economic downturn or international financial uncertainty may result in aweakening of charter rates. This could reduce the charter rates for our vesselsnot then subject to long-term charters and, thereby, negatively impact ourresults of operations.

 

In addition, four of the Arlington Vessels arecurrently chartered to subsidiaries of Stena and Concordia Maritime AB, orConcordia, a significant shareholder of Arlington prior to the ArlingtonAcquisition. We receive a fixed minimum daily base charter rate, or basic hire,under these charters and may also receive additional hire based on a formula ofnotional voyages and expenses on routes agreed to with these charterers. Thereis no obligation to pay additional hire during any period when the obligationto pay basic hire is suspended under the charter if the vessel is off-hire dueto technical reasons. These charterers have options which they may exercise intheir sole discretion to extend the terms of the charters for each of theArlington Vessels, four of which options were exercised in May 2008. Thecharterers for the four other vessels declined to exercise their options toextend the terms of their charters, during the fourth quarter of 2009.  Three of these vessels have been recharteredon time charters and one has been deployed on the spot market.  Notice that the charterer is exercising itsoption to extend the term of a charter is required to be delivered no laterthan six months prior to the expiration of the charter period in effect at thattime. Although we periodically evaluates the probability that these optionperiods will be exercised, we cannot predict whether the charterers willexercise any additional extension options under one or more of the charters. Ifthese charterers decide not to extend their current charters, we may not beable to re-charter the Arlington Vessels with terms similar to the terms of thecurrent charters, or at all. We may also directly employ these vessels on thespot charter market, which is subject to greater rate fluctuation than the timecharter market.

 

**An over supply of new vessels mayadversely affect charter rates and vessel values.**

 

If the number of new ships delivered exceeds thenumber of tankers being scrapped and lost, tanker capacity will increase. In addition, we believe that the total newbuilding order books for Suezmaxvessels and Aframax vessels scheduled to enter the fleet through 2012 currentlyare a substantial portion of the existing fleets and we cannot assure you thatthe order books will not increase further in proportion to the existingfleets.  If the supply of tanker capacity increases and the demand fortanker capacity does not increase correspondingly, charter rates couldmaterially decline and the value of our vessels could be adversely affected.

 

**Our revenues may be adverselyaffected if we do not successfully employ our vessels.**

 

We seek to deploy our vessels between spot marketvoyage charters and time charters in a manner that maximizes long-term cashflow. Currently, 15 of our vessels are contractually committed to timecharters, with the remaining terms of these charters expiring on dates between March 2010and July 2011.  Although these timecharters generally provide stable revenues, they also limit the portion of ourfleet available for spot market voyages during an upswing in the tanker industrycycle, when spot market voyages might be more profitable.

 

18

----

 

We earned approximately 11.8% of our net voyagerevenue from spot charters for the year ended December 31, 2009. The spotcharter market is highly competitive, and spot market voyage charter rates mayfluctuate dramatically based primarily on the worldwide supply of tankersavailable in the market for the transportation of oil and the worldwide demandfor the transportation of oil by tanker. Factors affecting the volatility ofspot market voyage charter rates include the quantity of oil produced globally,shifts in locations where oil is produced or consumed, actions by OPEC, thegeneral level of worldwide economic activity and the development and use ofalternative energy sources. We cannot assure you that future spot market voyagecharters will be available at rates that will allow us to operate our vesselsthat are not under time charter profitably.

 

**We receive a significant portion ofour revenues from a single customer, and any decrease in the amount of businessit or any other significant customer transacts with us could materially andadversely affect our cash flows and profitability.**

 

We derive a significant portion of our revenues fromour largest customer, Lukoil Oil Company. During 2009, Lukoil accounted for 35.8%  of our voyage revenues andwe expect Lukoil to account for a significant portion of our voyage revenues inthe future.  Five of our 15 time chartersare with Lukoil.  We also derive asignificant portion of our voyage revenues from time charters with subsidiariesof Concordia and Stena.  During 2009,these customers accounted for 22.0% of our voyage revenues and we expect thesecustomers to account for a significant portion of our voyage revenues in thefuture.  As of December 31, 2009,four Arlington Vessels are on time charters with the Concordia and Stenasubsidiaries.  Our revenues, other thanthose received from Lukoil, Concordia and Stena are also derived from a limitednumber of customers.

 

If Lukoil or one of the Concordia and Stenasubsidiaries breaches or terminates these time charters or renegotiates orrenews them on terms less favorable than those currently in effect, or if anysignificant customer decreases the amount of business it transacts with us orif we lose any of our customers or a significant portion of our revenues, ouroperating results, cash flows and profitability could be materially adverselyaffected.

 

**The failure of our counterparties to meet their obligationsunder our time****charteragreements could cause us to suffer losses or otherwise adversely****affect our business.**

 

We employ 15 vessels undertime charters with an average remaining duration of approximately eight monthsas of December 31, 2009. The ability of each of our charterers to performits obligations under a charter will depend on a number of factors that arebeyond our control.  These factors mayinclude general economic conditions, the condition of the tanker industry, thecharter rates received for specific types of vessels and various operatingexpenses.  The costs and delaysassociated with the default by a charterer under a charter of a vessel may beconsiderable and this may negatively impact our business.

 

In addition, in depressedmarket conditions, our charterers and customers may no longer need a vesselthat is currently under charter or contract or may be able to obtain acomparable vessel at lower rates. As a result, charterers and customers mayseek to renegotiate the terms of their existing charter agreements or avoidtheir obligations under those contracts. Should a counterparty fail to honorits obligations under agreements with us, we could sustain significant losses.

 

If our charterers attempt torenegotiate their charters or default on their charters, this may adverselyaffect our business, results of operations, cash flows and financial conditionand our available cash.

 

**A decline in demand for crude oil ora shift in oil transport patterns could materially and adversely affect ourrevenues.**

 

The demand for tankercapacity to transport crude oil depends upon world and regional oilmarkets.  A number of factors influence these markets, including:

 

·                  global and regional economic conditions;

 

·                  increases and decreases in production ofand demand for crude oil;

 

·                  developments in international trade;

 

·                  changes in seaborne and othertransportation patterns;

 

·                  environmental concerns and regulations;and

 

·                  weather.

 

19

----

 

Historically, the crude oil markets have been volatileas a result of the many conditions and events that can affect the price,demand, production and transport of oil, including competition from alternativeenergy sources.  Decreased demand for oil transportation may have amaterial adverse effect on our revenues, cash flows and profitability.

 

**The market for crude oiltransportation services is highly competitive and we may not be able to effectivelycompete.**

 

Our vessels are employed in a highly competitivemarket.  Our competitors include the owners of other Aframax and Suezmaxtankers and, to a lesser degree, owners of other size tankers.  Bothgroups include independent oil tanker companies as well as oil companies. We do not control a sufficiently large share of the market to influence themarket price charged for crude oil transportation services.

 

Our market share may decrease in the future.  Wemay not be able to compete profitably as we expand our business into newgeographic regions or provide new services.  New markets may requiredifferent skills, knowledge or strategies than we use in our current markets,and the competitors in those new markets may have greater financial strengthand capital resources than we do.

 

**The market value of our vessels mayfluctuate significantly, and we may incur losses when we sell vessels followinga decline in their market value.**

 

We believe that the fair market value of our vesselsmay have declined recently, and may increase and decrease depending on a numberof factors including:

 

·                  general economic and market conditionsaffecting the shipping industry;

 

·                  competition from other shippingcompanies;

 

·                  supply and demand for tankers and thetypes and sizes of tankers we own;

 

·                  alternative modes of transportation;

 

·                  cost of newbuildings;

 

·                  governmental or other regulations;

 

·                  prevailing level of charter rates; and

 

·                  technological advances.

 

Declines in charter ratesand other market deterioration could cause the market value of our vessels todecrease significantly.  We evaluate thecarrying amounts of our vessels to determine if events have occurred that wouldrequire an impairment of their carrying amounts. The recoverable amount ofvessels is reviewed based on events and changes in circumstances that wouldindicate that the carrying amount of the assets might not be recovered. Thereview for potential impairment indicators and projection of future cash flowsrelated to the vessels is complex and requires us to make various estimatesincluding future freight rates, earnings from the vessels and discount rates.All of these items have been historically volatile.

 

We evaluate the recoverable amount as the higher of fair value lesscosts to sell and value in use.  If therecoverable amount is less than the carrying amount of the vessel, the vesselis deemed impaired. The carrying values of our vessels may not represent theirfair market value at any point in time because the new market prices ofsecondhand vessels tend to fluctuate with changes in charter rates and the costof newbuildings.  Any impairment chargesincurred as a result of further declines in charter rates could negativelyaffect our business, financial condition, operating results or the tradingprice of our common shares.

 

**We may not be able to grow or toeffectively manage our growth.**

 

A principal focus of our strategy is to continue togrow by taking advantage of changing market conditions, which may includeexpanding our business in the Atlantic basin, the primary geographic area andmarket where we operate, expanding into other regions, or increasing the numberof vessels in our fleet.  Our future growth will depend upon a number offactors, some of which we can control and some of which we cannot.  Thesefactors include our ability to:

 

·                  identify businesses engaged in managing,operating or owning vessels for acquisitions or joint ventures;

 

·                  identify vessels and/or shippingcompanies for acquisitions;

 

20

----

 

·                  integrate any acquired businesses orvessels successfully with our existing operations;

 

·                  hire, train and retain qualifiedpersonnel to manage and operate our growing business and fleet;

 

·                  identify additional new markets outsideof the Atlantic basin;

 

·                  improve our operating and financialsystems and controls; and

 

·                  obtain required financing for ourexisting and new operations.

 

Our ability to grow is in part dependent on ourability to expand our fleet through acquisitions of suitable double-hullvessels.  We may not be able to acquire newbuildings or secondhanddouble-hull tankers on favorable terms, which could impede our growth andnegatively impact our financial condition and ability to pay dividends. We may not be able to contract for newbuildings or locate suitable secondhanddouble-hull vessels or negotiate acceptable construction or purchase contractswith shipyards and owners, or obtain financing for such acquisitions oneconomically acceptable terms.

 

The failure to effectively identify, purchase, developand integrate any vessels or businesses could adversely affect our business,financial condition and results of operations.

 

**Our operating results may fluctuateseasonally.**

 

We operate our vessels in markets that havehistorically exhibited seasonal variations in tanker demand and, as a result,in charter rates.  Tanker markets are typically stronger in the fall andwinter months (the fourth and first quarters of the calendar year) inanticipation of increased oil consumption in the Northern Hemisphere during thewinter months.  Unpredictable weather patterns and variations in oilreserves disrupt vessel scheduling and could impact charter rates.

 

**Becausewe generate all of our revenues in U.S. Dollars but incur a significant portionof our expenses in other currencies, exchange rate fluctuations could have anadverse impact on our results of operations.**

 

We generate all of our revenues in U.S. Dollars but weincur a significant portion of our expenses, particularly crew and maintenancecosts, in currencies other than the U.S. Dollar.  This difference couldlead to fluctuations in net income due to changes in the value of the U.S.Dollars relative to the other currencies, in particular the Euro.  Adecline in the value of the U.S. Dollar could lead to higher expenses payableby us.

 

**There may be risks associated withthe purchase and operation of secondhand vessels.**

 

Our current business strategy includes additionalgrowth through the acquisition of additional secondhand vessels.  Althoughwe inspect secondhand vessels prior to purchase, this does not normally provideus with the same knowledge about their condition that we would have had if suchvessels had been built for and operated exclusively by us.  Therefore, ourfuture operating results could be negatively affected if some of the vessels donot perform as we expect.  Also, we generally do not receive the benefitof warranties from the builders if the vessels we buy are older than one year.

 

**Delays or defaults by the shipyardsin the construction of any new vessels that we may order could increase our expensesand diminish our net income and cash flows.**

 

Our business strategy may include additional growththrough constructing new vessels or acquiring newbuilding contracts.  Anysuch projects would be subject to the risk of delay or defaults by shipyards causedby, among other things, unforeseen quality or engineering problems, workstoppages, weather interference, unanticipated cost increases, delays inreceipt of necessary equipment, and inability to obtain the requisite permitsor approvals.  In accordance with industry practice, in the event any suchshipyards are unable or unwilling to deliver the vessels ordered, we may nothave substantial remedies.  Failure to construct or deliver vessels by theshipyards or any significant delays could increase our expenses and diminishour net income and cash flows.

 

**An increase in costs could materiallyand adversely affect our financial performance.**

 

Our vessel operating expenses are comprised of avariety of costs including crew costs, provisions, deck and engine stores,lubricating oil, insurance, maintenance and repairs, many of which are beyondour control and affect the entire shipping industry.  Also, costs such asinsurance and security are still increasing.  If costs continue to rise,that could materially and adversely affect our cash flows and profitability.

 

21

----

 

Fuel, or bunkers, is a significant, if not thelargest, expense for our vessels that will be employed in the spot market. Withrespect to our vessels that will be employed on time charter, the charterer isgenerally responsible for the cost of fuel, however such cost may affect thecharter rates we are able to negotiate for our vessels.  Changes in the price of fuel may adverselyaffect our profitability.  The price andsupply of fuel is unpredictable and fluctuates based on events outside ourcontrol, including geopolitical developments, supply and demand for oil andgas, actions by OPEC and other oil and gas producers, war and unrest in oilproducing countries and regions, regional production patterns and environmentalconcerns.  Further, fuel may become muchmore expensive in the future, which may reduce the profitability andcompetitiveness of our business versus other forms of transportation, such astruck or rail.

 

**We may face unexpected repair costsfor our vessels.**

 

Repairs and maintenance costs are difficult to predictwith certainty and may be substantial.  Many of these expenses are notcovered by our insurance.  Large repair expenses could decrease our cashflow and profitability and reduce our liquidity.

 

Our vessels and theircargoes are at risk of being damaged or lost because of events such as marinedisasters, bad weather, business interruptions caused by mechanical failures,grounding, fire, explosions and collisions, human error, war, terrorism, piracyand other circumstances or events. Changing economic, regulatory and politicalconditions in some countries, including political and military conflicts, havefrom time to time resulted in attacks on vessels, mining of waterways, piracy,terrorism, labor strikes and boycotts. These hazards may result in death orinjury to persons, loss of revenues or property, environmental damage, higherinsurance rates, damage to our customer relationships, market disruptions,delay or rerouting.  In addition, theoperation of tankers has unique operational risks associated with thetransportation of oil. An oil spill may cause significant environmental damage,and the associated costs could exceed the insurance coverage available tous.  Compared to other types of vessels,tankers are exposed to a higher risk of damage and loss by fire, whetherignited by a terrorist attack, collision, or other cause, due to the highflammability and high volume of the oil transported in tankers.

 

If our vessels suffer damage, they may need to be repaired at adrydocking facility. The costs of drydock repairs are unpredictable and may besubstantial. We may have to pay drydocking costs that our insurance does notcover in full. The loss of revenues while these vessels are being repaired andrepositioned, as well as the actual cost of these repairs, may adversely affectour business and financial condition. In addition, space at drydockingfacilities is sometimes limited and not all drydocking facilities areconveniently located. We may be unable to find space at a suitable drydockingfacility or our vessels may be forced to travel to a drydocking facility thatis not conveniently located to our vessels’ positions. The loss of earningswhile these vessels are forced to wait for space or to travel to more distantdrydocking facilities may adversely affect our business and financialcondition.  Further, the total loss ofany of our vessels could harm our reputation as a safe and reliable vesselowner and operator.  If we are unable toadequately maintain or safeguard our vessels, we may be unable to prevent anysuch damage, costs, or loss which could negatively impact our business,financial condition, results of operations and available cash.

 

**Compliance with safety and othervessel requirements imposed by classification societies may be very costly andmay adversely affect our business.**

 

The hull and machinery of every commercial tanker mustbe classed by a classification society authorized by its country ofregistry.  The classification society certifies that a tanker is safe andseaworthy in accordance with the applicable rules and regulations of thecountry of registry of the tanker and the Safety of Life at SeaConvention.  All of our vessels are certified as being “in-class” by DetNorske Veritas or the American Bureau of Shipping.  These classificationsocieties are members of the International Association of ClassificationSocieties.

 

A vessel must undergo annual surveys, intermediatesurveys and special surveys.  In lieu of a special survey, a vessel’smachinery may be on a continuous survey cycle, under which the machinery wouldbe surveyed periodically over a five-year period.  Our vessels are onspecial survey cycles for hull inspection and on special survey or continuoussurvey cycles for machinery inspection.  Every vessel is also required tobe drydocked every two to five years for inspection of the underwater parts ofsuch vessel.

 

If a vessel in our fleet does not maintain its classand/or fails any annual survey, intermediate survey or special survey, it willbe unemployable and unable to trade between ports.  This would negativelyimpact our results of operations.

 

**We depend on our key personnel andmay have difficulty attracting and retaining skilled employees.**

 

The loss of the services ofany of our key personnel or our inability to successfully attract and retainqualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and operating results. Our future success dependsparticularly on the continued service of John Tavlarios, our President, and ourability to attract a suitable replacement, if necessary.

 

22

----

 

Our success also depends inlarge part on our ability to attract and retain highly skilled and qualifiedship officers and crew. In crewing our vessels, we require technically skilledemployees with specialized training who can perform physically demanding work.Competition to attract and retain qualified crew members is intense. We expectcrew costs to increase slightly in 2010. If we are not able to increase ourrates to compensate for any crew cost increases, our financial condition andresults of operations may be adversely affected. Any inability we experience inthe future to hire, train and retain a sufficient number of qualified employeescould impair our ability to manage, maintain and grow our business.

 

Our vessel-owning subsidiaries and third-party technical managementcompanies employ masters, officers and crews to man our vessels. If notresolved in a timely and cost-effective manner, industrial action or otherlabor unrest could prevent or hinder our operations from being carried out aswe expect and could have a material adverse effect on our business, results ofoperations, cash flows, financial condition and available cash.

 

**Shipping is an inherently riskybusiness and our insurance may not be adequate.**

 

Our vessels and their cargoes are at risk of beingdamaged or lost because of events such as marine disasters, bad weather,mechanical failures, human error, war, terrorism, piracy and othercircumstances or events. In addition, transporting crude oil creates a risk ofbusiness interruptions due to political, economic or regulatory circumstancesin foreign countries, hostilities, labor strikes and boycotts.  Any ofthese events may result in loss of revenues, increased costs and decreased cashflows.  Future hostilities or other political instability could affect ourtrade patterns and adversely affect our operations and our revenues, cash flowsand profitability.

 

We carry insurance to protect against most of theaccident-related risks involved in the conduct of our business.  Wecurrently maintain $1 billion in coverage for each of our vessels for liabilityfor spillage or leakage of oil or pollution.  We also carry insurancecovering lost revenue resulting from vessel off-hire for all of ourvessels.  Nonetheless, risks may arise against which we are not adequatelyinsured.  For example, a catastrophic spill could exceed our insurancecoverage and have a material adverse effect on our financial condition. In addition, we may not be able to procure adequate insurance coverage atcommercially reasonable rates in the future and we cannot guarantee that anyparticular claim will be paid.  In the past, new and stricterenvironmental regulations have led to higher costs for insurance coveringenvironmental damage or pollution, and new regulations could lead to similarincreases or even make this type of insurance unavailable.  Furthermore,even if insurance coverage is adequate to cover our losses, we may not be ableto timely obtain a replacement ship in the event of a loss.  We may alsobe subject to calls, or premiums, in amounts based not only on our own claimrecords but also the claim records of all other members of the protection andindemnity associations through which we receive indemnity insurance coveragefor tort liability.  In addition, our protection and indemnityassociations may not have enough resources to cover claims made against them.Our payment of these calls could result in significant expenses to us whichcould reduce our cash flows and place strains on our liquidity and capitalresources.

 

**The risks associated with oldervessels could adversely affect our operations.**

 

In general, the costs tomaintain a vessel in good operating condition increase as the vessel ages. Asof December 31, 2009, the weighted average age of the 31 vessels inour fleet was 9.6 years, compared to an average age of 8.6 years as of December 31,2008. Due to improvements in engine technology, older vessels typically areless fuel-efficient than more recently constructed vessels. Cargo insurancerates increase with the age of a vessel, making older vessels less desirable tocharterers.

 

Governmental regulations,safety or other equipment standards related to the age of tankers may requireexpenditures for alterations or the addition of new equipment to our vessels,and may restrict the type of activities in which our vessels may engage. Wecannot assure you that, as our vessels age, market conditions will justify anyrequired expenditures or enable us to operate our vessels profitably during theremainder of their useful lives.

 

If we do not set aside fundsand are unable to borrow or raise funds for vessel replacement, we will beunable to replace the vessels in our fleet upon the expiration of theirremaining useful lives of 25 years. Our cash flows and income are dependent onthe revenues earned by the chartering of our vessels. If we are unable toreplace the vessels in our fleet upon the expiration of their useful lives, ourrevenue will decline and our business, results of operations, financialcondition, and available cash per share would be adversely affected. Any fundsset aside for vessel replacement will reduce available cash.

 

**Acts of piracy on ocean-going vesselshave recently increased in frequency, which could adversely affect ourbusiness.**

 

Acts of piracy have historically affected ocean-goingvessels trading in regions of the world such as the South China Sea and in theGulf of Aden off the coast of Somalia.  Throughout 2008 and 2009, thefrequency of piracy incidents has increased significantly, particularly in theGulf of Aden off the coast of Somalia.  For example, in November 2008,the M/V *Sirius*Star, a tanker vessel notaffiliated with us, was captured by pirates in the Indian Ocean while carryingcrude oil estimated to be worth $100 million. If these piracy attacks result inregions in which our vessels are deployed being characterized by insurers as “warrisk” zones, as the Gulf of Aden temporarily was in May 2008, or Joint WarCommittee (JWC) “war and strikes” listed areas, premiums payable for such coveragecould increase significantly and such insurance coverage may be more difficultto obtain.  In addition, crew costs, including

 

23

----

 

costs which may be incurred to the extent we employonboard security guards, could increase in such circumstances.  We may notbe adequately insured to cover losses from these incidents, which could have amaterial adverse effect on us.  In addition, detention hijacking as aresult of an act of piracy against our vessels, or an increase in cost, orunavailability of insurance for our vessels, could have a material adverseimpact on our business, financial condition and results of operations.

 

**Terrorist attacks, increasedhostilities or war could lead to further economic instability, increased costsand disruption of our business.**

 

Terrorist attacks, and the current conflicts in Iraqand Afghanistan and other current and future conflicts, may adversely affectour business, operating results, financial condition, ability to raise capitaland future growth. Continuing hostilities in the Middle East may lead toadditional armed conflicts or to further acts of terrorism and civildisturbance in the United States or elsewhere, which may contribute further toeconomic instability.

 

In addition, oil facilities, shipyards, vessels,pipelines and oil and gas fields could be targets of future terroristattacks.  Any such attacks could lead to, among other things, bodilyinjury or loss of life, vessel or other property damage, increased vesseloperational costs, including insurance costs, and the inability to transportoil and other refined products to or from certain locations.  Terroristattacks, war or other events beyond our control that adversely affect thedistribution, production or transportation of oil and other refined products tobe shipped by us could entitle our customers to terminate our chartercontracts, which would harm our cash flow and our business.

 

**Compliancewith safety, environmental and other governmental requirements and relatedcosts may adversely affect our operations.**

 

The shipping industry ingeneral, our business and the operation of our vessels in particular, areaffected by a variety of governmental regulations in the form of numerousinternational conventions, national, state and local laws and national andinternational regulations in force in the jurisdictions in which such tankersoperate, as well as in the country or countries in which such tankers areregistered. These regulations include:

 

·             theU.S. Oil Pollution Act of 1990, or OPA, which imposes strict liability forthe discharge of oil into the 200-mile United States exclusive economic zone,the obligation to obtain certificates of financial responsibility for vesselstrading in United States waters and the requirement that newly constructedtankers that trade in United States waters be constructed with double-hulls;

 

·             theInternational Convention on Civil Liability for Oil Pollution Damage of 1969entered into by many countries (other than the United States) which imposesstrict liability for pollution damage caused by the discharge of oil;

 

·             theInternational Convention for the Prevention of Pollution from Ships adopted andimplemented under the auspices of the International Maritime Organization, orIMO, with respect to strict technical and operational requirements for tankers;

 

·             the IMOInternational Convention for the Safety of Life at Sea of 1974, or SOLAS, whichimposes crew and passenger safety requirements;

 

·             theInternational Ship and Port Facilities Securities Code, or the ISPS Code, whichbecame effective in 2004;

 

·             theInternational Convention on Load Lines of 1966 which imposes requirementsrelating to the safeguarding of life and property through limitations on loadcapability for vessels on international voyages; and

 

·             theU.S. Maritime Transportation Security Act of 2002 which imposes securityrequirements for tankers entering U.S. ports.

 

More stringent maritimesafety rules have been imposed in the European Union and further rules maybe imposed as a result of the oil spill in November 2002 relating to theloss of the *M.T. Prestige*, a 26-year old single-hulltanker owned by a company not affiliated with us. Additional laws andregulations may also be adopted that could limit our ability to do business orincrease the cost of our doing business and that could have a material adverseeffect on our operations. In addition, we are required by various governmentaland quasi-governmental agencies to obtain certain permits, licenses andcertificates with respect to our operations. We believe our vessels aremaintained in good condition in compliance with present regulatoryrequirements, are operated in compliance with applicable safety andenvironmental laws and regulations and are insured against usual risks for suchamounts as our management deems appropriate. The vessels’ operatingcertificates and licenses are renewed periodically during each vessel’srequired annual

 

24

----

 

survey. However, governmentregulation of tankers, particularly in the areas of safety and environmentalimpact may change in the future and require us to incur significant capitalexpenditures with respect to our ships to keep them in compliance.

 

**Increased inspection procedures andtighter import and export controls could increase costs and disrupt ourbusiness.**

 

International shipping is subject to various securityand customs inspections and related procedures in countries of origin anddestination.  Inspection procedures can result in the seizure of contentsof our vessels, delays in the loading, offloading or delivery and the levyingof customs, duties, fines and other penalties against us.

 

It is possible that changes to inspection procedurescould impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additionalcosts and obligations on our customers and may, in certain cases, render theshipment of certain types of cargo impractical.  Any such changes ordevelopments may have a material adverse effect on our business, financialcondition, results of operations and our ability to pay dividends.

 

**Our vessels may be requisitioned bygovernments without adequate compensation.**

 

A government could requisition for title or seize ourvessels.  In the case of a requisition for title, a government takescontrol of a vessel and becomes its owner.  Also, a government couldrequisition our vessels for hire.  Under requisition for hire, agovernment takes control of a vessel and effectively becomes its charterer atdictated charter rates.  Generally, requisitions occur during a period ofwar or emergency. Although we, as owner, would be entitled to compensation inthe event of a requisition, the amount and timing of payment would beuncertain.

 

**Increases in tonnage taxes on ourvessels would increase the costs of our operations.**

 

Our vessels are currently registered under the flagsof the Republic of Liberia, the Republic of the Marshall Islands and Bermuda. These jurisdictions impose taxes based on the tonnage capacity of each of thevessels registered under their flag.  The tonnage taxes imposed by thesecountries could increase, which would cause the costs of our operations toincrease.

 

**Arrests of our vessels by maritimeclaimants could cause a significant loss of earnings for the related off hireperiod.**

 

Crew members, suppliers of goods and services to avessel, shippers of cargo and other parties may be entitled to a maritime lienagainst a vessel for unsatisfied debts, claims or damages.  In manyjurisdictions, a maritime lienholder may enforce its lien by “arresting” or “attaching”a vessel through foreclosure proceedings.  The arrest or attachment of oneor more of our vessels could result in a significant loss of earnings for therelated off-hire period.

 

In addition, in jurisdictions where the “sister ship”theory of liability applies, a claimant may arrest both the vessel which issubject to the claimant’s maritime lien and any “associated” vessel, which isany vessel owned or controlled by the same owner.  In countries with “sistership” liability laws, claims might be asserted against us, any of oursubsidiaries or our vessels for liabilities of other vessels that we own.

 

**Proceedings involving GeneralMaritime, our vessel-operating subsidiary and two General Maritime vesselofficers could negatively impact our business.**

 

On November 25, 2008, a jury in the SouthernDistrict of Texas found General Maritime Management (Portugal) L.D.A., asubsidiary of ours, or GMM Portugal, and two vessel officers of the *Genmar Defiance*guilty of violating theAct to Prevent Pollution from Ships and 18 USC 1001. The convictionresulted from charges based on alleged incidents occurring on board the *Genmar Defiance*arising from potentialfailures by shipboard staff to properly record discharges of bilge waste duringthe period of November 24, 2007 through November 26, 2007. We havedenied any wrongdoing in this matter by us or any of our employees. Pursuant tothe sentence imposed by the Court on March 13, 2009, GMM Portugal paid a$1 million fine in April 2009 and is subject to a probationary periodof five years. During this period, a court-appointed monitor will monitor andaudit GMM Portugal’s compliance with its environmental compliance plan, and GMMPortugal is required to designate a responsible corporate officer to submitmonthly reports to, and respond to inquiries from, the court’s probationdepartment. The court stated that, should GMM Portugal engage in future conductin violation of its probation, it may, under appropriate circumstances, bancertain of our vessels from calling on U.S. ports. We have also writtenoff approximately $3.3 million of insurance claims related to this matter.

 

On or about August 29,2007, an oil sheen was discovered by shipboard personnel of the *Genmar Progress*in Guayanilla Bay, PuertoRico in the vicinity of the vessel. We understand the federal and Puerto Ricoauthorities are conducting civil investigations into an oil pollution incidentwhich occurred during this time period on the southwest coast of Puerto Ricoincluding Guayanilla Bay. The extent to which oil discharged from the *Genmar Progress*is responsible for thisincident is currently the subject of investigation. The

 

25

----

 

U.S. Coast Guard hasdesignated the *Genmar Progress*asa potential source of discharged oil. Under the Oil Pollution Act of 1990, thesource of the discharge is liable, regardless of fault, for damages and oilspill remediation as a result of the discharge.

 

On January 19, 2009, wereceived a demand from the U.S. National Pollution Fund for$5.8 million for the U.S. Coast Guard’s response costs and certaincosts of the *Departamento de RecursosNaturales y Ambientales*of Puerto Rico in connection with thealleged damage to the environment caused by the spill. We are reviewing thedemand and have requested additional information from the U.S. NationalPollution Fund relating to the demand. We and General Maritime ManagementLLC recently received grand jury subpoenas, dated October 5, 2009 and September 21,2009, respectively, from U.S. Department of Justice requesting additionalinformation and records pertaining to the operations of the *Genmar**Progress*and our business. Currently, no charges have been made and no otherfines or penalties have been levied against us. We have been cooperating inthese investigations and have posted a surety bond to cover potential fines orpenalties that may be imposed in connection with the matter.

 

This matter, including thedemand from the U.S. National Pollution Fund, has been reported to ourprotection and indemnity insurance underwriters. We have not accrued reservesfor this incident other than the deductible because the amount of anyadditional costs that may be incurred by us is not estimable at this time. Anyuninsured or underinsured loss could harm our business and financial condition.

 

**We may have to pay U.S. tax on U.S.source income, which would reduce our net income and cash flows.**

 

If we do not qualify for an exemption pursuant to Section 883of the U.S. Internal Revenue Code of 1986, as amended, or the Code, which werefer to as Section 883, then we will be subject to U.S. federal incometax on our shipping income that is derived from U.S. sources.  If we aresubject to such tax, our net income and cash flows would be reduced by theamount of such tax.

 

We will qualify for exemption under Section 883if, among other things, our stock is treated as primarily and regularly tradedon an established securities market in the United States.  Underapplicable Treasury regulations, we may not satisfy this publicly tradedrequirement in any taxable year in which 50% or more of our stock is owned formore than half the days in such year by persons who actually or constructivelyown 5% or more of our stock, which we sometimes refer to as 5% shareholders.

 

We believe that, based on the ownership of our stockin 2009, we satisfied the publicly traded requirement for 2009.  However,if 5% shareholders were to own more than 50% of our common stock for more thanhalf the days of any future taxable year, we may not be eligible to claimexemption from tax under Section 883 for such taxable year.  We canprovide no assurance that changes and shifts in the ownership of our stock by5% shareholders will not preclude us from qualifying for exemption from tax in2010 or in future years.

 

If we do not qualify for the Section 883exemption, our shipping income derived from U.S. sources, or 50% of our grossshipping income attributable to transportation beginning or ending in theUnited States, would be subject to a 4% tax without allowance for deductions.

 

***Legislative action relating to taxation could materially andadversely affect us.***

*** ***

Our tax position could beadversely impacted by changes in tax laws, tax treaties or tax regulations orthe interpretation or enforcement thereof by any tax authority. For example,legislative proposals have been introduced in the U.S. Congress which, ifenacted, could change the circumstances under which we would be treated as aU.S. person for U.S. federal income tax purposes, which couldmaterially and adversely affect our effective tax rate and cash tax positionand require us to take action, at potentially significant expense, to seek topreserve our effective tax rate and cash tax position. We cannot predict theoutcome of any specific legislative proposals.

 

**U.S. tax authorities could treat usas a “passive foreign investment company,” which could have adverse U.S.federal income tax consequences to U.S. shareholders.**

 

A foreign corporation generally will be treated as a “passiveforeign investment company,” which we sometimes refer to as a PFIC, for U.S.federal income tax purposes if either *(1) *atleast 75% of its gross income for any taxable year consists of “passive income”or *(2) *at least 50% of its assets(averaged over the year and generally determined based upon value) produce orare held for the production of “passive income.” U.S. shareholders of a PFICare subject to a disadvantageous U.S. federal income tax regime with respect todistributions they receive from the PFIC and gain, if any, they derive from thesale or other disposition of their stock in the PFIC.

 

For purposes of these tests, “passive income”generally includes dividends, interest, gains from the sale or exchange ofinvestment property and rents and royalties other than rents and royaltieswhich are received from unrelated parties in connection with the active conductof a trade or business, as defined in applicable Treasury regulations.

 

26

----

 

For purposes of these tests, income derived from theperformance of services does not constitute “passive income.” By contrast,rental income would generally constitute passive income unless we were treatedunder specific rules as deriving our rental income in the active conductof a trade or business. We do not believe that our past or existing operationsor the past operations of General Maritime Subsidiary or Arlington would causeus, or would have caused General Maritime Subsidiary or Arlington, to be deemeda PFIC with respect to any taxable year. In this regard, we treat the grossincome we derive or are deemed to derive from our time and spot charteringactivities as services income, rather than rental income. Accordingly, webelieve that *(1) *our income from our timeand spot chartering activities does not constitute passive income and *(2) *the assets that we own and operate in connectionwith the production of that income do not constitute passive assets.

 

While there is no direct legal authority under thePFIC rules addressing our method of operation, there is legal authoritysupporting this position consisting of case law and pronouncements by theUnited States Internal Revenue Service, which we sometimes refer to as the IRS,pronouncements concerning the characterization of income derived from timecharters and voyage charters as services income for other tax purposes.  However, it should be noted that there isalso authority which characterizes time charter income as rental income ratherthan services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of lawwill accept our position, and there is a risk that the IRS or a court of lawcould determine that we are a PFIC. Moreover, because there are uncertainties in the application of the PFICrules, because the PFIC test is an annual test, and because, although we intendto manage our business so as to avoid PFIC status to the extent consistent withour other business goals, there could be changes in the nature and extent ofour operations in future years, there can be no assurance that we will notbecome a PFIC in any taxable year.

 

If we were to be treated as a PFIC for any taxableyear (and regardless of whether we remain a PFIC for subsequent taxable years),our U.S. shareholders would face adverse U.S. tax consequences. These adversetax consequences to shareholders could negatively impact our ability to issueadditional equity in order to raise the capital necessary for our businessoperations.

 

**Theinternational nature of our operations may make the outcome of any bankruptcyproceedings difficult to predict.**

** **

We are incorporated under the laws of the Republic ofthe Marshall Islands and our subsidiaries are also incorporated under the lawsof the Marshall Islands, Liberia, Bermuda and certain other countries besidesthe United States, and we conduct operations in countries around the world.Consequently, in the event of any bankruptcy, insolvency, liquidation,dissolution, reorganization or similar proceeding involving us or any of oursubsidiaries, bankruptcy laws other than those of the United States couldapply. We have limited operations in the United States. If we become a debtorunder U.S. bankruptcy laws, bankruptcy courts in the United States may seek toassert jurisdiction over all of our assets, wherever located, includingproperty situated in other countries. There can be no assurance, however, thatwe would become a debtor in the United States, or that a U.S. bankruptcy courtwould be entitled to, or accept, jurisdiction over such a bankruptcy case, orthat courts in other countries that have jurisdiction over us and ouroperations would recognize a U.S. bankruptcy court’s jurisdiction if any otherbankruptcy court would determine it had jurisdiction.

 

**RISKFACTORS RELATED TO OUR FINANCINGS**

 

**Wehave incurred significant indebtedness which could affect our ability tofinance our operations, pursue desirable business opportunities andsuccessfully run our business in the future, and therefore make it moredifficult for us to fulfill our obligations under the Senior Notes.**

** **

**We haveincurred substantial debt. As of December 31, 2009, we had $1,019 millionof indebtedness outstanding and shareholders’ equity of $406.3 million. Oursubstantial indebtedness and interest expense could have important consequencesto our company, including:**

** **

·                  limiting our ability to use a substantial portion ofour cash flow from operations in other areas of our business, including forworking capital, capital expenditures and other general business activities,because we must dedicate a substantial portion of these funds to service ourdebt;

 

·                  requiring us to seek to incur further indebtedness inorder to make the capital expenditures and other expenses or investmentsplanned by us to the extent our future cash flows are insufficient;

 

·                  limiting our ability to obtain additional financing inthe future for working capital, capital expenditures, debt servicerequirements, acquisitions and the execution of our growth strategy, and otherexpenses or investments planned by us;

 

·                  limiting our flexibility and our ability to capitalizeon business opportunities and to react to competitive pressures and adversechanges in government regulation, our business and our industry;

 

27

----

 

·                  limiting our ability to satisfy our obligations underour indebtedness (which could result in an event of default if we fail tocomply with the requirements of our indebtedness);

 

·                  increasing our vulnerability to a downturn in ourbusiness and to adverse economic and industry conditions generally;

 

·                  placing us at a competitive disadvantage as comparedto our competitors that are less leveraged;

 

·                  limiting our ability, or increasing the costs, torefinance indebtedness; and

 

·                  limiting our ability to enter into hedgingtransactions by reducing the number of counterparties with whom we can enterinto such transactions as well as the volume of those transactions.

 

Our 2005 Credit Facility began to amortize in February 2009.Our ability to secure additional financing, if needed, may be substantiallyrestricted by the existing level of our indebtedness and the restrictionscontained in our debt instruments. When our 2005 Credit Facility matures in2012, if we are unable to refinance it, we will be required to dedicate asubstantial portion of our cash flow to the payment of such debt, which willreduce the amount of funds available for operations, capital expenditures andfuture business opportunities.

 

The occurrence of any one of the events describedabove could have a material adverse effect on our business, financialcondition, results of operations, prospects, and ability to satisfy ourobligations under our indebtedness.

 

**Wemay incur significantly more indebtedness, which could further increase therisks associated with our indebtedness and prevent us from fulfilling ourobligations under the Senior Notes.**

** **

Despite our current level of indebtedness, our 2005Credit Facility and the indenture governing the Senior Notes permit us to incursignificant additional indebtedness in the future, subject to specifiedlimitations. Although our 2005 Credit Facility and the indenture governing theSenior Notes restrict our and our subsidiaries’ ability to incur additionalindebtedness, these restrictions are subject to a number of qualifications andexceptions, and, under specified circumstances, the indebtedness incurred incompliance with such restrictions could be substantial. If new indebtedness isadded to our and our subsidiaries’ current debt levels, the related risks thatwe and they face would be increased, and we may not be able to meet all ourdebt obligations, in whole or in part.

 

**Wemay not be able to generate sufficient cash to service all of our indebtedness.**

** **

We expect our earnings and cash flow to varysignificantly from year to year due to the cyclical nature of our industry. Asa result, the amount of debt that we can manage in some periods may not beappropriate for us in other periods. Additionally, our future cash flow may beinsufficient to meet our debt obligations and commitments. Any insufficiencycould negatively impact our business. A range of economic, competitive,financial, business, industry and other factors will affect our futurefinancial performance, and, as a result, our ability to generate cash flow fromoperations and to pay our debt. Many of these factors, such as charter rates,economic and financial conditions in our industry and the global economy orcompetitive initiatives of our competitors, are beyond our control. If we donot generate sufficient cash flow from operations to satisfy our debtobligations, we may have to undertake alternative financing plans, such as:

 

·                  refinancing or restructuring our debt;

 

·                  selling tankers or other assets;

 

·                  reducing or delaying investments and capitalexpenditures; or

 

·                  seeking to raise additional capital.

