Free Motion to Dismiss - District Court of Connecticut - Connecticut

Case 3:03-cv-00409-DJS

As filed with the Securities and Exchange Commission on October 26, 2001

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F/A
AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended November 30, 2000 Commission File Number 0-16977

STOLT-NIELSEN S.A.
(Exact name of Registrant as specified in its charter) LUXEMBOURG (Jurisdiction of incorporation or organization) c/o STOLT-NIELSEN LIMITED Aldwych House 71-91 Aldwych London WC2B 4HN, England (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act: None Securities registered or to be registered pursuant to Section 12(g) of the Act: Common Shares, no par value Class B Shares, no par value * Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: Common Shares, no par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Class B Shares, no par value * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Founder's Shares, no par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * 24,194,646** 30,648,690 7,970,864

**

No Class B Shares are outstanding as of the date of this Report. As a result of a share reclassification implemented on March 7, 2001, all Class B Shares were reclassified as Common Shares on a one-for-one basis. The number of outstanding Common Shares excludes 7,688,810 Common Shares owned by a subsidiary.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18

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EXPLANATORY NOTE The Registrant hereby amends its Annual Report on Form 20-F for its fiscal year ended November 30, 2000 (the ``Form 20-F'') pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, by setting forth herein the complete text of Item 4 (Information on the Company), as well as the complete text of Exhibit 10.1 (Consent of Arthur Andersen LLP), Exhibit 10.3 (Company's 2000 Annual Report, pages 13 through 43) and Exhibit 10.4 (Financial Data Schedule). Additionally, all references in Item 3 (Key Information), Item 5 (Operating and Financial Review and Prospects), Item 8 (Financial Information) and Item 18 (Financial Statements) of the Form 20-F to the Registrant's Report on Form 6-K filed on April 12, 2001 shall be deemed to refer to the Registrant's Report on Form 6-K filed on October 26, 2001, which Form 6-K is incorporated herein by reference.

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Item 4. Information on the Company. History and Development of the Company Stolt-Nielsen S.A. was incorporated in Luxembourg in 1974 as the holding company for all of the Group's activities. Stolt's registered office is located at 23, avenue Monterey, L-2086 Luxembourg and it is registered at the Companies' Register of the Luxembourg District Court under the designation ``R.C. Luxembourg B.12.179''. Stolt's principal executive offices are c/o Stolt-Nielsen Limited, Aldwych House, 71-91 Aldwych, London WC2B 4HN, England; telephone number 44-207-611-8960; internet address www.stolt-nielsen.com. The Company's agent for U.S. federal securities law purposes is StoltNielsen Inc., 8 Sound Shore Drive, P.O. Box 2300, Greenwich, Connecticut, U.S. 06836. The Company has 76 offices and facilities and employs approximately 10,000 persons worldwide as of November 30, 2000. Recent Significant Developments SNTG is in the final stages of construction of a fourth tank storage terminal in the U.S., to be located in Braithwaite, Louisiana. The facility is projected to have a storage capacity of approximately 0.8 million barrels of liquid storage and associated ship, rail and trading facilities, and have a total cost in excess of US $40 million. The Braithwaite terminal is expected to become operational in early June 2001. In 2000, SNTG purchased the land and made progress payments on the terminal in Braithwaite, Louisiana. During 2000, SNTG also made progress payments on newbuildings under construction, and final payments on the delivery of six newbuildings. On December 7, 1999, Stolt Offshore completed a transaction to form a joint venture entity, NKT Flexibles I/S (``NKT''), a manufacturer of flexible flowlines and dynamic risers for the offshore oil and gas industry. NKT is owned 51% by NKT Holdings A/S, and 49% by Stolt Offshore. This transaction was effected by the acquisition of Danco A/S, a wholly-owned Norwegian company, which holds the investment in the joint venture entity. The total purchase price was $36 million. On December 16, 1999, Stolt Offshore acquired approximately 55% of the French offshore construction and engineering company ETPM S.A. (``ETPM''), a wholly owned subsidiary of Groupe (GTM S.A. (``GTM''), the construction affiliate of Suez Lyonnaise des Eaux S.A). The remaining 45% was acquired on February 4, 2000. The total purchase price was $350 million. In connection with the ETPM acquisition, Stolt Offshore also entered into a hire purchase arrangement for two ships owned by GTM, the Seaway Polaris and the DLB 801, with an early purchase option after two years. The net present value of this arrangement at acquisition date was approximately $32 million and as at April 30, 2001 stood at approximately $24 million. In early 2000, the Company decided to commercialize its expertise in logistics and procurement. Optimum Logistics Ltd. (``OLL'') was established to provide internet-based logistics software for the chemical and other bulk material industries. PrimeSupplier Ltd. (``PSL'') was established to provide an internet-based total marine procurement system which will make available all products and services needed for marine operations. In June 2000, SSF purchased the remaining 49% of Ocean Horizons SA that it did not own. Ocean Horizons was a producer of Atlantic salmon in Chile. In September 2000, SSF purchased Rokerji La Couronne NV, a smoker and processor of salmon and other seafood products. Also, in September 2000, SSF purchased the remaining 49% of Pacific Aqua Salmon Farmers Ltd. (``PASFL'') that it did not own. PASFL is a producer of Atlantic salmon in British Columbia.

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In December 2000, SSF purchased Australian Bluefin Pty Ltd., a company involved in the ranching of Southern Bluefin tuna, for a total consideration of approximately $30 million. On February 28, 2001, the Company sold a minority stake in Optimum Logistics to Aspen Technology Inc., a global provider of intelligent decision--support and e-business solutions for process industries. This marks a significant milestone in the plan to bring strategic partners into Optimum Logistics. On March 6, 2001, at an extraordinary general meeting of shareholders, the Company's share reclassification was approved, effective as of the beginning of the trading day, March 7, 2001. Under the reclassification, the outstanding non-voting Class B Shares were reclassified as Common Shares on a one-for-one basis. On March 30, 2001, Stolt Offshore entered into an agreement that allowed it to obtain a controlling interest in the Houston based Paragon Engineering Services (``PES'') and has subsequently established a new company, Paragon Europe. Stolt Offshore expects that this acquisition will further broaden its range of engineering skills and enable Stolt Offshore to undertake all of the engineering required on many of the large engineering, procurement, installation and commission contracts that are expected to come into the market in the next few years. Stolt Offshore paid $4.1 million upon conclusion of the sale agreement and is expected to outlay a further $5.0 million by December 31, 2001. Stolt Offshore has a part-contingent, part-actual obligation to pay out a further minimum $12.1 million. This sum could decrease dependent upon the performance of PES, as measured by an earnings before interest, taxes, depreciation and amortization (``EBITDA'') multiple factor. In May 2001, PSL entered into an agreement with OneSea.com Inc. to merge their respective businesses. The Company will hold a controlling interest in PSL, which will be renamed SeaSupplier Ltd., and which will have offices in London, Oslo, Houston, Singapore, Piraeus, and Bermuda. Capital Expenditures Capital asset expenditures by business over the last three years is summarized below. There were no significant divestitures during the three year period.
2000 1999 (In millions) 1998

