Exhibit 10.3


 


Date 1 January 2004


 


 


FRONTLINE LTD


as Guarantor


 


- and -


 


SHIP FINANCE INTERNATIONAL LIMITED

AND THE OWNERS (AS DEFINED IN THE GUARANTEE)


as Beneficiaries


 


 


PERFORMANCE GUARANTEE


 


relating to Frontline Shipping Limited

and Frontline Management (Bermuda) Limited


 


 


WATSON, FARLEY & WILLIAMS


London


 

















 


INDEX


 


	
  Clause

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1

  	
  INTERPRETATION

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
  GUARANTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  3

  	
  GUARANTOR’S COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  4

  	
  LIABILITY AS PRINCIPAL AND INDEPENDENT
  DEBTOR

  	
   

  
	
   

  	
   

  	
   

  
	
  5

  	
  ADJUSTMENT OF TRANSACTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  6

  	
  PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7

  	
  ENFORCEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  8

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  9

  	
  SUPPLEMENTAL

  	
   

  
	
   

  	
   

  	
   

  
	
  10

  	
  ASSIGNMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  11

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  12

  	
  INVALIDITY OF RELEVANT DOCUMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  13

  	
  GOVERNING LAW AND JURISDICTION

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTION
  PAGE

  	
   

  



 

















 


THIS
PERFORMANCE GUARANTEE (this “Guarantee”) is made by way of deed as of the 1st
of January 2004


 


BETWEEN


 


(1)                                  FRONTLINE LTD, a company incorporated in
Bermuda whose registered office is at Par-La-Ville Place, 14 Par-La-Ville Road,
Hamilton, Bermuda (the “Guarantor”);


 


(2)                                  SHIP FINANCE INTERNATIONAL LIMITED, a
company incorporated in Bermuda whose registered office is at Par-La-Ville
Place, 14 Par-La-Ville Road, Hamilton, Bermuda (the “Company”, which expression includes its successors and
assigns);and


 


(3)                                  Each
of the Owners as defined in the Charter Ancillary Agreement referred to in the
Recitals below (“Owners”, and
individually, “Owner” which
expression includes their successors and assigns);


 


BACKGROUND


 


(A)                              WHEREAS,  Frontline Shipping Limited, a Bermuda
company (the “Charterer”), and
each of the owners have entered or will enter into certain time charters (the “Charters”) pursuant to which the Charterer
has agreed or will agree to time charter each of the Vessels (as defined in the
Charter Ancillary Agreement) from its respective Owner;


 


(B)                                WHEREAS,
each of the Owners is a direct or indirect wholly-owned subsidiary of the
Company;


 


(C)                                WHEREAS,
the Charterer, the Guarantor, the Company and each of the Owners have entered
or will enter into an agreement (the “Charter
Ancillary Agreement”) with respect to, inter alia, the Charter Service Reserve, the Bonus Payments,
certain deferral rights under the Charters and certain financial covenants of
the Guarantor and the Company.


 


(D)                               WHEREAS,
Frontline Management (Bermuda) Ltd., a Bermuda company (“Frontline Management”), and each of the
Owners have entered or will enter into certain management agreements (the “Management Agreements”) pursuant to which
Frontline Management has agreed or will agree to provide certain services with
respect to, inter alia, the
management and operation of each of the Vessels;


 


(E)                                 WHEREAS,
Frontline Management, the Company and each of the Owners have entered or will
enter into an administrative services agreement (the “Administrative Services Agreement”) pursuant to which
Frontline Management has agreed or will agree to provide certain non-vessel
administrative and other support services;


 


(F)                                 WHEREAS,
the Charterer and Frontline Management are both wholly-owned direct or indirect
subsidiaries of the Guarantor;


 