 

However, we cannot assure you that undertakingalternative financing plans, if necessary, would be successful in allowing usto meet our debt obligations. Our ability to restructure or refinance our debtwill depend on the condition of the capital markets and our financial conditionat such time. Any refinancing of our debt could be at higher interest rates andmay require us to comply with more onerous covenants, which could furtherrestrict our business operations. The terms of existing or future debtinstruments may restrict us from adopting some of these alternatives. In addition,any failure to make payments of interest and principal on our outstandingindebtedness on a timely basis would likely result in a reduction of our creditrating, which could harm our ability to incur additional indebtedness. Thesealternative measures may not be successful and may not permit us to meet ourscheduled debt service obligations. 

 

28

----

 

Our inability to generate sufficient cash flow tosatisfy our debt obligations, or to obtain alternative financing, couldmaterially and adversely affect our business, financial condition, results ofoperations and prospects.

 

**The indenture for the Senior Notes and our 2005Credit Facility impose significant operating and financial restrictions thatmay limit our ability to operate our business.**

 

The indenture for the Senior Notes and our 2005 CreditFacility will impose significant operating and financial restrictions on us andour restricted subsidiaries. These restrictions will limit our ability and theability of our restricted subsidiaries to, among other things, as applicable:

 

·                  incur additional debt and provide additionalguarantees;

 

·                  pay dividends or make other restricted payments,including certain investments;

 

·                  create or permit certain liens;

 

·                  sell tankers or other assets;

 

·                  create or permit restrictions on the ability of ourrestricted subsidiaries to pay dividends or make other distributions to us;

 

·                  engage in certain transactions with affiliates; and

 

·                  consolidate or merge with or into other companies, ortransfer all or substantially all of our assets or the assets of our restrictedsubsidiaries.

 

These restrictions could limit our ability to financeour future operations or capital needs, make acquisitions or pursue availablebusiness opportunities.

 

In addition, our 2005 Credit Facility requires us tomaintain specified financial ratios and satisfy financial covenants. Amongother things, we are required to maintain the aggregate fair market value ofall mortgaged vessels under the credit facility at or above 125% of the totalcommitment amount under the credit facility, and as a result we have pledged 11of our Suezmax, 12 of our Aframax vessels, 2 of our Panamax vessels and 1Handymax vessels as security to the lenders under the 2005 Credit Facility. Weare currently required to maintain a net debt to Adjusted EBITDA ratio of nomore than 6.5:1.0 on the last day of any fiscal quarter. Such ratio will lowerto 6.0:1.0 from December 31, 2010 until September 30, 2011 and5.5:1.0 thereafter.  Additionally, we arenot permitted to allow the sum of *(A) *unrestrictedcash and cash equivalents plus *(B) *thelesser of *(1) *the total available unutilizedcommitment under the 2005 Credit Facility and *(2) *$25million to be less than $50 million. Under the 2005 Credit Facility, we arepermitted to pay quarterly cash dividends limited to $0.125 per share.  We may be required to take action to reduceour debt or to act in a manner contrary to our business objectives to meetthese ratios and satisfy these covenants. Events beyond our control, includingchanges in the economic and business conditions in the markets in which weoperate, may affect our ability to comply with these covenants. We cannotassure you that we will meet these ratios or satisfy these covenants or thatour lenders will waive any failure to do so. A breach of any of the covenantsin, or our inability to maintain the required financial ratios under, our 2005Credit Facility would prevent us from borrowing additional money under the 2005Credit Facility and could result in a default under it. If a default occursunder our 2005 Credit Facility, the lenders could elect to declare that debt,together with accrued interest and other fees, to be immediately due andpayable and proceed against the collateral securing that debt, whichconstitutes all or substantially all of our assets, including our rights in themortgaged vessels and their charters. Moreover, if the lenders under our 2005Credit Facility were to accelerate the debt outstanding under that facility, itcould result in a default under our other debt obligations that may exist atsuch time, and if all or any part of our debt were to be accelerated, we maynot have or be able to obtain sufficient funds available to repay it or torepay our other indebtedness.

 

**Fluctuationsin the market value of our fleet may adversely affect our liquidity and mayresult in breaches under our financing arrangements and sales of vessels at aloss.**

 

The market value of vessels fluctuates depending upongeneral economic and market conditions affecting the tanker industry, thenumber of tankers in the world fleet, the price of constructing new tankers, ornewbuildings, types and sizes of tankers, and the cost of other modes oftransportation. The market value of our fleet may decline as a result of adownswing in the historically cyclical shipping industry or as a result of theaging of our fleet. Declining tanker values could affect our ability to raisecash by limiting our ability to refinance vessels and thereby adversely impactour liquidity. In addition, declining vessel values could result in thereduction 

 

29

----

 

in lending commitments, the requirement to repayoutstanding amounts or a breach of loan covenants, which could give rise to anevent of default under our 2005 Credit Facility.

 

Our 2005 Credit Facility requires us to comply with acollateral maintenance covenant under which the market value of our vesselsmust remain at or above 125% of the total commitment amount under the creditfacility. If we are unable to maintain this required collateral maintenanceratio, we may be prevented from borrowing additional money under our creditfacility, or we may default under our credit facility. If a default occurs, thelenders could elect to declare the debt, together with accrued interest andother fees, to be immediately due and payable and proceed against thecollateral securing the debt, which constitutes a majority of our assets.Moreover, if the lenders were to accelerate the debt outstanding, it couldresult in a default under our other debt obligations that may exist at suchtime.

 

Due to the cyclical nature of the tanker market, themarket value of one or more of our vessels may at various times be lower than theirbook value, and sales of those vessels during those times would result inlosses. If we determine at any time that a vessel’s future limited useful lifeand earnings require us to impair its value on our financial statements, thatcould result in a charge against our earnings and the reduction of ourshareholders’ equity. If for any reason we sell vessels at a time when vesselprices have fallen, the sale may be at less than the vessel’s carrying amounton our financial statements, with the result that we would also incur a lossand a reduction in earnings. The 26 vessels which are currently collateralizingin part our 2005 Credit Facility had an aggregate carrying value of $935.9million as of December 31, 2009.

 

**Ifwe default on our obligations to pay any of our indebtedness, we may be subjectto restrictions on the payment of our other debt obligations or cause across-default or cross-acceleration.**

** **

Any default under the agreements governing ourindebtedness that is not waived by the required lenders or holders of suchindebtedness, and the remedies sought by the holders of such indebtedness,could prevent us from paying principal, premium, if any, and interest on theSenior Notes and substantially decrease the market value of such debtinstruments. If we are unable to generate sufficient cash flow or are otherwiseunable to obtain funds necessary to meet required payments of principal,premium, if any, and interest on our indebtedness, or if we otherwise fail tocomply with the various covenants in any agreement governing our indebtedness,we would be in default under the terms of the agreements governing suchindebtedness. In the event of such default:

 

·                  the lenders or holders of such indebtedness couldelect to terminate their commitments thereunder, declare all the funds borrowedthereunder to be due and payable and, if not promptly paid, instituteforeclosure proceedings against our assets;

 

·                  even if those lenders or holders do not declare adefault, they may be able to cause all of our available cash to be used torepay the indebtedness owed to them; and

 

·                  such default could cause a cross-default orcross-acceleration under our other indebtedness.

 

As a result of such default and any actions thelenders may take in response thereto, we could be forced into bankruptcy orliquidation.

 

**Anincrease in interest rates would increase the cost of servicing our debt andcould reduce our profitability.**

** **

Our debt under our 2005 Credit Facility bears interestat a variable rate of LIBOR plus 250 basis points. We may also incurindebtedness in the future with variable interest rates. As a result, anincrease in market interest rates would increase the cost of servicing our debtand could materially reduce our profitability and cash flows. The impact ofsuch an increase would be more significant for us than it would be for someother companies because of our substantial debt.

 

LIBOR rates have recently been volatile, with thespread between those rates and prime lending rates widening significantly attimes.  These conditions are the resultof the recent disruptions in the international credit markets.  Because the interest rates borne by amountsthat we may drawdown under our credit facilities fluctuate with changes in theLIBOR rates, if this volatility were to continue, it would affect the amount ofinterest payable on amounts that we were to drawdown from our credit facility,which in turn, would have an adverse effect on our profitability, earnings andcash flow.

 

**Our ability to obtain additional debt financingmay be dependent on the performance of our then existing charters and thecreditworthiness of our charterers.**

 

Theactual or perceived credit quality of our charterers, and any defaults by them,may materially affect our ability to obtain the additional capital resourcesthat we will require to purchase additional vessels or may significantlyincrease our costs of obtaining 

 

30

----

 

suchcapital.  Our inability to obtainadditional financing at all or at a higher than anticipated cost may materiallyaffect our results of operation and our ability to implement our businessstrategy.

 

**The derivative contracts we have entered into to hedge ourexposure to****fluctuations ininterest rates could result in higher than market interest****rates and charges against our income.**

 

Wehave entered into five interest rate swaps for purposes of managing ourexposure to fluctuations in interest rates applicable to indebtedness under our2005 Credit Facility which was advanced at a floating rate based on LIBOR. Ourhedging strategies, however, may not be effective and we may incur substantiallosses if interest rates move materially differently from our expectations.Since our existing interest rate swaps do not, and future derivative contractsmay not, qualify for treatment as hedges for accounting purposes we recognizefluctuations in the fair value of such contracts in our income statement. Inaddition, our financial condition could be materially adversely affected to theextent we do not hedge our exposure to interest rate fluctuations under ourfinancing arrangements.

 

Anyhedging activities we engage in may not effectively manage our interest rateexposure or have the desired impact on our financial conditions or results ofoperations. At December 31, 2009, the fair value of our interest rateswaps was a liability of $21.9 million.

 

**RISKFACTORS RELATED TO OUR COMMON STOCK**

 

**Anti-takeoverprovisions in our financing agreements and organizational documents could havethe effect of discouraging, delaying or preventing a merger or acquisition,which could adversely affect the market price of our common stock.**

 

Several of our existing financing agreements imposerestrictions on changes of control of our company and our ship-owningsubsidiaries. These include requirements that we obtain the lenders’ consentprior to any change of control and that we make an offer to redeem certainindebtedness before a change of control can take place.

 

Several provisions of our amended and restatedarticles of incorporation and our by-laws could discourage, delay or prevent amerger or acquisition that shareholders may consider favorable. Theseprovisions include:

 

·                  authorizing our Board of Directors toissue “blank check” preferred stock without shareholder approval;

 

·                  providing for a classified board ofdirectors with staggered, three-year terms;

 

·                  prohibiting us from engaging in a “businesscombination” with an “interested shareholder” for a period of three years afterthe date of the transaction in which the person became an interestedshareholder unless certain provisions are met;

 

·                  prohibiting cumulative voting in theelection of directors;

 

·                  authorizing the removal of directors onlyfor cause and only upon the affirmative vote of the holders of at least 80% ofthe outstanding shares of our common stock entitled to vote for the directors;

 

·                  prohibiting shareholder action by writtenconsent unless the written consent is signed by all shareholders entitled tovote on the action;

 

·                  limiting the persons who may call specialmeetings of shareholders; and

 

·                  establishing advance notice requirementsfor nominations for election to our Board of Directors or for proposing mattersthat can be acted on by shareholders at shareholder meetings.

 

**We cannot assure you that we will payany dividends.**

 

On December 16, 2008, following the consummationof the Arlington Acquisition, our Board of Directors adopted a cash dividendpolicy. The actual declaration of future cash dividends, and the establishmentof record and payment dates, is subject to final determination by our Board ofDirectors each quarter after its review of our financial performance. Ourability to pay dividends in any period will depend upon factors includingsatisfying the requirements under our 2005 Credit Facility and the indenturefor our Senior Notes and applicable provisions of Marshall Islands law.

 

31

----

 

The timing and amount of dividends, if any, could beaffected by factors affecting cash flows, results of operations, requiredcapital expenditures, or reserves. Maintaining the dividend policy will dependon our cash earnings, financial condition and cash requirements and could beaffected by factors, including the loss of a vessel, required capitalexpenditures, reserves established by the Board of Directors, increased orunanticipated expenses, additional borrowings or future issuances of securities,which may be beyond our control. The declaration and payment of dividends issubject to certain conditions and limitations under our 2005 Credit Facilityand the indenture for our Senior Notes.

 

Under Marshall Islands law, a company may not declareor pay dividends if it is currently insolvent or would thereby be madeinsolvent. Marshall Islands law also provides that a company may declaredividends only to the extent of its surplus, or if there is no surplus, out ofits net profits for the then current and/or immediately preceding fiscal years.

 

Our dividend policy may be changed at any time, andfrom time to time, by our Board of Directors.

 

**Future sales of our common stockcould cause the market price of our common stock to decline.**

 

The market price of our common stock could decline dueto sales of a large number of shares in the market, including sales of sharesby our large shareholders, or the perception that these sales could occur.These sales could also make it more difficult or impossible for us to sellequity securities in the future at a time and price that we deem appropriate toraise funds through future offerings of common stock. We have entered intoregistration rights agreements with the securityholders who received shares forthe sale of vessels to Arlington in connection with its initial public offeringin November 2004, which were exchanged for shares of our common stock as aresult of the Arlington Acquisition. These registration rights agreementsentitle them to have an aggregate of 2,787,772 shares registered for sale inthe public market. We have also agreed with Peter C. Georgiopoulos that we willenter into a new registration rights agreement granting Mr. Georgiopoulosregistration rights with respect to 2,938,343 shares of our common stock whichhe received in connection with the Arlington Acquisition in exchange for sharesof General Maritime Subsidiary issued to him in connection with therecapitalization of General Maritime Subsidiary in June 2001 and that suchregistration rights agreement would become effective within a reasonable timeafter the effective date of the Arlington Acquisition. We also registered on Form S-8an aggregate of 1,624,347 shares issuable upon exercise of options we havegranted to purchase common stock or reserved for issuance under our equitycompensation plans.  We have alsoregistered on Form S-3 an aggregate of 8,128,612 shares of our commonstock, which include the 5,726,115 shares covered under the registration rightsagreements mentioned above.

 

**Our incorporation under the laws ofthe Republic of the Marshall Islands may limit the ability of our shareholdersto protect their interests.**

 

Our corporate affairs are governed by our amended andrestated articles of incorporation and by-laws and by the Republic of theMarshall Islands Business Corporations Act. The provisions of the Republic ofthe Marshall Islands Business Corporations Act resemble provisions of thecorporation laws of a number of states in the United States. However, therehave been few judicial cases in the Republic of the Marshall Islandsinterpreting the Republic of the Marshall Islands Business Corporations Act.For example, the rights and fiduciary responsibilities of directors under thelaws of the Republic of the Marshall Islands are not as clearly established asthe rights and fiduciary responsibilities of directors under statutes orjudicial precedent in existence in certain U.S. jurisdictions. Although theRepublic of the Marshall Islands Business Corporations Act does specificallyincorporate the non-statutory law, or judicial case law, of the State ofDelaware and other states with substantially similar legislative provisions,our public shareholders may have more difficulty in protecting their interestsin the face of actions by management, directors or controlling shareholdersthan would shareholders of a corporation incorporated in a U.S. jurisdiction.

 

**It may not be possible for ourinvestors to enforce U.S. judgments against us.**

 

We are incorporated in the Republic of the MarshallIslands and most of our subsidiaries are organized in the Republic of Liberiaand the Republic of the Marshall Islands. Substantially all of our assets andthose of our subsidiaries are located outside the United States. As a result,it may be difficult or impossible for U.S. investors to serve process withinthe United States upon us or to enforce judgment upon us for civil liabilitiesin U.S. courts. In addition, you should not assume that courts in the countriesin which we or our subsidiaries are incorporated or where our assets or theassets of our subsidiaries are located (1) would enforce judgments of U.S.courts obtained in actions against us or our subsidiaries based upon the civilliability provisions of applicable U.S. federal and state securities laws or (2) wouldenforce, in original actions, liabilities against us or our subsidiaries basedupon these laws.

 

**ITEM 1B. UNRESOLVED STAFF COMMENTS**

 

None.

 

32

----

** **

**ITEM 2. PROPERTIES**

** **

Welease six properties, all of which house offices used in the administration ofour operations: a property of approximately 24,000 square feet in New York, NewYork, a property of approximately 12,500 square feet in Lisbon, Portugal, aproperty of approximately 2,000 square feet in Piraeus, Greece, a property ofapproximately 3,400 square feet in Mumbai, India and a property ofapproximately 750 square feet in Novorossiysk, Russia. We do not own or leaseany production facilities, plants, mines or similar real properties.

 

**ITEM 3. LEGAL PROCEEDINGS**

** **

On or about August 29,2007, an oil sheen was discovered by shipboard personnel of the *Genmar Progress*in Guayanilla Bay, PuertoRico in the vicinity of the vessel. The vessel crew took prompt action pursuantto the vessel response plan. Our subsidiary which operates the vessel promptlyreported this incident to the U.S. Coast Guard and has subsequentlyaccepted responsibility  under the OilPollution Act of 1990 for any damage or loss resulting from the accidentaldischarge of bunker fuel determined to have been discharged from the vessel. Weunderstand the federal and Puerto Rico authorities are conducting civilinvestigations into an oil pollution incident which occurred during this timeperiod on the southwest coast of Puerto Rico including Guayanilla Bay. Theextent to which oil discharged from the *GenmarProgress*is responsible for this incident is currently the subjectof investigation. The U.S. Coast Guard has designated the *Genmar Progress*as a potential source ofdischarged oil. Under the Oil Pollution Act of 1990, the source of thedischarge is liable, regardless of fault, for damages and oil spill remediationas a result of the discharge.

 

On January 13, 2009, wereceived a demand from the U.S. National Pollution Fund for$5.8 million for the U.S. Coast Guard’s response costs and certaincosts of the Departamento de Recursos Naturales y Ambientales of Puerto Rico inconnection with the alleged damage to the environment caused by the spill. Weare reviewing the demand and have requested additional information from theU.S. National Pollution Fund relating to the demand. We and GeneralMaritime Management LLC recently received grand jury subpoenas, dated October 5,2009 and September 21, 2009, respectively, from U.S. Department ofJustice requesting additional information and records pertaining to theoperations of the *Genmar**Progress*and our business. Currently, nocharges have been made and no other fines or penalties have been levied againstus. We have been cooperating in these investigations and have posted a suretybond to cover potential fines or penalties that may be imposed in connectionwith the matter.

 

This matter, including thedemand from the U.S. National Pollution Fund, has been reported to ourprotection and indemnity insurance underwriters, and we believe that any suchliabilities will be covered by its insurance, less a deductible. We have notaccrued reserves for this incident other than the deductible because the amountof any additional costs that may be incurred by us is not estimable at thistime.

 

**ITEM 4. RESERVED**

 

33

----

** **

**PART II**

** **

**ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

** **

**MARKET INFORMATION, HOLDERS AND DIVIDENDS**

** **

Our common stock is traded on the New York Stock Exchange under thesymbol “GMR”. The following table sets forth for the periods indicated the highand low intra-day trading prices for our common stock as reported on the NewYork Stock Exchange:

 
| **FISCAL  YEAR ENDED DECEMBER 31, 2009** | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|------------------------------------------|------------|----------|------------|---------|------------|
| 1st Quarter                              |       | $        | 12.24      |    | $          | 6.40 |   |
| 2nd Quarter                              |       | $        | 12.66      |    | $          | 6.87 |   |
| 3rd Quarter                              |       | $        | 10.07      |    | $          | 7.22 |   |
| 4th Quarter                              |       | $        | 8.95       |    | $          | 6.70 |   |

 
| **FISCAL YEAR ENDED DECEMBER 31,  2008** | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|------------------------------------------|------------|----------|------------|---------|------------|
| 1st Quarter                              |       | $        | 20.72      |    | $          | 14.78 |   |
| 2nd Quarter                              |       | $        | 23.13      |    | $          | 17.31 |   |
| 3rd Quarter                              |       | $        | 20.52      |    | $          | 13.60 |   |
| 4th Quarter                              |       | $        | 14.59      |    | $          | 6.51 |   |

 

As of February 23, 2010, there were approximately 175 holders ofrecord of our common stock.

 

All share and per share amounts presented throughout this Annual Reporton Form 10-K, unless otherwise noted, have been adjusted to reflect theexchange of 1.34 shares of our common stock for each share of common stock heldby shareholders of General Maritime Subsidiary in connection with the ArlingtonAcquisition.

 

On February 21, 2007 the Board ofDirectors of General Maritime Subsidiary changed its quarterly dividend policyby adopting a fixed target amount of $0.37 per share per quarter or $1.49 pershare each year, starting with the first quarter of 2007.

 

On February 21, 2007, General MaritimeSubsidiary also announced that the Board of Directors of General MaritimeSubsidiary declared a special, one-time cash dividend of $11.19 per share. Thedividend was paid on or about March 23, 2007 to shareholders of record asof March 9, 2007.

 

On December 16, 2008, our Board ofDirectors adopted a quarterly dividend policy with a fixed target amount of$0.50 per share per quarter or $2.00 per share each year. We announced on July 29,2009 that out Board of Directors changed our quarterly dividend policy byadopting a fixed target amount of $0.125 per share per quarter or $0.50 pershare each year, starting with the third quarter of 2009.

 

During the year ended December 31, 2008, General MaritimeSubsidiary repurchased 953,142 shares of its common stock for $16.4 million (anaverage per share purchase price of $17.18) pursuant to its share repurchaseprogram described in “Share Repurchase Program” under the heading “LIQUIDITYAND CAPITAL RESOURCES” in Item 7.

 

34

----

 

**ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHERDATA**

 

Set forth below are selected historical consolidated and other data ofGeneral Maritime Corporation at the dates and for the fiscal years shown.

 
| ** **                                                              | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                              | ** ** | **2009**                    | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **INCOME STATEMENT DATA**(Dollars in  thousands, except per share data) |       |                        |       |   |   |   |   |   |   |   |   |
| Voyage revenues                                                         |       | $                           | 350,520    |   | $ | 326,068 |   | $ | 255,015 |   | $ | 325,984 |   | $ | 567,901 |   |
| Voyage expenses                                                         |       | 58,876                      |       | 54,404 |   | 38,069 |   | 80,400 |   | 137,203 |   |
| Direct vessel  operating expenses                                       |       | 95,573                      |       | 63,556 |   | 48,213 |   | 47,472 |   | 86,681 |   |
| Other expense                                                           |       | —                      |       | — |   | — |   | 2,430 |   | — |   |
| General and  administrative expenses                                    |       | 40,339                      |       | 80,285 |   | 46,920 |   | 44,787 |   | 43,989 |   |
| Goodwill  impairment                                                    |       | 40,872                      |       | — |   | — |   | — |   | — |   |
| Loss (gain) on  sale of vessels and equipment                           |       | 2,051                       |       | 804 |   | 417 |   | (46,022 | ) | (91,235 | ) |
| Depreciation and  amortization                                          |       | 88,024                      |       | 58,037 |   | 49,671 |   | 42,395 |   | 97,320 |   |
| Operating income                                                        |       | 24,785                      |       | 68,982 |   | 71,725 |   | 154,522 |   | 293,943 |   |
| Net interest  (income) expense                                          |       | 37,215                      |       | 28,289 |   | 23,059 |   | (1,455 | ) | 28,918 |   |
| Other (income)  expense                                                 |       | (435                        | )          | 10,886 |   | 4,127 |   | (854 | ) | 52,668 |   |
| Net income  (loss)                                                      |       | $                           | (11,995    | ) | $ | 29,807 |   | $ | 44,539 |   | $ | 156,831 |   | $ | 212,357 |   |
|                                                                    |       |                        |       |   |   |   |   |   |   |   |   |
| Earnings (loss)  per common share:                                      |       |                        |       |   |   |   |   |   |   |   |   |
| Basic                                                                   |       | $                           | (0.22      | ) | $ | 0.76 |   | $ | 1.09 |   | $ | 3.72 |   | $ | 4.26 |   |
| Diluted                                                                 |       | $                           | (0.22      | ) | $ | 0.73 |   | $ | 1.06 |   | $ | 3.63 |   | $ | 4.19 |   |
|                                                                    |       |                        |       |   |   |   |   |   |   |   |   |
| Dividends  declared per common share                                    |       | $                           | 1.49       |   | $ | 1.49 |   | $ | 12.78 |   | $ | 3.58 |   | $ | 2.13 |   |
|                                                                    |       |                        |       |   |   |   |   |   |   |   |   |
| Weighted average  basic shares outstanding, thousands:                  |       |                        |       |   |   |   |   |   |   |   |   |
| Basic                                                                   |       | 54,651                      |       | 39,463 |   | 40,740 |   | 42,172 |   | 49,800 |   |
| Diluted                                                                 |       | 54,651                      |       | 40,562 |   | 41,825 |   | 43,171 |   | 50,751 |   |
|                                                                    |       |                        |       |   |   |   |   |   |   |   |   |
| **BALANCE SHEET DATA, at end of  period**(Dollars in  thousands)        |       |                        |       |   |   |   |   |   |   |   |   |
| Cash                                                                    |       | $                           | 52,651     |   | $ | 104,146 |   | $ | 44,526 |   | $ | 107,460 |   | $ | 96,976 |   |
| Current assets,  including cash                                         |       | 108,528                     |       | 141,703 |   | 82,494 |   | 137,865 |   | 471,324 |   |
| Total assets                                                            |       | 1,445,257                   |       | 1,577,225 |   | 835,035 |   | 843,690 |   | 1,146,126 |   |
|                                                                    |       |                        |       |   |   |   |   |   |   |   |   |
| Current  liabilities, including current portion of long-term debt       |       | 56,194                      |       | 88,392 |   | 35,502 |   | 27,147 |   | 32,906 |   |
| Current portion  of long-term debt                                      |       | —                      |       | — |   | — |   | — |   | — |   |
| Total long-term  debt, including current portion                        |       | 1,018,609                   |       | 990,500 |   | 565,000 |   | 50,000 |   | 135,020 |   |
| Shareholders'  equity                                                   |       | 364,909                     |       | 455,799 |   | 228,657 |   | 763,913 |   | 976,125 |   |

 

35

----

 
| **OTHER FINANCIAL DATA**(Dollars in  thousands)             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| Net cash  provided by operating activities                  |       | 47,518     |       | $          | 114,415    |       | $          | 95,833     |       | $          | 189,717    |   | $ | 249,614 |   |
| Net cash  provided (used) by investing activities           |       | (24,632    | )          | (171,082   | )          | (84,516    | )          | 285,264    |       | 318,169    |       |
| Net cash (used)  provided by financing activities           |       | (74,085    | )          | 115,476    |       | (74,251    | )          | (464,497   | )          | (517,728   | )          |
| Capital  expenditures                                       |       |       |       |       |       |       |       |       |       |       |       |
| Vessel sales  (purchases), gross including deposits         |       | —     |       | (173,447   | )          | (80,061    | )          | 290,299    |       | 324,087    |       |
| Drydocking or  capitalized survey or improvement costs      |       | (18,921    | )          | (9,787     | )          | (11,815    | )          | (11,929    | )          | (38,039    | )          |
| Weighted average  long-term debt, including current portion |       | 959,935    |       | 653,154    |       | 414,137    |       | 93,085     |       | 410,794    |       |
|                                                        |       |       |       |       |       |       |       |       |       |       |       |
| **OTHER DATA**(Dollars in  thousands)                       | ** ** | ** ** |       |       |       |       |       |       |       |       |       |
| EBITDA (1)                                                  |       | 113,244    |       | $          | 116,133    |       | $          | 117,269    |       | $          | 197,771    |   | $ | 338,595 |   |
|                                                        |       |       |       |       |       |       |       |       |       |       |       |
| **FLEET  DATA**                                             |       |       |       |       |       |       |       |       |       |       |       |
| Total number of  vessels at end of period                   |       | 31.0       |       | 31.0       |       | 20.0       |       | 18.0       |       | 30.0       |       |
| Average number  of vessels (2)                              |       | 31.0       |       | 21.5       |       | 19.3       |       | 20.6       |       | 41.9       |       |
|                                                        |       |       |       |       |       |       |       |       |       |       |       |
| Total voyage  days for fleet (3)                            |       | 10,681     |       | 7,568      |       | 6,599      |       | 7,121      |       | 14,073     |       |
| Total time  charter days for fleet                          |       | 7,878      |       | 5,665      |       | 4,641      |       | 2,300      |       | 3,983      |       |
| Total spot  market days for fleet                           |       | 2,803      |       | 1,903      |       | 1,958      |       | 4,821      |       | 10,090     |       |
| Total calendar  days for fleet (4)                          |       | 11,315     |       | 7,881      |       | 7,045      |       | 7,534      |       | 15,311     |       |
| Fleet  utilization (5)                                      |       | 94.4       | %          | 96.0       | %          | 93.7       | %          | 94.5       | %          | 91.9       | %          |
| **AVERAGE  DAILY RESULTS**                                  |       |       |       |       |       |       |       |       |       |       |       |
| Time charter  equivalent (6)                                |       | $          | 27,305     |       | $          | 35,896     |       | $          | 32,876     |       | $          | 34,487 |   | $ | 30,605 |   |
| Direct vessel  operating expenses (7)                       |       | 8,447      |       | 8,064      |       | 6,844      |       | 6,301      |       | 5,661      |       |
| General and  administrative expenses (8)                    |       | 3,565      |       | 10,187     |       | 6,660      |       | 5,945      |       | 2,873      |       |
| Total vessel  operating expenses (9)                        |       | 12,012     |       | 18,252     |       | 13,504     |       | 12,246     |       | 8,534      |       |
|                                                             |            |            |            |            |            |            |            |            |            |            |            |  |  |  |  |  |

 
| ** **                                       | ** ** | **Year Ended December 31,** | ** **  |
|--------------------------------------------------|------------|-----------------------------|-------------|
| ** **                                       | ** ** | **2009**                    | ** **  | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **EBITDA Reconciliation**(Dollars in  thousands) |       |                        |        |   |   |   |   |   |   |   |   |
| **Net  Income**                                  | ** ** | **$**                       | **(11,995** | **)** | **$** | **29,807** | ** ** | **$** | **44,539** | ** ** | **$** | **156,831** | ** ** | **$** | **212,357** | ** ** |
| + Net interest  expense                          |       | 37,215                      |        | 28,289 |   | 23,059 |   | (1,455 | ) | 28,918 |   |
| + Depreciation  and amortization                 |       | 88,024                      |        | 58,037 |   | 49,671 |   | 42,395 |   | 97,320 |   |
| **EBITDA**                                       | ** ** | **$**                       | **113,244** |   | **$** | **116,133** | ** ** | **$** | **117,269** | ** ** | **$** | **197,771** | ** ** | **$** | **338,595** | ** ** |

 

----

(1)                                  EBITDA represents net income plus netinterest expense and depreciation and amortization. EBITDA is included becauseit is used by management and certain investors as a measure of operatingperformance. EBITDA is used by analysts in the shipping industry as a commonperformance measure to compare results across peers. Management of the Company usesEBITDA as a performance measure in consolidating quarterly and annual internal financialstatements and is presented for review at our board meetings. The Companybelieves that EBITDA is useful to investors as the shipping industry is capitalintensive which often brings significant cost of financing. EBITDA is not anitem recognized by accounting principles generally accepted in the UnitedStates of America (GAAP), and should not be considered as an alternative to netincome, operating income or any other indicator of a company’s operatingperformance required by GAAP. The definition of EBITDA used here may not becomparable to that used by other companies.

 

(2)                                  Average number of vessels is the numberof vessels that constituted our fleet for the relevant period, as measured bythe sum of the number of days each vessel was part of our fleet during theperiod divided by the number of calendar days in that period.

 

(3)                                  Voyage days for fleet are the total daysour vessels were in our possession for the relevant period net of off hire daysassociated with major repairs, drydockings or special or intermediate surveys.

 

(4)                                  Calendar days are the total days thevessels were in our possession for the relevant period including off hire daysassociated with major repairs, drydockings or special or intermediate surveys.

 

(5)                                  Fleet utilization is the percentage oftime that our vessels were available for revenue generating voyage days, and isdetermined by dividing voyage days by calendar days for the relevant period.

 

36

----

 

(6)                                  Time Charter Equivalent, or TCE, is ameasure of the average daily revenue performance of a vessel on a per voyagebasis. Our method of calculating TCE is consistent with industry standards andis determined by dividing net voyage revenue by voyage days for the relevanttime period. The period over which voyage revenues are recognized commences atthe time the vessel arrives at the load port for a voyage and ends at the timethat discharge of cargo is completed. Net voyage revenues are voyage revenues minus voyage expenses. Voyageexpenses primarily consist of port, canal and fuel costs that are unique to aparticular voyage, which would otherwise be paid by the charterer under a timecharter contract.

 

(7)                                  Daily direct vessel operating expenses,or DVOE, is calculated by dividing DVOE, which includes crew costs, provisions,deck and engine stores, lubricating oil, insurance and maintenance and repairs,by calendar days for the relevant time period.

 

(8)                                  Daily general and administrative expenseis calculated by dividing general and administrative expenses by calendar daysfor the relevant time period.

 

(9)                                  Total Vessel Operating Expenses, or TVOE,is a measurement of our total expenses associated with operating our vessels.Daily TVOE is the sum of daily direct vessel operating expenses, or DVOE, anddaily general and administrative expenses.

 

**ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

** **

**General**

** **

The following is a discussion of our financial condition at December 31,2009 and 2008 and our results of operations comparing the years ended December 31,2009 and 2008 and the years ended December 31, 2008 and 2007. You shouldread this section together with the consolidated financial statements includingthe notes to those financial statements for the years mentioned above.

 

We are a leading provider of international seaborne crude oiltransportation services. We also provide transportation services for refinedpetroleum, products.  As of December 31,2009, our fleet consisted of 31 vessels (12 Aframax vessels, 11 Suezmaxvessels, two VLCCs, two Panamax vessels and four Handymax vessels) with a totalcargo carrying capacity of 3.9 million deadweight tons.

 

General Maritime Subsidiary is the predecessor of the Company forpurposes of U.S. securities regulations governing financial statement filing.The Arlington Acquisition is accounted for as an acquisition by GeneralMaritime Subsidiary of Arlington. Therefore, the disclosures throughout thisAnnual Report on Form 10-K and the accompanying Consolidated FinancialStatements, unless otherwise noted, reflect the results of operations ofGeneral Maritime Subsidiary for period January 1, 2008 through December 15, 2008and the years ended December 31, 2007 and 2006 and the financial positionof General Maritime Subsidiary as of December 31, 2007. The Company hadseparate operations for the period beginning December 16, 2008, theeffective date of the Arlington Acquisition, and disclosures and references toamounts for periods after that date relate to the Company unless otherwisenoted. Arlington’s results have been included in the disclosures throughoutthis Annual Report on Form 10-K and the accompanying Consolidated Statementsof Operations, unless otherwise noted, from the effective date of acquisitionand thereafter (see “Arlington Acquisition” in Note 2 to the ConsolidatedFinancial Statements).

 

All share and per share amounts presented throughout this Annual Reporton Form 10-K, unless otherwise noted, have been adjusted to reflect theexchange of 1.34 shares of our common stock for each share of common stock heldby shareholders of General Maritime Subsidiary in connection with the ArlingtonAcquisition.

 

**Spot and Time CharterDeployment**

** **

We actively manage the deployment of our fleet between spot marketvoyage charters, which generally last from several days to several weeks, andtime charters, which can last up to several years. A spot market voyage charteris generally a contract to carry a specific cargo from a load port to adischarge port for an agreed upon total amount. Under spot market voyagecharters, we pay voyage expenses such as port, canal and fuel costs. A timecharter is generally a contract to charter a vessel for a fixed period of timeat a set daily rate. Under time charters, the charterer pays voyage expensessuch as port, canal and fuel costs.

 

Vessels operating on time charters provide more predictable cash flows,but can yield lower profit margins than vessels operating in the spot marketduring periods characterized by favorable market conditions. Vessels operatingin the spot market generate revenues that are less predictable but may enableus to capture increased profit margins during periods of improvements in tankerrates although we are exposed to the risk of declining tanker rates. We areconstantly evaluating opportunities to increase the number of our vesselsdeployed on time charters, but only expect to enter into additional time chartersif we can obtain contract terms that satisfy our criteria.

 

37

----

 

**NetVoyage Revenues as Performance Measure**

** **

For discussion and analysis purposes only, we evaluate performanceusing net voyage revenues.  Net voyagerevenues are voyage revenues minus voyage expenses.  Voyage expenses primarily consist of port,canal and fuel costs that are unique to a particular voyage, which wouldotherwise be paid by a charterer under a time charter.  We believe that presenting voyage revenues,net of voyage expenses, neutralizes the variability created by unique costsassociated with particular voyages or the deployment of vessels on time charteror on the spot market and presents a more accurate representation of the revenuesgenerated by our vessels.

 

Our voyage revenues are recognized ratably over the duration of thespot market voyages and the lives of the charters, while direct vessel expensesare recognized when incurred.  Werecognize the revenues of time charters that contain rate escalation schedulesat the average rate during the life of the contract.  We calculate time charter equivalent, or TCE,rates by dividing net voyage revenue by voyage days for the relevant time period.  We also generate demurrage revenue, whichrepresents fees charged to charterers associated with our spot market voyageswhen the charterer exceeds the agreed upon time required to load or discharge acargo.  We calculate daily direct vesseloperating expenses and daily general and administrative expenses for therelevant period by dividing the total expenses by the aggregate number ofcalendar days that we owned each vessel for the period.

 

**RESULTS OF OPERATIONS**

** **

Margin analysis for the indicated items as a percentage of net voyagerevenues for the years ended December 31, 2009, 2008 and 2007 are setforth in the table below.

 

**INCOME STATEMENT MARGIN ANALYSIS(% OF NET VOYAGE REVENUES)**

** **

| ** **                            | ** ** | **YEAR ENDED DECEMBER 31,** | ** ** |
|---------------------------------------|------------|--------------------------------------------|------------|
| ** **                            | ** ** | **2009**                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
| **INCOME STATEMENT DATA**             | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | ** **                                 |       |   |   |   |   |
| Net voyage  revenues **(1)**          |       | 100                                        | %          | 100.0 | % | 100.0 | % |
| Direct vessel  expenses               |       | 32.8                                       | %          | 23.4 | % | 22.2 | % |
| General and  administrative expenses  |       | 13.8                                       | %          | 29.6 | % | 21.6 | % |
| Depreciation and  amortization        |       | 30.2                                       | %          | 21.4 | % | 22.9 | % |
| Goodwill  impairment                  |       | 14.0                                       | %          | 0.0 | % | 0.0 | % |
| Loss on disposal  of vessel equipment |       | 0.7                                        | %          | 0.3 | % | 0.2 | % |
| Operating income                      |       | 8.5                                        | %          | 25.3 | % | 33.1 | % |
| Net interest  expense                 |       | 12.8                                       | %          | 10.4 | % | 10.6 | % |
| Other (income)  expense               |       | -0.1                                       | %          | 4.0 | % | 1.9 | % |
| Net (loss)  income                    |       | -4.2                                       | %          | 10.9 | % | 20.6 | % |

 

----

**(1)          ****INCOME STATEMENT DATA**

 
| ** **                                     | ** ** | **YEAR ENDED DECEMBER 31,** | ** ** |
|------------------------------------------------|------------|-----------------------------|------------|
| **(Dollars in thousands, except share  data)** | ** ** | **2009**                    | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                           |       |                        |       |   |   |   |   |
| Voyage revenues                                |       | $                           | 350,520    |   | $ | 322,294 |   | $ | 255,015 |   |
| Voyage expenses                                |       | $                           | (58,876    | ) | $ | (50,630 | ) | $ | (38,069 | ) |
| Net voyage  revenues                           |       | $                           | 291,644    |   | $ | 271,664 |   | $ | 216,946 |   |

** **

**YEAR ENDED DECEMBER 31, 2009 COMPARED TO THE YEARENDED DECEMBER 31, 2008**

** **

VOYAGEREVENUES-****Voyage revenues increased by $24.4million, or 7.5%, to $350.5 million for the year ended December 31, 2009compared to $326.1 million for the prior year. This increase is primarily attributable to a significant increase in thesize of our fleet, which increased vessel operating days by 41.1% to 10,681days during the year ended December 31, 2009 compared to 7,568 days in theprior year.  The average size of ourfleet increased by 44.2% to 31.0 vessels (12.0 Aframax, 11.0 Suezmax, 2.0 VLCC,2.0 Panamax, 4.0 Handymax) for the year ended December 31, 2009 comparedto 21.5 vessels (10.3 Aframax, 10.9 Suezmax, 0.1 VLCC, 

 

38

----

 

0.1Panamax, 0.1 Handymax) for the prior year.  This increase in fleet size is attributable to the completion ofconstruction of a Suezmax tanker in February 2008, the acquisitions duringthe fourth quarter of 2008 of two Aframax vessels, and the acquisition of twoVLCCs, two Panamaxes, and four Handymaxes as part of the ArlingtonAcquisition.  Also, included in thisincrease in voyage revenues is $16.4 million associated with the accelerationof the amortization of a net liability associated with four time chartercontracts.  These contracts were recordedas a liability when the vessels to which the time charters relate were acquiredby the Company pursuant to the Arlington Acquisition.  This recorded liability was being amortizedover the remaining time charter period, including the option periods.  The Company accelerated the amortization onfour of these time charters, having been informed by the charterer that theoptions would not be exercised. Accordingly, the Company accelerated theamortization on these contracts such that the net liability would be fullyamortized by the earlier of November 10, 2009 (the end of the charterperiod) or the redelivery date indicated by the charterer on two of thevessels.  This additional revenue isnonrecurring and was noncash.  This increaseis partially offset by a significant reduction in rates, especially withrespect to vessels under spot voyage and, to a lesser extent time charters, aswell as decreased utilization rates relating to drydocking and repositioning ofvessels, during the year ended December 31, 2009 as compared to the prioryear period.