SNTG: Tankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tankers Containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . Terminals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total SNTG . . . . Stolt Offshore . . . . . . Stolt Sea Farm . . . . . Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$150 27 29 206 62 12 6 $286

$175 9 7 191 91 21 -- $303

$ 206 20 16 242 123 14 -- $ 379

Total SNSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In addition, the cash costs of acquisition of subsidiaries, net of cash acquired, amounted to $120 million, $22 million and $218 million in 2000, 1999 and 1998, respectively. These amounts exclude non-cash costs for acquisitions of $265 million in 2000 and $9 million in 1999. Asset Dispositions In 2000, proceeds from the sale of assets were $72 million including $50 million for tank containers that were leased back and $19 million for Stolt Offshore. In 1999, proceeds from the sale of assets

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were $119 million including $56 million for sale of ships and $52 million for tank container sales. In 1998, proceeds from the sale of assets were $58 million for the sale of ships and other assets. Business Overview General Stolt is a holding company which, through its subsidiaries, is engaged in: the worldwide transportation, storage, and distribution of bulk liquid chemicals, edible oils, acids, and other specialty liquids; subsea services covering all phases of offshore oil and gas operations from exploration to decommissioning; and aquaculture; the production, marketing, and distribution of farmed fish. Stolt also has two Internet-based e-commerce businesses, one focused on bulk logistics; the other on procurement for ship owners and operators. Description of Business Segments Stolt-Nielsen Transportation Group The transportation business is carried out through Stolt-Nielsen Transportation Group Ltd. (``SNTG''), which represented approximately 43% of the Company's 2000 net operating revenue, approximately 87% of 2000 income from operations, and approximately 54% of total assets as of November 30, 2000. SNTG is engaged in the worldwide transportation, storage, and distribution of bulk liquid chemicals, edible oils, acids, and other specialty liquids. These products are carried on worldwide seaborne trade routes for the producers, refiners, and distributors of such products, as well as for trading, end-manufacturing, and industrial companies. Several of SNTG's largest customers are among the world's major chemical companies. Parcel tankers and tank containers carry similar products with parcel tankers typically used to transport lots greater than 150 metric tons, while tank containers are typically more economical for the transportation of smaller lots. SNTG's terminal operations facilitate the turnaround of its parcel tankers. The different operations of SNTG share many of the same customers and employ many of the same chemical handling and cleaning technologies. While the parcel tanker operations remain SNTG's single largest activity, the expansion of its tank container operations and storage and distribution services has increasingly enabled SNTG to provide integrated logistics solutions for its customers' transportation requirements. SNTG offers fully integrated transport and logistic services including intercontinental parcel tanker, coastal parcel tanker, river parcel tanker, tank container, rail, and storage. Parcel Tanker Operations SNTG has been a pioneer in the parcel tanker industry, an industry which derives its name from the Group's first operating company, Parcel Tankers Inc. (``PTI''), which was incorporated in 1959. PTI subsequently changed its name to Stolt- Nielsen Transportation Group Ltd. SNTG is one of the largest operators of parcel tankers in the world. As of March 31, 2001, SNTG marketed a fleet of 142 parcel tankers, product tankers, and river tankers ranging in size from approximately 1,200 to 46,000 deadweight tons (``dwt'') (of which 79 were over 10,000 dwt), and totaling approximately 2.5 million dwt. The parcel tanker industry occupies a market niche in the worldwide tanker trade and represents only about 5% of the dwt of the international tanker fleet. Unlike crude oil tankers which generally load a full cargo at one port for one customer and discharge at one destination, parcel tankers, as the name implies, carry many cargoes (as many as 58 parcels) for many customers on the same voyage and load and discharge cargo at many ports. A parcel tanker may carry a wide range of bulk liquids shipped in parcels of several hundred to several thousand tons each.

