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<SEC-DOCUMENT>0001130319-01-500125.txt : 20010713
<SEC-HEADER>0001130319-01-500125.hdr.sgml : 20010713
ACCESSION NUMBER:		0001130319-01-500125
CONFORMED SUBMISSION TYPE:	F-4
PUBLIC DOCUMENT COUNT:		18
FILED AS OF DATE:		20010711

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TEEKAY SHIPPING CORP
		CENTRAL INDEX KEY:			0000911971
		STANDARD INDUSTRIAL CLASSIFICATION:	DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			C5
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		F-4
		SEC ACT:		
		SEC FILE NUMBER:	333-64928
		FILM NUMBER:		1679093

	BUSINESS ADDRESS:	
		STREET 1:		TK HOUSE, BAYSIDE EXECUTIVE PARK
		STREET 2:		WEST BAY ST & BLAKE RD, PO BOX AP-59213
		CITY:			NASSAU BAHAMAS
		STATE:			C5
		ZIP:			00000
		BUSINESS PHONE:		8093228020

	MAIL ADDRESS:	
		STREET 1:		TK HOUSE, BAYSIDE EXECUTIVE PARK
		STREET 2:		WEST BAY ST & BLAKE RD, PO BOX AP-59213
		CITY:			NASSAU BAHAMAS
		STATE:			C5
		ZIP:			00000

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VIKING STAR SHIPPING INC
		DATE OF NAME CHANGE:	19930914
</SEC-HEADER>
<DOCUMENT>
<TYPE>F-4
<SEQUENCE>1
<FILENAME>o05789f-4.txt
<DESCRIPTION>FORM F-4
<TEXT>

<PAGE>   1

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 2001.
                                                     REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                      ------------------------------------

                                    FORM F-4
                        REGISTRATION STATEMENT UNDER THE
                             SECURITIES ACT OF 1933
                      ------------------------------------

                          TEEKAY SHIPPING CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                               <C>                               <C>
       REPUBLIC OF THE                         4412                            NOT APPLICABLE
       MARSHALL ISLANDS            (Primary Standard Industrial        (I.R.S. Employer Identification
 (State or other jurisdiction      Classification Code Number)                     Number)
     of incorporation or
        organization)
</TABLE>

        TK HOUSE, BAYSIDE EXECUTIVE PARK, WEST BAY STREET AND BLAKE ROAD
             P.O. BOX AP-59213, NASSAU, COMMONWEALTH OF THE BAHAMAS
                                 (242) 502-8820
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)
                      ------------------------------------

                             LAWCO OF OREGON, INC.
                        1211 SW FIFTH AVENUE, SUITE 1500
                               PORTLAND, OR 97204
                              ATTN: KAREN M. DODGE
                                 (503) 727-2000
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                      ------------------------------------

                                   COPIES TO:
                                 ROY W. TUCKER
                                PERKINS COIE LLP
                       1211 S.W. FIFTH AVENUE, SUITE 1500
                               PORTLAND, OR 97204
                                 (503) 727-2000
                      ------------------------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
                      ------------------------------------

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
                                                          PROPOSED MAXIMUM       PROPOSED MAXIMUM       AMOUNT OF
        TITLE OF EACH CLASS            AMOUNT TO BE      OFFERING PRICE PER     AGGREGATE OFFERING     REGISTRATION
  OF SECURITIES TO BE REGISTERED        REGISTERED            SECURITY               PRICE(1)              FEE
- ---------------------------------------------------------------------------------------------------------------------
<S>                                  <C>               <C>                    <C>                    <C>
8.875% Notes Due 2011..............    $250,000,000             100%               $250,000,000          $62,500
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
    registration fee.
                      ------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.

                   SUBJECT TO COMPLETION, DATED JULY 11, 2001

PRELIMINARY PROSPECTUS

                                  $250,000,000

                                      LOGO
                          TEEKAY SHIPPING CORPORATION
         OFFER TO EXCHANGE ALL OUTSTANDING 8.875% SENIOR NOTES DUE 2011
          FOR 8.875% SENIOR NOTES DUE 2011, WHICH HAVE BEEN REGISTERED
                        UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER
     -  We will exchange all outstanding notes that are validly tendered and not
        validly withdrawn for an equal principal amount of exchange notes that
        are freely tradable.
     -  You may withdraw tenders of outstanding notes at any time prior to the
        expiration of the exchange offer.
     -  The exchange offer expires at 5:00 p.m., New York City time, on
                  , 2001, unless extended. We do not currently intend to extend
        the expiration date.
     -  The exchange of outstanding notes for exchange notes in the exchange
        offer will not be a taxable event for U.S. federal income tax purposes.
     -  We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
     -  The exchange notes are being offered in order to satisfy certain of our
        obligations under the exchange and registration rights agreement entered
        into in connection with the private placement of the outstanding notes.
     -  The terms of the exchange notes to be issued in the exchange offer are
        substantially identical to the outstanding notes, except that the
        exchange notes are registered under the Securities Act of 1933 and will
        be freely tradable.
RESALES OF EXCHANGE NOTES
     -  The exchange notes may be sold in the over-the-counter market, in
        negotiated transactions or through a combination of such methods. We
        expect to list the exchange notes on the New York Stock Exchange.
                            ------------------------

     If you are a broker-dealer and you receive exchange notes for you own
account, you must acknowledge that you will deliver a prospectus in connection
with any resale of such exchange notes. By making such acknowledgement, you will
not be deemed to admit that you are an "underwriter" under the Securities Act of
1933.

     Broker-dealers may use this prospectus in connection with any resale of
exchange notes received in exchange for outstanding notes where such outstanding
notes were acquired by the broker-dealer as a result of market-making activities
or trading activities.

     We will make this prospectus available to any broker-dealer for use in any
such resale for a period of up to 180 days after the date of this prospectus.

     A broker-dealer may not participate in the exchange offer with respect to
outstanding notes acquired other than as a result of market-making activities or
trading activities.

     If you are an affiliate of Teekay Shipping Corporation or are engaged in,
or intend to engage in, or have an agreement or understanding to participate in,
a distribution of the exchange notes, you must comply with the registration
requirements of the Securities Act of 1933 in connection with any resale
transaction.
                            ------------------------

YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 12 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
                            ------------------------

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<PAGE>   3

                      WHERE YOU CAN FIND MORE INFORMATION

     We file annual and special reports and other information with the
Securities and Exchange Commission. You can read and copy any materials we file
with the SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the SEC's regional offices located at Seven World Trade
Center, New York, New York 10048, and at 500 West Madison Street, Chicago,
Illinois 60661. You can obtain information about the operation of the SEC's
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the internet at http://www.sec.gov. In addition,
you can obtain information about us at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. We have agreed that, if we
are not subject to the informational requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934 at any time while the notes constitute
"restricted securities" within the meaning of the Securities Act of 1933, we
will furnish to holders and beneficial owners of the notes and to prospective
purchasers designated by such holders the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with
Rule 144A in connection with resales of the notes.

     We have we filed with the SEC a registration statement on Form F-4 under
the Securities Act of 1933. This prospectus, which forms a part of the
registration statement, does not contain all of the information in the
registration statement. We have omitted parts of the registration statement, as
permitted by the rules and regulations of the SEC. You may inspect and copy the
registration statement, including exhibits, at the SEC's public reference
facilities or its Web site. Our statements in this prospectus about the contents
of any contract or other document are not necessarily complete. You should refer
to the copy of each contract or other document we have filed as an exhibit to
the registration statement for complete information.

     The SEC allows us to "incorporate by reference" into this prospectus the
information that we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information that we file with the SEC may automatically update and supersede
this information. We incorporate by reference the documents listed below:

     -  our Annual Report on Form 20-F for the year ended December 31, 2000,
        filed on April 2, 2001;

     -  our reports on Form 6-K filed on April 16 and May 9 and May 24, 2001,
        respectively; and

     -  all other documents filed by Teekay pursuant to Section 13(a), 13(c), or
        15(d) of the Securities Exchange Act of 1934, after the date of this
        prospectus and prior to the termination of the exchange offer.

     You may request a copy of our filings at no cost, by writing or telephoning
us at the following address:
                          Teekay Shipping Corporation
                         505 Burrard Street, Suite 1400
                         Vancouver, B.C. CANADA V7X 1M5
                         Attention: Investor Relations
                           Telephone: (604) 844-6654

     You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus is accurate after the date on the front of the document. Information
contained on our Web site will not be deemed to be a part of this prospectus.

     The indenture pursuant to which the notes offered by this prospectus will
be issued contains a covenant that requires us to provide to each holder of
record of the notes, upon request, and to the trustee under the indenture,
annual reports containing audited financial statements and a related report
expressed by independent chartered accountants, and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.

                                        i
<PAGE>   4

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include statements regarding, among other items:

     -  our future earnings and other operating results;

     -  tanker supply and demand;

     -  our market share in the Indo-Pacific Basin and Atlantic region Aframax
        tanker markets and in the world shuttle tanker market;

     -  expectations as to funding our future capital requirements;

     -  future capital expenditures;

     -  our growth strategy and measures to implement our growth strategy;

     -  our potential ability to effectively integrate the operations of Ugland
        Nordic Shipping ASA with our own and to successfully enter the shuttle
        tanker market;

     -  competition;

     -  prospects and trends of the tanker industry, including TCE rates; and

     -  other discussions of future plans and strategies, anticipated
        developments and other matters that involve predictions of future
        events.

     Other statements contained in this prospectus are forward-looking
statements and are not based on historical fact, such as statements containing
the words "believes," "may," "will," "estimates," "continue," "anticipates,"
"intends," "expects" and words of similar import.

     These forward-looking statements are subject to risks, uncertainties and
assumptions, including those discussed in "Risk Factors," "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
"Business" and elsewhere in this prospectus and in reports we file with the SEC.
The risks, uncertainties and assumptions involve known and unknown risks and are
inherently subject to significant uncertainties and contingencies, many of which
are beyond our control.

     Actual results may differ materially from those projected in
forward-looking statements. Although we believe that our estimates are
reasonable, you should not unduly rely on these estimates, which are based on
our current expectations. Factors that could cause actual results to differ
materially include:

     -  the cyclical nature of the tanker industry and its dependence on oil
        markets;

     -  the supply of tankers available to meet the demand for transportation of
        petroleum products;

     -  our inability to successfully integrate the operations of Ugland Nordic
        Shipping ASA with our own;

     -  our dependence on spot oil voyages;

     -  environmental and other regulation;

     -  our potential inability to achieve and manage growth; and

     -  the other factors described in "Risk Factors."

     We undertake no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for us to predict all
of these factors. Further, we cannot assess the impact of each such factor on
our business or the extent to which any factor, or combination of factors, may
cause actual results to be materially different from those contained in any
forward-looking statement. Neither we, nor any initial purchaser of the

                                        ii
<PAGE>   5

outstanding notes, make any representation, warranty or assurance as to the
completeness or accuracy of these projections, and neither express an opinion or
any other form of assurance regarding them.

               SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

     We and most of our subsidiaries are incorporated in the Republic of the
Marshall Islands, and other of our subsidiaries are incorporated in Bermuda, the
Bahamas, Canada, Japan, Singapore, Australia, United Kingdom, Norway, India, the
Philippines, Liberia and the United States. Most of our directors and executive
officers and those of our subsidiaries are residents of countries other than the
United States. Substantially all of our and our subsidiaries' assets and a
substantial portion of the assets of the directors and officers are located
outside the United States. As a result, it may be difficult or impossible for
United States investors to effect service of process within the United States
upon us, our subsidiaries or the directors and officers or to realize against
them judgments obtained in United States courts. In addition, you should not
assume that courts in countries in which we or our subsidiaries are incorporated
or where our or the assets of our subsidiaries are located (a) would enforce
judgments of U.S. courts obtained in actions against us or our subsidiaries
based upon civil liabilities provisions of applicable U.S. federal and state
securities laws or (b) would enforce, in original actions, liabilities against
us or our subsidiaries based upon these laws.

     Certain shipping industry terms used in this prospectus are defined in
Exhibit A to this prospectus, "Definitions of Shipping Terms." Unless otherwise
specifically noted or the context otherwise requires, the term "tankers" refers
to tankers, shuttle tankers and oil/bulk/ore carriers.

     Except as otherwise indicated herein, when we describe our fleet, tankers
or vessels, we include newbuildings, time-chartered-in vessels and tankers that
we have an interest in through joint ventures. Our description also includes one
Aframax tanker and two other tankers, each owned through a joint venture in
which we hold a 50% interest, that we have contracted to sell between July and
August of 2001. Unless our description specifically notes that it is at March
31, 2001 or before, we also include four tankers purchased by our UNS subsidiary
in April 2001 and one newbuilding delivered in May 2001. Unless otherwise
specifically noted or the context otherwise requires, when we describe our
Aframax fleet we refer to all of our Aframax-size tankers, including two
Aframax-size oil/bulk/ore carriers trading exclusively as crude oil carriers,
but exclude our other oil/bulk/ore carriers. Industry data in this prospectus
relating to Aframax tankers or vessels includes all Aframax-size tankers,
including Aframax-size oil/bulk/ore carriers. See "Business -- Our Fleet."

     All dollar references in this prospectus are to U.S. Dollars, unless
otherwise specifically indicated.

     Certain statistical and graphical information contained in this prospectus
is derived from data published by the International Energy Agency, Clarkson
Research Studies Inc. and other sources available prior to the date of this
prospectus. While we have no reason to believe that such information is
inaccurate in any material respect, we cannot warrant its accuracy. In addition,
you are advised that some information in such databases is based on estimates or
subjective judgments.

     The Teekay logo and the name Teekay Shipping Corporation are among our
trademarks. All other trademarks and trade names referred to in this prospectus
are the property of their respective owners.

                                       iii
<PAGE>   6

                               PROSPECTUS SUMMARY

     The following summary supplements, and should be read in conjunction with,
the more detailed information contained elsewhere in this prospectus. You should
read carefully the entire document to understand our business, the nature of the
notes and the tax and other considerations that are important to your decision
to invest in the notes. You should pay special attention to the "Risk Factors"
section.

                                  THE COMPANY

OVERVIEW

     Teekay is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium-size
oil tankers. Our modern fleet of 95 tankers (including three newbuildings, seven
vessels time-chartered-in and six vessels owned by joint ventures) provides
transportation services to major oil companies, major oil traders and government
agencies worldwide. We believe our Aframax fleet is approximately three times
larger than that of our nearest direct Aframax competitor. Through our recent
acquisition of Ugland Nordic Shipping ASA ("UNS"), we are also the largest owner
of shuttle tankers, which engage in the transportation of oil from offshore
production platforms to onshore storage and refinery facilities.

COMPETITIVE STRENGTHS

     We pursue an intensively customer- and operations-focused business strategy
designed to achieve superior operating results. We base our business strategy on
the following five key competitive strengths:

     -  MARKET CONCENTRATION.  In each market that we address within the
        shipping industry, we seek to achieve significant scale and scope. This
        market concentration has enabled us to provide comprehensive coverage of
        charterers' requirements while also providing a base for efficient
        operation and a high degree of capacity utilization. We estimate that
        our market share is approximately 25% in the Indo-Pacific Basin Aframax
        market and approximately 10% in the Atlantic region Aframax market,
        based on tankers trading in those regions that are 20 years old or
        younger. Through our recent acquisition of UNS' shuttle tanker
        operations, we estimate that our market share is approximately 25% in
        the world shuttle tanker market. Our significant presence in these
        markets strategically positions us to deliver superior service to the
        oil industry on a global basis.

     -  OPERATIONAL CONTROL AND EXPERIENCED MANAGEMENT.  Teekay services
        substantially all of its operational and management needs in-house. We
        have experienced management in all functions critical to our operations,
        which provides us with a focused marketing effort, tight quality and
        cost controls and effective safety monitoring.

     -  MODERN, HIGH-QUALITY TONNAGE.  Our modern, high-quality tanker fleet
        operates with higher fuel efficiency and lower maintenance and operating
        costs compared to the world tanker fleet. We now control a fleet of 84
        tankers (excluding three newbuildings and eight oil/bulk/ore carriers)
        with an average age of approximately 9 years. The average age for the
        world tanker fleet is approximately 13 years. In an environment of
        increasingly stringent operating and safety standards, we believe that
        the age profile and quality of our fleet result in a high level of
        demand for our tankers by charterers.

     -  LARGE FLEET OF UNIFORM, MEDIUM-SIZE VESSELS.  Our large fleet of
        medium-size tankers, many of which are substantially identical vessels,
        allows us to substitute vessels to meet customer demands. This increases
        our scheduling flexibility and allows us to enhance the capacity
        utilization of our fleet. We believe that the scale of our operations
        and the resulting

                                        1
<PAGE>   7

       purchasing power, combined with the uniformity of our medium-size
       vessels, results in lower operating expenses than those experienced by
       smaller operators.

     -  STRONG NETWORK OF CUSTOMER RELATIONSHIPS.  We pursue an intensively
        customer-oriented focus that, when combined with other competitive
        strengths, has enabled us to establish a strong network of customer
        relationships and a reputation for transportation excellence among
        quality-sensitive customers such as Exxon Mobil, BP, Chevron and Shell.

BUSINESS STRATEGY

     Our business strategy is to leverage our existing competitive strengths to
continue to expand our business and increase shareholder value.

     -  MAINTAIN AND EXPAND AFRAMAX FRANCHISE.  The expansion and upgrading of
        our Aframax fleet will continue to be a key component of our strategy.
        As the world's largest Aframax tanker operator, we believe we will be
        able to provide the most comprehensive service to our customers and
        generate superior operating results. For example, our size and scope of
        services has enabled us to enter into contracts of affreightment to
        provide large oil-company customers with ongoing services that will
        grant us preferential rights on certain routes. We expect that this will
        result in significant fleet utilization benefits and high market share
        on strategically important routes.

     -  LEVERAGE THE FRANCHISE TO PROVIDE VALUE-ADDED SERVICES.  Our
        full-service marine operations capabilities, reputation for safety and
        quality and strong customer orientation provide us with the opportunity
        to expand our business by providing additional value-added and
        innovative services to new and existing customers. Such services include
        providing customers with floating storage and off-take vessels,
        outsourcing arrangements where we service a customer's complete oil
        transportation requirements and, with our recent acquisition of UNS,
        providing shuttle tanker services for customers engaged in offshore oil
        production. By providing our customers with these value-added services,
        we believe that we will strengthen our franchise and further improve our
        financial performance.

     -  SELECTIVELY EXPAND INTO RELATED MARKETS AND SERVICES.  We intend to
        continue to identify expansion opportunities in new tanker market
        sectors, geographic areas and services to which our competitive
        strengths are well suited and that will enhance shareholder value. We
        may pursue such opportunities through internal growth, joint ventures or
        business acquisitions, such as our recent acquisition of UNS, through
        which we expanded into the shuttle tanker market.

ACQUISITION OF UGLAND NORDIC SHIPPING ASA

     We recently purchased Ugland Nordic Shipping ASA, the world's largest
shuttle tanker owner. UNS' modern fleet of 18 vessels engages in the
transportation of oil from offshore production platforms to onshore storage and
refinery facilities. The UNS fleet has an average age of 8.5 years (excluding
three newbuildings) and operates primarily in the North Sea under long-term
fixed-rate contracts. The total purchase price for the outstanding shares of UNS
was approximately $223.3 million (including estimated transaction expenses of
$7.0 million). The operating results of UNS have been reflected in our financial
statements commencing March 6, 2001, the effective date that we acquired a
majority interest in UNS.

     UNS' large scale and high quality shuttle tanker operations provided us
with a strategic opportunity to enter this attractive market as a market leader.
The acquisition also allows us to expand the portfolio of value-added services
we offer to our customers. We believe that as offshore oil fields become more
important to the global oil supply, the need for shuttle tanker services will
increase. By combining our global franchise and UNS' expertise in the shuttle
tanker market, we believe that the shuttle tanker business represents an area of
significant growth for Teekay. The acquisition of UNS will also provide added
stability to our cash flow throughout the business cycle, due to the long-term
fixed-price nature of shuttle tanker contracts.
                                        2
<PAGE>   8

                         SUMMARY OF THE EXCHANGE OFFER

     On June 22, 2001, we completed a private offering of our 8.875% Senior
Notes due 2011. We received proceeds of approximately $244.5 million from the
sale of the outstanding notes.

     In connection with the offering of outstanding notes, we entered into an
exchange and registration rights agreement with the initial purchasers of the
outstanding notes in which we agreed to deliver this prospectus and to use our
best efforts to complete the exchange offer for the outstanding notes by
February 17, 2002. In the exchange offer, you are entitled to exchange your
outstanding notes for exchange notes, with substantially identical terms, that
are registered under the Securities Act of 1933. You should read the discussion
under the heading "The Exchange Offer" beginning on page 67 and "Description of
the Notes" beginning on page 77 for further information about the exchange
notes. After the exchange offer is completed, you will no longer be entitled to
any exchange or, with limited exceptions, registration rights for your
outstanding notes.

The Exchange Offer............   We are offering to exchange up to $250 million
                                 principal amount of the exchange notes for up
                                 to $250 million principal amount of the
                                 outstanding notes. Outstanding notes may only
                                 be exchanged in $1,000 increments.

                                 The terms of the exchange notes are identical
                                 in all material respects to those of the
                                 outstanding notes except the exchange notes
                                 will not be subject to transfer restrictions
                                 and holders of exchange notes, with limited
                                 exceptions, will have no registration rights.
                                 Also, the exchange notes will not contain
                                 provisions for an increase in their stated
                                 interest rate related to any registration or
                                 exchange delay.

