**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

**FORM 10-K**

 

| **x** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------------|

** **

**For the fiscal yearended December 31, 2008**

 

| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------------------|

** **

**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 Registrant registered pursuant to Section 12(b) ofthe Act:

 

Title of Each Class

**CommonStock, par value $.01 per share**

** **

Name of Each Exchange on Which Registered

**NewYork Stock Exchange**

** **

Securities of the Registrant registered pursuant to Section 12(g) ofthe Act:

 

**None**

 

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes  o  No  x

 

Indicate by check mark if the registrant is not requiredto file reports pursuant to Section 13 or 15(d) of the Act.

 

Yes  o  No  x

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past 90 days.

 

Yes  x  No  o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein and willnot be contained, to the best of the registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check mark whether registrant is a largeaccelerated filer, an accelerated filer, a non-accelerated filer, or a smallerreporting company (See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the ExchangeAct). (Check one):

 

Large Accelerated Filer x AcceleratedFiler o Non-AcceleratedFiler o SmallerReporting Company o

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes o No x

 

The aggregate market value of the voting stockof the registrant’s predecessor, General Maritime Corporation (renamed GeneralMaritime Subsidiary Corporation), held by non-affiliates of the registrant’spredecessor as of June 30, 2008 was approximately $693.7 million, based onthe closing price of $19.39 per share.

 

The number of shares outstanding of the registrant’scommon stock as of February 22, 2009 was 57,850,528 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Proxy Statement for the 2009 Annual Meeting ofStockholders, to be filed with the Securities and Exchange Commission not laterthan 120 days after December 31, 2008, is incorporated by reference in Part IIIherein.

 

 

 

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**PART I**

 

**ITEM 1. BUSINESS**

** **

**OVERVIEW**

** **

We are a leading provider of international seaborne crude oiltransportation services.  As of March 2, 2009our fleet consists of 31 wholly owned vessels, consisting of 12 Aframaxvessels, 11 Suezmax vessels (together with our 12 Aframax vessels, the “GeneralMaritime Subsidiary Vessels”), two Very Large Crude Carriers (“VLCCs”), twoPanamax vessels and four product carriers. These vessels have a total of 3.9 million dwt, all of which isdouble-hulled. Many of the vessels in our fleet are “sister ships”, whichprovide us with operational and scheduling flexibility, as well as economies ofscale in their operation and maintenance. We acquired our two VLCCs, two Panamax vessels and four product carriers(the “Arlington Vessels”) in a combination with Arlington Tankers Ltd.  (“Arlington”) described below.

 

On December 16, 2008, pursuant to an Agreement and Plan of Mergerand Amalgamation, dated as of August 5, 2008, by and among the GeneralMaritime Corporation (the “Company”), 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 Combination”).  As a result of the Arlington Combination,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 Combination, 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.

 

General Maritime Subsidiary is the predecessor of the Company forpurposes of U.S. securities regulations governing financial statementfiling.  The Arlington Combination isaccounted for as an acquisition by General Maritime Subsidiary ofArlington.  Therefore, the disclosuresthroughout this Annual Report on Form 10-K and the accompanyingConsolidated Financial Statements, unless otherwise noted,  reflect the results of operations of GeneralMaritime Subsidiary for the years ended December 31, 2007 and 2006 and thefinancial position of General Maritime Subsidiary as of December 31,2007.  The Company had separateoperations for the period beginning December 16, 2008, the effective dateof the Arlington Combination, and disclosures and references to amounts forperiods after that date 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 “ArlingtonTransaction” in Note 2 to the Consolidated Financial 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 ArlingtonCombination.

 

The majority of our vessels currently operate in the Atlantic, whichincludes ports in the Caribbean, South and Central America, the United States,Western Africa, the Mediterranean, Europe and the North Sea.  Transportation of crude oil to the U.S. GulfCoast and other refining centers in the United States requires vessel ownersand operators to meet more stringent environmental regulations than in otherregions of the world.  We have focusedour operations in the Atlantic because we believe that these stringentoperating and safety standards give us a potential competitive advantage.  We have established a niche in the region dueto our high quality vessels, all of which are double-hulled, our commitment tosafety and our many years of experience in the industry.  Although the majority of our vessels operatein the Atlantic, we also currently operate vessels in the Black Sea and inother regions, which we believe enables us both to take advantage of marketopportunities and to position our vessels in anticipation of drydockings.  Our customers include most of the majorinternational oil companies and vessel owners such as Chevron Corporation,CITGO Petroleum Corp., ConocoPhillips, Exxon Mobil Corporation, HessCorporation, Lukoil Oil Company, Stena AB (including its majority owned subsidiaries)and Sun International Ltd.

 

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We actively manage the deployment of our vessels between spot marketvoyage charters, which generally last from several days to several weeks, andtime charters, which can last up to several years.  We continuously and actively monitor marketconditions in an effort to take advantage of changes in charter rates and tomaximize our long-term cash flow by changing this chartering deploymentprofile.  We design our fleet deploymentto provide greater cash flow stability through the use of time charters forpart of our fleet, while maintaining the flexibility to benefit fromimprovements in market rates by deploying the balance of our vessels in thespot market.

 

Our net voyage revenues, which are voyage revenues minus voyageexpenses, have grown from $12.0 million in 1997 to $271.7 million in 2008.  Net voyage revenues increased by $54.8million, or 25.3%, to $271.7 million for the year ended December 31, 2008compared to $216.9 million for the year ended December 31, 2007 primarilydue to the larger size of our fleet. Between March 2006 and February 2008 General MaritimeSubsidiary took delivery of four newly constructed Suezmax vessels.  During the fourth quarter of 2008, GeneralMaritime Subsidiary took delivery of two Aframax vessels.  During December 2008, pursuant to theArlington Combination, we acquired the Arlington Vessels.  As a result, we believe that our fleetprofile has become more attractive to 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, andother documents with the Securities and Exchange Commission, or the SEC, underthe Securities Exchange Act of 1934, or the Exchange Act.  The public may read and copy any materialsthat we file with the SEC at the SEC’s Public Reference Room at 100 FStreet, 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 company website can be found on the Internet atwww.generalmaritimecorp.com.  The websitecontains information about us and our operations.  Copies of each of our filings with the SEC onForm 10-K, Form 10-Q and Form 8-K, and all amendments to thosereports, can be viewed and downloaded free of charge as soon as reasonablypracticable after the reports and amendments are electronically filed with orfurnished to the SEC.  To view thereports, access www.generalmaritimecorp.com, click on Press Releases, and thenSEC Filings.

 

Any of the above documents can also be obtained in print by anyshareholder upon request to our Investor Relations Department at the followingaddress:

 

Corporate InvestorRelationsGeneral Maritime Corporation299 Park AvenueNew York, NY 10171

 

**BUSINESS STRATEGY**

** **

Our strategy is to employ our existing competitive strengths to enhanceour position within the industry and maximize long-term cash flow.  Our strategic initiatives include:

 

·                  *Managing Environmentally Safe, Yet Cost Efficient Operations. *We aggressively manage ouroperating and maintenance costs.  At thesame time, our fleet has an excellent safety and environmental record that wemaintain through acquisitions of high-quality vessels and regular maintenanceand 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 staffoversees many of these services.  Webelieve the age and quality of the vessels in our fleet, coupled 

 

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with our excellent safetyand environmental record, position us favorably within the sector with ourcustomers and for future business opportunities.

 

·                  *Balancing Vessel Deployment to Maximize Fleet Utilization and CashFlows*.  We actively manage thedeployment of our fleet between time charters and spot market voyagecharters.  Our vessel deployment strategyis designed to provide greater cash flow stability through the use of timecharters for part of our fleet, while maintaining the flexibility to benefitfrom improvements in market rates by deploying the balance of our vessels inthe spot market.  Our goal is to be thefirst choice of our customers for the transportation of crude oil and refinedpetroleum products.  We constantlymonitor the market and seek to anticipate our customers’ transportation needsand to respond quickly when we recognize attractive chartering opportunities.

 

·                  *Growing and Managing the Profile of Our Fleet*.  We have been an industry consolidator focusedon opportunistically acquiring high-quality mid-sized vessels or newbuildingcontracts for such vessels.  We arecontinuously and actively monitoring the market in an effort to take advantageof expansion and growth opportunities. We also evaluate opportunities to monetize our investment in vessels byselling them when conditions are favorable to generate return on investedcapital, to adjust the profile of our fleet to fit customer demands such aspreference for double-hull vessels and to generate capital for potential valueenhancing investments in the future.

 

·                  *Maintaining a Prudent Capital Structure. *We are committed to maintainingprudent financial policies aimed at preserving financial stability andappropriate leverage and increasing long-term cash flow.  As of December 31, 2008, our debt tocapitalization ratio was 68.5%,  As of December 31,2008 we had the ability to draw down an additional $133.0 million on our 2005Credit Facility.

 

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**OUR FLEET**

** **

Our current fleet consists of 31 vessels and is comprised of 12 Aframaxvessels, 11 Suezmax vessels, two VLCCs, two Panamax vessels and four productcarriers.  The following chart providesinformation regarding our 31 vessels.

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

 

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TC = Long Term Time Chartered

 

(1)                                  Vesselis collateral for our 2005 Credit Facility.

 

(2)                                  Vesselis collateral for our RBS Facility.

 

(3)                                  Eachvessel with the same letter is a “sister ship” of each other vessel with thesame letter.

 

During April 2004 and July 2004, we acquired nine vessels, consistingof three Aframax vessels, two Suezmax vessels and four Suezmax newbuildingcontracts, and a technical management company from Soponata SA, an unaffiliatedentity, for an aggregate purchase price of $248.1 million in cash.  These four newbuilding Suezmax vessels weredelivered 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 Combination, weacquired two VLCCs, two Panamax vessels and four product carriers along withArlington’s other assets and liabilities in exchange for 15.5 million shares ofour common stock.

 

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

 

Commercial management for our vessels is provided through ourwholly-owned subsidiary, General Maritime Management LLC.

 

**FLEET DEPLOYMENT**

** **

We strive to optimize the financial performance of our fleet bydeploying our vessels on time charters and in the spot market.  We believe that our fleet deployment strategyprovides us with the ability to benefit from increases in tanker rates while atthe same time maintaining a measure of stability through cycles in theindustry.  The following table details thepercentage of our fleet operating on time charters and in the spot marketduring the past three years.

 
| ** **                    | ** ** | **TIME CHARTER VS.SPOT MIX (as % of operating days)  YEAR ENDED DECEMBER 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                    | ** ** | **2008**                                                                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Percent in Time  Charter Days |       | 74.9                                                                           | %          | 70.3 | % | 32.3 | % |
| Percent in Spot  Days         |       | 25.1                                                                           | %          | 29.7 | % | 67.7 | % |
| Total Vessel  Operating Days  |       | 7,568                                                                          |       | 6,599 |   | 7,121 |   |

 

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.

 

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**OUR CHARTERS**

** **

Our current fleet of 31 vessels has 23 vessels on time chartercontracts expiring on dates between July 2009 and July 2011 shown asfollows:

 
| **Vessel**         | ** ** | **Vessel Type** | ** ** | **Expiration Date**     | ** ** | **Daily Rate (1)** | ** ** |
|--------------------|------------|-----------------|------------|-------------------------|------------|--------------------|------------|
|               |       |            |       |                    |       |               |       |
| Genmar Agamemnon   |       | Aframax         |       | July 04, 2009      |       | $                  | 36,750     |   |
| Genmar Argus       |       | Suezmax         |       | November 5, 2009   |       | $                  | 38,500     |   |
| Genmar Defiance    |       | Aframax         |       | December 24, 2009  |       | $                  | 29,500     |   |
| Genmar George T.   |       | Suezmax         |       | August 27, 2010    |       | $                  | 39,000     |   |
| Genmar Harriet G.  |       | Suezmax         |       | June 1, 2010       |       | $                  | 38,000     |   |
| Genmar Hope        |       | Suezmax         |       | August 11, 2009    |       | $                  | 36,500     |   |
| Genmar Horn        |       | Suezmax         |       | November 22, 2009  |       | $                  | 38,500     |   |
| Genmar Kara G.     |       | Suezmax         |       | June 1, 2010       |       | $                  | 38,000     |   |
| Genmar Minotaur    |       | Aframax         |       | November 30, 2009  |       | $                  | 25,000     |   |
| Genmar Orion       |       | Suezmax         |       | June 1, 2010       |       | $                  | 38,000     |   |
| Genmar Phoenix     |       | Suezmax         |       | October 31, 2009   |       | $                  | 38,500     |   |
| Genmar Princess    |       | Aframax         |       | October 23, 2009   |       | $                  | 27,750     |   |
| Genmar Spyridon    |       | Suezmax         |       | October 12, 2009   |       | $                  | 38,500     |   |
| Genmar St. Nikolas |       | Suezmax         |       | February 6, 2011   |       | $                  | 39,000     |   |
| Genmar Strength    |       | Aframax         |       | September 20, 2009 |       | $                  | 39,000     |   |
| Stena Companion    |       | Panamax         |       | November 10, 2009  | (2)        | $                  | 18,639     | (3) |
| Stena Compatriot   |       | Panamax         |       | November 10, 2010  | (2)        | $                  | 18,639     | (3) |
| Stena Concept      |       | Handymax        |       | July 4, 2011       | (2)        | $                  | 20,335     | (5) |
| Stena Concord      |       | Handymax        |       | November 10, 2009  | (2)        | $                  | 16,642     | (4) |
| Stena Consul       |       | Handymax        |       | November 10, 2010  | (2)        | $                  | 16,642     | (4) |
| Stena Contest      |       | Handymax        |       | July 4, 2011       | (2)        | $                  | 20,335     | (5) |
| Stena Vision       |       | VLCC            |       | November 10, 2009  | (2)        | $                  | 37,316     |   |
| Stena Victory      |       | VLCC            |       | November 10, 2009  | (2)        | $                  | 37,316     |   |

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(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 increases to $18,989 per day commencing November 11,2009.

 

(4)                    Rate increases to $16,964 per day commencing November 11,2009.

 

(5)                    Rate adjusts as follows: $17,942 per day from January 5,2009 through January 4, 2010, $18,264 per day from January 5, 2010through January 4, 2011 and $18,603 per day from January 5, 2011through July 4, 2011.

 

Our time charters on our General Maritime Subsidiary Vessels are forfixed rates per day with no additional hire earned.

 

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Our time charters on our Arlington Vessels are for fixed rates per dayand also have the potential to earn additional hire.  Under these charters, we are required to keepthe 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 the charter.  However, under the ship management agreementsdescribed below, Northern Marine will reimburse us for any loss of or reductionin Basic Hire, in excess of five days during any twelve-month period followingthe date the vessels are delivered to us, net of any proceeds we receive fromour 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.

 

The following table sets forth the daily Basic Hire and base operatingcosts for the two VLCCs, the *Stena Vision*and the *Stena Victory*:

 
| **Period**                               | ** ** | **Basic Hire  (1)** | ** ** | **Base Operating  Costs** | ** ** |
|------------------------------------------|------------|---------------------|------------|---------------------------|------------|
| Dec. 16,  2008 - Nov. 10, 2009 |       | $                   | 37,316     |                      | $          | 9,116 |   |
| Nov. 11,  2009 - Nov. 10, 2010 | **(2)**    | 37,772              |       | 9,572                     |       |
| Nov. 11,  2010 - Nov. 10, 2011 | **(2)**    | 38,251              |       | 10,051                    |       |
| Nov. 11,  2011 - Nov. 10, 2012 | **(2)**    | 38,753              |       | 10,553                    |       |
|                                          |            |                     |            |                           |            |  |  |

----

(1)          Each vessel is entitled to receiveAdditional Hire, the methodology for its calculation is described below.  However, to the extent the charterer hassubchartered the vessel, the amount on which additional hire is calculated isbased on the subcharter rate.  The *Stena Vision* and the *Stena Victory*are subchartered at a daily rate of $47,000 through September 11, 2010 forthe *Stena Vision* and October 20, 2009for the *Stena Victory*.  Additional hire for periods in which thissubcharter is in effect for the *Stena Vision* isfixed at $3,961 per day through November 10, 2009 and $3,733 for theperiod from November 11, 2009 through September 11, 2010.  For the *Stena Victory*,additional hire will be $3,961 per day through October 20, 2009, the dateon which the subcharter expires for this vessel.

 

(2)          Represents options for the charterer toextend 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 the *Stena Companion*, a PanamaxVessel, and the *Stena Concord*, a product carrier:

 

 
| ** **                               | *** *** | **Stena Companion** | *** *** | **Stena Concord**        | *** *** |
|------------------------------------------|--------------|---------------------|--------------|--------------------------|--------------|
| **Period**                               | ** **   | **Basic Hire  (1)** | ** **   | **Base Operating Costs** | ** **   | **Basic Hire  (1)** | ** ** | **Base Operating Costs** | ** ** |
| Dec. 16,  2008 - Nov. 10, 2009 |         | $                   | 18,639       |                     | $            | 6,989 |   | $ | 16,642 |   | $ | 6,442 |   |
| Nov. 11,  2009 - Nov. 10, 2010 | **(2)**      | 18,989              |         | 7,339                    |         | 16,964 |   | 6,764 |   |
| Nov. 11,  2010 - Nov. 10, 2011 | **(2)**      | 19,356              |         | 7,706                    |         | 17,303 |   | 7,103 |   |
|                                          |              |                     |              |                          |              |  |  |  |  |  |  |  |  |

----

(1)          Each vessel is entitled to receiveAdditional Hire, the methodology for its calculation is described below.  However, to the extent the charterer hassubchartered vessel, the amount on which additional hire is calculated is basedon the subcharter rate.  The *Stena Companion* is subchartered at a daily rate of $27,000

 

7

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                        through January 8, 2010.  Additional hire for periods in which thissubcharter is in effect is fixed at $3,674 per day through November 10,2009 and $3,499 per day from November 10, 2009 through January 8,2010.

 

(2)          Represents options for the charterer toextend 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 product carriers- the *Stena Compatriot*,a Panamax vessel, and the *Stena Consul*, aproduct carrier:

 
| ** **                               | *** *** | **Stena Compatriot** | ** ** | **Stena Consul**         | *** *** |
|------------------------------------------|--------------|----------------------|------------|--------------------------|--------------|
| **Period**                               | ** **   | **Basic Hire  (1)**  | ** ** | **Base Operating Costs** | ** **   | **Basic Hire  (1)** | ** ** | **Base Operating Costs** | ** ** |
| Dec. 16,  2008 - Nov. 10, 2009 |         | $                    | 18,639     |                     | $            | 6,989 |   | $ | 16,642 |   | $ | 6,442 |   |
| 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 to receiveAdditional Hire, the methodology for its calculation is described below.  However, to the extent the charterer hassubchartered vessel, the amount on which additional hire is calculated is basedon the subcharter rate.  The *Stena Compatriot* is subchartered at a daily rate of $27,000through January 8, 2010.  Additionalhire for periods in which this subcharter is in effect is fixed at $3,674 perday through November 10, 2009 and $3,499 per day from November 10,2009 through January 8, 2010.

 

(2)          Represents options for the charterer toextend 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 the *Stena Concept*and the *Stena Contest*:

 
| **Period**                              | ** ** | **Basic Hire  (1)** | ** ** | **Base Operating Costs** | ** ** |
|-----------------------------------------|------------|---------------------|------------|--------------------------|------------|
| Dec. 16,  2008 - Jan. 4, 2009 |       | $                   | 20,335     |                     | $          | 6,135 |   |
| 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)          From January 5, 2009 through July 4,2011, each vessel is entitled to receive Additional Hire, the methodology forits calculation is described below. However, to the extent the charterer has subchartered vessel, the amounton which additional hire is calculated is based on the subcharter rate.

 

(2)          Represents options for the charterer toextend 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 Charters forour Arlington Vessels***

*** ***

Under the charters for our Arlington Vessels, inaddition 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.

 

8

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The Additional Hire, if any, other than the VLCCs as described below,for any calendar quarter is an amount equal to 50% of the weighted averagehire, calculated as described below, for the quarter after deduction of theBasic Hire in effect for that quarter. The weighted average hire is a daily rate equal to the weighted averageof the following amounts:

 

·                  a weighted average of the time charter hire per day received by theCharterer for any periods during the calculation period, determined asdescribed below, that the vessel is sub-chartered by the Charterer under a timecharter, less ship broker commissions paid by the Charterer in an amount not toexceed 2.5% of such time charter hire and commercial management fees paid bythe Charterer in an amount not to exceed 1.25% of such time charter hire; and

 

·                  the time charter equivalent hire for any periods during the calculationperiod that the vessel is not sub-chartered by the charterer under a timecharter.

 

The calculation period is the 12 month period ending on the last day ofeach calendar quarter, the calculation period is the three, six and nine monthperiods, 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 Spot Rate expressed in Worldscale Points by theapplicable Worldscale flat rate and multiplying that product by the cargo sizefor each vessel type to calculate freight income;

 

·                  subtracting voyage costs consisting of brokerage commissions of 2.5%and commercial management fees of 1.25%, bunker costs and port charges tocalculate voyage income; and

 

·                  dividing voyage income by voyage duration, including time in port, tocalculate 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:

 
| *Product  carriers:* |   | Rotterdam to New York  with 37,000 tons clean (40% weight) Curacao to New York with 38,000 tons  clean (60% weight)            |
|----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
| * *             |   |                                                                                                                           |
| *Panamax  vessels:*  |   | Curacao to New York  with 50,000 tons dirty (50% weight) Augusta to Houston with 50,000 tons dirty  (50% weight)               |
| * *             |   |                                                                                                                           |
| *VLCCs:*             |   | West-Africa to LOOP  with 260,000 tons of crude (50% weight) Middle East Gulf to LOOP with 265,000  tons of crude (50% weight) |

 

9

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Additional terms used in the calculation of Time Charter EquivalentHire are as follows:

 

·                  *Calculation of freight income.* The freight income for each Notional Route is calculated by multiplyingthe Average Spot Rate for such route, as supplied by the Brokers Panel, by theWorldscale flat rate for such route as set forth in the New Worldwide TankerNominal Freight Scale issued by the Worldscale Association and current for therelevant period and then multiplying such product by the cargo size for suchroute.

 

·                  *Calculation of voyage income.* The voyage income for each Notional Route is calculated by deductingfrom the freight income for such route ship broker commissions equal to 2.5% ofthe freight income, commercial management fees equal to 1.25% of the freightincome, the port charges and bunker costs (equal to the bunkers used multipliedby the bunkers prices) specified below for each Vessel. Bunkers used aredetermined based on speed, distance and consumption of bunkers at sea and inport.

 

·                  *Calculation of voyage duration.* The voyage duration for each Notional Route is calculated using thedistance, 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:

 
| · Bunkers in port |                                                                                                                                                                                                                                                                                                                                                                                      |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   | For Product carriers:  40 tons per voyage all-inclusive loading and discharging ports.                                                                                                                                                                                                                                                                                                    |
|                   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                   | For Panamax vessels: 65  tons per port call all-inclusive loading and discharging ports.                                                                                                                                                                                                                                                                                                  |
|                   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                   | For VLCCs: loading 12  tons per day; idling 3 tons per day; discharging 145 tons per day.                                                                                                                                                                                                                                                                                                 |
|                   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · 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. |
|                   |                                                                                                                                                                                                                                                                                                                                                                                      |
|                   | For VLCCs: the mean of  the average prices during the quarter for Marine Fuel Oil grade IFO 380 CST  prevailing at Curacao and Fujairah 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.                                                                                                                                                         |

 

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| · Time in port |                                                                                                                                                             |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                | For Product carriers  and Panamax vessels: 5.5 days, which are split 2 days loading, 2 days  discharging and the balance of the time idling.                     |
|                |                                                                                                                                                             |
|                | For VLCCs: 7.5 days,  which are split 3 days loading, 3 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 productcarriers, Panamax vessels and VLCCs are typically used.  If during the term of the charter, in thecharterer’s reasonable opinion, these routes cease to be used by productcarriers, Panamax vessels or VLCCs, or the assumptions regarding bunkeringports for purposes of determining bunker prices cease to be applicable, thecharterer may, with our consent, which we may not unreasonably withhold,instruct the Brokers Panel to substitute alternative notional routes andbunkering ports that most closely match the routes and bunkering portstypically used by Product tankers, Panamax tankers or VLCCs and to applyappropriate 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 product tankers, Panamax tankers andVLCCs to operate on the Notional Routes, the charterer may request ouragreement, which we may not unreasonably refuse, for the Daily Value to bedetermined during the period of such danger or restriction of trading usingAverage Spot Rates determined by the Brokers Panel for alternative notionalroutes proposed by the Charterer that reasonably reflect realistic alternativeround voyage trade for Product tankers, Panamax tankers and VLCCs during theperiod of such danger or restriction of trading.  In such event, the Time Charter EquivalentHire will be calculated using the Daily Value for such alternative routes andapplying such weights as determined by the charterer.

 

**OPERATIONS AND SHIP MANAGEMENT**

** **

***General Maritime Subsidiary Vessels***

*** ***

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 ownedsubsidiaries.

 

In February 2006, we determined that one technical managementoffice outside the U.S. would adequately service our current fleet and as aresult decided to close our office in Piraeus, Greece, operated by GeneralMaritime Management (Hellas) Ltd.  Thisoffice ceased its technical management activities in May 2006 and wasclosed during 2008.  The cost of closingthis office, which we have classified as a component of general andadministrative expense, was approximately $1.3 million, substantiallyattributable to employee severance costs. All of these costs were paid as of December 31, 2006.

 

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.

 

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

 

·                  supervision of routine maintenance and repair of the vessel required tokeep each vessel in good and efficient condition, including the preparation ofcomprehensive drydocking specifications and the supervision of each drydocking;

 

·                  oversight of maritime and environmental compliance with applicableregulations, including licensing and certification requirements, and therequired inspections of each vessel to ensure that it meets the standards setforth by classification societies and applicable legal jurisdictions as well asour internal corporate requirements and the standards required by ourcustomers;

 

·                  engagement and provision of qualified crews (masters, officers, cadetsand ratings) and attendance to all matters regarding discipline, wages andlabor relations;

 

·                  arrangement to supply the necessary stores and equipment for eachvessel; and

 

·                  continual monitoring of fleet performance and the initiation ofnecessary remedial actions to ensure that financial and operating targets aremet.

 

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.

 

***Arlington Vessels***

* *

Our Arlington Vessels are party to fixed-rate ship managementagreements with Northern Marine.  Underthe ship management agreements, Northern Marine is responsible for alltechnical management of the vessels, including crewing, maintenance, repair,drydockings, vessel taxes and other vessel operating and voyage expenses.  Northern Marine has outsourced some of theseservices to third-party providers.  Wehave agreed to guarantee the obligations of each of our vessel subsidiariesunder 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 product carrier 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 the Arlington Vessels in-class and in the same good order and conditionas when delivered, except for ordinary wear and tear.

 

Northern Marine is also obligated under the ship management agreementsto maintain insurance for each of our Arlington Vessels, including marine hulland machinery insurance, protection and indemnity insurance (includingpollution risks and crew insurances), war risk insurance and off-hireinsurance.  Under the ship managementagreements, we pay Northern Marine a fixed fee per day per Arlington Vessel forall of the above services, which increases 5% per year, for so long as therelevant charter is in place.  Under theship management agreements, Northern Marine has agreed to indemnify us for theloss of the Basic Hire for each of the Arlington Vessels in the event, forcircumstances specified under the charters, the Arlington Vessel is off-hire orreceiving reduced hire for more than five days during any twelve-month period,net of amounts received by us from off-hire insurance.  Stena has agreed to guarantee thisindemnification by Northern Marine.  Bothwe and Northern Marine have the right to terminate any of the ship managementagreements if the relevant charter has been terminated.  Tables setting forth the daily base operatingcosts for each Arlington Vessel can be found above in the section entitled “OurCharters.”

 

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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.

 

**CREWING AND EMPLOYEES**

** **

As of December 31, 2008, we employed approximately 93 officepersonnel. Approximately 45 of these employees manage the commercial operationsof our business, and are located in New York City.  We have 35 employees located in Lisbon,Portugal, who manage the technical operations of our business, and are subjectto a local company employment collective bargaining agreement which covers themain terms and conditions of their employment. We have 12 employees who procure crews for most of our vessels, three ofwhich are located in Novorossiysk, Russia and nine of which are located inMumbai, India.  We also have one employeelocated in Piraeus, Greece who is subject to Greece’s national employmentcollective bargaining agreement which covers the terms and conditions of heremployment.

 

As of December 31, 2008, we employed approximately 1,035 seabornepersonnel to crew our General Maritime Subsidiary Vessels who are staffed byour offices in India, Russia and Portugal. Crews for our Arlington Vessels are provided by Northern Marine asdescribed above.

 

We place great emphasis on attracting qualified crew members foremployment on our vessels.  Recruitingqualified senior officers has become an increasingly difficult task for vesseloperators.  We pay competitive salariesand provide competitive benefits to our personnel.  We believe that the well-maintained quartersand equipment on our vessels help to attract and retain motivated and qualifiedseamen and officers.  Our crew managementservices contractors have collective bargaining agreements that cover all thejunior officers and seamen whom they provide to us.

 

**CUSTOMERS**

** **

Our customers includemost oil companies, as well as oil producers, oil traders, vessel owners andothers.  During the year ended December 31,2008, Lukoil accounted for 40.8% of our voyage revenues and we expect Lukoil toaccount for a significant portion of our voyage revenues in the future.  Ten of our 23 time charters are withLukoil.  We also derive a significantportion of our voyage revenues from time charters by subsidiaries of Concordiaand Stena.  During the year ended December 31,2008, these customers accounted for all of Arlington’s voyage revenues and weexpect these customers to account for a significant portion of our voyagerevenues in the future.  All eightArlington Vessels are on time charters with the Concordia and Stenasubsidiaries.  Our revenues other thanLukoil revenues, Concordia and Stena, are also derived from a limited number ofcustomers.

 

**COMPETITION**

** **

International seaborne transportation of crude oil and other petroleumproducts is provided by two main types of operators: fleets owned byindependent companies and fleets operated by oil companies (both private andstate-owned).  Many oil companies andother oil trading companies, the primary charterers of the vessels we own, alsooperate their own vessels and transport oil for themselves and third partycharterers in direct competition 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 operators of vessels carrying crude oil and otherpetroleum products include American Eagle Tankers Inc. Limited, Frontline,Ltd., Overseas Shipholding Group, Inc., Teekay Shipping Corporation andTsakos Energy Navigation.  There are alsonumerous, smaller vessel operators.

 

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**INSURANCE**

** **

The operation of any ocean-going vessel carries an inherent risk ofcatastrophic marine disasters and property losses caused by adverse weatherconditions, mechanical failures, human error, war, terrorism and othercircumstances or events.  In addition,the transportation of crude oil is subject to the risk of spills, and businessinterruptions due to political circumstances in foreign countries, hostilities,labor strikes and boycotts.  The U.S. OilPollution Act of 1990, or OPA has made liability insurance more expensive forship owners and operators imposing potentially unlimited liability upon owners,operators and bareboat charterers for oil pollution incidents in theterritorial waters of the United States. We believe that our current insurance coverage is adequate to protect usagainst the principal accident-related risks that we face in the conduct of ourbusiness.

 

Our protection and indemnity insurance, or P&I insurance, coversthird-party liabilities and other related expenses from, among other things,injury or death of crew, passengers and other third parties, claims arisingfrom collisions, damage to cargo and other third-party property and pollutionarising from oil or other substances. Our current P&I insurance coverage for pollution is the maximumcommercially available amount of $1.0 billion per tanker per incident and isprovided by mutual protection and indemnity associations.  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 AssuranceAssociations.  The 13 protection andindemnity associations that comprise the International Group insureapproximately 90% of the world’s commercial tonnage and have entered into apooling agreement to reinsure each association’s liabilities.  Each protection and indemnity association hascapped its exposure to this pooling agreement at $4.3 billion.  As a member of protection and indemnityassociations, which are, in turn, members of the International Group, we aresubject to calls payable to the associations based on its claim records as wellas the claim records of all other members of the individual associations andmembers of the pool of protection and indemnity associations comprising theInternational Group.

 

Our hull and machinery insurance covers actual or constructive totalloss from covered risks of collision, fire, heavy weather, grounding and enginefailure or damages from same.  Our warrisk insurance covers risks of confiscation, seizure, capture, vandalism,sabotage and other war-related risks. Our loss-of-hire insurance covers loss of revenue for up to 90 daysresulting from vessel off hire for each of our vessels, with a 20 daydeductible.

 

**ENVIRONMENTAL REGULATION AND OTHER REGULATIONS**

 

Government regulations and laws significantly affect the ownership andoperation of our tankers.  We are subjectto international conventions, national, state and local laws and regulations inforce in the countries in which our vessels may operate or are registered.  Compliance with such laws, regulations andother requirements entails significant expense, including vessel modificationsand implementation of certain operating procedures.

 

A variety of government, quasi-governmental and private organizationssubject our tankers to both scheduled and unscheduled inspections.  These organizations include the local portauthorities, national authorities, harbor masters or equivalent, classificationsocieties, flag state administrations (countries of registry) and charterers,particularly terminal operators and oil companies.  Some of these entities require us to obtainpermits, licenses and certificates for the operation of our tankers.  Our failure to maintain necessary permits, certificatesor approvals could require us to incur substantial costs or temporarily suspendoperation of one or more of the vessels in our fleet.

 

We believe that the heightened levels of environmental and qualityconcerns among insurance underwriters, regulators and charterers have led togreater inspection and safety requirements on all vessels and may acceleratethe scrapping of older vessels throughout the tanker industry.  Increasing environmental concerns have createda demand for tankers that conform to the stricter environmental standards.  We are required to maintain operatingstandards for all of our vessels that emphasize operational safety, qualitymaintenance, continuous training of our officers and crews and compliance withapplicable local, national and international environmental laws andregulations.  We believe that theoperation of our vessels is in substantial compliance with applicableenvironmental laws and regulations and that our vessels have all materialpermits, licenses, certificates or other authorizations necessary for theconduct of our operations; however, because such laws and regulations arefrequently changed and may impose increasingly stricter requirements, we cannotpredict the ultimate cost of complying with these requirements, or the impactof these requirements on the resale value or useful lives of our tankers.  In addition, a 

 

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future serious marine incident that results in significant oilpollution or otherwise causes significant adverse environmental impact couldresult in additional legislation or regulation that could negatively affect ourprofitability.

 

***International Maritime Organization***

*** ***

The International Maritime Organization, or IMO (the United Nationsagency for maritime safety and the prevention of pollution by ships), hasadopted the International Convention for the Prevention of Marine Pollutionfrom Ships, 1973, as modified by the Protocol of 1978 relating thereto, whichhas been updated through various amendments, or the MARPOL Convention.  The MARPOL Convention implementsenvironmental standards including oil leakage or spilling, garbage management,as well as the handling and disposal of noxious liquids, harmful substances inpackaged forms, sewage and air emissions. Under IMO regulations, in order for a tanker to trade in ports of IMOmember nations, a tanker must be of double hull construction or a mid-deckdesign with double-sided construction or be of another approved design ensuringthe same level of protection against oil pollution if the tanker:

 

·                  is the subject of a contract for a major conversion ororiginal construction on or after July 6, 1993;

 

·                  commences a major conversion or has its keel laid onor after January 6, 1994; or

 

·                  completes a major conversion or is a newbuildingdelivered on or after July 6, 1996.

 

Since the enactment of these regulations, the IMO has accelerated thetimetable for the phase-out of single hull oil tankers.  We do not currently own any single hullvessels.

 

In December 2003, the Marine Environmental Protection Committee ofthe IMO, or MEPC, adopted an amendment to the MARPOL Convention, which becameeffective in April 2005.  Theamendment revised an existing regulation 13G accelerating the phase-out ofsingle hull oil tankers and adopted a new regulation 13H on the prevention ofoil pollution from oil tankers when carrying heavy grade oil.  Under the revised regulation, single hull oiltankers were required to be phased out no later than April 5, 2005 or theanniversary of the date of delivery of the ship on the date or in the yearspecified in the following table:

 
| **Category  of Oil Tankers**                                                                                                                                                                                                                                                                                                                                                               | ** ** | **Date  or Year for Phase Out**                                                                                                                                                                                                                                                                                                                                   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Category 1 oil tankers of 20,000 dwt and above  carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo,  and of 30,000 dwt and above carrying other oils, which do not comply with the  requirements for protectively located segregated ballast tanks                                                                                                                 |       | April 5, 2005 for  ships delivered on April 5, 1982 or earlier; or  2005 for ships delivered after April 5, 1982                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                       |       |                                                                                                                                                                                                                                                                                                                                                              |
| Category 2 - oil tankers of 20,000 dwt and above  carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo,  and of 30,000 dwt and above carrying other oils, which do comply with the  protectively located segregated ballast tank requirements and Category 3 - oil tankers of 5,000 dwt and above but less than the  tonnage specified for Category 1 and 2 tankers. |       | April 5, 2005 for  ships delivered on April 5, 1977 or earlier  2005 for ships delivered after April 5, 1977 but before January 1,  1978  2006 for ships delivered in 1978 and 1979  2007 for ships delivered in 1980 and 1981  2008 for ships delivered in 1982  2009 for ships delivered in 1983  2010 for ships delivered in 1984 or later |

 

Under the revised regulations, a flag statemay permit continued operation of certain Category 2 or 3 tankers beyond theirphase out date in accordance with the above schedule.  Under regulation 13G, the flag state mayallow for some newer single hull oil tankers registered in its country thatconform to certain technical specifications to continue operating until theearlier of the anniversary of the date of delivery of the vessel in 2015 or the25th 

 

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anniversary of their delivery.  Under regulations 13G and 13H, certain Category 2 and3 tankers fitted only with double bottoms or double sides may be allowed by theflag state to continue operations until their 25th anniversary ofdelivery.  Any port state, however,may deny entry of those single hull oil tankers that are allowed to operate underany of the flag state exemptions.