(G)                                WHEREAS,
in order to induce the Company to enter into the Charter Ancillary Agreement
and the Administrative Services Agreement and in order to induce the Owners to
enter into the Charters, the Charter Ancillary Agreement, the Management
Agreement and the Administrative Services Agreement, the Guarantor is willing
to guarantee (i) certain obligations of the Charterer under the Charters, (ii)
the obligations of the Charterer under the Charter Ancillary Agreement, (iii)
the obligations of Frontline


 

















 


Management
under the Management Agreements and (iv) the obligations of Frontline
Management as service provider under the Administrative Services Agreement;


 


IT
IS AGREED as follows:


 


1                                         INTERPRETATION


 


1.1                               Defined
expressions.  Words and expressions
defined in the Charter Ancillary Agreement shall have the same meanings when
used in this Guarantee unless the context otherwise requires.


 


1.2                               Construction
of certain terms.  In this
Guarantee:


 


“bankruptcy”
includes a liquidation, receivership or administration and any form of
suspension of payments, arrangement with creditors or reorganisation under any
corporate or insolvency law of any country;


 


“Beneficiaries”
means, together, each of the Company, the Owners and any Substitute Owner
together as beneficiaries of this Guarantee and “Beneficiary” means any one of them;


 


“Charter Hire” means
any amount of charter hire payable by the Charterer to an Owner under clause 44
(Charter Hire) of a Charter;


 


“Greenwich Holdings Ltd”
means a company incorporated and existing under the laws of Bermuda;


 


“Guaranteed Obligations”
means each of those obligations of the Charterers and Frontline Management set
out in Clause 2.1 (a), (b) and (c) below;


 


“Relevant Documents” means
each of the Charters, the Charter Ancillary Agreement, the Management
Agreements and the Administrative Services Agreement;


 


“Subsidiaries”
means each of the Charterer and Frontline Management;


 


“Substitute
Owner” means any Substitute Owner as defined in the
Charter Ancillary Agreement.


 


2                                         GUARANTEE


 


2.1                               Guarantee
and indemnity.  The Guarantor
unconditionally and irrevocably:


 


(a)                                  guarantees to each
Beneficiary the full and punctual performance of the obligations of the
Charterer under the Charters and the Charter Ancillary Agreement and the due
payment of all amounts payable by the Charterers under the Charters and the
Charter Ancillary Agreement; provided,
however, that this Guarantee shall not extend to the payment of
Charter Hire;


 


(b)                                 guarantees to each
Beneficiary the full and punctual performance of the obligations of Frontline
Management under the Management Agreements and the due payment of all amounts
payable by Frontline Management under the Management Agreements, including, but
not limited to, any amount payable under the off-hire indemnity given by


 


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Frontline Management under clause 27
(off-hire) of each of the Management Agreements; provided, however, that the Guarantor’s obligations under this
Guarantee with respect to indemnification for environmental matters shall not
extend beyond the protection and indemnity insurance coverage with respect to
any Vessel required by the Owners under the Management Agreements;


 


(c)                                  guarantees to each
Beneficiary the full and punctual performance of the obligations of Frontline
Management under the Administrative Services Agreement and the due payment of
all amounts payable by Frontline Management under the Administrative Services
Agreement;


 


(d)                                 undertakes to pay to
each Beneficiary, on such Beneficiary’s first demand, any amount arising in
respect of or relating to the Guaranteed Obligations or any other amount
arising due to losses, damages or claims arising from non performance by a
Subsidiary of the Guaranteed Obligations, which is not paid by the Subsidiary
when payable; and


 


(e)                                  fully indemnifies
each Beneficiary on its first demand in respect of all claims, expenses,
liabilities and losses which are made or brought against or incurred by such
Beneficiary as a result of or in connection with any obligation or liability
guaranteed by the Guarantor being or becoming unenforceable, invalid, void or
illegal; and the amount recoverable under this indemnity shall be equal to the
amount which such Beneficiary would otherwise have been entitled to recover.


 


2.2                               No
limit on number of demands.  A
Beneficiary may serve more than one demand under Clause 2.1.