                                 Outstanding notes that are not tendered for
                                 exchange will continue to be subject to
                                 transfer restrictions and, with limited
                                 exceptions, will not have registration rights.
                                 Therefore, the market for secondary resales of
                                 outstanding notes that are not tendered for
                                 exchange is likely to be minimal.

                                 We will issue registered exchange notes on or
                                 promptly after the expiration of the exchange
                                 offer.

Expiration Date...............   The exchange offer will expire at 5:00 p.m. New
                                 York City time, on           , 2001, unless we
                                 decide to extend the expiration date. Please
                                 read "The Exchange Offer -- Extensions, Delay
                                 in Acceptance, Termination or Amendment"
                                 beginning on page 68 for more information about
                                 an extension of the expiration date.

Withdrawal of Tenders.........   You may withdraw your tender of outstanding
                                 notes at any time prior to the expiration date.
                                 We will return to you, without charge, promptly
                                 after the expiration or termination of the
                                 exchange offer any outstanding notes that you
                                 tendered but that were not accepted for
                                 exchange.

Conditions to the Exchange
Offer.........................   We will not be required to accept outstanding
                                 notes for exchange:

                                 -  if the exchange offer would be unlawful or
                                    would violate any interpretation of the
                                    staff of the SEC, or

                                 -  if any legal action has been instituted or
                                    threatened that would impair our ability to
                                    proceed with the exchange offer.

                                        3
<PAGE>   9

                                 The exchange offer is not conditioned upon any
                                 minimum aggregate principal amount of
                                 outstanding notes being tendered. Please read
                                 "The Exchange Offer -- Conditions to the
                                 Exchange Offer" on page 69 for more information
                                 about the conditions to the exchange offer.

Procedures for Tendering
  Outstanding Notes...........   If your outstanding notes are held through The
                                 Depositary Trust Company, or "DTC," and you
                                 wish to participate in the exchange offer, you
                                 may do so through DTC's automated tender offer
                                 program. If you tender under this program, you
                                 will agree to be bound by the letter of
                                 transmittal that we are providing with this
                                 prospectus as though you had signed the letter
                                 of transmittal. By signing or agreeing to be
                                 bound by the letter of transmittal, you will
                                 represent to us that, among other things:

                                 -  any exchange notes that you receive will be
                                    acquired in the ordinary course of your
                                    business,

                                 -  you have no arrangement or understanding
                                    with any person to participate in the
                                    distribution of the outstanding notes or the
                                    exchange notes,

                                 -  you are not our "affiliate," as defined in
                                    Rule 405 of the Securities Act of 1933, or,
                                    if you are our affiliate, you will comply
                                    with any applicable registration and
                                    prospectus delivery requirements of the
                                    Securities Act,

                                 -  if you are not a broker-dealer, you are not
                                    engaged in and do not intend to engage in
                                    the distribution of the exchange notes, and

                                 -  if you are a broker-dealer that will receive
                                    exchange notes for your own account in
                                    exchange for outstanding notes that you
                                    acquired as a result of market-making
                                    activities or other trading activities, you
                                    will deliver a prospectus in connection with
                                    any resale of such exchange notes.

Special Procedures for
Beneficial Owners.............   If you own a beneficial interest in outstanding
                                 notes that are registered in the name of a
                                 broker, dealer, commercial bank, trust company
                                 or other nominee and you wish to tender the
                                 outstanding notes in the exchange offer, please
                                 contact the registered holder as soon as
                                 possible and instruct the registered holder to
                                 tender on your behalf and to comply with our
                                 instructions described in this prospectus.

Guaranteed Delivery
Procedures....................   You must tender your outstanding notes
                                 according to the guaranteed delivery procedures
                                 described in "The Exchange Offer -- Guaranteed
                                 Delivery Procedures" beginning on page 73 if
                                 any of the following apply:

                                 -  you wish to tender your outstanding notes
                                    but they are not immediately available,

                                        4
<PAGE>   10

                                 -  you cannot deliver your outstanding notes,
                                    the letter of transmittal or any other
                                    required documents to the exchange agent
                                    prior to the expiration date, or

                                 -  you cannot comply with the applicable
                                    procedures under DTC's automated tender
                                    offer program prior to the expiration date.

Resales.......................   Except as indicated herein, we believe that the
                                 exchange notes may be offered for resale,
                                 resold and otherwise transferred without
                                 compliance with the registration and prospectus
                                 delivery provisions of the Securities Act of
                                 1933, provided that:

                                 -  you are acquiring the exchange notes in the
                                    ordinary course of your business;

                                 -  you are not participating, do not intend to
                                    participate, and have no arrangement or
                                    understanding with any person to
                                    participate, in the distribution of the
                                    exchange notes; and

                                 -  you are not an affiliate of Teekay.

                                 Our belief is based on existing interpretations
                                 of the Securities Act by the SEC staff set
                                 forth in several no-action letters to third
                                 parties. We do not intend to seek our own
                                 no-action letter, and there is no assurance
                                 that the SEC staff would make a similar
                                 determination with respect to the exchange
                                 notes. If this interpretation in inapplicable,
                                 and you transfer any exchange note without
                                 delivering a prospectus meeting the
                                 requirements of the Securities Act or without
                                 an exemption from such requirements, you may
                                 incur liability under the Securities Act. We do
                                 not assume or indemnify holders of notes
                                 against such liability.

                                 Each broker-dealer that is issued exchange
                                 notes for its own account in exchange for
                                 outstanding notes that were acquired by such
                                 broker-dealer as a result of market-making or
                                 other trading activities must acknowledge that
                                 it will deliver a prospectus meeting the
                                 requirements of the Securities Act in
                                 connection with any resale of the exchange
                                 notes. A broker-dealer may use this prospectus
                                 for an offer to resell, resale or other
                                 transfer of the exchange notes. Please read
                                 "Plan of Distribution" on page 101.

U.S. Federal Income Tax
  Considerations..............   The exchange of outstanding notes for exchange
                                 notes will not be a taxable exchange for United
                                 States federal income tax purposes. You will
                                 not recognize any taxable gain or loss or any
                                 interest income as a result of such exchange.
                                 Please read "Tax Considerations -- United
                                 States Federal Income Tax Consequences"
                                 beginning on page 97.

Use of Proceeds...............   We will not receive any proceeds from the
                                 issuance of the exchange notes pursuant to the
                                 exchange offer. We will pay all our expenses
                                 incident to the exchange offer.

                                        5
<PAGE>   11

Registration Rights...........   If we fail to complete the exchange offer as
                                 required by the exchange and registration
                                 rights agreement, we may be obligated to pay
                                 additional interest to holders of outstanding
                                 notes. Please read "Registration Rights"
                                 beginning on page 94 for more information
                                 regarding your rights as a holder of
                                 outstanding notes.

                               THE EXCHANGE AGENT

     We have appointed United States Trust Company of New York as exchange agent
for the exchange offer. Please direct questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for the notice of guaranteed delivery to the exchange
agent. If you are not tendering under DTC's automated tender offer program, you
should send the letter of transmittal and any other required documents to the
exchange agent as follows:
                      ------------------------------------

                         BY HAND DELIVERY TO 4:30 P.M.

                    United States Trust Company of New York
                            30 Broad Street, B-Level
                            New York, NY 10004-2304

                        BY OVERNIGHT COURIER AND BY HAND
                  DELIVERY AFTER 4:30 P.M. ON EXPIRATION DATE

                    United States Trust Company of New York
                          30 Broad Street, 14th Floor
                            New York, NY 10004-2304

                        BY REGISTERED OR CERTIFIED MAIL

                    United States Trust Company of New York
                                  P.O. Box 84
                             Bowling Green Station
                            New York, NY 10274-0084

            BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):

                    United States Trust Company of New York
                            30 Broad Street, B-Level
                            New York, NY 10004-2304
                              FAX: (646) 458-8111

                             CONFIRM BY TELEPHONE:
                                 (800) 548-6565

                                        6
<PAGE>   12

                               THE EXCHANGE NOTES

     The summary below describes the principal terms of the notes. Certain of
the terms and conditions described below are subject to important limitations
and exceptions. The "Description of the Notes" section of this prospectus
contains a more detailed description of the terms and conditions of the notes.

Issuer........................   Teekay Shipping Corporation

Notes Offered.................   $250 million principal amount of 8.875% senior
                                 notes due July 15, 2011.

Maturity......................   July 15, 2011.

Interest Payment Dates........   January 15 and July 15 of each year, commencing
                                 January 15, 2002.

Ranking.......................   The notes will rank equally in right of payment
                                 with all of our existing and future senior
                                 unsecured debt and senior to our existing and
                                 future subordinated debt. The notes will
                                 effectively rank behind all of our existing and
                                 future secured debt, to the extent of the value
                                 of the assets securing such debt.

                                 We are a holding company and the notes will not
                                 be guaranteed by any of our subsidiaries. The
                                 notes will effectively rank behind all existing
                                 and future debt and other liabilities of our
                                 subsidiaries.

                                 As of June 30, 2001 and giving effect to the
                                 proposed application of the net proceeds of the
                                 offering of the outstanding notes to prepay
                                 certain of our outstanding secured debt, we
                                 would have had approximately $1,053 million of
                                 debt on a consolidated basis, of which $803
                                 million was secured debt that represented the
                                 obligations of, or was guaranteed by, certain
                                 of our subsidiaries. In addition, as of June
                                 30, 2001, our subsidiaries had guaranteed $115
                                 million of debt of joint ventures.

Additional Amounts............   All payments with respect to the notes will be
                                 made without withholding or deduction for taxes
                                 imposed by the Republic of the Marshall Islands
                                 or any jurisdiction from or through which
                                 payment on the notes is made unless required by
                                 law or the interpretation or administration
                                 thereof, in which case, subject to certain
                                 exceptions, we will pay such additional amounts
                                 as may be necessary so that the net amount
                                 received by the holders after such withholding
                                 or deduction will not be less than the amount
                                 that would have been received in the absence of
                                 such withholding or deduction. See "Description
                                 of the Notes -- Additional Amounts."

Optional Redemption...........   We may redeem all or a portion of the notes at
                                 any time before their maturity date at a
                                 redemption price equal to the greater of (a)
                                 100% of the principal amount of the notes to be
                                 redeemed and (b) the sum of the present value
                                 of the remaining scheduled payments of
                                 principal and interest discounted to the
                                 redemption date at the treasury yield plus 50
                                 basis points. See "Description of the Notes --
                                 Optional Redemption."

                                        7
<PAGE>   13

Tax Redemption................   If we become obligated to pay additional
                                 amounts under the notes as a result of changes
                                 affecting certain withholding taxes, we may
                                 redeem all, but not less than all, of the notes
                                 at 100% of their principal amount plus accrued
                                 interest to the date of redemption. See
                                 "Description of the Notes -- Redemption for
                                 Changes in Withholding Taxes."

Change of Control Offer.......   Upon a Change of Control Triggering Event,
                                 which requires both a Change of Control and a
                                 Rating Decline (all as defined herein), we will
                                 be obligated to make an offer to purchase all
                                 outstanding notes at a redemption price of 101%
                                 of the principal amount thereof plus accrued
                                 and unpaid interest to the date of purchase.
                                 See "Description of the Notes -- Repurchase of
                                 Notes Upon a Change of Control Triggering
                                 Event."

Certain Indenture
Provisions....................   The indenture governing the notes will contain
                                 covenants limiting our ability to:

                                 -  create liens; and

                                 -  merge, consolidate or sell substantially all
                                 of our assets.

                                 These covenants are subject to a number of
                                 important limitations and exceptions which are
                                 described under the heading "Description of the
                                 Notes."

Registration Rights...........   If we fail to complete the exchange offer as
                                 required by the exchange and registration
                                 rights agreement, we may be obligated to pay
                                 additional interest to holders of old notes.
                                 Please read "Registration Rights" beginning on
                                 page 94 for more information regarding your
                                 rights as a holder of outstanding notes.

Use of Proceeds...............   We will not receive any proceeds from the
                                 issuance of the exchange notes pursuant to the
                                 exchange offer. We will pay all our expenses
                                 incident to the exchange offer. See "Use of
                                 Proceeds."

Absence of Public Market for
the Notes.....................   The exchange notes will be new securities for
                                 which there is no market. Although we intend to
                                 cause the exchange notes to be authorized for
                                 listing on the New York Stock Exchange, there
                                 can be no assurance that an active trading
                                 market for the notes will develop, or, if it
                                 develops, will continue to exist. Although the
                                 initial purchasers of the outstanding notes
                                 have informed us that they currently intend to
                                 make a market in the exchange notes, they are
                                 not obligated to do so, and any such market
                                 making may be discontinued at any time without
                                 notice. Accordingly, there can be no assurance
                                 as to the development or liquidity of any
                                 market for the exchange notes.

                                  RISK FACTORS

     You should carefully consider all of the information in this prospectus. In
particular, you should read the specific risk factors under "Risk Factors" for a
discussion of certain risks involved with an investment in the notes.
                                        8
<PAGE>   14

                 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

     We derived the following summary consolidated financial and other data from
more detailed information and financial statements appearing elsewhere in this
prospectus. You should read the following information in conjunction with
"Selected Consolidated Financial and Other Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements, unaudited pro forma consolidated condensed financial
statements and the related notes which are included elsewhere in this
prospectus. We changed our fiscal year end from March 31 to December 31,
commencing December 31, 1999, in order to facilitate comparison of our operating
results to those of other companies in the transportation industry.
<TABLE>
<CAPTION>
                                                                                   FISCAL YEARS ENDED
                                           THREE MONTHS ENDED MARCH 31,         ------------------------
                                      ---------------------------------------    PRO FORMA
                                       PRO FORMA                                 DEC. 31,      DEC. 31,
                                        2001(1)        2001          2000         2000(1)        2000
                                       ---------       ----          ----        ---------     --------
                                      (UNAUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)
                                                (IN THOUSANDS, EXCEPT RATIOS AND PER DAY DATA)
<S>                                   <C>           <C>           <C>           <C>           <C>
INCOME STATEMENT DATA:
Voyage revenues.....................  $  325,074    $  307,886    $  182,262     $ 962,307    $  893,226
Voyage expenses.....................      63,658        62,730        62,195       248,957       248,957
Net voyage revenues.................     261,416       245,156       120,067       713,350       644,269
Income from vessel operations.......     161,263       155,735        37,768       346,986       327,675
Interest expense....................     (21,343)      (14,786)      (19,989)     (106,500)      (74,540)
Interest income.....................       3,000         2,803         3,253        15,090        13,021
Other income (loss).................       2,177           936        (1,092)        9,978         3,864
Net income (loss)...................     145,097       144,688        19,940       265,554       270,020
BALANCE SHEET DATA (AT END OF
 PERIOD):
Cash and marketable securities......  $  268,655    $  348,054    $  253,749            --    $  223,123
Total assets........................   2,470,621     2,518,332     1,988,367            --     1,974,099
Total debt..........................   1,108,694     1,108,694     1,074,561            --       797,484
Total stockholders' equity..........   1,234,780     1,234,780       844,727            --     1,098,512
OTHER FINANCIAL DATA:
EBITDA(2)...........................  $  203,000    $  188,978    $   66,862     $ 504,127    $  451,066
EBITDA to interest expense(2)(3)....         9.4x         13.0x          3.4x          4.8x          6.1x
Total debt to LTM EBITDA(2)(4)......         1.8x          1.9x          6.8x           --           1.8x
Total debt to total
 capitalization(5)..................        46.9%         46.0%         55.9%           --          42.1%
Net debt to total
 capitalization(6)..................        40.1%         36.9%         49.2%           --          34.2%
Ratio of earnings to fixed
 charges(7).........................         7.6x         10.8x          2.0x          3.5x          4.6x
Cash earnings(8)....................  $  181,276    $  174,832    $   45,165     $ 389,626    $  372,168
Capital expenditures:
 Vessel purchases, gross(9).........      13,102         1,394           550       143,601        43,512
 Drydocking.........................       2,240         2,240         2,500        16,467        11,941
TOTAL FLEET DATA(10):
Average number of ships.............          79            73            73            80            72
Average age of our fleet (in years
 at end of period)..................         9.2           9.2           8.4           9.2           9.0
Operating cash flow per ship per
 day(11)............................  $   27,535    $   28,300    $    9,851     $  16,183    $   16,687
SPOT AFRAMAX FLEET DATA(12):
Average number of ships.............          58            58            61            59            59
Average age of our fleet (in years
 at end of period)..................         8.7           8.7           7.6           8.3           8.3
TCE per ship per day(13)............  $   43,720    $   43,720    $   19,016     $  27,138    $   27,138
Vessel operating expenses per ship
 per day(14)........................       5,307         5,307         5,217         4,980         4,980
Operating cash flow per ship
 per day(11)........................      32,351        32,351        10,441        18,145        18,145

<CAPTION>
                                                       FISCAL YEARS ENDED
                                      ----------------------------------------------------

                                        DEC. 31,       MAR. 31,     MAR. 31,     MAR. 31,
                                          1999           1999         1998         1997
                                        --------       --------     --------     --------
                                      (NINE MONTHS)
                                         (IN THOUSANDS, EXCEPT RATIOS AND PER DAY DATA)
<S>                                   <C>             <C>          <C>          <C>
INCOME STATEMENT DATA:
Voyage revenues.....................   $  377,882     $  411,922   $  406,036   $  382,249
Voyage expenses.....................      129,532         93,511      100,776      102,037
Net voyage revenues.................      248,350        318,411      305,260      280,212
Income from vessel operations.......       23,572         85,634      107,640       94,258
Interest expense....................      (44,996)       (44,797)     (56,269)     (60,810)
Interest income.....................        5,842          6,369        7,897        6,358
Other income (loss).................       (4,013)         5,506       11,236        2,824
Net income (loss)...................      (19,595)        45,406       70,504       42,630
BALANCE SHEET DATA (AT END OF
 PERIOD):
Cash and marketable securities......   $  226,381     $  132,256   $  115,254   $  117,523
Total assets........................    1,982,684      1,452,220    1,460,183    1,372,838
Total debt..........................    1,085,167        641,719      725,369      699,726
Total stockholders' equity..........      832,067        777,390      689,455      629,815
OTHER FINANCIAL DATA:
EBITDA(2)...........................   $   95,875     $  186,069   $  209,582   $  191,632
EBITDA to interest expense(2)(3)....          2.1x           4.0x         3.8x         3.2x
Total debt to LTM EBITDA(2)(4)......          8.3x           3.5x         3.5x         3.7x
Total debt to total
 capitalization(5)..................         56.6%          45.2%        51.3%        52.6%
Net debt to total
 capitalization(6)..................         50.7%          39.6%        46.9%        48.0%
Ratio of earnings to fixed
 charges(7).........................          0.6x           2.1x         2.3x         1.7x
Cash earnings(8)....................   $   43,343     $  146,489   $  165,575   $  133,554
Capital expenditures:
 Vessel purchases, gross(9).........       23,313         85,445      197,199       65,104
 Drydocking.........................        6,598         11,749       18,376       16,559
TOTAL FLEET DATA(10):
Average number of ships.............           65             47           43           41
Average age of our fleet (in years
 at end of period)..................          8.4            8.7          7.8          8.2
Operating cash flow per ship per
 day(11)............................   $    5,177     $   11,171   $   12,682   $   11,819
SPOT AFRAMAX FLEET DATA(12):
Average number of ships.............           55             43           42           41
Average age of our fleet (in years
 at end of period)..................          7.4            8.0          7.6          7.9
TCE per ship per day(13)............   $   13,462     $   19,576   $   21,373   $   20,356
Vessel operating expenses per ship
 per day(14)........................        5,621          4,969        4,554        4,922
Operating cash flow per ship
 per day(11)........................        4,731         10,903       12,664       11,819
</TABLE>

                                                   (Footnotes on following page)

                                        9
<PAGE>   15

 (1) Represents actual amounts as adjusted to give effect to the acquisition of
     100% of UNS, as if it had occurred on January 1, 2000. See unaudited pro
     forma consolidated condensed financial statements included elsewhere in
     this prospectus. The primary adjustments were (a) an increase in
     depreciation and amortization expense relating to the amortization of
     goodwill arising upon the acquisition of UNS, (b) an increase in interest
     expense as if we had borrowed funds under our revolving credit facilities
     to finance the acquisition, and (c) an increase in other income to reverse
     the expense related to the minority interest portion of UNS' results for
     the period March 6, 2001 to March 31, 2001.

 (2) EBITDA represents net income (loss) before extraordinary items, interest
     expense, income tax expense, depreciation and amortization expense,
     minority interest, and gains or losses arising from prepayment of debt,
     foreign exchange translation and disposal of assets. EBITDA is included
     because such data is used by certain investors to measure a company's
     financial performance. EBITDA is not required by accounting principles
     generally accepted in the United States and should not be considered as an
     alternative to net income or any other indicator of our performance
     required by accounting principles generally accepted in the United States.

 (3) For purposes of computing EBITDA to interest expense, interest expense
     includes capitalized interest but excludes amortization of loan costs.

 (4) Total debt to LTM EBITDA represents total debt as of the end of the period
     compared to EBITDA for the 12-month period then ended.

 (5) Total capitalization represents total debt, minority interest and total
     stockholders' equity.

 (6) Net debt represents total debt less cash, cash equivalents and marketable
     securities. Total capitalization represents net debt, minority interest and
     total stockholders' equity.