 

In October 2004, the MEPC adopted a unified interpretation ofregulation 13G that clarified the delivery date for converted tankers.  Under the interpretation, where an oil tankerhas undergone a major conversion that has resulted in the replacement of thefore-body, including the entire cargo carrying section, the major conversioncompletion date shall be deemed to be the date of delivery of the ship,provided that:

 

·                  the oil tanker conversion was completedbefore July 6, 1996;

 

·                  the conversion included the replacementof the entire cargo section and fore-body and the tanker complies with all therelevant provisions of MARPOL Convention applicable at the date of completionof the major conversion; and

 

·                  the original delivery date of the oiltanker will apply when considering the 15 years of age threshold relating tothe first technical specifications survey to be completed in accordance withMARPOL Convention.

 

In December 2003, the MEPC adopted a new regulation 13H on theprevention of oil pollution from oil tankers when carrying heavy grade oil, orHGO, which includes most of the grades of marine fuel.  The new regulation bans the carriage of HGOin single hull oil tankers of 5,000 dwt and above after April 5, 2005, andin single hull oil tankers of 600 dwt and above but less than 5,000 dwt, nolater than the anniversary of their delivery in 2008.

 

Under regulation 13H, HGO means any of the following:

 

·                  crude oils having a density at 15oChigher than 900 kg/m3;

 

·                  fuel oils having either a density at 15oChigher than 900 kg/m3; or a kinematic viscosity at 50oChigher than 180 mm2/s; or

 

·                  bitumen, tar and their emulsions.

 

Under the regulation 13H, the flag state may allow continued operationof oil tankers of 5,000 dwt and above, carrying crude oil with a density at15oC higher than 900 kg/m3; butlower than 945 kg/m3;, that conform to certain technicalspecifications and, in the opinion of the such flag state, the ship is fit tocontinue such operation, having regard to the size, age, operational area andstructural conditions of the ship and provided that the continued operationshall not go beyond the date on which the ship reaches 25 years after the dateof its delivery.  The flag state may alsoallow continued operation of a single hull oil tanker of 600 dwt and above butless than 5,000 dwt, carrying HGO as cargo, if, in the opinion of the such flagstate, the ship is fit to continue such operation, having regard to the size,age, operational area and structural conditions of the ship, provided that theoperation shall not go beyond the date on which the ship reaches 25 years afterthe date of its delivery.

 

The flag state may also exempt an oil tanker of 600 dwt and abovecarrying HGO as cargo if the ship is either engaged in voyages exclusivelywithin an area under the its jurisdiction, or is engaged in voyages exclusivelywithin an area under the jurisdiction of another party, provided the partywithin whose jurisdiction the ship will be operating agrees.  The same applies to vessels operating asfloating storage units of HGO.

 

Any port state, however, can deny entry of single hull tankers carryingHGO which have been allowed to continue operation under the exemptionsmentioned above, into the ports or offshore terminals under its jurisdiction,or deny ship-to-ship transfer of HGO in areas under its jurisdiction exceptwhen this is necessary for the purpose of securing the safety of a ship orsaving life at sea.

 

Revised Annex I to the MARPOL Convention entered into force in January 2007.  Revised Annex I incorporates variousamendments adopted since the MARPOL Convention entered into force in 1983,including the amendments to regulation 13G (regulation 20 in the revised Annex)and regulation 13H (regulation 21 in the revised Annex).  

 

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Revised Annex I also imposes construction requirements for oil tankersdelivered on or after January 1, 2010. A further amendment to revised Annex I includes an amendment to the definitionof heavy grade oil that will broaden the scope of regulation 21.  On August 1, 2007, regulation 12A (anamendment to Annex I) came into force requiring oil fuel tanks to be locatedinside the double hull in all ships with an aggregate oil fuel capacity of 600m3 and above, which are delivered on or after August 1, 2010 includingships for which the building contract is entered into on or after August 1,2007 or, in the absence of a contract, which keel is laid on or after February 1,2008.

 

*Air Emissions*

* *

In September 1997, the IMO adopted Annex VI to the MARPOLConvention, Regulations for the Prevention of Pollution from Ships, to addressair pollution from vessels.  Effectivein May 2005, AnnexVI sets limits on sulfur oxide and nitrogen oxide emissions from all commercialvessel exhausts and prohibits deliberate emissions of ozone depletingsubstances (such as halons and chlorofluorocarbons), emissions of volatilecompounds from cargo tanks, and the shipboard incineration of specificsubstances.  Annex VI also includes aglobal cap on the sulfur content of fuel oil and allows for special areas to beestablished with more stringent controls on sulfur emissions.  We believe that all our vessels are currentlycompliant in all material respects with these regulations.  Additional or new conventions, laws andregulations may be adopted that could require the installation of expensiveemission control systems and could adversely affect our business, cash flows,results of operations and financial condition. In October 2008, the IMO adopted amendments to Annex VI regardingnitrogen oxide and sulfur oxide emissions standards which are expected to enterinto force on July 1, 2010.  Theamended Annex VI would reduce air pollution from vessels by, among other things,(i) implementing a progressive reduction of sulfur oxide, emissions fromships, with the global sulfur cap reduced initially to 3.50% (from the currentcap of 4.50%), effective from January 1, 2012, then progressively to0.50%, effective from January 1, 2020, subject to a feasibility review tobe completed no later than 2018; and (ii) establishing new tiers ofstringent nitrogen oxide emissions standards for new marine engines, dependingon their date of installation.  Oncethese amendments become effective, we may incur costs to comply with theserevised standards.

 

*Safety Requirements*

* *

The IMO has also adopted the International Convention for the Safety ofLife at Sea, or SOLAS Convention, and the International Convention on LoadLines, 1966, or LL Convention, which impose a variety of standards to regulatedesign and operational features of ships. SOLAS Convention and LL Convention standards are revisedperiodically.  We believe that all ourvessels are in substantial compliance with SOLAS Convention and LL Conventionstandards.

 

Under Chapter IX of SOLAS, the requirements contained in theInternational Safety Management Code for the Safe Operation of Ships and forPollution Prevention, or ISM Code, promulgated by the IMO, also affect ouroperations.  The ISM Code requires theparty with operational control of a vessel to develop an extensive safetymanagement system that includes, among other things, the adoption of a safetyand environmental protection policy setting forth instructions and proceduresfor operating its vessels safely and describing procedures for responding toemergencies.  We intend to rely upon thesafety management system that we have developed.

 

The ISM Code requires that vessel operators obtain a safety managementcertificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with coderequirements for a safety management system. No vessel can obtain a certificate unless its manager has been awarded adocument of compliance, issued by each flag state, under the ISM Code.  We have obtained documents of compliance forour offices and safety management certificates for all of our vessels for whichthe certificates are required by the IMO. As required, we renew these documents of compliance and safetymanagement certificates annually.

 

Noncompliance with the ISM Code and other IMO regulations may subjectthe shipowner or bareboat charterer to increased liability, may lead todecreases in available insurance coverage for affected vessels and may resultin the denial of access to, or detention in, some ports.  The U.S. Coast Guard and European Unionauthorities have indicated that vessels not in compliance with the ISM Code bythe applicable deadlines will be prohibited from trading in U.S. and EuropeanUnion ports, as the case may be.

 

The IMO has negotiated international conventions that impose liabilityfor oil pollution in international waters and a signatory’s territorialwaters.  Additional or new conventions,laws and regulations may be adopted which could 

 

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limit our ability to do business and which could have a materialadverse effect on our business and results of operations.

 

*Ballast WaterRequirements*

* *

The IMO adopted an International Convention for the Control andManagement of Ships’ Ballast Water and Sediments, or the BWM Convention, in February 2004.  The BWM Convention’s implementing regulationscall for a phased introduction of mandatory ballast water exchange requirements(beginning in 2009), to be replaced in time with mandatory concentrationlimits.  The BWM Convention will notenter into force until 12 months after it has been adopted by 30 states, thecombined merchant fleets of which represent not less than 35% of the grosstonnage of the world’s merchant shipping. To date there has not been sufficient adoption of this standard for itto take force.

 

The flag state, as defined by the United Nations Convention on Law ofthe Sea, has overall responsibility for the implementation and enforcement ofinternational maritime regulations for all ships granted the right to fly itsflag.  The “Shipping Industry Guidelineson Flag State Performance” evaluates flag states based on factors such assufficiency of infrastructure, ratification of international maritime treaties,implementation and enforcement of international maritime regulations,supervision of surveys, casualty investigations and participation at IMOmeetings.

 

*Anti-Fouling Requirements*

* *

In 2001, the IMO adopted the International Convention on the Control ofHarmful Anti-fouling Systems on Ships, or the Anti-fouling Convention.  The Anti-fouling Convention prohibits the useof organotin compound coatings to prevent the attachment of mollusks and othersea life to the hulls of vessels after September 1, 2003.  The exteriors of vessels constructed prior toJanuary 1, 2003 that have not been in dry-dock must, as of September 17,2008, either not contain the prohibited compounds or have coatings applied tothe vessel exterior that act as a barrier to the leaching of the prohibitedcompounds.  Vessels of over 400 grosstons engaged in international voyages must obtain an International Anti-foulingSystem Certificate and undergo a survey before the vessel is put into serviceor when the anti-fouling systems are altered or replaced.  We have obtained Anti-fouling SystemCertificates for all of our vessels that are subject to the Anti-FoulingConvention.

 

*Oil Pollution Liability*

 

Although the United States is not a party to these conventions, manycountries have ratified and follow the liability plan adopted by the IMO andset out in the International Convention on Civil Liability for Oil PollutionDamage of 1969, as amended in 2000, or the CLC. Under this convention and depending on whether the country in which thedamage results is a party to the 1992 Protocol to the CLC, a vessel’sregistered owner is strictly liable for pollution damage caused in theterritorial waters of a contracting state by discharge of persistent oil,subject to certain complete defenses. The limits on liability outlined in the 1992 Protocol use theInternational Monetary Fund currency unit of Special Drawing Rights, orSDR.  Under an amendment to the 1992Protocol that became effective on November 1, 2003, for vessels of 5,000to 140,000 gross tons (a unit of measurement for the total enclosed spaceswithin a vessel), liability will be limited to approximately 4.51 million SDR plus631 SDR for each additional gross ton over 5,000.  For vessels of over 140,000 gross tons,liability will be limited to 89.77 million SDR. The exchange rate between SDRs and U.S. dollars was 0.675914 SDR perU.S. dollar on February 24, 2009. The right to limit liability is forfeited under the InternationalConvention on Civil Liability for Oil Pollution Damage where the spill iscaused by the owner’s actual fault and under the 1992 Protocol where the spillis caused by the owner’s intentional or reckless conduct.  Vessels trading to states that are parties tothese conventions must provide evidence of insurance covering the liability ofthe owner.  In jurisdictions where theInternational Convention on Civil Liability for Oil Pollution Damage has notbeen adopted, various legislative schemes or common law govern, and liabilityis imposed either on the basis of fault or in a manner similar to thatconvention.  We believe that our P&Iinsurance will cover the liability under the plan adopted by the IMO.

 

The IMO adopted the International Convention on Civil Liability forBunker Oil Pollution Damage, or the Bunker Convention, to impose strictliability on ship owners for pollution damage in jurisdictional waters ofratifying states caused by discharges of bunker fuel.  The Bunker Convention, which became effectiveon November 21, 2008, requires registered owners of ships over 1,000 grosstons to maintain insurance for pollution damage in an amount 

 

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equal to the limits of liability under the applicable national orinternational limitation regime (but not exceeding the amount calculated inaccordance with the Convention on Limitation of Liability for Maritime Claimsof 1976, as amended).  With respect tonon-ratifying states, liability for spills or releases of oil carried as fuelin ship’s bunkers typically is determined by the national or other domesticlaws in the jurisdiction where the events or damages occur.

 

IMO regulations also require owners and operators of vessels to adoptShip Oil Pollution Emergency Plans. Periodic training and drills for responsepersonnel and for vessels and their crews are required.

 

The IMO continues to review and introduce new regulations.  It is impossible to predict what additionalregulations, if any, may be passed by the IMO and what effect, if any, suchregulations might have on our operations.

 

***United States Requirements***

*** ***

In 1990, the United States Congress enacted OPA to establish anextensive regulatory and liability regime for environmental protection andcleanup of oil spills.  OPA affects allowners and operators whose vessels trade with the United States or itsterritories or possessions, or whose vessels operate in the waters of theUnited States, which include the U.S. territorial sea and the 200 nautical mileexclusive economic zone around the United States.  The Comprehensive Environmental Response,Compensation and Liability Act, or CERCLA, imposes liability for cleanup andnatural resource damage from the release of hazardous substances (other thanoil) whether on land or at sea. Both OPA and CERCLA impact our operations.

 

Under OPA, vessel owners, operators and bareboat charterers areresponsible parties who are jointly, severally and strictly liable (unless thespill results solely from the act or omission of a third party, an act of Godor an act of war) for all containment and clean-up costs and other damagesarising from oil spills from their vessels. These other damages are defined broadly to include:

 

·                  natural resource damages and relatedassessment costs;

 

·                  real and personal property damages;

 

·                  net loss of taxes, royalties, rents,profits or earnings capacity;

 

·                  net cost of public services necessitatedby a spill response, such as protection from fire, safety or health hazards;and loss of subsistence use of natural resources.

 

OPA previously limited the liability of responsible parties to thegreater of $1,200 per gross ton or $10.0 million per tanker that is over 3,000gross tons (subject to possible adjustment for inflation).  Amendments to OPA signed into law in July 2006increased these limits on the liability of responsible parties to the greaterof $1,900 per gross ton or $16.0 million per double hull tanker that is over3,000 gross tons.  The act specificallypermits individual states to impose their own liability regimes with regard tooil pollution incidents occurring within their boundaries, and some states haveenacted legislation providing for unlimited liability for discharge of pollutantswithin their waters.  In some cases,states which have enacted this type of legislation have not yet issuedimplementing regulations defining tanker owners’ responsibilities under theselaws.  CERCLA, which applies to ownersand operators of vessels, contains a similar liability regime and provides forcleanup, 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 iscaused by violation of applicable U.S. federal safety, construction oroperating regulations, or by the responsible party’s gross negligence orwillful misconduct.  These limits also donot apply if the responsible party fails or refuses to report the incident orto cooperate and assist in connection with the substance removal activities.  OPA and CERCLA each preserve the right torecover damages under existing law, including maritime tort law.  We believe that we are in substantialcompliance with OPA, CERCLA and all applicable state regulations in the portswhere our vessels call.

 

OPA also requires owners and operators of vessels to establish andmaintain with the U.S. Coast Guard evidence of financial responsibilitysufficient to meet the limit of their potential strict liability under theact.  On October 17, 2008, the U.S.Coast Guard regulatory requirements under OPA and CERCLA were amended torequire evidence of financial responsibility in amounts that reflect the higherlimits of liability imposed by the July 2006 amendments to OPA, as 

 

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described above.  Theincreased amounts became effective on January 15, 2009.  U.S. Coast Guard regulations currently requireevidence of financial responsibility in the amount of $2,200 per gross ton fordouble hull tankers, coupling the OPA limitation on liability of $1,900 pergross ton with the CERCLA liability limit of $300 per gross ton.  Under the regulations, evidence of financialresponsibility may be demonstrated by insurance, surety bond, self-insurance orguaranty.  Under OPA regulations, anowner or operator of more than one tanker is required to demonstrate evidenceof financial responsibility for the entire fleet in an amount equal only to thefinancial responsibility requirement of the tanker having the greatest maximumstrict liability under OPA and CERCLA. We have provided such evidence and received certificates of financialresponsibility from the U.S. Coast Guard for each of our vessels required tohave one.

 

We insure each of our vessels with pollution liability insurance in themaximum commercially available amount of $1.0 billion.  A catastrophic spill could exceed theinsurance coverage available, which could have a material adverse effect on ourbusiness.

 

Under OPA, with certain limited exceptions, all newly-built orconverted vessels operating in U.S. waters must be built with double hulls, andexisting vessels that do not comply with the double hull requirement will beprohibited from trading in U.S. waters over a 20-year period (1995-2015) basedon size, age and place of discharge, unless retrofitted with double hulls.  Our current fleet of 31 vessels are all ofdouble hull construction. Notwithstanding the prohibition to trade schedule, OPA currently permitsexisting single hull and double-sided tankers to operate until the year 2015 iftheir operations within U.S. waters are limited to discharging at the LouisianaOffshore Oil Port, or LOOP, or off-loading by lightering within authorizedlightering zones more than 60 miles off-shore. Lightering is the process by which vessels at sea off-load their cargoto smaller vessels for ultimate delivery to the discharge port.

 

OPA also amended the Federal Water Pollution Control Act to requireowners or operators of tankers operating in the waters of the United States tofile vessel response plans with the U.S. Coast Guard, and their tankers arerequired to operate in compliance with their U.S. Coast Guard approvedplans.  These response plans must, amongother things:

 

·                  address a “worst case” scenario andidentify and ensure, through contract or other approved means, the availabilityof necessary private response resources to respond to a “worst case discharge”;

 

·                  describe crew training and drills; and

 

·                  identify a qualified individual with fullauthority to implement removal actions.

 

We have obtained vessel response plans approved by the U.S. Coast Guardfor our vessels operating in the waters of the United States.  In addition, the U.S. Coast Guard hasannounced it intends to propose similar regulations requiring certain vesselsto prepare response plans for the release of hazardous substances.

 

In addition, the U.S. Clean Water Act, or CWA, prohibits the dischargeof oil or hazardous substances in U.S. navigable waters unless authorized by aduly-issued permit or exemption, and imposes strict liability in the form ofpenalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal,remediation and damages and complements the remedies available under OPA andCERCLA.  Furthermore, most U.S. statesthat border a navigable waterway have enacted environmental pollution laws thatimpose strict liability on a person for removal costs and damages resultingfrom a discharge of oil or a release of a hazardous substance.  These laws may be more stringent than U.S.federal law.

 

The U.S. Environmental Protection Agency, or EPA, historically exemptedthe discharge of ballast water and other substances incidental to the normaloperation of vessels in U.S. waters from CWA permitting requirements.  However, on March 31, 2005, a U.S.District Court ruled that the EPA exceeded its authority in creating anexemption for ballast water.  On September 18,2006, the court issued an order invalidating the exemption in the EPA’sregulations for all discharges incidental to the normal operation of a vesselas of September 30, 2008, and directed the EPA to develop a system forregulating all discharges from vessels by that date.  The District Court’s decision was affirmed bythe Ninth Circuit Court of Appeals on July 23, 2008.  The Ninth Circuit’s ruling meant that ownersand operators of vessels traveling in U.S. waters would soon be required tocomply with the CWA permitting program to be developed by the EPA or facepenalties.

 

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In response to the invalidation and removal of the EPA’s vesselexemption by the Ninth Circuit, the EPA has enacted rules governing theregulation of ballast water discharges and other discharges incidental to thenormal operation of vessels within U.S. waters. Under the new rules, which took effect February 6, 2009, commercialvessels 79 feet in length or longer (other than commercial fishing vessels),which we refer to as Regulated Vessels, are required to obtain a CWA permitregulating and authorizing such normal discharges.  This permit, which the EPA has designated asthe Vessel General Permit for Discharges Incidental to the Normal Operation ofVessels, or VGP, incorporates the current U.S. Coast Guard requirements forballast water management as well as supplemental ballast water requirements,and includes limits applicable to 26 specific discharge streams, such as deckrunoff, bilge water and gray water.

 

For each discharge type, among other things, the VGP establisheseffluent limits pertaining to the constituents found in the effluent, includingbest management practices, or BMPs, designed to decrease the amount ofconstituents entering the waste stream. Unlike land-based discharges, which are deemed acceptable by meetingcertain EPA-imposed numerical effluent limits, each of the 26 VGP dischargelimits is deemed to be met when a Regulated Vessel carries out the BMPspertinent to that specific discharge stream. The VGP imposes additional requirements on certain Regulated Vesseltypes, including tankers, that emit discharges unique to those vessels.  Administrative provisions, such asinspection, monitoring, recordkeeping and reporting requirements are alsoincluded for all Regulated Vessels.

 

On August 31, 2008, the District Court ordered that the date forimplementation of the VGP be postponed from September 30, 2008 until December 19,2008.  This date was further postponeduntil February 6, 2009 by the District Court.  Although the VGP became effective on February 6,2009, the VGP application procedure, known as the Notice of Intent, or NOI, hasyet to be finalized.  Accordingly,Regulated Vessels will effectively be covered under the VGP from February 6,2009 until June 19, 2009, at which time the “eNOI” electronic filinginterface will become operational. Thereafter, owners and operators of Regulated Vessels must file theirNOIs prior to September 19, 2009, or the Deadline.  Any Regulated Vessel that does not file anNOI by the Deadline will, as of that date, no longer be covered by the VGP andwill not be allowed to discharge into U.S. navigable waters until it hasobtained a VGP.  Any Regulated Vesselthat was delivered on or before the Deadline will receive final VGP permitcoverage on the date that the EPA receives such Regulated Vessel’s completeNOI.  Regulated vessels delivered afterthe Deadline will not receive VGP permit coverage until 30 days after their NOIsubmission.  Our fleet is composedentirely of Regulated Vessels, and we intend to submit NOIs for each vessel inour fleet as soon after June 19, 2009 as practicable.

 

Owners and operators of vessels visiting U.S. waters will be requiredto comply with this VGP program or face penalties.  This could require the installation ofequipment on our vessels to treat ballast water before it is discharged or theimplementation of other port facility disposal arrangements or procedures atpotentially substantial cost, and/or otherwise restrict our vessels fromentering U.S. waters.  In addition,pursuant to §401 of the CWA which requires each state to certify federaldischarge permits such as the VGP, certain states have enacted additionaldischarge standards as conditions to their certification of the VGP.  These local standards bring the VGP intocompliance with more stringent state requirements, such as those furtherrestricting ballast water discharges and preventing the introduction ofnon-indigenous species considered to be invasive.  The VGP and its state-specific regulationsand any similar restrictions enacted in the future will increase the costs ofoperating in the relevant waters.

 

The U.S. Clean Air Act of 1970, as amended by the Clean Air ActAmendments of 1977 and 1990, or the CAA, requires the EPA to promulgatestandards applicable to emissions of volatile organic compounds and other aircontaminants.  Our vessels are subject tovapor control and recovery requirements for certain cargoes when loading,unloading, ballasting, cleaning and conducting other operations in regulatedport areas.  Our vessels that operate insuch port areas with restricted cargoes are equipped with vapor recoverysystems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, orSIPs, designed to attain national health-based air quality standards inprimarily major metropolitan and/or industrial areas.  Several SIPs regulate emissions resultingfrom vessel loading and unloading operations by requiring the installation ofvapor control equipment.  As indicatedabove, our vessels operating in covered port areas are already equipped withvapor recovery systems that satisfy these existing requirements.

 

 

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On October 9, 2008,the United States ratified the amended Annex VI to the IMO’s MARPOL Convention,addressing air pollution from ships, which went into effect on January 8,2009.  The EPA and the state ofCalifornia, however, have each proposed more stringent regulations of airemissions from ocean-going vessels.  On July 24,2008, the California Air Resources Board of the State of California, or CARB,approved clean-fuel regulations applicable to all vessels sailing within 24miles of the California coastline whose itineraries call for them to enter anyCalifornia ports, terminal facilities, or internal or estuarine waters.  The new CARB regulations require such vesselsto use low sulfur marine fuels rather than bunker fuel.  By July 1, 2009, such vessels arerequired to switch either to marine gas oil with a sulfur content of no morethan 1.5% or marine diesel oil with a sulfur content of no more than 0.5%.  By 2012, only marine gas oil and marinediesel oil fuels with 0.1% sulfur will be allowed.  CARB unilaterally approved the newregulations in spite of legal defeats at both the district and appellate courtlevels, but more legal challenges are expected to follow.  If CARB prevails and the new regulations tointo effect as scheduled on July 1, 2009, in  the event our vessels were to travel withinsuch waters, these new regulations would require significant expenditures onlow-sulfur fuel and would increase our operating costs.  Finally,although the more stringent CARB regime was technically superseded when theUnited States ratified and implemented the amended Annex VI, the possibledeclaration of various U.S. coastal waters as Emissions Control Areas may inturn bring U.S. emissions standards into line with the new CARB regulations,which would cause us to incur further costs.

 

The U.S. National Invasive Species Act, or NISA, was enacted in 1996 inresponse to growing reports of harmful organisms being released into U.S. portsthrough ballast water taken on by ships in foreign ports.  The U.S. Coast Guard adopted regulationsunder NISA in July 2004 that impose mandatory ballast water managementpractices for all vessels equipped with ballast water tanks entering U.S.waters.  These requirements can be met byperforming mid-ocean ballast exchange, by retaining ballast water on board theships, or by using environmentally sound alternative ballast water managementmethods approved by the U.S. Coast Guard. (However, mid-ocean ballast exchange is mandatory for ships heading tothe Great Lakes or Hudson Bay, or vessels engaged in the foreign export ofAlaskan North Slope crude oil.) Mid-ocean ballast exchange is the primarymethod for compliance with the U.S. Coast Guard regulations, since holdingballast water can prevent ships from performing cargo operations upon arrivalin the United States, and alternative methods are still under development.  Vessels that are unable to conduct mid-oceanballast exchange due to voyage or safety concerns may discharge minimum amountsof ballast water (in areas other than the Great Lakes and the Hudson River),provided that they comply with recordkeeping requirements and document thereasons they could not follow the required ballast water managementrequirements.  The U.S. Coast Guard isdeveloping a proposal to establish ballast water discharge standards, whichcould set maximum acceptable discharge limits for various invasive species,and/or lead to requirements for active treatment of ballast water.  TheU.S. House of Representatives has recently passed a bill that amends NISA byprohibiting the discharge of ballast water unless it has been treated withspecified methods or acceptable alternatives. Similar bills have been introduced in the U.S. Senate, but we cannot predict which bill,if any, will be enacted into law.  In the absence of federal standards, stateshave enacted legislation or regulations to address invasive species throughballast water and hull cleaning management and permitting requirements.  For instance, the state of Californiahas recently enacted legislation extending its ballast water management programto regulate the management of “hull fouling” organisms attached to vessels andadopted regulations limiting the number of organisms in ballast waterdischarges.  In addition, in November 2008the Sixth Circuit affirmed a District Court’s dismissal of challenges to the state of Michigan’s ballast water managementlegislation mandating the use of various techniques for ballast watertreatment.  Other states may proceed withthe enactment of similar requirements that could increase the costs ofoperating in state waters.

 

Our operations occasionally generate and require the transportation,treatment and disposal of both hazardous and non-hazardous solid wastes thatare subject to the requirements of the U.S. Resource Conservation and RecoveryAct, or RCRA, or comparable state, local or foreign requirements.  In addition, from time to time we arrange forthe disposal of hazardous waste or hazardous substances at offsite disposalfacilities.  If such materials areimproperly disposed of by third parties, we may still be held liable for cleanup costs under applicable laws.

 

***European Union Tanker Regulations***

*** ***

In July 2003, in response to the *Prestige*oil spill in November 2002, the European Union adopted legislation, whichwas amended in October 2003, that prohibits all single hull tankers fromentering into its ports or offshore terminals by 2010 or earlier, depending ontheir age.  The European Union has alsoalready banned all single hull tankers 

 

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carrying heavy grades of oil from entering or leaving its ports oroffshore terminals or anchoring in areas under its jurisdiction.  Commencing in 2005, certain single hulltankers above 15 years of age will also be restricted from entering or leavingEuropean Union ports or offshore terminals and anchoring in areas underEuropean Union jurisdiction.  TheEuropean Union is also considering legislation that would: (1) banmanifestly sub-standard vessels (defined as those more than 15 years old thathave been detained by port authorities at least twice in a six month period)from European waters and create an obligation of port states to inspect vesselsposing a high risk to maritime safety or the marine environment; and (2) providethe European Union with greater authority and control over classificationsocieties, including the ability to seek to suspend or revoke the authority ofnegligent societies.  The sinking of the *Prestige* and resulting oil spill in November 2002 hasled to the adoption of other environmental regulations by certain EuropeanUnion nations, which could adversely affect the remaining useful lives of allof our tankers and our ability to generate income from them.  It is impossible to predict what legislationor additional regulations, if any, may be promulgated by the European Union orany other country or authority.

 

In 2005, the European Union adopted a directive on ship-sourcepollution, imposing criminal sanctions for intentional, reckless or negligentpollution discharges by ships.  Thedirective could result in criminal liability for pollution from vessels inwaters of European countries that adopt implementing legislation.  Criminal liability for pollution may resultin substantial penalties or fines and increased civil liability claims.

 

***Greenhouse Gas Regulation***

*** ***

In February 2005, the Kyoto Protocol to the United NationsFramework Convention on Climate Change, or the Kyoto Protocol, entered intoforce.  Pursuant to the Kyoto Protocol,adopting countries are required to implement national programs to reduceemissions of certain gases, generally referred to as greenhouse gases, whichare suspected of contributing to global warming.  Currently, the emissions of greenhouse gasesfrom international shipping are not subject to the Kyoto Protocol.  However, the European Union has indicatedthat it intends to propose an expansion of the existing European Unionemissions trading scheme to include emissions of greenhouse gases fromvessels.  In the United States, theAttorneys General from 16 states and a coalition of environmental groups in April 2008filed a petition for a writ of mandamus, or petition, with the DC Circuit Courtof Appeals to request an order requiring the EPA to regulate greenhouse gasemissions from ocean-going vessels under the Clean Air Act.  Although the court denied the petition in June 2008,any future passage of climate control legislation or other regulatoryinitiatives by the IMO, European Union or individual countries where we operatethat restrict emissions of greenhouse gases could entail financial impacts onour operations that we cannot predict with certainty at this time.

 

***Vessel Security Regulations***

*** ***

Since the terrorist attacks of September 11, 2001, there have beena variety of initiatives intended to enhance vessel security.  On November 25, 2002, the U.S. MaritimeTransportation Security Act of 2002, or MTSA, came into effect.  To implement certain portions of the MTSA, inJuly 2003, the U.S. Coast Guard issued regulations requiring theimplementation of certain security requirements aboard vessels operating inwaters subject to the jurisdiction of the United States.  Similarly, in December 2002, amendmentsto SOLAS created a new chapter of the convention dealing specifically withmaritime security.  The new chapterbecame effective in July 2004 and imposes various detailed securityobligations on vessels and port authorities, most of which are contained in theInternational Ship and Port Facilities Security Code, or the ISPS Code.  The ISPS Code is designed to protect portsand international shipping against terrorism. After July 1, 2004, to trade internationally, a vessel must attainan International Ship Security Certificate from a recognized securityorganization approved by the vessel’s flag state.  Among the various requirements are:

 

·                  on-board installation of automaticidentification systems to provide a means for the automatic transmission ofsafety-related information from among similarly equipped ships and shorestations, including information on a ship’s identity, position, course, speedand navigational status;

 

·                  on-board installation of ship securityalert systems, which do not sound on the vessel but only alert the authoritieson shore;

 

·                  the development of vessel security plans;

 

·                  ship identification number to bepermanently marked on a vessel’s hull;

 

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·                  a continuous synopsis record kept onboardshowing a vessel’s history including, the name of the ship and of the statewhose flag the ship is entitled to fly, the date on which the ship wasregistered with that state, the ship’s identification number, the port at whichthe ship is registered and the name of the registered owner(s) and theirregistered address; and

 

·                  compliance with flag state securitycertification requirements.

 

The U.S. Coast Guard regulations, intended to align with internationalmaritime security standards, exempt from MTSA vessel security measures non-U.S.vessels that have on board, as of July 1, 2004, a valid ISSC attesting tothe vessel’s compliance with SOLAS security requirements and the ISPSCode.  We have implemented the varioussecurity measures addressed by MTSA, SOLAS and the ISPS Code, and our fleet isin compliance with applicable security requirements.

 

***Inspection by ClassificationSocieties***

*** ***

Every oceangoing vessel must be “classed” by a classificationsociety.  The classification societycertifies that the vessel is “in-class,” signifying that the vessel has beenbuilt and maintained in accordance with the rules of the classificationsociety and complies with applicable rules and regulations of the vessel’scountry of registry and the international conventions of which that country isa member.  In addition, where surveys arerequired by international conventions and corresponding laws and ordinances ofa flag state, the classification society will undertake them on application orby official order, acting on behalf of the authorities concerned.

 

The classification society also undertakes on request other surveys andchecks that are required by regulations and requirements of the flagstate.  These surveys are subject toagreements made in each individual case and/or to the regulations of thecountry concerned.

 

For maintenance of the class, regular and extraordinary surveys ofhull, machinery, including the electrical plant, and any special equipmentclassed are required to be performed as follows:

 

·                  *Annual Surveys. *For seagoing ships, annual surveys are conducted forthe hull and the machinery, including the electrical plant and where applicablefor special equipment classed, at intervals of 12 months from the date ofcommencement of the class period indicated in the certificate.

 

·                  *IntermediateSurveys. *Extended annual surveys are referred to asintermediate surveys and typically are conducted two and one-half years aftercommissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second orthird annual survey.

 

·                  *Class RenewalSurveys. *Class renewal surveys, also known as specialsurveys, are carried out for the ship’s hull, machinery, including theelectrical plant and for any special equipment classed, at the intervalsindicated by the character of classification for the hull.  At the special survey the vessel isthoroughly examined, including audio-gauging to determine the thickness of thesteel structures.  Should the thicknessbe found to be less than class requirements, the classification society wouldprescribe steel renewals.  Theclassification society may grant a one year grace period for completion of thespecial survey.  Substantial amounts ofmoney may have to be spent for steel renewals to pass a special survey if thevessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending onwhether a grace period was granted, a ship owner has the option of arrangingwith the classification society for the vessel’s hull or machinery to be on acontinuous survey cycle, in which every part of the vessel would be surveyedwithin a five year cycle.  At an owner’sapplication, the surveys required for class renewal may be split according toan agreed schedule to extend over the entire period of class.  This process is referred to as continuousclass renewal.

 

All areas subject to survey as defined by the classification societyare required to be surveyed at least once per class period, unless shorterintervals between surveys are prescribed elsewhere.  The period between two subsequent surveys ofeach area must not exceed five years.

 

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Most vessels are also drydocked every 30 to 36 months for inspection ofthe underwater parts and for repairs related to inspections.  If any defects are found, the classificationsurveyor will issue a recommendation which must be rectified by the ship ownerwithin prescribed time limits.

 

Most insurance underwriters make it a condition for insurance coveragethat a vessel be certified as “in-class” by a classification society which is amember of the International Association of Classification Societies.  All our vessels are certified as being “in-class”by Det Norske Veritas.  All new andsecondhand vessels that we purchase must be certified prior to their deliveryunder our standard purchase contracts and memoranda of agreement.  If the vessel is not certified on thescheduled date of closing, we have no obligation to take delivery of thevessel.

 

In addition to the classification inspections, many of our customersregularly inspect our vessels as a precondition to chartering them forvoyages.  We believe that ourwell-maintained, high-quality vessels provide us with a competitive advantagein the current environment of increasing regulation and customer emphasis onquality.

 

**ITEM 1A.  RISK FACTORS**

** **

**ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS**

** **

This annual report on Form 10-K contains forward-lookingstatements made pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. These forward-looking statements are based on management’s currentexpectations and observations.  Includedamong the factors that, in our view, could cause actual results to differmaterially from the forward looking statements contained in this annual reporton Form 10-K are the following: (i) loss or reduction in businessfrom our significant customers; (ii) the failure of our significantcustomers to perform their obligations owed to us; (iii) changes indemand; (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) changes in trading patternssignificantly impacting overall tanker tonnage requirements; (x) changesin the typical seasonal variations in tanker charter rates; (xi) changes in thecost of other modes of oil transportation; (xii) changes in oil transportationtechnology; (xii) increases in costs including without limitation: crew wages,insurance, provisions, repairs and maintenance; (xiv) changes in generaldomestic and international political conditions; (xv) changes in the conditionof our vessels or applicable maintenance or regulatory standards (which mayaffect, among other things, our anticipated drydocking or maintenance andrepair costs);****(xvi) changes in the itinerariesof the Company’s vessels; (xvii) adverse changes in foreign currency exchangerates affecting our expenses; and other factors listed from time to time in ourfilings with the Securities and Exchange Commission.

 

Our ability to pay dividends in any period will depend upon factorsincluding applicable provisions of Marshall Islands law and the finaldetermination by our board of directors each quarter after its review of ourfinancial performance.  The timing andamount of dividends, if any, could also be affected by factors affecting cashflows, results of operations, required capital expenditures, or reserves.  As a result, the amount of dividends actuallypaid may vary.