 


2.3                               Effectiveness.  The Guarantor’s obligations under Clause 2.1
with respect to any Relevant Document shall be effective as of the effective
date of such Relevant Document notwithstanding the execution and delivery of
such Relevant Document after the date of this Guarantee.


 


3                                         GUARANTOR’S COVENANTS


 


3.1                               Certain
Covenants.  The Guarantor hereby
covenants and undertakes with each Beneficiary that the Guarantor will:


 


(a)                                  procure that the
Charterer use its commercial best efforts to charter the Vessels on market
terms (including, without limitation, ensuring that preferential treatment is
not given to any other vessels owned, managed by or under the control of the
Guarantor or any of its affiliates (including, without limitation, Greenwich
Holdings Ltd and any affiliates thereof) when marketing any of the Vessels);


 


(b)                                 cause the Charterer
not to declare or make any dividend or distribution of any kind whatsoever to
its shareholders (including through a buyback, redemption or repurchase of its
securities) or loan, place deposits, repay or make any other payment in respect
of Indebtedness of the Charterer or any affiliate thereof (other than the
Company and the Subsidiaries) unless (i) the Charterer is then in compliance
with all of its obligations and covenants under the Charter Ancillary
Agreement; (ii) after giving effect to the declaration or payment of any such
dividend or distribution or loan or payment in respect of such Indebtedness,
(A) the Charterer will continue to be in compliance with all of its obligations
and covenants under the Charter Ancillary Agreement, (B) the Charter Service
Reserve equals at least the then applicable Minimum Reserve and (C) the chief


 


3

















 


financial officer of the Charterer certifies
to the Company that the amount of the Charter Service Reserve will equal or exceed
the then applicable Minimum Reserve for at least 30 days after the date of any
such payment (each, a “Payment Date”),
taking into consideration the Charterer’s reasonably expected payment
obligations during such 30-day period; (iii) any charter payments deferred
pursuant to Article III of the Charter Ancillary Agreement have been paid to
the Company prior to any such Payment Date; and (iv) any Bonus Payments
deferred pursuant to Article IV of the Charter Ancillary Agreement have been
paid to the Company prior to any such Payment Date; and


 


(c)                                  not pledge any of its
equity interests in the Charterer or Frontline Management other than in favour
of the Company as contemplated under the Charter Ancillary Agreement.


 


4                                         LIABILITY AS PRINCIPAL AND INDEPENDENT
DEBTOR


 


4.1                               Principal and independent debtor.  The Guarantor shall be liable under this
Guarantee as a principal and independent debtor and accordingly it shall not
have, as regards this Guarantee, any of the rights or defences of a surety.


 


4.2                               Waiver of rights and defences.  Without limiting the generality of Clause
4.1, the Guarantor shall neither be discharged by, nor have any claim against a
Beneficiary in respect of:


 


(a)                                  any amendment or
supplement being made to the Relevant Documents;


 


(b)                                 any arrangement or
concession (including a rescheduling or acceptance of partial payments)
relating to, or affecting, the Relevant Documents;


 


(c)                                  any release or loss
(event though negligent) of any right or interest created by the Relevant
Documents;


 


(d)                                 any failure (even
though negligent) promptly or properly to exercise or enforce any right or
interest created by the Relevant Documents; or


 


(e)                                  any other Relevant
Document or any right or interest in a Relevant Document now being or later
becoming void, unenforceable, illegal or invalid or otherwise defective for any
reason.


 


5                                         ADJUSTMENT OF TRANSACTIONS


 


5.1                               Reinstatement
of obligation to pay.  The Guarantor
shall pay to each Beneficiary on its first demand any amount which the
Beneficiary is required, or agrees, to pay pursuant to any claim by, or
settlement with, a trustee in bankruptcy (or similar) of a Subsidiary on the
ground that the Relevant Document, or a payment by a Subsidiary, was invalid or
on any similar ground.