 (7) For purposes of computing the ratio of earnings to fixed charges, earnings
     consist of net income (loss) before extraordinary items, income taxes,
     minority interest expense, equity income, interest expense, amortization of
     deferred financing costs and amortization of capitalized interest. Fixed
     charges consist of interest expense, capitalized interest and amortization
     of deferred financing costs.

 (8) Cash earnings represents net income (loss) before extraordinary items,
     foreign exchange gains (losses), and depreciation and amortization expense.
     Cash earnings is included because it is used by certain investors to
     measure a company's financial performance as compared to other companies in
     the shipping industry. Cash earnings is not required by accounting
     principles generally accepted in the United States and should not be
     considered as an alternative to net income or any other indicator of our
     performance required by accounting principles generally accepted in the
     United States.

 (9) Excludes vessels purchased in connection with our corporate acquisitions of
     Bona Shipholding Ltd. in 1999 and UNS in 2001. See "Management's Discussion
     and Analysis of Financial Condition and Results of Operations."

(10) Excludes vessels of our joint ventures, newbuildings and one Aframax tanker
     that has been subject to a bareboat charter.

(11) Operating cash flow represents income from vessel operations plus
     depreciation and amortization expense (other than drydock amortization
     expense). Ship days are calculated on the basis of a 365-day fiscal year
     multiplied by the average number of vessels in our fleet for the respective
     year (excluding vessels of our joint ventures). Operating cash flow is not
     required by accounting principles generally accepted in the United States
     and should not be considered as an alternative to net income or any other
     indicator of our performance required by accounting principles generally
     accepted in the United States.

(12) Includes our core Aframax fleet that operates primarily in the spot charter
     market and excludes vessels that operate primarily under long-term
     fixed-rate contracts, including our ten Aframax-size shuttle tankers and
     our Aframax-size Australian-crewed vessels. TCE and vessel operating
     expense data is separately presented only for this portion of our fleet
     because the remainder of

                                        10
<PAGE>   16

     our fleet generally has varying revenue and expense characteristics that
     make period-to-period comparisons not meaningful. Also excludes one Aframax
     tanker that has been subject to a bareboat charter and Aframax tankers of
     our joint ventures.

(13) TCE is a measure of the revenue performance of a vessel, which, on a per
     voyage basis, is generally determined by Clarkson Research Studies Inc.
     ("Clarkson") and other industry data sources by subtracting voyage expenses
     (except commissions) which are incurred in transporting cargo from gross
     revenue per voyage and dividing the remaining revenue by the total number
     of days required for the round-trip voyage. For purposes of calculating our
     average TCE for the year, TCE has been calculated consistent with
     Clarkson's method, by deducting total voyage expenses (except commissions)
     from total voyage revenues and dividing the remaining sum by our total
     voyage days in the year. Voyage expenses comprise all expenses relating to
     particular voyages, including bunker fuel expenses, port fees, canal tolls,
     and brokerage commissions. See "Exhibit A -- Definitions of Shipping
     Terms."

(14) Vessel operating expenses comprise all expenses relating to the operation
     of vessels (other than voyage expenses), including crewing, repairs and
     maintenance, insurance, stores and lubes, and communications expenses. Ship
     days are calculated on the basis of a 365-day year multiplied by the
     average number of owned vessels in our fleet for the respective year.
     Vessel operating expenses exclude vessels time-chartered-in.

                                        11
<PAGE>   17

                                  RISK FACTORS

     Before investing in our notes, you should consider carefully the following
factors, as well as the information contained in the rest of this prospectus.

THERE MAY BE ADVERSE CONSEQUENCES TO YOU IF YOU DO NOT EXCHANGE YOUR OUTSTANDING
NOTES

     If you do not exchange your outstanding notes for exchange notes in the
exchange offer, then you will continue to be subject to the transfer
restrictions on the outstanding notes described in the offering circular
distributed in connection with the private placement of the outstanding notes.
In general, the outstanding notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act of 1933 and
applicable state securities laws. Except as required by the exchange and
registration rights agreement that we entered into with the initial purchasers
of the outstanding notes, we do not intend to register resales of the
outstanding notes under the Securities Act. See "The Exchange Offer --
Consequences of Failure to Exchange." You should refer to "The Exchange Offer"
for information about how to tender your outstanding notes. The tender of
outstanding notes pursuant to the exchange offer will reduce the outstanding
principal amount of the outstanding notes, which may have an adverse effect
upon, and increase the volatility of, the market price of the outstanding notes
due to a reduction in liquidity.

                           RISKS RELATING TO OUR DEBT

OUR SUBSTANTIAL DEBT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND PREVENT
US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES OFFERED BY THIS PROSPECTUS

     We have substantial debt and debt service requirements. At June 30, 2001
and giving effect to the proposed application of the net proceeds of the
offering of the outstanding notes to prepay certain of our outstanding secured
debt, our consolidated debt would have been approximately $1,053 million, and we
would have been able to borrow an additional $352 million under our credit
facilities.

     The amount of our debt could have important consequences to you. For
example, it could:

     -  make it more difficult for us to satisfy our obligations under the
        exchange notes;

     -  increase our vulnerability to general adverse economic and industry
        conditions;

     -  limit our ability to fund future capital expenditures, working capital
        and other general corporate requirements;

     -  require us to dedicate a substantial portion of our cash flow from
        operations to make interest and principal payments on our debt;

     -  limit our flexibility in planning for, or reacting to, changes in our
        business and the shipping industry;

     -  place us at a competitive disadvantage compared to competitors that have
        less debt; and

     -  limit our ability to borrow additional funds, even when necessary to
        maintain adequate liquidity.

TO SERVICE OUR DEBT, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, WHICH MAY NOT
BE AVAILABLE TO US

     Our ability to repay our debt, including the notes offered by this
prospectus, will depend largely upon our future operating performance and a
number of other factors, many of which are beyond our control. In addition, we
will rely on dividends and other intercompany cash flows from our subsidiaries
to repay our obligations. Financing arrangements between some of our
subsidiaries and their respective lenders contain restrictions on dividends by
and distribution from such subsidiaries to us.

                                        12
<PAGE>   18

     If we are unable to generate sufficient cash flow to meet our debt service
requirements, we may have to renegotiate the terms of our debt. We cannot assure
you that we would be able to renegotiate successfully those terms or refinance
our debt when required. If we were unable to refinance our debt or obtain new
financing under these circumstances, we would have to consider other options,
such as:

     -  sales of certain assets to meet our debt service obligations;

     -  sales of equity; and

     -  negotiations with our lenders to restructure applicable debt.

     Our credit agreements and the indenture governing the notes offered by this
prospectus may restrict our ability to do some of these things.

OUR SUBSIDIARIES CONDUCT ALL OF OUR OPERATIONS AND OWN ALL OF OUR OPERATING
ASSETS, AND THE NOTES OFFERED BY THIS PROSPECTUS WILL BE STRUCTURALLY
SUBORDINATED TO THE LIABILITIES OF OUR SUBSIDIARIES

     We are a holding company and our subsidiaries conduct all of our operations
and own all of our operating assets. Our only material asset is our ownership of
the capital stock of our subsidiaries. As a result, our ability to make required
payments on the notes offered by this prospectus depends on the operations of
our subsidiaries and our subsidiaries' ability to distribute funds to us. To the
extent our subsidiaries are unable to distribute, or are restricted from
distributing, funds to us, we may be unable to fulfill our obligations under the
notes. Our subsidiaries will have no obligation to pay amounts due on the notes
offered by this prospectus, and none of our subsidiaries will guarantee the
notes.

     The rights of holders of the notes offered by this prospectus will be
structurally subordinated to the rights of our subsidiaries' lenders. A default
by a subsidiary under its debt obligations would result in a block on
distributions from the affected subsidiary to us. The exchange notes will be
effectively junior to all liabilities of our subsidiaries. In the event of a
bankruptcy, liquidation or reorganization of any of our subsidiaries, creditors
of our subsidiaries will generally be entitled to payment of their claims from
the assets of those subsidiaries before any assets are made available for
distribution to us. Giving effect to the proposed application of the net
proceeds of the offering of the outstanding notes to prepay certain secured debt
and assuming we had completed the exchange offer, on June 30, 2001, the exchange
notes offered by this prospectus would have been effectively junior to an
aggregate of approximately $803 million of debt owed or guaranteed by certain of
our subsidiaries and an additional $115 million of debt of our joint ventures
guaranteed by subsidiaries.

THE EXCHANGE NOTES WILL BE UNSECURED AND WILL BE EFFECTIVELY SUBORDINATED TO OUR
SECURED DEBT AND SECURED DEBT OF OUR SUBSIDIARIES

     The notes offered by this prospectus are unsecured and therefore will be
effectively subordinated to any secured debt we, or our subsidiaries, currently
maintain or may incur to the extent of the value of the assets securing the
debt. Each of our subsidiary's debt is currently secured by the tanker or
tankers owned by that subsidiary. In the event of a bankruptcy or similar
proceeding involving us or a subsidiary, the assets that serve as collateral
will be available to satisfy the obligations under any secured debt before any
payments are made on the notes. Giving effect to the proposed application of net
proceeds of the offering of the outstanding notes to prepay certain of our
secured debt and assuming we had completed the exchange offer, on June 30, 2001,
the exchange notes would have been effectively junior to an aggregate of
approximately $803 million in outstanding secured debt.

                                        13
<PAGE>   19

FAILURE TO COMPLY WITH COVENANTS COULD LEAD TO ACCELERATION OF DEBT

     Our existing financing agreements and those of our subsidiaries impose
operating and financial restrictions that restrict our actions. These
restrictions limit or prohibit our ability to, among other things:

     -  incur additional debt;

     -  create liens;

     -  sell capital stock of subsidiaries or other assets;

     -  make certain investments;

     -  engage in mergers and acquisitions;

     -  make certain capital expenditures; or

     -  pay dividends.

     Failure to comply with any of the covenants in our existing or future
financing agreements could result in a default under those agreements or under
other agreements containing cross-default provisions. A default would permit
lenders to accelerate the maturity of the debt under these agreements and to
foreclose upon any collateral securing that debt. Under these circumstances, we
might not have sufficient funds or other resources to satisfy all of our
obligations, including our obligations under the notes offered by this
prospectus. In addition, the secured nature of a portion of our other debt,
together with the limitations imposed by financing agreements on our ability to
incur additional debt and to take other actions, might significantly impair our
ability to obtain other financing.

     Some of our existing financing agreements also impose restrictions on
changes of control of us or our ship-owning subsidiaries, including requirements
for prior consent and that we make an offer to redeem certain debt. See
"Description of Certain Debt."

DECLINING MARKET VALUES OF OUR VESSELS COULD ADVERSELY AFFECT OUR LIQUIDITY AND
RESULT IN BREACHES OF OUR FINANCING AGREEMENTS

     Market values of tankers fluctuate depending upon general economic and
market conditions affecting the tanker industry and competition from other
shipping companies, other types and sizes of vessels, and other modes of
transportation. In addition, as vessels become older, they generally decline
significantly in value. Declining vessel values of our tankers could adversely
affect our liquidity by limiting our ability to raise cash by refinancing
vessels. Declining vessel values could also result in a breach of loan covenants
and events of default under relevant financing agreements that require us to
maintain certain loan-to-value ratios. If we are unable to pledge additional
collateral in the event of a decline in vessel values, the lenders could
accelerate our debt and foreclose on our vessels pledged as collateral for the
loans.

WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL
OFFER REQUIRED BY THE INDENTURE GOVERNING THE NOTES

     The terms of the notes will require us to make an offer to repurchase the
notes upon the occurrence of a change of control triggering event at a purchase
price equal to 101% of the principal amount of the notes, plus accrued interest
to the date of the purchase. In the event of a change of control triggering
event, the total debt represented by the notes could become due and payable. We
may not have sufficient funds available at the time of any change of control to
repurchase the notes. See "Description of the Notes -- Repurchase of Notes Upon
a Change of Control Triggering Event."

                                        14
<PAGE>   20

                         RISKS RELATING TO OUR BUSINESS

THE CYCLICAL NATURE OF THE TANKER INDUSTRY CAUSES VOLATILITY IN OUR
PROFITABILITY

     Historically, the tanker industry has been cyclical, experiencing
volatility in profitability due to changes in the supply of, and demand for,
tanker capacity. Increases in tanker capacity supply or decreases in tanker
capacity demand could harm our business, financial condition and results of
operations. The supply of tanker capacity is a function of the number of new
vessels built, older vessels scrapped, converted and lost and the number of
vessels that are out of service. The demand for tanker capacity is influenced
by, among other factors:

     -  global and regional economic conditions;

     -  increases and decreases in industrial production and demand for crude
        oil and petroleum products;

     -  the distance crude oil and petroleum products need to be transported by
        sea; and

     -  developments in international trade and changes in seaborne and other
        transportation patterns.

     Because many of the factors influencing the supply of and demand for tanker
capacity are unpredictable, the nature, timing and degree of changes in tanker
industry conditions are also unpredictable. See "Business -- The International
Tanker Market -- Industry Fundamentals."

WE DEPEND UPON OIL MARKETS, CHANGES IN WHICH COULD RESULT IN DECREASED DEMAND
FOR OUR VESSELS AND SERVICES

     Demand for our vessels and services in transporting crude oil and petroleum
products depends upon world and regional oil markets. Any decrease in shipments
of crude oil in those markets could harm our business, financial condition and
results of operations. Historically, those markets have been volatile as a
result of the many conditions and events that affect the price, production and
transport of oil, as well as competition from alternative energy sources.

OUR DEPENDENCE ON SPOT VOYAGES MAY RESULT IN SIGNIFICANT FLUCTUATIONS IN THE
UTILIZATION OF OUR VESSELS AND IN OUR PROFITABILITY

     In fiscal 2000, we derived approximately 82% of our net voyage revenues
(75% after giving effect to our acquisition of UNS as if it had occurred on
January 1, 2000) from spot voyages or time charters and contracts of
affreightment priced on a spot market basis. Because we depend on the spot
charter market, declining charter rates in a given period generally will result
in corresponding declines in our operating results for that period. The spot
charter market is highly competitive and spot charter rates are subject to
significant fluctuations based on tanker and oil supply and demand. Charter
rates have varied dramatically in the last few years. Future spot charters may
not be available at rates that will be sufficient to enable our vessels to be
operated profitably or provide sufficient cash flow to service the notes and pay
our other debt obligations.

REDUCTION IN OIL PRODUCED FROM OFFSHORE OIL FIELDS COULD HARM OUR SHUTTLE TANKER
BUSINESS

     Demand for our shuttle tankers in transporting crude oil and petroleum
products depends upon the amount of oil produced from offshore oil fields,
especially in the North Sea, where our shuttle tankers primarily operate. As oil
prices increase, the prospect of offshore oil exploration and development of
offshore oil fields, which cost more to build than land oil fields, becomes more
attractive to oil companies. However, if oil prices were to decline, it would
become less attractive for oil companies to explore for oil offshore and develop
offshore oil fields. If the amount of oil produced from offshore oil fields
declines, especially in the North Sea, our shuttle tanker business could be
harmed.

                                        15
<PAGE>   21

OUR INABILITY TO RENEW OR REPLACE LONG-TERM CHARTER CONTRACTS COULD HARM OUR
BUSINESS

     Twenty-five of our tankers, including 16 of our 18 shuttle tankers,
currently are subject to long-term charter contracts. Twelve of these contracts
terminate by their terms between April 2002 and September 2003. The 13 remaining
contracts terminate by their terms between 2004 and 2013. Our inability to renew
or replace these contracts on favorable terms, if at all, or the early
termination of a significant number of these contracts, could harm our business,
financial condition and results of operations.

THE INTENSE COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED PROFITABILITY

     Our vessels operate in highly competitive markets. Competition arises
primarily from other Aframax and shuttle tanker owners, including major oil
companies as well as independent companies. We also compete with owners of other
size tankers. Our market share is insufficient to enforce any degree of pricing
discipline in the markets in which we operate and our competitive position may
erode in the future. Any new markets that we enter could include participants
that have greater financial strength and capital resources than us and we may
not be successful in entering into new markets, including the shuttle tankers
market through our acquisition of UNS.

THE TANKER INDUSTRY IS SUBJECT TO SUBSTANTIAL ENVIRONMENTAL AND OTHER
REGULATIONS, WHICH MAY SIGNIFICANTLY INCREASE OUR EXPENSES

     Our operations are affected by extensive and changing environmental
protection laws and other regulations. We have incurred, and expect to continue
to incur, substantial expenses in complying with these laws and regulations,
including expenses for ship modifications and changes in operating procedures.
Additional laws and regulations may be adopted that could limit our ability to
do business or further increase the cost of our doing business. This could harm
our business, financial condition and results of operations. See "Business --
Regulation."

     The United States Oil Pollution Act of 1990 ("OPA 90") in particular has
increased our expenses. The OPA 90 provides for the phase-in of the exclusive
use of double-hull tankers at United States ports, as well as potentially
unlimited liability for owners, operators and demise or bareboat charterers for
oil pollution in U.S. waters. To comply with the OPA 90, tanker owners generally
incur additional costs in meeting additional maintenance and inspection
requirements, in developing contingency arrangements for potential spills and in
obtaining required insurance coverage. The OPA 90 contains financial
responsibility requirements for vessels operating in U.S. waters and requires
owners and operators of vessels to establish and maintain with the United States
Coast Guard evidence of insurance or of qualification as a self-insurer or other
evidence of financial responsibility sufficient to meet their potential
liabilities under the OPA 90.

     Following the example of the OPA 90, the International Maritime
Organization, the United Nations' agency for maritime safety, adopted
regulations for tanker design and inspection that are designed to reduce oil
pollution in international waters and that will be phased in on a schedule
depending upon vessel age. In addition, certain U.S. states, the European
Community and certain countries are considering stricter technical and
operational requirements for tankers and legislation that will affect the
liability of tanker owners and operators for oil pollution.

     Our shuttle tankers primarily operate in the North Sea. In addition to the
regulations imposed by the International Maritime Organization, the countries
having jurisdiction over areas of the North Sea impose regulatory requirements
in connection with operations in those areas. These regulatory requirements,
together with additional requirements imposed by the operators in the North Sea
oil fields, require us to make further expenditures for sophisticated equipment,
reporting and redundancy systems on our shuttle tankers and for the training of
seagoing staff. Additional regulations and requirements may be adopted or
imposed that could limit our ability to do business or further increase the cost
of doing business in the North Sea.

                                        16
<PAGE>   22

OUR INSURANCE MAY NOT BE SUFFICIENT TO COVER THE LOSSES THAT MAY OCCUR TO OUR
PROPERTY OR AS A RESULT OF OUR OPERATIONS

     The operation of oil tankers carries the risk of environmental damage from
an oil spill as well as the risk of catastrophic marine disasters and property
losses inherent to any ocean-going vessel. We carry protection and indemnity
coverage to protect against most of the accident-related risks involved in the
conduct of our business and maintain environmental damage and pollution
coverage. Except with respect to our shuttle tankers, we do not carry insurance
covering the loss of revenue resulting from vessel off-hire time. All risks may
not be adequately insured against, and any particular claim may not be paid. In
addition, we may not be able to procure adequate coverage at commercially
reasonable rates in the future. Any uninsured loss could harm our business,
financial condition and results of operations.

     More stringent environmental regulations at times in the past have resulted
in increased costs for, and in the future may result in the lack of availability
of, insurance against the risks of environmental damage or pollution. We
currently maintain $1 billion in coverage for liability for pollution, spillage
or leakage of oil for each of our vessels. A catastrophic spill could exceed the
coverage available, which could harm our business, financial condition and
results of operations.

BECAUSE OUR FUTURE GROWTH DEPENDS IN LARGE PART ON FACTORS BEYOND OUR CONTROL,
WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING OUR GROWTH STRATEGY

     A principal component of our strategy is to continue to grow by expanding
our business both in the geographic areas and markets where we have historically
focused as well as into new geographic areas, market segments and services. We
may not be successful in expanding our operations and any expansion may not be
profitable. Our future growth will depend upon a number of factors, both within
and outside of our control. These include:

     -  our identification of new markets;

     -  our acceptance by new customers;

     -  our identification and entering into of suitable joint venture
        opportunities;

     -  our identification and acquisition on favorable terms of suitable
        acquisition candidates;

     -  our successful integration of any acquired businesses, including UNS,
        with our existing operations;

     -  our ability to hire and train qualified personnel; and

     -  our ability to obtain required financing.

     We have grown primarily by means of internal growth and have limited
experience with completing acquisitions and integrating acquired businesses. The
failure to effectively identify, purchase, develop and integrate any acquired
businesses could harm our business, financial condition and results of
operations. In addition, the results we have achieved to date may not be
indicative of our ability to penetrate new markets, including the shuttle tanker
market, many of which may have different competitive conditions and
characteristics than our traditional markets.

WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE UGLAND NORDIC SHIPPING INTO OUR
OPERATIONS

     We may not be successful in integrating into our operations our recent
acquisition of UNS. The UNS acquisition involves risks commonly encountered in
acquisitions of companies, including:

     -  potential disruption of our ongoing business;

     -  diversion of the time and resources of our management; and

     -  potential loss of key employees of the acquired company.

                                        17
<PAGE>   23

     In addition, IUM Shipmanagement AS, a company in which UNS holds a
one-third interest ("IUM"), manages the technical operation, such as crewing and
maintenance, of most of the UNS fleet. While we believe that IUM has
successfully managed the UNS fleet in the past and we currently continue to
utilize the services of IUM, we have a limited operating history with IUM and we
do not have direct control over the IUM personnel.