 

We face a variety of risks that are substantial and inherent in ourbusiness, including market, financial, operational, legal and regulatoryrisks.  Below, we have described certainimportant risks that could affect our business. These risks and other information included in this report should becarefully considered.  If any of theserisks occur, our business, financial condition, operating results and cashflows could be materially adversely affected and the trading price of ourcommon stock could decline.

 

**RISK FACTORS RELATED TOOUR BUSINESS & OPERATIONS**

** **

**Our recent businesscombination with Arlington exposes us to a number of significant risks.**

** **

There are a number of significant risks associated with our recentbusiness combination with Arlington, including:

 

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·                  risks associated with our ability tosuccessfully integrate the operations and business of Arlington, and the relateddiversion of management resources necessary to integrate the businesses;

 

·                  risks associated with our ability torealize the full projected cost savings and benefits in connection with thetransaction; and

 

·                  expenses related to the transaction.

 

**We may incur adverseconsequences in connection with our executive transition.**

** **

As we previously announced, on October 24, 2008, in connectionwith the recent Arlington Combination, we entered into a new letter agreementwith Peter Georgiopoulos.  Pursuant toits terms, the new letter agreement became effective as of December 16,2008, the date on which the effective time of the Arlington Combinationoccurred, the Effective Date.  Thisletter agreement provided that, among other things:  the employment letter agreement, dated April 5,2005, between General Maritime Subsidiary and Peter Georgiopoulos terminated onthe Effective Date (and Peter Georgiopoulos stepped down as President and CEO);and Peter Georgiopoulos will serve as Chairman of the Board of Directors of thenew combined company for three years following the Effective Date, or earlierif he is not nominated to such position or if our shareholders decline tore-elect him to, or remove him from, our Board of Directors.  On the Effective Date, John Tavlarios, CEO ofour management subsidiary, became President of the Company.  The loss of Peter Georgiopoulos’ full-timeservice could have an adverse effect on our operations.

 

**TheArlington Combination may adversely affect our relationships with our customersand suppliers.**

 

In response to theArlington Combination, existing or prospective customers or suppliers of theCompany, General Maritime Subsidiary or Arlington may:

 

·                  delay, defer or cease purchasing servicesfrom or providing goods or services to the Company, General Maritime Subsidiaryor Arlington;

 

·                  delay or defer other decisions concerningthe Company, General Maritime Subsidiary or Arlington, or refuse to extendcredit to the Company, General Maritime Subsidiary or Arlington;

 

·                  raise disputes under their businessarrangements with the Company, General Maritime Subsidiary or Arlington orassert purported consent or change of control rights; or

 

·                  otherwise seek to change the terms onwhich they do business with the Company, General Maritime Subsidiary orArlington.

 

Any such delays, disputes orchanges to terms could seriously harm our business.

 

**The current globaleconomic turndown may negatively impact our business.**

** **

Recent months have seen a significant shift in the global economy, withoperating businesses facing tightening credit, weakening demand for goods andservices, deteriorating international liquidity conditions, and decliningmarkets.  Lower demand for tanker cargoesas well as diminished trade credit available for the delivery of such cargoesmay create downward pressure on charter rates. If the current global economic environment persists or worsens, we maybe negatively affected in 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, such a decline in the market value of our vessels could prevent us fromborrowing under our credit facilities or trigger a default under theircovenants.

 

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

 

**The cyclical nature ofthe tanker industry may lead to volatility in charter rates and vessel valueswhich may adversely affect our earnings.**

** **

If the tanker market, which has been cyclical, is depressed in thefuture, our earnings and available cash flow may decrease.  Our ability to employ our vessels profitablywill depend upon, among other things, economic conditions in the tankermarket.  Fluctuations in charter ratesand tanker values result from changes in the supply and demand for tankercapacity and changes in the supply and demand for petroleum and petroleumproducts.

 

The factors affecting the supply and demand for tankers are outside ofour control, and the nature, timing and degree of changes in industryconditions are unpredictable.  Thecurrent global financial crisis has intensified this unpredictability.

 

The factors that influence demand for tanker capacity include:

 

·                  demand for and supply of petroleum andpetroleum products,

 

·                  regional availability of refiningcapacity,

 

·                  environmental and other regulatorydevelopments,

 

·                  global and regional economic conditions,

 

·                  the distance petroleum and petroleumproducts are to be moved by sea, and

 

·                  changes in seaborne and othertransportation patterns.

 

The factors that influence the supply of tanker capacity include:

 

·                  the number of newbuilding deliveries,

 

·                  the scrapping rate of older vessels,

 

·                  conversion of tankers to other uses,

 

·                  the number of vessels that are out ofservice, and

 

·                  environmental concerns and regulations.

 

Historically, the tanker markets have been volatile as a result of themany conditions and factors that can affect the price, supply and demand fortanker capacity.  Changes in demand fortransportation of oil over longer distances and supply of tankers to carry thatoil may materially affect our revenues, profitability and cash flows.

 

**Charter rates forvessels may decrease in the future, which may adversely affect our earnings andability to pay dividends.**

** **

We anticipate that future demand for our vessels, and in turn ourfuture charter rates, will be affected by the rate of economic growth in theworld’s economy as well as seasonal and regional changes in demand and changesin the capacity of the world’s fleet.  Ifthe tanker industry, which has been highly cyclical, is depressed in the futurewhen our charters expire or at a time when we may want to sell a vessel, ourearnings and available cash flow may be adversely affected.  We cannot assure you that we will be able tosuccessfully charter our vessels in the future or renew our existing chartersat rates sufficient to allow us to operate our business profitably, meet ourobligations 

 

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including payment of debt service to our lenders or to pay dividends toour shareholders.  Our ability to renewthe charters on our vessels on the expiration or termination of our currentcharters, the charter rates payable under any replacement charters and vesselvalues will depend upon, among other things, economic conditions in the tankerindustry at that time, changes in the supply and demand for vessel capacity andchanges in the supply and demand for the seaborne transportation of crudeoil.  A general global economic downturnor international financial uncertainty may result in a weakening of charterrates.  This could reduce the charterrates for our vessels not then subject to long-term charters and, thereby,negatively impact our results of operations.

 

In addition, the Arlington Vessels, are currently chartered tosubsidiaries of Concordia and Stena.  Wereceive a fixed minimum daily base charter rate, or basic hire, under thesecharters and may also receive additional hire based on a formula of notionalvoyages and expenses on routes agreed to with these charterers.  Currently, the payments received by us underthese charters are below market compared to the time charter marketgenerally.  There is no obligation to payadditional hire during any period when the obligation to pay basic hire issuspended under the charter if due to technical reasons the vessel isoff-hire.  These charterers have optionswhich they may exercise in their sole discretion to extend the terms of thecharters for each of the Arlington Vessels, four of which options wereexercised in May 2008.  Notice thatthe charterer is exercising its option to extend the term of a charter isrequired to be delivered no later than six months prior to the expiration ofthe charter period in effect at that time. We cannot predict whether the charterers will exercise any additionalextension options under one or more of the charters.  If these charterers decide not to extendtheir current charters, we may not be able to re-charter the Arlington Vesselswith terms similar to the terms of the current charters, or at all.  We may also directly employ these vessels onthe spot charter market, which is subject to greater rate fluctuation than thetime charter market.

 

**An over supply of newvessels may adversely affect charter rates and vessel values.**

** **

If the number of new ships delivered exceeds the number of tankersbeing scrapped and lost, tanker capacity will increase.  In addition, we believe that the totalnewbuilding order books for Suezmax vessels and Aframax vessels scheduled toenter the fleet through 2012 currently are a substantial portion of theexisting fleets and we cannot assure you that the order books will not increasefurther in proportion to the existing fleets. If the supply of tanker capacity increases and the demand for tankercapacity does not increase correspondingly, charter rates could materiallydecline and the value of our vessels could be adversely affected.

 

**Our revenues may beadversely affected if we do not successfully employ our vessels.**

** **

We seek to deploy our vessels between spot market voyage charters andtime charters in a manner that maximizes long-term cash flow.  Currently, 23 of our vessels arecontractually committed to time charters, with the remaining terms of thesecharters expiring on dates between July 2009 and July 2011.  Although these time charters generallyprovide stable revenues, they also limit the portion of our fleet available forspot market voyages during an upswing in the tanker industry cycle, when spotmarket voyages might be more profitable.

 

We earned approximately 26% of our net voyage revenue from spotcharters for the year ended December 31, 2008.  The spot charter market is highly competitive,and spot market voyage charter rates may fluctuate dramatically based primarilyon the worldwide supply of tankers available in the market for thetransportation of oil and the worldwide demand for the transportation of oil bytanker.  Factors affecting the volatilityof spot market voyage charter rates include the quantity of oil producedglobally, shifts in locations where oil is produced or consumed, actions byOPEC, the general level of worldwide economic activity and the development anduse of alternative energy sources.  Wecannot assure you that future spot market voyage charters will be available atrates that will allow us to operate our vessels profitably.

 

**We receive a significant portion of our revenuesfrom a single customer, and any decrease in the amount of business it or anyother significant customer transacts with us could materially and adverselyaffect our cash flows and profitability.**

 

We derive a significant portion of our revenues from our single largestcustomer, Lukoil Oil Company, or Lukoil. During the year ended December 31, 2008, Lukoil accounted for 40.8%of our voyage revenues and we expect Lukoil to account for a significantportion of our voyage revenues in the future. Ten of our 23 time charters are with Lukoil.  We also derive a significant portion of ourvoyage revenues from time charters by subsidiaries of Concordia 

 

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and Stena.  During the year endedDecember 31, 2008, these customers accounted for all of Arlington’s voyagerevenues and we expect these customers to account for a significant portion ofour voyage revenues in the future.  Alleight Arlington Vessels are on time charters with the Concordia and Stenasubsidiaries.  Our revenues other thanLukoil revenues, Concordia and Stena are also derived from a limited number ofcustomers.

 

If Lukoil or one of the Concordia and Stena subsidiaries breaches orterminates these time charters or renegotiates or renews them on terms lessfavorable than those currently in effect, or if any significant customerdecreases the amount of business it transacts with us or if we lose any of ourcustomers or a significant portion of our revenues, our operating results, cashflows and profitability could be materially adversely affected.

 

**A decline in demand forcrude oil or a shift in oil transport patterns could materially and adverselyaffect our revenues.**

** **

The demand for tanker capacity to transport crude oil depends uponworld and regional oil markets.  A numberof 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.

 

Historically, the crude oil markets have been volatile as a result ofthe many conditions and events that can affect the price, demand, productionand transport of oil, including competition from alternative energy sources.  Decreased demand for oil transportation mayhave a material adverse effect on our revenues, cash flows and profitability.

 

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

** **

Our vessels are employed in a highly competitive market.  Our competitors include the owners of otherAframax and Suezmax tankers and, to a lesser degree, owners of other sizetankers.  Both groups include independentoil tanker companies as well as oil companies. We do not control a sufficiently large share of the market to influencethe market price charged for crude oil transportation services.

 

Our market share may decrease in the future.  We may not be able to compete profitably aswe expand our business into new geographic regions or provide newservices.  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 ourvessels may fluctuate significantly, and we may incur losses when we sellvessels following a decline in their market value.**

** **

The fair market value of our vessels may increase and decreasedepending on a number of 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;

 

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·                  alternative modes of transportation;

 

·                  cost of newbuildings;

 

·                  governmental or other regulations;

 

·                  prevailing level of charter rates; and

 

·                  technological advances.

 

If the fair market value of our vessels declines below their carryingvalues and such decline is other than temporary, we may be required totake an impairment charge or may incur losses if we were to sell one or more ofour vessels at such time, which would adversely affect our business andfinancial condition as well as our earnings.

 

**We may not be able togrow or to effectively manage our growth.**

** **

A principal focus of our strategy is to continue to grow by takingadvantage of changing market conditions, which may include expanding ourbusiness in the Atlantic basin, the primary geographic area and market where weoperate, expanding into other regions, or increasing the number of vessels inour fleet.  Our future growth will dependupon a number of factors, some of which we can control and some of which wecannot.  These factors include ourability to:

 

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

 

·                  identify vessels and/or shippingcompanies for acquisitions;

 

·                  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 our ability to expand ourfleet through acquisitions of suitable double-hull vessels.  We may not be able to acquire newbuildings orsecondhand double-hull tankers on favorable terms, which could impede ourgrowth and negatively impact our financial condition and ability to paydividends.  We may not be able tocontract for newbuildings or locate suitable secondhand double-hull vessels ornegotiate acceptable construction or purchase contracts with shipyards andowners, or obtain financing for such acquisitions on economically acceptableterms.

 

The failure to effectively identify, purchase, develop and integrateany vessels or businesses could adversely affect our business, financialcondition and results of operations.

 

**Our operating resultsmay fluctuate seasonally.**

** **

We operate our vessels in markets that have historically exhibitedseasonal variations in tanker demand and, as a result, in charter rates.  Tanker markets are typically stronger in thefall and winter months (the fourth and first quarters of the calendar year) inanticipation of increased oil consumption in the Northern Hemisphere during thewinter months.  Unpredictable weatherpatterns and variations in oil reserves disrupt vessel scheduling.

 

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**Because we generate allof our revenues in U.S. Dollars but incur a significant portion of our expensesin other currencies, exchange rate fluctuations could have an adverse impact onour results of operations.**

 

We generate all of our revenues in U.S. Dollars but we incur asignificant portion of our expenses, particularly crew and maintenance costs,in currencies other than the U.S. Dollar. This difference could lead to fluctuations in net income due to changesin the value of the U.S. Dollars relative to the other currencies, inparticular the Euro.  A decline in thevalue of the U.S. Dollar could lead to higher expenses payable by us.

 

**There may be risksassociated with the purchase and operation of secondhand vessels.**

** **

Our current business strategy may include additional growth through theacquisition of additional secondhand vessels. Although we inspect secondhand vessels prior to purchase, this does notnormally provide us with the same knowledge about their condition that we wouldhave had if such vessels had been built for and operated exclusively byus.  Therefore, our future operatingresults could be negatively affected if some of the vessels do not perform aswe expect.  Also, we do not receive thebenefit of warranties from the builders if the vessels we buy are older thanone year.

 

**Delays or defaults bythe shipyards in the construction of any new vessels that we may order couldincrease our expenses and diminish our net income and cash flows.**

** **

Our business strategy may include additional growth throughconstructing new vessels or acquiring newbuilding contracts.  Any such projects would be subject to therisk of delay or defaults by shipyards caused by, among other things,unforeseen quality or engineering problems, work stoppages, weather interference,unanticipated cost increases, delays in receipt of necessary equipment, andinability to obtain the requisite permits or approvals.  In accordance with industry practice, in theevent any such shipyards are unable or unwilling to deliver the vesselsordered, we may not have substantial remedies. Failure to construct or deliver vessels by the shipyards or anysignificant delays could increase our expenses and diminish our net income andcash flows.

 

**An increase in costscould materially and adversely affect our financial performance.**

** **

Our vessel operating expenses are comprised of a variety of costsincluding crew costs, provisions, deck and engine stores, lubricating oil,insurance, maintenance and repairs, many of which are beyond our control andaffect the entire shipping industry. Also, costs such as insurance and security are still increasing.  If costs continue to rise, that couldmaterially and adversely affect our cash flows and profitability.

 

**We may face unexpectedrepair costs for our vessels.**

** **

Repairs and maintenance costs are difficult to predict with certaintyand may be substantial.  Many of theseexpenses are not covered by our insurance. Large repair expenses could decrease our cash flow and profitability andreduce our liquidity.

 

**Compliance with safetyand other vessel requirements imposed by classification societies may be verycostly and may adversely affect our business.**

** **

The hull and machinery of every commercial tanker must be classed by aclassification society authorized by its country of registry.  The classification society certifies that atanker is safe and seaworthy in accordance with the applicable rules andregulations of the country of registry of the tanker and the Safety of Life atSea Convention.  All of our vessels arecertified as being “in-class” by Det Norske Veritas or the American Bureau ofShipping.  These classification societiesare members of the International Association of Classification Societies.

 

A vessel must undergo annual surveys, intermediate surveys and specialsurveys.  In lieu of a special survey, avessel’s machinery may be on a continuous survey cycle, under which themachinery would be surveyed periodically over a five-year period.  Our vessels are on special survey cycles forhull inspection and on special survey or continuous survey cycles for machineryinspection.  Every vessel is alsorequired to be drydocked every two to five years for inspection of theunderwater parts of such vessel.

 

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If a vessel in our fleet does not maintain its class and/or fails anyannual survey, intermediate survey or special survey, it will be unemployableand unable to trade between ports.  Thiswould negatively impact our results of operations.

 

**We depend on our keypersonnel and may have difficulty attracting and retaining skilled employees.**

** **

The loss of the services of any of our key personnel or our inabilityto successfully attract and retain qualified personnel, including ships’officers, in the future could have a material adverse effect on our business,financial condition and operating results. Our future success depends particularly on the continued service of JohnTavlarios, our President.

 

**We may be unable to attract and retain qualified,skilled employees or crew necessary to operate our business.**

 

Our success depends in large part on our ability to attract and retainhighly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees withspecialized training who can perform physically demanding work.  Competition to attract and retain qualifiedcrew members is intense.  We expect crewcosts to increase in 2009.  If we are notable to increase our rates to compensate for any crew cost increases, ourfinancial condition and results of operations may be adversely affected.  Any inability we experience in the future tohire, train and retain a sufficient number of qualified employees could impairour ability to manage, maintain and grow our business.

 

**Shipping is aninherently risky business and our insurance may not be adequate.**

** **

Our vessels and their cargoes are at risk of being damaged or lostbecause of events such as marine disasters, bad weather, mechanical failures,human error, war, terrorism, piracy and other circumstances or events. Inaddition, transporting crude oil creates a risk of business interruptions dueto political circumstances in foreign countries, hostilities, labor strikes andboycotts.  Any of these events may resultin loss of revenues, increased costs and decreased cash flows.  Future hostilities or other politicalinstability could affect our trade patterns and adversely affect our operationsand our revenues, cash flows and profitability.

 

We carry insurance to protect against most of the accident-relatedrisks involved in the conduct of our business. We currently maintain $1 billion in coverage for each of our vessels forliability for spillage or leakage of oil or pollution.  We also carry insurance covering lost revenueresulting from vessel off-hire for all of our vessels.  Nonetheless, risks may arise against which weare not adequately insured.  For example,a catastrophic spill could exceed our insurance coverage and have a materialadverse effect on our financial condition. In addition, we may not be able to procure adequate insurance coverageat commercially reasonable rates in the future and we cannot guarantee that anyparticular claim will be paid.  In thepast, new and stricter environmental regulations have led to higher costs forinsurance covering environmental damage or pollution, and new regulations couldlead to similar increases or even make this type of insurance unavailable.  Furthermore, even if insurance coverage isadequate to cover our losses, we may not be able to timely obtain a replacementship 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.  Our payment of thesecalls could result in significant expenses to us which could reduce our cashflows and place strains on our liquidity and capital resources.

 

**The risks associated witholder vessels could adversely affect our operations.**

** **

In general, the costs to maintain a vessel in good operating conditionincrease as the vessel ages.  As of December 31,2008, the average age of the 31 vessels in our fleet was 8.6 years compared toan average age of 9.6 years as of December 31, 2007.  Due to improvements in engine technology,older vessels typically are less fuel-efficient than more recently constructedvessels.  Cargo insurance rates increasewith the age of a vessel, making older vessels less desirable to charterers.

 

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Governmental regulations, safety or other equipment standards relatedto the age of tankers may require expenditures for alterations or the additionof new equipment to our vessels, and may restrict the type of activities inwhich our vessels may engage.  We cannotassure 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.

 

**Acts of piracy onocean-going vessels have recently increased in frequency, which could adverselyaffect our business.**

** **

Acts of piracy have historically affected ocean-going vessels tradingin regions of the world such as the South China Sea and in the Gulf of Aden offthe coast of Somalia.  Throughout 2008,the frequency of piracy incidents has increased significantly, particularly inthe Gulf of Aden off the coast of Somalia. If these piracy attacks result in regions in which our vessels aredeployed being characterized by insurers as “war risk” zones, as the Gulf ofAden temporarily was in May 2008, or Joint War Committee (JWC) “war andstrikes” listed areas, premiums payable for such coverage could increasesignificantly and such insurance coverage may be more difficult to obtain.  In addition, crew costs, including costswhich may be incurred to the extent we employ onboard security guards, couldincrease in such circumstances.  We maynot be adequately insured to cover losses from these incidents, which couldhave a material adverse effect on us.  Inaddition, detention hijacking as a result of an act of piracy against ourvessels, or an increase in cost, or unavailability of insurance for ourvessels, could have a material adverse impact on our business, financialcondition and results of operations.

 

**Terrorist attacks,increased hostilities or war could lead to further economic instability,increased costs and disruption of our business.**

** **

Terrorist attacks, such as the attacks that occurred in the UnitedStates on September 11, 2001, the bombings in Spain on March 11,2004, the bombings in London on July 7, 2005, and the current conflicts inIraq and Afghanistan and other current and future conflicts, may adverselyaffect our business, operating results, financial condition, ability to raisecapital and future growth. Continuing hostilities in the Middle East may leadto additional 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 andgas fields could be targets of future terrorist attacks.  Any such attacks could lead to, among otherthings, bodily injury or loss of life, vessel or other property damage,increased vessel operational costs, including insurance costs, and theinability to transport oil and other refined products to or from certainlocations.  Terrorist attacks, war orother events beyond our control that adversely affect the distribution,production or transportation of oil and other refined products to be shipped byus could entitle our customers to terminate our charter contracts, which wouldharm our cash flow and our business.

 

**Compliance with safety,environmental and other governmental requirements and related costs mayadversely affect our operations.**

** **

The shipping industry in general, our business and the operation of ourvessels in particular, are affected by a variety of governmental regulations inthe form of numerous international conventions, national, state and local lawsand national and international regulations in force in the jurisdictions inwhich such tankers operate, as well as in the country or countries in whichsuch tankers are registered.  Theseregulations include:

 

·                  the U.S. OilPollution Act of 1990, or OPA, which imposes strict liability for the dischargeof oil into the 200-mile United States exclusive economic zone, the obligationto obtain certificates of financial responsibility for vessels trading inUnited States waters and the requirement that newly constructed tankers thattrade 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;

 

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·                  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

 

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

 

More stringent maritime safety rules are also likely to be imposedworldwide 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 and regulations may also beadopted that could limit our ability to do business or increase the cost of ourdoing business and that could have a material adverse effect on ouroperations.  In addition, we are requiredby various governmental and quasi-governmental agencies to obtain certainpermits, licenses and certificates with respect to our operations.  We believe our vessels are maintained in goodcondition in compliance with present regulatory requirements, are operated incompliance with applicable safety/environmental laws and regulations and areinsured against usual risks for such amounts as our management deemsappropriate.  The vessels’ operatingcertificates and licenses are renewed periodically during each vessel’srequired annual survey.  However,government regulation of tankers, particularly in the areas of safety andenvironmental impact may change in the future and require us to incursignificant capital expenditures with respect to our ships to keep them incompliance.

 

**Increased inspectionprocedures and tighter import and export controls could increase costs anddisrupt our business.**

** **

International shipping is subject to various security and customsinspections and related procedures in countries of origin and destination.  Inspection procedures can result in the seizureof contents of our vessels, delays in the loading, offloading or delivery andthe levying of customs, duties, fines and other penalties against us.

 

It is possible that changes to inspection procedures could imposeadditional financial and legal obligations on us.  Furthermore, changes to inspection procedurescould also impose additional costs and obligations on our customers and may, incertain cases, render the shipment of certain types of cargo impractical.  Any such changes or developments may have amaterial adverse effect on our business, financial condition, results ofoperations and our ability to pay dividends.

 

**Our vessels may berequisitioned by governments without adequate compensation.**

** **

A government could requisition for title or seize our vessels.  In the case of a requisition for title, agovernment takes control of a vessel and becomes its owner.  Also, a government could requisition ourvessels for hire.  Under requisition forhire, a government takes control of a vessel and effectively becomes itscharterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency.Although we, as owner, would be entitled to compensation in the event of arequisition, the amount and timing of payment would be uncertain.

 

**Increases in tonnagetaxes on our vessels would increase the costs of our operations.**

** **

Our vessels are currently registered under the flags of the Republic ofLiberia, the Republic of the Marshall Islands and Bermuda.  These jurisdictions impose taxes based on thetonnage capacity of each of the vessels registered 

 

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under their flag.  The tonnagetaxes imposed by these countries could increase, which would cause the costs ofour operations to increase.

 

**Arrests of our vesselsby maritime claimants could cause a significant loss of earnings for therelated off hire period.**

** **

Crew members, suppliers of goods and services to a vessel, shippers ofcargo and other parties may be entitled to a maritime lien against a vessel forunsatisfied debts, claims or damages.  Inmany jurisdictions, a maritime lienholder may enforce its lien by “arresting”or “attaching” a vessel through foreclosure proceedings.  The arrest or attachment of one or more ofour vessels could result in a significant loss of earnings for the relatedoff-hire period.

 

In addition, in jurisdictions where the “sister ship” theory ofliability applies, a claimant may arrest both the vessel which is subject tothe claimant’s maritime lien and any “associated” vessel, which is any vesselowned or controlled by the same owner. In countries with “sister ship” liability laws, claims might be assertedagainst us, any of our subsidiaries or our vessels for liabilities of othervessels that we own.

 

**Proceedings involvingGeneral Maritime vessel-owning subsidiaries and two General Maritime vesselofficers could negatively impact our business.**

** **

On November 25, 2008, a jury in theSouthern District of Texas found General Maritime Management (Portugal) L.D.A.,a subsidiary of ours (“GMM Portugal”), and two vessel officers of the *Genmar Defiance* guilty of violating the Act to PreventPollution from Ships and 18 USC 1001. The conviction resulted from charges based on alleged incidentsoccurring on board the *Genmar Defiance*arising from potential failures by shipboard staff to properly recorddischarges of bilge waste during the period of November 24, 2007 through November 26,2007.  We have denied any wrongdoing inthis matter by us or any of our employees. The continuation of the sentencing hearing is scheduled for March 13,2009.  The unfavorable verdict couldresult in criminal sanctions or civil remedies against us, such as materialfines, injunctions or the loss of our ability to conduct business with governmentalentities and could also negatively affect our relationships with our customersand have an adverse impact on our business.

 

On or about August 29, 2007, an oil sheen was discovered byshipboard personnel of the *Genmar Progress*in Guayanilla Bay, Puerto Rico 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 towhich oil discharged from the *Genmar Progress*is responsible for this incident is currently the subject ofinvestigation.  The U.S. Coast Guard hasdesignated the *Genmar Progress* as a potentialsource 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 19, 2009, we received a demand from the U.S. NationalPollution Fund for $5.8 million for the U.S. Coast Guard’s response costs andcertain costs of the Departamento de Recursos Naturales y Ambientales of PuertoRico in connection with the alleged damage to the environment caused by thespill.  We are reviewing the demand andhas requested additional information from the U.S. National Pollution Fundrelating to the demand.  Currently, nocharges have been made and no other fines or penalties have been levied againstus.  We have been cooperating in theseinvestigations and have posted a surety bond to cover potential fines orpenalties that may be imposed in connection with the matter.

 

This matter, including the demand from the U.S. National PollutionFund, has been reported to our protection and indemnity insuranceunderwriters.  We have not accruedreserves for this incident other than the deductible because the amount of anyadditional costs that may be incurred by us is not estimable at this time.  Any uninsured or underinsured loss could harmour 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 883 ofthe U.S. Internal Revenue Code of 1986, as amended, or the Code, which we referto as Section 883, then we will be subject to U.S. federal income tax onour 

 

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shipping income that is derived from U.S. sources.  If we are subject to such tax, our net incomeand cash flows would be reduced by the amount of such tax.

 

We will qualify for exemption under Section 883 if, among otherthings, our stock is treated as primarily and regularly traded on anestablished securities market in the United States.  Under applicable Treasury regulations, we maynot satisfy this publicly traded requirement in any taxable year in which 50%or more of our stock is owned for more than half the days in such year bypersons who actually or constructively own 5% or more of our stock, which wesometimes refer to as 5% shareholders.

 

We believe that, based on the ownership of our stock in 2008, wesatisfied the publicly traded requirement for 2008.  However, if 5% shareholders were to own morethan 50% of our common stock for more than half the days of any future taxableyear, we may not be eligible to claim exemption from tax under Section 883for such taxable year.  We can provide noassurance that changes and shifts in the ownership of our stock by 5%shareholders will not preclude us from qualifying for exemption from tax in 2009or in future years.

 

If we do not qualify for the Section 883 exemption, our shippingincome derived from U.S. sources, or 50% of our gross shipping incomeattributable to transportation beginning or ending in the United States, wouldbe subject to a 4% tax without allowance for deductions.

 

**U.S. tax authoritiescould treat us as a “passive foreign investment company,” which could haveadverse U.S. federal income tax consequences to U.S. shareholders.**

** **

A foreign corporation generally will be treated as a “passive foreigninvestment company,” which we sometimes refer to as a PFIC, for U.S. federalincome tax purposes if either (1) at least 75% of its gross income for anytaxable year consists of “passive income” or (2) at least 50% of itsassets (averaged over the year and generally determined based upon value)produce or are held for the production of “passive income.”  U.S. shareholders of a PFIC are subject to adisadvantageous U.S. federal income tax regime with respect to distributionsthey receive from the PFIC and gain, if any, they derive from the sale or otherdisposition of their stock in the PFIC.

 

For purposes of these tests, “passive income” generally includesdividends, interest, gains from the sale or exchange of investment property andrents and royalties other than rents and royalties which are received fromunrelated parties in connection with the active conduct of a trade or business,as defined in applicable Treasury regulations. For purposes of these tests, income derived from the performance ofservices does not constitute “passive income.” By contrast, rental income would generally constitute passive incomeunless we were treated under specific rules as deriving our rental incomein the active conduct of a trade or business. We do not believe that our existing operations or the past operations ofGeneral Maritime Subsidiary or Arlington would cause us, or would have causedGeneral Maritime Subsidiary or Arlington, to be deemed a PFIC with respect toany taxable year.  In this regard, wetreat the gross income we derive or are deemed to derive from our time and spotchartering activities as services income, rather than rental income.  Accordingly, we believe that (1) ourincome from our time and spot chartering activities does not constitute passiveincome and (2) the assets that we own and operate in connection with theproduction of that income do not constitute passive assets.

 

There is, however, no direct legal authority under the PFIC rules addressingour method of operation.  Accordingly, noassurance can be given that the U.S. Internal Revenue Service, which wesometimes refer to as the IRS, or a court of law will accept our position, andthere is a risk that the IRS or a court of law could determine that we are aPFIC.  Moreover, because there areuncertainties in the application of the PFIC rules, because the PFIC test is anannual test, and because, although we intend to manage our business so as toavoid PFIC status to the extent consistent with our other business goals, therecould be changes in the nature and extent of our operations in future years,there can be no assurance that we will not become a PFIC in any taxable year.

 

If we were to be treated as a PFIC for any taxable year (and regardlessof whether we remain a PFIC for subsequent taxable years), our U.S.shareholders would face adverse U.S. tax consequences.  Under the PFIC rules, unless a shareholdermakes certain elections available under the Code (which elections could themselveshave adverse consequences for such shareholder, such shareholder would beliable to pay U.S. federal income tax at the highest applicable income taxrates on ordinary income upon the receipt of excess distributions and upon anygain from the 

 

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disposition of our common stock, plus interest on such amounts, as ifsuch excess distribution or gain had been recognized ratably over theshareholder’s holding period of our common stock.

 

**RISK FACTORS RELATED TO OUR FINANCINGS**

** **

**Our 2005 Credit Facilityand our RBS credit facility will impose, and it is possible that any indenturefor debt securities we may issue will impose, significant operating andfinancial restrictions that may limit our ability to operate our business.**

** **

Our 2005 Credit Facility and our RBS credit facility, as and to theextent amended or otherwise modified, will impose, and it is possible that anyindenture for debt securities that we may issue will impose, significantoperating and financial restrictions on us. These restrictions will limit our ability to, among other things:

 

·                  incur additionaldebt;

 

·                  pay dividends ormake other restricted payments;

 

·                  create or permitcertain liens;

 

·                  sell vessels orother assets;

 

·                  create or permitrestrictions on the ability of our subsidiaries to pay dividends or make otherdistributions to us;

 

·                  engage intransactions with affiliates; and

 

·                  consolidate ormerge with or into other companies or sell all or substantially all of ourassets.

 

On October 20, 2008, in connection with the proposed transaction,we amended and restated the 2005 Credit Facility.  Under the amended and restated creditagreement, we are permitted to pay dividends at a rate not to exceed $0.50 percommon share per quarter on the Company’s common stock.  This covenant applies to dividends and otherdistributions, including stock buy-backs, in respect of the Company’sshares.  Under the amended and restatedcredit agreement, the Company is also permitted to pay additional dividends ina cumulative amount not to exceed the sum of $150 million and 50% of theCompany’s cumulative net excess cash flow (as defined in the amended andrestated credit agreement).

 

In addition, the amended and restated credit agreement requires us tomaintain specified financial ratios and satisfy financial covenants.  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, including changes in the economic andbusiness conditions in the markets in which we operate, may affect our abilityto comply with these covenants.  Wecannot assure you that we will meet these ratios or satisfy these covenants orthat our lenders will waive any failure to do so.  A breach of any of the covenants in, or ourinability to maintain the required financial ratios under, the amended andrestated credit agreement would prevent us from borrowing additional moneyunder the facility and could result in a default under it.  If a default occurs under the amended andrestated credit agreement, 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.  Moreover, if the lenders under the amendedand restated credit agreement or other agreement in default were to acceleratethe debt outstanding under that facility, it could result in a default underour other debt obligations that may exist at such time, including any debtsecurities.

 

Our RBS credit facility requires that Arlington comply with variousoperating covenants and maintain certain financial ratios including that themarket value of the Arlington Vessels exceeds 125% of the total facility amountoutstanding and that, in order for Arlington to pay a dividend, the marketvalue of the Arlington Vessels exceeds 140% of its borrowings (or 125% of theloan amount if at the time of such dividend all of the Arlington Vessels are ontime charter for a remaining period of at least 12 months).  Our RBS credit facility also requires thatNorthern 

 

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Marine remain as technical manager for the Arlington Vessels.  In the event of the sale or loss of an Arlington Vessel, we might berequired to repay a percentage of the loan earlier than we planned orincrease our payments under the facility, which could affect our financialcondition and ability to make payments to our shareholders.  Declining tanker values could adversely affectour ability to refinance our RBS credit facility at its maturity in January 2011,and thereby adversely impact our business and operations and liquidity.

 

These restrictions could limit our ability to finance our futureoperations or capital needs, make acquisitions or pursue available businessopportunities.

 

**Wehave incurred significant indebtedness which could affect our ability tofinance our operations, pursue desirable business opportunities or successfullyrun our business in the future.**

** **

As of December 31, 2008, we have borrowed $761 million under our2005 Credit Facility and $229.5 million under our RBS credit facility.  Our leverage and debt service obligationscould have significant consequences, including the following:

 

·                  If future cashflows are insufficient, we may need to incur further indebtedness in order tomake the capital expenditures and other expenses or investments planned by us.

 

·                  Our indebtednesswill have the general effect of reducing our flexibility to react to changingbusiness and economic conditions insofar as they affect our financial conditionand, therefore, may pose substantial risk to our stockholders.

 

·                  In the eventthat we are liquidated, any of our senior or subordinated creditors and anysenior or subordinated creditors of our subsidiaries will be entitled topayment in full prior to any distributions to the holders of our shares ofcommon stock.

 

·                  Our 2005 CreditFacility begins to amortize in February 2009 and our RBS Facility maturesin January 2011.  Our ability tosecure additional financing prior to or after that time, if needed, may besubstantially restricted by the existing level of our indebtedness and therestrictions contained in our debt instruments. When our credit facilities mature in 2011 and 2012, we will be requiredto dedicate a substantial portion of our cash flow to the payment of such debt,which will reduce the amount of funds available for operations, capitalexpenditures and future business opportunities.

 

The occurrence of any one of these events could have a material adverseeffect on our business, financial condition, results of operations, prospectsand ability to satisfy our obligations under our credit facilities.

 

**Fluctuations in themarket value of our fleet may adversely affect our liquidity and may result inbreaches under our financing arrangements and sales of vessels at a loss.**

** **

The market value of vessels fluctuates depending upon general economicand market conditions affecting the tanker industry, the number of tankers**in the world fleet, the price of constructing new tankers,or newbuildings, types and sizes of tankers, and the cost of other modes oftransportation.  The market value of ourfleet may decline as a result of a downswing in the historically cyclicalshipping industry or as a result of the aging of our fleet.  Declining tanker values could affect ourability to raise cash by limiting our ability to refinance vessels and therebyadversely impact our liquidity.  Inaddition, declining vessel values could result in a breach of loan covenants,which could give rise to events of default under our credit facilities.  Due to the cyclical nature of the tankermarket, the market value of one or more of our vessels may at various times belower than their book value, and sales of those vessels during those timeswould result in losses.  If we determineat any time that a vessel’s future limited useful life and earnings require usto impair its value on our financial statements, that could result in a chargeagainst our earnings and the reduction of our shareholders’ equity.  If for any reason we sell vessels at a timewhen vessel prices have fallen, the sale may be at less than the vessel’scarrying amount on our financial statements, with the result that we would alsoincur a loss and a reduction in earnings.