 

Voyagerevenues are expected to remain relatively flat during 2010 as compared to2009.  Decreases associated with expectedlower spot rates during 2010 as compared to 2009 are expected to be offset by agreater number of vessels expected to be on the spot market during 2010compared to 2009.  Because spot voyagecharters require the vessel owner to pay voyage-related expenses such as fueland port costs, which costs are borne by the charterer under a time chartercontract, spot voyage charters typically earn significantly higher revenues torecoup these expenses.  In addition,$16.4 million of voyage revenue recognized in 2009 associated with the accelerationof a net liability associated with four time charter contracts described abovewill not recur in 2010.

 

VOYAGEEXPENSES-****Voyage expenses increased $4.5million, or 8.2%, to $58.9 million for the year ended December 31, 2009compared to $54.4 million for the prior year. Substantially all of our voyageexpenses relate to spot charter voyages, under which the vessel owner isresponsible for voyage expenses such as fuel and port costs.  This increase in voyageexpenses is primarily attributable to an increase in the number of days our vesselsoperated under spot charters.  During theyear ended December 31, 2009, the number of days our vessels operatedunder spot charters increased by 47.3% to 2,803 days (2,188 days for ourAframax vessels, 428 days for our Suezmax vessels, 151 days for our VLCCs, and36 days for our Panamax vessels) from 1,903 days (1,549 days for our Aframaxvessels and 354 days for our Suezmax vessels, the only vessels on spot charterduring 2008) during the prior year.  Thisincrease is partially offset by lower fuel cost incurred during 2009.  Although this increase in spot vessel daysincreased fuel cost by $2.8 million, or 8.7%, to $35.3 million during the yearended December 31, 2009 compared to $32.5 million during the prior year,fuel cost per spot voyage day decreased 24% during the year ended December 31,2009 compared to the prior year period as a result of lower bunker fuel prices.

 

Voyage expenses are expected to increase during 2010 as compared to2009 as a result of a greater number of vessels expected to be on the spotmarket during 2010 compared to 2009. Under spot voyage charters, the vessel owner pays for the voyageexpenses.

 

NET VOYAGE REVENUES-****Net voyagerevenues, which are voyage revenues minus voyage expenses, increased by $19.9million, or 7.4%, to $291.6 million for the year ended December 31, 2009compared to $271.7 million for the prior year. This increase is primarilyattributable to the increase in the average size of our fleet, which increased44.2% to 31.0 vessels (12.0 Aframax, 11.0 Suezmax, 2.0 VLCC, 2.0 Panamax, 4.0Handymax vessel) for the year ended December 31, 2009 compared to 21.5vessels (10.3 Aframax, 10.9 Suezmax, 0.1 VLCC, 0.1 Panamax, 0.1 Handymaxvessel) for the prior year.  Partiallyoffsetting this increase in net voyage revenue are significantly weaker overalldaily TCE rates for our vessels during the year ended December 31, 2009compared to the prior year.  Our averageTCE rates decreased 23.9% to $27,305 during the year ended December 31,2009 compared to $35,896 during the year ended December 31, 2008. Thisdecrease reflects a significant decline in spot charter TCE rates whichdecreased to $12,291 during the year ended December 31, 2009 compared to$37,377 for the prior year.  Partiallyoffsetting this decrease in overall spot rates is $16.4 million of voyage revenue associated with theacceleration of the amortization of a net liability associated with four timecharter contracts.  These contracts wereassigned a liability when the vessels to which the time charters relate wereacquired by the Company pursuant to the Arlington Acquisition.  This additional revenue, which isnonrecurring and noncash, had the effect of increasing (decreasing) timecharter TCE on VLCCs, Panamaxes and Handymaxes by $27,848, $1,507 and $(353), respectively.  This $16.4 million of voyage revenue also hadthe effect of increasing combined overall time charter TCE and overall TCE andby $2,087 and $1,539, respectively.

 

Net voyage revenues are expected to decrease during 2010 compared to2009 for reasons discussed above relating to voyage revenues and voyageexpenses.

 

39

----

 

The following is additional data pertaining to net voyage revenues:

 
| ** **                             | ** ** | **Year  ended December 31,** | ** ** | **Increase** | ** ** | ** **     | ** ** |
|----------------------------------------|------------|-----------------------------------|------------|--------------|------------|----------------|------------|
| ** **                             | ** ** | **2009**                          | ** ** | **2008**     | ** ** | **(Decrease)** | ** ** | **%  Change** | ** ** |
|                                   |       |                              |       |         |       |           |       |   |   |
| **Net voyage revenue (in thousands):** |       |                              |       |         |       |           |       |   |   |
| Time charter:                          |       |                              |       |         |       |           |       |   |   |
| Aframax                                |       | $                                 | 49,850     |         | $          | 62,969         |       | $ | (13,119 | ) | -20.8 | % |
| Suezmax                                |       | 124,308                           |       | 134,430      |       | (10,122        | )          | -7.5 | % |
| VLCC (A)                               |       | 42,629                            |       | 1,454        |       | 41,175         |       | 2831.8 | % |
| Panamax (A)                            |       | 16,716                            |       | 696          |       | 16,020         |       | 2301.7 | % |
| Handymax (A)                           |       | 23,690                            |       | 986          |       | 22,704         |       | 2302.6 | % |
| Total                                  |       | 257,193                           |       | 200,535      |       | 56,658         |       | 28.3 | % |
|                                   |       |                              |       |         |       |           |       |   |   |
| Spot charter:                          |       |                              |       |         |       |           |       |   |   |
| Aframax                                |       | 26,714                            |       | 56,126       |       | (29,412        | )          | -52.4 | % |
| Suezmax                                |       | 4,718                             |       | 15,003       |       | (10,285        | )          | -68.6 | % |
| VLCC                                   |       | 3,321                             |       | —       |       | 3,321          |       | n/a |   |
| Panamax                                |       | (302                              | )          | —       |       | (302           | )          | n/a |   |
| Total                                  |       | 34,451                            |       | 71,129       |       | (36,678        | )          | -51.6 | % |
| TOTAL NET VOYAGE REVENUE               |       | $                                 | 291,644    |         | $          | 271,664        |       | $ | 19,980 |   | 7.4 | % |
|                                   |       |                              |       |         |       |           |       |   |   |
| **Vessel operating days:**             |       |                              |       |         |       |           |       |   |   |
| Time charter:                          |       |                              |       |         |       |           |       |   |   |
| Aframax                                |       | 1,797                             |       | 1,941        |       | (144           | )          | -7.4 | % |
| Suezmax                                |       | 3,369                             |       | 3,604        |       | (235           | )          | -6.5 | % |
| VLCC (A)                               |       | 572                               |       | 30           |       | 542            |       | 1806.7 | % |
| Panamax (A)                            |       | 680                               |       | 30           |       | 650            |       | 2166.7 | % |
| Handymax (A)                           |       | 1,460                             |       | 60           |       | 1,400          |       | 2333.3 | % |
| Total                                  |       | 7,878                             |       | 5,665        |       | 2,213          |       | 39.1 | % |
|                                   |       |                              |       |         |       |           |       |   |   |
| Spot charter:                          |       |                              |       |         |       |           |       |   |   |
| Aframax                                |       | 2,188                             |       | 1,549        |       | 639            |       | 41.3 | % |
| Suezmax                                |       | 428                               |       | 354          |       | 74             |       | 20.9 | % |
| VLCC (A)                               |       | 151                               |       | —       |       | 151            |       | n/a |   |
| Panamax (A)                            |       | 36                                |       | —       |       | 36             |       | n/a |   |
| Total                                  |       | 2,803                             |       | 1,903        |       | 900            |       | 47.3 | % |
| TOTAL VESSEL OPERATING DAYS            |       | 10,681                            |       | 7,568        |       | 3,113          |       | 41.1 | % |
|                                   |       |                              |       |         |       |           |       |   |   |
| AVERAGE NUMBER OF VESSELS              |       | 31.0                              |       | 21.5         |       | 9.5            |       | 44.2 | % |
|                                   |       |                              |       |         |       |           |       |   |   |
| **Time Charter Equivalent (TCE):**     |       |                              |       |         |       |           |       |   |   |
| Time charter:                          |       |                              |       |         |       |           |       |   |   |
| Aframax                                |       | $                                 | 27,741     |         | $          | 32,441         |       | $ | (4,700 | ) | -14.5 | % |
| Suezmax                                |       | $                                 | 36,898     |         | $          | 37,300         |       | $ | (402 | ) | -1.1 | % |
| VLCC (A)                               |       | $                                 | 74,526     |         | $          | 48,479         |       | $ | 26,047 |   | 53.7 | % |
| Panamax (A)                            |       | $                                 | 24,583     |         | $          | 23,202         |       | $ | 1,381 |   | 6.0 | % |
| Handymax (A)                           |       | $                                 | 16,226     |         | $          | 16,426         |       | $ | (200 | ) | -1.2 | % |
| Combined                               |       | $                                 | 32,647     |         | $          | 35,399         |       | $ | (2,752 | ) | -7.8 | % |
|                                   |       |                              |       |         |       |           |       |   |   |
| Spot charter:                          |       |                              |       |         |       |           |       |   |   |
| Aframax                                |       | $                                 | 12,210     |         | $          | 36,234         |       | $ | (24,024 | ) | -66.3 | % |
| Suezmax                                |       | $                                 | 11,023     |         | $          | 42,382         |       | $ | (31,359 | ) | -74.0 | % |
| VLCC (A)                               |       | $                                 | 21,992     |         | $          | —         |       | $ | 21,992 |   | n/a |   |
| Panamax (A)                            |       | $                                 | (8,398     | )            | $          | —         |       | $ | (8,398 | ) | n/a |   |
| Combined                               |       | $                                 | 12,291     |         | $          | 37,377         |       | $ | (25,086 | ) | -67.1 | % |
|                                   |       |                              |       |         |       |           |       |   |   |   |   |
| TOTAL TCE                              |       | 27,305                            |       | $            | 35,896     |           | $          | (8,591 | ) | -23.9 | % |

 

----

(A)Acquired on December 16, 2008.

 

40

----

 

As of December 31, 2009, 15 of our vessels were on time chartersexpiring between January 2010 and July 2011.

 

DIRECTVESSEL EXPENSES-****Direct vessel expenses, whichinclude crew costs, provisions, deck and engine stores, lubricating oil,insurance, maintenance and repairs increased by $32.0 million, or 50.4%, to$95.6 million for the year ended December 31, 2009 compared to $63.6million for the prior year.  Thisincrease is primarily due to  an increasein the average size of our fleet which increased 44.2% to 31.0 vessels (12.0Aframax, 11.0 Suezmax, 2.0 VLCC, 2.0 Panamax, 4.0 Handymax) for the year ended December 31,2009 compared to 21.5 vessels (10.3 Aframax, 10.9 Suezmax, 0.1 VLCC, 0.1Panamax, 0.1 Handymax) for the prior year. In addition, daily direct vesselexpenses for our VLCCs increased in part during 2009 because our two VLCCs wereredelivered from a fixed-fee technical management agreements with NorthernMarine during October 2009 and replaced with technical managementagreements with Northern Marine that were based on actual costs which weresignificantly higher than the previous fixed fee.  This contributed to a rise in daily directvessel expenses per vessel which increased by $383, or 4.7%, to $8,447 ($9,095Aframax, $8,373 Suezmax, $10,135 VLCC, $7,031 Panamax, $6,565 Handymax) for theyear ended December 31, 2009 compared to $8,064 ($7,973 Aframax, $8,178Suezmax, $9,078 VLCC, $6,875 Panamax, $6,298 Handymax) for the prior year.  Factors contributing to this increase inoverall and daily direct vessel expenses include higher crewing costs on theAframax and Suezmax vessels relating to wage increases given to crewscommencing during the second half of 2008 and the beginning of 2009, higherrepair costs during the year ended December 31, 2009 associated withsignificant repairs such as main and auxiliary engines on certain Aframaxvessels and increases in insurance costs during the year ended December 31,2009 on the Aframax fleet relating to increased premiums as well as thewrite-off of certain claims not deemed to be collectible.  Partially offsetting this increase in overallas well as daily direct vessel expenses is a reduction in insurance relatedcosts on our Suezmax fleet pertaining to an expense of $1.3 million during 2008relating to a general average claim associated with a Suezmax vessel which didnot recur in 2009. We anticipate that direct vessel expenses will decrease to$93.5 million during 2010 based on daily budgeted direct vessel expenses on our11 Suezmax vessels, 12 Aframax vessels, two VLCCs, two Panamax vessels and fourHandymax vessels of $8,278, $8,419, $12,128, $6,890 and $6,522, respectively.  The budgets for the Aframax and Suezmaxvessels are based on 2009 actual results adjusted for certain 2009 events notexpected to recur or anticipated 2010 events which did not occur in 2009.  This decrease primarily reflectsunanticipated repairs on our Aframax vessels made during 2009 that are notexpected to recur in 2010.  The budgetedamounts include no provisions for unanticipated repair or other costs.  We cannot assure you that our budgetedamounts will reflect our actual results. Unanticipated repair or other costs may cause our actual expenses to bematerially higher than those budgeted.

 

GENERAL AND ADMINISTRATIVEEXPENSES—General and administrative expenses decreased by $40.0 million, or49.8%, to $40.3 million for the year ended December 31, 2009 compared to$80.3 million for the prior year. Significant factors contributing to thisdecrease for the year ended December 31, 2009 compared to the prior yearare:

 

(a) A $22.0 million decrease during the year ended December 31,2009 as compared to the prior year relating to compensation accruals inconnection with our executive transition plan incurred in 2008, relating toamounts due to Peter C. Georgiopoulos in connection with the termination of hisemployment arrangments with the Company.

 

(b) An $8.0 million decrease during the year ended December 31,2009 associated with a payment in lieu of a bonus payable to PeterGeorgiopoulos during the year ended December 31, 2008.

 

(c) An aggregate decrease of $4.2 million during the year ended December 31,2009 as compared to the prior year comprised of a $2.0 million decrease insalaries due to reduced head count in the Company’s New York office, a $1.3million decrease in restricted stock amortization associated with fewer sharesgranted at the end of 2008 compared to the end of 2007 and $0.9 millionreduction in cash bonuses incurred during 2009 compared to 2008.

 

(d) A $3.3 million decrease during the year ended December 31,2009 as compared to the prior year associated with costs incurred during theyear ended December 31, 2008 relating to fines and costs deemed to beuncollectible from insurers relating to a conviction in a criminal proceedinginvolving the *Genmar Defiance*.

 

(e) A $2.6 million decrease during the year ended December 31,2009 compared to the prior year associated with ceasing the operation of ourcorporate aircraft, which we leased through February 2009.

 

General and administrative expenses as a percentage of net voyagerevenues decreased to 13.8% for the year ended December 31, 2009 from29.6% for the prior year.  Daily generaland administrative expenses per vessel decreased by $6,622, or 65.0%, to $3,565for the year ended December 31, 2009 compared to $10,187 for the prioryear.

 

For 2010, we have budgetedgeneral and administrative expenses to be approximately $35.9 million.  We cannot assure you that our budgetedamounts will reflect our actual results. Unanticipated costs may cause our actual expenses to be materiallyhigher than those budgeted.

 

41

----

 

DEPRECIATION AND AMORTIZATION—Depreciation and amortization, whichinclude depreciation of vessels as well as amortization of drydocking andspecial surveys, increased by $30.0 million, or 51.7%, to $88.0 million for theyear ended December 31, 2009 compared to $58.0 million for the prioryear.  Vessel depreciation increased by$28.8 million, or 66.2%, to $72.3 million during year ended December 31,2009 compared to $43.5 million during the prior year period.  This increase is due to increaseddepreciation during 2009 relating to the additions to our fleet of the*Genmar St. Nikolas* in February 2008,the*Genmar Elektra* in October 2008,the*Genmar Daphne* in December 2008,and the eight vessels we acquired in the Arlington Acquisition in December 2008.

 

Amortization of drydocking increased by $0.6 million, or 5.2%, to $12.1million for the year ended December 31, 2009 compared to $11.5 million forthe prior year.  Drydocks are typicallyamortized over periods from 30 months to 60 months.  This increase reflects amortization during2009 of a portion of the $18.9 million of drydock costs capitalized during theyear ended December 31, 2009 and amortization for the full year of the$9.8 million of drydock costs capitalized during the year ended December 31,2008.  The effect of these additions to2009 drydock amortization expense was offset by a reduction in drydock costsincurred during 2009 resulting from vessels drydocked at the end of the year.

 

Depreciation of vessel equipment increased by $0.8 million, or 34.7%,to $3.1 million for the year ended December 31, 2009 compared to $2.3million for the prior year.  Thisincrease relates to a greater amount of equipment being capitalized to vesselsduring 2009 as compared to the prior year.  As of December 31, 2009 and 2008, vesselequipment was $18.5 million and $13.1 million, respectively.

 

Depreciation and amortization is expected to increase during 2010 asthe additions made during the year ended December 31, 2009 to drydockingand vessel equipment are amortized and depreciated for a full year.

 

GOODWILL IMPAIRMENT- For the year ended December 31, 2009, werecorded goodwill impairment of $40.9 million. There was no goodwill impairment during 2008.  Refer to the GOODWILL section in CriticalAccounting Policies.

 

LOSS (GAIN) ON DISPOSAL VESSEL EQUIPMENT— During the years ended December 31,2009 and 2008, we incurred losses of $2.1 million and $0.8 million,respectively, associated with the disposal of certain vessel equipment.

 

INTEREST INCOME—Interest income decreased by $1.0 million, or 88.3%, to$0.1 million during the year ended December 31, 2009 compared to $1.1million during the prior year.  Thisdecrease is the result of lower average cash balances and lower interest rateson deposits during 2009 compared to 2008.

 

INTEREST EXPENSE—Interest expense increased by $7.9 million, or 27.1%,to $37.3 million for the year ended December 31, 2009 compared to $29.4million for the prior year.  Thisincrease is attributable to the issuance of $300 million of Senior Notes on November 12,2009 at a coupon interest rate of 12% and an increase of margin over LIBORunder our 2005 Credit Facility from 100 basis points to 250 basis pointspursuant to an amendment to the 2005 Credit Facility on that same date.  In addition, the $229.5 million RBS Facilityacquired in connection with the Arlington Acquisition on December 16, 2008was outstanding until its retirement on November 12, 2009.  During the year ended December 31, 2009,our weighted average outstanding debt increased by 47.0% to $959.9 millioncompared to $653.2 million during the prior year.  This increase in interest expense waspartially offset by lower interest rates on our floating rate debt during 2009compared to 2008.

 

We expect our long-term debt during 2010 to approximate our debt levelat December 31, 2009.  However, dueto the current composition of our debt consisting of $300 million of SeniorNotes at a fixed rate of 12% and $726 million of floating rate debt under our2005 Credit Facility bearing a margin over LIBOR of 250 basis points, we expectour interest expense to increase significantly during 2010 due to higherinterest rates on our debt.

 

OTHER INCOME (EXPENSE)— Other income for the year ended December 31,2009 was $0.4 million and is primarily attributable to a $1.0 million recoveryfrom a 2004 insurance claim.  Partiallyoffsetting this other income is a $0.5 million write-off associated with adrydock-related asset on two vessels for which their technical managementagreements with Northern Marine terminated prior to the consummation ofdrydockings.  This amount relates to theestimated excess of the cost the Company would have incurred to procure thedrydocks itself over the amount it would have paid Northern Marine to performthe drydock  had the contracts not beenterminated.  Other income for the yearended December 31, 2009 also reflects a realized gain on our freightderivative of $0.7 million and $0.6 million of unrealized loss on our freightderivative, a realized loss of $0.1 million associated with our interest rateswaps, and a $0.1 million unrealized gain on a bunker derivative.   Offsetting this income is an unrealized lossduring the year ended December 31, 2009 of approximately $0.2 millionassociated with foreign currency transaction losses.  Other expense for the year ended December 31,2008 was $10.9 million which included an aggregate realized loss on our freightderivatives of $11.4 million partially offset by an unrealized gain on ourfreight derivatives of $0.6 million.

 

42

----

 

NET (LOSS) INCOME—Net loss was $12.0 million for the year ended December 31,2009 compared to net income of $29.8 million for the prior year.

 

**YEAR ENDED DECEMBER 31, 2008 COMPARED TO THE YEARENDED DECEMBER 31, 2007**

** **

VOYAGE REVENUES-****Voyagerevenues increased by $71.1 million, or 27.9%, to $326.1 million for the yearended December 31, 2008 compared to $255.0 million for the prioryear.  This increase reflects a 14.7%increase in vessel operating days, reflecting in part an increased utilizationrate for our vessels, as well as increases in rates attained during 2008 forour vessels under time charter and spot charter as compared to the prioryear.  Included in this percentageincrease is 120 operating days for the two VLCCs, two Panamaxes, and fourHandymax vessels we acquired on December 16, 2008 pursuant to our mergerwith Arlington.  An additional 115operating days during 2008 relates to our purchase of two Aframax vesselsduring 2008.

 

VOYAGE EXPENSES-****Voyageexpenses increased $16.3 million, or 42.9%, to $54.4 million for the year endedDecember 31, 2008 compared to $38.1 million for the prior year. This increase in voyage expenses is primarilyattributable to higher fuel costs incurred during 2008.  Fuel costs increased by 32.5% per spot voyageday during the year ended December 31, 2008 compared to the prior year.Substantially all of our voyage expenses relate to spot charter voyages, underwhich the vessel owner is responsible for voyage expenses such as fuel and portcosts. During the year ended December 31, 2008, the number of days ourvessels operated under spot charters decreased by 2.8% to 1,903 days (1,549days for our Aframax vessels and 354 days for our Suezmax vessels) from 1,958days (1,386 days for our Aframax vessels and 572 days for our Suezmax vessels)during the prior year.

 

NET VOYAGE REVENUES-****Net voyagerevenues, which are voyage revenues minus voyage expenses, increased by $54.8million, or 25.2%, to $271.7 million for the year ended December 31, 2008compared to $216.9 million for the prior year. Of this total increase,approximately $32 million is attributable to the increase in the average sizeof our fleet which increased 11.4% to 21.5 vessels (10.3 Aframax, 10.9 Suezmax,0.1 VLCC, 0.1 Panamax, 0.1 Handymax vessel) for the year ended December 31,2008 compared to 19.3 vessels (10.0 Aframax, 9.3 Suezmax) for the prioryear.  Approximately $23 million of theincrease in net voyage revenue is associated with stronger overall daily TCErates for Suezmax and Aframax vessels during the year ended December 31,2008 compared to the prior year.  Ouraverage TCE rates increased 9.2% to $35,896 during the year ended December 31,2008 compared to $32,876 during the year ended December 31, 2007.

 

43

----

 

The following is additional data pertaining to net voyage revenues:

 
| ** **                             | ** ** | **Year ended December 31,** | ** ** | **Increase** | ** ** | ** **     | ** ** |
|----------------------------------------|------------|----------------------------------|------------|--------------|------------|----------------|------------|
| ** **                             | ** ** | **2008**                         | ** ** | **2007**     | ** ** | **(Decrease)** | ** ** | **% Change** | ** ** |
|                                   |       |                             |       |         |       |           |       |   |   |
| **Net voyage revenue (in thousands):** |       |                             |       |         |       |           |       |   |   |
| Time charter:                          |       |                             |       |         |       |           |       |   |   |
| Aframax                                |       | $                                | 62,969     |         | $          | 55,496         |       | $ | 7,473 |   | 13.5 | % |
| Suezmax                                |       | 134,430                          |       | 102,023      |       | 32,407         |       | 31.8 | % |
| VLCC (A)                               |       | 1,454                            |       | —       |       | 1,454          |       | n/a |   |
| Panamax (A)                            |       | 696                              |       | —       |       | 696            |       | n/a |   |
| Product (A)                            |       | 986                              |       | —       |       | 986            |       | n/a |   |
| Total                                  |       | 200,535                          |       | 157,519      |       | 43,016         |       | 27.3 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| Spot charter:                          |       |                             |       |         |       |           |       |   |   |
| Aframax                                |       | 56,126                           |       | 42,453       |       | 13,673         |       | 32.2 | % |
| Suezmax                                |       | 15,003                           |       | 16,974       |       | (1,971         | )          | -11.6 | % |
| Total                                  |       | 71,129                           |       | 59,427       |       | 11,702         |       | 19.7 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| TOTAL NET VOYAGE REVENUE               |       | $                                | 271,664    |         | $          | 216,946        |       | $ | 54,718 |   | 25.2 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| **Vessel operating days:**             |       |                             |       |         |       |           |       |   |   |
| Time charter:                          |       |                             |       |         |       |           |       |   |   |
| Aframax                                |       | 1,941                            |       | 1,894        |       | 47             |       | 2.5 | % |
| Suezmax                                |       | 3,604                            |       | 2,747        |       | 857            |       | 31.2 | % |
| VLCC (A)                               |       | 30                               |       | —       |       | 30             |       | n/a |   |
| Panamax (A)                            |       | 30                               |       | —       |       | 30             |       | n/a |   |
| Product (A)                            |       | 60                               |       | —       |       | 60             |       | n/a |   |
| Total                                  |       | 5,665                            |       | 4,641        |       | 1,024          |       | 22.1 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| Spot charter:                          |       |                             |       |         |       |           |       |   |   |
| Aframax                                |       | 1,549                            |       | 1,386        |       | 163            |       | 11.8 | % |
| Suezmax                                |       | 354                              |       | 572          |       | (218           | )          | -38.1 | % |
| Total                                  |       | 1,903                            |       | 1,958        |       | (55            | )          | -2.8 | % |
| TOTAL VESSEL OPERATING DAYS            |       | 7,568                            |       | 6,599        |       | 969            |       | 14.7 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| AVERAGE NUMBER OF VESSELS              |       | 21.5                             |       | 19.3         |       | 2.2            |       | 11.4 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| **Time Charter Equivalent (TCE):**     |       |                             |       |         |       |           |       |   |   |
| Time charter:                          |       |                             |       |         |       |           |       |   |   |
| Aframax                                |       | $                                | 32,441     |         | $          | 29,301         |       | $ | 3,140 |   | 10.7 | % |
| Suezmax                                |       | $                                | 37,300     |         | $          | 37,140         |       | $ | 160 |   | 0.4 | % |
| VLCC (A)                               |       | $                                | 48,479     |         | —     |           | n/a        |   | n/a |   |
| Panamax (A)                            |       | $                                | 23,202     |         | —     |           | n/a        |   | n/a |   |
| Product (A)                            |       | $                                | 16,426     |         | —     |           | n/a        |   | n/a |   |
| Combined                               |       | $                                | 35,399     |         | $          | 33,941         |       | $ | 1,458 |   | 4.3 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| Spot charter:                          |       |                             |       |         |       |           |       |   |   |
| Aframax                                |       | $                                | 36,234     |         | $          | 30,630         |       | $ | 5,604 |   | 18.3 | % |
| Suezmax                                |       | $                                | 42,382     |         | $          | 29,674         |       | $ | 12,709 |   | 42.8 | % |
| Combined                               |       | $                                | 37,377     |         | $          | 30,351         |       | $ | 7,026 |   | 23.2 | % |
|                                   |       |                             |       |         |       |           |       |   |   |
| TOTAL TCE                              |       | $                                | 35,896     |         | $          | 32,876         |       | $ | 3,021 |   | 9.2 | % |

 

----

(A) Acquiredon December 16, 2008.

 

As of December 31, 2008, 23 of our vessels are on time chartersexpiring between July 2009 and July 2011.

 

44

----

 

DIRECT VESSEL EXPENSES-****Direct vesselexpenses, which include crew costs, provisions, deck and engine stores,lubricating oil, insurance, maintenance and repairs increased by $15.4 million,or 31.8%, to $63.6 million for the year ended December 31, 2008 comparedto $48.2 million for the prior year.  Weincurred higher crewing costs during the year ended December 31, 2008 ascompared to the prior year period which reflects higher crew wages in 2008 duein part to exchange rates on a substantially higher portion of crew wages paidin Euros during the 2008 period as compared to the prior year period, as wellas additional wage increases given to crews commencing during the second halfof 2008.  This increase is alsoassociated with higher repair costs during the year ended December 31,2008 associated with significant repairs including fuel consumed during therepair period on four of the our Suezmax vessels, as well as additionalexpenses of spare parts purchases and their delivery costs and costs associatedwith tank cleaning of several vessels pursuant to tank inspections required bycharterers during the year ended December 31, 2008 compared to the prioryear.  Lubricating costs were also higherduring the year ended December 31, 2008 compared to the prior yearassociated with higher petroleum product costs. In addition, we recognized an expense of $1.3 million during the 2008period relating to a general average claim associated with a Suezmaxvessel.  These factors contributed to arise in daily direct vessel expenses per vessel which increased by $1,220, or17.8%, to $8,064 ($7,973 Aframax, $8,178 Suezmax, $9,078 VLCC, $6,875 Panamax,$6,298 product) for the year ended December 31, 2008 compared to $6,844($6,965 Aframax, $6,713 Suezmax) for the prior year.  Also contributing to the overall increase indirect vessel expense is an increase in the average size of our fleet whichincreased 11.4% to 21.5 vessels (10.3 Aframax, 10.9 Suezmax, 0.1 VLCC, 0.1Panamax, 0.1 product) for the year ended December 31, 2008 compared to19.3 vessels (10.0 Aframax, 9.3 Suezmax) for the prior year.

 

GENERAL AND ADMINISTRATIVEEXPENSES—General and administrative expenses increased by $33.4 million, or71.2%, to $80.3 million for the year ended December 31, 2008 compared to$46.9 million for the prior year. Significant factors contributing to thisincrease for the year ended December 31, 2008 compared to the prior yearare:

 

(a) A $23.2 million increase in compensation accruals inconnection with our executive transition plan incurred in 2008, including $22million paid to Peter C. Georgiopoulos in connection with the termination ofhis employment arrangements with us.

 

(b) An $8.0 million payment in lieu of a cash bonus to PeterGeorgiopoulos during the year ended December 31, 2008.  Peter Georgiopoulos did not receive a cashbonus in the prior year when he was granted restricted shares, the expense ofwhich is amortized over the vesting period of approximately 10 years.

 

(c) $3.7 million incurred during the year ended December 31,2008 relating to fines and costs deemed to be uncollectible from insurersrelating to a conviction in a criminal proceeding involving the *Genmar Defiance*.

 

(d) $2.0 million decrease due to financial advisory fees duringthe year ended December 31, 2007 associated with financial advisoryservices received pursuant to our determination to pay a special dividend.

 

General and administrative expenses as a percentage of net voyagerevenues increased to 29.6% for the year ended December 31, 2008 from21.6% for the prior year.  Daily generaland administrative expenses per vessel increased by $3,527, or 53%, to $10,187for the year ended December 31, 2008 compared to $6,660 for the prioryear.

 

DEPRECIATION AND AMORTIZATION—Depreciation and amortization, whichinclude depreciation of vessels as well as amortization of drydocking andspecial surveys, increased by $8.3 million, or 16.8%, to $58.0 million for theyear ended December 31, 2008 compared to $49.7 million for the prioryear.  Vessel depreciation increased by$6.2 million to $43.5 million during year ended December 31, 2008 comparedto $37.3 million during the prior year period. This increase is due to increased depreciation during 2008 relating tothe additions to our fleet of the*Genmar St.Nikolas* in February 2008, the*Genmar Elektra* in October 2008, the*Genmar Daphne* in December 2008, and the eightArlington Vessels we acquired in the Arlington Acquisition in December 2008.

 

Amortization of drydocking increased by $1.4 million to $11.5 millionfor the year ended December 31, 2008 compared to $10.1 million for theprior year.  Drydocks are typicallyamortized over periods from 30 months to 60 months.  This increase reflects amortization during2008 of a portion of the $9.8 million of drydock costs capitalized during theyear ended December 31, 2008 and amortization for the full year of the$11.8 million of drydock costs capitalized during the year ended December 31,2007.

 

LOSS (GAIN) ON SALE OF VESSELS AND EQUIPMENT— During the years ended December 31,2008 and 2007, we incurred losses of $0.8 million and $0.4 million,respectively, associated with the disposal of certain vessel equipment.

 

INTEREST INCOME—Interest income decreased by $1.4 million, or 55.7%, to$1.1 million during the year ended December 31, 2008 compared to $2.5million during the prior year.  Thisdecrease is primarily the result of lower average cash balances and lowerinterest rates on deposits during 2008 compared to 2007.

 

45

----

 

INTEREST EXPENSE—Interest expense increased by $3.9 million, or 15.1%,to $29.4 million for the year ended December 31, 2008 compared to $25.5million for the prior year.  Thisincrease is attributable to the increase in outstanding borrowings under our2005 Credit Facility during 2008 and the addition of the RBS Facility in December 2008.  During the year ended December 31, 2008,our weighted average outstanding debt increased by 57.7% to $653.2 millioncompared to $414.1 million during the prior year.  This increase in interest expense waspartially offset by lower interest rates during 2008 compared to 2007 on ourfloating rate debt.

 

OTHER EXPENSE— Other expense for the year ended December 31, 2008was $10.9 million which included an aggregate realized loss on our freightderivatives of $11.4 million partially offset by an unrealized gain on ourfreight derivatives of $0.6 million. Other expense for the year ended December 31, 2007 was $4.1 millionwhich is comprised primarily of an aggregate realized loss on our freightderivatives of $2.0 million and an unrealized loss on our freight derivativesof $2.3 million.

 

NET INCOME—Net income was $29.8 million for the year ended December 31,2008 compared to net income of $44.5 million for the prior year.

 

**Effects of Inflation**

** **

We do not consider inflation to be a significant risk to the cost ofdoing business in the current or foreseeable future. Inflation has a moderateimpact on operating expenses, drydocking expenses and corporate overhead.

 

**LIQUIDITY AND CAPITAL RESOURCES**

** **

**Sources and Uses ofFunds; Cash Management**

** **

Since our formation, our principal sources of funds have been equityfinancings, issuance of long-term debt securities, operating cash flows,long-term bank borrowings and opportunistic sales of our older vessels.  Our principal use of funds has been capitalexpenditures to establish and grow our fleet, maintain the quality of ourvessels, comply with international shipping standards and environmental lawsand regulations, fund working capital requirements and repayments on outstandingloan facilities.  Beginning in 2005,General Maritime Subsidiary and subsequently the Company also adopted policiesto use funds to pay dividends and, from time to time, to repurchase our commonstock. See below for descriptions of our Dividend Policy and our ShareRepurchase Program.

 

Our practice has been to acquire vessels or newbuilding contracts usinga combination of funds received from equity investors, bank debt secured bymortgages on our vessels and shares of the common stock of our shipowningsubsidiaries, and long-term debt securities. Because our payment of dividends is expected to decrease our availablecash, while we expect to use our operating cash flows and borrowings to fundacquisitions, if any, on a short-term basis, we also intend to review debt andequity financing alternatives to fund such acquisitions.  Our business is capital intensive and itsfuture success will depend on our ability to maintain a high-quality fleetthrough the acquisition of newer vessels and the selective sale of oldervessels.  These acquisitions will beprincipally subject to management’s expectation of future market conditions aswell as our ability to acquire vessels on favorable terms.

 

Because the Arlington Acquisition wasstructured as a stock-for-stock combination, we funded the acquisition ofArlington through an issuance of shares in exchange for the shares of thepost-combination Arlington entities.

 

We expect to rely on operating cash flows as well as long-termborrowings and future equity offerings to fund our operations and implement ourgrowth plan and dividend policy.  Webelieve that our current cash balance as well as operating cash flows andavailable borrowings under our credit facility will be sufficient to meet ourliquidity needs for the next year.

 

46

----

 

**Dividend Policy**

** **

On February 21, 2007, GeneralMaritime Subsidiary announced that its Board of Directors declared a special,one-time cash dividend of $11.19 per share. The dividend was paid on March 23, 2007 to shareholders of recordas of March 9, 2007.  GeneralMaritime Subsidiary funded substantially the entire amount of the specialdividend payment through new borrowings under the 2005 Credit Facility.  Inclusive of this special dividend, ourhistory of dividend payments is as follows:

 
| **Quarter ended**   | ** ** | **Paid date**                     | ** ** | **Per share amount** | ** ** | **Amount**     | ** ** |
|---------------------|------------|-----------------------------------|------------|----------------------|------------|----------------|------------|
| ** **          | ** ** | ** **                        | ** ** | ** **           | ** ** | **(millions)** | ** ** |
| March 31, 2005      |       | June 13, 2005                     |       | $                    | 1.321      |           | $          | 68.4 |   |
| June 30, 2005       |       | September 7, 2005                 |       | $                    | 0.627      |           | $          | 32.5 |   |
| September 30,  2005 |       | December 13, 2005                 |       | $                    | 0.187      |           | $          | 9.5 |   |
|                |       | dividends declared and paid- 2005 |       | $                    | 2.135      |           |       |   |
|                |       |                              |       |                 |       |           |       |
| December 31,  2005  |       | March 17, 2006                    |       | $                    | 1.493      |           | $          | 68.0 |   |
| March 31, 2006      |       | June 5, 2006                      |       | $                    | 1.067      |           | $          | 47.7 |   |
| June 30, 2006       |       | September 8, 2006                 |       | $                    | 0.493      |           | $          | 21.7 |   |
| September 30,  2006 |       | December 14, 2006                 |       | $                    | 0.530      |           | $          | 23.0 |   |
|                |       | dividends declared and paid- 2006 |       | $                    | 3.583      |           |       |   |
|                |       |                              |       |                 |       |           |       |
| December 31,  2006  |       | March 23, 2007                    |       | $                    | 0.463      |           | $          | 20.3 |   |
| December 31,  2006  |       | March 23, 2007                    |       | $                    | 11.194     | (1)            | 486.5      |   |
| March 31, 2007      |       | May 31, 2007                      |       | $                    | 0.373      |           | $          | 16.4 |   |
| June 30, 2007       |       | August 31, 2007                   |       | $                    | 0.373      |           | $          | 16.4 |   |
| September 30,  2007 |       | November 30, 2007                 |       | $                    | 0.373      |           | $          | 15.9 |   |
|                |       | dividends declared and paid- 2007 |       | $                    | 12.776     |           |       |   |
|                |       |                              |       |                 |       |           |       |
| December 31,  2007  |       | March 28, 2008                    |       | $                    | 0.373      |           | $          | 15.6 |   |
| March 31, 2008      |       | May 30, 2008                      |       | $                    | 0.373      |           | $          | 15.7 |   |
| June 30, 2008       |       | August 01, 2008                   |       | $                    | 0.373      |           | $          | 15.6 |   |
| September 30,  2008 |       | December 5, 2008                  |       | $                    | 0.373      |           | $          | 15.6 |   |
|                |       | dividends declared and paid-2008  |       | 1.492                |       |           |       |
|                |       |                              |       |                 |       |           |       |
| December 31,  2008  |       | March 20, 2009                    |       | $                    | 0.500      |           | $          | 28.9 |   |
| March 31, 2009      |       | May 22, 2009                      |       | $                    | 0.500      |           | $          | 28.9 |   |
| June 30, 2009       |       | September 4, 2009                 |       | $                    | 0.500      |           | $          | 28.9 |   |
| September 30,  2009 |       | December 4, 2009                  |       | $                    | 0.125      |           | $          | 7.2 |   |
|                |       | dividends declared and paid- 2009 |       | $                    | 1.625      |           |       |   |

 

----

 (1) Denotes a special dividend.