     Our failure to effectively integrate UNS, or any other acquired businesses,
could harm our business, financial condition and results of operations.

THE STRAIN THAT OUR GROWTH PLACES UPON OUR SYSTEMS AND MANAGEMENT RESOURCES MAY
ADVERSELY AFFECT OUR BUSINESS

     To the extent our operations continue to expand, we will continue to
experience growth in the number of our employees, the scope of our operating and
financial systems and the geographic area of our operations. Recent growth has
increased, and future growth will continue to increase, our operating complexity
and the level of responsibility of existing and new management personnel. We
cannot assure you that we will be able to attract and retain qualified
management and employees, especially qualified officers and other seagoing
personnel, of which there is a limited supply, that our current operating and
financial systems and controls will be adequate as we grow, or that any steps
taken to attract and retain management and employees and to improve such systems
and controls will be sufficient.

WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE IN THE SHUTTLE TANKER MARKET

     We have historically operated in the Aframax spot and time-charter crude
and petroleum transportation markets in the Indo-Pacific Basin and the Atlantic
region. UNS operates primarily in the shuttle tanker market in the North Sea.
While we do not believe operating in the North Sea shuttle tanker market is
substantially different from operating in the Indo-Pacific Basin and Atlantic
region Aframax markets, we may not be successful in our expansion into a market
where we have little or no direct prior experience.

OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL FLUCTUATIONS

     Our tankers operate in markets that have historically exhibited seasonal
variations in demand and, therefore, in charter rates. This seasonality may
result in quarter-to-quarter volatility in our results of operations. Tanker
markets are typically stronger in the winter months as a result of increased oil
consumption in the northern hemisphere. In addition, unpredictable weather
patterns in these months tend to disrupt vessel scheduling. The oil price
volatility resulting from these factors has historically led to increased oil
trading activities in the winter months. As a result, our revenues have
historically been weaker during our fiscal quarters ended June 30 and September
30, and, conversely, revenues have been stronger in our fiscal quarters ended
March 31 and December 31.

WE EXPEND SUBSTANTIAL SUMS DURING CONSTRUCTION OF NEWBUILDINGS WITHOUT EARNING
REVENUE AND WITHOUT ASSURANCE THAT THEY WILL BE COMPLETED

     We are typically required to expend substantial sums as progress payments
during the construction of a newbuilding, but we do not derive any revenue from
the vessel until after its delivery. If the shipyard were unable to complete the
contract or if we were unable to obtain financing required to complete payments
on any of our newbuilding orders, we could effectively forfeit all or a portion
of the progress payments previously made. Our UNS subsidiary currently has three
newbuildings on order, with deliveries scheduled for December 2002, March 2003
and September 2003. We may in the future order additional newbuildings.

                                        18
<PAGE>   24

THE LOSS OF ANY KEY CUSTOMER COULD RESULT IN A SIGNIFICANT LOSS OF REVENUE IN A
GIVEN PERIOD

     We have derived, and believe that we will continue to derive, a significant
portion of our voyage revenues from a limited number of customers. Two
customers, both international oil companies, individually accounted for
approximately $118 million, or 13%, and approximately $110 million, or 12%, of
our consolidated voyage revenues during fiscal 2000. Giving pro forma effect to
our acquisition of UNS as if it had occurred on January 1, 2000, such
percentages would have been 12% and 11%, respectively. A single customer, an
international oil company, accounted for $48 million, or approximately 13%, of
our consolidated voyage revenues for the nine months ended December 31, 1999.
During the year ended March 31, 1999, three customers, all international oil
companies, individually accounted for $51 million, $51 million and $43 million,
or 12%, 12% and 10%, respectively, of our consolidated voyage revenues. No other
customer accounted for more than 10% of our consolidated voyage revenues in any
of the fiscal periods presented above. The loss of any significant customer, or
a substantial decline in the amount of services requested by a significant
customer, could harm our business, financial condition and results of
operations.

EXPOSURE TO CURRENCY EXCHANGE RATE AND INTEREST RATE FLUCTUATIONS COULD RESULT
IN FLUCTUATIONS IN OUR NET INCOME

     While virtually all of our revenues are earned in U.S. Dollars, a portion
of our operating costs is incurred in currencies other than U.S. Dollars. This
partial mismatch in operating revenues and expenses could lead to fluctuations
in net income due to changes in the value of the U.S. Dollar relative to other
currencies, in particular the Japanese Yen, the Singapore Dollar, the Canadian
Dollar, the Norwegian Kroner, the British Pound and the Australian Dollar.

     At March 31, 2001, after giving effect to the issuance of the outstanding
notes and the proposed application of the net proceeds therefrom to prepay
certain of our outstanding secured debt, approximately $700 million, or 63%, of
our debt would have borne interest at floating interest rates. Increases in
interest rates would increase interest payments on this debt, and could
materially adversely affect our business, financial condition and results of
operations. In order to partially mitigate our interest rate exposure, we have
entered into six interest rate swaps, totaling $145 million in notional
principal amount with maturities between December 2001 and May 2004. The average
interest rate of the swaps is 6.46%. As of March 31, 2001, the fair value of
these interest rate swaps was negative $3.4 million. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Market Rate Risks."

OUR SUBSTANTIAL OPERATIONS OUTSIDE THE UNITED STATES EXPOSE US TO POLITICAL,
GOVERNMENTAL AND ECONOMIC INSTABILITY, WHICH COULD ADVERSELY AFFECT OUR
OPERATIONS

     Because our operations are primarily conducted outside of the United
States, they may be affected by changing economic, political and governmental
conditions in the countries where we are engaged in business or where our
vessels are registered. Any disruption caused by these factors could materially
adversely affect our business, financial condition and results of operations.

     During fiscal 2000, we derived approximately 59% of our total revenues from
our operations in the Indo-Pacific Basin (55% after giving effect to our
acquisition of UNS as if it had occurred on January 1, 2000). Past political
conflicts in this region, particularly in the Arabian Gulf, have included
attacks on tankers, mining of waterways and other efforts to disrupt shipping in
the area. Vessels trading in this region have also been subject to, in limited
instances, acts of terrorism and piracy. Future hostilities or other political
instability in this region or other regions where we operate could affect our
trade patterns and materially adversely affect our business, financial condition
and results of operations.

                                        19
<PAGE>   25

WE MAY NOT BE EXEMPT FROM U.S. TAXATION FOR OUR UNITED STATES SOURCE INCOME,
WHICH WOULD REDUCE OUR NET INCOME AND CASH FLOW BY THE AMOUNT OF THE APPLICABLE
TAX

     If not exempt from tax under Section 883 of the United States Internal
Revenue Code, the shipping income derived from United States sources
attributable to our transportation of cargoes to or from the United States will
be subject to U.S. federal income tax. If we are subject to such tax, our net
income and cash flow would be reduced by the amount of such tax. Although we
currently believe we are exempt from taxation under Section 883, proposed
regulations, if they become final as proposed, may not permit us to continue to
claim the Section 883 exemption. See "Business -- Taxation of Teekay -- United
States Taxation."

     In fiscal 2000, approximately 42% of voyage revenues was derived from U.S.
sources attributable to the transportation of cargoes to or from the United
States. The average U.S. federal income tax on such U.S. source income, in the
absence of exemption under Section 883, would have been 2% thereof, or
approximately $7.5 million. Giving effect to our acquisition of UNS as if it had
occurred on January 1, 2000, approximately 40% of our pro forma voyage revenues
for fiscal 2000 would have been derived from such U.S. sources. In the absence
of an exemption under Section 883, the U.S. federal income tax on such pro forma
U.S. source income would have been approximately $7.7 million.

AN ACTIVE PUBLIC MARKET MAY NOT DEVELOP FOR YOUR NOTES, WHICH MAY HINDER YOUR
ABILITY TO LIQUIDATE YOUR INVESTMENT

     There is no established trading market for the exchange notes. Although we
intend to apply for listing the exchange notes on the New York Stock Exchange, a
liquid market for the exchange notes may not develop. Although the initial
purchasers of the outstanding notes have informed us that they intend to make a
market in the exchange notes after the exchange offer, they may stop making a
market at any time. Accordingly, we cannot assure you that a market for the
exchange notes will develop. Furthermore, if a market were to develop, the
market price for the notes may be adversely affected by changes in our financial
performance, changes in the overall market for similar securities and the
performance or prospects for companies in our industry.

     The outstanding notes have not been registered under the Securities Act of
1933 or any state securities laws and may not be offered or sold except pursuant
to an exemption from the registration requirements of the Securities Act and
applicable state securities laws, or pursuant to an effective registration
statement.

     The liquidity of, and trading market for, the exchange notes may also be
adversely effected by general declines in the market for similar securities or
by changes in our financial performance. Such a market decline may adversely
affect such liquidity and trading markets independent of our financial
performance and resources.

                                        20
<PAGE>   26

                                USE OF PROCEEDS

     We issued $250 million principal amount of the outstanding notes on June
22, 2001 to the initial purchasers of those notes. We are making the exchange
offer to satisfy our obligations under the outstanding notes, the indenture and
the exchange and registration rights agreement. We will not receive any cash
proceeds from the exchange offer. In consideration of issuing the exchange notes
in the exchange offer, we will receive an equal principal amount of outstanding
notes. Any outstanding notes that are properly tendered in the exchange offer
will be accepted, canceled and retired and cannot be reissued.

     Our net proceeds from the offering of the outstanding notes were
approximately $244.5 million, after deducting the discount payable to the
initial purchasers of the outstanding notes and offering expenses. We have used
a portion these net proceeds, and intend to use the balance of these net
proceeds, to prepay certain of our secured debt. The secured debt that we have
prepaid, and that we intend to prepay, bears interest at rates ranging from
4.9875% to 8.32% and has maturity dates ranging from October 2003 to December
2008. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Liquidity and Capital Resources" and "Description of
Certain Debt." Included in this prepaid debt is a portion of our outstanding
8.32% First Preferred Ship Mortgage Notes.

                                        21
<PAGE>   27

                                 CAPITALIZATION

     The following table sets forth our consolidated capitalization at March 31,
2001, to reflect:

     (1)   our actual capitalization; and

     (2)   our pro forma capitalization to give effect to (a) the acquisition of
           the remaining 36% interest of UNS for $79.4 million in cash, which
           was completed as of June 1, 2001, (b) the offering of the outstanding
           and notes and proposed application of the net proceeds therefrom, and
           (c) the exchange offer.

     You should read the following table in conjunction with our historical and
pro forma consolidated financial statements and the related notes included
elsewhere in this prospectus. See "Use of Proceeds," "Management's Discussion
and Analysis of Results of Operations and Financial Condition," "Business --
Acquisition of Ugland Nordic Shipping ASA" and "Description of Certain Debt."

<TABLE>
<CAPTION>
                                                                      MARCH 31, 2001
                                                                ---------------------------
                                                                  ACTUAL       PRO FORMA(1)
                                                                -----------    ------------
                                                                (UNAUDITED)    (UNAUDITED)
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>            <C>
Cash and marketable securities..............................    $  348,054      $  268,655
                                                                ==========      ==========
Current obligations(2):
  Current portion of long-term debt.........................    $  123,058      $   91,455
                                                                ----------      ----------
     Total current obligations..............................       123,058          91,455
                                                                ----------      ----------
Long-term debt(2):
  Long-term debt............................................       985,636         772,739
  Outstanding notes.........................................            --         250,000
                                                                ----------      ----------
     Total long-term debt...................................       985,636       1,022,739
                                                                ----------      ----------
Minority interest...........................................        66,968          19,257
                                                                ----------      ----------
Stockholders' equity:
  Capital stock.............................................       458,605         458,605
  Retained earnings.........................................       777,618         777,618
  Accumulated other comprehensive loss......................        (1,443)         (1,443)
                                                                ----------      ----------
     Total stockholders' equity.............................     1,234,780       1,234,780
                                                                ----------      ----------
     Total capitalization...................................    $2,410,442      $2,368,231
                                                                ==========      ==========
</TABLE>

- ---------------

(1) Excludes approximately $95 million of long-term debt incurred by UNS in
    April 2001 for its acquisition of four shuttle tankers from Awilco ASA.

(2) For information concerning our borrowing arrangements, see "Description of
    Certain Debt" and Note 6 to our consolidated financial statements included
    elsewhere in this prospectus.

                                        22
<PAGE>   28

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The following tables present selected financial and other data for us as at
and for the three-month periods ended March 31, 2001 and 2000 and the fiscal
year ended December 31, 2000, the nine-month period ended December 31, 1999 and
the three fiscal years ended March 31, 1999. We derived the selected financial
data set forth below with respect to our statements of income for the fiscal
year ended December 31, 2000, the nine-month period ended December 31, 1999 and
the fiscal year ended March 31, 1999 and our balance sheets as at December 31,
2000 and 1999, from our consolidated financial statements that are included
elsewhere in this prospectus and have been audited by Ernst & Young, independent
chartered accountants. We derived the income statement data for each of the two
fiscal years ended March 31, 1998 and 1997 and the balance sheet data as at
March 31, 1999, 1998 and 1997, from consolidated financial statements audited by
Ernst & Young which are not included in this prospectus. We derived the selected
financial and other data set forth below with respect to our statements of
income for each of the three-month periods ended March 31, 2001 and 2000 and our
balance sheet as at March 31, 2001 from our unaudited consolidated financial
statements included elsewhere in this prospectus. We derived the balance sheet
data as at March 31, 2000 from our unaudited consolidated financial statements
not included in this prospectus. In management's opinion, these unaudited
consolidated financial statements reflect all adjustments necessary (consisting
only of normal recurring adjustments) for a fair presentation of such financial
data. Our results for the three-month period ended March 31, 2001 are not
necessarily indicative of the eventual results for the year.

     We have provided pro forma information for us as at and for the three-month
period ended March 31, 2001 and for the fiscal year ended December 31, 2000 to
show the effect of the acquisition of 100% of UNS as if it had occurred on
January 1, 2000. We derived the selected pro forma data set forth below from our
pro forma consolidated condensed financial statements that are included
elsewhere in this prospectus. The pro forma financial information is based upon
available information and assumptions we believe are reasonable. The pro forma
financial information is provided for informational purposes only and is not
indicative of our operating results or financial position had the acquisition of
UNS occurred at January 1, 2000, nor is it necessarily indicative of future
combined operating results or financial position.

     You should read the data below in conjunction with the consolidated
financial statements, unaudited pro forma consolidated condensed financial
statements and related notes, the financial information and "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
included elsewhere in this prospectus.

     We changed our fiscal year end from March 31 to December 31, commencing
December 31, 1999, in order to facilitate comparison of our operating results to
those of other companies in the transportation industry.

                                        23
<PAGE>   29
<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED MARCH 31,                    FISCAL YEARS ENDED
                                        ---------------------------------------   ----------------------------------------
                                                                                   PRO FORMA
                                         PRO FORMA                                 DEC. 31,      DEC. 31,      DEC. 31,
                                          2001(1)        2001          2000         2000(1)        2000          1999
                                         ---------       ----          ----        ---------     --------      --------
                                        (UNAUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)                (NINE MONTHS)
                                                          (IN THOUSANDS, EXCEPT RATIOS AND PER DAY DATA)
<S>                                     <C>           <C>           <C>           <C>           <C>          <C>
INCOME STATEMENT DATA:
Voyage revenues.......................  $  325,074    $  307,886    $  182,262     $ 962,307    $  893,226    $  377,882
Voyage expenses.......................      63,658        62,730        62,195       248,957       248,957       129,532
                                        ----------    ----------    ----------     ---------    ----------    ----------
Net voyage revenues...................     261,416       245,156       120,067       713,350       644,269       248,350
                                        ----------    ----------    ----------     ---------    ----------    ----------
Operating expenses:
 Vessel operating expenses(2).........      38,250        33,879        34,769       146,075       125,415        98,780
 Time charter hire expense............      17,183        17,183        12,966        53,547        53,547        30,681
 Depreciation and amortization
   expense............................      32,675        27,521        25,042       123,297       100,153        68,299
 General and administrative expense...      12,045        10,838         9,522        43,445        37,479        27,018
                                        ----------    ----------    ----------     ---------    ----------    ----------
Total operating expenses..............     100,153        89,421        82,299       366,364       316,594       224,778
                                        ----------    ----------    ----------     ---------    ----------    ----------
Income from vessel operations.........     161,263       155,735        37,768       346,986       327,675        23,572
Interest expense......................     (21,343)      (14,786)      (19,989)     (106,500)      (74,540)      (44,996)
Interest income.......................       3,000         2,803         3,253        15,090        13,021         5,842
Other income (loss)...................       2,177           936        (1,092)        9,978         3,864        (4,013)
                                        ----------    ----------    ----------     ---------    ----------    ----------
Net income (loss) before extraordinary
 loss.................................     145,097       144,688        19,940       265,554       270,020       (19,595)
Extraordinary loss on bond
 Redemption...........................          --            --            --            --            --            --
                                        ----------    ----------    ----------     ---------    ----------    ----------
Net income (loss).....................  $  145,097    $  144,688    $   19,940     $ 265,554    $  270,020    $  (19,595)
                                        ==========    ==========    ==========     =========    ==========    ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and marketable securities........  $  268,655    $  348,054    $  253,749            --    $  223,123    $  226,381
Total assets..........................   2,470,621     2,518,332     1,988,367            --     1,974,099     1,982,684
Total debt............................   1,108,694     1,108,694     1,074,561            --       797,484     1,085,167
Total stockholders' equity............   1,234,780     1,234,780       844,727            --     1,098,512       832,067
OTHER FINANCIAL DATA:
EBITDA(3).............................  $  203,000    $  188,978    $   66,862     $ 504,127    $  451,066    $   95,875
EBITDA to interest expense(3)(4)......         9.4x         13.0x          3.4x          4.8x          6.1x          2.1x
Total debt to LTM EBITDA(3)(5)........         1.8x          1.9x          6.8x           --           1.8x          8.3x
Total debt to total
 Capitalization(6)....................        46.9%         46.0%         55.9%           --          42.1%         56.6%
Net debt to total capitalization(7)...        40.1%         36.9%         49.2%           --          34.2%         50.7%
Ratio of earnings to fixed
 charges(8)...........................         7.6x         10.8x          2.0x          3.5x          4.6x          0.6x
Cash earnings(9)......................  $  181,276    $  174,832    $   45,165     $ 389,626    $  372,168    $   43,343
Capital expenditures:
 Vessel purchases, gross(10)..........      13,102         1,394           550       143,601        43,512        23,313
 Drydocking...........................       2,240         2,240         2,500        16,467        11,941         6,598
TOTAL FLEET DATA(11):
Average number of ships...............          79            73            73            80            72            65
Average age of our fleet (in years at
 end of period).......................         9.2           9.2           8.4           9.2           9.0           8.4
Operating cash flow per ship
 per day(12)..........................  $   27,535    $   28,300    $    9,851     $  16,183    $   16,687    $    5,177
SPOT AFRAMAX FLEET DATA(13):
Average number of ships...............          58            58            61            59            59            55
Average age of our fleet (in years at
 end of period).......................         8.7           8.7           7.6           8.3           8.3           7.4
TCE per ship per day(14)..............  $   43,720    $   43,720    $   19,016     $  27,138    $   27,138    $   13,462
Vessel operating expenses per ship
 per day(2)...........................       5,307         5,307         5,217         4,980         4,980         5,621
Operating cash flow per ship
 per day(12)..........................      32,351        32,351        10,441        18,145        18,145         4,731

<CAPTION>
                                                 FISCAL YEARS ENDED
                                        ------------------------------------

                                         MAR. 31,     MAR. 31,     MAR. 31,
                                           1999         1998         1997
                                         --------     --------     --------

                                        (IN THOUSANDS, EXCEPT RATIOS AND PER
                                                     DAY DATA)
<S>                                     <C>          <C>          <C>
INCOME STATEMENT DATA:
Voyage revenues.......................  $  411,922   $  406,036   $  382,249
Voyage expenses.......................      93,511      100,776      102,037
                                        ----------   ----------   ----------
Net voyage revenues...................     318,411      305,260      280,212
                                        ----------   ----------   ----------
Operating expenses:
 Vessel operating expenses(2).........      84,397       70,510       72,586
 Time charter hire expense............      29,666       10,627        3,461
 Depreciation and amortization
   expense............................      93,712       94,941       90,698
 General and administrative expense...      25,002       21,542       19,209
                                        ----------   ----------   ----------
Total operating expenses..............     232,777      197,620      185,954
                                        ----------   ----------   ----------
Income from vessel operations.........      85,634      107,640       94,258
Interest expense......................     (44,797)     (56,269)     (60,810)
Interest income.......................       6,369        7,897        6,358
Other income (loss)...................       5,506       11,236        2,824
                                        ----------   ----------   ----------
Net income (loss) before extraordinary
 loss.................................      52,712       70,504       42,630
Extraordinary loss on bond
 Redemption...........................      (7,306)          --           --
                                        ----------   ----------   ----------
Net income (loss).....................  $   45,406   $   70,504   $   42,630
                                        ==========   ==========   ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and marketable securities........  $  132,256   $  115,254   $  117,523
Total assets..........................   1,452,220    1,460,183    1,372,838
Total debt............................     641,719      725,369      699,726
Total stockholders' equity............     777,390      689,455      629,815
OTHER FINANCIAL DATA:
EBITDA(3).............................  $  186,069   $  209,582   $  191,632
EBITDA to interest expense(3)(4)......         4.0x         3.8x         3.2x
Total debt to LTM EBITDA(3)(5)........         3.5x         3.5x         3.7x
Total debt to total
 Capitalization(6)....................        45.2%        51.3%        52.6%
Net debt to total capitalization(7)...        39.6%        46.9%        48.0%
Ratio of earnings to fixed
 charges(8)...........................         2.1x         2.3x         1.7x
Cash earnings(9)......................  $  146,489   $  165,575   $  133,554
Capital expenditures:
 Vessel purchases, gross(10)..........      85,445      197,199       65,104
 Drydocking...........................      11,749       18,376       16,559
TOTAL FLEET DATA(11):
Average number of ships...............          47           43           41
Average age of our fleet (in years at
 end of period).......................         8.7          7.8          8.2
Operating cash flow per ship
 per day(12)..........................  $   11,171   $   12,682   $   11,819
SPOT AFRAMAX FLEET DATA(13):
Average number of ships...............          43           42           41
Average age of our fleet (in years at
 end of period).......................         8.0          7.6          7.9
TCE per ship per day(14)..............  $   19,576   $   21,373   $   20,356
Vessel operating expenses per ship
 per day(2)...........................       4,969        4,554        4,922
Operating cash flow per ship
 per day(12)..........................      10,903       12,664       11,819
</TABLE>

                                                   (Footnotes on following page)

                                        24
<PAGE>   30

 (1) Represents actual amounts as adjusted to give effect to the acquisition of
     100% of UNS, as if it had occurred on January 1, 2000. See unaudited pro
     forma consolidated condensed financial statements included elsewhere in
     this prospectus. The primary adjustments were (a) an increase in
     depreciation and amortization expense relating to the amortization of
     goodwill arising upon the acquisition of UNS, (b) an increase in interest
     expense as if we had borrowed funds under our revolving credit facilities
     to finance the acquisition, and (c) an increase in other income to reverse
     the expense related to the minority interest portion of UNS' results for
     the period March 6, 2001 to March 31, 2001.