 

 

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**If we default under our2005 Credit Facility or the RBS Facility, we could forfeit our rights incertain of our vessels and their charters.**

** **

We have pledged 11 of our Suezmax vessels and 11 of our Aframax vesselsas security to the lenders under our 2005 Credit Facility  We have pledged the Arlington Vessels assecurity to the lenders under our RBS facility. Default under these loan agreements, if not waived or modified, wouldpermit the lenders to foreclose on the mortgages over the vessels and therelated collateral, and we could lose our rights in the vessels and theircharters.

 

When final payment is due under our loan agreements, we must repay anyborrowings outstanding, including balloon payments.  To the extent that our cash flows areinsufficient to repay any of these borrowings, we will need to refinance someor all of our loan agreements or replace them with an alternate creditarrangement.  We may not be able torefinance or replace our loan agreements at the time they become due.  In addition, the terms of any refinancing oralternate credit arrangement may restrict our financial and operatingflexibility.

 

**We are a holdingcompany, and we depend on the ability of our subsidiaries to distribute fundsto us in order to satisfy our financial and other obligations.**

** **

We are a holding company, and our subsidiaries conduct all of ouroperations and own all of our vessels. We have no significant assets other than the equity interests of oursubsidiaries.  As a result, our abilityto pay dividends depends on the performance of our subsidiaries and theirability to distribute funds to us.  Theability of our subsidiaries to make distributions to us may be restricted by,among other things, restrictions under our credit facilities, applicablecorporate and limited liability company laws of the jurisdictions of theirincorporation or organization and other laws and regulations.  If we are unable to obtain funds from oursubsidiaries, we will not be able to pay dividends or make payment on ourcredit facilities unless we obtain funds from other sources.  We cannot assure you that we will be able toobtain the necessary funds from other sources.

 

 

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**RISK FACTORS RELATED TO OUR COMMON STOCK**

** **

**Anti-takeover provisionsin our financing agreements and organizational documents could have the effectof discouraging, delaying or preventing a merger or acquisition, which couldadversely affect the market price of our common stock.**

** **

Our existing financing agreement imposes restrictions on changes ofcontrol of our company and our ship-owning subsidiaries. These includerequirements that we obtain the lenders’ consent prior to any change of controland that we make an offer to redeem certain indebtedness before a change ofcontrol can take place.

 

Several provisions of our amended and restated articles ofincorporation and our by-laws could discourage, delay or prevent a merger oracquisition that shareholders may consider favorable. These provisions 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 youthat we will pay any dividends.**

** **

On December 16, 2008, following the consummation of the Arlingtontransaction, our board of directors adopted a cash dividend policy. The actualdeclaration of future cash dividends, and the establishment of record andpayment dates, is subject to final determination by our board of directors eachquarter after its review of our financial performance. Our ability to paydividends in any period will depend upon factors including satisfying therequirements under our 2005 Credit Facility and applicable provisions ofMarshall Islands law.

 

The timing and amount of dividends, if any, could be affected byfactors affecting cash flows, results of operations, required capitalexpenditures, or reserves. Maintaining the dividend policy will depend on ourcash earnings, financial condition and cash requirements and could be affectedby factors, including the loss of a vessel, required capital expenditures,reserves established by the board of directors, increased or unanticipatedexpenses, additional borrowings or future issuances of securities, which may bebeyond our control. The declaration and payment of dividends is subject tocertain conditions and limitations under our 2005 Credit Facility.

 

Under Marshall Islands law, a company may not declare or pay dividendsif it is currently insolvent or would thereby be made insolvent. MarshallIslands law also provides that a company may declare dividends only to theextent of its surplus, or if there is no surplus, out of its net profits forthe then current and/or immediately preceding fiscal years.

 

Our dividend policy may be changed at any time, and from time to time,by our board of directors.

 

40

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

** **

The market price of our common stock could decline due to sales of alarge number of shares in the market, including sales of shares by our largeshareholders, or the perception that these sales could occur. These sales couldalso make it more difficult or impossible for us to sell equity securities inthe future at a time and price that we deem appropriate to raise funds throughfuture offerings of common stock. We have entered into registration rightsagreements with the securityholders who received shares for the sale of vesselsto Arlington in connection with its initial public offering in November 2004,which were exchanged for shares of our common stock as a result of theArlington transaction. These registration rights agreements entitle them tohave an aggregate of 2,787,772 shares registered for sale in the public market.We have also agreed with Peter C. Georgiopoulos that we will enter intoa 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 Combination 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 Combination. We also registered on Form S-8 anaggregate of 1,624,347 shares issuable upon exercise of options we have grantedto purchase common stock or reserved for issuance under our equity compensationplans.

 

**Our incorporation underthe laws of the Republic of the Marshall Islands may limit the ability of ourshareholders to protect their interests.**

** **

Our corporate affairs are governed by our amended and restated articlesof incorporation and by-laws and by the Republic of the Marshall IslandsBusiness Corporations Act. The provisions of the Republic of the MarshallIslands Business Corporations Act resemble provisions of the corporation lawsof a number of states in the United States. However, there have been fewjudicial cases in the Republic of the Marshall Islands interpreting theRepublic of the Marshall Islands Business Corporations Act. For example, therights and fiduciary responsibilities of directors under the laws of theRepublic of the Marshall Islands are not as clearly established as the rightsand fiduciary responsibilities of directors under statutes or judicialprecedent in existence in certain U.S. jurisdictions. Although the Republic ofthe Marshall Islands Business Corporations Act does specifically incorporatethe non-statutory law, or judicial case law, of the State of Delaware and otherstates with substantially similar legislative provisions, our publicshareholders may have more difficulty in protecting their interests in the faceof actions by management, directors or controlling shareholders than wouldshareholders of a corporation incorporated in a U.S. jurisdiction.

 

**It may not be possiblefor our investors to enforce U.S. judgments against us.**

** **

We are incorporated in the Republic of the Marshall Islands and most ofour subsidiaries are organized in the Republic of Liberia and the Republic ofthe Marshall Islands. Substantially all of our assets and those of oursubsidiaries are located outside the United States. As a result, it may bedifficult or impossible for U.S. investors to serve process within the UnitedStates upon us or to enforce judgment upon us for civil liabilities in U.S.courts. In addition, you should not assume that courts in the countries inwhich we or our subsidiaries are incorporated or where our assets or the assetsof our subsidiaries are located (1) would enforce judgments of U.S. courtsobtained 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.

 

**ITEM 2. PROPERTIES**

** **

We lease six properties, all of which house offices used in theadministration of our operations: a property of approximately 24,000 squarefeet in New York, New York, a property of approximately 12,500 square feet inLisbon, Portugal, a property of approximately 2,000 square feet in Piraeus,Greece, a property of approximately

 

41

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3,400 square feet in Mumbai, India and a property of approximately 750square feet in Novorossiysk, Russia. We do not own or lease any productionfacilities, plants, mines or similar real properties.

 

**ITEM 3. LEGAL PROCEEDINGS**

** **

**LEGAL PROCEEDINGS**

** **

We have been cooperating in a criminal investigation being conducted bythe U.S. Department of Justice relating to the alleged failure by the *Genmar Ajax* to record certain dischargesof oily waste between October 2004 and December 2004. On December 15,2004, following a routine Coast Guard inspection, U.S. Coast Guard officialstook various documents, logs and records from the vessel for further review andanalysis. During 2005, the custodian of records for the *Genmar Ajax* received four subpoenas ducestecum requesting supplemental documentation pertaining to the vessel inconnection with a pending grand jury investigation, all of which have beencomplied with. We have denied any wrongdoing in this matter by us or any of ouremployees. On September 26, 2006, we received a letter from the U.S.Department of Justice stating that it may seek an indictment against ourGeneral Maritime Management LLC subsidiary in connection with itsinvestigation. Since then, there have been no further communications from theU.S. Department of Justice or any other developments with respect to thismatter. Currently, no charges have been made and no fines or penalties havebeen levied against us.

 

This matter been reported to our protection and indemnity insuranceunderwriters. Through December 31, 2008, we have paid $464,170 of legalfees incurred by such underwriters and has delivered to such underwriters aletter of credit in the amount of $1 million for additional costs that may beincurred in connection with this matter. These amounts are subject toreimbursement by the underwriters to the extent that the proceedings result inan outcome covered by insurance.

 

On or about August 29, 2007, an oil sheen was discovered byshipboard personnel of the *Genmar Progress*in Guayanilla Bay, Puerto Rico in the vicinity of the vessel. The vessel crewtook prompt action pursuant to the vessel response plan. Our subsidiary whichoperates the vessel promptly reported this incident to the U.S. Coast Guard andhas subsequently accepted responsibility for an accidental discharge of bunkerfuel from the vessel. We understand the federal and Puerto Rico authorities areconducting civil investigations into an oil pollution incident which occurredduring this time period on the southwest coast of Puerto Rico includingGuayanilla Bay. The extent to which oil discharged from the *Genmar Progress* is responsible for thisincident is currently the subject of investigation. The 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, we received a demand from the U.S. NationalPollution Fund for $5.8 million for the U.S. Coast Guard’s response costs andcertain costs of the Departamento de Recursos Naturales y Ambientales of PuertoRico in connection with the alleged damage to the environment caused by thespill. We are reviewing the demand and have requested additional informationfrom the U.S. National Pollution Fund relating to the demand. Currently, nocharges have been made and no other fines or penalties have been levied againstus.

 

This matter, including the demand from the U.S. National PollutionFund, has been reported to our protection and indemnity insurance underwriters,and we believe that any such liabilities will be covered by its insurance, lessa deductible. We have not accrued reserves for this incident other than thedeductible because the amount of any additional costs that may be incurred byus is not estimable at this time.

 

We have been cooperating in these investigations and has posted asurety bond to cover potential fines or penalties that may be imposed inconnection with the matter.

 

On January 19, 2009, an oil sheen was discovered about the *Genmar Progress* by the vessel’s personnel while the vesselwas receiving cargo and conducting ballast discharge operations in theGalveston lighterage area off the coast of Texas. The vessel crew took promptaction pursuant to the vessel response plan, and our subsidiary which operatesthe vessel promptly reported the incident to the U.S. Coast Guard. The vesselproceeded to anchor offshore pursuant to U. S. Coast Guard directive, where itwas inspected by a Class Surveyor as required by the U.S. Coast

 

42

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Guard. The U.S. Coast Guard did not board the vessel on scene, butsubsequently U. S. Coast Guard personnel boarded the vessel at Lake Charles,Louisiana on January 29 and 30, 2009. Repairs to the vessel were performedbased on the recommendation of the Class Surveyor, and no clean up by uswas required. Currently, no notice of any assessment, claim, charge orpenalties has been served by any authorities against us by reason of theincident.

 

On November 25, 2008, a jury in theSouthern District of Texas found General Maritime Management (Portugal) L.D.A.,a subsidiary of the Company (“GMM Portugal”), and two vessel officers of the *Genmar Defiance* guilty of violating the Act to PreventPollution from Ships and 18 USC 1001. The conviction resulted from chargesbased on alleged incidents occurring on board the *GenmarDefiance* arising from potential failures by shipboard staff toproperly record discharges of bilge waste during the period of November 24,2007 through November 26, 2007. The Company has denied any wrongdoing inthis matter by the Company or any of its employees. The continuation of thesentencing hearing is scheduled for March 13, 2009.

 

We have accrued $350,000 and posted a bond for potential fines orpenalties which may be sought in connection with this matter. We have alsowritten off approximately $3.3 million of insurance claims related to thismatter.

 

From time to time in the future, we may be subject to legal proceedingsand claims in the ordinary course of business, principally personal injury andproperty casualty claims. Those claims, even if lacking merit, could result inthe expenditure by us of significant financial and managerial resources.

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

** **

On December 16, 2008, special meetings of the securityholders ofGeneral Maritime Subsidiary and of Arlington were held and the ArlingtonCombination was approved. Of the total votes cast by shareholders of GeneralMaritime Subsidiary, 21,916,026 voted for the Arlington Combination, 112,549voted against the Arlington Combination, and 53,876 abstained. Of the totalvotes cast by shareholders of Arlington, 9,860,327 voted for the ArlingtonCombination, 1,177,894 voted against the Arlington Combination and 38,865abstained. There were no other matters submitted to a vote of thesecurityholders of the Company during the fourth quarter of fiscal year 2008.

 

43

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**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, 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 |   |

 
| **FISCAL  YEAR ENDED DECEMBER 31, 2007** | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|------------------------------------------|------------|----------|------------|---------|------------|
| 1st Quarter                              |       | $        | 33.83      |    | $          | 20.89 |   |
| 2nd Quarter                              |       | $        | 25.24      |    | $          | 19.70 |   |
| 3rd Quarter                              |       | $        | 22.22      |    | $          | 16.60 |   |
| 4th Quarter                              |       | $        | 21.54      |    | $          | 16.86 |   |

 

As of February 25, 2009, there were approximately 134 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 ArlingtonCombination.

 

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 intend to declaredividends in April, July, October and February of each year.

 

During the year ended December 31, 2008, General MaritimeSubsidiary repurchased 953,142 shares of its common stock for $16.4 million(average 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.

 

44

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**ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA**

** **

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,** | ** **  |
|-------------------------------------------------------------------|------------|----------------------------------|-------------|
| ** **                                                        | ** ** | **2008**                         | ** **  | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| **INCOME  STATEMENT DATA**                                        | ** ** | ** **                       | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| (Dollars in  thousands, except per share data)                    |       |                             |        |   |   |   |   |   |   |   |   |
| Voyage revenues                                                   |       | $                                | 326,068     |   | $ | 255,015 |   | $ | 325,984 |   | $ | 567,901 |   | $ | 701,291 |   |
| Voyage expenses                                                   |       | 54,404                           |        | 38,069 |   | 80,400 |   | 137,203 |   | 117,955 |   |
| Direct vessel  operating expenses                                 |       | 63,556                           |        | 48,213 |   | 47,472 |   | 86,681 |   | 96,818 |   |
| Other expense                                                     |       | —                           |        | — |   | 2,430 |   | — |   | — |   |
| General and  administrative expenses                              |       | 80,285                           |        | 46,920 |   | 44,787 |   | 43,989 |   | 31,420 |   |
| Loss (gain) on  sale of vessels and equipment                     |       | 804                              |        | 417 |   | (46,022 | ) | (91,235 | ) | (6,570 | ) |
| Depreciation and  amortization                                    |       | 58,037                           |        | 49,671 |   | 42,395 |   | 97,320 |   | 100,806 |   |
| Operating income                                                  |       | 68,982                           |        | 71,725 |   | 154,522 |   | 293,943 |   | 360,862 |   |
| Net interest (income)  expense                                    |       | 28,289                           |        | 23,059 |   | (1,455 | ) | 28,918 |   | 37,852 |   |
| Other (income)  expense                                           |       | 10,886                           |        | 4,127 |   | (854 | ) | 52,668 |   | 7,901 |   |
| Net income  (loss)                                                |       | $                                | 29,807      |   | $ | 44,539 |   | $ | 156,831 |   | $ | 212,357 |   | $ | 315,109 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| Earnings (loss)  per common share:                                |       |                             |        |   |   |   |   |   |   |   |   |
| Basic                                                             |       | $                                | 0.76        |   | $ | 1.09 |   | $ | 3.72 |   | $ | 4.26 |   | $ | 6.35 |   |
| Diluted                                                           |       | $                                | 0.73        |   | $ | 1.06 |   | $ | 3.63 |   | $ | 4.18 |   | $ | 6.22 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| Dividends  declared per common share                              |       | $                                | 1.49        |   | $ | 12.78 |   | $ | 3.58 |   | $ | 2.13 |   | $ | — |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| Weighted average  basic shares outstanding, thousands:            |       |                             |        |   |   |   |   |   |   |   |   |
| Basic                                                             |       | 39,463                           |        | 40,740 |   | 42,172 |   | 49,800 |   | 49,646 |   |
| Diluted                                                           |       | 40,562                           |        | 41,825 |   | 43,171 |   | 50,751 |   | 50,671 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| **BALANCE  SHEET DATA, at end of period**                         | ** ** | ** **                       | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| (Dollars in  thousands)                                           |       |                             |        |   |   |   |   |   |   |   |   |
| Cash                                                              |       | $                                | 104,146     |   | $ | 44,526 |   | $ | 107,460 |   | $ | 96,976 |   | $ | 46,921 |   |
| Current assets,  including cash                                   |       | 141,703                          |        | 82,494 |   | 137,865 |   | 471,324 |   | 152,145 |   |
| Total assets                                                      |       | 1,577,225                        |        | 835,035 |   | 843,690 |   | 1,146,126 |   | 1,427,261 |   |
| Current  liabilities, including current portion of long-term debt |       | 88,392                           |        | 35,502 |   | 27,147 |   | 32,906 |   | 84,120 |   |
| Current portion  of long-term debt                                |       | —                           |        | — |   | — |   | — |   | 40,000 |   |
| Total long-term  debt, including current portion                  |       | 990,500                          |        | 565,000 |   | 50,000 |   | 135,020 |   | 486,597 |   |
| Shareholders’  equity                                        |       | 455,799                          |        | 228,657 |   | 763,913 |   | 976,125 |   | 890,426 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| **OTHER  FINANCIAL DATA**                                         | ** ** | ** **                       | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| (Dollars in  thousands)                                           |       |                             |        |   |   |   |   |   |   |   |   |
| Net cash  provided by operating activities                        |       | 114,415                          |        | $ | 95,833 |   | $ | 189,717 |   | $ | 249,614 |   | $ | 363,238 |   |
| Net cash  provided (used) by investing activities                 |       | (171,082                         | )           | (84,516 | ) | 285,264 |   | 318,169 |   | (168,477 | ) |
| Net cash (used)  provided by financing activities                 |       | 115,476                          |        | (74,251 | ) | (464,497 | ) | (517,728 | ) | (186,745 | ) |
| Capital  expenditures                                             |       |                             |        |   |   |   |   |   |   |   |   |
| Vessel sales  (purchases), gross including deposits               |       | (173,447                         | )           | (80,061 | ) | 290,299 |   | 324,087 |   | (165,796 | ) |
| Drydocking or  capitalized survey or improvement costs            |       | (9,787                           | )           | (11,815 | ) | (11,929 | ) | (38,039 | ) | (17,050 | ) |
| Weighted average  long-term debt, including current portion       |       | 653,154                          |        | 414,137 |   | 93,085 |   | 410,794 |   | 650,196 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| **OTHER  DATA**                                                   | ** ** | ** **                       | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| (Dollars in  thousands)                                           |       |                             |        |   |   |   |   |   |   |   |   |
| EBITDA (1)                                                        |       | 116,133                          |        | $ | 117,269 |   | $ | 197,771 |   | $ | 338,595 |   | $ | 453,767 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| **FLEET  DATA**                                                   | ** ** | ** **                       | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total number of  vessels at end of period                         |       | 31.0                             |        | 20.0 |   | 18.0 |   | 30.0 |   | 43.0 |   |
| Average number  of vessels (2)                                    |       | 21.5                             |        | 19.3 |   | 20.6 |   | 41.9 |   | 44.0 |   |
| Total voyage  days for fleet (3)                                  |       | 7,568                            |        | 6,599 |   | 7,121 |   | 14,073 |   | 15,482 |   |
| Total time  charter days for fleet                                |       | 5,665                            |        | 4,641 |   | 2,300 |   | 3,983 |   | 4,371 |   |
| Total spot  market days for fleet                                 |       | 1,903                            |        | 1,958 |   | 4,821 |   | 10,090 |   | 11,111 |   |
| Total calendar  days for fleet (4)                                |       | 7,881                            |        | 7,045 |   | 7,534 |   | 15,311 |   | 16,123 |   |
| Fleet  utilization (5)                                            |       | 96.0                             | %           | 93.7 | % | 94.5 | % | 91.9 | % | 96.0 | % |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| **AVERAGE  DAILY RESULTS**                                        | ** ** | ** **                       | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Time charter  equivalent (6)                                      |       | $                                | 35,896      |   | $ | 32,876 |   | $ | 34,487 |   | $ | 30,605 |   | $ | 37,676 |   |
| Direct vessel  operating expenses (7)                             |       | 8,064                            |        | 6,844 |   | 6,301 |   | 5,661 |   | 6,005 |   |
| General and  administrative expenses (8)                          |       | 10,187                           |        | 6,660 |   | 5,945 |   | 2,873 |   | 1,949 |   |
| Total vessel  operating expenses (9)                              |       | 18,252                           |        | 13,504 |   | 12,246 |   | 8,534 |   | 7,954 |   |
|                                                              |       |                             |        |   |   |   |   |   |   |   |   |
| **EBITDA  Reconciliation**                                        |       |                             |        |   |   |   |   |   |   |   |   |
| (Dollars in  thousands)                                           |       |                             |        |   |   |   |   |   |   |   |   |
| **Net  Income**                                                   | ** ** | **$**                            | **29,807**  | ** ** | **$** | **44,539** | ** ** | **$** | **156,831** | ** ** | **$** | **212,357** | ** ** | **$** | **315,109** |   |
| + Net interest expense                                            |       | 28,289                           |        | 23,059 |   | (1,455 | ) | 28,918 |   | 37,852 |   |
| + Depreciation and amortization                                   |       | 58,037                           |        | 49,671 |   | 42,395 |   | 97,320 |   | 100,806 |   |
| **EBITDA**                                                        | ** ** | **$**                            | **116,133** | ** ** | **$** | **117,269** | ** ** | **$** | **197,771** | ** ** | **$** | **338,595** | ** ** | **$** | **453,767** |   |

 

45

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(1)                                  EBITDA represents net income plus net interest expenseand depreciation and amortization. EBITDA is included because it is used bymanagement and certain investors as a measure of operating performance. EBITDAis used by analysts in the shipping industry as a common performance measure tocompare results across peers. Management of the Company uses EBITDA as aperformance measure in consolidating quarterly internal financial statementsand is presented for review at our board meetings. The Company believes thatEBITDA is useful to investors as the shipping industry is capital intensivewhich often brings significant cost of financing. EBITDA is not an itemrecognized by accounting principles generally accepted in the United States ofAmerica (GAAP), and should not be considered as an alternative to net income,operating income or any other indicator of a company’s operating performancerequired by GAAP. The definition of EBITDA used here may not be comparable tothat 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.

 

(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. Net voyage revenues are voyage revenues minus voyage expenses.Voyage expenses primarily consist of port, canal and fuel costs that are uniqueto a particular voyage, which would otherwise be paid by the charterer under atime charter 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. DailyTVOE is the sum of daily direct vessel operating expenses, or DVOE, and dailygeneral and administrative expenses.

 

46

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**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 31,2008 and 2007 and our results of operations comparing the years ended December 31,2008 and 2007 and the years ended December 31, 2007 and 2006. 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. As of December 31, 2008 our fleet consisted of 31vessels (12 Aframax vessels, 11 Suezmax vessels, two VLCCs, two Panamax vesselsand four product carriers) with a total cargo carrying capacity of 3.9 milliondeadweight tons.

 

General Maritime Subsidiary is the predecessor of the Company forpurposes of U.S. securities regulations governing financial statement filing. TheArlington Combination is accounted for as an acquisition by General MaritimeSubsidiary of Arlington. Therefore, the disclosures throughout this AnnualReport on Form 10-K and the accompanying Consolidated Financial Statements,unless otherwise noted, reflect the results of operations of General MaritimeSubsidiary for the years ended December 31, 2007 and 2006 and thefinancial position of General Maritime Subsidiary as of December 31, 2007.The Company had separate operations for the period beginning December 16,2008, the effective date of the Arlington Combination, and disclosures andreferences to amounts for periods after that date relate to the Company unlessotherwise noted. Arlington’s results have been included in the disclosuresthroughout this Annual Report on Form 10-K and the accompanyingConsolidated Statements of Operations, unless otherwise noted, from theeffective date of acquisition and thereafter (see “Arlington Transaction” inNote 2 to the Consolidated Financial 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 ArlingtonCombination.

 

**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 timecharters if we can obtain contract terms that satisfy our criteria.

 

47

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**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 therevenues generated 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 timeperiod.  We also generate demurragerevenue, which represents fees charged to charterers associated with our spotmarket voyages when the charterer exceeds the agreed upon time required to loador discharge a cargo.  We calculate dailydirect vessel operating expenses and daily general and administrative expensesfor the relevant period by dividing the total expenses by the aggregate numberof calendar 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, 2008, 2007 and 2006 are setforth in the table below.

 

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

** **
| ** **                                    | ** ** | **YEAR ENDED DECEMBER 31,** | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|
| ** **                                    | ** ** | **2008**                    | ** ** | **2007** | ** ** | **2006** | ** ** |
| **INCOME  STATEMENT DATA**                    | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net voyage  revenues **(1)**                  |       | 100                         | %          | 100.0 | % | 100.0 | % |
| Direct vessel  expenses                       |       | 23.4                        | %          | 22.2 | % | 19.3 | % |
| Other expense                                 |       | 0.0                         | %          | 0.0 | % | 1.0 | % |
| General and  administrative expenses          |       | 29.6                        | %          | 21.6 | % | 18.2 | % |
| Depreciation and  amortization                |       | 21.4                        | %          | 22.9 | % | 17.3 | % |
| Loss (gain) on  sale of vessels and equipment |       | 0.3                         | %          | 0.2 | % | -18.7 | % |
| Operating income                              |       | 25.3                        | %          | 33.1 | % | 62.9 | % |
| Net interest  expense (income)                |       | 10.4                        | %          | 10.6 | % | -0.6 | % |
| Other expense  (income)                       |       | 4.0                         | %          | 1.9 | % | -0.3 | % |
| Net income                                    |       | 10.9                        | %          | 20.6 | % | 63.8 | % |

----

**(1)****           ****INCOME STATEMENT DATA**
| **(Dollars in thousands, except share data)** | ** ** | **YEAR ENDED DECEMBER 31,** | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|
| ** **                                    | ** ** | **2008**                    | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Voyage revenues                               |       | $                           | 326,068    |   | $ | 255,015 |   | $ | 325,984 |   |
| Voyage expenses                               |       | $                           | (54,404    | ) | $ | (38,069 | ) | $ | (80,400 | ) |
| Net voyage  revenues                          |       | $                           | 271,664    |   | $ | 216,946 |   | $ | 245,584 |   |

** **

**48**

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**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 fourproduct carriers 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 revenues are expectedto increase during 2009 as compared to 2008 as a result of the vessels acquiredin late 2008 being in our fleet for all of 2009.

 

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. Substantiallyall of our voyage expenses relate to spot charter voyages, under which thevessel owner is responsible for voyage expenses such as fuel and port costs.During the year ended December 31, 2008, the number of days our vesselsoperated under spot charters decreased by 2.8% to 1,903 days (or 1,549 days forour Aframax vessels and 354 days for our Suezmax vessels) from 1,958 days(1,386 days for our Aframax vessels and 572 days for our Suezmax vessels)during the prior year.  Voyage expensesare expected to increase during 2009 as compared to 2008 due to increases in the number of days ourvessels are expected to be on spot charter during 2009 as compared to 2008.

 

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 product carrier) 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.

 

49

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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) Acquired on December 16, 2008.

 

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

 

50

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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.  TheCompany incurred higher crewing costs during the year ended December 31,2008 as compared to the prior year period which reflects higher crew wages in2008 due in part to exchange rates on a substantially higher portion of crewwages paid in Euros during the 2008 period as compared to the prior yearperiod, as well as additional wage increases given to crews commencing duringthe second half of 2008.  This increaseis also associated 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 Company’s 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, the Company recognized an expense of $1.3 million duringthe 2008 period relating to a general average claim associated with a Suezmax vessel.  These factors contributed to a rise in dailydirect vessel expenses per vessel which increased by $1,220, or 17.8%, to$8,064 ($7,973 Aframax, $8,178 Suezmax, $9,078 VLCC, $6,875 Panamax, $6,298product) for the year ended December 31, 2008 compared to $6,844 ($6,965Aframax, $6,713 Suezmax) for the prior year. Also contributing to the overall increase in direct vessel expense is anincrease in the average size of our fleet which increased 11.4% to 21.5 vessels(10.3 Aframax, 10.9 Suezmax, 0.1 VLCC, 0.1 Panamax, 0.1 product) for the yearended December 31, 2008 compared to 19.3 vessels (10.0 Aframax, 9.3Suezmax) for the prior year.

 

We anticipate that direct vessel expenses willincrease to $88.9 million during 2009 based on daily budgeted direct vesselexpenses on our 11 Suezmax vessels, 12 Aframax vessels, two VLCCs, two Panamaxvessels and four product carriers of $8,241, $8,140, $8,632, $6,666 and $6,187,respectively.  The budgets for theAframax and Suezmax vessels are based on 2008 actual results adjusted forcertain 2008 events not expected to recur or anticipated 2009 events which didnot occur in 2008.  Increases in dailybudgets from 2008 actual results are primarily attributed to expected increasesin crew costs and higher costs of lubricating oils.  Budgets for the VLCCs, Panamax vessels andproduct carriers are based on contractual obligations with Northern Marine.

 

GENERAL AND ADMINISTRATIVE EXPENSES—General andadministrative expenses increased by $33.4 million, or 71.2%, to $80.3 millionfor the year ended December 31, 2008 compared to $46.9 million for theprior year. Significant factors contributing to this increase for the yearended December 31, 2008 compared to the prior year are:

 

(a) A $23.2 million increase in compensation accruals inconnection with our executive transition plan incurred in 2008, including $22million to Peter C.Georgiopoulos in connection with the termination of hisemployment arrangments with the Company.

 

(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 GenmarDefiance.

 

(d) $2.0 million of financial advisory fees during the year ended December 31,2007 associated with financial advisory services received pursuant to ourdetermination 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.

 

For 2009, we have budgeted general and administrative expenses to beapproximately $38.6 million.  This budgetreflects 2009 reductions in payroll attributable to lower head count in 2009relating to severance costs incurred during 2008 and reduction in expensesassociated with the corporate aircraft, the lease for which will terminate in February 2009.

 

51

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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 eight vesselswe acquired in the Arlington Combination 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.

 

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.

 

We expect our long-term debt during 2009 to approximate the debt levelat December 31, 2008.  Because thisamount is greater than our weighted average debt for the year ended December 31,2008, we expect our interest expense to be higher during 2009 as compared to2008.

 

OTHER INCOME (EXPENSE)— Other expense for the year ended December 31,2008 was $10.9 million which 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.

 

**YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE YEARENDED DECEMBER 31, 2006**

** **

VOYAGE REVENUES- Voyage revenues decreased by $71.0 million, or 21.8%,to $255.0 million for the year ended December 31, 2007 compared to $326.0million for the prior year.  Thisdecrease reflects a 7.3% decrease in vessel operating days, reflecting in parta decreased utilization rate for our vessels, as well as a decrease in theproportion of our vessel operating days relating to spot charters; spot charterrates are generally higher than time charter rates to allow the vessel owner torecoup voyage expenses which are paid for by the charterer under time charters.

 

VOYAGE EXPENSES- Voyage expenses decreased $42.3 million, or 52.7%, to$38.1 million for the year ended December 31, 2007 compared to $80.4million for the prior year.  Thisdecrease in voyage expenses is primarily due to a decrease in the number ofdays our vessels operated under spot charters. Substantially all of our voyageexpenses relate to spot charter voyages, under which the vessel owner isresponsible for voyage expenses such as

 

52

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fuel and port costs.  During theyear ended December 31, 2007, the number of days our vessels operatedunder spot charters decreased by 2,863, or 59.4%, to 1,958 days (1,386 daysAframax, 572 days Suezmax) from 4,821 days (2,467 days Aframax, 2,354 days Suezmax)during the prior year.  Although portcosts, which can vary depending on the geographic regions in which the vesselsoperate and their trading patterns, decreased by 51% during 2007 to $9.9million from $20.2 million during the prior year, port costs per spot charterday increased by approximately 20% associated with the increase in 2007 in theproportion of such spot days associated with Aframax tankers.  Aframax spot market voyages are generally ofshorter durations than Suezmax spot market voyages, resulting in more portcalls during the year and consequently higher port costs.  Fuel costs decreased by approximately 59%during 2007 to $23.9 million from $58.9 million during the prior year.  Although fuel prices were higher in 2007 ascompared to 2006, fuel cost per spot days remained relatively unchanged.  This is due to the increase in 2007 in theproportion of spot market voyage days associated with Aframax tankers, whichconsume significantly less fuel than do Suezmax vessels.

 

NET VOYAGE REVENUES- Net voyage revenues, which are voyage revenuesminus voyage expenses, decreased by $28.7 million, or 11.7%, to $216.9 millionfor the year ended December 31, 2007 compared to $245.6 million for theprior year.  Of this total decrease,approximately $18 million is attributable to the decrease in the average sizeof our fleet which decreased 6.3% to 19.3 vessels (10.0 Aframax, 9.3 Suezmax)for the year ended December 31, 2007 compared to 20.6 vessels (12.7Aframax, 7.9 Suezmax) for the prior year. Approximately $11 million of the decrease in net voyage revenue isassociated with weaker overall daily rates for Suezmax and Aframax vesselsduring the year ended December 31, 2007 compared to the prior year.  Our average TCE rates decreased 4.7% to$32,876 during the year ended December 31, 2007 compared to $34,487 duringthe year ended December 31, 2006.

 

53

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The following is additional data pertaining to net voyage revenues:

 
| ** **                                                 | ** ** | **Year ended December 31,** | ** ** | **Increase** | ** ** | ** **     | ** ** |
|------------------------------------------------------------|------------|--------------------------------------------|------------|--------------|------------|----------------|------------|
| ** **                                                 | ** ** | **2007**                                   | ** ** | **2006**     | ** ** | **(Decrease)** | ** ** | **% Change** | ** ** |
| ** **                                                 | ** ** | ** **                                 | ** ** | ** **   | ** ** | ** **     | ** ** | ** ** | ** ** |
| **Net voyage revenue (in thousands):** |       |                                       |       |         |       |           |       |   |   |
| Time charter:                                              |       |                                       |       |         |       |           |       |   |   |
| Aframax                                                    |       | $                                          | 55,496     |         | $          | 46,327         |       | $ | 9,169 |   | 19.8 | % |
| Suezmax                                                    |       | 102,023                                    |       | 13,929       |       | 88,094         |       | 632.5 | % |
| Total                                                      |       | 157,519                                    |       | 60,256       |       | 97,263         |       | 161.4 | % |
|                                                       |       |                                       |       |         |       |           |       |   |   |
| Spot charter:                                              |       |                                       |       |         |       |           |       |   |   |
| Aframax                                                    |       | 42,453                                     |       | 78,791       |       | (36,338        | )          | -46.1 | % |
| Suezmax                                                    |       | 16,974                                     |       | 106,537      |       | (89,563        | )          | -84.1 | % |
| Total                                                      |       | 59,427                                     |       | 185,328      |       | (125,901       | )          | -67.9 | % |
|                                                       |       |                                       |       |         |       |           |       |   |   |
| TOTAL NET VOYAGE  REVENUE                                  |       | $                                          | 216,946    |         | $          | 245,584        |       | $ | (28,638 | ) | -11.7 | % |
|                                                       |       |                                       |       |         |       |           |       |   |   |
| **Vessel  operating days:**                                |       |                                       |       |         |       |           |       |   |   |
| Time charter:                                              |       |                                       |       |         |       |           |       |   |   |
| Aframax                                                    |       | 1,894                                      |       | 1,935        |       | (41            | )          | -2.1 | % |
| Suezmax                                                    |       | 2,747                                      |       | 365          |       | 2,382          |       | 652.6 | % |
| Total                                                      |       | 4,641                                      |       | 2,300        |       | 2,341          |       | 101.8 | % |
|                                                       |       |                                       |       |         |       |           |       |   |   |
| Spot charter:                                              |       |                                       |       |         |       |           |       |   |   |
| Aframax                                                    |       | 1,386                                      |       | 2,467        |       | (1,081         | )          | -43.8 | % |
| Suezmax                                                    |       | 572                                        |       | 2,354        |       | (1,782         | )          | -75.7 | % |
| Total                                                      |       | 1,958                                      |       | 4,821        |       | (2,863         | )          | -59.4 | % |
| TOTAL VESSEL  OPERATING DAYS                               |       | 6,599                                      |       | 7,121        |       | (522           | )          | -7.3 | % |
| AVERAGE NUMBER  OF VESSELS                                 |       | 19.3                                       |       | 20.6         |       | (1.3           | )          | -6.3 | % |
|                                                       |       |                                       |       |         |       |           |       |   |   |
| **Time  Charter Equivalent (TCE):**                        |       |                                       |       |         |       |           |       |   |   |
| Time charter:                                              |       |                                       |       |         |       |           |       |   |   |
| Aframax                                                    |       | $                                          | 29,301     |         | $          | 23,941         |       | $ | 5,359 |   | 22.4 | % |
| Suezmax                                                    |       | $                                          | 37,140     |         | $          | 38,163         |       | $ | (1,023 | ) | -2.7 | % |
| Combined                                                   |       | $                                          | 33,941     |         | $          | 26,198         |       | $ | 7,742 |   | 29.6 | % |
|                                                       |       |                                       |       |         |       |           |       |   |   |
| Spot charter:                                              |       |                                       |       |         |       |           |       |   |   |
| Aframax                                                    |       | $                                          | 30,630     |         | $          | 31,938         |       | $ | (1,308 | ) | -4.1 | % |
| Suezmax                                                    |       | $                                          | 29,674     |         | $          | 45,258         |       | $ | (15,584 | ) | -34.4 | % |
| Combined                                                   |       | $                                          | 30,351     |         | $          | 38,442         |       | $ | (8,091 | ) | -21.0 | % |
| TOTAL TCE                                                  |       | $                                          | 32,876     |         | $          | 34,487         |       | $ | (1,611 | ) | -4.7 | % |

 

As of December 31, 2007, 12 of our vessels are on time chartersexpiring between August 2009 and August 2010.