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To facilitate handling of the diverse range of products carried by parcel tankers, the fleet is comprised of highly specialized ships. SNTG's sophisticated intercontinental parcel tankers typically have 45 to 58 separate cargo tanks of varying sizes to permit the carriage of up to that number of fully segregated cargoes. The tanks are made of stainless steel or specially coated or lined steel to maintain the integrity of the variety of chemicals and other products carried and to facilitate cleaning. In addition, many tanks have independent heating and cooling systems to provide temperature control for each cargo. The level of sophistication of parcel tankers is reflected in newbuilding costs that are substantially higher than for equivalently-sized product tankers. SNTG's parcel tanker fleet covers nearly all of the major international trade routes served by the industry. SNTG operates its ships on round-trip voyages with cargo carried on both outbound and inbound legs. These patterns result in high load factors, with ships seldom sailing without cargo. SNTG operates its major intercontinental services through the Stolt Tankers Joint Service (``STJS'' or ``Joint Service''), an arrangement for the coordinated marketing, operation, and administration of the fleet of parcel tankers owned or chartered by the Joint Service participants in the deep sea intercontinental market. The Joint Service participants include affiliates and non-affiliates of the Company. This fleet currently is comprised of 74 parcel tankers totaling approximately 2.2 million dwt. Of these, SNTG owns 44 ships and time-charters two ships for participation in the STJS. The Joint Service operates seven ships owned by NYK Stolt Tankers, S.A. (``NYK Stolt'', 50%owned by the Company), three ships owned by Rederi AB Sunship, two ships owned by Barton Partner Limited, five ships owned by Bibby Pool Partner Limited and two ships owned by Unicorn Lines (Pty) Limited. The STJS currently has an additional nine tankers on time-charter through its agent Stolt Tankers Inc. (``STI''). Each ship in the STJS is assigned an earnings factor based upon its cargo carrying capacity and technical capabilities. The profitability of each ship is determined by its share of the STJS results, and not by the specific voyages performed. This enables the management of the STJS to schedule the fleet to seek to optimize its total results. STI, a Liberian corporation wholly owned by the Company, acting as agent for the STJS, enters into contracts with third parties on behalf of the STJS. The STJS ships are marketed by SNTG's professional chartering personnel worldwide using proprietary marketing and cargo tracking information systems as part of SNTG's worldwide network of chemical transportation and distribution services. Management believes that SNTG's ships operating in the STJS derive higher utilization, revenues, and profitability than competitors operating outside a similar pooling arrangement. SNTG also operates tankers in six regional markets, three of which are in conjunction with joint venture partners. The Stolt NYK Asia Pacific Services Inc. (``SNAPS'') joint venture operates between East Asia, Southeast Asia, and Australia. The Stolt NYK Australia Pty. Ltd. (``SNAPL'') joint venture operates within the Australian coastal and trans-Tasman markets. Both the SNAPS and SNAPL tankers are marketed by SNTG's offices in these areas. The Stolt-Nielsen Inter-Europe Service (``SNIES'') operates small tankers in European coastal waters. The Stolt-Nielsen Inland Tanker Service (``SNITS'') currently operates 37 inland tankers on the River Rhine and the adjacent Rotterdam Antwerp waterways. SNTG manages all of its owned ships and employs its own seafarers. For its shipowning activities SNTG has secured International Ship Management Association (``ISMA'') Quality Assurance System certification, which includes International Standards Organization (``ISO'') 9002 and International Safety Management (``ISM'') certifications. SNTG has also secured ISO 9002 certification for its chartering and operations activities worldwide. SNTG personnel coordinate most of the marketing and sales efforts directly with SNTG's parcel tanker customers. In some markets third-party brokers support this effort. SNTG's top ten tanker

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customers and top ten products accounted for 33% and 28%, respectively, of the total SNTG deep sea tanker revenue in 2000. SNTG's tanker operations make extensive use of information systems for estimating voyages, scheduling cargo, stowing cargo, billing customers, tracking product handling and cleaning requirements, and managing ships. These systems not only control and track the status of each cargo movement but also keep the customer informed through system-generated estimated time of arrival notices. SNTG's Cargo STOW system has won a Windows World Open award for best Microsoft Windows system for distribution companies. Tank Container Operations The emergence of liquid tank containers as a means of transporting bulk liquids such as chemicals and oils dates back to the early 1970s. Tank containers are stainless steel cylindrical tanks enclosed in rectangular steel frames, with the same outside dimensions as 20 foot dry box containers. They carry 17,000 to 24,000 liters of bulk liquids (16 to 20 tons, depending upon the specific gravity of the product). This compares to the smallest compartment in a parcel tanker which carries approximately 100,000 liters of bulk liquid. Tank containers are fully intermodal and are transported on container ships, rail cars, and trucks owned by others. SNTG is the largest door-to-door operator in the tank container market. SNTG's tank container operations specialize in smaller lot shipments of bulk liquid products. These are primarily operated for door-to-door shipments. SNTG entered the tank container business in 1982 when it acquired United Tank Containers, which at the time operated about 400 tank containers. As the market grew, SNTG steadily expanded its tank container fleet through the purchase or lease of newly- manufactured tank containers and through acquisitions. Shipments in the year 2000 increased from the downturn encountered in 1999. Increases were primarily the result of improved demand in three main operating regions of Asia Pacific, Europe and the United States. Shipment levels in 2001 continue to reflect improved demand particularly from the United States and Asia. The slowing economy in the U.S. has reduced shipments from both Europe and Asia to the United States. As of April 30, 2001, SNTG controls a fleet of approximately 15,350 tank containers of which approximately 9,300 are owned and 6,050 are tank containers that are leased in or managed for customers. SNTG specializes in offering door-to-door tank container transportation services, making all transportation arrangements from origin to destination on behalf of the shipper. SNTG is one of the largest operators in the door-to-door business, deploying approximately 13,150 tank containers in all major worldwide markets. In addition, approximately 2,200 tank containers are managed on behalf of customers. Until February 1999, SNTG also operated a leasing division, which leased tank containers to shippers who wish to operate their own containers. On February 12, 1999, the 2,830 tank containers in the leasing division were sold to TransAmerica Leasing Inc. Since 1999, SNTG has had a net addition of 1,200 tank containers to its fleet, in addition to the remaining commitment for the purchase of 400 new tanks. All of SNTG's tank containers are built and maintained to the standards of the International Maritime Organization (``IMO''), the ISO, the U.S. Department of Transportation and other governmental and private organizations. SNTG requires that all of its tank containers be constructed according to, and have valid certificates in accordance with, the International Convention for Safe Containers (``CSC''). SNTG conducts periodic inspections in conformity with CSC and IMO testing requirements. SNTG's tank container operations requires its own infrastructure for tank cleaning and repair. In Europe and the U.S., third-party contractors primarily perform this work. In Rotterdam, Houston, and

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the Asia Pacific region, SNTG has established its own facilities to ensure high standards of quality, reduce costs, and speed market penetration. The facilities in Japan, China, Taiwan, and Korea are operated through joint ventures. The business systems of SNTG's tank container operations have received ISO 9002 Certification. SNTG's Move/Quote System is used by the tank container personnel on a worldwide basis to schedule, track and bill for all tank container movements. Terminal Operations SNTG has interests in, investments in or alliances with eleven bulk liquid storage terminals. SNTG's terminals offer storage services and consolidate inland waterway and land transportation for more efficient operation and better customer service. SNTG owns and operates three tank storage terminals in the U.S. and one in Brazil, with a combined capacity of approximately 5.1 million barrels of liquid storage. SNTG is in the final stages of construction of a fourth tank storage terminal in the U.S., to be located in Braithwaite, Louisiana with a projected storage capacity of approximately 0.8 million barrels of liquid storage and associated ship, rail and trading facilities at a total cost in excess of $40 million. The Braithwaite terminal will become operational in early June 2001. Each of these terminals serves as a hub for the regional storage and distribution of liquid chemicals, vegetable oils, and other products, providing storage and handling services to SNTG's parcel tankers and for third parties. SNTG's terminal operations also have interests in three ventures, with a combined storage capacity of 3.8 million barrels: (i) a 40% interest in Stolthaven Westport, a joint venture with the Bolton Group in Malaysia; (ii) a 37% interest in Dovechem Terminal Holdings Ltd., a publicly-traded company listed on the Singapore Stock Exchange, with terminals and drum manufacturing interests in China, Singapore, Indonesia and Malaysia; and (iii) a 50% interest in Jeong II Tank Terminal which has a terminal facility in Ulsan, South Korea. SNTG also has an arrangement with subsidiaries of Vopak pursuant to which it has preferential berthing rights to two terminals located in Rotterdam, which is SNTG's parcel tanker operations' most frequently called port. The following table contains information on SNTG's terminals:
Storage Location % Holding Year Acquired Capacity (barrels)