 (2) Vessel operating expenses comprise all expenses relating to the operation
     of vessels (other than voyage expenses), including crewing, repairs and
     maintenance, insurance, stores and lubes, and communications expenses.
     Voyage expenses also comprise all expenses relating to particular voyages,
     including bunker fuel expenses, port fees, canal tolls, and brokerage
     commissions. Ship days are calculated on the basis of a 365-day year
     multiplied by the average number of owned vessels in our fleet for the
     respective year. Vessel operating expenses exclude vessels time-
     chartered-in.

 (3) EBITDA represents net income (loss) before extraordinary items, interest
     expense, income tax expense, depreciation and amortization expense,
     minority interest, and gains or losses arising from prepayment of debt,
     foreign exchange translation and disposal of assets. EBITDA is included
     because such data is used by certain investors to measure a company's
     financial performance. EBITDA is not required by accounting principles
     generally accepted in the United States and should not be considered as an
     alternative to net income or any other indicator of our performance
     required by accounting principles generally accepted in the United States.

 (4) For purposes of computing EBITDA to interest expense, interest expense
     includes capitalized interest but excludes amortization of loan costs.

 (5) Total debt to LTM EBITDA represents total debt as of the end of the period
     compared to EBITDA for the 12-month period then ended.

 (6) Total capitalization represents total debt, minority interest and total
     stockholders' equity.

 (7) Net debt represents total debt less cash, cash equivalents and marketable
     securities. Total capitalization represents net debt, minority interest and
     total stockholders' equity.

 (8) For purposes of computing the ratio of earnings to fixed charges, earnings
     consist of net income (loss) before extraordinary items, income taxes,
     minority interest expense, equity income, interest expense, amortization of
     deferred financing costs and amortization of capitalized interest. Fixed
     charges consist of interest expense, capitalized interest and amortization
     of deferred financing costs.

 (9) Cash earnings represents net income (loss) before extraordinary items,
     foreign exchange gains (losses), and depreciation and amortization expense.
     Cash earnings is included because it is used by certain investors to
     measure a company's financial performance as compared to other companies in
     the shipping industry. Cash earnings is not required by accounting
     principles generally accepted in the United States and should not be
     considered as an alternative to net income or any other indicator of our
     performance required by accounting principles generally accepted in the
     United States.

(10) Excludes vessels purchased in connection with our corporate acquisitions of
     Bona Shipbuilding Ltd. in 1999 and UNS in 2001. See "Management's
     Discussion and Analysis of Financial Condition and Results of Operations."

(11) Excludes vessels of our joint ventures, newbuildings and one Aframax tanker
     that has been subject to a bareboat charter.

                                        25
<PAGE>   31

(12) Operating cash flow represents income from vessel operations plus
     depreciation and amortization expense (other than drydock amortization
     expense). Ship days are calculated on the basis of a 365-day fiscal year
     multiplied by the average number of vessels in our fleet for the respective
     year (excluding vessels of our joint ventures). Operating cash flow is not
     required by accounting principles generally accepted in the United States
     and should not be considered as an alternative to net income or any other
     indicator of our performance required by accounting principles generally
     accepted in the United States.

(13) Includes our core Aframax fleet that operates primarily in the spot charter
     market and excludes vessels that operate primarily under long-term
     fixed-rate contracts, including our ten Aframax-size shuttle tankers and
     our Aframax-size Australian-crewed vessels. TCE and vessel operating
     expense data is separately presented only for this portion of our fleet
     because the remainder of our fleet generally has varying revenues and
     expense characteristics that make period-to-period comparisons not
     meaningful. Also excludes one Aframax tanker that has been subject to a
     bareboat charter and Aframax tankers of our joint ventures.

(14) TCE is a measure of the revenue performance of a vessel, which, on a per
     voyage basis, is generally determined by Clarkson Research Studies Inc.
     ("Clarkson") and other industry data sources by subtracting voyage expenses
     (except commissions) which are incurred in transporting cargo from gross
     revenue per voyage and dividing the remaining revenue by the total number
     of days required for the round-trip voyage. For purposes of calculating our
     average TCE for the year, TCE has been calculated consistent with
     Clarkson's method, by deducting total voyage expenses (except commissions)
     from total voyage revenues and dividing the remaining sum by our total
     voyage days in the year. See "Exhibit A -- Definitions of Shipping Terms."

                                        26
<PAGE>   32

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     You should read the following discussion together with the financial
statements, including the related notes, and the other financial information
appearing elsewhere in this prospectus, as well as the risks described in the
"Risk Factors" section.

     We changed our fiscal year end from March 31 to December 31, commencing
December 31, 1999, in order to facilitate comparison of our operating results to
those of other companies in the transportation industry.

OVERVIEW

     Teekay is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium-size
oil tankers. Our modern fleet of 95 tankers (including three newbuildings, seven
vessels time-chartered-in and six vessels owned by joint ventures) provides
transportation services to major oil companies, major oil traders and government
agencies worldwide. We believe our Aframax fleet is approximately three times
larger than that of our nearest direct Aframax competitor. Through our recent
acquisition of Ugland Nordic Shipping ASA, we are also the largest owner of
shuttle tankers, which engage in the transportation of oil from offshore
production platforms to onshore storage and refinery facilities. We estimate
that our market share is approximately 25% in the Indo-Pacific Basin Aframax
market and approximately 10% in the Atlantic region Aframax market, based on
tankers trading in those regions that are 20 years old or younger, and we
estimate that our market share is approximately 25% of the world shuttle tanker
market.

     During fiscal 2000, approximately 82% of our net voyage revenues were
derived from spot voyages or time charters and contracts of affreightment priced
on a spot market basis. Time charters refer to vessels chartered to customers
for a fixed period and contracts of affreightment refer to contracts where we
carry an agreed quantity of cargo for a customer over a specified trade route
within a specified period of time. During fiscal 2000, approximately 68% of our
net voyage revenues were generated from spot voyages and approximately 14% of
our net voyage revenues were generated from spot market-based time charters and
contracts of affreightment. The remaining 18% of our net voyage revenues during
fiscal 2000 were derived from fixed-rate time-charters and contracts of
affreightment. Our dependence on the spot market contributes to the volatility
of our revenues, cash flow from operations, and net income.

     Historically, the tanker industry has been cyclical, experiencing
volatility in profitability and asset values resulting from changes in the
supply of, and demand for, vessel capacity. In addition, tanker markets have
historically exhibited seasonal variations in charter rates. Tanker markets are
typically stronger in the winter months as a result of increased oil consumption
in the northern hemisphere and unpredictable weather patterns that tend to
disrupt vessel scheduling.

ACQUISITION OF UGLAND NORDIC SHIPPING ASA

     As of March 31, 2001, we had purchased approximately a 64% interest in UNS
(9% of which we had purchased in 2000), the world's largest shuttle tanker
owner, for $143.9 million. As of April 26, 2001, we acquired an additional 34%
interest for $75.2 million, giving us a total interest in UNS of 98%. As of June
1, 2001, we had purchased the remaining 2% of UNS. The total purchase price for
the outstanding shares of UNS was approximately $223.3 million (including
estimated transaction expenses of $7.0 million).

     UNS controls a modern fleet of 18 vessels that engage in the transportation
of oil from offshore production platforms to onshore storage and refinery
facilities. The UNS fleet has an average age of 8.5 years (excluding three
newbuildings), and operates primarily in the North Sea under long-term fixed-
rate contracts. In addition, as of June 1, 2001, UNS owned approximately 14.4%
of the publicly traded

                                        27
<PAGE>   33

company Nordic American Tankers Shipping Ltd., the owner of three Suezmax
tankers on a long-term contract to BP.

     For the year ended December 31, 2000, UNS earned net voyage revenues of
approximately $69.1 million, resulting in income from vessel operations of
approximately $23.8 million and net income of approximately $15.4 million. These
amounts reflect the conversion from accounting principles generally accepted in
Norway to accounting principles generally accepted in the United States. The
acquisition of UNS has been accounted for using the purchase method of
accounting, based upon preliminary estimates of fair value. The operating
results of UNS have been reflected in our financial statements on a 100% basis
commencing March 6, 2001, the effective date that we acquired a majority
interest in UNS. Minority interest expense, which is included as part of other
income (loss), has been recorded to reflect the minority shareholders' share of
UNS' net income for the period from March 6, 2001 to March 31, 2001.

     Since UNS derives a majority of its revenues from long-term fixed-rate
contracts, the percentage of our fleet that will be dependent on the spot tanker
market is expected to decline. Giving effect to the acquisition of UNS as if it
had occurred on January 1, 2000, our pro forma net voyage revenues from
fixed-rate time-charters and contracts of affreightment during the fiscal year
ended December 31, 2000 and the three months ended March 31, 2001 would have
been 25% and 18%, respectively, compared to 18% and 12% when excluding UNS.

ACQUISITION OF BONA SHIPHOLDING LTD.

     In June 1999, we acquired Bona Shipholding Ltd. ("Bona"), then a leading
operator of medium-size tankers, for aggregate consideration (including
transaction expenses) of approximately $450 million, consisting of approximately
$40 million in cash, $294 million of assumed debt (net of cash acquired), and
the balance in shares of our common stock. Through its fleet of primarily
Aframax tankers and oil/bulk/ore carriers ("O/B/Os"), Bona engaged in the
transportation of oil, oil products, and dry bulk commodities, primarily in the
Atlantic region.

     The acquisition of Bona was accounted for using the purchase method of
accounting and did not result in the recording of any goodwill. We capitalized
acquisition expenses by adding them to the capitalized value of acquired vessels
whose values were written down and amortized the expenses over the remaining
life of the vessels. Under the purchase method of accounting, Bona's operating
results are reflected in our financial statements commencing after June 11,
1999, the effective date of the acquisition.

     Prior to the Bona acquisition, we depreciated our vessels for accounting
purposes over an economic life of 20 years down to estimated residual values.
Bona depreciated its vessels over an economic life of 25 years down to estimated
scrap values, which method is used by the majority of companies in the shipping
industry. Effective April 1, 1999, we changed, on a prospective basis, our
useful life estimate to 25 years.

     All O/B/Os owned by Bona are operated through an O/B/O pool managed by a
subsidiary of Bona. Net voyage revenues from the O/B/O pool are currently
included on a 100% basis in Teekay's consolidated financial statements, with the
minority participants' share of the O/B/O pool's net voyage revenues reflected
as a time charter hire expense.

RECENT TANKER MARKET TRENDS

     In 1999, oil production cutbacks by OPEC producers resulted in a
significant drawdown of world oil inventory levels, lowering tanker demand and
TCE rates, and increasing scrapping. As a result, our Aframax fleet earned an
average of $14,203 in TCE during calendar 1999.

     In 2000, tanker demand and TCE rates improved significantly as increased
oil demand and replenishment of low inventory levels supported production
increases throughout the year. OPEC responded to this escalating oil demand with
four production increases during 2000: 1.7 mbpd (million

                                        28
<PAGE>   34

barrels per day) in March, 0.7 mbpd in June, 0.8 mbpd in September and 0.5 mbpd
in November. Overall, OPEC increased production by 3.7 mbpd during 2000. Global
oil production increased from an average 74.1 mbpd in 1999 to 76.7 mbpd in 2000.
Oil production in the fourth quarter of 2000 peaked at 78.2 mbpd.

     The tanker market in 2000 was driven not only by transitory cyclical events
but also by positive structural developments in the tanker industry. A number of
high profile oil spills involving old tankers increased charterers' preference
for modern high-quality tankers and, consequently, the freight differential
customers were willing to pay to charter these ships. As a result of those
factors, our Aframax fleet earned an average of $27,138 in TCE in 2000, or a 91%
increase over the prior year.

     OPEC has decreased scheduled production by 1.5 mbpd in February 2001 and
1.0 mbpd in April 2001 due to seasonally weaker demand in the spring quarter.
However, industry sources anticipate that OPEC will raise production later this
year to meet winter demand. The International Energy Agency estimates that
global oil demand will increase by 1.2% in 2001, compared with 0.9% in 2000.
Much of the incremental production required to meet this increase in oil demand
is expected to come from the Middle East, which would particularly increase
tanker demand by requiring long-haul tanker transportation to markets.

     Newbuilding deliveries into the world fleet in 2001 are expected to be 16.9
mdwt (million deadweight tons), well below the 21.2 mdwt delivered in 2000. As
of May 31, 2001, 7.7 mdwt of newbuildings had been delivered in 2001. With the
newbuilding orderbook full for 2001 and 2002, the typical lead time for delivery
of a new vessel is now into late-2003. Both of these elements should continue to
constrain tanker supply.

     In April 2001, the International Maritime Organization (IMO) -- the United
Nation's specialized agency responsible for improving maritime safety and
preventing pollution from ships -- adopted legislation accelerating the
phase-out of single-hull tankers. Under prior IMO regulations, single-hull
tankers would be phased out of the world tanker fleet at age 30. The new
regulations accelerate the phase-out from 30 years in 2003 to 26 years in 2007
for single-hull tankers, which would affect approximately 30% of the current
world tanker fleet by the end of 2007. See "Business -- Regulation."

     Together, we believe the factors discussed above create a positive outlook
for the TCE rate environment for the near term.

RESULTS OF OPERATIONS

     Historically, our business has been dominated by the spot charter market,
including time charters priced on a spot market basis. In the spot market, bulk
shipping industry freight rates are commonly measured at the net voyage revenue
level in terms of TCE, or "time charter equivalent" rates, defined as (1)(a)
voyage revenues less (b) voyage expenses (excluding commissions), (2) divided by
voyage ship-days for the round-trip voyage. Voyage revenues and voyage expenses
are a function of the type of charter, either spot charter or time charter, and
port, canal and fuel costs depending on the trade route upon which a vessel is
sailing, in addition to being a function of the level of shipping freight rates.
For this reason, shipowners operating in the spot market base economic decisions
regarding the deployment of their vessels upon anticipated TCE rates, and
industry analysts typically measure bulk shipping freight rates in terms of TCE
rates. Accordingly, the discussion of revenue below focuses on net voyage
revenue and TCE rates.

     TCE rates are dependent on oil production levels, oil consumption growth,
the number of vessels scrapped, the number of newbuildings delivered and
charterers' preference for modern tankers. As a result of our dependence on the
tanker spot market, any fluctuations in Aframax TCE rates will impact our
revenues and earnings.

                                        29
<PAGE>   35

  QUARTER ENDED MARCH 31, 2001 VERSUS QUARTER ENDED MARCH 31, 2000

     Our average Aframax TCE rates increased significantly in the first quarter
of 2001, compared to the first quarter of 2000, due to increased demand for
modern tankers, arising from increased oil production and discrimination against
older tankers by charterers.

     The OPEC decrease in oil production in February 2001 in anticipation of the
seasonal reduction in crude oil demand, which typically occurs during the second
quarter, caused Aframax TCE rates to decline at the end of the quarter from the
high levels experienced during the most recent winter.

     Our average fleet size was 1.8% lower in the quarter ended March 31, 2001,
compared to the same quarter in 2000, due to the sale of two older tankers in
March 2000, partially offset by the acquisition of UNS in March 2001.

     NET VOYAGE REVENUE.  Net voyage revenues increased 104.2% to $245.2 million
in the quarter ended March 31, 2001, compared to a $120.1 million for the same
quarter last year. This is primarily the result of a 112.2% increase in our
average TCE rate to $39,754 in the quarter ended March 31, 2001, from $18,734 in
the same quarter last year.

     VESSEL OPERATING EXPENSE.  Vessel operating expenses, which include
crewing, repairs and maintenance, insurance, stores and lubes, and communication
expenses, decreased 2.6% to $33.9 million in the quarter ended March 31, 2001,
from $34.8 million in the same quarter last year, mainly as a result of the
reduction in our average fleet size.

     TIME-CHARTER HIRE EXPENSE.  Time-charter hire expense increased to $17.2
million in the quarter ended March 31, 2001, from $13.0 million in the same
quarter last year, primarily due to an increase in the average TCE rates earned
in the O/B/O pool, which we manage. The minority participants' share of the
O/B/O pool's net voyage revenues, which is reflected as a time-charter hire
expense, was $9.4 million for the quarter ended March 31, 2001, compared to $5.5
million for the quarter ended March 31, 2000. The average number of vessels
time-chartered-in by us was five, excluding the O/B/Os, in the quarter ended
March 31, 2001, unchanged from the same quarter last year.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
increased 9.9% to $27.5 million in the quarter ended March 31, 2001, from $25.0
million in the same quarter last year, mainly due to the acquisition of UNS and
an increase in drydock amortization expense. Depreciation and amortization
expense included amortization of drydocking costs of $3.0 million in the quarter
ended March 31, 2001, compared to $2.2 million in the same quarter last year.

     GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expenses
increased 13.8% to $10.8 million in the quarter ended March 31, 2001, from $9.5
million in the same quarter last year, primarily as a result of the payment of
senior management bonuses in the quarter ended March 31, 2001 and the
acquisition of UNS during the quarter.

     INTEREST EXPENSE.  Interest expense decreased 26.0% to $14.8 million in the
quarter ended March 31, 2001, from $20.0 million in the same quarter last year,
reflecting lower interest rates and a lower average debt balance due to
principal prepayments.

     INTEREST INCOME.  Interest income decreased 13.8% to $2.8 million in the
quarter ended March 31, 2001, as compared to $3.3 million in the same quarter
last year, mainly as a result of lower interest rates.

     OTHER INCOME/LOSS.  Other income of $0.9 million in the quarter ended March
31, 2001 was comprised of a gain on the disposition of marketable securities and
equity income from joint ventures, partially offset by minority interest,
foreign exchange loss and income taxes. Other loss of $1.1 million in the
quarter ended March 31, 2000, primarily reflected the loss on the disposition of
vessels and equipment.

                                        30
<PAGE>   36

     NET INCOME.  As a result of the foregoing factors, our net income was
$144.7 million in the quarter ended March 31, 2001, compared to net income of
$19.9 million in the quarter ended March 31, 2000, due mainly to the improvement
in Aframax TCE rates.

  YEAR ENDED DECEMBER 31, 2000 VERSUS NINE MONTHS ENDED DECEMBER 31, 1999

     As a result of our change in fiscal year end from March 31 to December 31,
commencing December 31, 1999, the fiscal 2000 results are for the twelve month
period ended December 31, 2000, while the comparative fiscal period's results
are for the nine month period ended December 31, 1999. Where indicated in the
following discussions, percentage change figures reflect the annualized results
for the nine month period ended December 31, 1999. We annualized the results by
multiplying our results for the nine month period by 4/3. The annualized results
for the nine month period ended December 31, 1999 are not necessarily indicative
of those for a full 12-month period.

     The results for the nine month period ended December 31, 1999 include the
results of Bona commencing on its acquisition in June 1999. On an annualized
basis, our average fleet size increased 9.0% in the year ended December 31, 2000
compared to the nine month period ended December 31, 1999. Average Aframax TCE
rates increased significantly in 2000 compared to the nine month period ended
December 31, 1999, due to increased demand for modern tankers that arose from
increased oil production and discrimination against older tankers by charterers.

     NET VOYAGE REVENUE.  Net voyage revenues were $644.3 million in the year
ended December 31, 2000, as compared to $248.4 million in the nine month period
ended December 31, 1999, representing a 94.6% increase on an annualized basis
from the nine month period ended December 31, 1999. This is mainly the result of
a 81.2% increase in the average TCE rate earned by our fleet, to $25,661 for the
year ended December 31, 2000, from $14,165 for the nine month period ended
December 31, 1999. As of December 31, 1999, we changed the process of estimating
net voyage revenues from a load port-to-load port basis to a discharge
port-to-discharge port basis, which is consistent with most other shipping
companies. This change in voyage estimate resulted in a one-time increase in net
voyage revenues of $5.7 million for the nine month period ended December 31,
1999.