 

DIRECT VESSEL EXPENSES- Direct vessel expenses, which include crewcosts, provisions, deck and engine stores, lubricating oil, insurance,maintenance and repairs increased by $0.7 million, or 1.6%, to $48.2 millionfor the year ended December 31, 2007 compared to $47.5 million for the prioryear.  This increase is primarily due tohigher daily direct vessel expenses per vessel which increased by $543, or8.6%, to $6,844 ($6,965 Aframax, $6,713 Suezmax) for the year ended December 31,2007 compared to $6,301 ($6,051 Aframax, $6,705 Suezmax) for the prioryear.  This increase is partially offsetby a 6.3% decrease in the size of our fleet during 2007 as compared to2006.  This increase in daily cost duringthe year ended December 31, 2007 as compared to the prior year isprimarily attributable to certain expenses reflecting expensing of insuranceclaim deductibles, increased insurance premiums associated with the increasedvalue of our fleet, higher crewing costs associated with bringing the technicalmanagement of two of our Aframax vessels in-house, higher maintenance andrepairs associated with three 

 

54

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Aframax tankers, and higher costs of lubricating oils associated withhigher pricing in the areas where our vessels under time charters trade duringthe year ended December 31, 2007 as compared to the prior year.

 

OTHER EXPENSE—Other expense for the year ended December 31,2006 is comprised of a $2.4 million settlement of a claim by a subsidiary ofthe Exxon Mobil Corporation arising from the February 4, 2005 collision ofthe *Genmar Kestrel*.

 

GENERAL AND ADMINISTRATIVE EXPENSES—General andadministrative expenses increased by $2.1 million, or 4.8%, to $46.9 millionfor the year ended December 31, 2007 compared to $44.8 million for theprior year. Significant factors contributing to this increase for the yearended December 31, 2007 compared to the prior year are:

 

(a) A $2.0 million increase in financial advisoryfees during the year ended December 31, 2007 compared to the prior yearassociated with financial advisory services received pursuant to ourdetermination to pay a special dividend.

 

(b) A $0.9 million increase in severance costs for the year ended December 31,2007 compared to the prior year.

 

(c) A $0.9 million increase in restricted stock amortizationduring the year ended December 31, 2007 as compared to the prior yearassociated with amortization of restricted shares granted during 2007 as wellas a full year amortization on restricted stock awards granted in December 2006,partially offset by lower restricted stock amortization associated withrestricted shares granted prior to December 2006.

 

(d) A $1.1 million net decrease in costs associated with operatingour foreign offices in Greece and Portugal during the year ended December 31,2007 compared to the prior year period. This net decrease includes a $2.7 million decrease in operating ouroffice in Greece during the year ended December 31, 2007 as compared tothe prior year.  This office ceasedvessel operations during May 2006, and during the year ended December 31,2006, we incurred the cost of operating this office as well as severance costsrelating to the closing of this office, compared to significantly lower costsincurred during the year ended December 31, 2007.  This decrease is partially offset by a $1.6million increase in costs of operating our office in Portugal during the yearended December 31, 2007 as compared to the prior year, associated withincreased staffing levels and infrastructure in that office.

 

(e) A $0.4 million decrease during the year ended December 31,2007 as compared to the prior year relating to the costs of operating ourforeign office in London associated with that office ceasing commercialoperations activity during March 2007.

 

General and administrative expenses as a percentage of net voyagerevenues increased to 21.6% for the year ended December 31, 2007 from18.2% for the prior year. Daily general and administrative expenses per vesselincreased $715, or 12.0%, to $6,660 for the year ended December 31, 2007compared to $5,945 for the prior year.

 

DEPRECIATION AND AMORTIZATION—Depreciation and amortization, whichinclude depreciation of vessels as well as amortization of drydocking andspecial surveys, increased by $7.3 million, or 17.2%, to $49.7 million for theyear ended December 31, 2007 compared to $42.4 million for the prioryear.  Vessel depreciation increased by$3.4 million to $37.3 million during year ended December 31, 2007 comparedto $33.9 million during the prior year period. This increase is due to more depreciation during 2007 relating to theadditions to our fleet of the*Harriet G*in March 2006, the*Kara G* inJanuary 2007 and the*George T*in August 2007.

 

Amortization of drydocking increased by $4.0 million, or 65.6%, to$10.1 million for the year ended December 31, 2007 compared to $6.1million for the prior year.  Drydocks aretypically amortized over periods from 30 months to 60 months.  This increase reflects amortization during2007 of a portion of the $11.8 million of drydock costs capitalized during theyear ended December 31, 2007 and amortization for the full year of the$11.9 million of drydock costs capitalized during the year ended December 31,2006, as well as acceleration of amortization of two drydocks that had been rescheduledto earlier dates.

 

55

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LOSS (GAIN) ONSALE OF VESSELS AND EQUIPMENT—During the year ended December 31, 2007, weincurred a $0.4 million loss associated with the disposal of certain vesselequipment.  During 2006, we sold 13vessels for aggregate net proceeds of $340.9 million, for a net gain on sale ofvessels of $46.0 million.

 

INTERESTINCOME—Interest income decreased by $3.1 million, or 55.8%, to $2.5 millionduring the year ended December 31, 2007 compared to $5.6 million duringthe prior year.  This decrease is theresult of lower average cash balances during 2007 compared to 2006.

 

INTERESTEXPENSE—Interest expense increased by $21.3 million, or  513%, to $25.5 million for the year ended December 31,2007 compared to $4.2 million for the prior year.  This increase is attributable to the increasein outstanding borrowings under our 2005 Credit Facility during 2007.  During the year ended December 31, 2007,our weighted average outstanding debt increased by 345% to $414.1 millioncompared to $93.1 million during the prior year.

 

During March 2007we paid a $15.00 per share dividend on our common stock through borrowingsunder our 2005 Credit Facility which increased our outstanding borrowings underour 2005 Credit Facility to $565 million as of December 30, 2007 comparedto $50 million outstanding as of December 31, 2006.

 

OTHER INCOME(EXPENSE)— Other expense for the year ended December 31, 2007 was $4.1million of which the main components were an aggregate realized loss on ourfreight derivatives of $2.0 million and an unrealized loss on our freightderivatives of $2.3 million.  Otherincome for the year ended December 31, 2006 was $0.9 million and consistedprimarily of a $0.6 million gain on Euros held by the Company and an unrealizedgain on our freight derivative of $2.2 million offset by a realized loss on ourfreight derivative of $2.1 million.

 

NET INCOME—Netincome was $44.5 million for the year ended December 31, 2007 compared tonet income of $156.8 million for the prior year.

 

**Effects of Inflation**

** **

The Company doesnot consider inflation to be a significant risk to the cost of doing businessin the current or foreseeable future. Inflation has a moderate impact onoperating expenses, drydocking expenses and corporate overhead.

 

**LIQUIDITY AND CAPITAL RESOURCES**

** **

**Sources and Uses ofFunds; Cash Management**

** **

Since ourformation, our principal sources of funds have been equity financings, issuanceof long-term debt securities, operating cash flows, long-term bank borrowingsand opportunistic sales of our older vessels. Our principal use of funds has been capital expenditures to establishand grow our fleet, maintain the quality of our vessels, comply withinternational shipping standards and environmental laws and regulations, fundworking capital requirements and repayments on outstanding loanfacilities.  Beginning in 2005, GeneralMaritime Subsidiary and subsequently the Company also adopted policies to usefunds to pay dividends and, from time to time, to repurchase our common stock. Seebelow for descriptions of our Dividend Policy and our Share Repurchase Program.

 

Our practice hasbeen to acquire vessels or newbuilding contracts using a combination of fundsreceived from equity investors, bank debt secured by mortgages on our vesselsand shares of the common stock of our shipowning subsidiaries, and long-termdebt securities.  Because our payment ofdividends is expected to decrease our available cash, while we expect to useour operating cash flows and borrowings to fund acquisitions, if any, on ashort-term basis, we also intend to review debt and equity financingalternatives to fund such acquisitions. Our business is capital intensive and its future success will depend onour ability to maintain a high-quality fleet through the acquisition of newervessels and the selective sale of older vessels.  These acquisitions will be principallysubject to management’s expectation of future market conditions as well as ourability to acquire vessels on favorable terms.

 

As the Arlington Combination was structured as a stock-for-stockcombination, we funded the acquisition of Arlington through an issuance ofshares in exchange for the shares of the combined entities.

 

 

56

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We expect to relyon operating cash flows as well as long-term borrowings and future equityofferings to implement our growth plan, dividend policy, and sharerepurchases.  We believe that our currentcash balance as well as operating cash flows and available borrowings under ourcredit facilities will be sufficient to meet our liquidity needs for the nextyear.

 

Our operation ofocean-going vessels carries an inherent risk of catastrophic marine disastersand property losses caused by adverse severe weather conditions, mechanicalfailures, human error, war, terrorism and other circumstances or events.  In addition, the transportation of crude oilis subject to business interruptions due to political circumstances,hostilities among nations, labor strikes and boycotts.  Our current insurance coverage includes (1) protectionand indemnity insurance coverage for tort liability, which is provided bymutual protection and indemnity associations, (2) hull and machineryinsurance for actual or constructive loss from collision, fire, grounding andengine breakdown, (3) war risk insurance for confiscation, seizure,capture, vandalism, sabotage and other war-related risks and (4) loss ofhire insurance for loss of revenue for up to 90 days resulting from a vesselbeing off hire for all of our vessels.

 

**Dividend Policy**

** **

On February 21, 2007, General Maritime Subsidiary announcedthat its Board of Directors declared a special, one-time cash dividend of$11.19 per share.  The dividend was paidon March 23, 2007 to shareholders of record as of March 9, 2007.  General Maritime Subsidiary fundedsubstantially the entire amount of the special dividend payment through newborrowings under the 2005 Credit Facility. Inclusive of this special dividend, our history of dividend payments isas follows:

 
| **Quarter ended**   | ** ** | **Paid date**                | ** ** | **Per share amount** | ** ** | **Amount**    | ** ** |
|--------------------------|------------|-----------------------------------|------------|--------------------------------|------------|---------------|------------|
| ** **               | ** ** | ** **                        | ** ** | ** **                     | ** ** | **(million)** | ** ** |
| March 31,  2005     |       | June 13, 2005           |       | $                              | 1.32       |          | $          | 68.4 |   |
| June 30,  2005      |       | September 7, 2005            |       | $                              | 0.63       |          | $          | 32.5 |   |
| September 30,  2005 |       | December 13, 2005            |       | $                              | 0.19       |          | $          | 9.5 |   |
|                     |       | dividends declared and paid- 2005 |       | $                              | 2.13       |          |       |   |
|                     |       |                              |       |                           |       |          |       |
| December 31,  2005  |       | March 17, 2006               |       | $                              | 1.49       |          | $          | 68 |   |
| March 31,  2006     |       | June 5, 2006                 |       | $                              | 1.07       |          | $          | 47.7 |   |
| June 30,  2006      |       | September 8, 2006            |       | $                              | 0.49       |          | $          | 21.7 |   |
| September 30,  2006 |       | December 14, 2006            |       | $                              | 0.53       |          | $          | 23 |   |
|                     |       | dividends declared and paid- 2006 |       | $                              | 3.58       |          |       |   |
|                     |       |                              |       |                           |       |          |       |
| December 31,  2006  |       | March 23, 2007               |       | $                              | 0.46       |          | $          | 20.3 |   |
| December 31,  2006  |       | March 23, 2007               |       | $                              | 11.19      | **(1)**       | $          | 486.5 |   |
| March 31,  2007     |       | May 31, 2007                 |       | $                              | 0.37       |          | $          | 16.4 |   |
| June 30,  2007      |       | August 31, 2007              |       | $                              | 0.37       |          | $          | 16.4 |   |
| September 30,  2007 |       | November 30, 2007            |       | $                              | 0.37       |          | $          | 15.9 |   |
|                     |       | dividends declared and paid- 2007 |       | $                              | 12.78      |          |       |   |
|                     |       |                              |       |                           |       |          |       |
| December 31,  2007  |       | March 28, 2008               |       | $                              | 0.37       |          | $          | 15.6 |   |
| March 31,  2008     |       | May 30, 2008                 |       | $                              | 0.37       |          | $          | 15.7 |   |
| June 30,  2008      |       | August 1, 2008               |       | $                              | 0.37       |          | $          | 15.6 |   |
| September 30,  2008 |       | December 5, 2008             |       | $                              | 0.38       |          | $          | 15.6 |   |
|                     |       | dividends declared and paid- 2008 |       | $                              | 1.49       |          |       |   |

----

(1) Denotes a specialdividend.

 

 

57

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All share and pershare amounts 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 Combination.

 

General Maritime Subsidiary also announced on February 21,2007 that its Board of Directors changed its quarterly dividend policy byadopting 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 December 16, 2008, our Board of Directors adopted a quarterlydividend policy with a fixed target amount of $0.50 per share per quarter or$2.00 per share each year.  We intend to declare dividends in April,July, October and February of each year.

 

The declaration of dividends and their amount, if any, will dependupon the results of the Company and the determination of our Board ofDirectors.  Any dividends paid will besubject to the terms and conditions of our 2005 Credit Facility and applicableprovisions of Marshall Islands law.

 

**Share Repurchase Program**

** **

In October 2005and February 2006, General Maritime Subsidiary’s board of directors approvedrepurchases by GeneralMaritime Subsidiary of its common stock under a share repurchase programfor up to an aggregate total of $400 million, of which $107.1 million wasavailable as of December 16, 2008.  On December 16, 2008, the Company’sboard approved repurchases by the Company of its 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 theprogram.  Share repurchases will be madefrom time to time for cash in open market transactions at prevailing marketprices or in privately negotiated transactions. The timing and amount of purchases under the program will be determinedby management 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 the Company topurchase any specific number or amount of shares and may be suspended orreinstated at any time in the Company’s discretion and without notice.  Repurchases will be subject to the terms ofour 2005 Credit Facility, which are described in further detail below.

 

Through December 31,2008, the Company has acquired 11,830,609 shares of its common stock for $292.9million using borrowings under its 2005 Credit Facility and funds fromoperations.  All of these shares havebeen retired.

 
| **Period**                                   | ** ** | **Total Number of Shares Purchased** | ** ** | **Average Price Paid Per Share** | ** ** | **Total Dollar Amount as Part of Publicly Announced Plans or  Programs** | ** ** | **Maximum Dollar Amount that May Yet Be Purchased Under the Plans  or Programs** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|----------------------------------|------------|-------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------|------------|
| Jan. 1,  2008 – Jan. 31, 2008 |       | 953,142                              |       | $                                | 17.18      |                                                                          | $          | 16,379,244                                                                            |       | $ | 107,118,685 |   |
| Feb. 1,  2005 – Feb. 29, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Mar. 1,  2008 – Mar. 31, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Apr. 1,  2008 – Apr. 30, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| May 1, 2008  – May 31, 2008   |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Jun. 1, 2008  – Jun. 30, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Jul. 1,  2008 – Jul. 31, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Aug. 1,  2008 – Aug. 31, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Sep. 1,  2008 – Sep. 30, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Oct. 1,  2008 – Oct. 31, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Nov. 1,  2008 – Nov. 1, 2008  |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Dec. 1,  2008 – Dec. 31, 2008 |       | —                               |       | —                           |       | —                                                                        |       | 107,118,685                                                                           |       |
| Total                                        |       | 953,142                              |       | $                                | 17.18      |                                                                          | $          | 16,379,244                                                                            |       | $ | 107,118,685 |   |

 

 

58

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All share and pershare amounts 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 Combination.

 

Informationregarding securities authorized for issuance under equity compensation plansand a performance graph relating to our common stock is set forth in the 2009Proxy Statement and is incorporated by reference herein.

 

**Debt Financings**

** **

**2005 Credit Facility**

** **

On October 26,2005, General Maritime Subsidiary entered into a revolving credit facility (the“2005 Credit Facility”) with a syndicate of commercial lenders.  On October 20, 2008, pursuant to anamendment and restatement of the credit facility entered into an order to giveeffect to the Arlington Combination, the Company became a party to the creditfacility.  The 2005 Credit Facility,which has been amended and restated on various dates through February 24,2009, provides a total commitment of $900 million.  As of December 31, 2008 and 2007, $761 million and $565million, respectively, of the facility were outstanding.

 

As of December 31, 2008, the Company is in compliance withall of its financial covenants under its 2005 Credit Facility.

 

Under the 2005Credit Facility, as amended and restated, the Company is permitted to (1) payquarterly cash dividends with respect to fiscal quarters on or after March 31,2007, limited to $0.37 per share and (2) pay additional dividends, includingstock buy-backs, in an aggregate amount not to exceed $150 million plus 50% ofcumulative net excess cash flow after January 1, 2007.  In addition, the amendment permitted theCompany to declare a one-time special dividend of up to $11.19 per share (up toan aggregate amount not to exceed $500 million) at any time prior to December 31,2007.

 

Under the 2005Credit Facility, as amended and restated, the Company is not permitted toreduce the sum of (A) unrestricted cash and cash equivalents plus (B) thelesser of (1) the total available unutilized commitment and (2) $25million, to be less than $50 million.  Inaddition, the Company will not permit its net debt to EBITDA ratio to begreater than 5.5:1.00 on the last day of any fiscal quarter at any time beginningApril 1, 2007.

 

As of December 31,2008, the Company is in compliance with all of the financial covenants underits 2005 Credit Facility, as amended and restated.

 

While we remain in compliance with our 2005 Credit Facility, on February 24,2009 we amended the facility to accelerate the amortization of a portion of theoutstanding commitment from October 26, 2009 to February 24, 2009 andto pledge the *Genmar Daphne* as collateral underthe facility.  This had the effect ofreducing our debt to collateral ratio under the facility’s covenants, which isintended to bolster our continuing ability to remain in compliance with thesecovenants.

 

The 2005 Credit Facility, as amended and restated, provides a four yearnonamortizing revolving loan with a reduction of $50.1 million on February 24,2009, semiannual reductions of $50.1 million beginning April 26, 2010 anda bullet reduction of $599.6 million at the end of year seven.  Up to $50 million of the 2005 Credit Facilityis available for the issuance of standby letters of credit to supportobligations of the Company and its subsidiaries that are reasonably acceptableto the issuing lenders under the facility. As of December 31, 2008, the Company has outstanding letters ofcredit aggregating $6.0 million which expire between March 2009 and December 2009,leaving $44.0 million available to be issued.

 

The 2005 Credit Facility carries an interest rate of LIBOR plus 100basis points on the outstanding portion and a commitment fee of 26.25 basispoints on the unused portion.  As of December 31,2008 and 2007, $761 million and $565 million, respectively, of the facility isoutstanding.  The facility is currentlycollateralized by 22 of the Company’s double-hull vessels with an aggregatecarrying value as of December 31, 2008 of $776.2 million, as well as theCompany’s equity interests in its subsidiaries that own these assets, insuranceproceeds of the collateralized 

 

59

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vessels, and certain deposit accounts 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 on 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.  These covenants include, among other things,customary restrictions on the Company’s ability to incur indebtedness or grantliens, pay dividends or make stock repurchases (except as otherwise permittedas described above), engage in businesses other than those engaged in on theeffective date of the credit facility and similar or related businesses, enterinto transactions with affiliates, and merge, consolidate, or dispose ofassets.  The Company is also required tocomply with various ongoing financial covenants, including with respect to theCompany’s minimum cash balance, collateral maintenance, and net debt to EBITDA ratio.  Theamended and restated Credit Agreement defines EBITDA as net income before netinterest expense, provision for income taxes, depreciation and amortization,non-cash management incentive compensation, and gains and losses from sales ofassets other than inventory sold in the ordinary course of business.  Until such time as the Merger has beenconsummated, any determination of Consolidated EBITDA shall give pro formaeffect to the Merger as if it had occurred on the first day of the respectiveTest Period but without taking into account any pro forma cost savings andexpenses.  If the Company does not complywith the various financial and other covenants and requirements of the 2005Credit Facility, the lenders may, subject to various customary cure rights,require the immediate payment of all amounts outstanding under the facility.

 

Interest rates during the year ended December 31, 2008 ranged from1.50% to 5.63% on the 2005 Credit Facility.

 

**RBS Facility**

** **

Pursuant to theArlington Combination, Arlington remains the borrower under its $229.5 millionfacility with The Royal Bank of Scotland plc. (the “RBS Facility”).  This facility is secured by first prioritymortgages over the Arlington Vessels which have an aggregate carrying value of$475.0 million as of December 31, 2008, assignment of earnings andinsurances and the Company’s rights under the time charters for the vessels andthe ship management agreements, a pledge of the shares of the Company’swholly-owned subsidiaries and a security interest in certain of the Company’sbank accounts.  The term loan agreementwith The Royal Bank of Scotland matures on January 5, 2011.  All amounts outstanding under the term loanagreement must be repaid on that maturity date. There is no principal amortization prior to maturity. Borrowings underthe term loan agreement bear interest at LIBOR plus a margin of 125 basispoints.  In connection with the term loanagreement, the Company has entered into an interest rate swap agreement withThe Royal Bank of Scotland. As a result of this swap, the Company haseffectively fixed the interest rate on the term loan agreement at 6.2325% perannum.

 

The term loan agreementprovides that if at any time the aggregate fair value of the Arlington Vesselsthat secure the obligations under the Loan Agreement is less than 125% of theloan amount, the Company must either provide additional security or prepay aportion of the loan to reinstate such percentage.  The term loan agreement also containsfinancial covenants requiring that at the end of each financial quarter (1) theaggregate total assets of Arlington and the eight subsidiaries that own theArlington Vessels (adjusted to give effect to the market value of the vessels)less total liabilities of these nine entities is equal to or greater than 30%of such total assets and (2) these nine entities have positive workingcapital. In addition, if the aggregate value of the Arlington Vesselscollateralizing this loan is less than 140% of the aggregate of the loan, thesenine entities may not pay any dividend or make any other form of distributionor effect any form of redemption, purchase or return of share capital.

 

As of December 31,2008 the Company was in compliance with the financial covenants of the loanagreement.

 

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

 

A repaymentschedule of outstanding borrowings at December 31, 2008 is as follows (inthousands of dollars):

 

60

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| ** **            | ** ** | **Year ending December 31,** | ** ** | ** ** | ** ** |
|-----------------------|------------|-----------------------------------|------------|------------|------------|
| ** **            | ** ** | **2009**                          | ** ** | **2010**   | ** ** | **2011** | ** ** | **2012** | ** ** | **Total** | ** ** |
|                  |       |                              |       |       |       |   |   |   |   |   |   |
| 2005 Credit  Facility |       | $                                 | —     |       | $          | 11,187 |   | $ | 100,125 |   | $ | 649,688 |   | $ | 761,000 |   |
| RBS Facility          |       | —                            |       | —     |       | 229,500 |   | — |   | 229,500 |   |
| Total                 |       | $                                 | —     |       | $          | 11,187 |   | $ | 329,625 |   | $ | 649,688 |   | $ | 990,500 |   |

 

**Interest Rate SwapAgreements**

** **

On December 31,2008, the Company is party to five interest rate swap agreements to manageinterest costs and the risk associated with changing interest rates.  The notional principal amounts of these swapsaggregate $579.5 million, the details of which are as follows (notional amountsin thousands of dollars):

 
| **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 |       |
|                     |            |                     |            |                         |            |                            |             |                        |            |  |

 

Interest expensepertaining to interest rate swaps for the years ended December 31, 2008,2007 and 2006 was $1.9 million, $(0.1) million and $0, respectively.

 

The Company wouldhave paid approximately $35 million to settle its outstanding swap agreementbased upon its aggregate fair value as of December 31, 2008.  This fair value is based upon estimatesreceived from financial institutions.

 

**Cash and Working Capital**

** **

Cash increased to$104.1 million as of December 31, 2008 compared to $44.5 million as of December 31,2007. Working capital is current assets minus current liabilities, includingthe current portion of long-term debt. Working capital was $53.3 million as of December 31,2008 compared to $47.0 million as of December 31, 2007.  The current portion of long-term debtincluded in our current liabilities was $0 as of December 31, 2008 and2007.

 

**Cash Flows from Operating Activities**

 

Net cash providedby operating activities increased 19.4% to $114.4 million for the year ended December 31,2008, compared to $95.8 million for the prior year.  This increase is primarily attributable tocomponents of net income that had not been paid as of December 31, 2008such as the $22 million in compensation accruals in connection with the Company’sexecutive transition plan, which is included in the increase in accruedexpenses as of December 31, 2008 as compared to the prior year.  Net income was $29.8 million and $44.5million for the years ended December 31, 2008 and 2007, respectively.

 

Net cash providedby operating activities decreased 49.5% to $95.8 million for the year ended December 31,2007, compared to $189.7 million for the prior year.  This decrease is primarily attributable tonet income of $44.5 million for the year ended December 31, 2007 comparedto net income of $156.8 million for the prior year as well as an increase inprepaid expenses and other current and noncurrent assets of $10.9 millionduring the year ended December 31, 2007 compared to a decrease of $15.0million during the prior year.  Thesedecreases are partially offset by $0.4 million loss on sale of vessels andequipment during the year ended December 31, 2007 compared to gains onsale of vessels and equipment of $46.0 million during the prior year.

 

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**Cash Flows from InvestingActivities**

** **

Net cash used byinvesting activities was $171.1 million for the year ended 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.

 

Net cash used byinvesting activities was $84.5 million for the year ended December 31,2007 compared to net cash provided by investing activities of $285.3 millionfor the prior year.  During the yearended December 31, 2007, we paid $80.1 million on three Suezmaxconstruction contracts (including capitalized interest of $2.4 million) andpaid $4.4 million for other fixed assets. During the year ended December 31,2006, we received $340.9 million from the sale of 13 vessels, paid $50.6million on our four Suezmax construction contracts (including capitalizedinterest of $3.6 million) and paid $5.0 million for other fixed assets.

 

**Cash Flows fromFinancing Activities**

** **

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

 

·                  During the yearsended December 31, 2008 and 2007, we made net borrowings of revolving debtassociated with our 2005 Credit Facility of $196.0 million and $515.0 million,respectively.

 

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

 

·                  During the yearsended December 31, 2008 and 2007, we paid $62.5 million and $555.5 millionof dividends to shareholders, respectively.

 

Net cash used byfinancing activities was $74.3 million for the year ended December 31,2007 compared to $464.5 million for the prior year. The change in cash providedby financing activities relates primarily to the following:

 

·                  During the yearended December 31, 2007, we made net borrowings of $515.0 million ofrevolving debt associated with our 2005 Credit Facility; during the year ended December 31,2006, we made net repayments of $85.0 million of revolving debt associated withour 2005 Credit Facility.

 

·                  During the yearended December 31, 2007, we paid $32.7 million to acquire 1,811,144 sharesof our common stock which we retired; during the year ended December 31,2006, we paid $219.1 million to acquire 8,158,071 shares of our common stockwhich we retired.

 

·                  During the yearsended December 31, 2007 and 2006, we paid $555.5 million and $160.4million of dividends to shareholders, respectively.

 

**Capital Expenditures forDrydockings and Vessel Acquisitions**

** **

**Drydocking**

** **

In addition tovessel acquisition and acquisition of new building contracts, other majorcapital expenditures include funding our drydock program of regularly scheduledin-water survey or drydocking necessary to preserve the quality of our vesselsas well as to comply with international shipping standards and environmentallaws and regulations. Management anticipates that vessels which are youngerthan 15 years are required to undergo in-water surveys 2.5 years after adrydock and that vessels are to be drydocked every five years, while vessels 15years or older are to be drydocked every 2.5 years in which case the additionaldrydocks take the place of these in-water surveys. During the 

 

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year ended December 31,2008, we paid $9.8 million of drydock related costs.  For the year ending December 31, 2009,we anticipate that we will capitalize costs associated with drydocks andsignificant in-water surveys on 10 vessels. We estimate that the expendituresto complete drydocks during 2009 will aggregate approximately $25 million to$28 million and that the vessels will be offhire for approximately 330 days toeffect these 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 Statesratified Annex VI 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.  The Company mayincur costs to comply with these newly defined standards.

 

**Capital Improvements**

** **

During the yearended December 31, 2008, we capitalized $5.2 million relating to capitalprojects including environmental compliance equipment upgrades, satisfyingrequirements of oil majors and vessel upgrades. For the year ending December 31, 2009, we have budgetedapproximately $5.8 million for such projects.

 

**Vessel Acquisitions**

** **

In July 2004,we acquired four Suezmax newbuilding contracts. These Suezmax vessels were delivered to us during March 2006, January 2007,August 2007 and February 2008 for an aggregate cost of $253.4million.

 

During the fourthquarter of 2008 we also acquired two double-hull Aframax vessels for acontracted price aggregating $137 million.

 

Also, on December 16,2008, we completed our merger with Arlington which added its fleet of twoVLCCs, two Panamax vessels and four product carriers to our fleet.

 

**OFF-BALANCE SHEET ARRANGEMENTS**

** **

As of December 31,2008, we did not have any significant off-balance-sheet arrangements, asdefined in Item 303(a)(4) of SEC Regulation S-K.

 

**Other Commitments**

** **

In February 2004,the Company entered into an operating lease for an aircraft.  The lease has a term of five years, expiringon February 9, 2009, and requires monthly payments by the Company of$125,000.

 

In December 2004,the Company entered into a 15-year lease for office space in New York, NewYork.  The monthly rental is as follows:Free rent from December 1, 2004 to September 30, 2005, $109,724 permonth from October 1, 2005 to September 30, 2010, $118,868 per monthfrom October 1, 2010 to September 30, 2015, and $128,011 per monthfrom 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 futurevessel operating expenses to be paid by the Company under ship managementagreements in effect as of December 31, 2008 that will expire in 2009,2010, and 2011 are $19.6 million, $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.

 

 

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

 

**TABULARDISCLOSURE OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS**

 
| ** **                            | ** ** | **Total** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** |
|---------------------------------------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|
| 2005 Credit  Facility                 |       | $         | 761.0      |     | $          | —   |       | $        | 11.2       |     | $          | 100.1    |       | $              | 649.7      |   | $ | — |   | $ | — |   |
| RBS Facility                          |       | 229.5     |       | —   |       | —   |       | 229.5    |       | —   |       | —   |       | —         |       |
| Interest expense  (1)                 |       | 123.5     |       | 42.0     |       | 40.9     |       | 22.9     |       | 16.6     |       | 1.1      |       | —         |       |
| Aircraft lease                        |       | 0.1       |       | 0.1      |       | —   |       | —   |       | —   |       | —   |       | —         |       |
| Senior officer  employment agreements |       | 2.6       |       | 1.4      |       | 0.6      |       | 0.6      |       | —   |       | —   |       | —         |       |
| Severance to  President and CEO       |       | 22.0      |       | 22.0     |       | —   |       | —   |       | —   |       | —   |       | —         |       |
| Ship management  agreements           |       | 31.6      |       | 19.6     |       | 9.4      |       | 2.6      |       | —   |       | —   |       | —         |       |
| Office leases                         |       | 17.1      |       | 1.4      |       | 1.3      |       | 1.4      |       | 1.4      |       | 1.4      |       | 10.2           |       |
| Total  commitments                    |       | $         | 1,187.4    |     | $          | 86.5     |       | $        | 63.4       |     | $          | 357.1    |       | $              | 667.7      |   | $ | 2.5 |   | $ | 10.2 |   |

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(1)                    Future interest payments on our 2005 Credit Facilityand RBS Facility are based on our current outstanding balance using a currentborrowing LIBOR rate of 1.50%, adjusted for quarterly cash settlements of ourinterest rate swaps designated as hedges using the same 3-month LIBOR interestrate.  The amount also includes a 0.2625%commitment fee we are required to pay on the unused portion of the 2005 CreditFacility.

 

**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 expire 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, 2008 and2007, 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 (liability) to the Company of $0.6million and $(0.1) million, respectively. The Company recorded an unrealized gain (loss) of $0.6 million, ($2.3)million and 

 

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$2.2 million for the years ended December 31, 2008, 2007 and 2006,respectively, which is reflected on the Company’s statement of operations asOther income (expense).  The Company hasrecorded an aggregate realized loss of $10.2 million, $1.2 million and$2.1million for the years ended December 31, 2008, 2007 and 2006,respectively, which is classified as Other income (expense) on the statement ofoperations.

 

***Currency Forward Contract***

*** ***

On July 19, 2005, the Company enteredinto a forwardcontract to acquire 5 million Euros on January 17, 2006 for $6.0million.  Changes in the fair value ofthis forward contract subsequent the date on which the Company entered into thecontract (at which time the fair value was $0) was recorded as Other income(expense) on the Company’s statement of operations.  The Company entered into this contract toguard against weakening in the dollar against the Euro.  As of December 31, 2005, the Company hasrecorded a liability of $0.1 million related to the fair market value of thisderivative financial instrument.  TheCompany has recorded an aggregate net unrealized gain (loss) of $0.1 millionand $(0.1) million, for the years ended December 31, 2006 and 2005, whichis classified as Other income (expense) on the statement of operations.

 

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.

 

***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 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 year ended December 31, 2008,we recognized an unrealized loss of $0.1 million, which is classified as Otherincome (expense) on the statement of operations.

 

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

 

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**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 orconditions.

 

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.  We have had an excellentcollection record during the past seven years. To the extent that some voyage revenues become uncollectible, theamounts of these revenues would be expensed at that time.  We provide a reserve for our demurragerevenues based upon our historical record of collecting these amounts.  As of December 31, 2008, we provided areserve of approximately 10% for these claims, which we believe is adequate inlight of our collection history.  Weperiodically review the adequacy of this reserve so that it properly reflectsour collection history.  To the extentthat our collection experience warrants a greater reserve we will incur anexpense as to increase this amount in that 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 and double-sided vessels is consistent with that of other shipowners and with its economic useful life. Depreciation is based on cost less the estimated residual scrapvalue.  We estimate our residual scrapvalue per lightweight ton to be $175.  Anincrease in the useful life of the vessel would have the effect of decreasingthe annual depreciation 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 we 

 

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capitalize for replacements, renewals and betterments to our vesselswere reduced, we would recognize the amount of the difference as an expense.

 

DEFERRED DRYDOCK COSTS.  Ourvessels are required to be drydocked approximately every 30 to 60 months formajor repairs 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, and that our policy ofcapitalization reflects the economics and market values of the vessels.

 

IMPAIRMENT OF LONG-LIVED ASSETS. We evaluate the carrying amounts and periods over which long-livedassets are depreciated to determine if events have occurred which would requiremodification to their carrying values or useful lives.  In evaluating useful lives and carryingvalues of long-lived assets, we review certain indicators of potentialimpairment, such as undiscounted projected operating cash flows, vessel salesand purchases, business plans and overall market conditions.  We determine undiscounted projected netoperating cash flows for each vessel and compare it to the vessel carryingvalue.  In the event that impairmentoccurred, we would determine the fair value of the related asset and we record acharge to operations calculated by comparing the asset’s carrying value to theestimated fair value.  Various factorsincluding future charter rates and vessel operating costs are included in thisanalysis.

 

GOODWILL.  We follow theprovisions for SFAS No. 142 “Goodwill and Other Intangible Assets.”  This statement requires that goodwill andintangible assets with indefinite lives no longer be amortized, but instead betested for impairment at least annually and written down with a charge tooperations when the carrying amount exceeds the estimated fair value. Prior tothe adoption of SFAS No. 142, we amortized goodwill. Goodwill as of December 31,2008 and 2007 was $71.7 million and $1.2 million, respectively.  Based on tests performed, we determined thatthere was no impairment of goodwill as of December 31, 2008 and 2007.

 

**Recent AccountingPronouncements**

** **

In September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*. This Statement defines fair value, establishes a framework for measuringfair value and enhances disclosures about fair value measurements.  In February 2008, the FASB issued FASBStaff Position (“FSP”) 157-1, *Application of FASBStatement No. 157 to FASB Statement No. 13 and Other AccountingPronouncements That Address Fair Value Measurements for Purposes of Lease Classificationor Measurement under Statement 13* and FSP 157-2, *Effective Date of FASB Statement No. 157*.  FSP 157-1 amends SFAS No. 157 to removecertain leasing transactions from its scope. FSP 157-2, *Effective Date of FASB Statement No. 157*delays the effective date of SFAS No. 157 for all nonfinancial assets andliabilities except those that are recognized or disclosed at fair value in thefinancial statements on at least an annual basis, until January 1, 2009for calendar year end entities.  Theadoption of SFAS 157 did not have a material impact on the Company’sconsolidated financial statements.