Perth Amboy, New Jersey . Houston, Texas . . . . . . . . Chicago, Illinois . . . . . . . . Santos, Brazil . . . . . . . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

100% 100% 100% 100%

1983 1982 1975 1982

2,258,400 1,731,500 741,100 349,400 5,080,400

Sub Total . . . . . . . . . . . . . . . . . . . . . Joint Ventures Westport, Malaysia . Kuantan, Malaysia . Shenzen, China . . . Shanghai, China . . . Ulsan, South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40% 10% 26% 26% 50% 1998 1999 1998-2000 1998-2000 1999

224,900 237,800 641,200 417,100 2,252,300 3,773,300 8,853,700

Sub Total . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . .

SNTG obtained ISO 9002 certification for its terminal business systems in Houston, Chicago, Perth Amboy, and Santos. SNTG implemented a Terminal Automation System for tracking customer contracts and tank inventory, as well as for producing customer bills and reports.

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SNTG also operates a fleet of 347 leased railroad tank cars consisting of general-purpose low-pressure and specialized high-pressure tank cars. Stolt Offshore The offshore contracting business is carried out through Stolt Offshore S.A. (``Stolt Offshore''), (formerly named Stolt Comex Seaway S.A.) a subsidiary in which the Company currently holds a 53% economic interest and a 61% voting interest. Stolt Offshore was formed by the Company through the acquisitions of Stolt-Nielsen Seaway A/S (``Seaway'') in March 1992 and Comex Services S.A. (``Comex'') in June 1992. Seaway was founded by Jacob Stolt-Nielsen, the Company's Chairman, in 1973 to provide services for offshore oil and gas exploration and production in the North Sea. Comex, which was founded in 1961, was a leading worldwide underwater services contractor with a strong presence in major offshore markets outside the U.S. Stolt Offshore completed an initial public offering in May 1993 and secondary offerings in March and November 1997. Stolt Offshore is one of the largest offshore services contractors in the world, providing technologically sophisticated offshore engineering, flowline and pipeline lay, subsea construction, inspection, maintenance, and repair services to its customers in the offshore oil and gas industry. Stolt Offshore develops and applies innovative and cost-efficient offshore techniques that address the evolving technical needs of oil and gas companies that are increasingly developing oil and gas fields in deeper and more demanding offshore environments. Stolt Offshore has operated in more than 60 countries worldwide and currently operates in over 20 countries. Stolt Offshore's business backlog at April 30, 2001 stands at $1,250 million, of which $683 million is for 2001. This compares to a backlog at April 30, 2000 of $1,100 million, of which $574 million was for 2000. The services offered by Stolt Offshore cover all phases of offshore oil and gas operations from exploration to decommissioning. During the exploration phase, Stolt Offshore provides seabed survey and drilling support services. During the development phase, Stolt Offshore provides, with partners when appropriate, engineering design, component procurement, and installation of offshore equipment, well control umbilicals, flowlines, trunklines and production risers. During the production phase, which may continue for many years, Stolt Offshore inspects, maintains, and repairs platforms, pipelines, flowlines, and subsea equipment. Following the production phase, Stolt Offshore provides field decommissioning services including the removal of offshore structures and subsea equipment. Stolt Offshore conducts four principal activities within its regional business segments: Pipelay and Engineering, Procurement, Installation and Commission (``EPIC''), Subsea Construction, Special Projects and Regional Services. Pipelay and EPIC refers to projects involving offshore fields where platforms are part of the infrastructure or where there is a trunkline or a major offshore element of pipeline work. It can also include platform design and fabrication or can include tieback projects where there is a large element of pipelaying or pipeline procurement. Subsea Construction refers to projects where there may be umbilical laying, trenching, flexible flowline laying, jumper installation and hyperbaric welding. Tieback projects which use most of these specific elements but which may include a small element of steel flowline laying are included in the Subsea Construction category. Special Projects are large or complex offshore projects where Stolt Offshore has some influence over the field architecture and could include design, engineering, offshore structures, floating production storage and offloading ships and very deep water. These projects may include complex commercial and contracting strategies. Regional Services tend to be local business projects which can be supported by Regional departments. They can include engineering studies; drill support; or inspection, repair and maintenance operations, shallow water pipelay, for example. In addition to its main product lines, Stolt Offshore offers heavy lift services through a joint venture company, Seaway Heavy Lifting Limited (``SHL''), which operates the heavy lift ship, Stanislav