     VESSEL OPERATING EXPENSE.  Vessel operating expenses increased to $125.4
million in the year ended December 31, 2000 from $98.8 million in the nine month
period ended December 31, 1999, representing a 4.8% decrease on an annualized
basis. This decrease was mainly the result of lower per-day operating expenses
arising from the application of our lower cost structure to the Bona fleet. This
decrease was partially offset by the increase in our average fleet size.

     TIME-CHARTER HIRE EXPENSE.  Time-charter hire expense was $53.5 million in
the year ended December 31, 2000, up from $30.7 million in the nine month period
ended December 31, 1999, representing a 30.7% increase on an annualized basis.
This increase is primarily due to an increase in the minority participants'
share of the O/B/O pool's net voyage revenues, which was $26.3 million for the
year ended December 31, 2000, compared to $10.5 million in the nine month period
ended December 31, 1999. This was caused by an improvement in the average TCE
rate earned in the O/B/O pool and the inclusion of Bona's operating results,
which includes the O/B/O vessels, for only part of the previous fiscal period
from June 11, 1999. The average number of vessels that we time-chartered-in,
excluding the O/B/Os, was five in the year ended December 31, 2000, compared to
four in the nine month period ended December 31, 1999.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
increased to $100.2 million in the year ended December 31, 2000, from $68.3
million in the nine month period ended December 31, 1999, representing a 10.0%
increase on an annualized basis. This increase primarily reflects the increase
in our average fleet size arising from the acquisition of Bona. Depreciation and
amortization expense included amortization of drydocking costs of $9.2 million
in the year ended December 31, 2000, compared to $6.3 million in the nine month
period ended December 31, 1999.

                                        31
<PAGE>   37

     GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expenses
were $37.5 million in the year ended December 31, 2000, as compared to $27.0
million in the nine month period ended December 31, 1999, representing a 4.0%
increase on an annualized basis. This increase is primarily a result of the
acquisition of Bona, partially offset by overhead cost savings related to the
acquisition.

     INTEREST EXPENSE.  Interest expense increased to $74.5 million in the year
ended December 31, 2000 from $45.0 million in the nine month period ended
December 31, 1999, representing a 24.2% increase on an annualized basis. This
increase reflects an increase in interest rates and the additional debt assumed
as part of the Bona acquisition.

     INTEREST INCOME.  Interest income increased to $13.0 million in the year
ended December 31, 2000 from $5.8 million in the nine month period ended
December 31, 1999. On an annualized basis, interest income increased by 67.2% as
a result of increased interest rates and higher cash and marketable securities
balances.

     OTHER INCOME.  Other income of $3.9 million in the year ended December 31,
2000 consisted primarily of equity income from a 50%-owned joint venture,
partially offset by future income taxes related to our Australian ship-owning
subsidiaries, and losses on the sale of two vessels. Other loss of $4.0 million
in the nine month period ended December 31, 1999 consisted primarily of future
income taxes related to our Australian ship-owning subsidiaries and one-time
employee and severance-related costs, partially offset by equity income from the
50%-owned joint venture.

     NET INCOME.  As a result of the foregoing factors, net income was $270.0
million in the year ended December 31, 2000, compared to a net loss of $19.6
million in the nine month period ended December 31, 1999. The results for the
year ended December 31, 2000 include losses on the disposition of assets of $1.0
million. There were no extraordinary items and no asset dispositions in the nine
month period ended December 31, 1999.

  NINE MONTHS ENDED DECEMBER 31, 1999 VERSUS YEAR ENDED MARCH 31, 1999

     As a result of our change in fiscal year end from March 31 to December 31,
the results for the nine month period ended December 31, 1999, are compared to
the results for the twelve month period ended March 31, 1999. Where indicated in
the following discussions, percentage change figures reflect the annualized
results for the nine month period ended December 31, 1999. We annualized the
results by multiplying our results for the nine month period by 4/3. The
annualized results for the nine month period ended December 31, 1999 are not
necessarily indicative of those for a full 12-month period.

     The results for the nine month period ended December 31, 1999 include the
results of Bona commencing June 11, 1999. On an annualized basis, our average
fleet size increased 39.5% in the nine month period ended December 31, 1999,
compared to the year ended March 31, 1999.

     NET VOYAGE REVENUE.  Net voyage revenues were $248.4 million in the nine
month period ended December 31, 1999, as compared to $318.4 million in the year
ended March 31, 1999, representing a 4.0% increase on an annualized basis from
the year ended March 31, 1999. This is mainly the result of an increase in fleet
size, partially offset by a 29.8% decrease in our average TCE rate, to $14,165
for the nine month period ended December 31, 1999, from $20,185 for the year
ended March 31, 1999. Aframax TCE rates declined during the second half of 1998
and 1999 due to a reduction in tanker demand, oil production cutbacks and a
large number of newbuilding deliveries. As of December 31, 1999, we changed the
process of estimating net voyage revenues from a load port-to-load port basis to
a discharge port-to-discharge port basis, which is consistent with most other
shipping companies. This change in voyage estimate resulted in a one-time
increase in net voyage revenues of $5.7 million for the nine month period ended
December 31, 1999.

     VESSEL OPERATING EXPENSE.  Vessel operating expenses increased to $98.8
million in the nine month period ended December 31, 1999 from $84.4 million in
the year ended March 31, 1999, representing a 56.1% increase on an annualized
basis. This increase was mainly the result of the addition of the Bona vessels,
which had higher operating expenses than the remainder of our fleet.

                                        32
<PAGE>   38

     TIME-CHARTER HIRE EXPENSE.  Time-charter hire expense was $30.7 million in
the nine month period ended December 31, 1999, up from $29.7 million in the year
ended March 31, 1999, primarily due to the Bona acquisition. The minority pool
participants' net voyage revenues in the O/B/O pool managed by a Bona subsidiary
is reflected as time charter hire expense. The average number of Aframax vessels
that we time-chartered-in was four in the nine month period ended December 31,
1999, the same as in the year ended March 31, 1999.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
decreased to $68.3 million in the nine month period ended December 31, 1999,
from $93.7 million in the year ended March 31, 1999, representing a 2.8%
decrease on an annualized basis. This reflects the change in estimated useful
life of the vessels from 20 to 25 years, partially offset by the increase in
fleet size arising from the acquisition of Bona. Depreciation and amortization
expense included amortization of drydocking costs of $6.3 million and $8.6
million in the nine month period ended December 31, 1999 and in the year ended
March 31, 1999, respectively. Had we retained our previous depreciation policy
and applied this policy to the Bona fleet, depreciation expense would have been
$22.5 million higher in the nine month period ended December 31, 1999.

     GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expenses
were $27.0 million in the nine month period ended December 31, 1999, as compared
to $25.0 million in the year ended March 31, 1999, representing a 44.1% increase
on an annualized basis primarily as a result of the acquisition of Bona.

     INTEREST EXPENSE.  Interest expense increased to $45.0 million in the nine
month period ended December 31, 1999 from $44.8 million in the year ended March
31, 1999, representing a 33.9% increase on an annualized basis. This increase
reflects the $386.0 million in additional debt assumed as part of the Bona
acquisition and an increase in interest rates.

     INTEREST INCOME.  Interest income decreased to $5.8 million in the nine
month period ended December 31, 1999 from $6.4 million in the year ended March
31, 1999. On an annualized basis, interest income increased by 20.8% as a result
of increased interest rates and higher cash and marketable securities balances.

     OTHER LOSS.  Other loss of $4.0 million in the nine month period ended
December 31, 1999 consisted primarily of future income taxes related to our
Australian ship-owning subsidiaries and one-time employee and severance-related
costs, partially offset by equity income from the 50%-owned joint venture. Other
income of $5.5 million in the year ended March 31, 1999 consisted primarily of
gains on the sale of vessels.

     NET INCOME/LOSS.  As a result of the foregoing factors, net loss was $19.6
million in the nine month period ended December 31, 1999, compared to a net
income of $45.4 million in the year ended March 31, 1999. The results for the
year ended March 31, 1999 included an extraordinary loss of $7.3 million on the
redemption of our 9 5/8% First Preferred Ship Mortgage Notes, and gains on asset
sales of $7.1 million. There were no extraordinary items and no asset sales in
the nine month period ended December 31, 1999.

                                        33
<PAGE>   39

     The following table illustrates the relationship between fleet size
(measured in ship-days), TCE performance, and operating results per calendar
ship-day.

<TABLE>
<CAPTION>
                                     THREE MONTHS                     NINE MONTHS
                                   ENDED MARCH 31,      YEAR ENDED       ENDED       YEAR ENDED
                                  ------------------   DECEMBER 31,   DECEMBER 31,   MARCH 31,
                                    2001      2000         2000           1999          1999
                                  --------   -------   ------------   ------------   ----------
<S>                               <C>        <C>       <C>            <C>            <C>
SPOT AFRAMAX FLEET(1)(2):
Average number of ships........         58        61           59             55            43
Total calendar ship-days.......      5,251     5,531       21,621         15,173        15,612
Revenue generating ship-days
  (A)..........................      4,923     5,253       20,513         14,301        14,647
Net voyage revenue before
  commissions (B) (000s).......   $215,234   $99,891     $556,672       $192,522      $286,735
                                  --------   -------     --------       --------      --------
TCE (B/A)......................   $ 43,720   $19,016     $ 27,138       $ 13,462      $ 19,576
                                  --------   -------     --------       --------      --------
Operating results per calendar
  ship-day:
Net voyage revenue.............   $ 39,848   $17,516     $ 24,997       $ 12,310      $ 17,950
Vessel operating expense.......      5,307     1,217        4,980          5,621         4,969
General and administrative
  expense......................      1,648     1,438        1,441          1,510         1,465
Drydocking expense.............        542       420          431            448           613
                                  --------   -------     --------       --------      --------
Operating cash flow per
  calendar ship-day............   $ 32,351   $10,441     $ 18,145       $  4,731      $ 10,903
                                  ========   =======     ========       ========      ========
TOTAL FLEET(2):
Operating cash flow per
  calendar ship-day............   $ 28,300   $ 9,851     $ 16,687       $  5,177      $ 11,171
                                  ========   =======     ========       ========      ========
</TABLE>

- ---------------

(1) Excludes Aframax-size shuttle tankers and Australian-crewed vessels.

(2) Excludes vessels of our joint ventures, newbuildings and one Aframax tanker
    that has been subject to a bareboat charter.

LIQUIDITY AND CAPITAL RESOURCES

     Our liquidity requirements relate to servicing our debt, funding capital
expenditures and working capital and maintaining cash reserves against
fluctuations in operating cash flow. Net cash flow generated by operations is
our main source of liquidity. Additional sources of liquidity include proceeds
from asset sales and refinancings.

     We operate in a capital-intensive industry requiring extensive investment
in revenue-producing assets. Funds invested are raised mainly from borrowings
and our internally generated liquidity. We are required to expend substantial
sums in connection with the construction of newbuildings, with 10% to 20% of the
purchase price typically paid upon order of the vessel and the remainder paid as
progress payments prior to or on delivery one to three years later. The purchase
price of second-hand vessels is typically paid in two installments, with 10%
paid upon signing of the acquisition agreement and the remainder paid upon
delivery of the vessel.

     As at March 31, 2001, our total liquidity, including cash, short-term
marketable securities and undrawn long-term lines of credit, was $435.2 million,
up from $339.4 million as at December 31, 2000, mainly as a result of the cash
flow from operating activities earned during the quarter ended March 31, 2001,
partially offset by the $97.1 million in cash used to purchase the UNS shares
(net of $26.6 million in cash assumed from UNS).

     Net cash flow from operating activities increased to $164.5 million in the
quarter ended March 31, 2001, from $40.2 million in the same quarter last year,
mainly reflecting the increase in TCE rates. Net

                                        34
<PAGE>   40

cash flow from operating activities was $333.3 million in the year ended
December 31, 2000, compared to $51.5 million in the nine month period ended
December 31, 1999, and $137.7 million in the year ended March 31, 1999.

     Scheduled debt repayments were $5.8 million during the quarter ended March
31, 2001, compared to $0.6 million during the same quarter last year. Debt
prepayments during the quarter ended March 31, 2001 totaled $92.1 million, which
were used to reduce our two long-term revolving credit facilities (the
"Revolvers"). Debt prepayments during the quarter ended March 31, 2000 totaled
$10.0 million. Scheduled debt repayments were $63.8 million during the year
ended December 31, 2000, compared to $32.3 million during the nine month period
ended December 31, 1999, and $50.6 million in the year ended March 31, 1999. Our
debt prepayments during the year ended December 31, 2000 totaled $429.9 million,
of which $35.7 million represented the repurchase of some of our 8.32% First
Preferred Ship Mortgage Notes and the balance of $394.2 million was used to
reduce the Revolvers. Debt prepayments during the nine-month period ended
December 31, 1999 was $10.0 million.

     As at March 31, 2001, our total debt was $1,108.7 million, compared to
$797.5 million as at December 31, 2000, primarily due to debt existing at UNS at
the time of our acquisition of UNS. Our total debt as at December 31, 1999 was
$1,085.2 million. Our Revolvers provided for borrowings of up to $555.8 million
as at March 31, 2001, of which $424.8 was drawn at that date. The amount
available under the Revolvers reduces semi-annually with final balloon
reductions in 2006 and 2008. The 8.32% Notes are due February 1, 2008 and are
subject to a sinking fund, which will retire $45.0 million principal amount of
the 8.32% Notes on each February 1, commencing 2004. Our outstanding term loans
reduce in quarterly or semi-annual payments with varying maturities through
2009. As of March 31, 2001, our term loans outstanding totaled $494.6 million.
The aggregate annual long-term debt principal repayments required to be made
subsequent to March 31, 2001 were $122.4 million in 2001, $90.7 million in 2002,
$158.4 million in 2003, $146.1 million in 2004, $146.0 million in 2005 and
$445.1 million thereafter to 2009. Giving effect to the proposed application of
the net proceeds of the offering of the outstanding notes to prepay certain
outstanding debt would result in the following aggregate annual long-term debt
principal repayments: $81.3 million in 2001, $60.0 million in 2002, $85.8
million in 2003, $111.8 million in 2004, $136.7 million in 2005 and $638.6
million thereafter to 2011. See "Use of Proceeds."

     Among other matters, our long-term debt agreements generally provide for
such items as maintenance of certain vessel market value to loan ratios and
minimum consolidated financial covenants, prepayment privileges (in some cases
with penalties), and restrictions against the incurrence of new investments by
the individual subsidiaries without prior lender consent. The amount of
restricted payments that we can make, including dividends and purchases of our
own capital stock, was limited as of March 31, 2001, to $380.4 million. Certain
of the loan agreements require a minimum level of free cash be maintained. As at
March 31, 2001, this amount was $26.0 million.

     Funding and treasury activities are conducted within corporate policies to
minimize borrowing costs and maximize investment returns while maintaining the
safety of the funds and appropriate liquidity for our purposes.

     Cash and cash equivalents are held primarily in U.S. dollars with some
balances held in Japanese Yen, Singapore Dollars, Canadian Dollars, Australian
Dollars, British Pounds and Norwegian Kroner. We use foreign currency contracts
to manage risks associated with holding these currencies.

     We manage the impact of interest rate changes on earnings and cash flows
through our interest rate structure. For the Revolvers, the interest rate
structure is based on LIBOR plus a margin depending on our financial leverage.
Interest payments on our term loans are based on LIBOR plus a margin. We use
interest rate swaps to manage our interest rate risk.

                                        35
<PAGE>   41

     Dividends declared during the quarter ended March 31, 2001 were $8.4
million, or 21.5 cents per share. Dividends declared during the year ended
December 31, 2000 were $33.0 million, or 86 cents per share.

     During the quarter ended March 31, 2001, we incurred capital expenditures
for vessels and equipment of $1.4 million. Cash expenditures for drydocking were
$2.2 million in the quarter ended March 31, 2001 compared to $2.5 million over
the same period last year. During the year ended December 31, 2000, we incurred
capital expenditures for vessels and equipment of $43.5 million, consisting
mainly of the purchase of a modern second-hand Aframax tanker and the conversion
of an Aframax tanker to a floating storage and off-take vessel. Cash
expenditures for drydocking were $11.9 million in the year ended December 31,
2000 compared to $6.6 million in the nine month period ended December 31, 1999
and $11.7 million in the year ended March 31, 1999.

     At March 31, 2001, UNS was committed to the construction of three
newbuilding shuttle tankers, having an aggregate cost of approximately $160.8
million. A joint venture company, 50% owned by UNS, was committed to the
construction of one additional newbuilding shuttle tanker, having an aggregate
cost of approximately $63.4 million. The joint venture newbuilding was delivered
in May 2001 and the remaining three newbuilding vessels are scheduled for
delivery in 2002 and 2003. As of March 31, 2001, payments had been made towards
these commitments of approximately $60.8 million (including $18.9 million for
the joint venture) and long-term financing arrangements exist for approximately
$122.3 million (including $44.5 million for the joint venture) of the unpaid
cost of these vessels. We intend to finance the remaining unpaid amount of
approximately $41.1 million, which includes our portion of the amounts owned by
the 50%-owned joint venture, through either additional debt borrowings or
surplus cash balances or a combination thereof. As of March 31, 2001, the
remaining payments required to be made under these newbuilding contracts were:
$67.0 million in 2001, $43.3 million in 2002 and $53.1 million in 2003. Of the
$67.0 million due in 2001, $44.5 million was paid in May 2001 by our joint
venture company for the final payment on the recently delivered newbuilding.

     We have guaranteed our share of the outstanding mortgage debt in three
joint venture companies that are 50% owned by us. As of March 31, 2001, we
guaranteed $92.8 million of such debt, or our 50% portion of the $185.6 million
total debt of the joint venture companies.

     In April 2001, UNS purchased four shuttle tankers for $95.0 million. The
purchase was financed with long term debt borrowings. Also in April 2001, a
joint venture in which we own a 50% interest entered into an agreement to sell
its three vessels, with deliveries scheduled between July and August 2001.

     As part of our growth strategy, we will continue to consider strategic
opportunities, including the acquisition of additional vessels and expansion
into new markets. We may choose to pursue such opportunities through internal
growth, joint ventures, or business acquisitions. We intend to finance any
future acquisitions through various sources of capital, including internally
generated cash flow, existing credit lines, additional debt borrowings, and the
issuance of additional shares of capital stock.

MARKET RATE RISKS

     We are exposed to market risk from foreign currency and changes in interest
rate fluctuations. We use forward currency contracts and interest rate swaps to
manage these risks, but do not use financial instruments for trading or
speculative purposes.

  FOREIGN EXCHANGE RATE RISK

     The international tanker industry's functional currency is the U.S. dollar.
Virtually all of our revenues and most of our operating costs are in U.S.
dollars. We incur certain operating expenses, drydocking, and overhead costs in
foreign currencies, the most significant of which are Japanese Yen, Singapore
Dollars, Canadian Dollars, Australian Dollars, British Pounds and Norwegian
Kroner. During the three

                                        36
<PAGE>   42

months ended March 31, 2001, approximately 28% of vessel and voyage costs,
overhead and drydock expenditures were denominated in these currencies. However,
we have the ability to shift the purchase of goods and services from one country
to another and, thus, from one currency to another, on relatively short notice.

     We enter into forward contracts as a hedge against changes in certain
foreign exchange rates. As at March 31, 2001, we had $57.1 million in foreign
exchange forward contracts that mature as follows: $28.3 million in 2001, $27.0
million in 2002, and $1.8 million in 2003. To the extent the hedge is effective,
changes in the fair value of the forward contracts are either offset against the
fair value of assets or liabilities through income, or recognized in other
comprehensive income until the hedged item is recognized in income. The
ineffective portion of a forward contract's change in fair value will be
immediately recognized in income.

  INTEREST RATE RISK

     We invest our cash and marketable securities in financial instruments with
maturities of less than six months within the parameters of our investment
policy and guidelines.

     We use interest rate swaps to manage the impact of interest rate changes on
earnings and cash flows. Changes in the fair value of the interest rate swaps
are either offset against the fair value of assets or liabilities through
income, or recognized in other comprehensive income until the hedged item is
recognized in income. The ineffective portion of an interest rate swap's change
in fair value will be immediately recognized in income. Premiums and receipts,
if any, are recognized as adjustments to interest expense over the lives of the
individual contracts.

     As at March 31, 2001, we were committed to a series of interest rate swap
agreements whereby $145.0 million of floating rate debt was swapped with fixed
rate obligations having a weighted average remaining term of 1.3 years, expiring
between December 2001 and May 2004. These arrangements effectively change our
interest rate exposure on $145.0 million of debt from a floating LIBOR rate to
an average fixed rate of 6.46%.

     The following table sets forth the magnitude of these interest rate swap
agreements and foreign exchange forward contracts:

<TABLE>
<CAPTION>
                                                         CARRYING AMOUNT
                                        CONTRACT     ------------------------
                                         AMOUNT        ASSET       LIABILITY     FAIR VALUE
                                       ----------    ----------    ----------    -----------
                                                     (IN THOUSANDS OF DOLLARS)
<S>                                    <C>           <C>           <C>           <C>
MARCH 31, 2001:
  Foreign Exchange Forward
     Contracts.......................  $   57,148            --    $    1,070    $    (1,070)
  Interest Rate Swap Agreements......  $  145,000            --    $    3,444    $    (3,444)
  Debt...............................  $1,108,694            --    $1,108,694    $(1,114,372)
DECEMBER 31, 2000:
  Foreign Exchange Forward
     Contracts.......................  $   62,125            --            --    $     2,252
  Interest Rate Swap Agreements......  $  100,000            --            --    $    (1,297)
  Debt...............................  $  797,484            --    $  797,484    $  (789,913)
DECEMBER 31, 1999:
  Foreign Exchange Forward
     Contracts.......................  $    4,448            --            --    $       (20)
  Interest Rate Swap Agreements......  $  200,000            --            --    $     4,488
  Debt...............................  $1,085,167            --    $1,085,167    $(1,060,417)
</TABLE>

INFLATION

     Although inflation has had a moderate impact on operating, drydocking and
corporate overhead expenses, management does not consider inflation to be a
significant risk to direct costs in the current and foreseeable economic
environment. However, in the event that inflation becomes a significant factor
in the world economy, inflationary pressures could result in increased operating
and financing costs.