 

In February 2007, the FASB issued SFAS No. 159, The FairValue Option for Financial Assets and Financial Liabilities (“SFAS No. 159”).  Under this statement, the Company may electto report financial instruments and certain other items at fair value on acontract-by-contract basis with changes in value reported in earnings.  This election is irrevocable.  SFAS 159 is effective for the Companycommencing in 2008.  The Company has noplans to apply SFAS No. 159.

 

In December 2007, the FASB issued SFAS No. 141 (Revised2007), “Business Combinations” (SFAS No. 141R).  SFAS No. 141R will significantly changethe accounting for business combinations. Under SFAS No. 141R, an acquiring entity will be required torecognize all the assets acquired and liabilities assumed in a transaction atthe acquisition-date fair value with limited exceptions.  SFAS No. 141R also includes asubstantial number of new disclosure requirements and applies prospectively tobusiness combinations for which the acquisition date is on or after thebeginning of the first annual reporting period beginning on or after December 15,2008.  As the provisions of SFAS No. 141Rare applied prospectively, the impact to the Company cannot be determined untilthe transactions occur.

 

In December 2007, the FASB issued SFAS No. 160, “NoncontrollingInterests in Consolidated Financial Statements — An Amendment of ARB No. 51”(SFAS No. 160).  SFAS No. 160establishes new accounting and reporting 

 

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standards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary.  Thisaccounting standard is effective for fiscal years, and interim periods withinthose fiscal years, beginning on or after December 15, 2008.  The Company will adopt SFAS No. 160 asof January 1, 2009.  The Companyexpects that the adoption of SFAS No. 160 will not have a material impacton its financial position, results of operations and cash flows.

 

In March 2008, the FASB issued SFAS No. 161, *Disclosures about Derivative Instruments and Hedging Activities- AnAmendment of FASB Statement No. 133* (“SFAS No. 161”).  SFAS No. 161 requires enhancedqualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of and gains and losses onderivative instruments, and disclosures about credit-risk-related contingentfeatures in derivative agreements.  SFAS No. 161is effective for financial statements issued for fiscal years and interimperiods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS No. 161 onits consolidated financial statements.

 

**Related PartyTransactions**

** **

During the fourth quarter of 2000, we lent $485,467 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.  On February 27, 2009, Mr. Georgiopoulosrepaid the full amount of the loan.

 

During the years ended December 31, 2008, 2007 and 2006, theCompany incurred fees for legal services aggregating $51,000, $46,000 and$150,000, respectively, to the father of Peter C. Georgiopoulos.  None of the balance remains outstanding as ofDecember 31, 2008.

 

In January 2006, the Company repurchased 5,596,853 shares of ourcommon stock from OCM Principal Opportunities Fund, L.P. (“OCM”) in a privatelynegotiated transaction at $27.61 per share for a total purchase price of $154.5million.  Stephen A. Kaplan, a member ofGeneral Maritime Subsidiary’s board of directors at that time, serves as aprincipal and portfolio manager of Oaktree Capital Management LLC, which is thegeneral partner of OCM.

 

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, 2008 and 2007, totaling $0.3 million and $0.3 millionrespectively.  None of the balanceremains outstanding as of December 31, 2008.  Peter C. Georgiopoulos is a director ofGenco.

 

During the years ended December 31, 2008 and 2007 and 2006, Gencomade available one of its employees who performed internal audit services forthe Company for which the Company was invoiced $175,000 and $167,000 based onactual time spent by the employee.  Thebalance of  $62,000 remains outstandingas of December 31, 2008.

 

During the years ended December 31, 2008, 2007 and 2006 AegeanMarine Petroleum Network, Inc. (“Aegean”) supplied bunkers and lubricatingoils to our vessels aggregating $1.3 million, $1.2 million and $1.7 million,respectively.  The balance of $16,000remains outstanding as of December 31, 2008.  During the years ended December 31, 2008and December 31, 2007, Aegean incurred travel related expenditure for useof the company aircraft totaling $0 and $98,000 respectively.  During July 2006, an investment vehiclecontrolled by Peter C. Georgiopoulos and John Tavlarios, a member of our boardof directors and one of our executive officers, made an investment in andpurchased shares of Aegean from Aegean’s principal shareholder.  During December 2006, Aegean completedits initial public offering.  At thattime, Peter Georgiopoulos became chairman of the board of Aegean and JohnTavlarios joined the board of directors of Aegean.

 

Pursuant to the Company’s revised aircraft use policy, the followingauthorized executives were permitted, subject to approval from the Company’sChairman, to charter the Company’s aircraft from an authorized third-partycharterer for use on non-business flights: the Chairman, the Chief ExecutiveOfficer, the President of General Maritime Management LLC, the Chief FinancialOfficer and the Chief Administrative Officer. 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 theaircraft for these purposes was monitored from time to time by the AuditCommittee.  During the year ended December 31,2008, Peter C.  

 

68

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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. During the year ended December 31, 2007, Peter C. Georgiopouloschartered the Company’s aircraft from the third-party charterer on fouroccasions and incurred charter fees totaling $113,000 directly to thethird-party charterer hired by the Company to manage the chartering of theaircraft.  There was no personal usage ofthe Company’s aircraft incurred from other Company’s executives during theyears ended December 2008 and December 2007.  The Company terminated its lease of theaircraft in February 2009.

 

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

** **

**INTEREST RATE RISK**

** **

We are exposed to various market risks, including changes in interestrates.  The exposure to interest raterisk relates primarily to our debt.  At December 31,2008, we had $990.5 million of floating rate debt with a margins over LIBORof  ranging from 1.00% to 1.25% comparedto December 31, 2007 when we had $565 million of floating rate debt with amargin over LIBOR of 0.75%.  As of December 31,2008, the Company is party to five interest rate swaps which effectively fixLIBOR on an aggregate $579.5 million of its outstanding floating rate debt to afixed rates ranging from 2.975% to 4.983%. A one percent increase in LIBOR would increase interest expense on theportion of our $411 million outstanding floating rate indebtedness, which isnot hedged, by approximately $4.1 million per year from December 31, 2008.

 

**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, SingaporeDollars, Australian Dollars and Norwegian Kroners.  During the year ended December 31, 2008,approximately 21% 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 $1.3 million for the year ended December 31, 2008.

 

**CHARTER RATE RISK**

** **

As part of our business strategy, we have and may from time to time enterinto freight derivative contracts to hedge and manage market risks relating tothe deployment of our existing fleet of vessels.  Generally, these freight derivative contractsare futures contracts that would bind us and each counterparty in the arrangementto buy or sell a specified notional amount of tonnage “forward” at an agreedtime and price and for a particular route. Our objective would be to hedge and manage market risks as part of ourcommercial management.  During May 2006,the Company entered into a freight derivative contract with the intention offixing the equivalent of one Suezmax vessel to a time charter equivalent rateof $35,500 per day for a three year period beginning on July 1, 2006.  This contract net settles each month with theCompany receiving $35,500 per day and paying a floating amount based on themonthly BITR and a specified bunker price index.  The aggregate notional value of this contractis $6.4 million as of December 31, 2008. As of December 31, 2008 and 2007, the fair market value of thefreight derivative contract resulted in an asset (liability) to the Company of$0.6 million and $(0.1) million, respectively, and a net unrealized andrealized gain (loss) of $(9.6) million and $(3.5) million for the years ended December 31,2008 and 2007, respectively, which is reflected on our statement of operationsas Other income (expense).  A 10%increase in the forward BITR from the December 31, 2008 levels wouldresult in a reduction of amounts expected to be received from the counterpartyof $0.9 million over the period from January 1, 2009 to June 30,2009.  A 10% decrease in the specifiedbunker price forward index from the December 31, 2008 level would resultin reduction of amounts expected to be received from the counterparty of $0.2million over the period from January 1, 2009 to June 30, 2009.

 

69

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**FUEL PRICE RISK**

** **

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 year ended December 31, 2008,the Company recognized an unrealized loss of $0.1 million, which is classifiedas Other income (expense) on the statement of operations.  A 10% decrease in the bunker prices from the December 31,2008 level would increase the Company’s liability at December 31, 2008 byapproximately $0.1 million.

 

70

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**Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

** **

**GENERAL MARITIMECORPORATION**

** **

**INDEX TO CONSOLIDATEDFINANCIAL STATEMENTS**

 
| CONSOLIDATED FINANCIAL  STATEMENTS AS OF DECEMBER 31, 2008 AND 2007 AND FOR THE YEARS ENDED DECEMBER  31, 2008, 2007 AND 2006. |
|--------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                           |
| Report  of Independent Registered Public Accounting Firm                                                                       |
|                                                                                                                           |
| Consolidated  Balance Sheets                                                                                                   |
|                                                                                                                           |
| Consolidated  Statements of Operations                                                                                         |
|                                                                                                                           |
| Consolidated Statements of Shareholders’ Equity and  Comprehensive Income                                                 |
|                                                                                                                           |
| Consolidated  Statements of Cash Flows                                                                                         |

 

 

71

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

** **

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

 

We have audited the accompanying consolidated balance sheets of GeneralMaritime Corporation and subsidiaries (the “Company”) as of December 31, 2008and 2007, and the related consolidated statements of operations, shareholders’equity and comprehensive income, and cash flows for each of the three years inthe period ended December 31, 2008.  These consolidated financialstatements are the responsibility of the Company’s management.  Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the consolidated financial statements are free of materialmisstatement.  An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the consolidated financial statements.  Anaudit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall consolidatedfinancial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly,in all material respects, the financial position of General MaritimeCorporation and subsidiaries at December 31, 2008 and 2007, and the results oftheir operations and their cash flows for each of the three years in the periodended December 31, 2008, in conformity with accounting principles generallyaccepted in the United States of America.

 

We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the Company’s internalcontrol over financial reporting as of December 31, 2008, based on the criteriaestablished in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission and our report dated March 2, 2009 expressed an unqualifiedopinion on the Company’s internal control over financial reporting.

 

*/s/ Deloitte & Touche LLP*

 

New York, New YorkMarch 2, 2009

 

72

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**GENERAL MARITIME CORPORATION ANDSUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

**DECEMBER31, 2008 AND 2007**

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

 
| ** **                                                                                                                                                                                           | ** ** | **DECEMBER 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                                                                                                           | ** ** | **2008**         | ** ** | **2007** | ** ** |
|                                                                                                                                                                                                 |       |             |       |   |   |
| ASSETS                                                                                                                                                                                               |       |             |       |   |   |
| CURRENT ASSETS:                                                                                                                                                                                      |       |             |       |   |   |
| Cash                                                                                                                                                                                                 |       | $                | 104,146    |   | $ | 44,526 |   |
| Due from  charterers, net                                                                                                                                                                            |       | 10,533           |       | 10,562 |   |
| Prepaid expenses  and other current assets                                                                                                                                                           |       | 26,456           |       | 27,385 |   |
| Derivative asset                                                                                                                                                                                     |       | 568              |       | 21 |   |
| Total current  assets                                                                                                                                                                                |       | 141,703          |       | 82,494 |   |
|                                                                                                                                                                                                 |       |             |       |   |   |
| NONCURRENT  ASSETS:                                                                                                                                                                                  |       |             |       |   |   |
| Vessels, net of  accumulated depreciation of $233,051 and $189,989, respectively                                                                                                                     |       | 1,319,555        |       | 684,019 |   |
| Vessel  construction in progress                                                                                                                                                                     |       | —           |       | 30,329 |   |
| Other fixed  assets, net                                                                                                                                                                             |       | 11,507           |       | 10,084 |   |
| Deferred drydock  costs, net                                                                                                                                                                         |       | 18,504           |       | 20,209 |   |
| Deferred financing  costs, net                                                                                                                                                                       |       | 5,296            |       | 4,724 |   |
| Derivative asset                                                                                                                                                                                     |       | —           |       | 246 |   |
| Other assets                                                                                                                                                                                         |       | 8,998            |       | 1,685 |   |
| Goodwill                                                                                                                                                                                             |       | 71,662           |       | 1,245 |   |
| Total noncurrent  assets                                                                                                                                                                             |       | 1,435,522        |       | 752,541 |   |
| TOTAL ASSETS                                                                                                                                                                                         |       | $                | 1,577,225  |   | $ | 835,035 |   |
|                                                                                                                                                                                                 |       |             |       |   |   |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                                                           |       |             |       |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                                 |       |             |       |   |   |
| Accounts payable  and accrued expenses                                                                                                                                                               |       | $                | 55,164     |   | $ | 24,381 |   |
| Deferred voyage  revenue                                                                                                                                                                             |       | 15,893           |       | 10,282 |   |
| Derivative  liability                                                                                                                                                                                |       | 17,335           |       | 839 |   |
| Total current  liabilities                                                                                                                                                                           |       | 88,392           |       | 35,502 |   |
| NONCURRENT  LIABILITIES:                                                                                                                                                                             |       |             |       |   |   |
| Long-term debt                                                                                                                                                                                       |       | 990,500          |       | 565,000 |   |
| Other noncurrent  liabilities                                                                                                                                                                        |       | 24,717           |       | 3,932 |   |
| Derivative  liability                                                                                                                                                                                |       | 17,817           |       | 1,944 |   |
| Total noncurrent  liabilities                                                                                                                                                                        |       | 1,033,034        |       | 570,876 |   |
| TOTAL  LIABILITIES                                                                                                                                                                                   |       | 1,121,426        |       | 606,378 |   |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                                                       |       |             |       |   |   |
| SHAREHOLDERS’  EQUITY:                                                                                                                                                                          |       |             |       |   |   |
| Common stock,  $0.01 par value per share; authorized 75,000,000 shares; issued and  outstanding 57,850,528 and 42,919,583 shares at December 31, 2008 and December 31,  2007, respectively |       | 579              |       | 430 |   |
| Paid-in capital                                                                                                                                                                                      |       | 474,424          |       | 230,639 |   |
| Retained  earnings                                                                                                                                                                                   |       | —           |       | — |   |
| Accumulated  other comprehensive loss                                                                                                                                                                |       | (19,204          | )          | (2,412 | ) |
| Total  shareholders’ equity                                                                                                                                                                     |       | 455,799          |       | 228,657 |   |
| TOTAL  LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                     |       | $                | 1,577,225  |   | $ | 835,035 |   |

 

See notes toconsolidated financial statements.

 

 

73

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**GENERAL MARITIME CORPORATION**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**FORTHE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006**

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

 
| ** **                                    | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| VOYAGE REVENUES:                              |       |       |       |       |       |       |       |
| Voyage revenues                               |       | $          | 326,068    |       | $          | 255,015    |       | $ | 325,984 |   |
| OPERATING  EXPENSES:                          |       |       |       |       |       |       |       |
| Voyage expenses                               |       | 54,404     |       | 38,069     |       | 80,400     |       |
| Direct vessel  expenses                       |       | 63,556     |       | 48,213     |       | 47,472     |       |
| Other expense                                 |       | —     |       | —     |       | 2,430      |       |
| General and  administrative                   |       | 80,285     |       | 46,920     |       | 44,787     |       |
| Depreciation and  amortization                |       | 58,037     |       | 49,671     |       | 42,395     |       |
| Loss (gain) on  sale of vessels and equipment |       | 804        |       | 417        |       | (46,022    | )          |
| Total operating  expenses                     |       | 257,086    |       | 183,290    |       | 171,462    |       |
| OPERATING INCOME                              |       | 68,982     |       | 71,725     |       | 154,522    |       |
| OTHER INCOME  (EXPENSE):                      |       |       |       |       |       |       |       |
| Interest income                               |       | 1,099      |       | 2,482      |       | 5,620      |       |
| Interest expense                              |       | (29,388    | )          | (25,541    | )          | (4,165     | )          |
| Other income  (expense)                       |       | (10,886    | )          | (4,127     | )          | 854        |       |
| Net other income  (expense)                   |       | (39,175    | )          | (27,186    | )          | 2,309      |       |
| Net income                                    |       | $          | 29,807     |       | $          | 44,539     |       | $ | 156,831 |   |
|                                          |       |       |       |       |       |       |       |
| Earnings per  common share:                   |       |       |       |       |       |       |       |
| Basic                                         |       | $          | 0.76       |       | $          | 1.09       |       | $ | 3.72 |   |
|                                          |       |       |       |       |       |       |       |
| Diluted                                       |       | $          | 0.73       |       | $          | 1.06       |       | $ | 3.63 |   |
|                                          |       |       |       |       |       |       |       |
| Weighted average  shares outstanding- basic   |       | 39,463,257 |       | 40,739,766 |       | 42,172,224 |       |
|                                          |       |       |       |       |       |       |       |
| Weighted average  shares outstanding- diluted |       | 40,561,633 |       | 41,825,061 |       | 43,171,353 |       |

 

See notes toconsolidated financial statements.

 

 

74

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**GENERALMARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OFSHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME**

**FORTHE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006**

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

 
| ** **                                                                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** **        | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|--------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **   | ** ** | **Other**         | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                                                      | ** ** | **Common** | ** ** | **Paid-in** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | **Comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                                      | ** ** | **Stock**  | ** ** | **Capital** | ** ** | **Earnings** | ** ** | **Loss**          | ** ** | **Income**        | ** ** | **Total**  | ** ** |
| ** **                                                                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **   | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| Balance as of  January 1, 2006                                                             |       | $          | 509        |        | $          | 428,210      |       | $                 | 547,406    |              | $          | —     |       |   |   | $ | 976,125 |   |
|                                                                                            |       |       |       |        |       |         |       |              |       |              |       |       |       |
| Net income                                                                                      |       |       |       |        |       | 156,831      |       |              |       | $                 | 156,831    |       | 156,831    |   |
| Exercise of  stock options                                                                      |       | 7          |       | 757         |       |         |       |              |       |              |       | 764        |       |
| Issuance of  296,700 shares of restricted stock, net of forfeitures                             |       | 4          |       | (4          | )          |         |       |              |       |              |       | —     |       |
| Acquisition and  retirement of 8,158,071 shares of common stock                                 |       | (80        | )          |        |       | (218,993     | )          |              |       |              |       | (219,073   | )          |
| Cash dividends  paid                                                                            |       |       |       |        |       | (160,440     | )          |              |       |              |       | (160,440   | )          |
| Restricted stock  amortization, net of forfeitures                                              |       |       |       | 9,706       |       |         |       |              |       |              |       | 9,706      |       |
| Balance at  December 31, 2006                                                              |       | 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 |   |

** **

**See notes to consolidated financialstatements.**

** **

**75**

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**GENERALMARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FORTHE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006**

**(Dollarsin thousands)**

 
| ** **                                                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS  PROVIDED BY OPERATING ACTIVITIES:                                      |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 29,807     |     | $          | 44,539   |       | $ | 156,831 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Loss (gain) on  sale of vessels and equipment                                      |       | 804      |       | 417      |       | (46,022  | )          |
| Depreciation and  amortization                                                     |       | 58,037   |       | 49,671   |       | 42,395   |       |
| Amortization of  deferred financing costs                                          |       | 1,089    |       | 959      |       | —   |       |
| Restricted stock  compensation expense                                             |       | 11,422   |       | 10,654   |       | 9,706    |       |
| Net unrealized  (gain) loss on derivative financial instruments                    |       | (540     | )          | 2,284    |       | —   |       |
| Bad debts                                                                          |       | 514      |       | —   |       | —   |       |
| Changes in  assets and liabilities:                                                |       |     |       |     |       |     |       |
| Decrease in due  from charterers                                                   |       | 752      |       | 2,726    |       | 33,993   |       |
| Decrease  (increase) in prepaid expenses and other current and noncurrent assets   |       | 3,350    |       | (10,953  | )          | 14,954   |       |
| Increase  (decrease) in other current and noncurrent liabilities                   |       | 16,063   |       | 5,518    |       | (16,520  | )          |
| Increase in  deferred voyage revenue                                               |       | 2,904    |       | 1,833    |       | 6,309    |       |
| Deferred drydock  costs incurred                                                   |       | (9,787   | )          | (11,815  | )          | (11,929  | )          |
| Net cash  provided by operating activities                                         |       | 114,415  |       | 95,833   |       | 189,717  |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS  (USED) PROVIDED BY INVESTING ACTIVITIES:                               |       |     |       |     |       |     |       |
| Payments for  vessel construction in progress                                      |       | (33,885  | )          | (80,061  | )          | (50,602  | )          |
| Purchase of  other fixed assets                                                    |       | (5,164   | )          | (4,455   | )          | (5,035   | )          |
| Arlington merger  closing costs, net of cash held by Arlington                     |       | 7,529    |       | —   |       | —   |       |
| Payments for  vessels                                                              |       | (139,562 | )          | —   |       | —   |       |
| Proceeds from  sale of vessels                                                     |       | —   |       | —   |       | 340,901  |       |
| Net cash (used)  provided by investing activites                                   |       | (171,082 | )          | (84,516  | )          | 285,264  |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS  PROVIDED (USED) BY FINANCING ACTIVITIES:                               |       |     |       |     |       |     |       |
| Borrowings on  revolving credit facilitities                                       |       | 226,000  |       | 570,000  |       | 175,000  |       |
| Repayments on  revolving credit facilities                                         |       | (30,000  | )          | (55,000  | )          | (260,000 | )          |
| Deferred  financing costs paid                                                     |       | (1,661   | )          | (1,214   | )          | (728     | )          |
| Cash dividends  paid                                                               |       | (62,533  | )          | (555,503 | )          | (160,440 | )          |
| Payments to  acquire and retire common stock                                       |       | (16,379  | )          | (32,657  | )          | (219,073 | )          |
| Proceeds from  exercise of stock options                                           |       | 49       |       | 123      |       | 764      |       |
| Payments to  retire Senior Notes                                                   |       | —   |       | —   |       | (20      | )          |
| Net cash  provided (used) by financing activities                                  |       | 115,476  |       | (74,251  | )          | (464,497 | )          |
|                                                                               |       |     |       |     |       |     |       |
| Effect of  exchange rate changes on cash balances                                  |       | 811      |       | —   |       | —   |       |
|                                                                               |       |     |       |     |       |     |       |
| Net increase  (decrease) in cash                                                   |       | 59,620   |       | (62,934  | )          | 10,484   |       |
| Cash, beginning  of the year                                                       |       | 44,526   |       | 107,460  |       | 96,976   |       |
| Cash, end of  year                                                                 |       | $        | 104,146    |     | $          | 44,526   |       | $ | 107,460 |   |
|                                                                               |       |     |       |     |       |     |       |
| Supplemental  disclosure of cash flow information:                                 |       |     |       |     |       |     |       |
| Cash paid during  the year for interest (net of amount capitalized)                |       | $        | 27,608     |     | $          | 24,296   |       | $ | 4,168 |   |
| Transfer from  Vessel construction in progress to Vessel                           |       | $        | 63,794     |     | $          | 127,885  |       | $ | 61,671 |   |
| Restricted stock  granted to employees (net of forfeitures)                        |       | $        | 3,996      |     | $          | 12,142   |       | $ | 10,383 |   |
| Restricted stock  granted in lieu of cash dividends                                |       | $        | —     |     | $          | 4,620    |       | $ | — |   |

 

 

See notes toconsolidated financial statements.

 

 

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**GENERALMARITIME CORPORATION**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2008, 2007 AND 2006(DOLLARS IN THOUSANDS, EXCEPT PER SHARE, PER DAY AND PER TON DATA)**

** **

**1.**                        BASIS OFPRESENTATION AND SUMMARY OF SIGNIFICANT 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 product carrier vessels. TheCompany operates its business in one business segment, which is thetransportation of international 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 between two to ten weeks, the owner of a vessel agrees to provide thevessel for the transport of specific goods between specific ports in return forthe payment of an agreed upon freight per ton of cargo or, alternatively, for aspecified total amount. All operating and specified voyage costs are paid bythe owner of the vessel.

 

A time charter involves placing a vessel at the charterer’s disposalfor a set period of time during which the charterer may use the vessel inreturn for the payment by the charterer of a specified daily or monthly hirerate. In time charters, operating costs such as for crews, maintenance andinsurance are typically paid by the owner of the vessel and specified voyagecosts such as fuel, canal and port charges are paid by 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 Combination”). As aresult of the Arlington Combination, 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.

 

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

 

 

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SPOT MARKET VOYAGECHARTERS.  Spot market voyage revenuesare recognized on a pro rata basis based on the relative transit time in eachperiod. Estimated losses on voyages are provided for in full at the time suchlosses become evident.  Voyage expensesprimarily include only those specific costs which are borne by the Company inconnection with voyage charters which would otherwise have been borne by thecharterer under time charter agreements. These expenses principally consist offuel, canal and port charges. Demurrage income represents payments by the chartererto the vessel owner when loading and discharging time exceed the stipulatedtime in the spot market voyage charter. Demurrage income is measured inaccordance with the provisions of the respective charter agreements and thecircumstances under which demurrage claims arise and is recognized on a prorata basis over the length of the voyage to which it pertains. At December 31,2008 and 2007, the Company has a reserve of approximately $510 and $424,respectively, against its due from charterers balance associated with demurragerevenues and certain other receivables.

 

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.  Duringthe year ended December 31, 2006, all asserted performance claimsaggregating $11,750 were settled and paid. The Company has determined that there are no unasserted claims on any ofits time charters since that time; accordingly, there is no reserve as of December 31,2008 and 2007.

 

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. Undepreciated cost of any asset componentbeing replaced is written off as a component of Loss (gain) on sale of vesselsand vessel equipment operating expense. Expenditures for routine maintenanceand repairs are expensed as incurred.

 

CONSTRUCTION IN PROGRESS. Construction in progress represents the cost of acquiring contracts tobuild vessels, installments paid to shipyards, certain other payments made tothird parties and interest costs incurred during the construction of vessels(until the vessel is substantially complete and ready for its intended use).During the years ended December 31, 2008, 2007 and 2006, the Companycapitalized $119, $2,385 and $3,571, respectively, of interest expense. As of December 31,2008, the entire balance of this account has been reclassified to Vessels upondelivery in February 2008 of the Company’s final vessel underconstruction.

 

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 Statement of Financial Accounting Standards (“SFAS”)No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets*, which requires impairment 

 

 

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losses to be recorded on long-lived assets used in operations whenindicators of impairment are present and the undiscounted cash flows estimatedto be generated by those assets are less than the asset’s carrying amount. Inthe evaluation of the fair value and future benefits of long-lived assets, theCompany performs an analysis of the anticipated undiscounted future net cashflows of the related long-lived assets. If the carrying value of the relatedasset exceeds the undiscounted cash flows, the carrying value is reduced to itsfair value. Various factors including future charter rates and vessel operatingcosts are included in this analysis.

 

DEFERRED DRYDOCK COSTS, NET. Approximately every 30 to 60 months the Company’s vessels are requiredto be drydocked for major repairs and maintenance, which cannot be performedwhile the vessels are operating. The Company capitalizes costs associated withthe drydocks as they occur and amortizes these costs on a straight line basisover the period between drydocks. Amortization of drydock costs is included indepreciation and amortization in the statement of operations. For the yearsended December 31, 2008, 2007 and 2006, amortization was $11,493, $10,178and $6,145, respectively. Accumulated amortization as of December 31, 2008and 2007 was $22,176 and $11,596, respectively.

 

DEFERRED FINANCING COSTS, NET.  Deferredfinancing costs include fees, commissions and legal expenses associated withsecuring loan facilities. These costs are amortized on a straight-line basisover the life of the related debt, which is included in interest expense.Amortization was $1,089, $959 and $722 for the years ended December 31,2008, 2007 and 2006, respectively. Accumulated amortization as of December 31,2008 and 2007 was $2,873 and $1,783, respectively.

 

GOODWILL.  The Company followsthe provisions for SFAS No. 142 “Goodwill and Other Intangible Assets.”  This statement requires that goodwill andintangible assets with indefinite lives no longer be amortized, but instead betested for impairment at least annually and written down with a charge tooperations when the carrying amount exceeds the estimated fair value. Prior tothe adoption of SFAS No. 142, the Company amortized goodwill. Goodwill asof December 31, 2008 and 2007 was $71,662 (see Note 2) and $1,245,respectively.  Based on tests performed,the Company determined that there was no impairment of goodwill as of December 31,2008 and 2007.

 

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 Financial Accounting Standards Board (“FASB”) Interpretation No. 48,“Accounting for Uncertainty in Income Taxes” (FIN 48) effective January 1,2007.  Only tax positions that meet themore likely than not recognition threshold at the effective date may berecognized upon adoption of FIN 48.  TheCompany qualifies for an exemption pursuant to Section 883 of the U.S.Internal Revenue Code of 1986, or the Code, from U.S. federal income tax onshipping income that is derived from U.S. sources. The Company is similarlyexempt from state and local income taxation. This Interpretation does not have a material effect on the Company’sconsolidated financial statements.

 

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 Statement of Financial Accounting Standards No. 130 “ReportingComprehensive Income”, which establishes standards for reporting and displayingcomprehensive income and its components in financial statements. Comprehensiveincome is comprised of net income, foreign currency translation gains andlosses, and unrealized gains and losses related to our interest rate swaps.

 

STOCK BASED COMPENSATION*. *Effective January 1, 2006,the Company adopted Statement of Financial Standards (“SFAS”) No. 123R, *Share-Based Payments*using a modified version of prospectiveapplication (See Note 18 for impact of adopting SFAS 123R.) Accordingly, priorperiod amounts have not been restated. Pursuant to the adoption of SFAS 123R,unamortized restricted stock is now classified as a component of Paid-incapital in Shareholders’ equity.

 

 

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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 Combination, 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. The estimated fair values of the Company’s financial instrumentsapproximate their individual carrying amounts as of December 31, 2008 and2007 due to their short-term maturity or the variable-rate nature of therespective borrowings.

 

DERIVATIVE FINANCIAL INSTRUMENTS. In addition to interest rate swaps described below, the Company has beenparty to other derivative financial instruments to guard against the risks of (a) aweakening U.S. Dollar that would make future Euro-based expenditure morecostly, (b) rising fuel costs which would increase future voyage expenses,(c) declines in future spot market rates which would reduce revenues onfuture voyages of vessels trading on the spot market and (d) risinginterest rates which would increase interest expense on the Company’soutstanding borrowings. Except for its interest rate swap, described below, theCompany’s derivative financial instruments do not qualify for hedge accountingfor accounting purposes, although the Company considers certain of thesederivative financial instruments to be economic hedges against these risks. TheCompany records the fair value of its derivative financial instruments on itsbalance sheet as a Derivative liabilities or assets, as applicable. Changes infair value in the derivative financial instruments that do not qualify forhedge accounting, as well as payments made to, or received from counterparties,to periodically settle the derivative transactions, are recorded as Otherincome (expense) on the statement of operations as applicable.

 

INTEREST RATE RISK MANAGEMENT. The Company is exposed to the impact of interest rate changes.  The Company’s objective is to manage theimpact of interest rate changes on its earnings and cash flow in relation tooutstanding borrowings.  These borrowingsare subject to a variable borrowing rate. The Company uses a forward startingpay-fixed receive-variable interest rate swap to manage future interest costsand the risk associated with changing interest rate obligations.  These swaps are designated as cash flowhedges of future variable rate interest payments and are tested foreffectiveness on a quarterly basis.

 

The differential to be paid or received for the effectively hedgedportion of any swap agreement is recognized as an adjustment to interestexpense as incurred.  Additionally, thechanges in value for the portion of the swaps that are effectively hedgingfuture interest payments are reflected as a component of OCI.

 

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, 2008, the Company is party to pay-fixedinterest rate swap agreements that expire between 2010 and 2013 whicheffectively convert floating rate obligations to fixed rate instruments.  During the years ended December 31,2008, 2007 and 2006, the Company recognized a charge to other comprehensiveloss (OCI) of $17,597, $2,412 and $0, respectively.  The aggregate liability in connection with aportion of the Company’s interest rate swaps as of December 31, 2008 and2007 was $35,020 and $2,461, respectively, and is presented as Derivativeliability on the balance sheet.

 

 

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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 40.8% and 39.5%, respectively, of its revenues from one customer duringthe years ended December 31, 2008 and 2007, respectively.  Management does not believe significant riskexists in connection with the Company’s concentrations of credit at December 31,2008.

 

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 31,2008, 2007 and 2006,  transactionsdenominated in foreign currencies resulted in increases (decreases) in general and administrative expensesof $72, $114 and $79, respectively, and increases in other expense (income) of$0, $(198), $(628), respectively.

 

RECENT ACCOUNTING PRONOUNCEMENTS. In September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*. This Statement defines fair value,establishes a framework for measuring fair value and enhances disclosures aboutfair value measurements. In February 2008, the FASB issued FASB StaffPosition (“FSP”) 157-1, *Application of FASBStatement No. 157 to FASB Statement No. 13 and Other AccountingPronouncements That Address Fair Value Measurements for Purposes of LeaseClassification or Measurement under Statement 13* and FSP 157-2, *Effective Date of FASB Statement No. 157*. FSP 157-1amends SFAS No. 157 to remove certain leasing transactions from its scope.FSP 157-2, *Effective Date of FASB Statement No. 157*delays the effective date of SFAS No. 157 for all nonfinancial assets andliabilities except those that are recognized or disclosed at fair value in thefinancial statements on at least an annual basis, until January 1, 2009for calendar year end entities. The adoption of SFAS 157 did not have amaterial impact on the Company’s consolidated financial statements.

 

In February 2007, the FASB issued SFAS No. 159, The FairValue Option for Financial Assets and Financial Liabilities (“SFAS No. 159”).Under this statement, the Company may elect to report financial instruments andcertain other items at fair value on a contract-by-contract basis with changesin value reported in earnings. This election is irrevocable. SFAS 159 iseffective for the Company commencing in 2008. The Company does not apply SFAS No. 159.

 

In December 2007, the FASB issued SFAS No. 141 (Revised2007), “Business Combinations” (SFAS No. 141R). SFAS No. 141R willsignificantly change the accounting for business combinations. Under SFAS No. 141R,an acquiring entity will be required to recognize all the assets acquired andliabilities assumed in a transaction at the acquisition-date fair value withlimited exceptions. SFAS No. 141R also includes a substantial number ofnew disclosure requirements and applies prospectively to business combinationsfor which the acquisition date is on or after the beginning of the first annualreporting period beginning on or after December 15, 2008. As theprovisions of SFAS No. 141R are applied prospectively, the impact to theCompany cannot be determined until the transactions occur.

 

In December 2007, the FASB issued SFAS No. 160, “NoncontrollingInterests in Consolidated Financial Statements — An Amendment of ARB No. 51”(SFAS No. 160). SFAS No. 160 establishes new accounting and reportingstandards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary. This accounting standard is effective forfiscal years, and interim periods within those fiscal years, beginning on orafter December 15, 2008. The Company will adopt SFAS No. 160 as of January 1,2009. The Company expects that the adoption of SFAS No. 160 will not havea material impact on its financial position, results of operations and cashflows.

 

In March 2008, the FASB issued SFAS No. 161, *Disclosures about Derivative Instruments and Hedging Activities- AnAmendment of FASB Statement No. 133* (“SFAS No. 161”).  SFAS No. 161 requires enhancedqualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of and gains and losses onderivative instruments, and disclosures about credit-risk-related contingentfeatures in derivative agreements.  SFAS No. 161is effective for financial statements issued for fiscal years and interimperiods 

 

 

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beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS No. 161 onits consolidated financial statements.

 

**2.**                        ARLINGTONACQUISITION

** **

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 toSFAS No. 141, which required the Company to use the market price ofGeneral Maritime Subsidiary common shares over a reasonable period of timebefore and after the terms of the merger were agreed upon which was determinedto be the average closing price of General Maritime Subsidiary common sharesfor a period of two days before and two days after August 6, 2008 (date ofannouncement of the merger). Consequently, the value of the shares issued by the Company to acquireArlington was $281,568.  This amount, togetherwith approximately $8,216 of closing costs incurred by the Company to effectthe 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  |    |
|                                |   |     |    |
| 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 | )       |
| Derivitave  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 Combinationhad 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 |   |

 

 

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The pro forma income statements above exclude non-recurring items suchas the $22,000 compensation accruals for the cash payment to Peter C. Georgiopoulosin connection with the termination of his employment arrangements with theCompany in connection with the Company’s executive transition plan and the cashpayment in lieu of a bonus of $8,000 paid to Mr. Georgiopoulos pursuant tothe executive transition plan and approximately $10,165 of costs incurred byArlington pursuant to the Arlington Combination, inclusive of severance costs.

 

**3.**                        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 Vessels, Other fixed assets, and costs ofeffecting the Arlington Combination of approximately $550, $307 and $846,respectively, for the year ended December 31, 2008.  The fair value of the net assets of Arlingtonthat the Company acquired on December 16, 2008 in exchange for commonstock of the Company valued at $281,568 is a non-cash transaction and thecomposition of those net assets is shown 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.