 

All share and per share amounts presented throughout this Annual Reporton Form 10-K, unless otherwise noted, have been adjusted to reflect theexchange of 1.34 shares of our common stock for each share of common stock heldby shareholders of General Maritime Subsidiary in connection with the ArlingtonAcquisition.

 

General Maritime Subsidiary alsoannounced on February 21, 2007 that its Board of Directors changed itsquarterly dividend policy by adopting a fixed target amount of $0.37 per shareper quarter or $1.49 per share each year, starting with the first quarter of2007.  On December 16, 2008,our Board of Directors adopted a quarterly dividend policy with a fixed targetamount of $0.50 per share per quarter or $2.00 per share each year.  We announced on July 29,2009 that out Board of Directors changed our quarterly dividend policy byadopting a fixed target amount of $0.125 per share per quarter or $0.50 pershare each year, starting with the third quarter of 2009.  We intend todeclare dividends in April, July, October and February of eachyear.  

 

47

----

 

The declaration of dividends andtheir amount, if any, will depend upon our results and the determination of ourBoard of Directors.  Any dividends paidwill be subject to the terms and conditions of our 2005 Credit Facility,indenture governing the Senior Notes and applicable provisions of MarshallIslands law.

 

**Share Repurchase Program**

** **

In October 2005 and February 2006, GeneralMaritime Subsidiary’sBoard of Directors approved repurchases by General MaritimeSubsidiary of itscommon stock under a share repurchase program for up to an aggregate total of$400 million, of which $107.1 million was available as of December 16,2008.  On December 16, 2008,our board approved repurchases by us of our common stock under a sharerepurchase program for up to an aggregate total of $107.1 million, of which$107.1 million was available as of December 31, 2008. The board will periodically review the program.  Share repurchases will be made from time totime for cash in open market transactions at prevailing market prices or inprivately negotiated transactions.  Thetiming and amount of purchases under the program will be determined bymanagement based upon market conditions and other factors.  Purchases may be made pursuant to a programadopted under Rule 10b5-1 under the Securities Exchange Act.  The program does not require us to purchaseany specific number or amount of shares and may be suspended or reinstated atany time in our discretion and without notice. Repurchases will be subject to the terms of our 2005 Credit Facility,which are described in further detail below.

 

Through December 31, 2009, the Company has acquired 11,830,609shares of its common stock for $292.9 million using borrowings under its 2005Credit Facility and funds from operations. None of these shares were acquired during 2009.  All of these shares have been retired.

 

Information regarding securities authorized for issuance under equitycompensation plans and a performance graph relating to our common stock is setforth in the 2009 Proxy Statement and is incorporated by reference herein.  Pursuant to the amendment to the 2005 CreditFacility dated November 12, 2009, stock repurchases are no longerpermitted under the 2005 Credit Facility.

 

**Debt Financings**

** **

**Senior Notes**

 

On November 12,2009, we and certain of our direct and indirect subsidiaries (the “SubsidiaryGuarantors”) issued $300 million of 12% Senior Notes which are due November 15,2016.  Interest on the Senior Notes ispayable semiannually in cash in arrears each May 15 and November 15,commencing on May 15, 2010.  TheSenior Notes are senior unsecured obligations of the Company and rank equallyin right of payment with all of the Company and the Subsidiary Guarantor’sexisting and future senior unsecured indebtedness.  The Senior Notes are guaranteed on a seniorunsecured basis by the Subsidiary Guarantors. The Subsidiary Guarantors,jointly and severally, guarantee the payment of principal of, premium, if any,and interest on the Senior Notes on an unsecured basis. If we are unable tomake payments on the Senior Notes when they are due, any Subsidiary Guarantorsare obligated to make them instead.  Theproceeds of the Senior Notes, prior to payment of fees and expenses, were$292.5 million.  Of these proceeds,$229.5 million was used to fully prepay the RBS Facility in accordance with itsterms, $15 million was placed as collateral against an interest rate swap withRBS, and the remainder was used for general corporate purposes.  As of December 31, 2009, the discount onthe Senior Notes is $7.4 million.  Thisdiscount is being amortized as interest expense over the term of the SeniorNotes using the effective interest method.

 

We have the option toredeem all or a portion of the Senior Notes at any time on or after November 15,2013 at fixed redemption prices, plus accrued and unpaid interest, if any, tothe date of redemption, and at any time prior to November 15, 2013 at amake-whole price.  In addition, at anytime prior to November 15, 2012, we may, at our option, redeem up to 35%of the Senior Notes with the proceeds of certain equity offerings.

 

If we experience certainkinds of changes of control, we must offer to purchase the Senior Notes fromholders at 101% of their principal amount plus accrued and unpaidinterest.  The indenture pursuant towhich the Senior Notes were issued contains covenants that, among other things,limit our ability and the ability of any of our “restricted” subsidiaries to (i) incuradditional debt, (ii) make certain investments or pay dividends ordistributions on our capital stock or purchase, redeem or retire capital stock,(iii) sell assets, including capital stock of our Subsidiary Guarantors, (iv) restrictdividends or other payments by our subsidiaries, (v) create liens thatsecure debt, (vi) enter into transactions with affiliates and (vii) mergeor consolidate with another company. These covenants are subject to a number ofexceptions, limitations and qualifications set forth in the indenture.

 

**2005Credit Facility**

** **

On October 26, 2005, General Maritime Subsidiary entered into arevolving credit facility (the “2005 Credit Facility”) with a syndicate ofcommercial lenders, and on October 20, 2008, the 2005 Credit Facility wasamended and restated to give effect to the 

 

48

----

 

Arlington Acquisition and the Company was added as a loan party. The2005 Credit Facility was used to refinance its then existing termborrowings.  The 2005 Credit Facility, asamended and restated, which has been further amended on various dates through December 18,2009, provides a total commitment of $749.8 million.

 

On February 24, 2009, the Company amended the 2005 Credit Facilityto accelerate the $50.1 million amortization of the outstanding commitmentscheduled to occur on October 26, 2009 to February 24, 2009 and topledge the *Genmar Daphne* as additional collateralunder the 2005 Credit Facility.

 

On October 27, 2009, the Company entered into an amendment withthe lenders under the 2005 Credit Facility, which became effective on November 12,2009, when the Company completed its Senior Notes offering (describedabove).  The Company agreed with thelenders on which additional vessels may be pledged as additional collateralunder the 2005 Credit Facility.  Pursuantto this amendment, the 2005 Credit Facility was amended to, among other things:

 

·                  Reducethe commitment under the 2005 credit facility to $749.8 million, the result ofwhich is that the next scheduled reduction in total commitment will be April 26,2011.

 

·                  Amendthe net debt to EBITDA maintenance covenant to increase the permitted ratio to6.5:1.0 to and including September 30, 2010, to 6.0:1.0 from December 31,2010 until September 30, 2011 and to 5.5:1.0 thereafter.

 

·                  Amendthe collateral vessel appraisal reporting from annually to semi-annually andrequire the Company to provide a collateral vessel appraisal report datedwithin 30 days of the delivery date thereof.

 

·                  Restrictthe Company’s quarterly dividends to no more than $0.125 per share.

 

·                  Increasethe applicable interest rate margin over LIBOR to 250 basis points from 100basis points and the commitment fee to 87.5 basis points from 35 basis points.

 

·                  Permitsubsidiary guarantees in a qualified notes offering and obligate the Company todeliver guarantees to the lenders for all subsidiaries that guarantee the notesissued in a qualified notes offering.

 

On December 18, 2009, the Company entered into an amendment withthe lenders under the 2005 Credit Facility clarifying certain provisions.  On December 23, 2009, four additionalvessels were pledged to the lenders.

 

Under the 2005 Credit Facility, as amended and restated, the Company ispermitted to pay quarterly cash dividends limited to $0.125 per share.  The 2005 Credit Facility, as amended andrestated, currently provides semiannual reductions of $50.1 million commencingon April 26, 2011 and a bullet reduction of $599.6 million on October 26,2012. Up to $50 million of the 2005 Credit Facility is available for theissuance of standby letters of credit to support obligations of the Company andits subsidiaries that are reasonably acceptable to the issuing lenders underthe 2005 Credit Facility. As of December 31, 2009, the Company hasoutstanding letters of credit aggregating $5.0 million which expire between March 2010and December 2010, leaving $45.0 million available to be issued.

 

Under the 2005 Credit Facility, as amended and restated, the Company isnot permitted to reduce the sum of (A) unrestricted cash and cashequivalents plus (B) the lesser of (1) the total available unutilizedcommitment and (2) $25 million, to be less than $50 million.

 

As of December 31, 2009, the Company is in compliance with all ofthe financial covenants under its 2005 Credit Facility, as amended andrestated.

 

The2005 Credit Facility, as amended and restated, carries an interest rate ofLIBOR plus 250 basis points on the outstanding portion and a commitment fee of87.5 basis points on the unused portion. As of December 31, 2009, $726.0million of the facility is outstanding. The 2005 Credit Facility is secured by26 of the Company’s double-hull vessels with an aggregate carrying value as of December 31,2009 of $935.9 million, as well as the Company’s equity interests in its subsidiariesthat own these assets, insurance proceeds of the collateralized vessels, andcertain deposit accounts related to the vessels. The 2005 Credit Facility requires us to comply with a collateralmaintenance covenant under which the aggregate fair value of these vessels mustremain at or above 125% of the total commitment amount under the 2005 CreditFacility and to provide collateral vessel appraisal reports semi-annually.  We estimate that the aggregate fair value ofsuch vessels, as determined by valuations received on November 9,2009,  was $938.0 million as of December 31,2009, and that a 10% reduction in such fair value would have the effect ofreducing the total commitment amount to $675.4 million.  Each subsidiary of the Company with anownership interest in these vessels provides an unconditional guaranty ofamounts owing under the 2005 Credit Facility. The Company also provides a guarantee and has pledged its equityinterests in General Maritime Subsidiary.

 

49

----

 

The Company’s ability to borrow amounts under the 2005 Credit Facilityis subject to satisfaction of certain customary conditions precedent, andcompliance with terms and conditions contained in the credit documents. Thesecovenants include, among other things, customary restrictions on the Company’sability to incur indebtedness or grant liens, pay dividends or make stockrepurchases (except as otherwise permitted as described above), engage inbusinesses other than those engaged in on the effective date of the 2005 CreditFacility, as amended and restated, and similar or related businesses, enterinto transactions with affiliates, and merge, consolidate, or dispose ofassets. The Company is also required to comply with various financial covenants,including with respect to the Company’s minimum cash balance, collateralmaintenance, and net debt to EBITDA ratio. The amended andrestated Credit Agreement defines EBITDA as net income before net interestexpense, provision for income taxes, depreciation and amortization, non-cashmanagement incentive compensation, as amended and restated.  If the Company does not comply with the variousfinancial and other covenants and requirements of the 2005 Credit Facility, asamended and restated, the lenders may, subject to various customary curerights, require the immediate payment of all amounts outstanding under thefacility.

 

Interest rates during the year ended December 31, 2009 ranged from1.25% to 2.81% on the 2005 Credit Facility.

 

**RBS Facility**

 

Pursuantto the Arlington Acquisition, Arlington remained a party to its $229.5 millionfacility with The Royal Bank of Scotland plc. (the “RBS Facility”).  The RBS Facility was fully prepaid inaccordance with its terms for $229.5 million on November 13, 2009 usingproceeds of the Senior Notes offering and is no longer outstanding. As a resultall liens on these vessels were released. TheRBS Facility had been secured by first priority mortgages over theArlington Vessels, assignment of earnings and insurances and Arlington’s rightsunder the time charters for the vessels and the ship management agreements, apledge of the shares of Arlington’s wholly-owned subsidiaries and a securityinterest in certain of Arlington’s bank accounts. The RBS Facility with The RoyalBank of Scotland (the “RBS Swap”) was to mature on January 5, 2011.Borrowings under the RBS Facility bore interest at LIBOR plus a margin of 125basis points.  In connection with the RBSFacility, the Company is party to an interest rate swap agreement with TheRoyal Bank of Scotland.   The RBS Swapwas de-designated as a hedge as of November 13, 2009 because the Companydid not have sufficient floating-rate debt outstanding set at 3-month LIBORsubsequent to the repayment of the RBS Facility against which this swap’snotional principal amount of $229.5 million could be designated.  As of December 31, 2009, the Companyrolled over at 3-month LIBOR all of its $726.0 million outstanding balance onits 2005 Credit Facility and the RBS Swap was re-designated for hedgeaccounting against this debt.  Thisinterest rate swap remains outstanding as of December 31, 2009 and isdescribed below.

 

During the years ended December 31, 2009, 2008 and 2007, theCompany paid dividends of $94.0 million, $62.5 million and $555.5 million,respectively.  Included in the dividendspaid during the year ended December 31, 2007 is a special dividend of$11.19 per share of $486.5 million.

 

A repayment schedule of outstanding borrowings at December 31,2009 is as follows (dollars in thousands):

 
| **PERIOD  ENDING DECEMBER 31,** | ** ** | **2005 Credit  Facility** | ** **  | **Senior  Notes** | ** ** | **TOTAL**   | ** ** |
|---------------------------------|------------|---------------------------|-------------|-------------------|------------|-------------|------------|
| ** **                      | ** ** | ** **                | ** **  | ** **        | ** ** | ** **  | ** ** |
| 2010                            |       | $                         | —      |              | $          | —      | ** ** | **$** | **—** | ** ** |
| 2011                            |       | 76,312                    |        | —            | ** ** | **76,312**  | ** ** |
| 2012                            |       | 649,688                   |        | —            | ** ** | **649,688** | ** ** |
| 2013                            |       | —                    |        | —            | ** ** | **—**  | ** ** |
| 2014                            |       | —                    |        | —            | ** ** | **—**  | ** ** |
| Thereafter                      |       | —                    |        | 300,000           | ** ** | **300,000** | ** ** |
| ** **                      | ** ** | ** **                | ** **  | ** **        | ** ** | ** **  | ** ** |
| ** **                      | ** ** | **$**                     | **726,000** | ** **        | **$**      | **300,000** | ** ** | **$** | **1,026,000** | ** ** |

** **

**50**

----

** **

**InterestRate Swap Agreements**

** **

On December 31, 2009, the Company is party to five interest rateswap agreements to manage interest costs and the risk associated with changinginterest rates. The notional principal amounts of these swaps aggregate $579.5million, the details of which are as follows (dollars in thousands):

 
| **Notional  Amount** | ** ** | **Expiration  Date** | ** ** | **Fixed  Interest  Rate** | ** ** | **Floating  Interest Rate** | ** **  | **Counterparty**        | ** ** |
|----------------------|------------|----------------------|------------|---------------------------|------------|-----------------------------|-------------|-------------------------|------------|
| $                    | 100,000    |                 | 10/1/2010  |                      | 4.748      | %                           | 3 mo. LIBOR |                    | Citigroup  |   |
| 100,000              |       | 9/30/2012            |       | 3.515                     | %          | 3 mo. LIBOR                 |        | Citigroup               |       |
| 75,000               |       | 9/28/2012            |       | 3.390                     | %          | 3 mo. LIBOR                 |        | DnB  NOR Bank           |       |
| 75,000               |       | 12/31/2013           |       | 2.975                     | %          | 3 mo. LIBOR                 |        | Nordea                  |       |
| 229,500              |       | 1/5/2011             |       | 4.983                     | %          | 3 mo. LIBOR                 |        | Royal  Bank of Scotland |       |
|                      |            |                      |            |                           |            |                             |             |                         |            |  |

 

The Company’s 26 vessels which collateralize the 2005 Credit Facilityalso serve as collateral for the interest rate swap agreements with Citigroup,DnB Nor Bank and Nordea, subordinated to the outstanding borrowings andoutstanding letters of credit under the 2005 Credit Facility.  The interest rate swap agreement with theRoyal Bank of Scotland is collateralized by a $12.2 million deposit held bythat institution as of December 31, 2009 from which the quarterly cashsettlements are paid.  Of this deposit,$12.1 million is included in Prepaid expenses and other current assets and thebalance of $0.1 million is included in Other assets.

 

Interest expense pertaining to interest rate swaps for the years ended December 31,2009, 2008 and 2007 was $11.6 million, $1.9 million and $(0.1) million,respectively.

 

The Company would have paid a net amount of approximately $21.9 millionto settle its outstanding swap agreement based upon its aggregate fair value asof December 31, 2009. This fair value is based upon estimates receivedfrom financial institutions.

 

**Cash and Working Capital**

** **

Cash decreased to $52.6 million as of December 31, 2009 comparedto $104.1 million as of December 31, 2008. Working capital is currentassets minus current liabilities, including the current portion of long-termdebt.  Working capital was $52.3 millionas of December 31, 2009 compared to $53.3 million as of December 31,2008.  The current portion of long-termdebt included in our current liabilities was $0 as of December 31, 2009and 2008.

 

**CashFlows from Operating Activities**

 

Net cash provided by operating activities decreased 58.5% to $47.5million for the year ended December 31, 2009, compared to $114.4 millionfor the prior year.  This decrease isprimarily attributable to a decrease in accounts payable and accrued expensesand other noncurrent liabilities of $51.2 million during the year ended December 31,2009 compared to an increase of $16.1 million for the prior year; a decrease indeferred voyage revenue of approximately $12.8 million during the year ended December 31,2009 compared to an increase of $2.9 million during the prior year; and anincrease in drydocking costs incurred, which were $18.9 million during the yearended December 31, 2009 compared to $9.8 million during the prioryear.  Net (loss) income was $(12.0)million and $29.8 million for the years ended December 31, 2009 and 2008,respectively.  Partially offsetting thisdecrease in net cash provided by operating activities and factoring areincreases for the year ended December 31, 2009 compared to the prior yearof $30.0 million and $40.9 million in depreciation and amortization andgoodwill impairment, respectively.

 

Net cash provided by operating activities increased 19.4% to $114.4million for the year ended December 31, 2008, compared to $95.8 millionfor the prior year.  This increase isprimarily attributable to components of net income that had not been paid as ofDecember 31, 2008 such as the $22 million in compensation accruals inconnection with the Company’s executive transition plan, which is included inthe increase in accrued expenses as of December 31, 2008 as compared tothe prior year.  Net income was $29.8million and $44.5 million for the years ended December 31, 2008 and 2007,respectively.

 

**Cash Flows fromInvesting Activities**

** **

Net cash used by investing activities was $24.6 million for the yearended December 31, 2009 compared to $171.1 million for the prioryear.  During the year ended December 31,2009, we paid $11.2 million for additions to vessels and vessel equipment,$12.2 million of net deposits to a counterparty to collateralize the RBSinterest rate swap and paid $1.2 million of costs associated with the ArlingtonAcquisition that were unpaid as of December 31, 2008.  During the year ended December 31, 2008,we paid $139.6 million, substantially all of which was used to purchase twoAframax vessels, we paid $33.4 million on one Suezmax construction contract 

 

51

----

 

(including capitalized interest of $0.1 million), we paid $5.2 millionfor other fixed assets and received $7.5 million, which represents the amountby which Arlington’s cash balances at December 16, 2008 exceeded mergerclosing costs paid by the Company.

 

Net cash used by investing activities was $171.1 million for the yearended December 31, 2008 compared to $84.5 million for the prior year.  During the year ended December 31, 2008,we paid $139.6 million, substantially all of which was used to purchase twoAframax vessels, we paid $33.4 million on one Suezmax construction contract(including capitalized interest of $0.1 million), we paid $5.2 million forother fixed assets and received $7.5 million, which represents the amount bywhich Arlington’s cash balances at December 16, 2008 exceeded mergerclosing costs paid by the Company. During the year ended December 31, 2007, we paid $80.1 million onthree Suezmax construction contracts (including capitalized interest of $2.4million) and paid $4.4 million for other fixed assets.

 

**Cash Flows fromFinancing Activities**

** **

Net cash used by financing activities for the year ended December 31,2009 was $74.1 million compared to net cash provided by financing activities of$115.5 million for the prior year.  Thechange in cash provided by financing activities relates primarily to thefollowing:

 

·                  During the year ended December 31,2009, we issued $300 million of 12% Senior Notes for which proceeds afterdiscount were $292.5 million.

 

·                  During the year ended December 31,2009, we paid $8.2 million of deferred financing costs of which $7.2 million wasassociated with the Senior Notes offering and $1.0 million related to amendingthe 2005 Credit Facility, compared to $1.7 million paid during the prior yearto amend the 2005 Credit Facility.

 

·                  During the year ended December 31,2009, we paid $229.5 million to fully prepay the RBS Facility in accordancewith its terms.

 

·                  During the years ended December 31,2009 and 2008, we made net (payments) borrowings of revolving debt associatedwith our 2005 Credit Facility of $(35.0) million and $196.0 million, respectively.

 

·                  During the years ended December 31,2009 and 2008, we paid $94.0 million and $62.5 million of dividends toshareholders, respectively.

 

·                  During the year ended December 31,2008, we paid $16.4 million to acquire 953,142 shares of our common stock whichwe retired.

 

Net cash provided by financing activities for the year ended December 31,2008 was $115.5 million compared to net cash used by financing activities was$74.3 million for the prior year. The change in cash provided by financing activitiesrelates primarily to the following:

 

·                  During the years ended December 31,2008 and 2007, we made net borrowings of revolving debt associated with our2005 Credit Facility of $196.0 million and $515.0 million, respectively.

 

·                  During the year ended December 31,2008, we paid $16.4 million to acquire 953,142 shares of common stock which weretired; during the year ended December 31, 2007, we paid $32.7 million toacquire 1,811,144 shares of our common stock which we retired.

 

·                  During the years ended December 31,2008 and 2007, we paid $62.5 million and $555.5 million of dividends toshareholders, respectively.

 

**Capital Expenditures forDrydockings and Vessel Acquisitions**

** **

**Drydocking**

** **

In addition to vessel acquisition and acquisition of new buildingcontracts, other major capital expenditures include funding our drydock programof regularly scheduled in-water survey or drydocking necessary to preserve thequality of our vessels as well as to comply with international shippingstandards and environmental laws and regulations. Management anticipates thatvessels which are younger than 15 years are required to undergo in-watersurveys 2.5 years after a drydock and that vessels are to be drydocked every 

 

52

----

 

five years, while vessels 15 years or older are to be drydocked every2.5 years in which case the additional drydocks take the place of thesein-water surveys. During the year ended December 31, 2009, we paid $18.9million of drydock related costs.  Forthe year ending December 31, 2010, we anticipate that we will capitalizecosts associated with drydocks on seven vessels. We estimate that theexpenditures to complete drydocks during 2010 will aggregate approximately $19million and that the vessels will be offhire for approximately 290 days to effectthese drydocks and significant in-water surveys.  The ability to meet this drydock schedulewill depend on our ability to generate sufficient cash flows from operations,utilize our revolving credit facilities or secure additional financing.

 

The United States ratified Annex VI to the International MaritimeOrganization’s MARPOL Convention effective in October 2008.  This Annex relates to emission standards forMarine Engines in the areas of particulate matter, NOx and SOx and establishesEmission Control Areas.  The emissionprogram is intended to reduce air pollution from ships by establishing a newtier of performance-based standards for diesel engines on all vessels andstringent emission requirements for ships that operate in coastal areas withair-quality problems.  On October 10,2008, the International Maritime Organization adopted a new set of amendmentsto Annex VI.  These new rules/amendmentswill affect vessels built after the year 2000 and could affect vessels builtbetween 1990 and 2000.  We may incurcosts to comply with these newly defined standards.

 

**CapitalImprovements**

** **

During the year ended December 31, 2009, we capitalized $11.2million relating to capital projects including steel replacement, environmentalcompliance equipment upgrades, satisfying requirements of oil majors and vesselupgrades.  For the year ending December 31,2010, we have budgeted approximately $6.7 million for such projects.

 

**VesselAcquisitions**

** **

During the fourth quarter of 2008 we also acquired two double-hullAframax vessels for a contracted price aggregating $137 million.

 

Also, on December 16, 2008, we completed our stock-for-stockacquisition of Arlington which added its fleet of two VLCCs, two Panamaxvessels and four Handymax vessels to our fleet.

 

**OFF-BALANCE SHEET ARRANGEMENTS**

** **

As of December 31, 2009, we did not have any significantoff-balance-sheet arrangements, as defined in Item 303(a)(4) of SECRegulation S-K other than outstanding letters of credit under our 2005 CreditFacility as previously discussed.

 

**OtherCommitments**

** **

In December 2004, the Company entered into a 15-year lease foroffice space in New York, New York.  Themonthly rental is as follows: free rent from December 1, 2004 to September 30,2005, $109,724 per month from October 1, 2005 to September 30, 2010,$118,868 per month from October 1, 2010 to September 30, 2015, and$128,011 per month from October 1, 2015 to September 30, 2020.  The monthly straight-line rental expense fromDecember 1, 2004 to September 30, 2020 is $104,603.

 

The minimum future vessel operating expenses to be paid by the Companyunder ship management agreements in effect as of December 31, 2009 thatwill expire in 2010, and 2011 are $9.4 million and $2.6 million,respectively.  If the option periods areextended by the charterer of the Arlington Vessels, these ship managementagreements will be automatically extended for periods matching the duration ofthe time charter agreements.  Futureminimum payments under these ship management agreements exclude such periods.

 

53

----

 

The following is a tabular summary of our future contractualobligations for the categories set forth below (dollars in millions):

 

**TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS ANDCOMMERCIAL COMMITMENTS**

 
| ** **                               | ** ** | **Total** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** |
|------------------------------------------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|
| 2005 Credit Facility                     |       | $         | 726.0      |     | $          | —   |       | $        | —     |     | $          | 76.3     |       | $              | 649.7      |   | $ | — |   | $ | — |   |
| Senior Notes                             |       | 300.0     |       | —   |       | —   |       | —   |       | —   |       | —   |       | 300.0          |       |
| Interest expense (1)                     |       | 381.5     |       | 79.0     |       | 63.8     |       | 56.7     |       | 38.0     |       | 36.0     |       | 108.8          |       |
| Senior officer employment agreements (2) |       | 2.2       |       | 1.5      |       | 0.7      |       | —   |       | —   |       | —   |       | —         |       |
| Ship management agreements               |       | 12.0      |       | 9.4      |       | 2.6      |       | —   |       | —   |       | —   |       | —         |       |
| Office leases                            |       | 16.5      |       | 1.8      |       | 1.6      |       | 1.5      |       | 1.4      |       | 1.4      |       | 8.8            |       |
| Total commitments                        |       | $         | 1,438.2    |     | $          | 91.7     |       | $        | 68.7       |     | $          | 134.5    |       | $              | 689.1      |   | $ | 37.4 |   | $ | 416.8 |   |

 

----

(1)           Future interest payments on our 2005Credit Facility are based on our current outstanding balance using a currentborrowing LIBOR rate of 0.3125%, adjusted for quarterly cash settlements of ourinterest rate swaps designated as hedges using the same 3-month LIBOR interestrate.  The amount also includes a 0.875%commitment fee we are required to pay on the unused portion of the 2005 CreditFacility.  Future interest payments onour Senior Notes are based on a fixed rate of interest of 12%.

 

(2)           Senior officer employment agreementsare evergreen and renew for subsequent terms of one year.  This table excludes future renewal periods.

 

**Other DerivativeFinancial Instruments**

** **

***Freight Derivatives***

*** ***

As part of our business strategy, we have and may from time to timeenter into freight derivative contracts to hedge and manage market risksrelating to the deployment of our existing fleet of vessels.  Generally, these freight derivative contractsare futures contracts that would bind us and each counterparty in thearrangement to buy or sell a specified notional amount of tonnage “forward” atan agreed time and price and for a particular route.  These contracts generally settle based on themonthly Baltic Tanker Index (“BITR”), which is a worldscale index, and a mayalso include a specified bunker price index. The BITR averages rates received in the spot market by cargo type, crudeoil and refined petroleum products, and by trade route.  The duration of a contract can be one month,quarterly or up to three years with open positions settling on a monthlybasis.  Although freight derivatives canbe entered into for a variety of purposes, including for hedging, as an option,for trading or for arbitrage, our objective has been to hedge and manage marketrisks as part of our commercial management. To the extent that we enter into freight derivatives, we may reduce ourexposure to any declines in our results from operations due to weak marketconditions or downturns, but may also limit our ability to benefit economicallyduring periods of strong demand in the market.

 

During November 2007, the Company entered into three freightderivative contracts which expired on December 31, 2008.  The Company took short positions on two ofthese contracts for a VLCC tanker route for 45,000 metric tons and a longposition for 30,000 metric tons of a Suezmax tanker route.  The Company considers all of these contractsto be speculative.  At December 31,2008, these freight derivatives had an aggregate notional value of $0, becausethey expired on that date.  The net fairvalue of $0.7 million at December 31, 2007 of these freight derivativeswas settled as of December 31, 2007 by the clearinghouse of theseagreements whereby deposits the Company had with the clearinghouse have beenreduced by a like amount, resulting in a realized loss of $1.2 million and $0.7million for the years ended December 31, 2008 and 2007, respectively.

 

During May 2006, the Company entered into a freight derivativecontract with the intention of fixing the equivalent of one Suezmax vessel to atime charter equivalent rate of $35,500 per day for a three year periodbeginning on July 1, 2006.  Thiscontract net settles each month with the Company receiving $35,500 per day andpaying a floating amount based on the monthly BITR and a specified bunker priceindex.  As of December 31, 2009, theCompany is not party to any derivatives of this nature.  As of December 31, 2008, the fair marketvalue of the freight derivative, which was determined based on the aggregatediscounted cash flows using estimated future rates obtained from brokers,resulted in an asset to the Company of $0.6 million.  The Company recorded an unrealized gain(loss) of $(0.6) million, $0.6 million and ($2.3) million for the years ended December 31,2009, 2008 and 2007, respectively, which is reflected on the Company’sstatement of operations as Other income (expense).  The Company has recorded an aggregaterealized gain (loss) of $0.7 million,$(10.2) million and $(1.2) million for theyears ended December 31, 2009, 2008 and 2007, respectively, which isclassified as Other income (expense) on the statement of operations.

 

 

54

----

 

***Currency Forward Contract***

*** ***

On October 29, 2007, the Company entered into two call options topurchase at $1.45 per Euro one million Euros on January 16, 2008 and onemillion Euros on April 16, 2008. The Company paid an aggregate of $39,000 for these options.  As of December 31, 2007, the fair valueof these options based on the exchange rate on that date resulted in an assetof $21,000 which is recorded as Derivative asset on the Company’s balancesheet.  The related unrealized gain forthe year ended December 31, 2007 of $21,000 is classified as Other income(expense) on the statement of operations.

 

The Company paid an aggregate of $0.1 million for options to purchaseEuros during the year ended December 31, 2008, which is recorded as arealized loss and is classified as Other income (expense) on the statement ofoperations.

 

As of December 31, 2009, the Company is not party to anyderivatives of this nature.

 

***Bunker Derivatives***

*** ***

During January 2008, we entered into an agreement with acounterparty to purchase 5,000 MT per month of *Gulf Coast3%* fuel oil for $438.56/MT and sell the same amount of *Rotterdam 3.5% barges* fuel oil for $442.60/MT.  This contract settled on a net basis at theend of each calendar month from July 2008 through September 2008based on the average daily closing prices for these commodities for eachmonth.  During the year ended December 31,2008, we recognized a realized gain of $0.2 million, which is classified asOther income (expense) on the statement of operations.

 

Also during January 2008, we entered into an agreement with acounterparty for the five-month period from February 2008 to June 2008which stipulated a spread between *Gulf Coast 3%*fuel oil and *Houston 380* fuel oil of$11.44/MT.  The notional amount of fueloil was 2,000 MT each month and the prices of each commodity were determinedbased on the average closing trading prices during each month.  To the extent the spread was less than$11.44/MT, we were to pay the counterparty; to the extent the spread is greaterthan $11.44/MT we were to collect from the counterparty.  Because this contract expired on June 30,2008, the fair value of this contract is $0 as of December 31, 2008.  During the year ended December 31, 2008,we recognized a realized gain of $0.2 million which is classified as Otherincome (expense) on the statement of operations.

 

During November 2008, we entered into an agreement with acounterparty to purchase 1,000 MT per month of *Houston 380ex wharf* fuel oil for $254/MT. This contract settled on a net basis at the end of each calendar monthfrom January 2009 through March 2009 based on the average dailyclosing price for this commodity for each month.  During the years ended December 31, 2009and 2008, we recognized an unrealized (gain) loss of $(0.1) and $0.1 million,respectively, which is classified as Other income (expense) on the statement ofoperations.

 

We consider all of our fuel derivative contracts to be speculative.

 

As of December 31, 2009, the Company is not party to anyderivatives of this nature.

 

**Critical AccountingPolicies**

** **

The discussion and analysis of our financial condition and results ofoperations is based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited States of America, or GAAP.  Thepreparation of those financial statements requires us to make estimates andjudgments that affect the reported amount of assets and liabilities, revenuesand expenses and related disclosure of contingent assets and liabilities at thedate of our financial statements.  Actualresults may differ from these estimates under different assumptions or conditions.

 

Critical accounting policies are those that reflect significantjudgments or uncertainties, and potentially result in materially differentresults under different assumptions and conditions.  We have described below what we believe areour most critical accounting policies.

 

REVENUE RECOGNITION.  Revenue isgenerally recorded when services are rendered, the Company has a signed charteragreement or other evidence of an arrangement, pricing is fixed or determinableand collection is reasonably assured. Our revenues are earned under time charters or spot market voyagecontracts.  Revenue from time charters isearned and recognized on a daily basis. Certain time charters contain provisions which provide for adjustmentsto time charter rates based on agreed-upon market rates.  Revenue for spot market voyage contracts isrecognized based upon the percentage of voyage completion.  The percentage of voyage completion is basedon the number of spot market voyage days worked at the balance sheet datedivided by the total number of days expected on the voyage.

 

ALLOWANCE FOR DOUBTFUL ACCOUNTS. We do not provide any reserve for doubtful accounts associated with ourvoyage revenues because we believe that our customers are of highcreditworthiness and there are no serious issues concerningcollectibility.  

 

55

----

 

We have had an excellent collection record during the past sevenyears.  To the extent that some voyagerevenues become uncollectible, the amounts of these revenues would be expensedat that time.  We provide a reserve forour demurrage revenues based upon our historical record of collecting theseamounts.  As of December 31, 2009and 2008, we provided a reserve of approximately 10% for these claims, which webelieve is adequate in light of our collection history.  We periodically review the adequacy of thisreserve so that it properly reflects our collection history.  To the extent that our collection experiencewarrants a greater reserve we will incur an expense to increase this amount inthat period.

 

In addition, certain of our time charter contracts contain speed andfuel consumption provisions.  We have areserve for potential claims, which is based on the amount of cumulative timecharter revenue recognized under these contracts which we estimate may need tobe repaid to the charterer due to failure to meet these speed and fuelconsumption provisions.

 

DEPRECIATION AND AMORTIZATION. We record the value of our vessels at their cost (which includesacquisition costs directly attributable to the vessel and expenditures made toprepare the vessel for its initial voyage) less accumulated depreciation.  We depreciate our double-hull tankers on astraight-line basis over their estimated useful lives, estimated to be 25 yearsfrom date of initial delivery from the shipyard.  We believe that a 25-year depreciable lifefor double-hull vessels is consistent with that of other ship owners and withits economic useful life.  Depreciationis based on cost less the estimated residual scrap value.  We estimate our residual scrap value perlightweight ton to be $175.  An increasein the useful life of the vessel would have the effect of decreasing the annualdepreciation charge and extending it into later periods.  An increase in the residual scrap value woulddecrease the amount of the annual depreciation charge.  A decrease in the useful life of the vesselwould have the effect of increasing the annual depreciation charge.  A decrease in the residual scrap value wouldincrease the amount of the annual depreciation charge.

 

REPLACEMENTS, RENEWALS AND BETTERMENTS. We capitalize and depreciate the costs of significant replacements,renewals and betterments to our vessels over the shorter of the vessel’sremaining useful life or the life of the renewal or betterment.  The amount capitalized is based on ourjudgment as to expenditures that extend a vessel’s useful life or increase theoperational efficiency of a vessel.  Webelieve that these criteria are consistent with GAAP and that our policy ofcapitalization reflects the economics and market values of our vessels.  Costs that are not depreciated are writtenoff as a component of direct vessel operating expense during the periodincurred.  Expenditures for routinemaintenance and repairs are expensed as incurred.  If the amount of the expenditures wecapitalize for replacements, renewals and betterments to our vessels werereduced, we would recognize the amount of the difference as an expense.

 

DEFERRED DRYDOCK COSTS.  Our vesselsare required to be drydocked approximately every 30 to 60 months for majorrepairs and maintenance that cannot be performed while the vessels areoperating.  We capitalize the costsassociated with the drydocks as they occur and amortize these costs on astraight line basis over the period between drydocks.  We believe that these criteria are consistentwith GAAP guidelines and industry practice.

 

IMPAIRMENT OF LONG-LIVED ASSETS. We consider events and circumstances, including the factors in FASB ASC360-10-05, that would have more likely than not require modification to theircarrying values or useful lives.  Inevaluating useful lives and carrying values of long-lived assets, we reviewcertain indicators of potential impairment, such as undiscounted projectedoperating cash flows, vessel sales and purchases, business plans and overallmarket conditions.  We determineundiscounted projected net operating cash flows for each vessel and compare itto the vessel carrying value.  In theevent that impairment occurred, we would determine the fair value of therelated asset and we record a charge to operations calculated by comparing theasset’s carrying value to the estimated fair value.  Various factors including the use of atrailing 10-year industry average for each vessel class to forecast futurecharter rates and vessel operating costs are included in this analysis.  During the fourth quarter of 2009, tankerrates continued to remain soft despite our expectation that they would strengthenduring the fall and winter months. Additionally, the Company obtained third party vessel appraisals duringthe fourth quarter of 2009 which indicated that vessel values had fallen.  As a result of these factors, we concludedthat a trigger event had occured and therefore prepared an analysis whichestimated the future undiscounted cash flows for each vessel at December 31,2009.  Based on this analysis, similar tothe results of this procedure performed at December 31, 2008, no impairment wasidentified for any of our vessels.

 

TIME CHARTER ASSET/LIABILITY. When we acquire a vessel with an existing time charter, the fairvalue of the time charter contract is calculated using the present value (basedupon an interest rate which reflects our weighted average cost of capital) ofthe difference between (i) the contractual amounts to be received pursuantto the charter terms including estimates for profit sharing to the extent suchprovisions exist and (ii) management’s estimate of future cash receiptsbased on its estimate of the fair market charter rate, measured over periodsequal to the remaining term of the charter including option periods to extendthe time charter contract where the exercise of the option by the charterer isconsidered probable.  Management evaluates the ongoingappropriateness of the amortization period on a quarterly basis by reviewingestimated future time charter rates, reported one- to three-year time charterrates and historical 10-year average time charter rates and comparing suchestimates to the option renewal rates in order to evaluate the probability ofthe charterer exercising the renewal option. For time charter contracts where the contractual cash receipts exceedmanagement’s estimate of future cash receipts using the fair market charterrate, we have recorded an asset of $3.1 million and $4.8 million as of December 31,2009 and 2008, respectively, which is included in Other assets on our balancesheet.  This asset is being amortized asa reduction of voyage revenues over the remaining term of such charters or suchearlier date to the extent the option period is declined by the charterer.  For time charter contracts where themanagement’s estimate of future cash receipts using the fair market charterrate exceed contractual cash receipts, we have recorded a liability of $0.7million and $22.6 million as of December 31, 2009 and 2008, respectively,which is included in Other noncurrent liabilities on our balance sheet.  This liability is being amortized as anincrease in voyage revenues over the remaining term of such charters or suchearlier date to the extent the option period is declined by the charterer.  During the third 

 

56

----

 

quarter of 2009, we acceleratedthe amortization on four time charters it acquired during the ArlingtonAcquisition, having been informed by the charterer that the options would notbe exercised.  Accordingly, weaccelerated the amortization on these contracts such that the net liabilitywould be fully amortized by the date on which vessel being chartered wasredelivered to us.  The incrementaleffect of this adjustment reduced the time charter liability and asset by $17.0million and $0.5 million, respectively, and resulted in additional Voyagerevenues recognized of $16.4 million for the year ended December 31, 2009.