                                        37
<PAGE>   43

                                    BUSINESS

     Teekay is a leading provider of international crude oil and petroleum
product transportation services through the world's largest fleet of medium-size
oil tankers. Our modern fleet of 95 tankers (including three newbuildings, seven
vessels time-chartered-in and six vessels owned by joint ventures) provides
transportation services to major oil companies, major oil traders and government
agencies worldwide. We believe our Aframax fleet is approximately three times
larger than that of our nearest direct Aframax competitor. Through our recent
acquisition of Ugland Nordic Shipping ASA, we are also the largest owner of
shuttle tankers, which engage in the transportation of oil from offshore
production platforms to onshore storage and refinery facilities. We estimate
that our market share is approximately 25% in the Indo-Pacific Basin Aframax
market and approximately 10% in the Atlantic region Aframax market, based on
tankers trading in those regions that are 20 years old or younger, and we
estimate that our market share is approximately 25% of the world shuttle tanker
market.

     We were founded in 1973 and are incorporated under the laws of the Republic
of the Marshall Islands. We maintain our principal executive headquarters at TK
House, Bayside Executive Park, West Bay Street & Blake Road, P.O. Box AP-59213,
Nassau, Commonwealth of the Bahamas. Our telephone number at this address is
(242) 502-8820. Our principal operating office is located at Suite 1400, One
Bentall Centre, 505 Burrard Street, Vancouver, British Columbia, Canada, V7X
1M5. Our telephone number at that address is (604) 683-3529.

ACQUISITION OF UGLAND NORDIC SHIPPING ASA

     We recently purchased UNS, the world's largest shuttle tanker owner. UNS'
modern fleet of 18 vessels has an average age of 8.5 years (excluding three
newbuildings) and operates primarily in the North Sea under long-term fixed-rate
contracts. The total purchase price for the outstanding shares of UNS was
approximately $223.3 million (including estimated transaction expenses of $7.0
million). The operating results of UNS have been reflected in our financial
statements commencing March 6, 2001, the effective date that we acquired a
majority interest in UNS.

     UNS's large scale and high quality shuttle tanker operations provide us
with a strategic opportunity to enter this attractive market as a market leader.
The acquisition also allows us to expand the portfolio of value-added services
we offer to our customers. We believe that as offshore oil fields become more
important to the global oil supply, the need for shuttle tanker services will
increase. By combining our global franchise and UNS' expertise in the shuttle
tanker market, we believe that the shuttle tanker business represents an area of
significant growth for Teekay. The acquisition of UNS will also provide added
stability to our cash flow throughout the business cycle, due to the long-term
fixed-price nature of shuttle tanker contracts.

THE INTERNATIONAL TANKER MARKET

  OVERVIEW

     International seaborne crude oil and other petroleum products
transportation services are provided by two main types of operators: captive
fleets of major oil companies (both private and state-owned) and independent
ship owner fleets. Both types of operators transport oil under short-term
contracts (including single-voyage "spot charters") and long-term time charters
with oil companies, oil traders, large oil consumers, petroleum product
producers and government agencies. The five largest oil companies own, or
control through long-term time charters, approximately 10% of the current world
tanker fleet. The oil companies' fleets transport their own oil, as well as oil
for third-party charterers in direct competition with independent owners and
operators. We believe that the seaborne oil transportation business is
fragmented. According to industry data, as of March 31, 2001 the top 10
participants controlled approximately 27% of the world tanker fleet, in each
case as measured by deadweight tonnage. At that date, the three largest owners
by tonnage were Fredriksen Group, Mitsui O.S.K. Line, and Teekay, which
controlled 5.3%, 3.6% and 3.1%, respectively, of the world tanker fleet.

                                        38
<PAGE>   44

     A significant and ongoing shift toward quality in vessels and tanker
operations has been taking place in the tanker industry over the past several
years as charterers and regulators increasingly focus on safety and protection
of the environment. The oil transportation industry has historically been
subject to regulation by national authorities and through international
conventions. Since 1990, there has been an increasing emphasis on environmental
protection through legislation and regulations such as The United States Oil
Pollution Act of 1990, International Maritime Organization regulations,
international conventions and protocols and Classification Society procedures,
all demanding higher-quality tanker construction, maintenance, repair,
management and operations. Incidents such as the December 1999 sinking of the
24-year-old oil tanker Erika, which polluted more than 250 miles of the French
coastline with heavy oil, have contributed to this focus on quality and further
spurred regulatory action. As a result, oil companies acting as charterers,
terminal operators, shippers and receivers are becoming increasingly selective
in their acceptance of tankers, inspecting and vetting both vessels and
companies on a periodic basis, and often exclude tankers on the basis of age
alone. In calendar 2000, our vessels (excluding those acquired in our
acquisition of UNS) were inspected over 350 times by oil companies and port
states. We believe that the increasingly stringent regulatory environment and
emphasis on quality relating to environmental protection will accelerate the
obsolescence of older, poor-quality tankers and provide a competitive advantage
and higher operating cash flow to modern tankers with high quality management.
See "-- Our Fleet" "-- Crewing and Staff" and "-- Regulation."

     Pricing of oil transportation services occurs in the highly competitive and
efficient global tanker charter market. While some business is conducted
directly between ship owners and charterers, one or two brokers act as
intermediaries in most transactions. Tanker chartering is executed around the
clock in several shipping centers, including London, New York, Tokyo, Singapore
and Oslo. Business is transacted regionally according to the location of the
charterer or ship owner, rather than the location of the cargo's origin or
destination. Time charters, as well as vessel sale and purchase transactions,
are negotiated through brokers in the same centers in a similar pattern.

     In order to benefit from economies of scale, tanker charterers typically
charter the largest possible vessel to transport oil or other petroleum
products, consistent with port and canal dimensional restrictions and optimal
cargo lot sizes. The oil tanker fleet is generally divided into the six major
types of vessels, based on vessel carrying capacity, set forth below:

<TABLE>
<CAPTION>
                                                         APPROXIMATE SIZE RANGE
VESSEL TYPE                                               (DEADWEIGHT TONNAGE)
- -----------                                              ----------------------
<S>                                                      <C>
Ultra Large Crude Carriers............................        320,000 or more
Very Large Crude Carriers.............................     200,000 to 320,000
Suezmax...............................................     120,000 to 200,000
Aframax...............................................      80,000 to 120,000
Panamax...............................................       60,000 to 80,000
Small Tankers.........................................       Less than 60,000
</TABLE>

     Ultra and Very Large Crude Carriers typically transport crude oil in
long-haul trades, such as from the Arabian Gulf to Rotterdam via the Cape of
Good Hope. Because of the size of Ultra and Very Large Crude Carriers and their
predominance in the long-haul trades, more than 42% of the world's seaborne oil
transportation is conducted by these vessels. While the Ultra and Very Large
Crude Carrier markets differ in several respects from smaller size tanker
markets, Ultra and Very Large Crude Carriers have a significant influence on the
tanker charter market in general. Suezmax-size tankers also engage in long-haul
crude oil trades as well as in medium-haul crude oil trades, such as from West
Africa to the U.S. East Coast. Aframax-size vessels generally engage in both
medium- and short-haul trades of less than 1,500 miles and carry crude oil or
petroleum products. Panamax-size and smaller tankers primarily transport
petroleum products in short- to medium-haul trades.

     In addition to the six types of tankers listed above, oil/bulk/ore carriers
and shuttle tankers are typically considered part of the world tanker fleet in
industry statistics. As of May 31, 2001, oil/bulk/ore

                                        39
<PAGE>   45

carriers represented approximately 4.6% of the world tanker fleet based on total
cargo capacity. Oil/bulk/ore carriers are of various sizes and are capable of
carrying oil or dry bulk cargoes.

     According to industry data, at May 31, 2001, the world fleet of Aframax
tankers consisted of 571 vessels, comprising 54.9 million deadweight tons and
constituting approximately 17.6% of the vessels in the world tanker fleet. By
virtue of their size, Aframax vessels are large enough to benefit from economies
of scale yet have access to a wide range of size-restricted ports, and are
particularly well-suited for trading in regional markets, including the
Mediterranean, the Atlantic and the Indo-Pacific Basin.

     We estimate that we have approximately a 25% share of the Indo-Pacific
Basin Aframax market and approximately a 10% share of the Atlantic region
Aframax market, based on tankers trading in those regions that are 20 years old
or younger. Each of these areas contains a large number of loading and
discharging points capable of receiving Aframax size vessels. Aframax tankers in
the Indo-Pacific Basin transport crude oil from three primary production
locations -- the Arabian Gulf, Australia and Southeast Asia to refineries and
storage points located short to long distances away. They also transport
petroleum products in medium- and long-haul trades and engage in some
inter-regional trades. Aframax tankers in the Atlantic region transport crude
oil between the Caribbean and the U.S. Gulf of Mexico; between the U.K. and
continental Europe; from North Africa to Europe; and across the Atlantic.

  SHUTTLE TANKER MARKET

     The shuttle tanker market has become an integral part of the offshore oil
production business. Shuttle tankers are designed to transport oil from offshore
production platforms, particularly floating production platforms, to onshore
storage and refinery facilities. These vessels present an attractive alternative
to sub-sea pipelines for oilfields that have shorter life spans or lower
production volumes or that are positioned in deep water, conditions that
generally make pipelines impractical. Shuttle tankers offer shorter
establishment times, lower initial capital costs and lower maintenance costs
than pipelines.

     The largest current market for shuttle tankers is the North Sea, which
contains most of the world's offshore oil production platforms. The North Sea
presents a demanding operating environment that requires technically
sophisticated shuttle tankers. Although large offshore production platforms in
the North Sea are likely to decline in the future as large fields are depleted,
industry sources anticipate that North Sea offshore production in small fields
and deep waters will drive continued demand for shuttle tankers in the region.

     In 1997, there were approximately 40 shuttle tankers transporting 35% of
all North Sea oil production; in 2000, there were approximately 50 shuttle
tankers transporting an estimated 55% of all North Sea oil production. We
estimate that we have approximately a 25% share of the world shuttle tanker
market.

     In addition to the North Sea, the main geographical locations we believe
are best suited for shuttle tanker use include West Africa, Brazil, Canada, and
the U.S. Gulf of Mexico. All of those locations include some or all of the
following conditions that are conducive to the use of shuttle tankers: harsh
environmental conditions due to weather, deep water, swell and currents, or
little or no pipeline infrastructure.

     Barriers to entry into the shuttle tanker market include economies of
scale, operational know-how, and capital. The majority of the 61 vessels in the
world shuttle tanker fleet operate under long-term, fixed-rate contracts or
contracts of affreightment.

                                        40
<PAGE>   46

  INDUSTRY FUNDAMENTALS

     Tanker charter rates are strongly influenced by the demand for, and supply
of, tanker capacity because of the highly competitive nature of the tanker
charter market. Small changes in tanker utilization have historically led to
relatively large changes in tanker charter rates.

     TANKER DEMAND.  Tanker demand is expressed in "ton-miles" and is measured
as the product of (a) the amount of oil transported in tankers, multiplied by
(b) the distance over which this oil is transported. Tonnage of oil shipped is
primarily a function of global oil consumption, which is driven by economic
activity as well as the long-term impact of oil prices on the location and
related volume of oil production. Tonnage of oil shipped is also influenced by
transportation alternatives such as pipelines.

     The distance over which oil is transported is the more variable element of
the ton-mile demand equation. It is determined by seaborne trading and
distribution patterns, which are principally influenced by the locations of
production and the optimal economic distribution of the production to
destinations for refining and consumption. Seaborne trading patterns are also
periodically influenced by geo-political events that divert tankers from normal
trading patterns, as well as by inter-regional oil trading activity created by
oil supply and demand imbalances.

     The overall increase in world oil demand in recent years has positively
affected the development of the tanker market. World oil consumption increased
at a compounded annual growth rate of 1.6% from 1995 through 2000 according to
the International Energy Agency. Most of this incremental oil demand has been
met by production from the Arabian Gulf. Oil from Arabian Gulf OPEC, which
represented approximately 28% of the world oil supply in 2000, grew at a
compounded annual growth rate of 2.7% from 1995 through 2000 and at a rate of
5.5% between 1999 and 2000. Incremental oil supply from the Arabian Gulf results
in a more significant increase in demand for tanker services than incremental
supply from other locations such as the North Sea and the Caribbean because of
the greater distance from the Arabian Gulf to discharge points and the
associated longer average length of voyage for oil tankers. For example, the
average tanker tonnage required to ship the incremental supply of one million
barrels per day from the Arabian Gulf to the United States is approximately 13
million deadweight tons, as compared to an average of approximately 5 million
deadweight tons of tanker tonnage required to ship the incremental supply of one
million barrels per day from the North Sea to the United States.

     For 2001, the International Energy Agency forecasts oil consumption growth
at a rate of 1.2%, compared to 0.9% in 2000. Much of the spare capacity for oil
supply is located in the Arabian Gulf region, which should have a positive
effect on tanker demand.

     TANKER SUPPLY.  The supply of tankers is a function of scrapping, new
vessel deliveries and conversion and loss of tonnage.

     At any point in time, the level of scrapping activity is a function
primarily of scrapping prices in relation to current and prospective charter
market conditions and operating, repair and survey costs. Industry regulations
also affect scrapping levels. For example, International Maritime Organization
(IMO) regulations adopted in April 2001 change the phase-out age of single-hull
vessels from 30 years in 2003 to 26 years in 2007. Aging vessels typically
require substantial repairs and maintenance to conform to industry standards,
including repairs made in connection with special surveys, which involve
periodic thorough inspections. Insurance companies and customers rely to some
degree on the survey and classification regime to provide reasonable assurance
of a vessel's seaworthiness and vessels must be certified as "in-class" in order
to continue to trade. Because the costs of maintaining a vessel in-class rise
substantially as the age of the vessel increases, vessel owners often conclude
that it is more economical to scrap a vessel that has exhausted its anticipated
useful life than to upgrade it to maintain it in-class. In addition, the
economics of operating older vessels are adversely affected by customer demand
for the safety and reliability associated with more modern vessels, coupled with
the higher rates and operating cost efficiencies available to newer vessels.

     According to industry data, scrapping of Aframax tankers occurred at an
average of approximately 15 vessels per year for the period 1995 to 2000. As a
result of the decline in Aframax TCE rates in

                                        41
<PAGE>   47

1999, scrapping increased dramatically, with 32 Aframax vessels being scrapped
in 1999. As Aframax TCE rates increased in 2000, scrapping decreased, with a
majority of the 17 scrappings in 2000 occurring during the first six months of
that year. As of May 31, 2001, five Aframax tankers had been scrapped in 2001.
The recent IMO regulations requiring the accelerated phase-out of single-hull
tankers should result in the scrapping of approximately 28% of the world's
existing Aframax fleet by the end of 2007. See "-- Regulation."

     The level of newbuilding orders is a function primarily of newbuilding
prices in relation to current and prospective charter market conditions.
Typically, delivery of a vessel occurs within 18 to 36 months after ordering.
The correlation between the Aframax newbuilding orderbook and deliveries, and
additional supply of tonnage competing in the world Aframax tanker market, is
not precise since some of the newbuild vessels are expected to be employed in
the offshore oil production industry or as coated product tankers that do not
compete directly for crude oil shipping business.

     Newbuilding deliveries of Aframax tankers occurred at an annual average
rate of 28 vessels for the period 1995 through 2000, with deliveries peaking in
1999 at 52 vessels. There have been no oil/bulk/ore carriers ordered since 1997,
with the last vessel being delivered in 1999. There were 22 Aframax tankers
delivered in 2000. At May 31, 2001, six Aframax tankers had been delivered
during 2001, with an additional seven scheduled for delivery during the
remainder of the year. The Aframax newbuilding orderbook at May 31, 2001
(including the remainder of 2001) contained orders for 101 vessels, equivalent
to 19% of the existing fleet.

COMPETITIVE STRENGTHS

     We pursue an intensively customer- and operations-focused business strategy
designed to achieve superior operating results. We base our business strategy on
the following five key competitive strengths:

     -  MARKET CONCENTRATION.  In each market that we address within the
        shipping industry, we seek to achieve significant scale and scope. This
        market concentration has enabled us to provide comprehensive coverage of
        charterers' requirements while also providing a base for efficient
        operation and a high degree of capacity utilization. We estimate that
        our market share is approximately 25% in the Indo-Pacific Basin Aframax
        market and approximately 10% in the Atlantic region Aframax market,
        based on tankers trading in those regions that are 20 years old or
        younger. Through our recent acquisition of UNS' shuttle tanker
        operations, we estimate that our market share is approximately 25% in
        the world shuttle tanker market. Our significant presence in these
        markets strategically positions us to deliver superior service to the
        oil industry on a global basis.

     -  OPERATIONAL CONTROL AND EXPERIENCED MANAGEMENT.  Teekay services
        substantially all of its operational and management needs in-house. We
        have experienced management in all functions critical to our operations,
        which provides us with a focused marketing effort, tight quality and
        cost controls and effective safety monitoring.

     -  MODERN, HIGH-QUALITY TONNAGE.  Our modern, high-quality tanker fleet
        operates with higher fuel efficiency and lower maintenance and operating
        costs compared to the world tanker fleet. We now control a fleet of 84
        tankers (excluding three newbuildings and eight oil/bulk/ore carriers)
        with an average age of approximately 9 years. The average age for the
        world tanker fleet is approximately 13 years. In an environment of
        increasingly stringent operating and safety standards, we believe that
        the age profile and quality of our fleet result in a high level of
        demand for our tankers by charterers.

     -  LARGE FLEET OF UNIFORM, MEDIUM-SIZE VESSELS.  Our large fleet of
        medium-size tankers, many of which are substantially identical vessels,
        allows us to substitute vessels to meet customer demands. This increases
        our scheduling flexibility and allows us to enhance the capacity
        utilization of our fleet. We believe that the scale of our operations
        and the resulting

                                        42
<PAGE>   48

       purchasing power, combined with the uniformity of our medium-size
       vessels, results in lower operating expenses than those experienced by
       smaller operators.

     -  STRONG NETWORK OF CUSTOMER RELATIONSHIPS.  We pursue an intensively
        customer-oriented focus that, when combined with other competitive
        strengths, has enabled us to establish a strong network of customer
        relationships and a reputation for transportation excellence among
        quality-sensitive customers such as Exxon Mobil, BP, Chevron and Shell.

BUSINESS STRATEGY

     Our business strategy is to leverage our existing competitive strengths to
continue to expand our business and increase shareholder value.

     -  MAINTAIN AND EXPAND AFRAMAX FRANCHISE.  The expansion and upgrading of
        our Aframax fleet will continue to be a key component of our strategy.
        As the world's largest Aframax tanker operator, we believe we will be
        able to provide the most comprehensive service to our customers and
        generate superior operating results. For example, our size and scope of
        services has enabled us to enter into contracts of affreightment to
        provide large oil-company customers with ongoing services that will
        grant us preferential rights on certain routes. We expect that this will
        result in significant fleet utilization benefits and high market share
        on strategically important routes.

     -  LEVERAGE THE FRANCHISE TO PROVIDE VALUE-ADDED SERVICES. Our full-service
        marine operations capabilities, reputation for safety and quality and
        strong customer orientation provide us with the opportunity to expand
        our business by providing additional value-added and innovative services
        to new and existing customers. Such services include providing customers
        with floating storage and off-take vessels, outsourcing arrangements
        where we service a customer's complete oil transportation requirements
        and, with our recent acquisition of UNS, providing shuttle tanker
        services for customers engaged in offshore oil production. By providing
        our customers with these value-added services, we believe that we will
        strengthen our franchise and further improve our financial performance.

     -  SELECTIVELY EXPAND INTO RELATED MARKETS AND SERVICES.  We intend to
        continue to identify expansion opportunities in new tanker market
        sectors, geographic areas and services to which our competitive
        strengths are well suited and that will enhance shareholder value. We
        may pursue such opportunities through internal growth, joint ventures or
        business acquisitions, such as our recent acquisition of UNS, through
        which we expanded into the shuttle tanker market.

OUR FLEET

     We have the world's largest fleet of medium-size oil tankers. As of June
30, 2001, our fleet consisted of 95 vessels: 64 Aframax oil tankers, including
seven vessels time-chartered-in, two Aframax-size oil/bulk/ore carriers trading
exclusively as crude oil carriers, two Aframax tankers converted to floating
storage and off-take vessels ("FSOs") and, through a joint venture, a 50%
interest in one additional Aframax tanker; 18 shuttle tankers (including three
newbuildings and one vessel converted to an FSO); eight oil/bulk/ore carriers
that are operated through an O/B/O pool managed by a subsidiary of Bona; two
smaller oil tankers; one Very Large Crude Carrier; and, through a joint venture,
a 50% interest in two Suezmax tankers. Our vessels are of Australian, Bahamian,
Cayman Islands, Liberian, Marshall Islands, Norwegian, Norwegian International
Ship ("NIS") and Panamanian registry. Our fleet has a total cargo capacity of
approximately 9.6 million deadweight tons. Our Aframax tankers represent
approximately 12.5% of the total tonnage of the world Aframax fleet, and our
shuttle tankers represent approximately 25% of the total tonnage of the world
shuttle tanker fleet.