 


6                                         PAYMENTS


 


6.1                               Method
of payments.  Any amount due under
this Guarantee shall be paid:


 


(a)                                  in immediately
available funds;


 


(b)                                 to such account as the
Beneficiaries may from time to time notify to the Guarantor;


 


4

















 


(c)                                  without any form of
set-off, cross-claim or condition; and


 


(d)                                 free and clear of any
tax deduction except a tax deduction which the Guarantor is required by law to
make.


 


7                                         ENFORCEMENT


 


7.1                               No
requirement to commence proceedings against Subsidiary.  No Beneficiary will be required to commence
any proceedings under, or enforce any Lien created by, a Relevant Document or
any other related document before claiming or commencing proceedings under this
Guarantee.


 


8                                         REPRESENTATIONS AND WARRANTIES


 


8.1                               General.  The Guarantor represents and warrants to
each Beneficiary as follows.


 


8.2                               Status.  The Guarantor is duly incorporated and
validly existing and in good standing under the laws of Bermuda.


 


8.3                               Corporate
power.  The Guarantor has the
corporate capacity, and has taken all corporate action and obtained all
consents necessary for it:


 


(a)                                  to execute this
Guarantee; and


 


(b)                                 to make all the
payments contemplated by, and to comply with, this Guarantee.


 


8.4                               Legal
Validity.  This Guarantee
constitutes the Guarantor’s legal, valid and binding obligations enforceable
against the Guarantor in accordance with its terms subject to any relevant
insolvency laws affecting creditors’ rights generally.


 


9                                         SUPPLEMENTAL


 


9.1                               Continuing
guarantee.  This Guarantee shall
remain in force as a continuing security at all times until the Guaranteed
Obligations and the covenants of the Guarantor under this Guarantee have been
performed in full to the satisfaction of the Beneficiaries.


 


9.2                               Rights
cumulative, non-exclusive.  Each
Beneficiary’s rights under and in connection with this Guarantee are
cumulative, may be exercised as often as appears expedient and shall not be
taken to exclude or limit any right or remedy conferred by law.


 


9.3                               No
impairment of rights under Guarantee. 
If a Beneficiary omits to exercise, delays in exercising or invalidly
exercises any of its rights under this Guarantee, that shall not impair that or
any other right of such Beneficiary under this Guarantee.


 


9.4                               Severability
of provisions.  If any provision of
this Guarantee is or subsequently becomes void, illegal, unenforceable or
otherwise invalid, that shall not affect the validity, legality or
enforceability of its other provisions.


 


5

















 


9.5                               Guarantee
not affected by other security. 
This Guarantee shall not impair, nor be impaired by, any other
guarantee, any Lien or any right of set-off or netting which the Beneficiary
may now or later hold in connection with the Relevant Documents.


 


9.6                               Third
party rights.  A person who is not a
party to this Guarantee has no right under the Contracts (Rights of Third
Parties) Act 1999 to enforce to enjoy the benefit of any term of this Guarantee
except as the parties may otherwise agree in writing.


 


9.7                               Release.  If the Guarantor shall have discharged all
of its actual or contingent obligations under this Guarantee to the
satisfaction of the Beneficiaries, the Guarantor shall be released from its
obligations under this Guarantee.


 


9.8                               Waiver
of Immunity.  To the extent that the
Guarantor may in any jurisdiction claim for itself or its assets or revenues
immunity from suit, execution, attachment (whether in aid of execution, before
judgment or otherwise) or other legal process and to the extent that in any
such jurisdiction there may be attributed to itself, its assets or revenues
such immunity (whether or not claimed), the Guarantor irrevocably agrees not to
claim, and irrevocably waives, such immunity to the full extent permitted by
the laws of such jurisdiction.


 


10           ASSIGNMENT


 


10.1                        Assignment
by Beneficiary.  Each Beneficiary
may assign its rights under and in connection with this Guarantee to a bank or
financial institution.