 

GOODWILL.  We follow theprovisions of FASB ASC 350-20-35, *Intangibles-**Goodwill and Other* (SFAS No. 142).  We evaluate goodwill for impairment as of December 31of each year, or more frequently if events and circumstances indicate that theasset might be impaired.  Goodwillimpairment testing is a two-step process. As each of our vessels is considered an operating segment, each is alsoconsidered a reporting unit for testing goodwill for impairment.  Accordingly, goodwill, substantially all ofwhich arose in the Arlington Acquisition, has been allocated to thevessel/reporting units based on their proportionate fair value at date ofacquisition.  The first step involves acomparison of the estimated fair value of a reporting unit with its carryingamount. If the estimated fair value of the reporting unit exceeds the carryingvalue, goodwill of the reporting unit is considered unimpaired. If the carryingamount of the reporting unit exceeds its estimated fair value, the second stepis performed to measure the amount of impairment, if any. The second step ofthe goodwill impairment test compares the implied fair value of the reportingunit’s goodwill with the carrying amount of that goodwill. The implied fairvalue of goodwill is determined by allocating the estimated fair value of thereporting unit to the estimated fair value of its existing assets andliabilities in a manner similar to a purchase price allocation. The unallocatedportion of the estimated fair value of the reporting unit is the implied fairvalue of goodwill. If the implied fair value of goodwill is less than thecarrying amount, an impairment loss, equivalent to the difference, is recordedas a reduction of goodwill and a charge to operating expense.

 

Inour annual assessment of goodwill for impairment, we estimate future net cashflows of operating the vessels in our fleet to which goodwill has beenallocated over their remaining useful lives. For this purpose, over their remaining useful lives, we use the trailing10-year industry average charter rates for each vessel class recognizing thatthe transportation of crude oil and petroleum products is cyclical in natureand is subject to wide fluctuation in rates, and we believe the use of a10-year average is the best measure of future rates over the remaining usefullife of our fleet, adjusted for time charter contracts in place and a discountfor the first two years. Also for this purpose, we use a 92% utilization rate whichwas lower than our historic average of approximately 95%.  For the 10-year period ended December 31,2009, the industry average rates used in our assessment for Aframax, Suezmax,VLCC, Panamax and Handymax vessels were $35,171, $46,811, $59,041, $29,698 and$23,319, respectively.

 

Weexpect to incur the following costs over the remaining useful lives of thevessels in our fleet:

 

·                  Vessel operating costs based on historicand budgeted costs adjusted for inflation,

 

·                  Drydocking costs based on historic costsadjusted for inflation, and

 

·                  General and administrative costs adjustedfor inflation.

 

Themore significant factors which could impact our assumptions regarding voyagerevenues, drydocking costs and general and administrative expenses include,without limitation: (a) loss or reduction in business from our significantcustomers; (b) changes in demand; (c) material decline in rates inthe tanker market; (d) changes in production of or demand for oil andpetroleum products, generally or in particular regions; (e) greater thananticipated levels of tanker new building orders or lower than anticipatedrates of tanker scrapping; (f) changes in rules and regulationsapplicable to the tanker industry, including, without limitation, legislationadopted by international organizations such as the International MaritimeOrganization and the European Union or by individual countries; (g) actionstaken by regulatory authorities; and (h) increases in costs includingwithout limitation: crew wages, insurance, provisions, repairs and maintenance.

 

Step 1 ofimpairment testing consists of determining and comparing the fair value of areporting unit, calculated primarily using discounted expected future cashflows, to the carrying value of the reporting unit. Based on performance ofthis test, the Arlington Acquisition goodwill allocated to all eight reporting units was determined to beimpaired.  The Company then undertook thesecond step of the goodwill impairment test which involves the proceduresdiscussed above.  As a result of ourtesting, we determined that all of the goodwill allocated to the four Handymaxvessel reporting units and two Panamax vessel reporting units was fullyimpaired, which resulted in a write-off at December 31, 2009 of $40.9million.  Conversely, the step 2 test didnot result in any impairment charge related to the goodwill allocated to ourtwo VLCC vessel reporting units.

 

The Company alsohad $1.2 million of goodwill associated with a 2001 transaction.  Such goodwill is allocated to five Aframaxvessel reporting units.  This goodwillwas also tested for impairment, but each reporting unit passed step 1,indicating that there was no impairment.

 

57

----

 

**RecentAccounting Pronouncements**

 

In September 2006, the FASB issued FASB ASC 820-10, *Fair Value Measurements and Disclosures*(SFAS No. 157). This Statement, as amended through April 2009,defines fair value, establishes a framework for measuring fair value andenhances disclosures about fair value measurements.  The adoption of thisstatement did not have a material impact on the Company’s consolidatedfinancial statements.

 

In December 2007, the FASB issued FASB ASC 805, *Business Combinations* (SFAS No. 141 (Revised 2007),(SFAS No. 141R)). This statement will significantly change the accountingfor business combinations. Under this statement, an acquiring entity will berequired to recognize all the assets acquired and liabilities assumed in atransaction at the acquisition-date fair value with limited exceptions. FASBASC 805 also includes a substantial number of new disclosure requirements andapplies prospectively to business combinations for which the acquisition dateis on or after the beginning of the first annual reporting period beginning onor after December 15, 2008. As the provisions of FASB ASC 805 are appliedprospectively, the impact to the Company cannot be determined until thetransactions occur.

 

In December 2007, the FASB issued FASB ASC 810, *Consolidation* (SFAS No. 160). FASB ASC 810 establishesnew accounting and reporting standards for the noncontrolling interest in asubsidiary and for the deconsolidation of a subsidiary.  This accounting standard is effective forfiscal years, and interim periods within those fiscal years, beginning on orafter December 15, 2008.  Theadoption of this statement on January 1, 2009 did not have a materialimpact on the Company’s financial position, results of operations and cashflows.

 

In March 2008, the FASB issued FASB ASC 815, *Derivativeand Hedging* (SFAS No. 161). FASB ASC 815 requires enhanced qualitative disclosures about objectivesand strategies for using derivatives, quantitative disclosures about fair valueamounts of and gains and losses on derivative instruments, and disclosuresabout credit-risk-related contingent features in derivative agreements.  FASB ASC 815 is effective for financialstatements issued for fiscal years and interim periods beginning after November 15,2008. The adoption of FASB ASC 815 did not have a material impact on theCompany’s financial position, results of operations and cash flows.

 

In May 2009, the FASB issued FASB ASC 855, *SubsequentEvents* (SFAS No. 165), which provides guidance to establish generalstandards of accounting for and disclosures of events that occur after balancesheet date but before financial statements are issued or are available to beissued. FASB ASC 855 is effective for interim or fiscal periods ending afterJune 15, 2009. On February 24, 2010, the FASB issued Accounting StandardsUpdate (“ASU”) No. 2010-09, *Amendments to CertainRecognition and Disclosure Requirements*, which is effectiveimmediately. The ASU amends FASB ASC 855, to address certain implementationissues related to an entity’s requirement to perform and disclose subsequentevents procedures. The amendments that are specifically relevant include therequirement that SEC filers evaluate subsequent events through the date thefinancial statements are issued, and the exemption of SEC filers fromdisclosing the date through which subsequent events have been evaluated. Theadoption of ASC 855 and ASU 2010-09 did not have a material impact on theCompany’s financial position, results of operations and cash flows.

 

**Related PartyTransactions**

** **

During the fourth quarter of 2000, the Company loaned $486,467 to PeterC. Georgiopoulos.  This loan does notbear interest and is due and payable on demand. The full amount of this loan was outstanding as of December 31,2008.  The full amount of this loan wasrepaid by Mr. Georgiopoulos on February 27, 2009.

 

During the years ended December 31, 2009 and 2008, PeterC. Georgiopoulos and P C Georgiopoulos & Co. LLC, an investmentmanagement company controlled by Peter C. Georgiopoulos, rents officespace and incurred office expenses of $109,000 and $21,000 respectively. As of December 31,2009 balance of $5,000 remains outstanding for those expenses billed inDecember**.**

 

During the years ended December 31, 2009, 2008 and 2007, GeneralMaritime Subsidiary incurred fees for legal services aggregating $38,000,$51,000 and $46,000 respectively, to the father of Peter C. Georgiopoulos. Noneof the balance remains outstanding as of December 31, 2009.

 

Genco Shipping & Trading Limited (“Genco”), an owner andoperator of dry bulk vessels, has incurred travel related expenditures for useof the Company aircraft and other miscellaneous expenditures during the yearsended December 31, 2009 and 2008, totaling $139,000 and $337,000respectively. The balance of $10,000 remains outstanding as of December 31,2009.  Peter C. Georgiopoulos is a directorof Genco.

 

Duringthe years ended December 31, 2009 and 2008, Genco made available one ofits employees who performed internal audit services for the Company for whichthe Company was invoiced $158,000 and $175,000 based on actual time spent bythe employee. The balance of $51,000 remains outstanding as of December 31,2009. In addition,during the year ended December 31, 2009, Genco invoiced the Company $4,000relating to 2009 office expense, which was paid in full as of December 31,2009.

 

Duringthe years ended December 31, 2009, 2008 and 2007 Aegean Marine PetroleumNetwork, Inc. (“Aegean”)  suppliedbunkers and lubricating oils to the Company’s vessels aggregating $2,074,000,$1,320,000 and $1,190,000 respectively, The balance of $1,189,000 remainsoutstanding as of December 31, 2009. During July 2006, an investmentvehicle controlled by Peter Georgiopoulos and John Tavlarios, a member of theCompany’s Board of Directors and the chief executive officer of GeneralMaritime Management 

 

58

----

 

LLC(“GMM”), made an investment in and purchased shares of Aegean from Aegean’sprincipal shareholder.  During December 2006,Aegean completed its initial public offering. At that time, Peter Georgiopoulos became chairman of the board of Aegeanand John Tavlarios joined the Board of Directors of Aegean. In addition, the Company provided office space in its New York office toAegean during the years ended December 31, 2009 and 2008 for $55,000 and$47,000 respectively. A balance of $5,000 remains outstanding as of December 31,2009.

 

**Pursuant to the Company’s revised aircraft use policy, thefollowing authorized executives were permitted, subject to approval from theCompany’s Chairman/ Chief Executive Officer, to charter the Company’s aircraftfrom an authorized third-party charterer for use on non-business flights: theformer Chief Executive Officer (current Chairman of the Board of Directors),the former President of General Maritime Management LLC (current President ofGeneral Maritime Corporation), the Chief Financial Officer and the ChiefAdministrative Officer. The chartering fee to be paid by the authorizedexecutive was the greater of: (i) the incremental cost to the Company ofthe use of the aircraft and (ii) the applicable Standard Industry FareLevel for the flight under Internal Revenue Service regulations, in each caseas determined by the Company. The amount of use of the aircraft for thesepurposes was monitored from time to time by the Audit Committee.  During the year ended December 31, 2009,no authorized executive chartered the Company’s aircraft from the third-partycharterer.  Peter C. Georgiopoulosincurred charter fees totaling $14,000 payable directly to the third-partycharterer during the year ended December 31, 2009.  During the year ended December 31, 2008,Peter C. Georgiopoulos chartered the Company’s aircraft from the third-partycharterer on six occasions and incurred charter fees totaling $318,000 payabledirectly to the third-party charterer.  There was no personal usage of the Company’s aircraft incurred fromother Company executives during the years ended December 2009 and December 2008.  The Company terminated its lease of theaircraft as of February 9, 2009.**

** **

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK**

** **

**INTEREST RATE RISK**

** **

Weare exposed to various market risks, including changes in interest rates.  Changes in interest rates may result inchanges in the fair market value of our financial instruments, interest incomeand interest expense.  The exposure tointerest rate risk relates primarily to our debt.  At December 31, 2009, we had $726.0million of floating rate debt with a margin over LIBOR of 250 basis pointscompared to December 31, 2008 when we had $990.5 million of floating ratedebt with margins over LIBOR of ranging from 100 basis points to 125 basispoints.  As of December 31, 2009,the Company is party to five interest rate swaps which effectively fix LIBOR onan aggregate $579.5 million of its outstanding floating rate debt to a fixedrates ranging from 2.975% to 4.983%.  Aone percent increase in LIBOR would increase interest expense on the portion ofour $146.5 million outstanding floating rate indebtedness, which is not hedged,by approximately $1.5 million per year from December 31, 2009.

 

Changesin interest rates would not impact our interest expense for our long-term fixedinterest rate Senior Notes. However, changes in interest rates would impact thefair market value of the Senior Notes. In general, the fair market value ofdebt with a fixed interest rate will increase as interest rates fall.Conversely, the fair market value of debt will decrease as interest rates rise.The currently outstanding Senior Notes accrue interest at the rate of 12% per annumand mature on November 15, 2017 and the effective interest rate on suchnotes is 12.5%.  A hypothetical 10%change in interest rates as of December 31, 2009 would have no impact onour interest expense for our fixed interest rate debt.

 

**FOREIGN EXCHANGE RATE RISK**

** **

The international tanker industry’s functional currency is the U.S.Dollar.  Virtually all of the Company’srevenues and most of its operating costs are in U.S. Dollars.  The Company incurs certain operatingexpenses, drydocking, and overhead costs in foreign currencies, the mostsignificant of which is the Euro, as well as British Pounds, Japanese Yen,Singapore Dollars, Australian Dollars and Norwegian Kroners.  During the year ended December 31, 2009,approximately 14% of the Company’s direct vessel operating expenses weredenominated in these currencies.  Thepotential additional expense from a 10% adverse change in quoted foreigncurrency exchange rates, as it relates to all of these currencies, would beapproximately $1.4 million for the year ended December 31, 2009.

 

59

----

 

**Item 8. FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

**GENERAL MARITIMECORPORATION**

** **

**INDEX TO CONSOLIDATEDFINANCIAL STATEMENTS**

** **

CONSOLIDATEDFINANCIAL STATEMENTS AS OF DECEMBER 31, 2009 AND 2008 AND FOR THE YEARS ENDEDDECEMBER 31, 2009, 2008 AND 2007.

 
| Report of Independent  Registered Public Accounting Firm                       | 61     |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |
| Consolidated  Balance Sheets                                                   | 62     |
|                                                                           |   |
| Consolidated  Statements of Operations                                         | 63     |
|                                                                           |   |
| Consolidated  Statements of Shareholders’ Equity and Comprehensive Income | 64     |
|                                                                           |   |
| Consolidated  Statements of Cash Flows                                         | 65     |

 

60

----

 

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directors and Stockholders ofGeneral Maritime CorporationNew York, New York

 

We have audited the accompanying consolidatedbalance sheets of General Maritime Corporation and subsidiaries (the “Company”)as of December 31, 2009 and 2008, and the related consolidated statementsof operations, shareholders’ equity and comprehensive income, and cash flowsfor each of the three years in the period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’smanagement.  Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits.

 

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statementsare free of material misstatement.  An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the consolidatedfinancial statements.  An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall consolidated financial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financialstatements present fairly, in all material respects, the financial position ofGeneral Maritime Corporation and subsidiaries at December 31, 2009 and2008, and the results of their operations and their cash flows for each of thethree years in the period ended December 31, 2009, in conformity withaccounting principles generally accepted in the United States of America.

 

We have also audited, in accordance with thestandards of the Public Company Accounting Oversight Board (United States), theCompany’s internal control over financial reporting as of December 31,2009, based on the criteria established in *InternalControl—Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated March 1,2010 expressed an unqualified opinion on the Company’s internal control overfinancial reporting.

 
| */s/ Deloitte & Touche LLP* | * * |
|--------------------------------------|----------|
|                                 |     |
| New York, New York                   |     |
| March 1, 2010                   |     |

 

61

----

 

**GENERALMARITIME CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER31, 2009 AND 2008**

**(Dollarsin thousands except per share data)**

 
| ** **                                                                                                                                                                                 | ** ** | **DECEMBER 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                                                                                                 | ** ** | **2009**         | ** ** | **2008** | ** ** |
|                                                                                                                                                                                       |       |             |       |   |   |
| ASSETS                                                                                                                                                                                     |       |             |       |   |   |
| CURRENT ASSETS:                                                                                                                                                                            |       |             |       |   |   |
| Cash                                                                                                                                                                                       |       | $                | 52,651     |   | $ | 104,146 |   |
| Due from  charterers, net                                                                                                                                                                  |       | 9,142            |       | 10,533 |   |
| Prepaid expenses  and other current assets                                                                                                                                                 |       | 46,735           |       | 26,456 |   |
| Derivative asset                                                                                                                                                                           |       | —           |       | 568 |   |
| Total current  assets                                                                                                                                                                      |       | 108,528          |       | 141,703 |   |
|                                                                                                                                                                                       |       |             |       |   |   |
| NONCURRENT  ASSETS:                                                                                                                                                                        |       |             |       |   |   |
| Vessels, net of  accumulated depreciation of $303,660 and $233,051, respectively                                                                                                           |       | 1,251,624        |       | 1,319,555 |   |
| Other fixed  assets, net                                                                                                                                                                   |       | 13,251           |       | 11,507 |   |
| Deferred drydock  costs, net                                                                                                                                                               |       | 25,358           |       | 18,504 |   |
| Deferred  financing costs, net                                                                                                                                                             |       | 11,728           |       | 5,296 |   |
| Derivative asset                                                                                                                                                                           |       | 417              |       | — |   |
| Other assets                                                                                                                                                                               |       | 4,497            |       | 8,998 |   |
| Goodwill                                                                                                                                                                                   |       | 29,854           |       | 71,662 |   |
| Total noncurrent  assets                                                                                                                                                                   |       | 1,336,729        |       | 1,435,522 |   |
| TOTAL ASSETS                                                                                                                                                                               |       | $                | 1,445,257  |   | $ | 1,577,225 |   |
|                                                                                                                                                                                       |       |             |       |   |   |
| LIABILITIES AND  SHAREHOLDERS' EQUITY                                                                                                                                                      |       |             |       |   |   |
| CURRENT  LIABILITIES:                                                                                                                                                                      |       |             |       |   |   |
| Accounts payable  and accrued expenses                                                                                                                                                     |       | $                | 33,339     |   | $ | 55,164 |   |
| Deferred voyage  revenue                                                                                                                                                                   |       | 3,078            |       | 15,893 |   |
| Derivative  liability                                                                                                                                                                      |       | 19,777           |       | 17,335 |   |
| Total current  liabilities                                                                                                                                                                 |       | 56,194           |       | 88,392 |   |
| NONCURRENT  LIABILITIES:                                                                                                                                                                   |       |             |       |   |   |
| Long-term debt                                                                                                                                                                             |       | 1,018,609        |       | 990,500 |   |
| Other noncurrent  liabilities                                                                                                                                                              |       | 2,977            |       | 24,717 |   |
| Derivative  liability                                                                                                                                                                      |       | 2,568            |       | 17,817 |   |
| Total noncurrent  liabilities                                                                                                                                                              |       | 1,024,154        |       | 1,033,034 |   |
| TOTAL  LIABILITIES                                                                                                                                                                         |       | 1,080,348        |       | 1,121,426 |   |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                                             |       |             |       |   |   |
| SHAREHOLDERS'  EQUITY:                                                                                                                                                                     |       |             |       |   |   |
| Common stock,  $0.01 par value per share; authorized 75,000,000 shares; issued and  outstanding 58,248,189 and 57,850,528 shares at December 31, 2009 and December  31, 2008, respectively |       | 583              |       | 579 |   |
| Paid-in capital                                                                                                                                                                            |       | 378,530          |       | 474,424 |   |
| Retained  earnings                                                                                                                                                                         |       | —           |       | — |   |
| Accumulated  other comprehensive loss                                                                                                                                                      |       | (14,204          | )          | (19,204 | ) |
| Total  shareholders' equity                                                                                                                                                                |       | 364,909          |       | 455,799 |   |
| TOTAL  LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                |       | $                | 1,445,257  |   | $ | 1,577,225 |   |

 

See notes to consolidatedfinancial statements.

 

62

----

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THEYEARS ENDED DECEMBER 31, 2009, 2008 AND 2007**

**(Dollarsin thousands except per share data)**

 
| ** **                                    | ** ** | **2009**   | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|-----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|  VOYAGE  REVENUES:                       |       |       |       |       |       |       |       |
| Voyage revenues                               |       | $          | 350,520    |       | $          | 326,068    |       | $ | 255,015 |   |
| OPERATING EXPENSES:                           |       |       |       |       |       |       |       |
| Voyage expenses                               |       | 58,876     |       | 54,404     |       | 38,069     |       |
| Direct vessel  expenses                       |       | 95,573     |       | 63,556     |       | 48,213     |       |
| General and  administrative                   |       | 40,339     |       | 80,285     |       | 46,920     |       |
| Depreciation and  amortization                |       | 88,024     |       | 58,037     |       | 49,671     |       |
| Goodwill  impairment                          |       | 40,872     |       | —     |       | —     |       |
| Loss on disposal  of vessel equipment         |       | 2,051      |       | 804        |       | 417        |       |
| Total operating  expenses                     |       | 325,735    |       | 257,086    |       | 183,290    |       |
| OPERATING INCOME                              |       | 24,785     |       | 68,982     |       | 71,725     |       |
| OTHER INCOME  (EXPENSE):                      |       |       |       |       |       |       |       |
| Interest income                               |       | 129        |       | 1,099      |       | 2,482      |       |
| Interest expense                              |       | (37,344    | )          | (29,388    | )          | (25,541    | )          |
| Other income  (expense)                       |       | 435        |       | (10,886    | )          | (4,127     | )          |
| Net other  expense                            |       | (36,780    | )          | (39,175    | )          | (27,186    | )          |
| Net (loss)  income                            |       | $          | (11,995    | )          | $          | 29,807     |       | $ | 44,539 |   |
|                                          |       |       |       |       |       |       |       |
| Earnings per  common share:                   |       |       |       |       |       |       |       |
| Basic                                         |       | $          | (0.22      | )          | $          | 0.76       |       | $ | 1.09 |   |
| Diluted                                       |       | $          | (0.22      | )          | $          | 0.73       |       | $ | 1.06 |   |
|                                          |       |       |       |       |       |       |       |
| Weighted average  shares outstanding- basic   |       | 54,650,943 |       | 39,463,257 |       | 40,739,766 |       |
|                                          |       |       |       |       |       |       |       |
| Weighted average  shares outstanding- diluted |       | 54,650,943 |       | 40,561,633 |       | 41,825,061 |       |

 

See notes to consolidatedfinancial statements.

 

63

----

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ANDCOMPREHENSIVE INCOME**

**FOR THEYEARS ENDED DECEMBER 31, 2009, 2008 AND 2007**

**(Dollarsin thousands except per share data)**

 
| ** **                                                                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** **        | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|--------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **   | ** ** | **Other**         | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                                                      | ** ** | **Common** | ** ** | **Paid-in** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | **Comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                                      | ** ** | **Stock**  | ** ** | **Capital** | ** ** | **Earnings** | ** ** | **Loss**          | ** ** | **Income**        | ** ** | **Total**  | ** ** |
|                                                                                            |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Balance at  January 1, 2007                                                                     |       | $          | 440        |        | $          | 438,669      |       | $                 | 324,804    |              | $          | —     |       |   |   | $ | 763,913 |   |
| Comprehensive income:                                                                           |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Net income                                                                                      |       |       |       |        |       | 44,539       |       |              |       | $                 | 44,539     |       | 44,539     |   |
| Unrealized  derivative loss on cash flow hedge                                                  |       |       |       |        |       |         |       | (2,412            | )          | (2,412            | )          | (2,412     | )          |
| Comprehensive  income                                                                           |       |       |       |        |       |         |       |              |       | $                 | 42,127     |       |       |   |
| Exercise of  stock options                                                                      |       |       |       | 123         |       |         |       |              |       |              |       | 123        |       |
| Issuance of  634,774 shares of restricted stock, net of forfeitures                             |       | 7          |       | (7          | )          |         |       |              |       |              |       | —     |       |
| Acquisition and  retirement of 1,811,144 shares of common stock                                 |       | (18        | )          | (32,639     | )          |         |       |              |       |              |       | (32,657    | )          |
| Cash dividends  paid                                                                            |       |       |       | (190,780    | )          | (364,723     | )          |              |       |              |       | (555,503   | )          |
| Restricted stock  issued in lieu of cash dividend                                               |       | 1          |       | 4,619       |       | (4,620       | )          |              |       |              |       | —     |       |
| Restricted stock  amortization, net of forfeitures                                              |       |       |       | 10,654      |       |         |       |              |       |              |       | 10,654     |       |
| Balance at  December 31, 2007                                                                   |       | 430        |       | 230,639     |       | —       |       | (2,412            | )          |              |       | 228,657    |       |
| Comprehensive  income:                                                                          |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Net income                                                                                      |       |       |       |        |       | 29,807       |       |              |       | $                 | 29,807     |       | 29,807     |   |
| Unrealized  derivative loss on cash flow hedge                                                  |       |       |       |        |       |         |       | (17,597           | )          | (17,597           | )          | (17,597    | )          |
| Foreign currency  translation gains                                                             |       |       |       |        |       |         |       | 805               |       | 805               |       | 805        |       |
| Comprehensive  income                                                                           |       |       |       |        |       |         |       |              |       | $                 | 13,015     |       |       |   |
|                                                                                            |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Exercise of  stock options                                                                      |       |       |       | 49          |       |         |       |              |       |              |       | 49         |       |
| Acquisition and  retirement of 953,142 shares of common stock                                   |       | (10        | )          | (16,369     | )          |         |       |              |       |              |       | (16,379    | )          |
| Issuance of  15,500,000 shares of common stock in exchange for all of Arlington Tankers  shares |       | 155        |       | 281,413     |       |         |       |              |       |              |       | 281,568    |       |
| Issuance of  380,937 shares of restricted stock, net of forfeitures                             |       | 4          |       | (4          | )          |         |       |              |       |              |       | —     |       |
| Cash dividends  paid                                                                            |       |       |       | (32,726     | )          | (29,807      | )          |              |       |              |       | (62,533    | )          |
| Restricted stock  amortization, net of forfeitures                                              |       |       |       | 11,422      |       |         |       |              |       |              |       | 11,422     |       |
| Balance at  December 31, 2008                                                                   |       | 579        |       | 474,424     |       | —       |       | (19,204           | )          |              |       | 455,799    |       |
| Comprehensive  income:                                                                          |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Net loss                                                                                        |       |       |       |        |       | (11,995      | )          |              |       | $                 | (11,995    | )          | (11,995    | ) |
| Unrealized  derivative loss on cash flow hedge                                                  |       |       |       |        |       |         |       | 5,248             |       | 5,248             |       | 5,248      |       |
| Foreign currency  translation gains                                                             |       |       |       |        |       |         |       | (248              | )          | (248              | )          | (248       | )          |
| Comprehensive  income                                                                           |       |       |       |        |       |         |       |              |       | $                 | (6,995     | )          |       |   |
|                                                                                            |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Issuance of  416,322 shares of restricted stock, net of forfeitures                             |       | 4          |       | (4          | )          |         |       |              |       |              |       | —     |       |
| Cash dividends  paid                                                                            |       |       |       | (105,960    | )          | 11,995       |       |              |       |              |       | (93,965    | )          |
| Restricted stock  amortization, net of forfeitures                                              |       |       |       | 10,070      |       |         |       |              |       |              |       | 10,070     |       |
| Balance at December  31, 2009                                                                   |       | $          | 583        |        | $          | 378,530      |       | $                 | —     |              | $          | (14,204    | )          |   |   | $ | 364,909 |   |

 

See notes toconsolidated financial statements.

 

64

----

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THEYEARS ENDED DECEMBER 31, 2009, 2008 AND 2007**

**(Dollarsin thousands)**

 
| ** **                                                                        | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                              |       |     |       |     |       |     |       |
| CASH FLOWS FROM OPERATING  ACTIVITIES:                                            |       |     |       |     |       |     |       |
| Net (loss)  income                                                                |       | $        | (11,995    | )        | $          | 29,807   |       | $ | 44,539 |   |
| Adjustments to  reconcile net income to net cash                                  |       |     |       |     |       |     |       |
| provided by operating  activities:                                                |       |     |       |     |       |     |       |
| Loss on disposal  of vessel equipment                                             |       | 2,051    |       | 804      |       | 417      |       |
| Depreciation and  amortization                                                    |       | 88,024   |       | 58,037   |       | 49,671   |       |
| Goodwill  impairment                                                              |       | 40,872   |       | —   |       | —   |       |
| Amortization of  deferred financing costs                                         |       | 1,724    |       | 1,089    |       | 959      |       |
| Amortization of  discount on Senior Notes                                         |       | 73       |       | —   |       | —   |       |
| Restricted stock  compensation expense                                            |       | 10,070   |       | 11,422   |       | 10,654   |       |
| Net unrealized  loss (gain) on derivative financial instruments                   |       | 581      |       | (540     | )          | 2,284    |       |
| Allowance for  bad debts                                                          |       | 149      |       | 514      |       | —   |       |
| Changes in  assets and liabilities:                                               |       |     |       |     |       |     |       |
| Decrease in due  from charterers                                                  |       | 1,242    |       | 752      |       | 2,726    |       |
| (Increase)  decrease in prepaid expenses and other current and noncurrent assets  |       | (2,297   | )          | 3,350    |       | (10,953  | )          |
| (Decrease)  increase in accounts payable other current and noncurrent liabilities |       | (51,240  | )          | 16,063   |       | 5,518    |       |
| (Decrease)  increase in deferred voyage revenue                                   |       | (12,815  | )          | 2,904    |       | 1,833    |       |
| Deferred drydock  costs incurred                                                  |       | (18,921  | )          | (9,787   | )          | (11,815  | )          |
| Net cash  provided by operating activities                                        |       | 47,518   |       | 114,415  |       | 95,833   |       |
|                                                                              |       |     |       |     |       |     |       |
| CASH FLOWS FROM INVESTING  ACTIVITIES:                                            |       |     |       |     |       |     |       |
| Payments for  vessel construction in progress                                     |       | —   |       | (33,885  | )          | (80,061  | )          |
| Purchase of  Vessel improvements and other fixed assets                           |       | (11,241  | )          | (5,164   | )          | (4,455   | )          |
| Deposit made to  counterparty for interest rate swap                              |       | (12,247  | )          | —   |       | —   |       |
| Cash held by  Arlington upon merger, less merger costs paid                       |       | —   |       | 7,529    |       | —   |       |
| Expenditures for  Arlington Merger                                                |       | (1,144   | )          | —   |       | —   |       |
| Payments for  vessels                                                             |       | —   |       | (139,562 | )          | —   |       |
| Net cash used by  investing activites                                             |       | (24,632  | )          | (171,082 | )          | (84,516  | )          |
|                                                                              |       |     |       |     |       |     |       |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                            |       |     |       |     |       |     |       |
| Proceeds from  Senior Notes offering                                              |       | 292,536  |       | —   |       | —   |       |
| Payment to  retire long-term debt                                                 |       | (229,500 | )          | —   |       | —   |       |
| Borrowings on  revolving credit facilitities                                      |       | 15,000   |       | 226,000  |       | 570,000  |       |
| Repayments on  revolving credit facilities                                        |       | (50,000  | )          | (30,000  | )          | (55,000  | )          |
| Deferred  financing costs paid                                                    |       | (8,156   | )          | (1,661   | )          | (1,214   | )          |
| Cash dividends  paid                                                              |       | (93,965  | )          | (62,533  | )          | (555,503 | )          |
| Payments to  acquire and retire common stock                                      |       | —   |       | (16,379  | )          | (32,657  | )          |
| Proceeds from  exercise of stock options                                          |       | —   |       | 49       |       | 123      |       |
| Net cash (used)  provided by financing activities                                 |       | (74,085  | )          | 115,476  |       | (74,251  | )          |
| Effect of  exchange rate changes on cash balances                                 |       | (296     | )          | 811      |       | —   |       |
| Net (decrease)  increase in cash                                                  |       | (51,495  | )          | 59,620   |       | (62,934  | )          |
| Cash, beginning  of the year                                                      |       | 104,146  |       | 44,526   |       | 107,460  |       |
| Cash, end of  year                                                                |       | $        | 52,651     |     | $          | 104,146  |       | $ | 44,526 |   |
|                                                                              |       |     |       |     |       |     |       |
| Supplemental  disclosure of cash flow information:                                |       |     |       |     |       |     |       |
| Cash paid during  the year for interest (net of amount capitalized)               |       | $        | 37,554     |     | $          | 27,608   |       | $ | 24,296 |   |
| Transfer from  Vessel construction in progress to Vessel                          |       | $        | —     |     | $          | 63,794   |       | $ | 127,885 |   |
| Restricted stock  granted to employees (net of forfeitures)                       |       | $        | 2,791      |     | $          | 3,996    |       | $ | 12,142 |   |
| Restricted stock  granted in lieu of cash dividends                               |       | $        | —     |     | $          | —   |       | $ | 4,620 |   |

 

See notes to consolidatedfinancial statements.

 

65

----

 

 

**GENERALMARITIME CORPORATION**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2009, 2008 AND 2007(DOLLARS IN THOUSANDS, EXCEPT PER SHARE, PER DAY AND PER TON DATA)**

 

**1.**                        BASIS OF PRESENTATION AND SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

** **

NATURE OF BUSINESS.  GeneralMaritime Corporation (the “Company”) through its subsidiaries providesinternational transportation services of seaborne crude oil and petroleumproducts.  The Company’s fleet iscomprised of VLCC, Suezmax, Aframax, Panamax and Handymax vessels. The Companyoperates its business in one business segment, which is the transportation ofinternational seaborne crude oil and petroleum products.

 

The Company’s vessels are primarily available for charter on a spotvoyage or time charter basis. Under a spot voyage charter, which generallylasts from several days to several weeks, the owner of a vessel agrees toprovide the vessel for the transport of specific goods between specific portsin return for the payment of an agreed upon freight per ton of cargo or,alternatively, for a specified total amount. All operating and specified voyagecosts are paid by the owner of the vessel.

 

A time charter involves placing a vessel at the charterer’s disposalfor a set period of time, generally one to three years, during which thecharterer may use the vessel in return for the payment by the charterer of aspecified daily or monthly hire rate. In time charters, operating costs such asfor crews, maintenance and insurance are typically paid by the owner of thevessel and specified voyage costs such as fuel, canal and port charges are paidby the charterer.

 

BASIS OF PRESENTATION.  On December 16,2008, pursuant to an Agreement and Plan of Merger and Amalgamation, dated as ofAugust 5, 2008, by and among the General Maritime Corporation (the “Company”),Arlington Tankers Ltd. (“Arlington”), Archer Amalgamation Limited (“AmalgamationSub”), Galileo Merger Corporation (“Merger Sub”) and General MaritimeSubsidiary Corporation (formerly General Maritime Corporation) (“GeneralMaritime Subsidiary”), Merger Sub merged with and into General MaritimeSubsidiary, with General Maritime Subsidiary continuing as the surviving entity(the “Merger”), and Amalgamation Sub amalgamated with Arlington (the “Amalgamation”and, together with the Merger, collectively, the “Arlington Acquisition”). As aresult of the Arlington Acquisition, General Maritime Subsidiary and Arlingtoneach became a wholly-owned subsidiary of the Company. In addition, upon theconsummation of the Mergers, the Company exchanged 1.34 shares of its commonstock for each share of common stock held by shareholders of General MaritimeSubsidiary and exchanged one share of its common stock for each share held byshareholders of Arlington.  The financialstatements of the Company have been prepared on the accrual basis ofaccounting. A summary of the significant accounting policies followed in thepreparation of the accompanying financial statements, which conform toaccounting principles generally accepted in the United States of America, ispresented below.

 

BUSINESS GEOGRAPHICS.  Non-U.S.operations accounted for 100% of revenues and net income. Vessels regularlymove between countries in international waters, over hundreds of trade routes.It is therefore impractical to assign revenues or earnings from thetransportation of international seaborne crude oil and petroleum products bygeographical area.

 

SEGMENT REPORTING.  Each of theCompany’s vessels serve the same type of customer, have similar operations andmaintenance requirements, operate in the same regulatory environment, and aresubject to similar economic characteristics. Based on this, the Company hasdetermined that it operates in one reportable segment, the transportation ofcrude oil and petroleum products with its fleet of vessels.

 

PRINCIPLES OF CONSOLIDATION.  Theaccompanying consolidated financial statements include the accounts of GeneralMaritime Corporation and its wholly owned subsidiaries. All intercompanyaccounts and transactions have been eliminated on consolidation.

 

ACCOUNTING STANDARDSCODIFICATION. In June 2009, the Financial Accounting Standards Board (“FASB”)issued Accounting Standards Codification (“ASC”) 105, *The FASBAccounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles — a replacement of FASB Statement No. 162*(Statement of Financial Accounting Standards (“SFAS”) No. 168).  This standard replaced SFAS No. 162, *The Heirarchy of Generally Accepted Accounting Principles*and has modified the U.S. GAAP hierarchy to include only two levels of GAAP:authoritative and nonauthoritative.  TheFASB Accounting Standards Codification (the “Codification”) became the sourceof authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmentalentities.  Rules and interpretivereleases of the SEC under authority of federal securities laws are also sourcesof authoritative U.S. GAAP for SEC registrants. On the effective date of FASB ASC 105, the Codification supersededall then-existing non-SEC accounting and reporting standards.  All other nongrandfathered non-SEC accountingliterature not included in the Codification became nonauthoritative.  This statement is effective for fiscal yearsand interim periods ending after September 15, 

 

66

----

 

2009.  Because the Codification was not intended toalter existing U.S. GAAP, the adoption of this statement did not have an impacton the Company’s consolidated financial statements.

 

REVENUE AND EXPENSE RECOGNITION. Revenue and expense recognition policies for spot market voyage and timecharter agreements are as follows:

 

SPOT MARKET VOYAGECHARTERS.  Spot market voyage revenuesare recognized on a pro rata basis based on the relative transit time in eachperiod.  The period over which voyagerevenues are recognized commences at the time the vessel arrives at the loadport for a voyage and ends at the time that discharge of cargo is completed.  Estimated losses on voyages are provided forin full at the time such losses become evident. Voyage expenses primarily include only those specific costs which areborne by the Company in connection with voyage charters which would otherwisehave been borne by the charterer under time charter agreements. These expensesprincipally consist of fuel, canal and port charges. Demurrage incomerepresents payments by the charterer to the vessel owner when loading anddischarging time exceed the stipulated time in the spot market voyage charter.Demurrage income is measured in accordance with the provisions of therespective charter agreements and the circumstances under which demurrageclaims arise and is recognized on a pro rata basis over the length of thevoyage to which it pertains. At December 31, 2009 and 2008, the Companyhas a reserve of approximately $553 and $510, respectively, against its duefrom charterers balance associated with demurrage revenues and certain otherreceivables.

 

TIMECHARTERS.  Revenue from time charters isrecognized on a straight line basis as the average revenue over the term of therespective time charter agreement. Direct vessel expenses are recognized whenincurred. Time charter agreements require that the vessels meet specified speedand bunker consumption standards.  TheCompany has determined that there are no unasserted claims on any of its timecharters since that time; accordingly, there is no reserve as of December 31,2009 and 2008.

 

VESSELS, NET.  Vessels, net isstated at cost less accumulated depreciation. Included in vessel costs areacquisition costs directly attributable to the vessel and expenditures made toprepare the vessel for its initial voyage. Vessels are depreciated on astraight-line basis over their estimated useful lives, determined to be 25years from date of initial delivery from the shipyard.  In addition, the Company estimates residualvalue of its vessels to be $175/LWT.

 

Depreciation is based on cost less the estimated residual scrap value.The costs of significant replacements, renewals and betterments are capitalizedand depreciated over the shorter of the vessel’s remaining useful life or thelife of the renewal or betterment. Depreciation expense of vessel assets forthe years ended December 31, 2009, 2008 and 2007 totaled $72,280, $43,503, and$37,316, respectively.  Undepreciatedcost of any asset component being replaced is written off as a component ofLoss (gain) on sale of vessels and vessel equipment and is an operatingexpense. Expenditures for routine maintenance and repairs are expensed as incurred.

 

OTHER FIXED ASSETS, NET.  Otherfixed assets, net is stated at cost less accumulated depreciation. Depreciationis computed using the straight-line method over the following estimated usefullives:

 
| **DESCRIPTION**               | ** ** | **USEFUL LIVES** | ** ** |
|-------------------------------|------------|------------------|------------|
| Furniture and fixtures        |       | 10 years         |       |
| Vessel and computer equipment |       | 5 years          |       |

 

REPLACEMENTS, RENEWALS AND BETTERMENTS. The Company capitalizes and depreciates the costs of significantreplacements, renewals and betterments to its vessels over the shorter of thevessel’s remaining useful life or the life of the renewal or betterment.  The amount capitalized is based on management’sjudgment as to expenditures that extend a vessel’s useful life or increase theoperational efficiency of a vessel. Costs that are not depreciated are written off as a component of directvessel operating expense during the period incurred.  Expenditures for routine maintenance andrepairs are expensed as incurred.