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Yudin, chartered from Stolt Offshore's joint venture partner Lukoil-Kaliningradmorneft Plc. (``LKMN''), a subsidiary of a major Russian oil company, Lukoil. Stolt Offshore also manufactures flexible flowlines and dynamic flexible risers through the joint venture company NKT Flexibles I/S. The remainder of the joint ventures in which Stolt Offshore has an interest have been entered into on a project- specific basis to enhance the range of services provided to the customer. In these joint ventures, Stolt Offshore will typically have interests ranging from 22% to 55%. Stolt Offshore operates one of the world's most advanced fleets of subsea construction and flowline lay ships, from which the majority of Stolt Offshore's subsea activities are performed. Stolt Offshore owns or charters a fleet consisting of 4 flexible flowline and umbilical lay ships, 9 construction support ships, 5 survey, inspection, repair and maintenance ships, 12 construction ships, 7 heavy lift ships and barges, 100 ROVs, and 13 hardsuits. Investments in the fleet since 1993 include the acquisition and completion of the Seaway Eagle, a multi-purpose flowline lay and subsea construction ship, the conversion of the Seaway Osprey to lay flexible flowlines and flowline bundles, the acquisition of the Seaway Falcon and its conversion to a rigid and flexible flowline lay ship, the conversion of the Seaway Condor to a flexible flowline and umbilical lay ship, the acquisition of the Seaway Hawk, a subsea construction ship, and continuous investment in new ROV technology and construction equipment. Stolt Offshore also took over the long-term lease on the Discovery, a multipurpose subsea construction ship, as part of an asset swap with SubSea Offshore Limited in 1997. During 1999, Stolt Offshore entered into a long-term charter for the NTL 900 a derrick/lay barge. In addition, the Seaway Kingfisher, a diverless inspection, repair and maintenance ship, was introduced into the North Sea market at the end of August 1998. On December 7, 1999, Stolt Offshore completed a transaction to form a joint venture entity, NKT Flexibles I/S (``NKT''), a manufacturer of flexible flowlines and dynamic flexible risers for the offshore oil and gas industry. NKT is owned 51% by NKT Holdings A/S, and 49% by Stolt Offshore. This transaction was effected by the acquisition of Danco A/S, a wholly-owned Norwegian company, which holds the investment in the joint venture entity. Stolt Offshore issued 1.8 million Stolt Offshore Class A shares with an average guaranteed value of $14.475 per share and paid $10.5 million in cash for its 49% interest in NKT, for a total consideration of $36 million. On December 16, 1999, Stolt Offshore acquired approximately 55% of the French offshore construction and engineering company ETPM S.A. (``ETPM''), a wholly-owned subsidiary of Groupe GTM S.A. (``GTM''), the construction affiliate of Suez Lyonnaise des Eaux S.A. The remaining 45% was acquired on February 4, 2000. The purchase price was comprised of $111.6 million in cash; the issuance of 6.1 million Stolt Offshore Class A shares at a maximum guaranteed price of $18.50 per share, giving a value of $113.6 million; and acquisition costs of $3.4 million. Stolt Offshore also entered into a hire purchase arrangement for two ships owned by GTM, the Seaway Polaris and the DLB 801, with an early purchase option after two years. The net present value by of this arrangement at the date of acquisition was $32.0 million. In addition, Stolt Offshore assumed debt of $18.4 million that was due from ETPM to GTM and assumed debt of $71.0 million that was due to third parties. The total purchase price was $350.0 million. On August 18, 1998, Stolt Offshore acquired the Ceanic Corporation for a cash purchase price of approximately $218.9 million, including transaction costs. The transaction has been accounted for under the purchase method of accounting. The purchase price generated goodwill of approximately $114.8 million at November 30, 1998. This was adjusted during 1999 to $122.1 million. The adjustment reflects a reassessment of the value of certain intangible assets within Ceanic and their related deferred tax liabilities. The goodwill is being amortized on a straight-line basis over 25 years.

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The acquisition of ETPM also gives Stolt Offshore access to key assets including one combined heavy lift barge, three lay barges, one flowline lay ship, one construction support ship and two fabrication yards in West Africa. These assets are complimentary to the existing assets of Stolt Offshore with the LB200 holding world records for pipelay in the challenging conditions of the North Sea and the Seaway Kestrel (previously named Norlift) providing an alternative to the Seaway Falcon for pipelay. Stolt Sea Farm Stolt Sea Farm Holdings plc. (``SSF''), wholly-owned by Stolt, produces, processes, and markets high quality seafood products, including Atlantic salmon, salmon trout, turbot, halibut, sturgeon, caviar, tilapia and tuna. The predecessor of SSF was founded by Jacob Stolt-Nielsen in 1972 and acquired by the Company in late 1991. SSF produces, processes, and markets high quality seafood with salmon production sites in Norway, North America, Chile and Scotland; salmon trout production sites in Norway; tilapia production sites in Canada; turbot production sites in Spain, Portugal, Norway, and France; halibut production sites in Norway; a tuna production site in Australia; and sturgeon and caviar production sites in the U.S. SSF has worldwide marketing operations with sales organizations covering North America, Europe, and Asia Pacific. The aquaculture industry is the fastest growing segment of the food industry with an average annual growth rate of 12% between 1984 and 2000, and overall growth of 39% over the last 3 years. As the world population grows and individuals increasingly seek healthier products like fish, and the supply of wild catch seems to have reached its peak level, the demand for farmed fish is expected to increase. Approximately 85% of SSF's revenue is derived from the sale of Atlantic salmon. The remaining 15% of SSF's revenue is from the other species mentioned above and other seafood products. The world's main seafood markets are Asia, North America and Europe. Traditionally, there have been several middle-men between producers and consumers of fresh seafood. The majority of fish farmers are not set up with their own world wide sales and marketing organizations, and these companies will typically sell their fish to an exporter or a domestic wholesaler, which in turn will sell to importers, wholesalers and distributors, which in turn will sell to food service operators and retailers (restaurants and supermarkets). The overall trend in Europe, North America and Asia seems, with a varying degree of speed and concentration, to move towards a consolidation into fewer and larger vertically integrated fish farming companies selling their products more directly to food service operators, restaurant chains and supermarket chains, which in turn, to an increasing degree, are demanding a higher degree of value added and consumer convenient products. Of the main competitors in the industry, SSF is one of three currently with a presence in all the four major farming regions- Norway, Chile, Canada and the U.K allowing SSF to supply customers in all major market at competitive prices year round. SSF is the only producer with an in-market sales organization in all major markets. SSF's position in the industry is strengthened by the fact that SSF is one of the main salmon producing companies that has further diversified into farming various new species which offer product cross selling advantages and further earnings opportunities. In August 1999, SSF acquired International Aqua Foods Ltd. (``IAF''), a publicly listed company, for approximately $11.0 million and the assumption of $9.2 million in debt. IAF was involved in salmon and tilapia hatchery operations in Canada and the U.S., and salmon and trout farming in Chile. In June 2000, SSF purchased the remaining 49% of Ocean Horizons SA that it did not own. Ocean Horizons is a producer of Atlantic salmon in Chile, and SSF acquired its initial 51% interest in the company when it acquired IAF in 1999. In September 2000, SSF purchased Rokerij La Couronne NV, a smoker and processor of salmon and other seafood products.