 


11           NOTICES


 


11.1                        Notices to
Guarantor.  Any notice or demand to
the Guarantor under or in connection with this Guarantee shall be given by
letter, fax or telex at:


 


Frontline Ltd.

Par-La-Ville Place

14 Par-La-Ville Road

Hamilton, Bermuda HM 08

Attention: Finance Department

Facsimile: +1 (441) 295-3494


 


or to such
other address which the Guarantor may notify to each Beneficiary.


 


12           INVALIDITY OF RELEVANT DOCUMENT


 


12.1        Invalidity of Relevant Documents.  In the event of:


 


(a)                                  a Relevant Document
now being or later becoming, with immediate or retrospective effect, void,
illegal, unenforceable or otherwise invalid for any other reason whatsoever,
whether of a similar kind or not; or


 


(b)                                 without limiting the
scope of paragraph (a), a bankruptcy of the Subsidiary, the introduction of any
law or any other matter resulting in the Subsidiary being discharged from
liability under a Relevant Document, or a Relevant Document ceasing to operate
;


 


6

















 


this Guarantee
shall cover any amount which would have been or become payable under or in
connection with a Relevant Document if a Relevant Document had been and
remained entirely valid, legal and enforceable, or the Subsidiary had not
suffered bankruptcy, or any combination of such events or circumstances, as the
case may be, and the Subsidiary had remained fully liable under it for
liabilities whether invalidly incurred or validly incurred but subsequently
retrospectively invalidated; and references in this Guarantee to amounts
payable by the Subsidiary under or in connection with a Relevant Document shall
include references to any amount which would have so been or become payable as
aforesaid.


 


13           GOVERNING LAW AND JURISDICTION


 


13.1        English law.  This Guarantee shall be governed by, and
construed in accordance with, English law.


 


13.2                        Arbitration.  Any dispute arising under this Agreement
shall be referred to arbitration in London in accordance with the provisions of
the Arbitration Act 1996, or any statutory modification or re-enactment thereof
for the time being in force save to the extent necessary to give effect to this
provisions of this Section. The arbitration shall be conducted in accordance
with the London Maritime Arbitrators Association (LMAA) on terms current at the
time when the arbitration proceedings are commenced. The reference shall be to
three arbitrators: one to be appointed by the Company and the Owners, one to be
appointed by the Guarantor and the third to be appointed by the two arbitrators
so chosen; their decision or that of any two of them shall be final. Nothing
herein shall prevent the parties agreeing in writing to vary these provisions
to provide for the appointment of a sole arbitrator. In cases where neither the
claim nor any counterclaim exceeds the sum of USD50,000 (or such other sum as
the parties may agree) the arbitration shall be conducted in accordance with the
LMAA Small Claims Procedure current at the time when the arbitration
proceedings are commenced.


 


13.3                        English
proceedings.  The Guarantor shall
not commence any proceedings in any country other than England in relation to a
matter which arises out of or in connection with this Guarantee.


 


13.4                        Beneficiary’
rights unaffected.  Nothing in this
Clause 13 shall exclude or limit any right which the Beneficiary may have
(whether under the law of any country, an international convention or
otherwise) with regard to the bringing of proceedings, the recognition or
enforcement of a judgment or any similar or related matter in any jurisdiction.


 


13.5                        Meaning of
“proceedings”.  In this Clause 13, “proceedings” means proceedings of any
kind, including an application for a provisional or protective measure.


 


THIS
GUARANTEE has been duly executed as a deed on the date
stated at the beginning of this Guarantee.


 


7

















 


EXECUTION
PAGE


 


	
  GUARANTOR

  	
   

  
	
   

  	
   

  
	
  EXECUTED as a deed by

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
  /s/
  [ILLEGIBLE]

  	
   

  
	
  FRONTLINE LTD.

  	
  )

  	
   

  
	
  in the
  presence of:

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  
					



 


8