 

IMPAIRMENT OF LONG-LIVED ASSETS. The Company follows FASB ASC 360-10-05, *Accountingfor the Impairment or Disposal of Long-Lived Assets*(SFAS No.144),which requires impairment losses to be recorded on long-lived assets used inoperations when indicators of impairment are present and the undiscounted cashflows estimated to be generated by those assets are less than the asset’scarrying amount. In the evaluation of the fair value and future benefits oflong-lived assets, the Company performs an analysis of the anticipatedundiscounted future net cash flows of the related long-lived assets. If thecarrying value of the related asset exceeds the undiscounted cash flows, thecarrying value is reduced to its fair value. Various factors including the useof trailing 10 year industry average for each vessel class to forecast futurecharter rates and vessel operating costs are included in this analysis.  During the fourth quarter of 2009, tankerrates continued to remain soft despite our expectation that they would strengthenduring the fall and winter months. Additionally, the Company obtained third party vessel appraisals duringthe fourth quarter of 2009 which indicated that vessel values had fallen.  As a result of these factors, the Company concludedthat a trigger event had occured and therefore prepared an analysis whichestimated the future undiscounted cash flows for each vessel at December 31,2009.  Based on this analysis, similar tothe results of this procedure performed at December 31, 2008, no impairment wasidentified for any of the Company’s vessels.

 

DEFERRED DRYDOCK COSTS, NET.  Approximatelyevery 30 to 60 months the Company’s vessels are required to be drydocked formajor repairs and maintenance, which cannot be performed while the vessels areoperating. The Company capitalizes costs 

 

67

----

 

associated with the drydocks as they occur and amortizes these costs ona straight line basis over the period between drydocks. Amortization of drydockcosts is included in depreciation and amortization in the statement ofoperations. For the years ended December 31, 2009, 2008 and 2007,amortization was $12,067, $11,493 and $10,178, respectively. Accumulatedamortization as of December 31, 2009 and 2008 was $19,384 and $22,176,respectively.

 

DEFERRED FINANCING COSTS, NET. Deferred financing costs include fees, commissions and legal expensesassociated with securing loan facilities. These costs are amortized on astraight-line basis over the life of the related debt, which is included ininterest expense. Amortization was $1,724, $1,089 and $959 for the years ended December 31, 2009, 2008and 2007, respectively. Accumulated amortization as of December 31, 2009and 2008 was $4,399 and $2,873, respectively.

 

TIME CHARTER ASSET/LIABILITY. When the Company acquires a vessel with an existing time charter,the fair value of the time charter contract is calculated using the presentvalue (based upon an interest rate which reflects the Company’s weightedaverage cost of capital) of the difference between (i) the contractualamounts to be received pursuant to the charter terms including estimates forprofit sharing to the extent such provisions exist and (ii) management’sestimate of future cash receipts based on its estimate of the fair marketcharter rate, measured over periods equal to the remaining term of the charterincluding option periods to extend the time charter contract where the exerciseof the option by the charterer is considered probable.  Managementevaluates the ongoing appropriateness of the amortization period on a quarterlybasis by reviewing estimated future time charter rates, reported one- tothree-year time charter rates and historical 10-year average time charter ratesand comparing such estimates to the option renewal rates in order to evaluatethe probability of the charterer exercising the renewal option. For time charter contracts where the contractual cash receipts exceedmanagement’s estimate of future cash receipts using the fair market charterrate, the Company has recorded an asset of $3,117 and $4,706 as of December 31,2009 and 2008, respectively, which is included in Other assets on the Company’sbalance sheet.  This asset is beingamortized as a reduction of voyage revenues over the remaining term of suchcharters or such earlier date to the extent the option period is declined bythe charterer.  For time chartercontracts where the management’s estimate of future cash receipts using thefair market charter rate exceed contractual cash receipts, the Company hasrecorded a liability of $671 and $22,590 as of December 31, 2009 and 2008,respectively, which is included in Other noncurrent liabilities on the Company’sbalance sheet.  This liability is beingamortized as an increase in voyage revenues over the remaining term of suchcharters or such earlier date to the extent the option period is declined bythe charterer.  During the third quarterof 2009, the Company accelerated the amortization on four time charters itacquired during the Arlington Acquisition, having been informed by thecharterer that the options would not be exercised.  Accordingly, the Company accelerated theamortization on these contracts such that the net liability would be fullyamortized by the date on which vessel being chartered was redelivered to theCompany.  The incremental effect of thisadjustment reduced the time charter liability and asset by $16,954 and $515,respectively, and resulted in additional Voyage revenues recognized of $16,439for the year ended December 31, 2009.

 

GOODWILL.  The Company followsthe provisions for FASB ASC 350-20-35, *Intangibles-**Goodwill and Other* (SFAS No. 142).  This statement requires that goodwill andintangible assets with indefinite lives be tested for impairment at leastannually and written down with a charge to operations when the carrying amountexceeds the estimated fair value. Goodwill as of December 31, 2009 and2008 was $29,854 and $71,662, respectively. All but $1,245 of goodwill relates to the Arlington Acquisition (seeNote 2).  During the year ended December 31,2009, the Company adjusted the fair value of lubricating oils on board theeight vessels acquired in the Arlington Acquisition which reduced goodwill by$1,234 and increased Prepaid expense and other current assets by the sameamount. Based on annual tests performed, the Company determined that there wasan impairment of goodwill as of December 31, 2009 of $40,872.

 

INCOME TAXES.  The Company isincorporated in the Republic of the Marshall Islands. Pursuant to the incometax laws of the Marshall Islands, the Company is not subject to Marshall Islandsincome tax. Additionally, pursuant to the U.S. Internal Revenue Code, theCompany is exempt from U.S. income tax on its income attributable to theoperation of vessels in international commerce. Pursuant to various taxtreaties, the Company’s shipping operations are not subject to foreign incometaxes. Therefore, no provision for income taxes is required. The Companyadopted FASB ASC 740-25, *Accounting for Uncertaintyin Income Taxes* (FASB Interpretation No. 48 (FIN 48)) effectiveJanuary 1, 2007.  Only tax positionsthat meet the more likely than not recognition threshold at the effective datemay be recognized upon adoption of this pronouncement.  The Company qualifies for an exemptionpursuant to Section 883 of the U.S. Internal Revenue Code of 1986, or theCode, from U.S. federal income tax on shipping income that is derived from U.S.sources. The Company is similarly exempt from state and local income taxation.

 

DEFERRED VOYAGE REVENUE. Deferred voyage revenue primarily relates to cash received fromcharterers prior to it being earned. These amounts are recognized as incomewhen earned in the appropriate future periods.

 

COMPREHENSIVE INCOME.  TheCompany follows FASB ASC 220, *Reporting ComprehensiveIncome* (SFAS No. 130) which establishes standards for reportingand displaying comprehensive income and its components in financial statements.Comprehensive income is comprised of net income, foreign currency translationgains and losses, and unrealized gains and losses related to our interest rateswaps.

 

68

----

 

ACCOUNTING ESTIMATES.  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Significant estimates include vessel and drydockvaluations and the valuation of amounts due from charterers.  Actual results could differ from thoseestimates.

 

EARNINGS PER SHARE.  Basicearnings per share are computed by dividing net income by the weighted averagenumber of common shares outstanding during the year.  Because the Company exchanged 1.34 shares ofits common stock for each share of common stock held by shareholders of GeneralMaritime Subsidiary and exchanged one share of its common stock for each shareheld by shareholders of Arlington to effect the Arlington Acquisition, theweighted average number of common shares outstanding during the year have beenretroactively adjusted to reflect the exchange had it occurred on January 1,2006.  Diluted earnings per sharereflects the potential dilution that could occur if securities or othercontracts to issue common stock were exercised.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS. With the exception of the Company’s Senior Notes (see Note 10), theestimated fair values of the Company’s financial instruments approximate theirindividual carrying amounts as of December 31, 2009 and 2008 due to theirshort-term maturity or the variable-rate nature of the respective borrowings.

 

DERIVATIVE FINANCIALINSTRUMENTS.  In addition to the interestrate swaps described below, which guard against the risk of rising interestrates which would increase interest expense on the Company’s outstandingborrowings, the Company has been party to other derivative financialinstruments to guard against the risks of (a) a weakening U.S. Dollar thatwould make future Euro-based expenditure more costly, (b) rising fuelcosts which would increase future voyage expenses and (c) declines infuture spot market rates which would reduce revenues on future voyages ofvessels trading on the spot market. Except for its interest rate swapsdescribed below, the Company’s derivative financial instruments have nothistorically qualified for hedge accounting for accounting purposes, althoughthe Company considered certain of these derivative financial instruments to beeconomic hedges against these risks. The Company records the fair value of itsderivative financial instruments on its balance sheet as Derivative liabilitiesor assets, as applicable. Changes in fair value in the derivative financialinstruments that do not qualify for hedge accounting, as well as payments madeto, or received from counterparties, to periodically settle the derivativetransactions, are recorded as Other income (expense) on the statement ofoperations as applicable.  See Notes 10,11 and 12 for additional disclosures on the Company’s financial instruments.

 

INTEREST RATE RISKMANAGEMENT.  The Company is exposed tointerest rate risk through its variable rate credit facility.  Pay fixed, receive variable interest rateswaps are used to achieve a fixed rate of interest on the hedged portion ofdebt in order to increase the ability of the Company to forecast interestexpense.  The objective of these swaps isto protect the Company from changes in borrowing rates on the current and anyreplacement floating rate credit facility where LIBOR is consistentlyapplied.  Upon execution the Companydesignates the hedges as cash flow hedges of benchmark interest rate risk underFASB ASC 815, *Derivatives and Hedging* (SFAS No. 133) and establishes effectivenesstesting and measurement processes. Changes in the fair value of the interest rate swaps are recorded asassets or liabilities and effective gains/losses are captured in a component ofother comprehensive income until reclassified to interest expense when thehedged variable rate interest expenses are accrued and paid.  See Notes 10, 11 and 12 for additionaldisclosures on the Company’s interest rate swaps.

 

For the portion of the forward interest rate swaps that are noteffectively hedged, the change in the value and the rate differential to bepaid or received is recognized as income or (expense) from derivativeinstruments and is listed as a component of other (expense) income until suchtime the Company has obligations against which the swap is designated and is aneffective hedge.

 

As of December 31, 2009, the Company is party to pay-fixedinterest rate swap agreements that expire between 2011 and 2013 whicheffectively convert floating rate obligations to fixed rate instruments.  During the years ended December 31,2009, 2008 and 2007, the Company recognized a charge (credit) to othercomprehensive loss (OCI) of $(5,248), $17,597 and $2,412, respectively.  The aggregate net liability in connectionwith a portion of the Company’s interest rate swaps as of December 31,2009 and 2008 was $21,928 and $35,020, respectively, and is presented asDerivative liability on the balance sheet.

 

CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject the Company toconcentrations of credit risk are amounts due from charterers. With respect toaccounts receivable, the Company limits its credit risk by performing ongoingcredit evaluations and, when deemed necessary, requires letters of credit,guarantees or collateral.  The Companyearned 35.8% and 22.0% of its revenues from two customers during the year endedDecember 31, 2009.  The Companyearned 40.8% and 39.5%, respectively, 

 

69

----

 

of its revenues from one customer during the years ended December 31,2008 and 2007, respectively.  Managementdoes not believe significant risk exists in connection with the Company’sconcentrations of credit at December 31, 2009.

 

The Company maintains substantially all of its cash with threehigh-credit quality financial institutions. None of the Company’s cash balances are covered by insurance in theevent of default by this financial institution.

 

FOREIGN EXCHANGE GAINS AND LOSSES. Gains and losses on transactions denominated in foreign currencies arerecorded within the consolidated statement of operations as components ofgeneral and administrative expenses or other income (expense) depending on thenature of the transactions to which they relate.  During the years ended December 31,2009, 2008 and 2007, transactions denominated in foreign currencies resulted inincreases in general and administrative expenses of $0, $72 and $114,respectively, and increases in other expense (income) of $224, $0 and $(198),respectively.

 

RECENT ACCOUNTING PRONOUNCEMENTS.  In September 2006, the FASB issued FASB ASC 820-10, *Fair Value Measurements and Disclosures*(SFAS No. 157). This Statement, as amended through April 2009,defines fair value, establishes a framework for measuring fair value andenhances disclosures about fair value measurements.  The adoption of thisstatement did not have a material impact on the Company’s consolidatedfinancial statements.

 

In December 2007, the FASB issued FASB ASC 805, *Business Combinations* (SFAS No. 141 (Revised 2007),(SFAS No. 141R)). This statement will significantly change the accountingfor business combinations. Under this statement, an acquiring entity will berequired to recognize all the assets acquired and liabilities assumed in atransaction at the acquisition-date fair value with limited exceptions. FASBASC 805 also includes a substantial number of new disclosure requirements andapplies prospectively to business combinations for which the acquisition dateis on or after the beginning of the first annual reporting period beginning onor after December 15, 2008. As the provisions of FASB ASC 805 are appliedprospectively, the impact to the Company cannot be determined until thetransactions occur.

 

In December 2007, the FASB issued FASB ASC 810, *Consolidation* (SFAS No. 160). FASB ASC 810 establishesnew accounting and reporting standards for the noncontrolling interest in asubsidiary and for the deconsolidation of a subsidiary.  This accounting standard is effective forfiscal years, and interim periods within those fiscal years, beginning on orafter December 15, 2008.  Theadoption of this statement on January 1, 2009 did not have a materialimpact on the Company’s financial position, results of operations and cashflows.

 

In March 2008, the FASB issued FASB ASC 815, *Derivative andHedging* (SFAS No. 161). FASB ASC 815 requires enhanced qualitative disclosures about objectivesand strategies for using derivatives, quantitative disclosures about fair valueamounts of and gains and losses on derivative instruments, and disclosuresabout credit-risk-related contingent features in derivative agreements.  FASB ASC 815 is effective for financialstatements issued for fiscal years and interim periods beginning after November 15,2008. The adoption of FASB ASC 815 did not have a material impact on theCompany’s financial position, results of operations and cash flows.

 

In May 2009, the FASB issued FASB ASC855, *Subsequent Events* (SFAS No. 165),which provides guidance to establish general standards of accounting for anddisclosures of events that occur after balance sheet date but before financialstatements are issued or are available to be issued. FASB ASC 855 is effectivefor interim or fiscal periods ending after June 15, 2009. On February 24,2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-09, *Amendments to Certain Recognition and Disclosure Requirements*,which is effective immediately. The ASU amends FASB ASC 855, to address certainimplementation issues related to an entity’s requirement to perform anddisclose subsequent events procedures. The amendments that are specificallyrelevant include the requirement that SEC filers evaluate subsequent eventsthrough the date the financial statements are issued, and the exemption of SECfilers from disclosing the date through which subsequent events have beenevaluated. The adoption of FASB ASC 855 and ASU 2010-09 did not have a materialimpact on the Company’s financial position, results of operations and cashflows.

 

**2.**                        ARLINGTON ACQUISITION

** **

On August 5, 2008, General Maritime Subsidiary entered into amerger agreement with Arlington in order to increase the size of the Company’sfleet and increase the percentage of its vessels on time charter.  The merger was consummated on December 16,2008 at which time the Company issued 15.5 million shares of its common stockin exchange for the 15.5 million shares owned by Arlington shareholders.  The shares issued were valued pursuant toFASB ASC 805 (SFAS No. 141), which required the Company to use the marketprice of General Maritime Subsidiary common shares over a reasonable period oftime before and after the terms of the merger were agreed upon which wasdetermined to be the average closing price of General Maritime Subsidiarycommon shares for a period of two days before and two days after August 6,2008 (date of announcement of the merger). Consequently, the value of the shares issued by the Company to acquireArlington was $281,568.  This amount,together with approximately $8,216 of closing costs incurred by the Company toeffect the merger, represents the total amount paid for Arlington.  A summary of the consideration paid, the fairvalue of the net assets acquired and resulting goodwill is as follows:

 
| Consideration paid:          |   |    |    |
|------------------------------|--------|---------|---------|
| Common stock issued          |   | $       | 281,568 |   |
| Merger related closing costs |   | 8,216   |    |
|                         |   | 289,784 |    |
|                              |        |         |         |  |

 

70

----

 
| Fair value of net assets acquired: |   |     |   |
|------------------------------------|--------|----------|--------|
| Cash                               |   | 14,898   |   |
| Prepaid expenses                   |   | 222      |   |
| Due from charterers                |   | 1,237    |   |
| Vessels                            |   | 476,000  |   |
| Other assets                       |   | 9,512    |   |
| Accrued expenses                   |   | (12,652  | )      |
| Deferred voyage revenue            |   | (2,707   | )      |
| Long-term debt                     |   | (229,500 | )      |
| Derivative liability               |   | (15,054  | )      |
| Other liabilities                  |   | (22,590  | )      |
| Fair value of net assets acquired  |   | 219,366  |   |
| Goodwill                           |   | $        | 70,418 |   |
|                                    |        |          |        |  |

 

Goodwill arose as a result of the decline in the fair value of thevessels acquired during the period between the date on which the merger wasagreed to and the date on which the merger was actually consummated.

 

Pro forma income statement data for the years for the years ended December 31,2008 and 2007 is presented below and give effect to the Arlington Acquisitionhad it taken place on January 1, 2007:

 
| ** **                        | ** ** | **Year ended December 31,** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|
| ** **                        | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| ** **                        | ** ** | **(unaudited)**                  | ** ** | **(unaudited)** | ** ** |
| Revenue                           |       | $                                | 394,197    |   | $ | 325,214 |   |
| Income before extraordinary items |       | 62,476                           |       | 49,544 |   |
| Net income                        |       | 62,476                           |       | 49,544 |   |
|                              |       |                             |       |   |   |
| Basic earnings per share          |       | $                                | 1.15       |   | $ | 0.88 |   |

 

The pro forma income statements above exclude non-recurring items suchas the $22,000 compensation accruals for the cash payment to PeterC. Georgiopoulos in connection with the termination of his employmentarrangements with the Company in connection with the Company’s executivetransition plan and the cash payment in lieu of a bonus of $8,000 paid to Mr. Georgiopoulospursuant to the executive transition plan and approximately $10,165 of costsincurred by Arlington pursuant to the Arlington Acquisition, inclusive ofseverance costs.

 

**3.****                       ****GOODWILL IMPAIRMENT**

 

FASB ASC 350-20-35, *Intangibles-**Goodwill and Other*(SFAS No. 142) adopts an aggregate view of goodwill and bases theaccounting for goodwill on the units of the combined entity into which anacquired entity is integrated (those units are referred to as ReportingUnits).   A Reporting Unit is anoperating segment as defined in FASB ASC 280, *Disclosuresabout Segments of an Enterprise and Related Information* (SFAS No. 131),or one level below an operating segment. The Company considers each vessel tobe an operating segment and a reporting unit. Accordingly, goodwill, substantially all of which arose in the ArlingtonAcquisition, has been allocated to these eight vessels acquired based on theproportionate fair value of the vessels at the date of acquisition.

 

FASB ASC 350-20-35provides guidance for impairment testing of goodwill which is not amortized.Other than goodwill, the Company does not have any other intangible assets thatare not amortized. Goodwill is tested for impairment using a two-step processthat begins with an estimation of the fair value of the Company’s reportingunits. The first step is a screen for potential impairment and the second stepmeasures the amount of impairment, if any.  The first step involves a comparison of the estimated fair value of areporting unit with its carrying amount. If the estimated fair value of the reporting unit exceeds the carryingvalue, goodwill of the reporting unit is considered unimpaired.  Conversely, if the carrying amount of thereporting unit exceeds its estimated fair value, the second step is performedto measure the amount of impairment, if any. The second step of the goodwillimpairment test compares the implied fair value of the reporting unit’sgoodwill with the carrying amount of that goodwill. The implied fair value ofgoodwill is determined by allocating the estimated fair value of the reportingunit to the estimated fair value of its existing assets and liabilities in amanner similar to a purchase price allocation. The unallocated portion of theestimated fair value of the reporting unit is the implied fair value ofgoodwill. If the implied fair value of goodwill is less than the carryingamount, an impairment loss, equivalent to the difference, is recorded as areduction of goodwill and a charge to operating expense.

 

71

----

 

In the Company’s 2009annual assessment of goodwill for impairment, the Company estimates future netcash flows of operating the vessels in its fleet to which goodwill has beenallocated over their remaining useful lives. For this purpose, over their remaining useful lives, the Company usesthe trailing 10-year industry average rates for each vessel class recognizingthat the transportation of crude oil and petroleum products is cyclical innature and is subject to wide fluctuation in rates, and management believes theuse of a 10-year average is the best measure of future rates over the remaininguseful life of our fleet, adjusted for time charter contracts in place and adiscount for the first two years. Also for this purpose, the Company uses autilization rate based on the Company’s historic average.  For the 10-year period ended December 31,2009, the industry average rates used in our assessment for Aframax, Suezmax,VLCC, Panamax and Handymax vessels were $35,171, $46,811, $59,041, $29,698 and$23,319, respectively.

 

The Company expects toincur the following costs over the remaining useful lives of the vessels in ourfleet:

 

·                  Vessel operating costs based on historicand budgeted costs adjusted for inflation,

 

·                  Drydocking costs based on historic costsadjusted for inflation, and

 

·                  General and administrative costs adjustedfor inflation.

 

The more significantfactors which could impact management’s assumptions regarding voyage revenues,drydocking costs and general and administrative expenses include, withoutlimitation: (a) loss or reduction in business from our significantcustomers; (b) changes in demand; (c) material decline in rates inthe tanker market; (d) changes in production of or demand for oil andpetroleum products, generally or in particular regions; (e) greater thananticipated levels of tanker new building orders or lower than anticipatedrates of tanker scrapping; (f) changes in rules and regulationsapplicable to the tanker industry, including, without limitation, legislationadopted by international organizations such as the International MaritimeOrganization and the European Union or by individual countries; (g) actionstaken by regulatory authorities; and (h) increases in costs includingwithout limitation: crew wages, insurance, provisions, repairs and maintenance.

 

Step 1 ofimpairment testing consists of determining and comparing the fair value of areporting unit, calculated primarily using discounted expected future cashflows, to the carrying value of the reporting unit. Based on performance ofthis test, it was determined that the Arlington Acquisition goodwill  allocated to all eight reporting units wereimpaired.  The Company then undertook thesecond step of the goodwill impairment test which involves the proceduresdiscussed above.  As a result of thistesting, management determined that all of the goodwill allocated to the fourHandymax vessel reporting units and two Panamax vessel reporting units wasfully impaired, which resulted in a write-off at December 31, 2009 of$40,872.  Conversely, the step 2 test didnot result in any impairment charge related to the goodwill allocated to theCompany’s two VLCC vessel reporting units.

 

The Company alsohad $1,244 of goodwill associated with a 2001 transaction.  Such goodwill is allocated to five Aframaxvessel reporting units.  This goodwillwas also tested for impairment, but each reporting unit passed step 1,indicating that there was no impairment.

 

**4.**                        CASH FLOW INFORMATION

** **

The Company excluded from non-cash investing activities in theConsolidated Statement of Cash Flows items included in accounts payable andaccrued expenses for the purchase of Other fixed assets of approximately $1,430for the year ended December 31, 2009.

 

The Company excluded from non-cash investing activities in theConsolidated Statement of Cash Flows items included in accounts payable andaccrued expenses for the purchase of Vessels, Other fixed assets, and costs ofeffecting the Arlington Acquisition of approximately $550, $307 and $846, respectively,for the year ended December 31, 2008. The fair value of the net assets of Arlington that the Company acquiredon December 16, 2008 in exchange for common stock of the Company valued at$281,568 is a non-cash transaction and the composition of those net assets isshown in Note 2.

 

The Company excluded from non-cash investing activities in theConsolidated Statement of Cash Flows items included in accounts payable andaccrued expenses for the purchase of Vessels, Vessel construction in progressand Other fixed assets of approximately $63, $422 and $982, respectively, forthe year ended December 31, 2007.

 

**5.**                        VESSEL ACQUISITIONS/DELIVERIES

** **

During the fourth quarter of 2008, the Company acquired two double-hullAframax vessels built in 2002 for an aggregate purchase price of $137,000.

 

Pursuant to the Arlington Acquisition on December 16, 2008 (seeNote 2), the Company acquired the two VLCCs, two Panamax vessels and fourHandymax vessel vessels.

 

72

----

 

**6.****                                     ****EARNINGS PER COMMON SHARE**

 

Thecomputation of basic earnings per share is based on the weighted average numberof common shares outstanding during the year. Because the Company exchanged1.34 shares of its common stock for each share of common stock held byshareholders of General Maritime Subsidiary and exchanged one share of itscommon stock for each share held by shareholders of Arlington to effect theArlington Acquisition, the weighted average number of common shares outstandingduring the year has been retroactively adjusted to reflect the exchange had itoccurred on January 1, 2006. The computation of diluted earnings per shareassumes the exercise of all dilutive stock options using the treasury stockmethod and the lapsing of restrictions on unvested restricted stock awards, forwhich the assumed proceeds upon lapsing the restrictions are deemed to be theamount of compensation cost attributable to future services and not yetrecognized using the treasury stock method, to the extent dilutive. For theyears ended December 31, 2009, 2008 and 2007, all stock options wereconsidered to be dilutive.

 

Thecomponents of the denominator for the calculation of basic earnings per shareand diluted earnings per share are as follows:

 
| ** **                                           | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                           | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                 |       |                             |       |   |   |   |   |
| Common shares outstanding, basic:                    |       |                             |       |   |   |   |   |
| Weighted average common shares outstanding, basic    |       | 54,650,943                       |       | 39,463,257 |   | 40,739,766 |   |
|                                                 |       |                             |       |   |   |   |   |
| Common shares outstanding, diluted:                  |       |                             |       |   |   |   |   |
| Weighted average common shares outstanding, basic    |       | 54,650,943                       |       | 39,463,257 |   | 40,739,766 |   |
| Stock options                                        |       | —                           |       | 1,097 |   | 5,814 |   |
| Restricted stock awards                              |       | —                           |       | 1,097,279 |   | 1,079,481 |   |
|                                                 |       |                             |       |   |   |   |   |
| Weighted average common shares outstanding,  diluted |       | 54,650,943                       |       | 40,561,633 |   | 41,825,061 |   |

 

Due to the net loss realized for the yearended December 31, 2009, potentially dilutive restricted stock awards totaling992,773 shares, were determined to be anti-dilutive.

 

During January 2008, the Company repurchased and retired 953,142shares of its common stock for $16,379.

 

**7.**                        PREPAID EXPENSES AND OTHER CURRENT ASSETS

** **

Prepaid expenses and other current assets consist of the following:

 
| ** **                                | ** ** | **December 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Bunkers and lubricants inventory          |       | $                           | 14,605     |                        | $          | 6,678 |   |
| Insurance claims receivable               |       | 11,987                      |       | 11,999                      |       |
| Collateral deposit for interest rate swap |       | 12,081                      |       | —                      |       |
| Prepaid insurance                         |       | 2,543                       |       | 2,294                       |       |
| Other                                     |       | 5,519                       |       | 5,485                       |       |
| Total                                     |       | $                           | 46,735     |                        | $          | 26,456 |   |

 

Insurance claims receivable consist substantially of payments made bythe Company for repairs of vessels that the Company expects, pursuant to theterms of the insurance agreements, to recover from the carrier.

 

73

----

 

**8.**                        OTHER FIXED ASSETS

** **

Other fixed assets consist of the following:

 
| ** **                        | ** ** | **December 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|-----------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Other fixed assets:               |       |                        |       |                        |       |
|                              |       |                        |       |                        |       |
| Furniture, fixtures and equipment |       | $                           | 3,694      |                        | $          | 4,111 |   |
| Vessel equipment                  |       | 18,461                      |       | 13,144                      |       |
| Computer equipment                |       | 1,019                       |       | 1,202                       |       |
| Other                             |       | 71                          |       | 71                          |       |
|                              |       |                        |       |                        |       |
| Total cost                        |       | 23,245                      |       | 18,528                      |       |
|                              |       |                        |       |                        |       |
| Less: accumulated depreciation    |       | 9,994                       |       | 7,021                       |       |
| Total                             |       | $                           | 13,251     |                        | $          | 11,507 |   |

 

**9.**                        ACCOUNTS PAYABLE AND ACCRUED EXPENSES

** **

Accountspayable and accrued expenses consist of the following:

 
| ** **             | ** ** | **December 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Accounts payable       |       | $                           | 14,137     |                        | $          | 7,314 |   |
| Accrued operating      |       | 10,951                      |       | 36,518                      |       |
| Accrued administrative |       | 8,251                       |       | 11,332                      |       |
| Total                  |       | $                           | 33,339     |                        | $          | 55,164 |   |

 

**10.**                 LONG-TERM DEBT

** **

Long-termdebt, net of discount, consists of the following:

 
| ** **                           | ** ** | **December 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| 2005 Credit Facility                 |       | $                           | 726,000    |                        | $          | 761,000 |   |
|                                 |       | —                      |       | —                      |       |
| RBS Facility                         |       | —                      |       | 229,500                     |       |
|                                 |       |                        |       |                        |       |
| Senior Notes, net of $7,391 discount |       | 292,609                     |       | —                      |       |
|                                 |       |                        |       |                        |       |
| Long-term debt                       |       | $                           | 1,018,609  |                        | $          | 990,500 |   |

 

**Senior Notes**

 

On November 12,2009, the Company and certain of the Company’s direct and indirect subsidiaries(the “Subsidiary Guarantors”) issued $300,000 of 12% Senior Notes which are dueNovember 15, 2016.  Interest on theSenior Notes is payable semiannually in cash in arrears each May 15 and November 15,commencing on May 15, 2010.  TheSenior Notes are senior unsecured obligations of the Company and rank equallyin right of payment with all of the Company and the Subsidiary Guarantor’sexisting and future senior unsecured indebtedness.  The Senior Notes are guaranteed on a seniorunsecured basis by the Subsidiary Guarantors. The Subsidiary Guarantors,jointly and severally, guarantee the payment of principal of, premium, if any,and interest on the Senior Notes on an unsecured basis. If the Company isunable to make payments on the Senior Notes when they are due, any Subsidiary Guarantorsare obligated to make them instead.  Theproceeds of the Senior Notes, prior to payment of fees and expenses, were$292,536.  As of December 31, 2009,the discount on the Senior Notes is $7,391. This discount is being amortized as interest expense over the term ofthe Senior Notes using the effective interest method.

 

The Company has theoption to redeem all or a portion of the Senior Notes at any time on or after November 15,2013 at fixed redemption prices, plus accrued and unpaid interest, if any, tothe date of redemption, and at any time prior to November 15, 2013 at amake-whole price.  In addition, at anytime prior to November 15, 2012, the Company may, at its option, redeem upto 35% of the Senior Notes with the proceeds of certain equity offerings.

 

74

----

 

If the Companyexperiences certain kinds of changes of control, the Company must offer topurchase the Senior Notes from holders at 101% of their principal amount plusaccrued and unpaid interest.  Theindenture pursuant to which the Senior Notes were issued contains covenantsthat, among other things, limit the Company’s ability and the ability of any ofits “restricted” subsidiaries to (i) incur additional debt, (ii) makecertain investments or pay dividends or distributions on its capital stock orpurchase, redeem or retire capital stock, (iii) sell assets, includingcapital stock of its subsidiaries, (iv) restrict dividends or otherpayments by its subsidiaries, (v) create liens that secure debt, (vi) enterinto transactions with affiliates and (vii) merge or consolidate withanother company. These covenants are subject to a number of exceptions,limitations and qualifications set forth in the indenture.

 

**2005Credit Facility**

** **

On October 26, 2005, General Maritime Subsidiary entered into arevolving credit facility (the “2005 Credit Facility”) with a syndicate ofcommercial lenders, and on October 20, 2008, the 2005 Credit Facility wasamended and restated to give effect to the Arlington Acquisition and theCompany was added as a loan party. The 2005 Credit Facility was used torefinance its then existing term borrowings. The 2005 Credit Facility, as amended and restated, which has beenfurther amended on various dates through December 18, 2009, provides atotal commitment of $749,813.

 

On February 24, 2009, the Company amended the 2005 Credit Facilityto accelerate the $50,063 amortization of the outstanding commitment scheduledto occur on October 26, 2009 to February 24, 2009 and to pledge the *Genmar Daphne* as additional collateral under the facility.

 

On October 27, 2009, the Company entered into an amendment withthe lenders under its 2005 Credit Facility, which became effective on November 12,2009, when the Company completed its Senior Notes offering (describedabove).  The Company agreed with thelenders in which  additional vessels maybe pledged as additional collateral under the 2005 Credit Facility.  Pursuant to this amendment, the 2005 CreditFacility was amended to, among other things:

 

·                  Reducethe commitment under the 2005 credit facility to $749,813, the result of whichis that the next scheduled reduction in total commitment will be April 26,2011.

 

·                  Amendthe net debt to EBITDA maintenance covenant to increase the permitted ratio to6.5:1.0 to and including September 30, 2010, to 6.0:1.0 from December 31,2010 until September 30, 2011 and to 5.5:1.0 thereafter.

 

·                  Amendthe collateral vessel appraisal reporting from annually to semi-annually andrequire the Company to provide a collateral vessel appraisal report datedwithin 30 days of the delivery date thereof.

 

·                  Restrictthe Company’s quarterly dividends to no more than $0.125 per share.

 

·                  Increasethe applicable interest rate margin over LIBOR to 250 basis points from 100 basispoints and the commitment fee to 87.5 basis points from 35 basis points.

 

·                  Permitsubsidiary guarantees in a qualified notes offering and obligate the Company todeliver guarantees to the lenders for all subsidiaries that guarantee the notesissued in a qualified notes offering.

 

On December 18, 2009, the Company entered into an amendment withthe lenders under the 2005 Credit Facility clarifying certain provisions.  On December 23, 2009, four additionalvessels were pledged to the lenders.

 

Under the 2005 Credit Facility, as amended and restated, the Company ispermitted to pay quarterly cash dividends limited to $0.125 per share.   The 2005 Credit Facility, as amended andrestated, currently provides for semiannual reductions of $50,063 commencing onMay 26, 2011 and a bullet reduction of $599,625 on October 26, 2012.Up to $50,000 of the 2005 Credit Facility is available for the issuance ofstandby letters of credit to support obligations of the Company and itssubsidiaries that are reasonably acceptable to the issuing lenders under the2005 Credit Facility. As of December 31, 2009, the Company has outstandingletters of credit aggregating $5,008 which expire between March 2010 and December 2010,leaving $44,992 available to be issued.

 

Under the 2005 Credit Facility, as amended and restated, the Company isnot permitted to reduce the sum of (A) unrestricted cash and cashequivalents plus (B) the lesser of (1) the total available unutilizedcommitment and (2) $25,000, to be less than $50,000. In addition, theCompany will not permit its net debt to EBITDA ratio to be greater than 6.5:1.0to and including September 30, 2010, to 6.0:1.0 from December 31,2010 until September 30, 2011 and to 5.5:1.0 thereafter.

 

75

----

 

The 2005 Credit Facility, as amended and restated, carries an interestrate of LIBOR plus 250 basis points on the outstanding portion and a commitmentfee of 87.5 basis points on the unused portion. As of December 31, 2009and 2008, $726,000 and $761,000, respectively, of the facility is outstanding.The 2005 Credit Facility is secured by 26 of the Company’s double-hull vesselswith an aggregate carrying value as of December 31, 2009 of $935,941, aswell as the Company’s equity interests in its subsidiaries that own theseassets, insurance proceeds of the collateralized vessels, and certain depositaccounts related to the vessels. Each subsidiary of the Company with anownership interest in these vessels provides an unconditional guaranty ofamounts owing under the 2005 Credit Facility. The Company also provides a guarantee and has pledged its equityinterests in General Maritime Subsidiary.

 

The Company’s ability to borrow amounts under the 2005 Credit Facilityis subject to satisfaction of certain customary conditions precedent, andcompliance with terms and conditions contained in the credit documents. Thesecovenants include, among other things, customary restrictions on the Company’sability to incur indebtedness or grant liens, pay dividends or make stockrepurchases (except as otherwise permitted as described above), engage inbusinesses other than those engaged in on the effective date of the 2005 CreditFacility and similar or related businesses, enter into transactions withaffiliates, and merge, consolidate, or dispose of assets. The Company is alsorequired to comply with various financial covenants, including with respect tothe Company’s minimum cash balance, collateral maintenance, and net debt toEBITDA ratio. The amended and restated Credit Agreementdefines EBITDA as net income before net interest expense, provision for incometaxes, depreciation and amortization, non-cash management incentivecompensation, as amended and restated. If the Company does not comply with the variousfinancial and other covenants and requirements of the 2005 Credit Facility, asamended and restated, the lenders may, subject to various customary curerights, require the immediate payment of all amounts outstanding under thefacility.

 

As of December 31, 2009, the Company is incompliance with all of the financial covenants under its 2005 Credit Facilityand its Senior Notes.

 

Interest rates during the year ended December 31, 2009 ranged from1.25% to 2.81% on the 2005 Credit Facility.

 

**RBS Facility**

 

Followingthe Arlington Acquisition, Arlington remained a party to its $229,500 facilitywith The Royal Bank of Scotland plc. (the “RBS Facility”).  The RBS Facility was fully prepaid inaccordance with its terms for $229,500 on November 13, 2009 using proceedsof the Senior Notes offering and is no longer outstanding.   This facility had been secured by firstpriority mortgages over the Arlington Vessels, assignment of earnings andinsurances and Arlington’s rights under the time charters for the vessels andthe ship management agreements, a pledge of the shares of Arlington’swholly-owned subsidiaries and a security interest in certain of Arlington’sbank accounts. The RBS Facility with The Royal Bank of Scotland was to matureon January 5, 2011. Borrowings under the RBS Facility bore interest atLIBOR plus a margin of 125 basis points. In connection with the RBS Facility, the Company is party to an interestrate swap agreement with The Royal Bank of Scotland.   This swap was de-designated as a hedge as ofNovember 13, 2009 because the Company did not have sufficientfloating-rate debt outstanding set at 3-month LIBOR subsequent to the repaymentof the RBS Facility against which this swap’s notional principal amount of$229,500 could be designated.  As of December 31,2009, the Company rolled over at 3-month LIBOR all of its $726,000 outstandingbalance on its 2005 Credit Facility and the RBS Swap was re-designated forhedge accounting against this debt.  Thisinterest rate swap remains outstanding as of December 31, 2009 and isdescribed below.

 

During the years ended December 31, 2009, 2008 and 2007, theCompany paid dividends of $93,965, $62,533 and $555,503, respectively.  Included in the dividends paid during theyear ended December 31, 2007 is a special dividend of $11.19 per share of$486,491.