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In September 2000, SSF purchased the remaining 49% of Pacific Aqua Salmon Farmers Ltd. (``PASFL'') that it did not own. PASFL is a producer of Atlantic salmon in British Columbia, and SSF acquired its initial 51% interest in the company when it acquired IAF in 1999. The seller of the 49% interest in PASFL was EWOS Canada Ltd., a subsidiary of Statkorn Holdings A/S. The agreement involved SSF acquiring the remaining 49% of the company, while Statkorn acquired the assets and inventory owned by SSF at the Tofino, British Columbia sites. The total consideration for the three aforementioned SSF acquisitions in 2000 was approximately $9 million. In December 2000, SSF purchased Australian Bluefin Pty Ltd., a company involved in the ranching of Southern Bluefin tuna, for a total consideration of approximately $30 million. Optimum Logistics Optimum Logistics Ltd. (``OLL'') was established in Bermuda on December 30, 1999. OLL offers an internet-based logistics system for global supply chain management for companies engaged in the bulk materials industries. OLL connects all participants in a producer's supply chain, such as carriers, terminal operators, receivers, surveyors, and freight forwarders, to a single communication and value added services system. This system, TransLink (``TransLink''), enables OLL's customers to improve the efficiency of their entire supply chains. OLL has focused its initial technological development and marketing efforts on the bulk marine segment of the chemicals industry. During 2000, efforts were directed toward the development of logistics products and pilot testing of these products with various chemical producers. During 2000, OLL did not generate revenues and incurred operating losses and negative operating cash flow. OLL relied on equity and debt financing from SNTG to fund its operations. On February 28, 2001, SNTG sold a minority interest in OLL to Aspen Technology, Inc., a global provider of intelligent decision-support and e-business solutions for process industries. Prime Supplier In early 2000, the Company established Prime Supplier Ltd. (``PSL''), which offers an Internetbased total marine procurement system which will make available products and services needed for marine operations. The system enables ship operators to electronically select, purchase and arrange delivery for all the ship's needs for consumables, spare parts and other services. PSL employs a proprietary supplier and price database to intelligently manage the procurement process, including transportation. During 2000, PSL did not generate revenues and incurred operating losses and negative operating cash flow. PSL relied on equity and debt financing from SNTG to fund its operations. In May 2001, PSL entered into an agreement with OneSea.com Inc. to merge their respective businesses. The Company will hold a controlling interest in PSL, which will be renamed SeaSupplier Ltd., and which will have offices in London, Oslo, Houston, Singapore, Piraeus, and Bermuda.

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Financial Summary of Businesses The following table sets out the net operating revenue, income from operations and identifiable assets for each of the Company's businesses for the year ended November 30, 2000:
Net Operating Revenue Income From Operations ($ in Millions) Identifiable Assets

Stolt-Nielsen Transportation Group Tankers . . . . . . . . . . . . . . . . . . . . Tank Containers . . . . . . . . . . . . . Terminals . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . Stolt Offshore . . . . . . Stolt Sea Farm . . . . . Corporate and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

692 224 59 975 983 311 --

30% 10% 3% 43% 43% 14% -- 100%

$ 40 20 19 79 (5) 31 (14) $ 91

44% 22% 21% 87% (6)% 34% (15)% 100%

$1,612 157 262 2,031 1,403 284 9 $3,727

43% 4% 7% 54% 38% 8% -- 100%

Total . . . . . . . . . . . . . . . . . . . . . . Geographic Distribution

$ 2,269

The following table sets out net operating revenue by country for the Company's reportable segments. SNTG net operating revenue is allocated on the basis of the country in which cargo is loaded. Tankers and Tank Containers operate in a significant number of countries. Revenues from specific foreign countries which contribute over 10% of total net operating revenue are disclosed separately. SSF net operating revenue is primarily allocated on the basis of the country in which the sale is generated. Stolt Offshore net operating revenue is primarily allocated based on the geographic distribution of its activities. SEAME represents Southern Europe, Africa and the Middle East.
For the years ended November 30, 2000 1999 1998 ($ in Millions)

Net operating revenue: Stolt-Nielsen Transportation Group: Tankers: United States . . . . . . . . . . . . . . . . . . . . . South America . . . . . . . . . . . . . . . . . . . . Netherlands . . . . . . . . . . . . . . . . . . . . . . . Other Europe . . . . . . . . . . . . . . . . . . . . . Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . Other Asia . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . Less commissions, sublet costs, transshipment

................ ................ ................ ................ ................ ................ ................ and barging expenses

. . . . . . . .

. . . . . . . .

. . . . . . . .

$ 278 58 47 105 54 118 85 (53) 692

$ 272 48 43 100 44 110 54 (53) 618

$ 294 46 40 110 47 138 41 (58) 658

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For the years ended November 30, 2000 1999 1998 ($ in Millions)

Tank Containers: United States . South America France . . . . . . Other Europe . Japan . . . . . . . Other Asia . . . Other . . . . . . .

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80 9 23 55 16 39 2 224

73 7 24 46 25 30 1 206 49 6 55 879 43 156 165 57 56 162 2 641 104 14 21 11 12 48 51 261 $1,781

76 8 22 54 26 28 5 219 48 6 54 931 38 65 98 56 57 335 1 650 79 9 12 10 12 41 53 216 $1,797

Terminals: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total SNTG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stolt Offshore: Asia Pacific . . . . North America . Norway . . . . . . . SEAME . . . . . . South America . United Kingdom Other Corporate Stolt Sea Farm: United States . . Canada . . . . . . . United Kingdom Norway . . . . . . . Spain . . . . . . . . Japan . . . . . . . . Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52 7 59 975 40 122 199 445 53 124 -- 983 118 16 13 52 10 70 32 311 $2,269

Total Stolt Offshore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Stolt Sea Farm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategy

The Company pursues a strategy of seeking to provide sophisticated industrial services to customers in niche markets which demand complex technology. The Company aims to operate in global markets where it is, or believes it can become, the market leader. The Company's investment philosophy is to generate value over the long term. Stolt-Nielsen Transportation Group SNTG's strategy is to become the total transportation logistics supplier for the majority of its client base providing an integrated package of services including global transportation and storage, tracking of