 

**4.**                        VESSEL ACQUISITIONS/DELIVERIES

** **

In March 2004, the Company agreed to acquire three Aframaxvessels, two Suezmax vessels, four newbuilding Suezmax contracts and atechnical management company from an unaffiliated entity for cash. The threeAframax vessels, two Suezmax vessels and the technical management company wereacquired between April and June 2004. The four newbuilding Suezmaxcontracts were acquired in July 2004. The purchase price of these assetswas approximately $248,100, which were financed through cash on hand andborrowings under the Company’s then existing revolving credit facilities. This$248,100 purchase price was allocated as follows:  $180,599 for the five vessels, $67,242 forthe four newbuilding Suezmax contracts and $266 for the technical managementcompany the net assets of which are comprised of $107 of cash, other currentassets of $738, noncurrent assets of $82 and current liabilities of $661. Inaddition, $8,777 was paid to the shipyard as an installment on the constructionprice of the four newbuilding contracts.

 

Through December 31, 2008, the Company has taken delivery of allof these four newly-constructed Suezmax tankers.  Capitalized costs of these vessels over theirconstruction periods, inclusive of capitalized interest, were $253,350.  These four vessels are part of the 21 vesselsthat collateralize the Company’s 2005 Credit Facility (see Note 10).

 

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 merger with Arlington on December 16, 2008 (seeNote 2), the Company acquired the two VLCCs, two Panamax vessels and fourproduct carrier vessels.  These eightvessels collateralize the RBS Facility (see Note 10).

 

**5.**                        EARNINGS PER COMMON SHARE

** **

The computation of basic earnings per share is based on the weightedaverage number of common shares outstanding during the year. Because theCompany exchanged 1.34 shares of its common stock for each share of commonstock held by shareholders of General Maritime Subsidiary and exchanged oneshare of its common stock for each share held by shareholders of Arlington toeffect the Arlington Combination, the weighted average number of common sharesoutstanding during the year has been retroactively adjusted to reflect theexchange had it occurred on January 1, 2006. The computation of dilutedearnings per share assumes the exercise of all dilutive stock options using thetreasury stock method and the lapsing of restrictions on unvested restrictedstock awards, for which the assumed proceeds upon lapsing the restrictions aredeemed to be the amount of compensation cost attributable to future servicesand not yet recognized using the treasury stock method, to the extent dilutive.For the years ended December 31, 2008, 2007 and 2006, all stock optionswere considered to be dilutive.

 

 

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The components of the denominator for the calculation of basic earningsper share and diluted earnings per share are as follows:

 
| ** **                                           | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                           | ** ** | **2008**                         | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                 |       |                             |       |   |   |   |   |
| Common shares  outstanding, basic:                   |       |                             |       |   |   |   |   |
| Weighted average  common shares outstanding, basic   |       | 39,463,257                       |       | 40,739,766 |   | 42,172,224 |   |
|                                                 |       |                             |       |   |   |   |   |
| Common shares  outstanding, diluted:                 |       |                             |       |   |   |   |   |
| Weighted average  common shares outstanding, basic   |       | 39,463,257                       |       | 40,739,766 |   | 42,172,224 |   |
| Stock options                                        |       | 1,097                            |       | 5,814 |   | 59,785 |   |
| Restricted stock  awards                             |       | 1,097,279                        |       | 1,079,481 |   | 939,344 |   |
|                                                 |       |                             |       |   |   |   |   |
| Weighted average  common shares outstanding, diluted |       | 40,561,633                       |       | 41,825,061 |   | 43,171,353 |   |

 

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

 

**6.**                        SALE OF VESSELS AND OFFICECLOSINGS

** **

**Saleof Vessels**

** **

During the year ended December 31, 2006, in order to reduce theaverage age of the Company’s fleet, the Company sold nine Aframax OBO vessels,three single-hull Suezmax vessel and one double-sided Aframax vessel foraggregate net proceeds of $340,901, and a net gain on sale of vessels of$46,022.

 

**OfficeClosings**

** **

On February 10, 2006, the Company signed agreements to sell nineOBO Aframax vessels. In connection with that decision, the Company determinedone technical management office outside the U.S. would adequately service itscurrent fleet and as such decided to cease its technical management operationsat its office in Piraeus, Greece, operated by General Maritime Management(Hellas) Ltd.

 

This office ceased its vessel operations during May 2006.  The Company incurred approximately $1,300 ofcosts in connection with its closure during the year ended December 31,2006, which has been classified as a component of general and administrativeexpense on the Company’s statement of operations.  All of these costs have been paid as of December 31,2006.

 

During February 2007, the Company decided to close its office inLondon, England, operated by General Maritime Management (UK) LLC, whichprovides commercial management services for the Company’s vessels, due to alarge increase in the percentage of the fleet that is on long-term timecharter. This office ceased its commercial management activities during March 2007.The cost of closing this office, which was classified as a component of generaland administrative expense, was approximately $160, and was substantiallyattributable to employee severance costs which were paid during March 2007.The Company closed this office during 2008.

 

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**7.**                        PREPAID EXPENSES AND OTHERCURRENT ASSETS

** **

Prepaid expenses and other current assets consist of the following:

 

| ** **                        | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-----------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Bunkers and  lubricants inventory |       | $                          | 6,678      |                       | $          | 6,148 |   |
| Insurance claims  receivable      |       | 11,999                     |       | 11,234                     |       |
| Prepaid  insurance                |       | 2,294                      |       | 2,242                      |       |
| Other                             |       | 5,485                      |       | 7,761                      |       |
| Total                             |       | $                          | 26,456     |                       | $          | 27,385 |   |

 

Insurance claims receivable consist substantially of payments made bythe Company for repairs of vessels that the Company expects to recover frominsurance.

 

**8.**                        OTHER FIXED ASSETS

** **

Other fixed assetsconsist of the following:

 
| ** **                         | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Other fixed  assets:               |       |                       |       |                       |       |
|                               |       |                       |       |                       |       |
| Furniture,  fixtures and equipment |       | $                          | 4,111      |                       | $          | 4,246 |   |
| Vessel equipment                   |       | 13,144                     |       | 8,750                      |       |
| Computer equipment                 |       | 1,202                      |       | 1,186                      |       |
| Other                              |       | 71                         |       | —                     |       |
| Total cost                         |       | 18,528                     |       | 14,182                     |       |
|                               |       |                       |       |                       |       |
| Less:  accumulated depreciation    |       | 7,021                      |       | 4,098                      |       |
| Total                              |       | $                          | 11,507     |                       | $          | 10,084 |   |

 

**9.**                        ACCOUNTS PAYABLE AND ACCRUEDEXPENSES

** **

Accounts payable andaccrued expenses consist of the following:

 
| ** **              | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-------------------------|------------|----------------------------|------------|----------------------------|------------|
| Accounts payable        |       | $                          | 7,314      |                       | $          | 9,575 |   |
| Accrued  operating      |       | 36,518                     |       | 8,650                      |       |
| Accrued  administrative |       | 11,332                     |       | 6,156                      |       |
| Total                   |       | $                          | 55,164     |                       | $          | 24,381 |   |

 

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**10.**                 LONG-TERM DEBT

** **

Long-term debt consistsof the following:

 
| ** **                               | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| 2005 Credit  Facility                    |       | $                          | 761,000    |                       | $          | 565,000 |   |
| RBS Facility                             |       | 229,500                    |       | —                     |       |
| Total                                    |       | $                          | 990,500    |                       | $          | 565,000 |   |
| Less: Current  portion of long-term debt |       | —                     |       | —                     |       |
| Long-term debt                           |       | $                          | 990,500    |                       | $          | 565,000 |   |

 

**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 Combination and theCompany was added as a loan party. The 2005 Credit Facility was used torefinance its then existing term borrowings. The 2005 Credit Facility, which has been amended and restated on variousdates through February 24, 2009, provides a total commitment of $900,000.

 

Under the 2005 Credit Facility, as amended and restated, the Company ispermitted to (1) pay quarterly cash dividends with respect to fiscalquarters on or after March 31, 2007, limited to $0.37 per share and (2) payadditional dividends, including stock buy-backs, in an aggregate amount not toexceed $150,000 plus 50% of cumulative net excess cash flow after January 1,2007. In addition, the amendment permitted the Company to declare a one-timespecial dividend of up to $11.19 per share (up to an aggregate amount not toexceed $500,000) at any time prior to December 31, 2007.

 

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 than5.5:1.00 on the last day of any fiscal quarter at any time beginning April 1,2007.

 

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.

 

As of December 31, 2008, the Company is in compliance with all ofthe financial covenants under its 2005 Credit Facility, as amended andrestated.

 

The 2005 Credit Facility, as amended and restated, provides a four yearnonamortizing revolving loan with semiannual reductions of $50,063 and a bulletreduction of $599,625 at the end of year seven. Up to $50,000 of the 2005Credit Facility is available for the issuance of standby letters of credit tosupport obligations of the Company and its subsidiaries that are reasonablyacceptable to the issuing lenders under the facility. As of December 31,2008, the Company has outstanding letters of credit aggregating $6,008 whichexpire between March 2009 and December 2009, leaving $43,992available to be issued.

 

The 2005 Credit Facility carries an interest rate of LIBOR plus 100basis points on the outstanding portion and a commitment fee of 26.25 basispoints on the unused portion. As of December 31, 2008 and 2007, $761,000and $565,000, respectively, of the facility is outstanding. The facility iscollateralized by 22 of the Company’s double-hull vessels with an aggregatecarrying value as of December 31, 2008 of $776,249, as well as the Company’sequity interests in its subsidiaries that own these assets, insurance proceedsof the collateralized vessels, and certain 

 

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deposit accounts related to the vessels. Each subsidiary of the Companywith an ownership interest in these vessels provides an unconditional guarantyof amounts owing under the 2005 Credit Facility.  The Company also provides a guarantee and haspledged its equity interests 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 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 ongoing financial covenants, including withrespect to the Company’s minimum cash balance, collateral maintenance, and netdebt to EBITDA ratio. Theamended and restated Credit Agreement defines EBITDA as net income before netinterest expense, provision for income taxes, depreciation and amortization,non-cash management incentive compensation, and gains and losses from sales ofassets other than inventory sold in the ordinary course of business.  Until such time as the Merger has beenconsummated, any determination of Consolidated EBITDA shall give pro formaeffect to the Merger as if it had occurred on the first day of the respectiveTest Period but without taking into account any pro forma cost savings andexpenses.  If the Company does not complywith the various financial and other covenants and requirements of the 2005Credit Facility, the lenders may, subject to various customary cure rights,require the immediate payment of all amounts outstanding under the facility.

 

Interest rates during the year ended December 31, 2008 ranged from1.50% to 5.63% on the 2005 Credit Facility.

 

**RBSFacility**

 

Pursuant to the Arlington Combination, Arlington remains a party to its$229,500 facility with The Royal Bank of Scotland plc. (the “RBS Facility”).  This facility is secured by first prioritymortgages over the Arlington Vessels which have an aggregate carrying value of$475,040 as of December 31, 2008, assignment of earnings and insurancesand the Company’s rights under the time charters for the vessels and the shipmanagement agreements, a pledge of the shares of the Company’s wholly-ownedsubsidiaries and a security interest in certain of the Company’s bank accounts.The term loan agreement with The Royal Bank of Scotland matures on January 5,2011. All amounts outstanding under the term loan agreement must be repaid onthat maturity date. There is no principal amortization prior to maturity.Borrowings under the term loan agreement bear interest at LIBOR plus a marginof 125 basis points.  In connection withthe term loan agreement, the Company has entered into an interest rate swapagreement with The Royal Bank of Scotland. As a result of this swap, theCompany has effectively fixed the interest rate on the term loan agreement at6.2325% per annum.

 

The term loan agreement provides that if at any time the aggregate fairvalue of the Arlington Vessels that secure the obligations under the LoanAgreement is less than 125% of the loan amount, the Company must either provideadditional security or prepay a portion of the loan to reinstate suchpercentage. The term loan agreement also contains financial covenants requiringthat at the end of each financial quarter (1) the  aggregate total assets of Arlington and theeight subsidiaries that own the Arlington Vessels (adjusted to give effect tothe market value of the vessels) less total liabilities of these nine entitiesis equal to or greater than 30% of such total assets and (2) these nineentities have positive working capital. In addition, if the aggregate value ofthe Arlington Vessels collateralizing this loan is less than 140% of theaggregate of the loan, these nine entities may not pay any dividend or make anyother form of distribution or effect any form of redemption, purchase or returnof share capital.

 

As of December 31, 2008, the Company is in compliance with all ofthe financial covenants under the RBS Facility.

 

During the years ended December 31, 2008 and 2007, the Companypaid dividends of $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.

 

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A repayment schedule of outstanding borrowings at December 31,2008 is as follows:

 
| ** **            | ** ** | **Year ending December 31,** | ** ** | ** ** | ** ** |
|-----------------------|------------|-----------------------------------|------------|------------|------------|
| ** **            | ** ** | **2009**                          | ** ** | **2010**   | ** ** | **2011** | ** ** | **2012** | ** ** | **Total** | ** ** |
| 2005 Credit  Facility |       | $                                 | —     |       | $          | 11,187 |   | $ | 100,125 |   | $ | 649,688 |   | $ | 761,000 |   |
| RBS Facility          |       | —                            |       | —     |       | 229,500 |   | — |   | 229,500 |   |
| Total                 |       | $                                 | —     |       | $          | 11,187 |   | $ | 329,625 |   | $ | 649,688 |   | $ | 990,500 |   |

 

**InterestRate Swap Agreements**

** **

On December 31, 2008, 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, 2008, 2007 and 2006 are as follows:

 
| ** **                                    | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|----------------------------|------------|----------------------------|------------|
| Notional principal  amount, beginning of year |       | $                          | 100,000    |                       | $          | —                     |       | $ | 19,500 |   |
| Additions                                     |       | 479,500                    |       | 100,000                    |       | —                     |       |
| Amortization of  swaps                        |       | —                     |       | —                     |       | (19,500                    | )          |
|                                          |       |                       |       |                       |       |                       |       |
| Notional  principal amount, end of the year   |       | $                          | 579,500    |                       | $          | 100,000                    |       | $ | — |   |

 

Interest expense pertaining to interest rate swaps for the years ended December 31,2008, 2007 and 2006 was $1,853, $(122) and $0, respectively.

 

The Company would have paid approximately $35,020 to settle itsoutstanding swap agreement based upon its aggregate fair value as of December 31,2008. This fair value is based upon estimates received from financialinstitutions.

 

Interest expense under all of the Company’s credit facilities andinterest rate swaps aggregated $29,388, $25,540 and $4,166 for the years ended December 31,2008, 2007 and 2006, respectively.

 

**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 July 19,2005, the Company entered into a forward contract to acquire 5 millionEuros on January 17, 2006 for $6,033. Changes in the fair value of thisforward contract subsequent to the date on which the 

 

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Company entered into the contract (at which time the fair value was $0)was recorded as Other income (expense) on the Company’s statement ofoperations. The Company entered into this contract to guard against weakeningin the dollar against the Euro. As of December 31, 2005, the Company hasrecorded a liability of $126 related to the fair market value of thisderivative financial instrument. The Company has recorded an aggregate netunrealized gain (loss) of $126 and $(126), for the years ended December 31,2006 and 2005, which is classified as Other income (expense) on the statementof operations.

 

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 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 which is recorded as Derivative asset on the Company’s balancesheet.  The related unrealized gain for theyear ended December 31, 2007 of $21 is classified as Other income(expense) on the 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. *DuringJanuary 2008, the Company entered into an agreement with a counterparty topurchase 5,000 MT per month of *Gulf Coast 3%*fuel oil for $438.56/MT and sell the same amount of *Rotterdam3.5% barges* fuel oil for $442.60/MT. This contract settled on a net basis at the end of each calendar monthfrom July 2008 through September 2008 based on the average dailyclosing prices for these commodities for each month.  During the year ended December 31, 2008,the Company recognized a realized gain of $164, which is classified as Otherincome (expense) on the statement of operations.

 

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 year ended December 31, 2008,the Company recognized an unrealized loss of $132, which is classified as Otherincome (expense) on the statement of operations.

 

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

 

*Freight rates. *During the years ended December 31, 2006 and2005, the Company has taken net short positions in freight derivativecontracts, which reduce a portion of the Company’s exposure to the spot chartermarket by creating synthetic time charters. These freight derivative contractsinvolve contracts to provide a fixed number of theoretical voyages at fixedrates.  These contracts net settle eachmonth with the Company receiving a fixed amount per day and paying a floatingamount based on the monthly Baltic Tanker Index (“BITR”), which is a worldscaleindex, 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 September and October 2005, the Company entered intofour freight derivative contracts which expired in December 2005. Thesefreight forward contracts involved contracts to provide a fixed number oftheoretical voyages at fixed rates and settled based on the monthly BITR. TheCompany had taken short positions in these contracts, which reduced a portionof the Company’s exposure to the spot charter market by creating synthetic timecharters. 

 

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At December 31, 2005, these contracts had no aggregate notionalvalue, because they expired on December 31, 2005. The notional amount isbased on a computation of the quantity of cargo (or freight) the contractspecifies, the contract rate (based on a certain trade route) and a flat ratedetermined by the market on an annual basis. Each contract is marked to marketfor the specified cargo and trade route. The fair value of forward freightagreements is the estimated amount that the Company would receive or pay toterminate the agreements at the reporting date. As of December 31, 2005,the Company has recorded a liability of $294 related to the fair market valueof these economic hedges. The Company has recorded the aggregate net realizedand unrealized loss of $849, for the year ended December 31, 2005, whichis classified as Other income (expense) on the statement of operations.

 

During November 2007, the Company entered into three freightderivative contracts which expire 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 fair value of $737 at December 31, 2007of these freight derivatives was settled as of December 31, 2007 by theclearinghouse of these agreements whereby deposits the Company had with theclearinghouse have been reduced by a like amount, resulting in a realized lossof $1,228 and $737 for the years ended December 31, 2008 and 2007,respectively.

 

During May 2006, the Company entered into a freight derivative contractwith the intention of fixing the equivalent of one Suezmax vessel to a timecharter equivalent rate of $35,500 per day for a three year period beginning onJuly 1, 2006.  This contract netsettles each month with the Company receiving $35,500 per day and paying afloating amount based on the monthly BITR and a specified bunker priceindex.  As of December 31, 2008 and2007, 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 (liability) to the Company of $568and $(76), respectively.  The Companyrecorded an unrealized gain (loss) of $644, ($2,256) and $2,180 for the yearsended December 31, 2008, 2007 and 2006, respectively, which is reflectedon the Company’s statement of operations as Other income (expense).  The Company has recorded an aggregaterealized loss of $10,217, $1,247 and $2,073 for the years ended December 31,2008, 2007 and 2006, respectively, which is classified as Other income(expense) on the statement of operations.

 

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

 

 

| ** **            | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-----------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **            | ** ** | **Interest  Rate Swap**    | ** ** | **Freight  Derivative**    | ** ** | **Bunker  Derivative** | ** ** | **Total** | ** ** | **Interest  Rate Swap** | ** ** | **Freight  Derivative** | ** ** | **Currency  Options** | ** ** | **Total** | ** ** |
|                  |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Current asset         |       | $                          | —     |                       | $          | 568 |   | $ | — |   | $ | 568 |   | $ | — |   | $ | — |   | $ | 21 |   | $ | 21 |   |
| Noncurrent asset      |       | —                     |       | —                     |       | — |   | — |   | — |   | 246 |   | — |   | 246 |   |
| Current  liability    |       | (17,203                    | )          | —                     |       | (132 | ) | (17,335 | ) | (517 | ) | (322 | ) | — |   | (839 | ) |
| Noncurrent  liability |       | (17,817                    | )          | —                     |       | — |   | (17,817 | ) | (1,944 | ) | — |   | — |   | (1,944 | ) |
|                  |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                  |       | $                          | (35,020    | )                          | $          | 568 |   | $ | (132 | ) | $ | (34,584 | ) | $ | (2,461 | ) | $ | (76 | ) | $ | 21 |   | $ | (2,516 | ) |

 

**12.**                 FAIR VALUE OF FINANCIAL INSTRUMENTS

** **

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

 

| ** **                                      | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Cash                                            |       | $                          | 104,146    |                       | $          | 44,526 |   |
| Floating rate  debt                             |       | 990,500                    |       | 565,000                    |       |
| Derivative  financial instruments (See Note 10) |       | (34,584                    | )          | (2,516                     | )          |
|                                                 |            |                            |            |                            |            |  |  |

 

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 fair value of interest rate swaps (usedfor purposes other than trading) is the 

 

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estimated amount the Company would pay to terminate swap agreements atthe reporting date, taking into account current interest rates and the currentcredit-worthiness of the swap counter-parties. The fair value of the freight derivative was determined based on theaggregate discounted cash flows using estimated future rates obtained from brokers.The fair value of the currency options is based on the exchange rates at theend of the 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 areconsidered level 2 items.  Also, theCompany’s freight derivative values and one of its bunker derivatives are basedon quoted rates on the BITR and are therefore considered level 2 items.  The fair value of the currency options isbased on the exchange rates at the end of the year.

 

SFAS No. 157 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 SFAS 157 pricing levels as of the valuation dateslisted:

 

 

 

 
| ** **                                        | ** ** | **December 31, 2008** | ** ** |
|---------------------------------------------------|------------|----------------------------|------------|
| ** **                                        | ** ** | ** **                 | ** ** | **Significant  Other** | ** ** | **Significant  Other** | ** ** |
| ** **                                        | ** ** | ** **                 | ** ** | **Observable  Inputs** | ** ** | **Observable  Inputs** | ** ** |
| ** **                                        | ** ** | **Total**                  | ** ** | **(Level  2)** | ** ** | **(Level  3)** | ** ** |
| Derivative  instruments — asset position     |       | $                          | 568        |   | $ | 568 |   | $ | 0 |   |
| Derivative  instruments — liability position |       | 35,152                     |       | 35,020 |   | 132 |   |
|                                                   |            |                            |            |  |  |  |  |  |  |  |

 

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

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

 

**13.**                 REVENUE FROM TIME CHARTERS

** **

Total revenue earned on time charters for the years ended December 31,2008, 2007 and 2006 was $209,494, $161,542 and $60,613, respectively. Futureminimum rental receipts, based on vessels committed to non-cancelable timecharter contracts and excluding any periods for which a charterer has an optionto extend the contracts, as of December 31, 2008 will be $229,638, $53,961and $7,116 during 2009, 2010 and 2011, respectively.

 

**14.**                 LEASE PAYMENTS

** **

In February 2004, the Company entered into an operating lease foran aircraft. The lease has a term of five years and requires monthly paymentsby the Company of $125.  During the yearsended December 31, 2008, 2007 and 2006, the Company recorded $973, $980and $876 of net 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 

 

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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, 2015to 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, 2008, 2007 and 2006, theCompany recorded $1,255, $1,255 and $1,138 of expense associated with thislease.

 

Future minimum rental payments on the above leases for the next fiveyears are as follows: 2009-$1,442, 2010- $1,344, 2011-$1,426, 2012- $1,426,2013-$1,426 thereafter - $10,177.

 

The minimum future vessel operating expenses to be paid by the Companyunder ship management agreements in effect as of December 31, 2008 thatwill expire in 2009, 2010, and 2011 are $19,581, $9,366 and $2,571,respectively.  If the option periods areextended by the charterer of the Company’s Arlington Vessels, these shipmanagement agreements will be automatically extended for periods matching theduration of the time charter agreements. Future minimum payments under these ship management agreements excludesuch periods.

 

**15.**                 SIGNIFICANT CUSTOMERS

** **

For the year ended December 31, 2008 and 2007, the Company earned$132,990 and $100,725, respectively, from one customer which represented 40.8%and 39.5% of voyage revenues, respectively. For the year ended December 31, 2006, the Company did not earn 10%or more of its voyage revenues from any single customer.

 

**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, 2008, 2007 and 2006, GeneralMaritime Subsidiary incurred fees for legal services aggregating $51, $46 and$150, respectively, to the father of Peter C. Georgiopoulos. None of thebalance remains outstanding as of December 31, 2008.

 

In January 2006, the Company repurchased 5,596,853 shares of ourcommon stock from OCM Principal Opportunities Fund, L.P. (“OCM”) in a privatelynegotiated transaction at $27.61 per share for a total purchase price of$154,540. Stephen A. Kaplan, a member of General Maritime Subsidiary’s board ofdirectors at that time, serves as a principal and portfolio manager of OaktreeCapital Management LLC, which is the general partner of OCM.

 

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, 2008 and 2007, totaling $337 and $248, respectively.None of the balance remains outstanding as of December 31, 2008.  Peter C. Georgiopoulos is a director ofGenco.

 

During the years ended December 31, 2008 and 2007, Genco madeavailable one of its employees who performed internal audit services for theCompany for which the Company was invoiced $175 and $167 based on actual time spentby the employee. The balance of $62 remains outstanding as of December 31,2008.

 

During the years ended December 31, 2008, 2007 and 2006 AegeanMarine Petroleum Network, Inc. (“Aegean”) supplied bunkers and lubricating oils to the Company’s vessels aggregating$1,320, $1,190 and $1,682, respectively, The balance of $16 remains outstandingas of December 31, 2008. During the years ended December 31, 2008 andDecember 31, 2007, Aegean has incurred travel related expenditure for useof the Company aircraft totaling $0 and $98 respectively. During July 2006,an investment vehicle controlled by Peter Georgiopoulos and John Tavlarios, amember of the Company’s board of directors and the chief executive officer ofGeneral Maritime Management LLC (“GMM”), made an investment in and purchasedshares of Aegean from Aegean’s principal shareholder.  During December 2006, Aegean completedits initial public offering.  At thattime, Peter Georgiopoulos became chairman of the board of Aegean and JohnTavlarios joined the board of directors of Aegean.

 

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Pursuant to the Company’s revised aircraft use policy, the followingauthorized executives were permitted, subject to approval from the Company’sChairman/ Chief Executive Officer, to charter the Company’s aircraft from anauthorized third-party charterer for use on non-business flights: the formerChief Executive Officer (current Chairman of the Board of Directors), theformer 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 theyear ended December 31, 2008, Peter C. Georgiopoulos chartered the Company’saircraft from the third-party charterer on six occasions and incurred charterfees totaling $318 payable directly to the third-party charterer.  During the year ended December 31, 2007,Peter C. Georgiopoulos chartered the Company’s aircraft from the third-partycharterer on four occasions and incurred charter fees totaling $113 payabledirectly to the third-party charterer hired by the Company to manage thechartering of the aircraft. There was no personal usage of the Company’saircraft incurred from other Company’s executives during the years ended December 2008and December 2007.  The Companyterminated its lease of the aircraft 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 2008, 2007 and 2006, the Company’s matching contribution tothe Plan was $336, $320 and $347, respectively.

 

**18.**                 STOCK-BASED COMPENSATION

** **

***2001 Stock Incentive Plan***

*** ***

On June 10, 2001, General Maritime Subsidiary adopted the GeneralMaritime Corporation 2001 Stock Incentive Plan. On December 16, 2008, the Company assumed the obligations ofGeneral Maritime Subsidiary under the 2001 Stock Incentive Plan in connectionwith the Arlington Combination. The aggregate number of shares of common stockavailable for award under the 2001 Stock Incentive Plan was increased from 3,886,000shares to 5,896,000 shares pursuant to an amendment and restatement of the planas of May 26, 2005. Under this plan the Company’s compensation committee,another designated committee of the board of directors or the board ofdirectors, may grant a variety of stock based incentive awards to employees,directors and consultants whom the compensation committee (or other committeeor the board of directors) believes are key to the Company’s success. Thecompensation committee may award incentive stock options, nonqualified stockoptions, stock appreciation rights, dividend equivalent rights, restrictedstock, unrestricted stock and performance shares.

 

Since inception of the 2001 Stock Incentive Plan, the Company hasissued stock options and restricted stock, which issuances are summarizedbelow. 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.

 

The Company’s policy for attributing the value of graded-vesting stockoptions and restricted stock awards is to use an accelerated multiple-optionapproach.

 

***Stock Options***

*** ***

During 2001, 2002, 2003 and 2004, the Company granted to its officers,directors and employees options to purchase 1,152,400, 192,290, 119,260 and26,800 shares of common stock, respectively. The exercise prices for thesestock options granted in 2001, 2002 and 2004 were $13.43 per share, $4.52 pershare and $16.84 per share, 

 

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respectively. The exercise prices for stock options granted in 2003ranged from $6.51 per share to $10.88 per share. These options generally vestover a four year period.

 

During 2002, 790,600 stock options granted in 2001 were surrendered.During 2003, 67,000 stock options granted during 2002 were forfeited.

 

Until December 31, 2005, the Company followed the provisions ofAPB 25 to account for its stock option plan. The Company provided pro formadisclosure of net income and earnings per share as if the accounting provisionof SFAS No. 123 had been adopted. Options granted are exercisable atprices equal to the fair market value of such stock on the dates the optionswere granted, so the intrinsic value is $0. The fair values of the options weredetermined on the date of grant using a Black-Scholes option pricing model.Estimated life of options granted was estimated using the historical exercisebehavior of employees. Expected volatility was based on historical volatilityas calculated using various data points during the period between the Company’sinitial public offering date and the date of grant. Risk free interest is basedon the U.S. Treasury yield curve in effect at the time of grant. These optionswere valued based on the following assumptions: an estimated life of five yearsfor all options granted, volatility of 53%, 47%, 63% and 54% for optionsgranted during 2004, 2003, 2002 and 2001, respectively, risk free interest rateof 3.85%, 3.5%, 4.0% and 5.5% for options granted during 2004, 2003, 2002 and2001, respectively, and no dividend yield for any options granted because, asof the grant dates, the Company had not paid any dividends. The fair value ofthe 1,152,400 options to purchase common stock granted on June 12, 2001was $6.34 per share.

 

The fair value of the 192,290 options to purchase common stock grantedon November 26, 2002 was $2.55 per share. The fair value of the 67,000,16,750 and 38,860 options to purchase common stock granted on May 5, 2003,June 5, 2003 and November 12, 2003 was $2.95 per share, $3.37 pershare, and $4.93 per share, respectively. The fair value of the 26,800 optionsto purchase common stock granted on May 20, 2004 was $8.37 per share.

 

Effective January 1, 2006, the Company adopted Statement ofFinancial Standards (“SFAS”) No. 123R, *Share-Based Payments*usinga modified version of prospective application. Accordingly, prior periodamounts have not been restated.

 

Under this transition method, for the portion of outstanding awards forwhich the requisite service has not yet been rendered, compensation cost of$113 will be recognized subsequent to the effective date based on thegrant-date fair value of those awards calculated under SFAS No. 123.During the years ended December 31, 2008, 2007 and 2006, the adoption ofFAS 123R resulted in incremental stock-based compensation expense of $5, $28and $81, respectively, which reduced net income for by this amount and reducedbasic earnings per share by $0, $0 and $0.01, respectively.

 

As of December 31, 2008, there was no unrecognized compensationcost related to nonvested stock option awards.

 

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The following table summarizes all stock option activity through December 31,2008:

 
| ** **                           | ** ** | **Number of  Options** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Fair Value** | ** ** |
|--------------------------------------|------------|------------------------|------------|----------------------------------------|------------|-----------------------------------|------------|
|                                 |       |                   |       |                                   |       |                              |       |
| Outstanding,  January 1, 2006   |       | 117,116                |       | $                                      | 10.27      |                              | $          | 5.06 |   |
|                                 |       |                   |       |                                   |       |                              |       |
| Granted                              |       | —                 |       |                                   |       |                              |       |
| Exercised                            |       | (81,606                | )          | $                                      | 9.33       |                              | $          | 4.57 |   |
| Forfeited                            |       | (11,725                | )          | $                                      | 13.10      |                              | $          | 6.40 |   |
| Outstanding,  December 31, 2006 |       | 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 |   |

 

A summary of the activityfor nonvested stock option awards during the year ended of December 31,2008 is as follows:

 
| ** **                                         | ** ** | ** **    | ** ** | **Weighted**       | ** ** | **Weighted**   | ** ** |
|----------------------------------------------------|------------|---------------|------------|--------------------|------------|----------------|------------|
| ** **                                         | ** ** | **Number of** | ** ** | **Average**        | ** ** | **Average**    | ** ** |
| ** **                                         | ** ** | **Options**   | ** ** | **Exercise Price** | ** ** | **Fair Value** | ** ** |
|                                               |       |          |       |               |       |           |       |
| Outstanding and  nonvested, January 1, 2008   |       | 5,025         |       | $                  | 16.84      |           | $          | 8.37 |   |
|                                               |       |          |       |               |       |           |       |
| Granted                                            |       | —        |       | —             |       | —         |       |
| Vested                                             |       | (5,025        | )          | $                  | 16.84      |           | $          | 8.37 |   |
| Forfeited                                          |       | —        |       | $                  | —     |           | $          | — |   |
|                                               |       |          |       |               |       |           |       |
| Outstanding and  nonvested, December 31, 2008 |       | —        |       | n/a                |       | n/a            |       |

 

The following table summarizes certain information about stock optionsoutstanding as of December 31, 2008 (all of which are expected to vest):

 
| ** **         | ** ** | **Options Outstanding, December 31, 2008** | ** ** | **Options Exercisable, December 31, 2008** | ** ** |
|--------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| **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      |   | 4.8 |   | 1,675 |   | $ | 10.88 |   |
| $ 16.84       |       | 5,025                                           |       | $                                               | 16.84      |   | 5.4 |   | 5,025 |   | $ | 16.84 |   |
|               |       |                                            |       |                                            |       |   |   |   |   |   |   |
|               |       | 6,700                                           |       | $                                               | 15.35      |   | 5.3 |   | 6,700 |   | $ | 15.35 |   |

 

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*Restricted Stock*

* *

During 2002, 2003 and 2005, the Company granted 837,500, 207,700 and1,469,712 restricted shares, respectively, to certain officers and employees ofthe Company. The restrictions on the shares granted in 2002 lapse seven yearsafter the grant date; the restrictions on the shares granted in 2003 and 2005lapse either: (a) ratably over periods from four to five years from dateof grant (b) approximately one year from date of grant or (c) approximatelyten years from date of grant. The foregoing grants are subject to acceleratedvesting under certain circumstances set forth in the relevant grant agreement.

 

On May 18, 2006, the Company granted a total of 12,864 shares ofrestricted common stock to four of the Company’s independent Directors.Restrictions on the restricted stock lapsed on May 16, 2007. The foregoinggrants were subject to accelerated vesting upon certain circumstances set forthin the relevant grant agreement.

 

On October 23, 2006, the Company granted 3,216 shares ofrestricted common stock to one of the Company’s independent Directors.  Restrictions on the restricted stock lapsedon May 16, 2007. The foregoing grants were subject to accelerated vestingupon certain circumstances set forth in the relevant grant agreement.

 

On December 18, 2006, the Company made grants of restricted commonstock in the amount of 412,720 shares to certain officers and employees of theCompany.  Of this total, 201,000, 26,800and 13,400 restricted shares were granted to the CEO, chief financial officerand chief administrative officer, respectively, of the Company and 40,200restricted shares were granted to the president of GMM.  The remaining 131,320 restricted shares weregranted to other officers and employees of the Company and GMM. Therestrictions on the 201,000 shares granted to the CEO of the Company will lapseon November 15, 2016. The restrictions on 93,800 shares (including sharesgranted to individuals named above, exclusive of the CEO) will lapse as to 20%of these shares on November 15, 2007 and as to 20% of these shares on November 15of each of the four years thereafter, and will become fully vested on November 15,2011.  The restrictions on the remaining117,920 shares will lapse as to 25% of these shares on November 15, 2007and as to 25% of these shares on November 15 of each of the three yearsthereafter, and will become fully vested on November 15, 2010.  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 SFAS No. 123R, this grant resulted in noadditional future compensation cost associated with amortization of restrictedstock awards.

 

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 SFAS No. 123R, this grant resulted in noadditional future compensation cost associated with amortization of restrictedstock awards.

 

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. The restrictionson the 321,600 shares granted to the CEO of the Company will lapse on November 15,2017. The restrictions on 155,440 shares (including shares granted toindividuals named above, exclusive of the CEO) will lapse as to 20% of theseshares 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 

 

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November 15 of each of the three years thereafter, and will becomefully vested on November 15, 2011. The foregoing grants are subject toaccelerated vesting upon certain circumstances set forth in the relevant grantagreements.

 

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 will becomefully vested on November 15, 2013. The restrictions on the remaining138,690 shares will lapse as to 25% of these shares on November 15, 2009and as to 25% of these shares on November 15 of each of the three yearsthereafter, 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.

 

The weighted average grant-date fair value of restricted stock grantedduring the years ended December 31, 2008, 2007 and 2006 is $10.85, $19.75per share and $26.51 per share, respectively.