 

A repayment schedule of outstanding borrowings at December 31,2009 is as follows:

 
| **PERIOD  ENDING DECEMBER 31,** | ** ** | **2005 Credit  Facility** | ** **  | **Senior  Notes** | ** ** | **TOTAL**   | ** ** |
|---------------------------------|------------|---------------------------|-------------|-------------------|------------|-------------|------------|
| 2010                            |       | $                         | —      |              | $          | —      | ** ** | **$** | **—** | ** ** |
| 2011                            |       | 76,312                    |        | —            | ** ** | **76,312**  | ** ** |
| 2012                            |       | 649,688                   |        | —            | ** ** | **649,688** | ** ** |
| 2013                            |       | —                    |        | —            | ** ** | **—**  | ** ** |
| 2014                            |       | —                    |        | —            | ** ** | **—**  | ** ** |
| Thereafter                      |       | —                    |        | 300,000           | ** ** | **300,000** | ** ** |
|                            | ** ** | **$**                     | **726,000** | ** **        | **$**      | **300,000** | ** ** | **$** | **1,026,000** | ** ** |

** **

**76**

----

** **

**InterestRate Swap Agreements**

** **

On December 31, 2009, the Company is party to five interest rateswap agreements to manage interest costs and the risk associated with changinginterest rates. The notional principal amounts of these swaps aggregate$579,500, the details of which are as follows:

 
| **Notional  Amount** | ** ** | **Expiration  Date** | ** ** | **Fixed  Interest  Rate** | ** ** | **Floating  Interest Rate** | ** **  | **Counterparty**        | ** ** |
|----------------------|------------|----------------------|------------|---------------------------|------------|-----------------------------|-------------|-------------------------|------------|
| $                    | 100,000    |                 | 10/1/2010  |                      | 4.748      | %                           | 3 mo. LIBOR |                    | Citigroup  |   |
| 100,000              |       | 9/30/2012            |       | 3.515                     | %          | 3 mo. LIBOR                 |        | Citigroup               |       |
| 75,000               |       | 9/28/2012            |       | 3.390                     | %          | 3 mo. LIBOR                 |        | DnB  NOR Bank           |       |
| 75,000               |       | 12/31/2013           |       | 2.975                     | %          | 3 mo. LIBOR                 |        | Nordea                  |       |
| 229,500              |       | 1/5/2011             |       | 4.983                     | %          | 3 mo. LIBOR                 |        | Royal  Bank of Scotland |       |
|                      |            |                      |            |                           |            |                             |             |                         |            |  |

 

The changes in the notional principal amounts of the swaps during theyears ended December 31, 2009, 2008 and 2007 are as follows:

 
| ** **                                    | ** ** | **December 31,  2009** | ** ** | **December 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|
| Notional  principal amount, beginning of year |       | $                      | 579,500    |                   | $          | 100,000                |       | $ | — |   |
| Additions                                     |       | —                 |       | 479,500                |       | 100,000                |       |
| Amortization of  swaps                        |       | —                 |       | —                 |       | —                 |       |
| Notional  principal amount, end of the year   |       | $                      | 579,500    |                   | $          | 579,500                |       | $ | 100,000 |   |

 

The Company’s 26 vessels which collateralize the 2005 Credit Facilityalso serve as collateral for the interest rate swap agreements with Citigroup,DnB Nor Bank and Nordea, subordinated to the outstanding borrowings andoutstanding letters of credit under the 2005 Credit Facility.  The interest rate swap agreement with theRoyal Bank of Scotland is collateralized by a $12,247 deposit held by thatinstitution as of December 31, 2009 from which the quarterly cashsettlements are paid.  Of this deposit,$12,081 is included in Prepaid expenses (see Note 7) and other current assetsand the balance of $166 is included in Other assets.

 

Interest expense pertaining to interest rate swaps for the years ended December 31,2009, 2008 and 2007 was $11,635, $1,853 and $(122), respectively.

 

TheCompany would have paid a net amount of approximately $21,928 to settle itsoutstanding swap agreement based upon its aggregate fair value as of December 31,2009. This fair value is based upon estimates received from financialinstitutions.  At December 31, 2009, $12,692 of AccumulatedOCI is expected to be reclassified into income over the next 12 monthsassociated with interest rate derivatives.

 

Interest expense under all of the Company’s credit facilities, SeniorNotes and interest rate swaps aggregated $37,344, $29,388 and $25,541 for theyears ended December 31, 2009, 2008 and 2007, respectively.  Interest expense excludes interest that wascapitalized  associated with theconstruction of certain Suezmax vessels $0, $119 and $2,385 for the years endedDecember 31, 2009, 2008 and 2007, respectively.

 

The Company may issue debt securities in the future. All orsubstantially all of the subsidiaries of the Company may be guarantors of suchdebt. Any such guarantees are expected to be full, unconditional and joint andseveral.  Each of the Company’s subsidiaries is 100% owned by the Company.In addition, the Company has no independent assets or operations outside of itsownership of the subsidiaries and any such subsidiaries of the Company otherthan the subsidiary guarantors are expected to be minor. Other thanrestrictions contained (i) in the RBS Facility arising from any events ofdefault and (ii) under applicable provisions of the corporate, limitedliability company and similar laws of the jurisdictions of formation of thesubsidiaries of the Company, no restrictions exist on the ability of thesubsidiaries to transfer funds to the Company through dividends, distributionsor otherwise.

 

**11.**                 DERIVATIVE FINANCIAL INSTRUMENTS

** **

In addition to interest rate swap agreements (see Note 10), the Companyis party to the following derivative financial instruments:

 

*Foreign currency*.  On October 29, 2007, the Company entered into twocall options to purchase at $1.45 per Euro one million Euros on January 16,2008 and one million Euros on April 16, 2008.  The Company paid an aggregate of $39 forthese options.  As of December 31,2007, the fair value of these options based on the exchange rate on that dateresulted in an asset of $21 which is 

 

77

----

 

recorded as Derivative asset on the Company’s balance sheet.  The related unrealized gain for the yearended December 31, 2007 of $21 is classified as Other income (expense) onthe statement of operations.

 

The Company paid an aggregate of $126 for options to purchase Eurosduring the year ended December 31, 2008, which is recorded as a realizedloss and is classified as Other income (expense) on the statement ofoperations.

 

*Fuel. *During January 2008, the Companyentered into an agreement with a counterparty to purchase 5,000 MT per month of*Gulf Coast 3%* fuel oil for $438.56/MTand sell the same amount of *Rotterdam 3.5% barges*fuel oil for $442.60/MT.  This contractsettled on a net basis at the end of each calendar month from July 2008 throughSeptember 2008 based on the average daily closing prices for thesecommodities for each month.  During theyear ended December 31, 2008, the Company recognized a realized gain of$164, which is classified as Other income (expense) on the statement ofoperations.

 

Also during January 2008, the Company entered into an agreementwith a counterparty for the five-month period from February 2008 to June 2008which stipulated a spread between *Gulf Coast 3%*fuel oil and *Houston 380* fuel oil of$11.44/MT.  The notional amount of fueloil was 2,000 MT each month and the prices of each commodity were determinedbased on the average closing trading prices during each month.  To the extent the spread was less than$11.44/MT, the Company was to pay the counterparty; to the extent the spread isgreater than $11.44/MT the Company was to collect from the counterparty.  Because this contract expired on June 30,2008, the fair value of this contract is $0 as of December 31, 2008.  During the year ended December 31, 2008,the Company recognized a realized gain of $155 which is classified as Otherincome (expense) on the statement of operations.

 

During November 2008, the Company entered into an agreement with acounterparty to purchase 1,000 MT per month of *Houston 380ex wharf* fuel oil for $254/MT. This contract will settle on a net basis at the end of each calendarmonth from January 2009 through March 2009 based on the average dailyclosing price for this commodity for each month.  During the years ended December 31, 2009and 2008, the Company recognized an unrealized (gain) loss of $(132) and $132,respectively, which is classified as Other income (expense) on the statement ofoperations.  During the years ended December 31,2009 and 2008, the Company recognized a realized gain of $10 and $0,respectively, which is classified as Other income (expense) on the statement ofoperations.

 

The Company considers all of its fuel derivative contracts to bespeculative.

 

*Freight rates. *During theyears ended December 31, 2008 and 2007, the Company has taken net shortpositions in freight derivative contracts, which reduce a portion of theCompany’s exposure to the spot charter market by creating synthetic timecharters. These freight derivative contracts involve contracts to provide afixed number of theoretical voyages at fixed rates.  These contracts net settle each month withthe Company receiving a fixed amount per day and paying a floating amount basedon the monthly Baltic Tanker Index (“BITR”), which is a worldscale index, and,under certain contracts, a specified bunker price index.  The duration of a contract can be one month,quarterly or up to three years with open positions settling on a monthly basis.The BITR averages rates received in the spot market by cargo type, crude oiland refined petroleum products, and by trade route.  The Company uses freight derivative contractsas economic hedges, but has not designated them as hedges for accountingpurposes. As such, changes in the fair value of these contracts are recorded tothe Company’s statement of operations as Other income (expense) in eachreporting period.

 

During November 2007, the Company entered into three freightderivative contracts which expired on December 31, 2008.  The notional amount is based on a computationof the quantity of cargo (or freight) the contract specifies, the contract rate(based on a certain trade route) and a flat rate determined by the market on anannual basis. Each contract is marked to market for the specified cargo andtrade route. The fair value of forward freight agreements is the estimatedamount that the Company would receive or pay to terminate the agreements at thereporting date. The Company took short positions on two of these contracts fora VLCC tanker route for 45,000 metric tons and a long position for 30,000metric tons of a Suezmax tanker route. The Company considers all of these contracts to be speculative.  At December 31, 2008, these freightderivatives had an aggregate notional value of $0, because they expired on thatdate. The net fair value of $737 at December 31, 2007 of these freightderivatives was settled as of December 31, 2007 by the clearinghouse ofthese agreements whereby deposits the Company had with the clearinghouse havebeen reduced by a like amount, resulting in a realized loss of $1,228 and $737for the years ended December 31, 2008 and 2007, respectively.

 

During May 2006, the Company entered into a freight derivativecontract with the intention of fixing the equivalent of one Suezmax vessel to atime charter equivalent rate of $35,500 per day for a three year periodbeginning on July 1, 2006.  Thiscontract net settles each month with the Company receiving $35,500 per day andpaying a floating amount based on the monthly BITR and a specified bunker priceindex.  As of December 31, 2009 and2008, the fair market value of the freight derivative, which was determinedbased on the aggregate discounted cash flows using estimated future ratesobtained from brokers, resulted in an asset to the Company of $0 and $568,respectively.  The Company recorded anunrealized gain (loss) of $(568), $644 and ($2,256) for the years ended December 31,2009, 2008 and 2007, respectively, which is reflected on the Company’sstatement of operations as Other income (expense).  The Company has recorded an aggregaterealized gain (loss) gain of $720, $(10,217) and $(1,247) for the years ended December 31,2009, 2008 and 2007, respectively, which is classified as Other income(expense) on the statement of operations.

 

78

----

 

A summary of derivative assets and liabilities on the Company’s balancesheets is as follows:

 
| ** **            | ** ** | **December 31, 2009**   | ** ** | **December 31, 2008** | ** ** |
|-----------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **            | ** ** | **Interest  Rate Swap** | ** ** | **Total**             | ** ** | **Interest  Rate Swap** | ** ** | **Freight  Derivative** | ** ** | **Bunker  Derivative** | ** ** | **Total** | ** ** |
|                  |       |                    |       |                  |       |   |   |   |   |   |   |   |   |
| Current asset         |       | $                       | —     |                  | $          | — |   | $ | — |   | $ | 568 |   | $ | — |   | $ | 568 |   |
| Noncurrent asset      |       | 417                     |       | 417                   |       | — |   | — |   | — |   | — |   |
| Current  liability    |       | (19,777                 | )          | (19,777               | )          | (17,203 | ) | — |   | (132 | ) | (17,335 | ) |
| Noncurrent  liability |       | (2,568                  | )          | (2,568                | )          | (17,817 | ) | — |   | — |   | (17,817 | ) |
|                  |       |                    |       |                  |       |   |   |   |   |   |   |   |   |
|                  |       | $                       | (21,928    | )                     | $          | (21,928 | ) | $ | (35,020 | ) | $ | 568 |   | $ | (132 | ) | $ | (34,584 | ) |

 

Tabular disclosure of financial instrumentsunder FASB ASC 815 required by FASB ASC 820 are as follows:

 
| ** **                                                              | ** ** | **Liability Derivatives**        | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                              | ** ** | **December 31, 2009**            | ** ** |
| ** **                                                              | ** ** | **Balance Sheet Location**       | ** ** | **Fair Value** | ** ** |
| ** **                                                              |       |                             |       |   |   |
| **Derivatives  designated as hedging instruments under SFAS No. 133**   |       |                             |       |   |   |
|                                                                    |       |                             |       |   |   |
| Interest rate  contracts                                                |       | Derivative Asset, noncurrent     |       | $ | 417 |   |
| Interest rate  contracts                                                |       | Derivative Liability, current    |       | (19,777 | ) |
| Interest rate  contracts                                                |       | Derivative Liability, noncurrent |       | (2,568 | ) |
|                                                                    |       |                             |       |   |   |
| Total  derivatives designated as hedging instruments under FASB ASC 815 |       |                             |       | (21,928 | ) |
| Total  derivatives                                                      |       |                             |       | $ | (21,928 | ) |

 

**TheEffect of Derivative Instruments on the Consolidated Statement of Operations**

**Forthe Year Ended December 31, 2009**

 
| **Derivatives in FASB ASC 815 Cash  Flow Hedging Relationships** | ** ** | **Amount  of Gain or  (Loss) Recognized in  OCI on Derivative  (Effective Portion)** | ** ** | **Location  of Gain or  (Loss) Reclassified  from Accumulated OCI  into Income (Effective  Portion)** | ** **       | **Amount  of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** ** | **Location  of Gain or  (Loss) Recognized in  Income on Derivative  (Ineffective Portion)** | ** ** | **Amount  of Gain or  (Loss) Recognized in  Income on  Derivative  (Ineffective Portion)** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------------|-----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| Interest rate  contracts                                         |       | $                                                                                    | (6,443     | )                                                                                                     | Interest Expense |                                                                                                | $          | (11,691                                                                                     | )          | Other income/expense                                                                       |       | $ | (253 | ) |
| **Total**                                                        | ** ** | **$**                                                                                | **(6,443** | **)**                                                                                                 | ** **       | ** **                                                                                          | **$**      | **(11,691**                                                                                 | **)**      | ** **                                                                                 | ** ** | **$** | **(253** | **)** |

 

**TheEffect of Derivative Instruments on the Consolidated Statement of Operations**

**Forthe Year Ended December 31, 2009**

 
| **Derivatives  Not Designated as   Hedging Instruments under FASB   ASC 815** | ** ** | **Location of Gain or  (Loss) Recognized in  Income on Derivative** | ** ** | **Amount of Gain or  (Loss) Recognized in  Income on Derivative** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| Interest rate  contracts                                                      |       | Interest expense                                                    |       | $                                                                 | 215        |   |
| Freight derivative                                                            |       | Other income/expense                                                |       | $                                                                 | 152        |   |
| Bunker  derivative                                                            |       | Other income/expense                                                |       | $                                                                 | 142        |   |
| **Total**                                                                     | ** ** | ** **                                                          | ** ** | **$**                                                             | **509**    | ** ** |

** **

**79**

----

** **

**TheEffect of Derivative Instruments on the Consolidated Statement of Operations**

**For theThree Months Ended December 31, 2009**

** **
| **Derivatives in FASB ASC 815 Cash  Flow Hedging Relationships** | ** ** | **Amount  of Gain or  (Loss) Recognized in  OCI on Derivative  (Effective Portion)** | ** ** | **Location  of Gain or  (Loss) Reclassified  from Accumulated OCI  into Income (Effective  Portion)** | ** **       | **Amount  of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** ** | **Location  of Gain or  (Loss) Recognized in  Income on Derivative  (Ineffective Portion)** | ** ** | **Amount  of Gain or  (Loss) Recognized in  Income on  Derivative  (Ineffective Portion)** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------------|-----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| Interest rate  contracts                                         |       | $                                                                                    | (1,361     | )                                                                                                     | Interest Expense |                                                                                                | $          | (3,830                                                                                      | )          | Other income/expense                                                                       |       | $ | (26 | ) |
| **Total**                                                        | ** ** | **$**                                                                                | **(1,361** | **)**                                                                                                 | ** **       | ** **                                                                                          | **$**      | **(3,830**                                                                                  | **)**      | ** **                                                                                 | ** ** | **$** | **(26** | **)** |

** **

**12.**                 FAIR VALUE OF FINANCIAL INSTRUMENTS

** **

The estimated fair values of the Company’s financial instruments are asfollows:

 
| ** **                                      | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **Carrying  Value**   | ** ** | **Fair Value**        | ** ** | **Carrying  Value** | ** ** | **Fair Value** | ** ** |
| Cash                                            |       | $                     | 52,651     |                  | $          | 52,651 |   | $ | 104,146 |   | $ | 104,146 |   |
| Floating rate  debt                             |       | 726,000               |       | 726,000               |       | 990,500 |   | 990,500 |   |
| Senior Notes                                    |       | 292,609               |       | 319,500               |       | — |   | — |   |
| Derivative  financial instruments (See Note 10) |       | (21,928               | )          | (21,928               | )          | (34,584 | ) | (34,584 | ) |
|                                                 |            |                       |            |                       |            |  |  |  |  |  |  |  |  |

 

The fair value of term loans and revolving credit facilities isestimated based on current rates offered to the Company for similar debt of thesame remaining maturities. The carrying value approximates the fair marketvalue for the variable rate loans. The Senior Notes are carried at par value,net of original issue discount.  The fairvalue of the Senior Notes is derived from quoted market prices, and istherefore a Level 1 item.  The fair valueof interest rate swaps (used for purposes other than trading) is the estimatedamount the Company would pay to terminate swap agreements at the reportingdate, taking into account current interest rates and the current credit-worthinessof the swap counter-parties.  The fairvalue of the freight derivative was determined based on the aggregatediscounted cash flows using estimated future rates obtained from brokers. Thefair value of the currency options is based on the exchange rates at the end ofthe year.

 

The Company’s derivative instruments include pay-fixed,receive-variable interest rate swaps based on LIBOR swap rate.  The LIBOR swap rates are observable atcommonly quoted intervals for the full terms of the swaps and therefore wereconsidered Level 2 items.  Also, theCompany’s freight derivative values and one of its bunker derivatives werebased on quoted rates on the BITR and are therefore considered level 2items.  The fair value of the currencyoptions were based on the exchange rates at the end of the year.

 

FASB ASC 820-10 states that the fair value measurement of a liabilitymust reflect the nonperformance risk of the entity.  Therefore, the impact of the Company’screditworthiness has also been factored into the fair value measurement of thederivative instruments in a liability position.

 

The following table summarizes the valuation of our financialinstruments by the above FASB ASC 820-10 pricing levels as of the valuationdates listed:

 
| ** **                                        | ** ** | **December 31, 2009** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | ** **            | ** ** | **Quoted Prices** | ** ** | **Significant Other  Observable Inputs** | ** ** |
| ** **                                        | ** ** | **Total**             | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** |
| Derivative  instruments – asset position     |       | $                     | 417        |   | $ | — |   | $ | 417 |   |
| Derivative  instruments – liability position |       | 22,345                |       | — |   | 22,345 |   |
|                                                   |            |                       |            |  |  |  |  |  |  |  |

 

Inaccordance with the provisions FASB ASC 350-20, goodwill with a carrying amountof $40,872 was written down to its implied value of $0, resulting in animpairment charge of $40.9 million, which was included in earnings for theperiod. The Company used significant unobservable inputs (Level 3) in determiningimplied fair value of goodwill, as discussed in Note 3. 

 

80

----

 

A reconciliation of fuel derivatives which are based on Level 3 inputsfor the years ended December 31, 2009 and 2008 is as follows:

 
| ** **                                | ** ** | **2009** | ** ** | **2008** | ** ** |
|-------------------------------------------|------------|----------|------------|----------|------------|
| Fair value,  January 1                    |       | $        | (132       | )        | $          | — |   |
| Fair value,  December 31                  |       | —   |       | (132     | )          |
| Unrealized gain  (loss)                   |       | $        | 132        |     | (132       | ) |
| Realized gain,  cash settlements received |       | 10       |       | 155      |       |
| Total gain,  recorded as Other expense    |       | $        | 142        |     | $          | 23 |   |

 

**13.**                 REVENUE FROM TIME CHARTERS

** **

Total revenue earned on time charters for the years ended December 31,2009, 2008 and 2007 was 262,011, $209,494 and $161,542, respectively.  Future minimum rental receipts, excluding anyadditional revenue relating to profit sharing arrangements under certain timecharters, based on vessels committed to non-cancelable time charter contractsand excluding any periods for which a charterer has an option to extend thecontracts, as of December 31, 2009 will be $65,893 and $7,116 during 2010and 2011, respectively.

 

**14.**                 LEASE PAYMENTS

** **

In February 2004, the Company entered into an operating lease foran aircraft. The lease had a term of five years, which expired in February 2009,and required monthly payments by the Company of $125.  During the years ended December 31,2009, 2008 and 2007, the Company recorded $143, $973 and $980, respectively, ofnet expense associated with this lease.

 

In December 2004, the Company entered into a 15-year lease foroffice space in New York, New York. The monthly rental is as follows: Free rentfrom December 1, 2004 to September 30, 2005, $110 per month from October 1,2005 to September 30, 2010, $119 per month from October 1, 2010 to September 30,2015, and $128 per month from October 1, 2015 to September 30, 2020.The monthly straight-line rental expense from December 1, 2004 to September 30,2020 is $105.  During the years ended December 31,2009, 2008 and 2007, the Company recorded $143, $1,255 and $1,255,respectively, of expense associated with this lease.

 

Future minimum rental payments on the above lease for the next fiveyears are as follows: 2010- $1,344, 2011-$1,426, 2012- $1,426, 2013-$1,426,2014- $1,426, thereafter - $8,750.

 

The minimum future vessel operating expenses to be paid by the Companyunder ship management agreements in effect as of December 31, 2009 thatwill expire in 2010 and 2011 are $9,366 and $2,571, respectively.  If the option periods are extended by thecharterer of the Company’s Arlington Vessels, these ship management agreementswill be automatically extended for periods matching the duration of the timecharter agreements.  Future minimumpayments under these ship management agreements exclude such periods.

 

**15.**                 SIGNIFICANT CUSTOMERS

** **

For the year ended December 31, 2009, the Company earned $124,400and $76,513 from two customers who represented 35.8% and 22.0% of voyagerevenues, respectively.  For the yearended December 31, 2008 and 2007, the Company earned $132,990 and$100,725, respectively, from one customer who represented 40.8% and 39.5% ofvoyage revenues, respectively.

 

**16.**                 RELATED PARTY TRANSACTIONS

** **

The following are related party transactions not disclosed elsewhere inthese financial statements:

 

During the fourth quarter of 2000, the Company loaned $486 to Peter C.Georgiopoulos.  This loan does not bearinterest and is due and payable on demand. The full amount of this loan was outstanding as of December 31,2008.  The full amount of this loan wasrepaid by Mr. Georgiopoulos on February 27, 2009.

 

During the years ended December 31, 2009 and 2008, PeterC. Georgiopoulos and P C Georgiopoulos & Co. LLC, an investmentmanagement company controlled by Peter C. Georgiopoulos, incurred officeexpenses of $109 and $21, respectively. As of December 31, 2009, a balanceof $ 5 remains outstanding**.**

 

During the years ended December 31, 2009, 2008 and 2007, GeneralMaritime Subsidiary incurred fees for legal services aggregating $38, $51 and$46, respectively, to the father of Peter C. Georgiopoulos. None of the balanceremains outstanding as of December 31, 2008.

 

81

----

 

Genco Shipping & Trading Limited (“Genco”), an owner andoperator of dry bulk vessels, has incurred travel related expenditures for useof the Company aircraft and other miscellaneous expenditures during the yearsended December 31, 2009 and 2008, totaling $139 and $337, respectively.The balance of $10 remains outstanding as of December 31, 2009.  Peter C. Georgiopoulos is a director ofGenco.

 

Duringthe years ended December 31, 2009 and 2008, Genco made available one ofits employees who performed internal audit services for the Company for whichthe Company was invoiced $158 and $175 based on actual time spent by theemployee. The balance of $51 remains outstanding as of December 31, 2009. In addition, during the year ended December 31,2009, Genco invoiced the Company $4 relating to 2009 office expense, which waspaid in full as of December 31, 2009.

 

Duringthe years ended December 31, 2009, 2008 and 2007 Aegean Marine PetroleumNetwork, Inc. (“Aegean”)  suppliedbunkers and lubricating oils to the Company’s vessels aggregating $2,074,$1,320 and $1,190, respectively, The balance of $1,189 remains outstanding asof December 31, 2009. During July 2006, an investment vehiclecontrolled by Peter Georgiopoulos and John Tavlarios, a member of the Company’sBoard of Directors and the chief executive officer of General MaritimeManagement LLC (“GMM”), made an investment in and purchased shares of Aegeanfrom Aegean’s principal shareholder. During December 2006, Aegean completed its initial publicoffering.  At that time, PeterGeorgiopoulos became chairman of the board of Aegean and John Tavlarios joinedthe Board of Directors of Aegean.   In addition,the Company provided office space in its New York office to Aegean during theyears ended December 31, 2009 and 2008 for $55 and $47, respectively. Abalance of $5 remains outstanding as of December 31, 2009.

 

Pursuant to the Company’s revised aircraft use policy, the following authorizedexecutives were permitted, subject to approval from the Company’s Chairman/Chief Executive Officer, to charter the Company’s aircraft from an authorizedthird-party charterer for use on non-business flights: the former ChiefExecutive Officer (current Chairman of the Board of Directors), the formerPresident of General Maritime Management LLC (current President of GeneralMaritime Corporation), the Chief Financial Officer and the Chief AdministrativeOfficer. The chartering fee to be paid by the authorized executive was thegreater of: (i) the incremental cost to the Company of the use of theaircraft and (ii) the applicable Standard Industry Fare Level for theflight under Internal Revenue Service regulations, in each case as determinedby the Company. The amount of use of the aircraft for these purposes wasmonitored from time to time by the Audit Committee. During the year ended December 31,2009, no authorized executive chartered the Company’s aircraft from thethird-party charterer.  Peter C. Georgiopoulosincurred charter fees totaling $14 payable directly to the third-partycharterer. During the year ended December 31, 2008, Peter C. Georgiopouloschartered the Company’s aircraft from the third-party charterer on sixoccasions and incurred charter fees totaling $318 payable directly to thethird-party charterer.   There was nopersonal usage of the Company’s aircraft incurred from other Company’sexecutives during the years ended December 2009 and December 2008.  The Company terminated its lease of theaircraft as of February 9, 2009.

 

**17.**                 SAVINGS PLAN

** **

In November 2001, General Maritime Subsidiary established a 401(k) Plan(the “Plan”) which is available to full-time employees who meet the Plan’seligibility requirements.  The Companyassumed the obligations of General Maritime Subsidiary under the Plan during December 2008.This Plan is a defined contribution plan, which permits employees to makecontributions up to 25 percent of their annual salaries with the Companymatching up to the first six percent. The matching contribution vestsimmediately. During 2009, 2008 and 2007, the Company’s matching contribution tothe Plan was $356, $336 and $320, respectively.

 

**18.**                 STOCK-BASED COMPENSATION

** **

***2001 Stock Incentive Plan***

*** ***

On June 10, 2001,General Maritime Subsidiary adopted the General Maritime Corporation 2001 StockIncentive Plan.  On December 16, 2008, the Company assumed theobligations of General Maritime Subsidiary under the 2001 Stock Incentive Planin connection with the Arlington Acquisition. The aggregate number of shares ofcommon stock available for award under the 2001 Stock Incentive Plan wasincreased from 3,886,000 shares to 5,896,000 shares pursuant to an amendmentand restatement of the plan as of May 26, 2005. Under this plan the Company’scompensation committee, another designated committee of the Board of Directors,or the Board of Directors, may grant a variety of stock based incentive awardsto employees, directors and consultants whom the compensation committee (orother committee or the Board of Directors) believes are key to the Company’ssuccess. The compensation committee may award incentive stock options,nonqualified stock options, stock appreciation rights, dividend equivalentrights, restricted stock, unrestricted stock and performance shares.

 

Since inception of the2001 Stock Incentive Plan, the Company has issued stock options and restrictedstock. Upon the granting of stock options and restricted stock, the Companyallocates new shares from its reserve of authorized shares to employees subjectto the maximum shares permitted by the 2001 Stock Incentive Plan, as amended.

 

82

----

 

The Company’s policy forattributing the value of graded-vesting stock options and restricted stockawards is to use an accelerated multiple-option approach.

 

***Stock Options***

*** ***

Effective January 1,2006, the Company adopted FASB ASC 718 (SFAS No. 123R, *Share-Based Payments*) using a modifiedversion of prospective application. During the years ended December 31,2009, 2008 and 2007, the adoption of this statement resulted in incrementalstock-based compensation expense of $0, $5 and $28, respectively, which reducednet income for each period by such amounts and had no effect on basic ordiluted earnings per share.

 

Asof December 31, 2009, there was no unrecognized compensation cost relatedto nonvested stock option awards. Also, during the year ended December 31, 2009 nostock options were granted, forfeited or exercised.

 

Thefollowing table summarizes all stock option activity through December 31,2009:

 
| ** **                           | ** ** | **Number of  Options** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Fair Value** | ** ** |
|--------------------------------------|------------|------------------------|------------|----------------------------------------|------------|-----------------------------------|------------|
|                                 |       |                   |       |                                   |       |                              |       |
| Outstanding,  January 1, 2007   |       | 23,785                 |       | $                                      | 12.10      |                              | $          | 5.87 |   |
|                                 |       |                   |       |                                   |       |                              |       |
| Granted                              |       | —                 |       |                                   |       |                              |       |
| Exercised                            |       | (11,223                | )          | $                                      | 11.42      |                              | $          | 5.43 |   |
| Forfeited                            |       | (2,680                 | )          | $                                      | 4.52       |                              | $          | 2.56 |   |
| Outstanding,  December 31, 2007 |       | 9,883                  |       | $                                      | 14.93      |                              | $          | 7.27 |   |
|                                 |       |                   |       |                                   |       |                              |       |
| Granted                              |       | —                 |       |                                   |       |                              |       |
| Exercised                            |       | (3,183                 | )          | $                                      | 14.02      |                              | $          | 6.74 |   |
| Forfeited                            |       | —                 |       |                                   |       |                              |       |
| Outstanding,  December 31, 2008 |       | 6,700                  |       | $                                      | 15.35      |                              | $          | 7.51 |   |
|                                 |       |                   |       |                                   |       |                              |       |
| Granted                              |       | —                 |       |                                   |       |                              |       |
| Exercised                            |       | —                 |       |                                   |       |                              |       |
| Forfeited                            |       | —                 |       |                                   |       |                              |       |
| Outstanding,  December 31, 2009 |       | 6,700                  |       | $                                      | 15.35      |                              | $          | 7.51 |   |

 

Asof December 31, 2009 and 2008, all stock options were vested.

 

The following table summarizes certain information about stock optionsoutstanding as of December 31, 2009:

 
| ** **         | ** ** | **Options Outstanding, December 31, 2009** | ** ** | **Options Exercisable,  December 31, 2009** | ** ** |
|--------------------|------------|-------------------------------------------------|------------|--------------------------------------------------|------------|
| **Exercise Price** | ** ** | **Number of  Options**                          | ** ** | **Weighted  Average  Exercise Price**            | ** ** | **Weighted  Average  Remaining  Contractual  Life** | ** ** | **Number of  Options** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|               |       |                                            |       |                                             |       |   |   |   |   |   |   |
| $                  | 10.88      |                                            | 1,675      |                                             | $          | 10.88 |   | 3.8 |   | 1,675 |   | $ | 10.88 |   |
| $                  | 16.84      |                                            | 5,025      |                                             | $          | 16.84 |   | 4.4 |   | 5,025 |   | $ | 16.84 |   |
|               |       | 6,700                                           |       | $                                                | 15.35      |   | 4.3 |   | 6,700 |   | $ | 15.35 |   |

 

83

----

 

*Restricted Stock*

* *

The Company’s restricted stock grants to employeesgenerally vest ratably upon continued employment over periods of approximately4 or 5 years from date of grant.  Certain restricted stock grants to theCompany’s Chairman and President vest approximately 7 or 10 years from date ofgrant.  Restricted stock grants to non-employee directors generally vestover a one year period.  Such grants aresubject to accelerated vesting upon certain circumstances set forth in therelevant grant agreements.

 

On April 2, 2007, the Company granted 214,327 shares of restrictedcommon stock to holders of the 412,720 restricted shares granted on December 18,2006.  This grant was made to theseholders in lieu of the Company paying in cash the $11.19 per share specialdividend applicable to such shares.  Thisdividend was paid to all other shareholders during March 2007.  The restrictions on these shares lapsed onthe same schedule as the December 18, 2006 grant.  The foregoing grants are subject toaccelerated vesting upon certain circumstances set forth in the relevant grantagreements. Because this April 2, 2007 grant was made pursuant to amodification in which there was no incremental compensation cost as calculatedunder the provisions of FASB ASC 718, this grant resulted in no additionalfuture compensation cost associated with amortization of restricted stockawards.

 

On June 29, 2007, the Company granted a total of 21,775 shares ofrestricted common stock to the Company’s five independent Directors.Restrictions on the restricted stock will lapse, if at all, on June 29,2008 or the date of the Company’s 2008 Annual Meeting of Shareholders,whichever occurs first. The foregoing grants are subject to accelerated vestingupon certain circumstances set forth in the relevant grant agreement.

 

On December 21, 2007, the Company made grants of restricted commonstock in the amount of 619,080 shares to certain officers and employees of theCompany.  Of this total, 321,600, 40,200and 20,100 restricted shares were granted to the CEO, chief financial officerand chief administrative officer, respectively, of the Company and 64,320restricted shares were granted to the president of GMM.  The remaining 172,860 restricted shares weregranted to other officers and employees of the Company and GMM. Therestrictions on the 321,600 shares granted to the CEO of the Company will lapseon November 15, 2017. The restrictions on 155,440 shares (including sharesgranted to individuals named above, exclusive of the CEO) will lapse as to 20%of these shares on November 15, 2008 and as to 20% of these shares on November 15of each of the four years thereafter, and will become fully vested on November 15,2012. The restrictions on the remaining 142,040 shares will lapse as to 25% ofthese shares on November 15, 2008 and as to 25% of these shares on November 15of each of the three years thereafter, and will become fully vested on November 15,2011. The foregoing grants are subject to accelerated vesting upon certaincircumstances set forth in the relevant grant agreements.

 

On May 14, 2008, the Company granted a total of 17,420 shares ofrestricted common stock to the Company’s four independent Directors.Restrictions on the restricted stock will lapse, if at all, on May 14,2009 or the date of the Company’s 2009 Annual Meeting of Shareholders,whichever occurs first. The foregoing grants are subject to accelerated vestingupon certain circumstances set forth in the relevant grant agreement.

 

On December 15, 2008, the Company made grants of restricted commonstock in the amount of 165,490 shares to employees of the Company.  The restrictions on 26,800 shares will lapseas to 20% of these shares on November 15, 2009 and as to 20% of theseshares on November 15 of each of the four years thereafter, and willbecome fully vested on November 15, 2013. The restrictions on theremaining 138,690 shares will lapse as to 25% of these shares on November 15,2009 and as to 25% of these shares on November 15 of each of the threeyears thereafter, and will become fully vested on November 15, 2012. Theforegoing grants are subject to accelerated vesting upon certain circumstancesset forth in the relevant grant agreements.

 

On December 23, 2008, the Company made grants of restricted commonstock in the amount of 203,680 shares to officers of the Company and 7,555shares to two of the Company’s independent Directors who were not grantedshares on May 14, 2008.  Therestrictions on 203,680 shares granted to officers will lapse as to 20% ofthese shares on November 15, 2009 and as to 20% of these shares on November 15of each of the four years thereafter, and will become fully vested on November 15,2013. The restrictions on the 7,555 shares granted to the two Directors willlapse, if at all, on May 14, 2009 or the date of the Company’s 2009 AnnualMeeting of Shareholders, whichever occurs first.  The foregoing grants are subject toaccelerated vesting upon certain circumstances set forth in the relevant grantagreements.

 

On May 14, 2009, the Company granted a total of42,252 shares of restricted common stock to the Company’s six non-employeeDirectors.  Restrictions on the restricted stock will lapse, if at all, onMay 14, 2010 or the date of the Company’s 2010 Annual Meeting ofShareholders, whichever occurs first. The foregoing grants are subject toaccelerated vesting upon certain circumstances set forth in the relevant grantagreement.

 

84

----

 

On December 24, 2009, the Company made grants ofrestricted common stock in the amount of 160,390 shares to employees of theCompany and of 213,680 shares to officers of the Company.  The restrictions on all of these shares willlapse as to 25% of these shares on November 15, 2010 and as to 25% ofthese shares on November 15 of each of the three years thereafter, andwill become fully vested on November 15, 2013. The foregoing grants aresubject to accelerated vesting upon certain circumstances set forth in the relevantgrant agreements.

 

The weighted average grant-date fair value of restricted stock grantedduring the years ended December 31, 2009, 2008 and 2007 is $7.41, $10.85and $19.75 per share, respectively.

 

A summary of the activity for restricted stock awardsduring the year ended of December 31, 2009 is as follows:

 
| ** **                                    | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Fair Value** | ** ** |
|-----------------------------------------------|------------|-----------------------|------------|-----------------------------------|------------|
|                                          |       |                  |       |                              |       |
| Outstanding and  nonvested, January 1, 2009   |       | 3,340,005             |       | $                                 | 20.04      |   |
|                                          |       |                  |       |                              |       |
| Granted                                       |       | 416,322               |       | $                                 | 7.41       |   |
| Vested                                        |       | (1,150,352            | )          | $                                 | 8.98       |   |
| Forfeited                                     |       | (18,662               | )          | $                                 | 16.85      |   |
| Outstanding and  nonvested, December 31, 2009 |       | 2,587,313             |       | $                                 | 22.95      |   |

 

The following table summarizes the amortization, which will be includedin general and administrative expenses, of all of the Company’s restrictedstock grants as of December 31, 2009:

 
| ** **                       | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|----------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| **Restricted Stock Grant Date:** |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |
|                             |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |
| February 9,  2005           |       | $        | 738        |     | $          | 738      |       | $        | 739        |     | $          | 738            |       | $         | 646        |   | $ | — |   | $ | 3,599 |   |
| April 5,  2005              |       | 1,749    |       | 1,749    |       | 1,753    |       | 1,749    |       | 1,749    |       | —         |       | 8,749     |       |
| December 21,  2005          |       | 1,101    |       | 974      |       | 976      |       | 974      |       | 974      |       | 851            |       | 5,850     |       |
| December 18,  2006          |       | 879      |       | 628      |       | 541      |       | 539      |       | 539      |       | 1,012          |       | 4,138     |       |
| December 21,  2007          |       | 1,376    |       | 996      |       | 728      |       | 620      |       | 620      |       | 1,785          |       | 6,125     |       |
| December 15,  2008          |       | 429      |       | 231      |       | 101      |       | 11       |       | —   |       | —         |       | 772       |       |
| December 23,  2008          |       | 507      |       | 305      |       | 172      |       | 71       |       | —   |       | —         |       | 1,055     |       |
| May 14,  2009               |       | 149      |       | —   |       | —   |       | —   |       | —   |       | —         |       | 149       |       |
| December 24,  2009          |       | 1,412    |       | 712      |       | 375      |       | 150      |       | —   |       | —         |       | 2,649     |       |
| Total  by year                   |       | $        | 8,340      |     | $          | 6,333    |       | $        | 5,385      |     | $          | 4,852          |       | $         | 4,528      |   | $ | 3,648 |   | $ | 33,086 |   |

 

As of December 31, 2009 and 2008, there was $33,086 and $40,364,respectively, of total unrecognized compensation cost related to nonvestedrestricted stock awards. As of December 31, 2009, this cost is expected tobe recognized with a credit to paid-in capital over a weighted average periodof 2.6 years.

 

Total compensation cost recognized in income relating to amortizationof restricted stock awards for the years ended December 31, 2009, 2008 and2007 was $10,070, $11,417 and $10,627, respectively.

 

**19.**                 STOCK REPURCHASE PROGRAM

** **

In October 2005, General Maritime Subsidiary’s Board of Directorsapproved a share repurchase program for up to a total of $200,000 of its commonstock. In February 2006, General Maritime Subsidiary’s Board of Directorsapproved an additional $200,000 for repurchases of its common stock under theshare repurchase program.  On December 16,2008, the Company’s Board approved repurchases by the Company of its commonstock under a share repurchase program for up to an aggregate total of$107,119, of which $107,119 was available as of December 31, 2008. The Board of Directors will periodically review the program. Sharerepurchases will be made from time to time for cash in open market transactionsat prevailing market prices or in privately negotiated transactions. The timingand amount of purchases under the program will be determined by managementbased upon market conditions and other factors. Purchases may be made pursuantto a program adopted under Rule 10b5-1 under the Securities Exchange Act.The program does not require the Company to purchase any specific number oramount of shares and may be suspended or reinstated at any time in the Company’sdiscretion and without notice. Pursuant to the amendment to the 2005 CreditFacility dated November 12, 2009, stock repurchases are no longerpermitted under the 2005 Credit Facility.

 

85

----

 

Through December 31, 2009, the Company repurchased and retired11,830,609 shares of its common stock for $292,881.  As of December 31, 2009, the Company ispermitted under the program to acquire additional shares of its common stockfor up to $107,119.

 

**20.**                 LEGAL PROCEEDINGS

** **

From time to time the Company has been, and expects to continue to be,subject to legal proceedings and claims in the ordinary course of its business,principally personal injury and property casualty claims. Such claims, even iflacking merit, could result in the expenditure of significant financial andmanagerial resources.