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transportation and inventory, electronic communications of transactions, and supply chain management. SNTG is developing or expanding its capabilities in all of these areas. The demand for chemical transportation services varies with patterns of industrial growth and world trade. Historically, such demand has grown at a greater rate than world trade, which itself has grown faster than industrial production. In 1994, SNTG embarked on a new building program to construct 25 new parcel tankers (of which one ship was cancelled) designed to meet increasing demand for its transportation services and to replace the first generation of purpose-built parcel tankers built in the early to mid-1970s. The ships in the newbuilding program have greater capacity than the units they have replaced and introduce a series of features to increase operational efficiency, reduce operating costs, and be environmentally safer than previous generations of parcel tankers. SNTG's tank container operations provide transportation services for many of the same type of bulk liquids that are carried in parcel tankers, although tank containers transport smaller lots. Generally, parcel tankers are more economical for lots greater than 150 metric tons, whereas tank containers are more economical for smaller lots. A major trend in the tank container market is the conversion from transportation of liquids in drums to tank containers. The transportation of liquids in tank containers provides a cleaner, safer, and more economical means of transportation than by drums. It is SNTG's intention to continue to expand its presence in this market in response to the needs of its customers, and to continue to provide an important link in SNTG's transportation service chain. By using tank containers, SNTG is able to offer door-to-door, just-in-time deliveries. In developing countries in the Asia Pacific region where there is little supporting infrastructure for tank containers, SNTG has been a pioneer in developing cleaning and maintenance facilities. SNTG's terminal operations support its parcel tanker operations by enabling quicker turnaround of the tankers when in port. They also provide hubs for servicing SNTG's customers by integrating storage with sea and land transportation by parcel tanker, rail, and road. It is SNTG's strategy to take advantage of existing infrastructure and to make selective investments to increase the capacity of its existing terminal facilities, as well as to look for new opportunities on a worldwide basis which will support the strategic objectives of expanding its network of services and improving operational efficiency through faster parcel tanker turnaround and the integration of transportation services. Stolt Offshore Stolt Offshore's strategy is to enhance its position as a full-service offshore contractor providing technologically advanced and cost effective life-of-field offshore services to its customers. With the recent merger activities among the major oil companies it is clear that they are now looking for contractors with a greater range of assets and technologies and who are able to offer them a worldwide service for both new construction and field maintenance services. Stolt Offshore's December 1999 acquisition of ETPM enables Stolt Offshore to offer a much wider range of engineering and pipelay services and also to provide fixed or floating production platforms. Stolt Offshore is therefore able to supply a complete field development solution for the first time. This increased capability and capacity has given Stolt Offshore a much stronger presence in West Africa as it can now undertake larger pipelay and EPIC projects. Different operators require differing scopes of service in the various regions of the world. Stolt Offshore now has the ability to offer a complete EPIC contracting service, from wellhead to production platform or to undertake any part of the engineering and installation package that may be required by individual operators.

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Stolt Sea Farm SSF's mission is to position itself as a world leading seafood company; by capitalizing on the potential of aquaculture world-wide, through the long term development of new species and new farming technologies; by adding value to its products through further processing into convenient ``ready-to-eat'' products; and by building its own global sales network, close to its customers, making Sterling and Prodemar branded seafood products conveniently available to the consumer. In its strategy, Stolt Sea Farm emphasizes scale as well as decentralized farming operations, the importance of being fully integrated along the value chain, and the importance of having both a strong local presence in all the major markets and a production platform in all the four major production regions. Stolt Sea Farm focuses on spearheading research and development and taking a position with branded seafood products in several new species. Regulation The Company's businesses are subject to international conventions and U.S. and other governmental regulations which strictly regulate various aspects of the Company's operations. In addition, the Company is required by various governmental and other regulatory agencies to obtain certain permits, licenses, and certificates with respect to its equipment and operations. The kinds of permits, licenses and certificates required in the operations of the Company depend upon a number of factors. The Company believes that it has or can readily obtain all permits, licenses, and certificates necessary to conduct its operations. Some countries require that the Company enter into a joint venture or similar business arrangement with local individuals or businesses in order to conduct business. The Company has entered into such arrangements where necessary. Stolt-Nielsen Transportation Group SNTG is subject to the international and national conventions and regulations which cover ocean shipping generally and the transport of chemicals and oil in bulk specifically. The major international conventions applicable to SNTG's operations include the International Convention on the Safety of Life at Sea; the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978, as amended; the International Convention on the Standards of Training, Certification and Watchkeeping of Seafarers; and the Convention on Civil Liability for Oil Pollution Damage. Applicable national regulations for SNTG's operations in U.S. waters include the Port and Tanker Safety Act, the Hazardous Materials Transportation Act, the Clean Air Act, the Clean Water Act, the U.S. Oil Pollution Act of 1990 (``OPA `90''), and the U.S. Comprehensive Environmental Response, Compensation and Liability Act (``CERCLA'') (see specific discussion on OPA `90 and CERCLA below). In addition, specifically to protect the purity of fats and vegetable oils, SNTG complies with the latest cargo rules established by the National Institute of Oilseed Products in the U.S. and the Federation of Oils, Seeds, and Fats Associations in Europe. SNTG's Dedicated Vegetable Oil Service has been developed as a direct result of these rules. SNTG's river parcel tanker activities are governed by the European Agreement on Regulations for the Carriage of Dangerous Substances on the Rhine and other applicable standards for service on the Rhine River in Europe and by the U.S. Coast Guard safety and pollution prevention regulations. As a foreign-owned corporation, SNTG is prohibited by U.S. Federal law from owning more than a 25% interest in ships operating in the U.S. coastal market and in the U.S. inland waterway system. In addition to many of the regulations governing the parcel tanker operations, SNTG's tank container operations are subject to the International Convention for Safe Containers which establishes guidelines for the construction of tank containers; the International Maritime Dangerous Goods Code