 

A summary of the activity for restricted stock awardsduring the year ended of December 31, 2008 is as follows:

 
| ** **                                         | ** ** | ** **    | ** ** | **Weighted**   | ** ** |
|----------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                                         | ** ** | **Number of** | ** ** | **Average**    | ** ** |
| ** **                                         | ** ** | **Shares**    | ** ** | **Fair Value** | ** ** |
|                                               |       |          |       |           |       |
| Outstanding and  nonvested, January 1, 2001   |       | 3,227,007     |       | $              | 21.61      |   |
|                                               |       |          |       |           |       |
| Granted                                            |       | 394,145       |       | $              | 10.85      |   |
| Vested                                             |       | (267,939      | )          | $              | 25.22      |   |
| Forfeited                                          |       | (13,208       | )          | $              | 24.61      |   |
|                                               |       |          |       |           |       |
| Outstanding and  nonvested, December 31, 2008 |       | 3,340,005     |       | $              | 20.04      |   |

 

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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, 2008:

 
| ** **                        | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012**   | ** ** | **2013**   | ** ** | **Thereafter** | ** ** | **Total**  | ** ** |
|-----------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|------------|------------|
| **Restricted  Stock Grant Date:** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** |
|                              |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |
| November 26,  2002           |       | $          | 493        |       | $          | —     |       | $          | —     |       | $          | —         |       | $          | —     |   | $ | — |   | $ | 493 |   |
| February 9,  2005            |       | 952        |       | 738        |       | 738        |       | 739        |       | 738        |       | 646            |       | 4,551      |       |
| April 5,  2005               |       | 1,749      |       | 1,749      |       | 1,749      |       | 1,753      |       | 1,748      |       | 1,749          |       | 10,497     |       |
| December 21,  2005           |       | 1,418      |       | 1,101      |       | 974        |       | 976        |       | 974        |       | 1,824          |       | 7,267      |       |
| December 18,  2006           |       | 1,269      |       | 893        |       | 628        |       | 541        |       | 539        |       | 1,551          |       | 5,421      |       |
| December 21,  2007           |       | 2,016      |       | 1,412      |       | 1,011      |       | 728        |       | 620        |       | 2,406          |       | 8,193      |       |
| May 14, 2008                 |       | 100        |       | —     |       | —     |       | —     |       | —     |       | —         |       | 100        |       |
| December 15,  2008           |       | 932        |       | 480        |       | 258        |       | 111        |       | 11         |       | —         |       | 1,792      |       |
| December 23,  2008           |       | 995        |       | 507        |       | 305        |       | 172        |       | 71         |       | —         |       | 2,050      |       |
|                              |       |       |       |       |       |       |       |       |       |       |       |           |       |       |       |
| Total by year                     |       | $          | 9,924      |       | $          | 6,880      |       | $          | 5,663      |       | $          | 5,020          |       | $          | 4,701      |   | $ | 8,176 |   | $ | 40,364 |   |

 

As of December 31, 2008 and 2007, there was $40,364 and $47,785,respectively, of total unrecognized compensation cost related to nonvestedrestricted stock awards. As of December 31, 2007, this cost is expected tobe recognized with a credit to paid-in capital over a weighted average periodof 2.9 years.

 

Total compensation cost recognized in income relating to amortizationof restricted stock awards for the years ended December 31, 2008, 2007 and2006 was $11,417, $10,627 and $9,625, 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 approved anadditional $200,000 for repurchases of its common stock under the sharerepurchase 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 will periodically review the program. Share repurchases willbe made from time to time for cash in open market transactions at prevailingmarket prices or in privately negotiated transactions. The timing and amount ofpurchases under the program will be determined by management based upon marketconditions and other factors. Purchases may be made pursuant to a programadopted under Rule 10b5-1 under the Securities Exchange Act. The programdoes not require the Company to purchase any specific number or amount ofshares and may be suspended or reinstated at any time in the Company’sdiscretion and without notice. Repurchases will be subject to restrictionsunder our 2005 Credit Facility.

 

Through December 31, 2008, the Company repurchased and retired11,830,609 shares of its common stock for $292,881.  As of December 31, 2008, 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. 

 

The Company has been cooperating in a criminal investigation beingconducted by the U.S. Department of Justice relating to the alleged failure bythe Genmar Ajax to record certain discharges of oily waste between October 2004and December 2004.  On December 15,2004, following a routine Coast Guard inspection, U.S. Coast Guard officialstook various documents, logs and records from the vessel for further review andanalysis.  During 2005, the custodian ofrecords for the Genmar Ajax received four subpoenas duces tecum requestingsupplemental documentation pertaining to the vessel in connection with apending grand jury investigation, all of which have been complied with.  The Company has denied any wrongdoing in thismatter by it or any of its employees.  OnSeptember 26, 2006, the Company received a letter from the U.S. Departmentof Justice stating that it may seek an indictment against the Company’s GeneralMaritime Management LLC subsidiary in connection with its investigation.  Since then, there have been no furthercommunications from the U.S. Department of Justice or any 

 

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other developments with respect to this matter.  Currently, no charges have been made and nofines or penalties have been levied against the Company.

 

This matter has been reported to the Company’s protection and indemnityinsurance underwriters.  Through December 31,2008, the Company has paid $464,170 of legal fees incurred by such underwritersand has delivered to such underwriters a letter of credit in the amount of$1,000 for additional costs that may be incurred in connection with thismatter.  These amounts are subject toreimbursement by the underwriters to the extent that the proceedings result inan outcome covered by insurance.

 

On or about August 29, 2007, an oil sheen was discovered byshipboard personnel of the Genmar Progress in Guayanilla Bay, Puerto Rico inthe vicinity of the vessel.  The vesselcrew took prompt action pursuant to the vessel response plan.  The Company’s subsidiary which operates thevessel promptly reported this incident to the U.S. Coast Guard and hassubsequently accepted responsibility for an accidental discharge of bunker fuelfrom the vessel. The Company understands 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 towhich oil discharged from the Genmar Progress is responsible for this incidentis currently the subject of investigation. The U.S. Coast Guard has designated the Genmar Progress as a potentialsource 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 19, 2009, the Company received a demand from the U.S.National Pollution Fund for $5.8 million for the U.S. Coast Guard’s responsecosts and certain costs of the Departamento de Recursos Naturales y Ambientalesof Puerto Rico in connection with the alleged damage to the environment causedby the spill.  The Company is reviewingthe demand and has requested additional information from the U.S. NationalPollution Fund relating to the demand. Currently, no charges have been made and no other fines or penaltieshave been levied against the Company.

 

This matter, including the demand from the U.S. National PollutionFund, has been reported to the Company’s protection and indemnity insuranceunderwriters, and the Company believes that any such liabilities will becovered by its insurance, less a deductible. The Company has not accrued reserves for this incident other than thedeductible because the amount of any additional costs that may be incurred bythe Company is not estimable at this time.

 

The Company has been cooperating in these investigations and has posteda surety bond to cover potential fines or penalties that may be imposed inconnection with the matter.

 

On  January 19, 2009, an oilsheen was discovered about the Genmar Progress by the vessel’s personnel whilethe vessel was receiving cargo and conducting ballast discharge operations inthe Galveston lighterage area off the coast of Texas.  The vessel crew took prompt action pursuantto the vessel response plan, and the Company’s subsidiary which operates thevessel promptly reported the incident to the U.S. Coast Guard.  The vessel proceeded to anchor offshorepursuant to U. S. Coast Guard directive, where it was inspected by a Class Surveyoras required by the U.S. Coast Guard.  TheU.S. Coast Guard did not board the vessel on scene, but subsequently U. S.Coast Guard personnel boarded the vessel at Lake Charles, Louisiana on January 29and 30, 2009.  Repairs to the vessel wereperformed based on the recommendation of the Class Surveyor, and no cleanup by the Company was required. Currently, no notice of any assessment, claim, charge or penalties has beenserved by any authorities against the Company by reason of the incident.

 

On November 25, 2008, a jury in the Southern District of Texasfound General Maritime Management (Portugal) L.D.A., a subsidiary of theCompany (“GMM Portugal”), and two vessel officers of the Genmar Defiance guiltyof violating the Act to Prevent Pollution from Ships and 18 USC 1001.  The conviction resulted from charges based onalleged 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.  The Company has denied any wrongdoing in thismatter by the Company or any of its employees. The continuation of the sentencing hearing is scheduled for March 13,2009.

 

99

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The Company has accrued $350 and posted a bond for potential fines orpenalties which may be sought in connection with this matter.  The Company has also written offapproximately $3,300 of insurance claims related to this matter.

 

From time to time in the future, we may be subject to legal proceedingsand claims in the ordinary course of business, principally personal injury andproperty casualty claims.  Those claims,even if lacking merit, could result in the expenditure by us of significantfinancial and managerial resources.

 

**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 in a quarterly basis.

 
| ** **                  | ** ** | **2008 Quarter ended** | ** ** | **2007 Quarter ended** | ** ** |
|-----------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                  | ** ** | **March 31**      | ** ** | **June 30**       | ** ** | **Sept 30** | ** ** | **Dec 31** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **Sept 30** | ** ** | **Dec 31** | ** ** |
|                        |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Voyage revenues             |       | $                      | 73,592     |                   | $          | 80,931 |   | $ | 82,292 |   | $ | 89,253 |   | $ | 68,223 |   | $ | 62,740 |   | $ | 56,115 |   | $ | 64,879 |   |
| Operating income            |       | 20,317                 |       | 26,569                 |       | 28,478 |   | (6,382 | ) | 19,936 |   | 20,510 |   | 13,756 |   | 17,523 |   |
| Net Income                  |       | 12,910                 |       | 4,960                  |       | 23,474 |   | (11,537 | ) | 16,665 |   | 11,780 |   | 10,932 |   | 5,162 |   |
|                        |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings Per                |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Common Share:               |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                       |       | $                      | 0.33       |                   | $          | 0.13 |   | $ | 0.60 |   | $ | (0.28 | ) | $ | 0.40 |   | $ | 0.29 |   | $ | 0.27 |   | $ | 0.13 |   |
| Diluted                     |       | $                      | 0.32       |                   | $          | 0.12 |   | $ | 0.59 |   | $ | (0.28 | ) | $ | 0.39 |   | $ | 0.28 |   | $ | 0.26 |   | $ | 0.13 |   |
|                        |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average            |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding:(in  thousands) |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                       |       | 38,831                 |       | 38,776                 |       | 38,804 |   | 41,430 |   | 41,264 |   | 41,275 |   | 40,623 |   | 39,810 |   |
| Diluted                     |       | 39,818                 |       | 39,967                 |       | 39,952 |   | 41,430 |   | 42,360 |   | 42,382 |   | 41,683 |   | 40,795 |   |

 

Included in the resultsof operations for the fourth quarter of 2008 is $22,000 in compensationaccruals for the cash payment to Peter C. Georgiopoulos in connection with thetermination of his employment arrangements with the Company in connection withthe Company’s executive transition plan and the cash payment in lieu of a bonusof $8,000 paid to Mr. Georgiopoulos pursuant to the executive transitionplan (see Note 2).

 

**22.**                 FUTURE DEBT ISSUANCE

 

The Company may issue debt securities in the future.All or substantially all of the subsidiaries of the Company may be guarantorsof such debt. Any such guarantees are expected to be full, unconditional andjoint and several.  Each of the Company’ssubsidiaries is 100% owned by the Company. In addition, Company has noindependent assets or operations outside of its ownership of the subsidiariesand any such subsidiaries of the Company other than the subsidiary guarantorsare expected to be minor. Other than restrictions contained (i) in theexisting credit facility of Arlington Tankers Ltd. 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.

 

**23.**                 SUBSEQUENT EVENTS

** **

On February 24, 2009, the Company’s board of directors announcedthat the Company will be paying a quarterly dividend of $0.50 per share on orabout March 20, 2009 to the shareholders of record as of March 6,2009. The aggregate amount of the dividend is expected to be approximately$28,925, which we anticipate will be funded from cash on hand at the time thepayment is to be made.

 

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.

 

**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 

 

 

100

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that evaluation, our principal executive officer and principalfinancial officer concluded that our disclosure controls and procedures wereeffective as of December 31, 2008 to provide assurance that informationrequired to be disclosed in our reports filed or submitted under the ExchangeAct is recorded, processed, summarized and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms andsuch information is accumulated and communicated to our management, includingour principal executive officer and principal financial officer, as appropriateto allow timely decisions regarding disclosure.

 

**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, 2008 and, other than the ArlingtonCombination discussed below, found no change that has materially affected, oris reasonably likely to materially affect, internal control over financialreporting.

 

On December 16, 2008, the previouslyannounced Arlington Combination was consummated.  The Company is in the process of integratingArlington’s operations and has included Arlington’s activity in its evaluationof internal control over financial reporting pursuant to Section 404 ofthe Sarbanes-Oxley Act of 2002.

 

**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;

 

·                  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 ofGeneral Maritime 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, 2008. 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, 2008.

 

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.

 

 

101

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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Tothe Board of Directors and Stockholders ofGeneral Maritime CorporationNew York, New York

 

We have audited the internal control overfinancial reporting of General Maritime Corporation and subsidiaries (the “Company”)as of December 31, 2008, based on criteria established in *Internal Control — Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internalcontrol over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanyingManagement Report on Internal Control Over Financial Reporting.  Ourresponsibility is to express an opinion on the Company’s internal control overfinancial 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)pertain to the maintenance of records that, in reasonable detail, accuratelyand fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations of managementand directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or dispositionof the company’s assets that could have a material effect on the financialstatements.

 

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. 

 

Inour opinion, the Company maintained, in all material respects, effectiveinternal control over financial reporting as of December 31, 2008, 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 ended December 31, 2008 of the Company and our report dated March 2, 2009****expressed an unqualified opinion on those financialstatements.

 

*/s/ Deloitte & Touche LLP*

 

New York, New YorkMarch 2, 2009

** **

**102**

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** **

**ITEM 9B.  OTHERINFORMATION**

** **

On February 24, 2009, we amended our 2005 Credit Facility toaccelerate the amortization of a portion of the outstanding commitment from October 26,2009 to February 24, 2009 and to pledge the *GenmarDaphne* as collateral under the facility.  This had the effect of reducing our debt tocollateral ratio under the facility’s covenants.  A copy of the consent regarding the credit facilityfor this amendment is attached as Exhibit 10.53 to this report.

 

**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 2009 AnnualMeeting of Shareholders to be filed with the Securities and Exchange Commissionnot later than 120 days after December 31, 2008 (the “2009 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 2009 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 2008.

 

**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.

 

 

103

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**ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES ANDREPORTS ON FORM 8-K**

** **

(a)   Thefollowing documents are filed as a part 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  Certificate 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   |   | Restricted Stock Grant  Agreement dated November 26, 2002 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (10)                                                                                                                                                                                                |
| 10.3   |   | Restricted Stock Grant  Agreement dated November 26, 2002 between General Maritime Subsidiary  Corporation and John P. Tavlarios. (10)                                                                                                                                                                                                     |
| 10.4   |   | Agreement of Lease  between Fisher-Park Lane Owner LLC, and General Maritime Subsidiary  Corporation dated as of November 30, 2004. (10)                                                                                                                                                                                                   |
| 10.5   |   | Restricted Stock Grant  Agreement dated February 9, 2005 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (11)                                                                                                                                                                                                 |
| 10.6   |   | Form of Restricted  Stock Grant Agreement dated February 9, 2005 between General Maritime  Subsidiary Corporation and certain senior executive officers. (11)                                                                                                                                                                         |
| 10.7   |   | Employment Agreement  dated April 5, 2005, between General Maritime Subsidiary Corporation and  Peter C. Georgiopoulos. (12)                                                                                                                                                                                                               |
| 10.8   |   | Restricted Stock Grant  Agreement dated April 6, 2005, between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (12)                                                                                                                                                                                                   |
| 10.8   |   | Employment Agreement  dated April 22, 2005, between General Maritime Subsidiary Corporation  and John P. Tavlarios. (13)                                                                                                                                                                                                                   |
| 10.10  |   | Employment Agreement  dated April 22, 2005, between General Maritime Subsidiary Corporation  and Jeffrey D. Pribor. (13)                                                                                                                                                                                                                   |
| 10.11  |   | Employment Agreement  dated April 22, 2005, between General Maritime Subsidiary Corporation  and John C. Georgiopoulos. (13)                                                                                                                                                                                                               |
| 10.12  |   | General Maritime  Corporation Change of Control Severance Program for U.S. Employees. (*)                                                                                                                                                                                                                                                       |

 

104

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| 10.13 |   | Restricted Stock Grant  Agreement dated December 21, 2005 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (14)                         |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14 |   | Form of Restricted  Stock Grant Agreement dated December 21, 2005 between General Maritime  Subsidiary Corporation and certain senior executive officers. (14) |
| 10.15 |   | Restricted Stock Grant  Agreement dated May 18, 2006 between General Maritime Subsidiary  Corporation and John O. Hatab. (15)                                       |
| 10.16 |   | Restricted Stock Grant  Agreement dated May 18, 2006 between General Maritime Subsidiary  Corporation and Rex W. Harrington. (15)                                   |
| 10.17 |   | Restricted Stock Grant  Agreement dated May 18, 2006 between General Maritime Subsidiary  Corporation and William J. Crabtree. (15)                                 |
| 10.18 |   | Restricted Stock Grant  Agreement dated May 18, 2006 between General Maritime Subsidiary  Corporation and Peter S. Shaerf. (15)                                     |
| 10.19 |   | Restricted Stock Grant  Agreement dated October 23, 2006 between General Maritime Subsidiary  Corporation and Stephen A. Kaplan. (15)                               |
| 10.20 |   | Restricted Stock Grant  Agreement dated December 18, 2006 between General Maritime Subsidiary  Corporation and John P. Tavlarios. (15)                              |
| 10.21 |   | Restricted Stock Grant  Agreement dated December 18, 2006 between General Maritime Subsidiary  Corporation and Jeffrey D. Pribor. (15)                              |
| 10.22 |   | Restricted Stock Grant  Agreement dated December 18, 2006 between General Maritime Subsidiary  Corporation and John C. Georgiopoulos. (15)                          |
| 10.23 |   | Restricted Stock Grant  Agreement dated December 18, 2006 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (15)                         |
| 10.24 |   | Share Repurchase  Agreement between General Maritime Subsidiary Corporation and OCM Capital  Opportunities Fund, L.P. dated January 4, 2006. (16)                   |
| 10.25 |   | Restricted Stock Grant  Agreement dated April 2, 2007 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (17)                             |
| 10.26 |   | Restricted Stock Grant  Agreement dated April 2, 2007 between General Maritime Subsidiary  Corporation and John P. Tavlarios. (17)                                  |
| 10.27 |   | Restricted Stock Grant  Agreement dated April 2, 2007 between General Maritime Subsidiary  Corporation and Jeffrey D. Pribor. (17)                                  |
| 10.28 |   | Restricted Stock Grant  Agreement dated April 2, 2007 between General Maritime Subsidiary  Corporation and John C. Georgiopoulos. (17)                              |
| 10.29 |   | Restricted Stock Grant  Agreement dated April 2, 2007 between General Maritime Subsidiary  Corporation and Peter S. Bell. (17)                                      |
| 10.30 |   | Restricted Stock Grant  Agreement dated April 2, 2007 between General Maritime Subsidiary Corporation  and Milton H. Gonzales, Jr. (17)                        |
| 10.31 |   | Restricted Stock Grant  Agreement dated June 29, 2007 between General Maritime Subsidiary  Corporation and John O. Hatab. (18)                                      |
| 10.32 |   | Restricted Stock Grant  Agreement dated June 29, 2007 between General Maritime Subsidiary  Corporation and Rex W. Harrington. (18)                                  |
| 10.33 |   | Restricted Stock Grant  Agreement dated June 29, 2007 between General Maritime Subsidiary  Corporation and William J. Crabtree. (18)                                |
| 10.34 |   | Restricted Stock Grant  Agreement dated June 29, 2007 between General Maritime Subsidiary  Corporation and Peter S. Shaerf. (18)                                    |
| 10.35 |   | Restricted Stock Grant  Agreement dated June 29, 2007 between General Maritime Subsidiary  Corporation and Stephen A. Kaplan. (18)                                  |
| 10.36 |   | Restricted Stock Grant  Agreement dated December 21, 2007 between General Maritime Subsidiary  Corporation and Peter C. Georgiopoulos. (17)                         |
| 10.37 |   | Restricted Stock Grant  Agreement dated December 21, 2007 between General Maritime Subsidiary  Corporation and John P. Tavlarios. (17)                              |
| 10.38 |   | Restricted Stock Grant  Agreement dated December 21, 2007 between General Maritime Subsidiary  Corporation and Jeffrey D. Pribor. (17)                              |

 

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| 10.39 |   | Restricted Stock Grant  Agreement dated December 21, 2007 between General Maritime Subsidiary  Corporation and John C. Georgiopoulos. (17)                                                                                                                                                                                                                                                                                                                                                                                        |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.40 |   | Restricted Stock Grant  Agreement dated December 21, 2007 between General Maritime Subsidiary  Corporation and Peter S. Bell. (17)                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.41 |   | Restricted Stock Grant  Agreement dated December 21, 2007 between General Maritime Subsidiary  Corporation and Milton H. Gonzales, Jr. (17)                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.42 |   | ISDA Master Agreement,  dated as of January 8, 2008, between Keybank National Association and  General Maritime Corporation, and the Schedule thereto. (19)                                                                                                                                                                                                                                                                                                                                                                       |
| 10.43 |   | ISDA Master Agreement,  dated as of January 11, 2008, between HSH Nordbank AG and General  Maritime Corporation, and the Schedule thereto. (19)                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.44 |   | ISDA Master Agreement,  dated as of May 2, 2008, between DnB NOR Bank ASA and General Maritime  Corporation, and the Schedule thereto. (20)                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.45 |   | Restricted Stock Grant  Agreement, dated May 14, 2008, among General Maritime Corporation and  Peter S. Shaerf, pursuant to the 2001 Stock Incentive Plan. (21)                                                                                                                                                                                                                                                                                                                                                                   |
| 10.46 |   | Restricted Stock Grant  Agreement, dated May 14, 2008, among General Maritime Corporation and  Rex W. Harrington, pursuant to the 2001 Stock Incentive Plan. (21)                                                                                                                                                                                                                                                                                                                                                                 |
| 10.47 |   | Restricted Stock Grant  Agreement, dated May 14, 2008, among General Maritime Corporation and  William J. Crabtree, pursuant to the 2001 Stock Incentive Plan. (21)                                                                                                                                                                                                                                                                                                                                                               |
| 10.48 |   | Executive Retention  Agreement, dated as of October 17, 2008, by and between Arlington  Tankers, Ltd. and Edward Terino. (22)                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.49 |   | Letter Agreement dated  October 24, 2008 between General Maritime Subsidiary Corporation and  Peter C. Georgiopoulos. (23)                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.50 |   | Amendment to Letter  Agreement, dated December 16, 2008, by and among General Maritime  Corporation, General Maritime Subsidiary Corporation, and Peter C.  Georgiopoulos. (2)                                                                                                                                                                                                                                                                                                                                                    |
| 10.51 |   | 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. (24) |
| 10.52 |   | Letter agreement, dated  as of August 5, 2008 and countersigned by the Company on  September 25, 2008, as amended by the letters dated September 2,  2008 and September 23, 2008, by and among Arlington Tankers, Ltd., The  Royal Bank of Scotland plc and certain subsidiaries of the Company. (22)                                                                                                                                                                                                              |
| 10.53 |   | 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. (*)                                                                                                                                                                                                          |
| 10.54 |   | Amended and Restated  Loan Agreement, dated as of December 16, 2008, between Arlington Tankers  Ltd., a wholly-owned subsidiary of the Registrant, as Borrower, and The Royal  Bank of Scotland plc, as Lender. (25)                                                                                                                                                                                                                                                                                                              |
| 10.55 |   | Amending Agreement,  dated as of December 16, 2008, by and among Arlington Tankers Ltd., the  subsidiary guarantors party thereto, and The Royal Bank of Scotland. (25)                                                                                                                                                                                                                                                                                                                                                           |
| 10.56 |   | 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. (26)                                                                                                                                                                                                                                          |
| 10.57 |   | Employment Agreement,  dated as of December 15, 2008, by and among General Maritime  Corporation, General Maritime Subsidiary Corporation, and Jeffrey D. Pribor.  (26)                                                                                                                                                                                                                                                                                                                                                           |
| 10.58 |   | Employment Agreement,  dated as of December 15, 2008, by and among General Maritime Corporation,  General Maritime Subsidiary Corporation, and John C. Georgiopoulos. (26)                                                                                                                                                                                                                                                                                                                                                        |
| 10.59 |   | General Maritime  Corporation 2001 Stock Incentive Plan (as amended and restated, effective  December 16, 2008). (27)                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.60 |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and John P. Tavlarios. (*)                                                                                                                                                                                                                                                                                                                                                                                                        |

 

106

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| 10.61  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and Jeffrey D. Pribor. (*)           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
| 10.62  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and John C. Georgiopoulos. (*)       |
| 10.63  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and Peter S. Bell. (*)               |
| 10.64  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and Milton H. Gonzales, Jr. (*) |
| 10.65  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and E. Grant Gibbons. (*)            |
| 10.66  |   | Restricted Stock Grant  Agreement dated December 23, 2008 between General Maritime Corporation  and George J. Konomos. (*)           |
| 10.67  |   | Release dated December  31, 2008 between Arlington Tankers Ltd. and Edward Terino. (*)                                                    |
| 10.68  |   | Consulting Agreement  dated January 1, 2009 between General Maritime Corporation and Edward Terino.  (*)                                  |
| 10.69  |   | Time Charter Party for *Stena Companion.*(28)                                                                                             |
| 10.70  |   | Amendment No. 1 to  Time Charter Party for *Stena Companion.*(29)                                                                    |
| 10.71  |   | Amendment No. 2 to  Time Charter Party for *Stena Companion.*(30)                                                                    |
| 10.72  |   | Time Charter Party for *Stena Compatriot.* (28)                                                                                           |
| 10.73  |   | Amendment No. 1 to  Time Charter Party for *Stena Compatriot.*(29)                                                                   |
| 10.74  |   | Amendment No. 2 to  Time Charter Party for *Stena Compatriot.*(31)                                                                   |
| 10.75  |   | Time Charter Party for *Stena Concord.*(28)                                                                                               |
| 10.76  |   | Amendment No. 1 to  Time Charter Party for *Stena Concord.*(29)                                                                      |
| 10.77  |   | Amendment No. 2 to  Time Charter Party for *Stena Concord.*(31)                                                                      |
| 10.78  |   | Time Charter Party for *Stena Consul.*(28)                                                                                                |
| 10.79  |   | Amendment No. 1 to  Time Charter Party for *Stena Consul.* (29)                                                                      |
| 10.80  |   | Amendment No. 2 to  Time Charter Party for *Stena Consul.*(31)                                                                       |
| 10.81  |   | Time Charter Party for *Stena Victory.*(28)                                                                                               |
| 10.82  |   | Amendment No. 1 to  Time Charter Party for *Stena Victory.* (29)                                                                     |
| 10.83  |   | Time Charter Party for *Stena Vision.*(28)                                                                                                |
| 10.84  |   | Amendment No. 1 to  Time Charter Party for *Stena Vision.* (29)                                                                      |
| 10.85  |   | Ship Management  Agreement for *Stena Companion.* (28)                                                                                    |
| 10.86  |   | Amendment No. 1 to  Ship Management Agreement for *Stena  Companion.* (29)                                                           |
| 10.87  |   | Amendment No. 2 to  Ship Management Agreement for *Stena  Companion.*(31)                                                            |
| 10.88  |   | Ship Management  Agreement for *Stena Compatriot.* (28)                                                                                   |
| 10.89  |   | Amendment No. 1 to  Ship Management Agreement for *Stena  Compatriot.*(29)                                                           |
| 10.90  |   | Amendment No. 2 to  Ship Management Agreement for *Stena  Compatriot.* (31)                                                          |
| 10.91  |   | Ship Management  Agreement for *Stena Concord.* (28)                                                                                      |
| 10.92  |   | Amendment No. 1 to  Ship Management Agreement for *Stena  Concord.*(29)                                                              |
| 10.93  |   | Amendment No. 2 to  Ship Management Agreement for *Stena  Concord.* (31)                                                             |
| 10.94  |   | Ship Management  Agreement for *Stena Consul.* (28)                                                                                       |
| 10.95  |   | Amendment No. 1 to  Ship Management Agreement for *Stena  Consul.* (29)                                                              |
| 10.96  |   | Amendment No. 2 to  Ship Management Agreement for *Stena  Consul.*(31)                                                               |
| 10.97  |   | Ship Management  Agreement for *Stena Victory.* (28)                                                                                      |
| 10.98  |   | Amendment No. 1 to  Ship Management Agreement for *Stena  Victory.*(29)                                                              |
| 10.99  |   | Amendment No. 2 to  Ship Management Agreement for *Stena  Victory.* (31)                                                             |
| 10.100 |   | Ship Management  Agreement for *Stena Vision.*(28)                                                                                        |
| 10.101 |   | Amendment No. 1 to  Ship Management Agreement for *Stena  Vision.*(29)                                                               |
| 10.102 |   | Amendment No. 2 to  Ship Management Agreement for *Stena  Vision.* (31)                                                              |
| 10.103 |   | Ship Management  Agreement for *Stena Concept.* (31)                                                                                      |
| 10.104 |   | Ship Management  Agreement for *Stena Contest.* (31)                                                                                      |
| 10.105 |   | Stena Guaranty of Time  Charter for *Stena Companion.* (28)                                                                               |
| 10.106 |   | Stena Guaranty of Time  Charter for *Stena Compatrio.* (28)                                                                               |
| 10.107 |   | Stena Guaranty of Time  Charter for *Stena Concord.* (28)                                                                                 |
| 10.108 |   | Stena Guaranty of Time  Charter for *Stena Consul.* (28)                                                                                  |
| 10.109 |   | Stena Guaranty of Time  Charter for *Stena Concept.*(31)                                                                                  |
| 10.110 |   | Stena Guaranty of Time  Charter for *Stena Contest.* (31)                                                                                 |
| 10.111 |   | Concordia Guaranty of  Time Charter for *Stena Victory.*(28)                                                                              |

 

107

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| 10.112 |   | Concordia Guaranty of  Time Charter for *Stena Vision.*(28)                                                                                                              |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.113 |   | Stena Standby Charter  Agreement for *Stena Victory.*(28)                                                                                                                |
| 10.114 |   | Stena Standby Charter  Agreement for *Stena Vision.*(28)                                                                                                                 |
| 10.115 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Companion.*(28)                                                                                  |
| 10.116 |   | Stena Guaranty of Off-Hire  and Replacement of Ship Manager for *Stena  Compatriot.*(28)                                                                                 |
| 10.117 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Concord.*(28)                                                                                    |
| 10.118 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Consul.*(28)                                                                                     |
| 10.119 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Victory.*(28)                                                                                    |
| 10.120 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Vision.*(28)                                                                                     |
| 10.121 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Concept.*(31)                                                                                    |
| 10.122 |   | Stena Guaranty of  Off-Hire and Replacement of Ship Manager for *Stena  Contest.*(31)                                                                                    |
| 10.123 |   | Arlington Guaranty of  Time Charter for *Stena Companion.*(28)                                                                                                           |
| 10.124 |   | Arlington Guaranty of  Time Charter for *Stena Compatriot.*(28)                                                                                                          |
| 10.125 |   | Arlington Guaranty of  Time Charter for *Stena Concord.*(28)                                                                                                             |
| 10.126 |   | Arlington Guaranty of  Time Charter for *Stena Consul.*(28)                                                                                                              |
| 10.127 |   | Arlington Guaranty of  Time Charter for *Stena Victory.*(28)                                                                                                             |
| 10.128 |   | Arlington Guaranty of  Time Charter for *Stena Vision.*(28)                                                                                                              |
| 10.129 |   | Arlington Guaranty of  Time Charter for *Stena Concept.* (31)                                                                                                            |
| 10.130 |   | Arlington Guaranty of  Time Charter for *Stena Contest.*(31)                                                                                                             |
| 10.131 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Companion.*(28)                                                                                             |
| 10.132 |   | Arlington Guaranty of Ship  Management Agreement for *Stena Compatriot.*(28)                                                                                             |
| 10.133 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Concord.*(28)                                                                                               |
| 10.134 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Consul.*(28)                                                                                                |
| 10.135 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Victory.*(28)                                                                                               |
| 10.136 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Vision.*(28)                                                                                                |
| 10.137 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Concept.*(31)                                                                                               |
| 10.138 |   | Arlington Guaranty of  Ship Management Agreement for *Stena  Contest.* (31)                                                                                              |
| 10.139 |   | Arlington Tankers Ltd.  2007 Bonus Plan. (32)                                                                                                                            |
| 10.140 |   | Arlington Tankers Ltd.  2008 Bonus Plan. (33)                                                                                                                            |
| 14.1   |   | General Maritime  Corporation Code of Ethics. (34)                                                                                                                       |
| 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)                    Incorporatedby reference to General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on August 6, 2008.

 

(2)                    Incorporatedby reference to General Maritime Corporation’s Report on Form 8-K filedwith the Securities and Exchange Commission on December 16, 2008.

 

(3)                    Incorporatedby reference to General Maritime Corporation’s Registration Statement on Form S-4/Afiled with the Securities and Exchange Commission on October 3, 2008.

 

(4)                    Incorporatedby reference to Amendment No. 4 to General Maritime Subsidiary Corporation’sRegistration Statement on Form S-1, filed with the Securities and ExchangeCommission on June 6, 2001.

 

(5)                    Incorporatedby reference to Amendment No. 3 to General Maritime Subsidiary Corporation’sRegistration Statement on Form S-1, filed with the Securities and ExchangeCommission on May 25, 2001.

 

108

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(6)                    Incorporatedby reference to General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on September 7, 2006.

 

(7)                    Incorporatedby reference to General Maritime Subsidiary Corporation’s Report on Form 8-K/Afiled with the Securities and Exchange Commission on August 7, 2008.

 

(8)                    Incorporatedby reference from Arlington Tankers Ltd. Report on Form 8-K, filed withthe Securities and Exchange Commission on June 30, 2008.

 

(9)                    Incorporatedby reference from Arlington Tankers Ltd. Report on Form 8-K, filed withthe Securities and Exchange Commission on August 6, 2008.

 

(10)              Incorporated byreference to General Maritime Subsidiary Corporation’s Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on March 16, 2005.

 

(11)              Incorporated byreference to General Maritime Subsidiary Corporation’s Quarterly Report on Form 10-Qfiled with the Securities and Exchange Commission on May 10, 2005.

 

(12)              Incorporated byreference to General Maritime Subsidiary Corporation’s Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on April 7, 2005.

 

(13)              Incorporated byreference to General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on April 26, 2005.

 

(14)              Incorporated byreference to General Maritime Subsidiary Corporation’s Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on March 14, 2006.

 

(15)              Incorporated byreference to General Maritime Subsidiary Corporation’s Annual report on Form 10-Kfiled with the Securities and Exchange Commission on March 1, 2007.

 

(16)              Incorporated byreference to General Maritime Subsidiary Corporation’s Quarterly Report on Form 10-Qfiled with the Securities and Exchange Commission on May 9, 2006.

 

(17)              Incorporated byreference to General Maritime Subsidiary Corporation’s Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on February 29, 2008.

 

(18)              Incorporated byreference to General Maritime Subsidiary Corporation’s Report on Form 10-Qfiled with the Securities and Exchange Commission on August 9, 2007.

 

(19)              Incorporated byreference from General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on February 19, 2008.

 

(20)              Incorporated byreference from General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on May 29, 2008.

 

(21)              Incorporated byreference to General Maritime Subsidiary Corporation’s Quarterly Report on Form 10-Qfiled with the Securities and Exchange Commission on August 11, 2008.

 

(22)              Incorporated byreference to Arlington Tankers Ltd.’s Quarterly Report on Form 10-Q filedwith the Securities and Exchange Commission on November 10, 2008.

 

(23)              Incorporated byreference to General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on October 27, 2008.

 

109

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(24)              Incorporated byreference to General Maritime Subsidiary Corporation’s Report on Form 8-Kfiled with the Securities and Exchange Commission on October 23, 2008.

 

(25)              Incorporated byreference to Arlington Tankers Ltd. Report on Form 8-K filed with theSecurities and Exchange Commission on December 16, 2008.

 

(26)              Incorporated byreference to General Maritime Subsidiary Corporation’s Report on Form 8-KAwith the Securities and Exchange Commission on December 19, 2008.

 

(27)              Incorporated byreference to General Maritime’s Form S-8 filed with the Securities andExchange Commission on December 22, 2008.

 

(28)              Incorporated byreference from Arlington Tankers Ltd. Registration Statement on Form F-1filed with the Securities and Exchange Commission on October 24, 2004.

 

(29)              Incorporated byreference from Arlington Tankers Ltd. Annual Report on Form 20-F filedwith the Securities and Exchange Commission on June 6, 2005.

 

(30)              Incorporated byreference from Arlington Tankers Ltd. Report on Form 8-K filed with theSecurities and Exchange Commission on December 16, 2005.

 

(31)              Incorporated byreference from Arlington Tankers Ltd. Report on Form 8-K filed with theSecurities and Exchange Commission on January 16, 2006.

 

(32)              Incorporated byreference from Arlington Tankers Ltd. Report on Form 8-K filed with theSecurities and Exchange Commission on April 26, 2007 and Arlington TankersLtd. Report on Form 8-K filed with the Securities and Exchange Commissionon August 22, 2007.

 

(33)              Incorporated byreference from Arlington Tankers Ltd. Report on Form 8-K filed with theSecurities and Exchange Commission on April 23, 2008.

 

(34)              Incorporated byreference from General Maritime Corporation’s Report on Form 8-K filedwith the Securities and Exchange Commission on February 26, 2009.

 

110

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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 2, 2009.

 
| **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             |       |                                                  |

 

111

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