 

On or about August 29,2007, an oil sheen was discovered by shipboard personnel of the *Genmar Progress*in Guayanilla Bay, PuertoRico in the vicinity of the vessel. The vessel crew took prompt action pursuantto the vessel response plan. The Company’s subsidiary which operates the vesselpromptly reported this incident to the U.S. Coast Guard and hassubsequently accepted responsibility under the Oil Pollution Act of 1990 forany damage or loss resulting from the accidental discharge of bunker fueldetermined to have been discharged from the vessel. The Company understands thefederal and Puerto Rico authorities are conducting civil investigations into anoil pollution incident which occurred during this time period on the southwestcoast of Puerto Rico including Guayanilla Bay. The extent to which oil dischargedfrom the *Genmar Progress*isresponsible for this incident is currently the subject of investigation. TheU.S. Coast Guard has designated the *GenmarProgress*as a potential source of discharged oil. Under the OilPollution Act of 1990, the source of the discharge is liable, regardless offault, for damages and oil spill remediation as a result of the discharge.

 

On January 13, 2009,the Company received a demand from the U.S. National Pollution Fund for$5,833 for the U.S. Coast Guard’s response costs and certain costs of theDepartamento de Recursos Naturales y Ambientales of Puerto Rico in connectionwith the alleged damage to the environment caused by the spill. The Company isreviewing the demand and have requested additional information from the U.S. NationalPollution Fund relating to the demand. The Company and General MaritimeManagement LLC recently received grand jury subpoenas, dated October 5,2009 and September 21, 2009, respectively, from U.S. Department ofJustice requesting additional information and records pertaining to theoperations of the *Genmar**Progress*and the Company’s business. TheCompany and General Maritime Management LLC recently received grand jurysubpoenas, dated October 5, 2009 and September 21, 2009,respectively, from U.S. Department of Justice requesting additionalinformation and records pertaining to the operations of the *Genmar**Progress*and the Company’s business. Currently, no charges have been made andno other fines or penalties have been levied against the Company. The Companyhas been cooperating in these investigations and have posted a surety bond tocover potential fines or penalties that may be imposed in connection with thematter.

 

This matter, including thedemand from the U.S. National Pollution Fund, has been reported to theCompany’s protection and indemnity insurance underwriters, and managementbelieves that any such liabilities will be covered by its insurance, less adeductible. The Company has not accrued reserves for this incident other thanthe deductible because the amount of any additional costs that may be incurredby the Company is not estimable at this time.

 

**21.**                 UNAUDITED QUARTERLY RESULTS OF OPERATIONS

** **

In the opinion of the Company’s management, all adjustments, consistingof normal recurring accruals considered necessary for a fair presentation, havebeen included on a quarterly basis.

 
| ** **                  | ** ** | **2009  Quarter ended** | ** ** | **2008  Quarter ended** | ** ** |
|-----------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                  | ** ** | **March 31**       | ** ** | **June 30**        | ** ** | **Sept  30 (a)** | ** ** | **Dec  31 (b)** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **Sept  30** | ** ** | **Dec  31 (c)** | ** ** |
| Voyage  revenues            |       | $                       | 92,349     |                    | $          | 80,226 |   | $ | 96,706 |   | $ | 81,239 |   | $ | 73,592 |   | $ | 80,931 |   | $ | 82,292 |   | $ | 89,253 |   |
| Operating  income (loss)    |       | 26,350                  |       | 15,454                  |       | 23,058 |   | (40,077 | ) | 20,317 |   | 26,569 |   | 28,478 |   | (6,382 | ) |
| Net  income (loss)          |       | 18,896                  |       | 7,279                   |       | 14,755 |   | (52,925 | ) | 12,910 |   | 4,960 |   | 23,474 |   | (11,537 | ) |
|                        |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings  Per               |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Common  Share:              |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                       |       | $                       | 0.35       |                    | $          | 0.13 |   | $ | 0.27 |   | $ | (0.96 | ) | $ | 0.33 |   | $ | 0.13 |   | $ | 0.60 |   | $ | (0.28 | ) |
| Diluted                     |       | $                       | 0.34       |                    | $          | 0.13 |   | $ | 0.27 |   | $ | (0.96 | ) | $ | 0.32 |   | $ | 0.12 |   | $ | 0.59 |   | $ | (0.28 | ) |
|                        |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted  Average           |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                      |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding:(in  thousands) |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                       |       | 54,510                  |       | 54,535                  |       | 54,551 |   | 55,094 |   | 38,831 |   | 38,776 |   | 38,804 |   | 41,430 |   |
| Diluted                     |       | 55,489                  |       | 55,591                  |       | 55,529 |   | 55,094 |   | 39,818 |   | 39,967 |   | 39,952 |   | 41,430 |   |

 

----

(a)          As discussed in Note 1, during the third quarter of2009, the Company recorded as Other income $13,696 of accelerated

 

86

----

 

amortization of contractliabilities.  Subsequent to the filing ofthat Form 10-Q, the Company determined that such amortization should havebeen classified as Voyage revenue rather than Other Income. The Company hascorrected this classification in the above table which has the effectincreasing Voyage revenue and Operating income by $13,696 from the amountspreviously reported; there was no impact on Net Income, the ConsolidatedBalance Sheet or the Consolidated Statement of Cash Flows.  The Company will prospectively correct the2009 third quarter in its 2010 third quarter Form 10-Q.

 

(b)         As discussed in Note 3, during the fourthquarter of 2009, the Company recorded a goodwill impairment of $40,872.

 

(c)          Included in the results of operations for the fourthquarter of 2008 is $22,000 in compensation accruals for the cash payment toPeter C. Georgiopoulos in connection with the termination of his employmentarrangements with the Company in connection with the Company’s executivetransition plan and the cash payment in lieu of a bonus of $8,000 paid to Mr. Georgiopoulospursuant to the executive transition plan (see Note 2).

 

**22.**                 SUBSEQUENT EVENTS

** **

Subsequentevents have been evaluated through the date of issuance of the financialstatements herein.

 

On February 23, 2010 the Company’s Board ofDirectors declared a quarterly dividend relating to the fourth quarter of 2009 of$0.125 per share payable on or about March 26, 2010 to shareholders ofrecord as of March 12, 2010.

 

**ITEM 9.  CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

** **

No changes were made to, nor was there any disagreement with theCompany’s independent auditors regarding, the Company’s accounting or financialdisclosure.

 

**ITEM 9A. CONTROLS AND PROCEDURES**

** **

**EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.**

** **

In accordance with Exchange Act Rules 13a-15 and 15d-15, wecarried out an evaluation, under the supervision and with the participation ofmanagement, including our principal executive officer and principal financialofficer, of the effectiveness of our disclosure controls and procedures as ofthe end of the period covered by this report. Based on that evaluation, ourprincipal executive officer and principal financial officer concluded that ourdisclosure controls and procedures were effective as of December 31, 2009to provide assurance that information required to be disclosed in our reportsfiled or submitted under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in the Securities and ExchangeCommission’s rules and forms and such information is accumulated andcommunicated to our management, including our principal executive officer andprincipal financial officer, as appropriate to allow timely decisions regardingdisclosure.

 

**CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING**

** **

Under the supervision and with the participation of management,including the President and Chief Financial Officer, the Company has evaluatedchanges in internal control over financial reporting (as such term is definedin Rules 13a-15(f) under the Exchange Act) that occurred during thefiscal quarter ended December 31, 2009 and found no change that hasmaterially affected, or is reasonably likely to materially affect, internalcontrol over financial reporting.

 

**MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING**

** **

Our management is responsible for establishing and maintaining adequateinternal control over financial reporting. General Maritime Corporation’sinternal control over financial reporting is designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles.

 

Our internal control over financial reporting includes those policiesand procedures that:

 

·                  Pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of General Maritime Corporation;

 

87

----

 

·                  Provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that our receiptsand expenditures are being made only in accordance with authorizations of GeneralMaritime Corporation’s management and directors; and

 

·                  Provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of our assetsthat could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree or compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of General Maritime Corporation’sinternal control over financial reporting as of December 31, 2009. Inmaking this assessment, management used the criteria set forth by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO) in InternalControl-Integrated Framework. Based on our assessment and those criteria,management believes that General Maritime Corporation maintained effectiveinternal control over financial reporting as of December 31, 2009.

 

The Company’s independent registered public accounting firm has auditedand issued their attestation report on the Company’s internal control overfinancial reporting, which appears below.

 

88

----

 

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To theBoard of Directors and Stockholders ofGeneral Maritime CorporationNew York, New York

 

Wehave audited the internal control over financial reporting of General MaritimeCorporation and subsidiaries (the “Company”) as of December 31, 2009,based on criteria established in *InternalControl — Integrated Framework*issued by the Committee of SponsoringOrganizations of the Treadway Commission.  The Company’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying Management Report on Internal ControlOver Financial Reporting.  Our responsibility is to express an opinion onthe Company’s internal control over financial reporting based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects.  Our audit included obtaining an understanding ofinternal control over financial reporting, assessing the risk that a materialweakness exists, testing and evaluating the design and operating effectivenessof internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances.  We believethat our audit provides a reasonable basis for our opinion.

 

Acompany’s internal control over financial reporting is a process designed by,or under the supervision of, the company’s principal executive and principalfinancial officers, or persons performing similar functions, and effected bythe company’s board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles.  A company’s internal controlover financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Becauseof the inherent limitations of internal control over financial reporting,including the possibility of collusion or improper management override ofcontrols, material misstatements due to error or fraud may not be prevented ordetected on a timely basis.  Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to futureperiods are subject to the risk that the controls may become inadequate becauseof changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.

 

In ouropinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2009, based on thecriteria established in *Internal Control —Integrated Framework*issued by the Committee of SponsoringOrganizations of the Treadway Commission.

 

Wehave also audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated financialstatements as of and for the year endedDecember 31, 2009 of the Company and our report dated March 1, 2010****expressed an unqualified opinion on those financialstatements.

 
| */s/ Deloitte & Touche LLP* |   |
|--------------------------------------|--------|
|                                 |   |
| New York, New York                   |   |
| March 1, 2010                   |   |

 

89

----

 

**PART III**

** **

**ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

** **

Information regarding General Maritime’s directors and executiveofficers is set forth in General Maritime’s Proxy Statement for its 2010 AnnualMeeting of Shareholders to be filed with the Securities and Exchange Commissionnot later than 120 days after December 31, 2009 (the “2010 Proxy Statement”)and is incorporated by reference herein. Information relating to our Code ofConduct and Ethics and to compliance with Section 16(a) of the 1934Act is set forth in our 2010 Proxy Statement relating and is incorporated byreference herein.

 

We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-Kregarding amendment to, or waiver from, a provision of the Code of Ethics forChief Executive and Senior Financial Officers by posting such information onour website, www.generalmaritimecorp.com.

 

Pursuant to Section 303A.12(a) of the New York Stock ExchangeListed Company Manual, the Company submitted the Annual CEO Certification tothe New York Stock Exchange during 2009.

 

**ITEM 11. EXECUTIVE COMPENSATION**

** **

Information regarding compensation of General Maritime’s executiveofficers and information with respect to Compensation Committee Interlocks andInsider Participation in compensation decisions is set forth in the 2009 ProxyStatement and is incorporated by reference herein.

 

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

** **

Information regarding the beneficial ownership of shares of GeneralMaritime’s common stock by certain persons is set forth in the 2009 ProxyStatement and is incorporated by reference herein.

 

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

** **

Information regarding certain transactions of General Maritime is setforth in the 2009 Proxy Statement and is incorporated by reference herein.

 

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

** **

Information regarding our accountant fees and services is set forth inthe 2009 Proxy Statement and is incorporated by reference herein.

 

90

----

 

**ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

** **

(a)          The following documents are filed as apart of this report:

 
| 1.     |   | The  financial statements listed in the “Index to Consolidated Financial  Statements.”                                                                                                                                                                                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                            |
| 3.     |   | Exhibits:                                                                                                                                                                                                                                                                                                                                       |
| 2.1    |   | Agreement  and Plan of Merger and Amalgamation, dated as of August 5, 2008 by and  among Arlington Tankers, Ltd., General Maritime Corporation (formerly Galileo  Holding Corporation), Archer Amalgamation Limited, Galileo Merger Corporation  and General Maritime Subsidiary Corporation (formerly General Maritime  Corporation). (1) |
| 3.1    |   | Amended  and Restated Articles of Incorporation of General Maritime Corporation  (formerly Galileo Holding Corporation). (2)                                                                                                                                                                                                                    |
| 3.2    |   | By-Laws  of General Maritime Corporation. (2)                                                                                                                                                                                                                                                                                                   |
| 3.3    |   | Certificate  of Designation of Series A Junior Participating Preferred Stock. (3)                                                                                                                                                                                                                                                          |
| 4.1    |   | Form of  Common Stock Certificate of General Maritime Corporation. (4)                                                                                                                                                                                                                                                                     |
| 4.2    |   | Form of  Registration Rights Agreement. (5)                                                                                                                                                                                                                                                                                                |
| 4.3    |   | Amended  and Restated Rights Agreement, dated as of August 31, 2006, between  General Maritime Subsidiary Corporation and Mellon Investor Services LLC, as  Rights Agent, together with Exhibits A, B and C attached thereto. (6)                                                                                                          |
| 4.4    |   | Amendment,  dated as of August 6, 2008, to the Amended and Restated Rights  Agreement, dated August 31, 2006, between General Maritime Corporation  and Mellon Investor Services LLC, as Rights Agreement. (7)                                                                                                                        |
| 4.5    |   | Rights  Agreement, dated as of June 26, 2008, between Arlington Tankers Ltd. and  American Stock Transfer & Trust Company, LLC, as Rights Agent,  together with Exhibits A, B and C attached thereto. (8)                                                                                                                         |
| 4.6    |   | Amendment  to Rights Agreement, dated as of August 5, 2008, by and between  Arlington Tankers Ltd. and American Stock Transfer & Trust Company,  LLC. (9)                                                                                                                                                                         |
| 10.1   |   | Form of  Incentive Stock Option Grant Certificate. (4)                                                                                                                                                                                                                                                                                     |
| 10.2   |   | Agreement  of Lease between Fisher-Park Lane Owner LLC, and General Maritime Subsidiary  Corporation dated as of November 30, 2004. (10)                                                                                                                                                                                                   |
| 10.3   |   | Restricted  Stock Grant Agreement dated February 9, 2005 between General Maritime  Subsidiary Corporation and Peter C. Georgiopoulos. (11)                                                                                                                                                                                                 |
| 10.4   |   | Form of  Restricted Stock Grant Agreement dated February 9, 2005 between General  Maritime Subsidiary Corporation and certain senior executive officers. (11)                                                                                                                                                                         |
| 10.5   |   | Employment  Agreement dated April 5, 2005, between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (12)                                                                                                                                                                                                               |
| 10.6   |   | Restricted  Stock Grant Agreement dated April 6, 2005, between General Maritime  Subsidiary Corporation and Peter C. Georgiopoulos. (12)                                                                                                                                                                                                   |
| 10.7   |   | Employment  Agreement dated April 22, 2005, between General Maritime Subsidiary Corporation  and John P. Tavlarios. (13)                                                                                                                                                                                                                   |
| 10.8   |   | Employment  Agreement dated April 22, 2005, between General Maritime Subsidiary  Corporation and Jeffrey D. Pribor. (13)                                                                                                                                                                                                                   |
| 10.9   |   | Employment  Agreement dated April 22, 2005, between General Maritime Subsidiary  Corporation and John C. Georgiopoulos. (13)                                                                                                                                                                                                               |
| 10.10  |   | General  Maritime Corporation Change of Control Severance Program for U.S. Employees.  (29)                                                                                                                                                                                                                                                     |
| 10.11  |   | Restricted  Stock Grant Agreement dated December 21, 2005 between General Maritime  Subsidiary Corporation and Peter C. Georgiopoulos. (14)                                                                                                                                                                                                |
| 10.12  |   | Form of  Restricted Stock Grant Agreement dated December 21, 2005 between General  Maritime Subsidiary Corporation and certain senior executive officers. (14)                                                                                                                                                                        |
| 10.13  |   | Restricted  Stock Grant Agreement dated December 18, 2006 between General Maritime  Subsidiary Corporation and John P. Tavlarios. (15)                                                                                                                                                                                                     |
| 10.14  |   | Restricted  Stock Grant Agreement dated December 18, 2006 between General Maritime  Subsidiary Corporation and Jeffrey D. Pribor. (15)                                                                                                                                                                                                     |
| 10.15  |   | Restricted  Stock Grant Agreement dated December 18, 2006 between General Maritime  Subsidiary Corporation and John C. Georgiopoulos. (15)                                                                                                                                                                                                 |
| 10.16  |   | Restricted  Stock Grant Agreement dated December 18, 2006 between General Maritime  Subsidiary Corporation and Peter C. Georgiopoulos. (15)                                                                                                                                                                                                |
| 10.17  |   | Restricted  Stock Grant Agreement dated April 2, 2007 between General Maritime  Subsidiary                                                                                                                                                                                                                                                 |

 

91

----

 
|   |   | Corporation  and Peter C. Georgiopoulos. (16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.18  |   | Restricted  Stock Grant Agreement dated April 2, 2007 between General Maritime  Subsidiary Corporation and John P. Tavlarios. (16)                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.19  |   | Restricted  Stock Grant Agreement dated April 2, 2007 between General Maritime  Subsidiary Corporation and Jeffrey D. Pribor. (16)                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.20  |   | Restricted  Stock Grant Agreement dated April 2, 2007 between General Maritime  Subsidiary Corporation and John C. Georgiopoulos. (16)                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.21  |   | Restricted  Stock Grant Agreement dated April 2, 2007 between General Maritime  Subsidiary Corporation and Peter S. Bell. (16)                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.22  |   | Restricted  Stock Grant Agreement dated April 2, 2007 between General Maritime  Subsidiary Corporation and Milton H. Gonzales, Jr. (16)                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.23  |   | ISDA  Master Agreement, effective as of September 21, 2007, between Citibank,  N.A. and General Maritime Corporation, and the Schedule thereto. (32)                                                                                                                                                                                                                                                                                                                                                                              |
| 10.24  |   | Restricted  Stock Grant Agreement dated December 21, 2007 between General Maritime  Subsidiary Corporation and Peter C. Georgiopoulos. (16)                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.25  |   | Restricted  Stock Grant Agreement dated December 21, 2007 between General Maritime  Subsidiary Corporation and John P. Tavlarios. (16)                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.26  |   | Restricted  Stock Grant Agreement dated December 21, 2007 between General Maritime  Subsidiary Corporation and Jeffrey D. Pribor. (16)                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.27  |   | Restricted  Stock Grant Agreement dated December 21, 2007 between General Maritime  Subsidiary Corporation and John C. Georgiopoulos. (16)                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.28  |   | Restricted  Stock Grant Agreement dated December 21, 2007 between General Maritime  Subsidiary Corporation and Peter S. Bell. (16)                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.29  |   | Restricted  Stock Grant Agreement dated December 21, 2007 between General Maritime  Subsidiary Corporation and Milton H. Gonzales, Jr. (16)                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.30  |   | ISDA  Master Agreement, dated as of January 8, 2008, between Keybank National  Association and General Maritime Corporation, and the Schedule thereto. (17)                                                                                                                                                                                                                                                                                                                                                                       |
| 10.31  |   | ISDA  Master Agreement, dated as of January 11, 2008, between HSH Nordbank AG  and General Maritime Corporation, and the Schedule thereto. (17)                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.32  |   | ISDA  Master Agreement, dated as of May 2, 2008, between DnB NOR Bank ASA and  General Maritime Corporation, and the Schedule thereto. (18)                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.33  |   | Restricted  Stock Grant Agreement, dated May 14, 2008, among General Maritime  Corporation and Peter S. Shaerf, pursuant to the 2001 Stock Incentive Plan.  (19)                                                                                                                                                                                                                                                                                                                                                                  |
| 10.34  |   | Restricted  Stock Grant Agreement, dated May 14, 2008, among General Maritime  Corporation and Rex W. Harrington, pursuant to the 2001 Stock Incentive Plan.  (19)                                                                                                                                                                                                                                                                                                                                                                |
| 10.35  |   | Restricted  Stock Grant Agreement, dated May 14, 2008, among General Maritime  Corporation and William J. Crabtree, pursuant to the 2001 Stock Incentive  Plan. (19)                                                                                                                                                                                                                                                                                                                                                              |
| 10.36  |   | Letter  Agreement dated October 24, 2008 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (20)                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.37  |   | Amendment  to Letter Agreement, dated December 16, 2008, by and among General Maritime  Corporation, General Maritime Subsidiary Corporation, and Peter C.  Georgiopoulos. (2)                                                                                                                                                                                                                                                                                                                                                    |
| 10.38  |   | Amendment  and Restated Credit Agreement, dated October 20, 2008, among General  Maritime Corporation (renamed General Maritime Subsidiary Corporation), Galileo  Holding Corporation (renamed General Maritime Corporation), the Lenders party  from time to time thereto, Nordea Bank Finland PLC, New York Branch, as  Administrative Agent and Collateral Agent, and Nordea Bank Finland PLC, New  York Branch, HSH Nordbank AG, and DNB Nor Bank ASA, New York Branch, as Joint  Lead Arrangers and Joint Book Runners. (21) |
| 10.39  |   | Consent  regarding Credit Agreement, dated February 24, 2009, among General  Maritime Corporation (renamed General Maritime Subsidiary Corporation), Galileo  Holding Corporation (renamed General Maritime Corporation), the Lenders party  hereto, and Nordea Bank Finland PLC, New York, as Administrative Agent. (29)                                                                                                                                                                                                         |
| 10.40  |   | Employment  Agreement, dated as of December 15, 2008, by and among General Maritime  Corporation (formerly Galileo Holding Corporation), General Maritime  Subsidiary Corporation (formerly General Maritime Corporation), General  Maritime Management LLC, and John P. Tavlarios. (22)                                                                                                                                                                                                                                          |
| 10.41  |   | Employment  Agreement, dated as of December 15, 2008, by and among General Maritime  Corporation, General Maritime Subsidiary Corporation, and Jeffrey D. Pribor.  (22)                                                                                                                                                                                                                                                                                                                                                           |
| 10.42  |   | Employment  Agreement, dated as of December 15, 2008, by and among General Maritime  Corporation, General Maritime Subsidiary Corporation, and John C.  Georgiopoulos. (22)                                                                                                                                                                                                                                                                                                                                                       |
| 10.43  |   | General  Maritime Corporation 2001 Stock Incentive Plan (as amended and restated,  effective                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

92

----

 
|   |   | December 16,  2008). (23)                                                                                                                                                                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.44  |   | Restricted  Stock Grant Agreement dated December 23, 2008 between General Maritime  Corporation and John P. Tavlarios. (29)                                                                                                                                                                                  |
| 10.45  |   | Restricted  Stock Grant Agreement dated December 23, 2008 between General Maritime  Corporation and Jeffrey D. Pribor. (29)                                                                                                                                                                                  |
| 10.46  |   | Restricted  Stock Grant Agreement dated December 23, 2008 between General Maritime  Corporation and John C. Georgiopoulos. (29)                                                                                                                                                                              |
| 10.47  |   | Restricted  Stock Grant Agreement dated December 23, 2008 between General Maritime  Corporation and Peter S. Bell. (29)                                                                                                                                                                                      |
| 10.48  |   | Restricted  Stock Grant Agreement dated December 23, 2008 between General Maritime  Corporation and Milton H. Gonzales, Jr. (29)                                                                                                                                                                        |
| 10.49  |   | Restricted  Stock Grant Agreement dated December 23, 2008 between General Maritime  Corporation and E. Grant Gibbons. (29)                                                                                                                                                                                   |
| 10.50  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and George J. Konomos. (29)                                                                                                                                                                                  |
| 10.51  |   | Restricted Stock Grant  Agreement dated May 14, 2009, between General Maritime Corporation and  William J. Crabtree. (30)                                                                                                                                                                                    |
| 10.52  |   | Restricted Stock Grant  Agreement dated May 14, 2009, between General Maritime Corporation and  Peter C. Georgiopoulos. (30)                                                                                                                                                                                 |
| 10.53  |   | Restricted Stock Grant  Agreement dated May 14, 2009, between General Maritime Corporation and  E. Grant Gibbons. (30)                                                                                                                                                                                       |
| 10.54  |   | Restricted Stock Grant  Agreement dated May 14, 2009, between General Maritime Corporation and  Rex W. Harrington. (30)                                                                                                                                                                                      |
| 10.55  |   | Restricted Stock Grant  Agreement dated May 14, 2009, between General Maritime Corporation and  George J. Konomos. (30)                                                                                                                                                                                      |
| 10.56  |   | Restricted Stock Grant  Agreement dated May 14, 2009, between General Maritime Corporation and  Peter S. Shaerf. (30)                                                                                                                                                                                        |
| 10.57  |   | Letter Agreement, dated  September 29, 2009, by and among General Maritime Corporation, General  Maritime Subsidiary Corporation and Peter C. Georgiopoulos. (32)                                                                                                                                            |
| 10.59  |   | First  Amendment to Amended and Restated Credit Agreement, dated October 27,  2009, among General Maritime Corporation, General Maritime Subsidiary  Corporation, the Lenders party from time to time thereto, Nordea Bank Finland  PLC, New York Branch, as Administrative Agent and Collateral Agent. (31) |
| 10.60  |   | Indenture,  dated as of November 12, 2009, among General Maritime Corporation, the  Subsidiary Guarantors parties thereto and The Bank of New Mellon, as Trustee.  (33)                                                                                                                                      |
| 10.61  |   | Form of  12% Senior Notes due 2017. (33)                                                                                                                                                                                                                                                                     |
| 10.62  |   | Registration  Rights Agreement, dated November 12, 2009, among General Maritime  Corporation and the parties named therein. (33)                                                                                                                                                                             |
| 10.63  |   | Purchase  Agreement, dated November 6, 2009, by and among General Maritime  Corporation, the Subsidiary Guarantors party thereto, and J.P. Morgan  Securities, Inc., as representative of the Several Initial Purchasers  named in Schedule I thereto. (*)                                              |
| 10.64  |   | Time  Charter Party for *Stena Compatriot.* (24)                                                                                                                                                                                                                                                                  |
| 10.65  |   | Amendment  No. 1 to Time Charter Party for *Stena  Compatriot.*(25)                                                                                                                                                                                                                                          |
| 10.66  |   | Amendment  No. 2 to Time Charter Party for *Stena  Compatriot.*(26)                                                                                                                                                                                                                                          |
| 10.67  |   | Time  Charter Party for *Stena Consul.*(24)                                                                                                                                                                                                                                                                       |
| 10.68  |   | Amendment  No. 1 to Time Charter Party for *Stena  Consul.* (25)                                                                                                                                                                                                                                             |
| 10.69  |   | Amendment  No. 2 to Time Charter Party for *Stena  Consul.*(26)                                                                                                                                                                                                                                              |
| 10.70  |   | Ship  Management Agreement for *Stena Compatriot.* (24)                                                                                                                                                                                                                                                           |
| 10.71  |   | Amendment  No. 1 to Ship Management Agreement for *Stena  Compatriot.*(25)                                                                                                                                                                                                                                   |
| 10.72  |   | Amendment  No. 2 to Ship Management Agreement for *Stena  Compatriot.* (26)                                                                                                                                                                                                                                  |
| 10.73  |   | Ship  Management Agreement for *Stena Consul.* (24)                                                                                                                                                                                                                                                               |
| 10.74  |   | Amendment  No. 1 to Ship Management Agreement for *Stena  Consul.* (25)                                                                                                                                                                                                                                      |
| 10.75  |   | Amendment  No. 2 to Ship Management Agreement for *Stena  Consul.*(26)                                                                                                                                                                                                                                       |
| 10.76  |   | Ship  Management Agreement for *Stena Concept.* (26)                                                                                                                                                                                                                                                              |
| 10.77  |   | Ship  Management Agreement for *Stena Contest.* (26)                                                                                                                                                                                                                                                              |
| 10.78  |   | Stena  Guaranty of Time Charter for *Stena  Compatriot.* (24)                                                                                                                                                                                                                                                     |
| 10.79  |   | Stena  Guaranty of Time Charter for *Stena Consul.* (24)                                                                                                                                                                                                                                                          |
| 10.80  |   | Stena  Guaranty of Time Charter for *Stena  Concept.*(26)                                                                                                                                                                                                                                                         |
| 10.81  |   | Stena  Guaranty of Time Charter for *Stena  Contest.* (26)                                                                                                                                                                                                                                                        |

 

93

----

 
| 10.82  |   | Stena  Guaranty of Off-Hire and Replacement of Ship Manager for *Stena Compatriot.*(24)                                                                                                                                                                                                                            |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.83  |   | Stena  Guaranty of Off-Hire and Replacement of Ship Manager for *Stena Consul.*(24)                                                                                                                                                                                                                                |
| 10.84  |   | Stena  Guaranty of Off-Hire and Replacement of Ship Manager for *Stena Concept.*(26)                                                                                                                                                                                                                               |
| 10.85  |   | Stena  Guaranty of Off-Hire and Replacement of Ship Manager for *Stena Contest.*(26)                                                                                                                                                                                                                               |
| 10.86  |   | Arlington  Guaranty of Time Charter for *Stena  Compatriot.*(24)                                                                                                                                                                                                                                                   |
| 10.87  |   | Arlington  Guaranty of Time Charter for *Stena Consul.*(24)                                                                                                                                                                                                                                                        |
| 10.88  |   | Arlington  Guaranty of Time Charter for *Stena  Concept.* (26)                                                                                                                                                                                                                                                     |
| 10.89  |   | Arlington  Guaranty of Time Charter for *Stena  Contest.*(26)                                                                                                                                                                                                                                                      |
| 10.90  |   | Arlington  Guaranty of Ship Management Agreement for *Stena  Compatriot.*(24)                                                                                                                                                                                                                                      |
| 10.91  |   | Arlington  Guaranty of Ship Management Agreement for *Stena  Consul.*(24)                                                                                                                                                                                                                                          |
| 10.92  |   | Arlington  Guaranty of Ship Management Agreement for *Stena  Concept.*(26)                                                                                                                                                                                                                                         |
| 10.93  |   | Arlington  Guaranty of Ship Management Agreement for *Stena  Contest.* (26)                                                                                                                                                                                                                                        |
| 10.94  |   | Arlington  Tankers Ltd. 2008 Bonus Plan. (27)                                                                                                                                                                                                                                                                      |
| 10.95  |   | Amendment  Agreement, dated as of November 13, 2009, between Arlington Tankers  Ltd., a wholly-owned subsidiary of the Registrant, as Borrower, and The Royal  Bank of Scotland plc, as Lender. (*)                                                                                                           |
| 10.96  |   | Second  Amendment to Amended and Restated Credit Agreement, dated December 18,  2009, among General Maritime Corporation, General Maritime Subsidiary  Corporation, the Lenders party from time to time thereto, Nordea Bank Finland  PLC, New York Branch, as Administrative Agent and Collateral Agent. (*) |
| 10.97  |   | Restricted  Stock Grant Agreement dated December 24, 2009 between General Maritime  Corporation and John C. Georgiopoulos. (*)                                                                                                                                                                                |
| 10.98  |   | Restricted  Stock Grant Agreement dated December 24, 2009 between General Maritime  Corporation and Peter S. Bell. (*)                                                                                                                                                                                        |
| 10.99  |   | Restricted  Stock Grant Agreement dated December 24, 2009 between General Maritime  Corporation and Milton H. Gonzales, Jr. (*)                                                                                                                                                                          |
| 10.100 |   | Restricted  Stock Grant Agreement dated December 24, 2009 between General Maritime  Corporation and John P. Tavlarios. (*)                                                                                                                                                                                    |
| 10.101 |   | Restricted  Stock Grant Agreement dated December 24, 2009 between General Maritime  Corporation and Jeffrey D. Pribor. (*)                                                                                                                                                                                    |
| 10.102 |   | ISDA  Master Agreement, effective as of December 12, 2005, between Royal Bank  of Scotland plc and Arlington Tankers Ltd., and the Schedule thereto. (*)                                                                                                                                                      |
| 14.1   |   | General  Maritime Corporation Code of Ethics. (28)                                                                                                                                                                                                                                                                 |
| 21.1   |   | Subsidiaries  of General Maritime Corporation. (*)                                                                                                                                                                                                                                                                 |
| 23.1   |   | Consent  of Independent Registered Public Accounting Firm. (*)                                                                                                                                                                                                                                                     |
| 31.1   |   | Certification  of Chief Executive Officer pursuant to Rule 13(a)—14(a) and  15(d)—14(a) of the Securities Exchange Act of 1934, as amended. (*)                                                                                                                                           |
| 31.2   |   | Certification  of Chief Financial Officer pursuant to Rule 13(a)—14(a) and  15(d)—14(a) of the Securities Exchange Act of 1934, as amended. (*)                                                                                                                                           |
| 32.1   |   | Certification  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. (*)                                                                                                                                                                                                                             |
| 32.2   |   | Certification  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. (*)                                                                                                                                                                                                                             |

 

----

| (*)    |   | Filed  herewith.                                                                                                                                                                                                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                    |
| (1)    |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  August 6, 2008.                                        |
|   |   |                                                                                                                                                                                                                    |
| (2)    |   | Incorporated  by reference to General Maritime Corporation’s Report on Form 8-K filed  with the Securities and Exchange Commission on December 16, 2008.                                                 |
|   |   |                                                                                                                                                                                                                    |
| (3)    |   | Incorporated  by reference to General Maritime Corporation’s Registration Statement on  Form S-4/A filed with the Securities and Exchange Commission on  October 3, 2008.                                |
|   |   |                                                                                                                                                                                                                    |
| (4)    |   | Incorporated  by reference to Amendment No. 4 to General Maritime Subsidiary  Corporation’s Registration Statement on Form S-1, filed with the  Securities and Exchange Commission on June 6, 2001. |
|   |   |                                                                                                                                                                                                                    |
| (5)    |   | Incorporated by reference to Amendment No. 3 to  General Maritime Subsidiary Corporation’s Registration Statement on  Form S-1, filed with the Securities and Exchange Commission on  May 25, 2001. |

 

94

----

 
| (6)    |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  September 7, 2006.          |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                         |
| (7)    |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K/A filed with the Securities and Exchange Commission on  August 7, 2008.           |
|   |   |                                                                                                                                                                                         |
| (8)    |   | Incorporated  by reference from Arlington Tankers Ltd. Report on Form 8-K, filed with  the Securities and Exchange Commission on June 30, 2008.                                    |
|   |   |                                                                                                                                                                                         |
| (9)    |   | Incorporated  by reference from Arlington Tankers Ltd. Report on Form 8-K, filed with  the Securities and Exchange Commission on August 6, 2008.                                   |
|   |   |                                                                                                                                                                                         |
| (10)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Annual Report on  Form 10-K filed with the Securities and Exchange Commission on  March 16, 2005.     |
|   |   |                                                                                                                                                                                         |
| (11)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Quarterly Report on  Form 10-Q filed with the Securities and Exchange Commission on  May 10, 2005.    |
|   |   |                                                                                                                                                                                         |
| (12)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  April 7, 2005.              |
|   |   |                                                                                                                                                                                         |
| (13)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  April 26, 2005.             |
|   |   |                                                                                                                                                                                         |
| (14)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Annual Report on  Form 10-K filed with the Securities and Exchange Commission on  March 14, 2006.     |
|   |   |                                                                                                                                                                                         |
| (15)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Annual report on  Form 10-K filed with the Securities and Exchange Commission on  March 1, 2007.      |
|   |   |                                                                                                                                                                                         |
| (16)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Annual Report on  Form 10-K filed with the Securities and Exchange Commission on  February 29, 2008.  |
|   |   |                                                                                                                                                                                         |
| (17)   |   | Incorporated  by reference from General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  February 19, 2008.        |
|   |   |                                                                                                                                                                                         |
| (18)   |   | Incorporated  by reference from General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  May 29, 2008.             |
|   |   |                                                                                                                                                                                         |
| (19)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Quarterly Report on  Form 10-Q filed with the Securities and Exchange Commission on  August 11, 2008. |
|   |   |                                                                                                                                                                                         |
| (20)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  October 27, 2008.           |
|   |   |                                                                                                                                                                                         |
| (21)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-K filed with the Securities and Exchange Commission on  October 23, 2008.           |
|   |   |                                                                                                                                                                                         |
| (22)   |   | Incorporated  by reference to General Maritime Subsidiary Corporation’s Report on  Form 8-KA with the Securities and Exchange Commission on  December 19, 2008.               |
|   |   |                                                                                                                                                                                         |
| (23)   |   | Incorporated  by reference to General Maritime’s Form S-8 filed with the Securities  and Exchange Commission on December 22, 2008.                                            |
|   |   |                                                                                                                                                                                         |
| (24)   |   | Incorporated  by reference from Arlington Tankers Ltd. Registration Statement on  Form F-1 filed with the Securities and Exchange Commission on  October 24, 2004.                 |
|   |   |                                                                                                                                                                                         |
| (25)   |   | Incorporated by reference  from Arlington Tankers Ltd. Annual Report on Form 20-F filed with the  Securities and Exchange Commission on June 6, 2005.                              |

 

95

----

 
| (26)   |   | Incorporated  by reference from Arlington Tankers Ltd. Report on Form 8-K filed with  the Securities and Exchange Commission on January 16, 2006.               |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                      |
| (27)   |   | Incorporated  by reference from Arlington Tankers Ltd. Report on Form 8-K filed with  the Securities and Exchange Commission on April 23, 2008.                 |
|   |   |                                                                                                                                                                      |
| (28)   |   | Incorporated  by reference from General Maritime Corporation’s Report on Form 8-K  filed with the Securities and Exchange Commission on February 26, 2009. |
|   |   |                                                                                                                                                                      |
| (29)   |   | Incorporated  by reference from General Maritime Corporation’s Report on Form 10-K  filed with the Securities and Exchange Commission on March 2, 2009.    |
|   |   |                                                                                                                                                                      |
| (30)   |   | Incorporated  by reference from General Maritime Corporation’s Report on Form 10-Q  filed with the Securities and Exchange Commission on August 7, 2009.   |
|   |   |                                                                                                                                                                      |
| (31)   |   | Incorporated  by reference from General Maritime Corporation’s Report on Form 8-K  filed with the Securities and Exchange Commission on October 28, 2009.  |
|   |   |                                                                                                                                                                      |
| (32)   |   | Incorporated  by reference from General Maritime Corporation’s Report on Form 10-Q  filed with the Securities and Exchange Commission on November 6, 2009. |
|   |   |                                                                                                                                                                      |
| (33)   |   | Incorporated by reference  from General Maritime Corporation’s Report on Form 8-K filed with the  Securities and Exchange Commission on November 12, 2009. |

 

96

----

 

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
|   | GENERAL  MARITIME CORPORATION |
|--------|-------------------------------|
|   |                          |
|   | By:                           | /s/  JOHN P. TAVLARIOS |
|   |                          | Name:  John P. Tavlarios |
|   |                          | Title:  Principal Executive Officer |

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed by the following persons on behalf of theregistrant and in the capacity and on March 1, 2010.

 
| **SIGNATURE**               | ** ** | **TITLE**                                             |
|-----------------------------|------------|-------------------------------------------------------|
| ** **                  | ** ** | ** **                                            |
|                        |       |                                                  |
| /s/  PETER C. GEORGIOPOULOS |       | CHAIRMAN  AND DIRECTOR                                |
| Peter  C. Georgiopoulos     |       |                                                  |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  JOHN P. TAVLARIOS      |       | PRESIDENT  AND DIRECTOR                               |
| John  P. Tavlarios          |       | (PRINCIPAL  EXECUTIVE OFFICER)                        |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  JEFFREY D. PRIBOR      |       | EXECUTIVE  VICE PRESIDENT AND CHIEF FINANICAL OFFICER |
| Jeffrey  D. Pribor          |       | (PRINCIPAL  FINANCIAL AND ACCOUNTING OFFICER)         |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  WILLIAM J. CRABTREE    |       | DIRECTOR                                              |
| William  J. Crabtree        |       |                                                  |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  DR. E. GRANT GIBBONS   |       | DIRECTOR                                              |
| Dr. E.  Grant Gibbons  |       |                                                  |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  REX W. HARRINGTON      |       | DIRECTOR                                              |
| Rex  W. Harrington          |       |                                                  |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  GEORGE KONOMOS         |       | DIRECTOR                                              |
| George  Konomos             |       |                                                  |
|                        |       |                                                  |
|                        |       |                                                  |
| /s/  PETER S. SHAERF        |       | DIRECTOR                                              |
| Peter  S. Shaerf            |       |                                                  |

 

97

----