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which regulates the construction and periodic testing of equipment used to transport hazardous packaged liquids; and regulations of other comparable national authorities regarding the use of containers on rail cars and the transport of hazardous materials by rail or road. Additional regulations specific to SNTG's terminal operations in the U.S. are the Resource Conservation and Recovery Act regarding the reporting, recordkeeping, and handling of hazardous waste and the Occupational Safety and Health Act regulating the working conditions at U.S. terminals as well as other business facilities. Terminals located outside of the U.S. are governed by the comparable national and local governmental agencies. U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act OPA `90 sets out various requirements applicable to shipowners and ship operators in U.S. waters including, among other things, standards and requirements covering the construction of ships carrying oil and oil products (as defined in the Act), stringent financial responsibility requirements and expanded contingency planning requirements. OPA `90 also increases shipowners' and ship operators' potential liability for damages and cleanup and removal costs for pollution accidents in U.S. waters. Ship and facility owners and operators are ``responsible parties'' and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all oil spill containment and cleanup costs and other damages arising from oil spills from their ships or facilities. These other damages are defined broadly to include: (i) natural resources damages and the costs of assessment thereof; (ii) real and personal property damages; (iii) net loss to a government entity of taxes, royalties, rents, fees, and other lost revenues; (iv) lost profits or impairment of earning capacity due to property or natural resources damage; (v) net cost of public services necessitated by a spill response, such as protection from fire, safety, or health hazards; and (vi) loss of subsistence use of natural resources. With limited exceptions, OPA `90 requires that all new ships ordered after June 30, 1990, or delivered after January 1, 1994, must be built with double hulls to be allowed to call at U.S. ports. There is a timetable for retrofitting existing ships with double hulls or taking them out of service, depending upon the year the ship was built, its gross tonnage, and whether the ship already has a double bottom or double sides. Since January 1, 1995, double bottom ships of greater than 5,000 gross tons and more than 45 years of age have been required to be retrofitted with double hulls. The age requirement is reduced annually so that by 2005, and until 2015, no such ships may exceed 30 years of age without retrofitting. To operate in U.S. waters after 2015, ships must have both a double bottom and double sides. Double bottom installation has become standard on most parcel tankers and chemical tankers since the IMO regulations for the carriage of hazardous products in bulk became effective. All of SNTG's parcel tankers already have double bottoms. It is SNTG's intention that all tankers ordered in the future will comply with the double hull requirements identified above. The liability provisions of OPA `90 are applicable to ``oil'' as defined in the Act. For this purpose, ``oil'' means oil of any kind or in any form, including, but not limited to, petroleum, fuel oil, sludge, oil refuse, and oil mixed with wastes other than dredged spoil, but does not include any substance which is specifically listed or designated as a ``hazardous substance'' under CERCLA. Some of the chemicals carried on SNTG's ships are covered by the provisions of CERCLA. SNTG's ships frequently carry some parcel cargoes of lubricating oils and additives and the ships' engines are powered by fuel oil. In addition, cargoes of ``clean petroleum products,'' which are generally covered by the provisions of OPA `90, are occasionally carried on SNTG's ships. Animal fat and vegetable oils as well as other non-petroleum oils are included within the OPA `90 definition of ``oil''.

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In compliance with OPA `90 requirements, the Company has obtained Certificates of Financial Responsibility for all of its ships which call on U.S. ports. The effect of the liability provisions of OPA `90 and CERCLA on the shipping industry has not yet been fully determined. OPA `90 increased the limit on shipowners' and ship operators' liability for tankers over 3,000 gross tons to the greater of $1,200 per gross ton or $10 million for damages, cleanup, and removal costs. Owners and operators of onshore facilities, including oil terminals, are liable for removal costs and damages up to a limit of $62 million. However, OPA `90 provides for unlimited liability if the spill was proximately caused by: (i) gross negligence or willful misconduct; (ii) violation of an applicable federal safety, construction or operating regulation by the responsible party, its agents or employees or any person acting pursuant to a contractual relationship with it; or (iii) if the owner or operator fails to report the spill, provide reasonable cooperation in connection with a removal order or, without sufficient cause, to obey an order issued by an authority under a removal regulation. For owners and operators of ships carrying hazardous substances as cargo, the liability provisions under CERCLA are $300 per gross ton or $5 million, whichever is greater. Facility owners and operators are liable for the total of all response costs plus $50 million for damages as defined under CERCLA. The CERCLA damages provisions are broadly similar to those of OPA `90. CERCLA also contains provisions similar to OPA `90 for breaking liability limits. CERCLA contains various reporting provisions, some of which are more detailed than OPA `90. Furthermore, both OPA `90 and CERCLA provide that individual U.S. states may issue their own pollution prevention laws and regulations, which laws and regulations may impose greater liabilities than set out in, and which may differ significantly from, OPA `90 or CERCLA. Many states have, in fact, enacted such provisions which provide for virtually unlimited liability for pollution accidents occurring in their waters. OPA `90 also sets out contingency plan requirements with respect to cleanup and removal of the substances covered by its provisions. OPA `90 also requires expenditure to meet specific response standards for equipment to be kept on board ships. The contingency plan requirements also apply to marine transportation-related facilities, including Coast Guard-regulated onshore oil terminals, tank trucks, and railroad tank cars. OPA `90 has made liability insurance more expensive for shipowners and ship operators and has also caused insurers to consider reducing available liability coverage, although this has not yet occurred. See ``Other Matters--Insurance'' in this Item 4. Stolt Offshore Stolt Offshore's businesses are subject to international conventions and governmental regulations, which strictly regulate various aspects of its operations. In addition, Stolt Offshore is required by various governmental and other regulatory agencies to obtain certain permits, licenses, and certificates with respect to its equipment and operations. The kinds of permits, licenses, and certificates required in the operations of Stolt Offshore depend upon a number of factors. Stolt Offshore believes that it has or can readily obtain all permits, licenses, and certificates necessary to conduct its operations. Some countries require that Stolt Offshore enter into a joint venture or similar business arrangement with local individuals or businesses in order to conduct business in such countries. Stolt Offshore's operations are affected from time-to-time and to varying degrees by political developments and federal and local laws and regulations. In particular, oil and gas production, operations, and economics are affected by price control, tax, and other laws relating to the petroleum industry, by changes in such laws and by constantly changing administrative regulations. Such developments directly or indirectly may affect Stolt Offshore's operations and those of its customers.

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Case 3:03-cv-00409-DJS

Document 57-9

Filed 03/20/2006

Page 19 of 34

Stolt Sea Farm SSF is subject to the laws and regulations of the individual countries, including Norway, Canada, the U.S., Chile and Australia, in which its operations are situated which strict