                                        43
<PAGE>   49

     The following list provides additional information with respect to our
vessels as at June 30, 2001.

<TABLE>
<CAPTION>
                                                       PERCENT
                         SERIES/YARD     HULL TYPE    OWNERSHIP      DWT     YEAR BUILT         FLAG
                        -------------  -------------  ---------   ---------  ----------   ----------------
<S>                     <C>            <C>            <C>         <C>        <C>          <C>
AFRAMAX TANKERS (64)
Hamane Spirit.........  Onomichi       Double Hull       100%       105,300     1997      Bahamian
Poul Spirit...........  Onomichi       Double Hull       100%       105,300     1995      Bahamian
Torben Spirit.........  Onomichi       Double Hull       100%        98,600     1994      Bahamian
Leyte Spirit..........  Onomichi       Double Hull       100%        98,600     1992      Bahamian
Luzon Spirit..........  Onomichi       Double Hull       100%        98,600     1992      Bahamian
Mayon Spirit..........  Onomichi       Double Hull       100%        98,600     1992      Bahamian
Samar Spirit..........  Onomichi       Double Hull       100%        98,600     1992      Bahamian
Palmstar Lotus........  Onomichi       Single Hull       100%       100,200     1991      Bahamian
Palmstar Thistle......  Onomichi       Single Hull       100%       100,200     1991      Bahamian
Teekay Spirit.........  Onomichi       Single Hull       100%       100,200     1991      Bahamian
Onozo Spirit..........  Onomichi       Single Hull       100%       100,200     1990      Bahamian
Palmstar Cherry.......  Onomichi       Single Hull       100%       100,200     1990      Bahamian
Palmstar Poppy........  Onomichi       Single Hull       100%       100,200     1990      Bahamian
Palmstar Rose.........  Onomichi       Single Hull       100%       100,200     1990      Bahamian
Palmstar Orchid.......  Onomichi       Single Hull       100%       100,200     1989      Bahamian
Falster Spirit........  Hyundai        Double Hull       100%        95,400     1995      Bahamian
Gotland Spirit........  Hyundai        Double Hull       100%        95,400     1995      Bahamian
Sotra Spirit..........  Hyundai        Double Hull       100%        95,400     1995      Bahamian
Victoria Spirit(1)....  Hyundai        Double Hull       100%       103,200     1993      Bahamian
Vancouver Spirit(1)...  Hyundai        Double Hull       100%       103,200     1992      Bahamian
Shilla Spirit.........  Hyundai        Single Hull       100%       106,700     1990      Bahamian
Ulsan Spirit..........  Hyundai        Single Hull       100%       106,700     1990      Bahamian
Dampier Spirit(2).....  Hyundai        Single Hull       100%       106,700     1988      Bahamian
Karratha Spirit(2)....  Hyundai        Single Hull       100%       106,700     1988      Bahamian
Namsan Spirit.........  Hyundai        Single Hull       100%       106,700     1988      Bahamian
Pacific Spirit........  Hyundai        Single Hull       100%       106,700     1988      Bahamian
Mersey Spirit.........  Hyundai        Double Sides      100%        94,700     1986      Bahamian
Clyde Spirit..........  Hyundai        Double Sides      100%        94,700     1985      Bahamian
Opal Queen(3).........  Imabari        Double Hull         0%       107,000     2001      Bahamian
Bahamas Spirit........  Imabari        Double Hull       100%       107,000     1998      Bahamian
Nassau Spirit.........  Imabari        Double Hull       100%       107,000     1998      Bahamian
Seaservice(3).........  Imabari        Double Hull         0%       107,000     1998      Liberian
Senang Spirit.........  Imabari        Double Hull       100%        95,700     1994      Bahamian
Sebarok Spirit........  Imabari        Double Hull       100%        95,700     1993      Bahamian
Seraya Spirit.........  Imabari        Double Sides      100%        97,300     1992      Bahamian
Seafalcon(3)..........  Imabari        Double Sides        0%        97,300     1990      Marshall Islands
Alliance Spirit.......  Imabari        Double Sides      100%        97,300     1989      Bahamian
Sentosa Spirit........  Imabari        Double Sides      100%        97,300     1989      Bahamian
Seletar Spirit........  Imabari        Double Sides      100%        97,300     1988      Bahamian
Semakau Spirit........  Imabari        Double Sides      100%        97,300     1988      Bahamian
Singapore Spirit......  Imabari        Double Sides      100%        97,300     1987      Bahamian
Sudong Spirit.........  Imabari        Double Sides      100%        97,300     1987      Bahamian
Aegean Pride(3).......  Samsung        Double Hull         0%       105,300     1999      Liberian
Kanata Spirit.........  Samsung        Double Hull       100%       113,000     1999      Bahamian
Kareela Spirit........  Samsung        Double Hull       100%       113,000     1999      Bahamian
Kiowa Spirit..........  Samsung        Double Hull       100%       113,000     1999      Bahamian
Koa Spirit............  Samsung        Double Hull       100%       113,000     1999      Bahamian
</TABLE>

                                        44
<PAGE>   50

<TABLE>
<CAPTION>
                                                       PERCENT
                         SERIES/YARD     HULL TYPE    OWNERSHIP      DWT     YEAR BUILT         FLAG
                        -------------  -------------  ---------   ---------  ----------   ----------------
<S>                     <C>            <C>            <C>         <C>        <C>          <C>
Kyeema Spirit.........  Samsung        Double Hull       100%       113,000     1999      Bahamian
Silver Paradise(3)....  Samsung        Double Hull         0%       105,200     1998      Panamanian
Kyushu Spirit.........  Mitsubishi     Double Sides      100%        95,600     1991      Bahamian
Sabine Spirit.........  Mitsubishi     Double Sides      100%        84,800     1989      Bahamian
Koyagi Spirit.........  Mitsubishi     Single Hull       100%        96,000     1989      Bahamian
Columbia Spirit.......  Mitsubishi     Double Sides      100%        84,800     1988      Bahamian
Hudson Spirit.........  Mitsubishi     Double Sides      100%        84,800     1988      Bahamian
Seabridge(3)..........  Namura         Double Hull         0%       105,200     1996      Liberian
Torres Spirit.........  Namura         Single Hull       100%        96,000     1990      Bahamian
Seamaster(3)..........  Namura         Single Hull         0%       101,000     1990      Liberian
Shetland Spirit.......  Mitsui         Double Hull       100%       106,200     1994      Bahamian
Orkney Spirit.........  Mitsui         Double Hull       100%       106,200     1993      Bahamian
Shannon Spirit........  Gdynia         Single Hull       100%        99,300     1987      Bahamian
Clare Spirit..........  Gdynia         Single Hull       100%        95,200     1986      Bahamian
Bornes................  Solisnor       Double Sides       50%        88,900     1990      Liberian
Magellan Spirit.......  Hitachi        Double Sides      100%        95,000     1985      Bahamian
Cook Spirit...........  Hashima        Double Sides      100%        91,500     1987      Bahamian
         SUBTOTAL AFRAMAX TANKERS..............................   6,431,200

SHUTTLE TANKERS(15)
Stena Natalita........  Tsuneishi      Double Hull        50%       110,000     2001      Cayman Islands
Stena Sirita..........  Tsuneishi      Double Hull        50%       127,500     1999      Norwegian
Stena Alexita.........  Tsuneishi      Double Hull        50%       127,500     1998      Norwegian
Nordic Savonita.......  Tsuneishi      Double Hull       100%       108,200     1992      NIS
Nordic Torinita.......  Tsuneishi      Double Hull       100%       108,700     1992      Cayman Islands
Stena Akarita.........  Tsuneishi      Double Hull      65.5%       107,200     1991      Liberian
Petrotroll............  Tsuneishi      Double Sides      100%        67,400     1981      NIS
Nordic Laurita........  Tsuneishi      Single Hull      50.5%        68,100     1981      NIS
Nordic Marita.........  Samsung        Double Hull       100%       105,000     1999      Cayman Islands
Nordic Yukon..........  Dalian         Double Hull       100%        98,000     1992      NIS
Petrotrym.............  Dalian         Double Hull       100%        80,700     1987      NIS
Nordic Svenita........  Imabari        Double Hull       100%       106,500     1997      Liberian
Nordic Sarita.........  Daewoo         Double Hull       100%       124,500     1986      Norwegian
Petroskald............  Uddevalla      Double Bottom     100%        40,000     1982      Liberian
Nordic Apollo(2)......  Avondale       Double Hull        89%       129,000     1992      Liberian
         SUBTOTAL SHUTTLE TANKERS..............................   1,508,300

OIL/BULK/ORE CARRIERS(8)
Teekay Forum..........  Hyundai        Double Bottom     100%        78,500     1983      Bahamian
Teekay Fulmar.........  Hyundai        Double Bottom     100%        78,500     1983      Bahamian
Teekay Fountain.......  Hyundai        Double Bottom     100%        78,500     1982      NIS
Teekay Fortuna........  Hyundai        Double Bottom      67%        78,500     1982      NIS
Teekay Foam...........  Hyundai        Double Bottom     100%        78,500     1981      Bahamian
Teekay Freighter......  Bremer Vulcan  Double Bottom      52%        75,400     1982      NIS
Teekay Fair...........  Bremer Vulcan  Double Hull       100%        75,500     1981      NIS
Teekay Favour.........  Howaldtswerke  Double Bottom     100%        82,500     1981      Bahamian
         SUBTOTAL OIL/BULK/ORE CARRIERS........................     625,900

OTHER TANKERS(5)
Musashi Spirit........  Sasebo         Single Hull       100%       280,700     1993      Bahamian
Inago.................  Solisnor       Double Sides       50%       159,800     1993      Liberian
</TABLE>

                                        45
<PAGE>   51

<TABLE>
<CAPTION>
                                                       PERCENT
                         SERIES/YARD     HULL TYPE    OWNERSHIP      DWT     YEAR BUILT         FLAG
                        -------------  -------------  ---------   ---------  ----------   ----------------
<S>                     <C>            <C>            <C>         <C>        <C>          <C>
Erati.................  Solisnor       Double Sides       50%       159,700     1992      Liberian
Palmerston............  Halla          Double Bottom     100%        36,700     1990      Australian
Barrington............  Samsung        Double Hull       100%        33,300     1989      Australian
         SUBTOTAL OTHER TANKERS................................     670,200
         SUBTOTAL DWT -- VESSELS DELIVERED.....................   9,235,600

NEW BUILDINGS(3)
Shuttle Tanker (Hull
  1376)...............  Samsung        Double Hull       100%        92,000     2002      N/A
Shuttle Tanker (Hull
  1377)...............  Samsung        Double Hull       100%        92,000     2003      N/A
Shuttle Tanker (Hull
  1408)...............  Samsung        Double Hull       100%       147,500     2003      N/A
         SUBTOTAL NEWBUILDINGS.................................     331,500
         TOTAL DWT -- ALL TANKERS..............................   9,567,100
</TABLE>

- ---------------
(1) Oil/bulk/ore carrier trading exclusively as a crude oil tanker.

(2) Floating storage and off-take vessel.

(3) Time chartered-in vessel.

     See "Description of Certain Debt" for information regarding major
encumbrances against some of our vessels.

     Many of the Aframax tankers in our fleet have been designed and constructed
as substantially identical sister ships. These vessels can, in many situations,
be interchanged, providing scheduling flexibility and greater capacity
utilization. In addition, spare parts and technical knowledge can be applied to
all the vessels in the particular series, which generates operating
efficiencies.

     As part of our ongoing fleet modernization program, we sold a total of 8 of
our older tankers during the five fiscal periods ended December 31, 2000, and
added a total of 56 tankers (excluding time-chartered-in vessels) during the
same period, including vessels acquired through our purchases of Bona
Shipholding Ltd. in June 1999 and UNS in March 2001.

     By virtue of their size, Aframax vessels are large enough to benefit from
economies of scale yet have access to a wide range of size-restricted ports, and
are particularly well-suited for trading in regional markets, including the
Mediterranean, the Atlantic and the Indo-Pacific Basin. Our Aframax tanker fleet
of 64 vessels (excluding Aframax-size shuttle tankers) is one of the most modern
fleets in the world, having an average age of approximately 9 years, compared to
an average age for the world Aframax tanker fleet of approximately 12 years. In
an environment of increasingly stringent operating and safety standards, we
believe that the age profile and quality of our fleet create a high level of
demand for our tankers by charterers.

     Oil/bulk/ore carriers are designed to take advantage of natural trading
patterns for certain types of cargo in order to maximize the utilization and
revenue generating capacity of the vessel. They are capable of transporting
either liquid or dry bulk cargoes and are equipped with extensive cleaning
systems to facilitate a rapid changeover from wet to dry cargoes and vice versa.
The main commodities carried by our oil/bulk/ore carriers are condensate from
Algeria to Europe and the United States, and gasoline from the United Kingdom to
the United States. When trading to the United States, these vessels have
normally returned with coal to Europe. A majority of oil/bulk/ore carriers
transport oil and, as of May 31, 2001, these vessels represented approximately
4.6% of the world tanker fleet based on total cargo capacity. The two
Aframax-size oil/bulk/ore carriers included in our fleet have been used
exclusively to transport crude oil and petroleum products and our other eight
oil/bulk/ore carriers have been used in combination trades.

                                        46
<PAGE>   52

SHUTTLE TANKERS

     Through our acquisition of UNS in the spring of 2001, we acquired 18
shuttle tankers (including one floating storage and off-take vessel and four
newbuildings, one of which was delivered in May 2001). The UNS acquisition
represents our entry into the shuttle tanker market as a market leader.

     Shuttle tankers are designed to transport oil from offshore production
platforms to onshore storage and refinery facilities. These tankers generally
range in size from 80,000 to 150,000 dwt and are equipped with sophisticated
equipment to handle harsh weather and rolling seas while off-loading oil from
offshore production platforms. All but three of our shuttle tankers feature
dynamic positioning systems, which enable the tankers to automatically maintain
a constant position in spite of harsh conditions through the use of global
positioning satellite technology and propellers and thrusters built into the
vessels. The average age of the world shuttle tanker fleet is 10 years, compared
to 8.5 years (excluding the newbuildings) for our shuttle tanker fleet.

     In contrast to the largely spot price nature of the Aframax market, all but
two of our shuttle tankers currently operate under long-term fixed-rate
contracts. The fixed-rate contracts of our shuttle tankers have an average
remaining term of 4.5 years, excluding optional renewals at the charterers'
election. Our three shuttle tanker newbuildings are already subject to
contracts, with expiration dates between 2009 and 2013.

CLASSIFICATION AND INSPECTION

     All of our vessels have been certified as being "in-class" by their
respective classification societies: Nippon Kaiji Kyokai, Det Norske Veritas or
American Bureau of Shipping. Every commercial vessel's hull and machinery is
"classed" by a classification society authorized by its country of registry. The
classification society certifies that the vessel has been built and maintained
in accordance with the rules of that classification society and complies with
applicable rules and regulations of the country of registry of the vessel and
the international conventions of which that country is a member. Each vessel is
inspected by a surveyor of the classification society every year ("Annual
Survey"), every two to three years ("Intermediate Survey") and every four to
five years ("Special Survey"). Vessels also may be required, as part of the
Intermediate Survey process, to be drydocked every 24 to 30 months for
inspection of the underwater parts of the vessel and for necessary repair
related to such inspection. Many of our vessels have qualified with their
respective classification societies for drydocking every five years in
connection with the Special Survey and are no longer subject to the Intermediate
Survey drydocking process. To so qualify, we were required to enhance the
resiliency of the underwater coatings of each qualifying vessel as well as to
install apparatus on each vessel to accommodate thorough underwater inspection
by divers.

     In addition to the classification inspections, many of our customers,
including the major oil companies, regularly inspect our vessels as a
precondition to chartering voyages on the vessels. We believe that our
well-maintained, high quality tonnage should provide us with a competitive
advantage in the current environment of increasing regulation and customer
emphasis on quality of service.

     Our employees perform much of the necessary routine maintenance and
regularly inspect all of our vessels, both at sea and while the vessels are in
port. We inspect our vessels two to four times per year using predetermined and
rigorous criteria. Each vessel is examined and specific notations are made, and
recommendations are given for improvements to the overall condition of the
vessel and in its maintenance, safety, and crew welfare.

     We have obtained through Det Norske Veritas (DNV), the Norwegian
classification society, approval of our safety management system as in
compliance with International Safety Management (ISM) Code. In November 2000, we
obtained certification of our Document of Compliance through November 2004. As
part of our ISM Code compliance, all our vessels' safety management certificates
are being maintained through ongoing internal audits performed by us and
intermediate audits performed by DNV. DNV has also certified the UNS shuttle
tankers as ISM Code compliant.

                                        47
<PAGE>   53

OPERATIONS AND SHIP MANAGEMENT

     We have experienced management in all functions critical to our operations.
This affords a focused marketing effort and enhanced capacity utilization
supported by a safe, efficient and cost-effective operation.

     The critical ship management functions of vessel maintenance, crewing,
purchasing, shipyard supervision, insurance and financial management services
are carried out "in-house" in our various offices around the world. Since 1995,
IUM Shipmanagement AS ("IUM"), a company in which UNS owns a one-third interest,
has provided UNS ship management services, including crewing and maintenance.
IUM is under contract to provide these services to UNS until December 31, 2003.
IUM does not manage any shuttle tankers other than our vessels.

     In addition to our day-to-day focus on cost control, we established in 1999
with two other shipping companies a joint venture purchasing company, MARCAS,
which leverages the purchasing power of the combined fleets, mainly in the
commodity areas such as lube oils, paint and other chemicals.

     We have a worldwide chartering staff located in Vancouver, Tokyo, London,
Singapore, Houston, and Oslo. Each office serves our clients headquartered in
that office's region. Fleet operations, vessel positions and charter market
rates are monitored around the clock. We believe that monitoring this
information is critical to making informed bids on competitive brokered
business. During fiscal 2000, we derived approximately 82% of our consolidated
net voyage revenues from spot voyages or time charters and contracts of
affreightment priced on a spot market basis. After giving effect to our
acquisition of UNS as if it had occurred on January 1, 2000, we would have
derived approximately 75% of our pro forma consolidated net voyage revenues from
those sources.

CREWING AND STAFF

     We employ approximately 2,700 seagoing staff worldwide and 315 shore-based
personnel in offices located around the world. IUM provides approximately 440
additional seagoing staff for our shuttle tanker fleet.

     We regard attracting and retaining motivated seagoing personnel as a top
priority. Through our global manning organization comprising of offices in
Glasgow, Latvia, Manila, Mumbai, Oslo, and Sydney, we offer seafarers highly
competitive employment packages and comprehensive benefits. We also provide
excellent opportunities for personal and career development, which relates to
our philosophy of promoting internally.

     We have entered into a Collective Bargaining Agreement with the Philippine
Seafarers' Union, an affiliate of the International Transport Workers'
Federation (ITF), and a Special Agreement with ITF London, which covers
substantially all of our junior officers and seamen. We are also a party to
Enterprise Bargaining Agreements with three Australian maritime unions, covering
officers and seamen employed through our Australian operations.

     Our commitment to training is seen as fundamental to the development of the
highest caliber of seafarers for our marine operations. Our cadet training
approach is designed to balance academic learning with hands-on training at sea.
We have relationships with training institutions in Canada, Croatia, India,
Latvia, Norway, Philippines, Turkey, and the United Kingdom. After receiving
formal instruction at one of these institutions, the cadet's training continues
on board a Teekay vessel. We also have a career development plan which was
devised to ensure a continuous flow of qualified officers who are trained on our
vessels and familiarized with our operational standards, systems and policies.
We believe that high quality manning and training policies will play an
increasingly important role in distinguishing larger independent tanker
companies that have in-house (or affiliate) capabilities, from smaller companies
that must rely on outside ship managers and crewing agents.

                                        48
<PAGE>   54

CUSTOMERS

     Our customers include major oil companies, major oil traders, large oil
consumers and petroleum product producers, government agencies and various other
entities dependent upon the tanker transportation trade. Two customers, both
international oil companies, individually accounted for $118 million, or 13%,
and $110 million, or 12%, of our consolidated voyage revenues during fiscal
2000. Giving pro forma effect to our acquisition of UNS as if it had occurred
January 1, 2000, such percentages would have been 12% and 11%, respectively.
During the nine months ended December 31, 1999, a single customer, also an
international oil company, accounted for $48 million, or 13%, of our
consolidated voyage revenues. During the year ended March 31, 1999, three
customers, all international oil companies, individually accounted for $51
million, $51 million and $43 million, or 12%, 12% and 10%, respectively, of our
consolidated voyage revenues. No other customer accounted for more than 10% of
our consolidated voyage revenues in those periods. The loss of any significant
customer or a substantial decline in the amount of services requested by a
significant customer could have a material adverse effect on our business,
financial condition and results of operations.

COMPETITION

     We compete primarily in the Aframax and shuttle tanker markets. In the
Aframax market, international seaborne oil and other petroleum products
transportation services are provided by two main types of operators: captive
fleets of major oil companies (both private and state-owned) and independent
ship owner fleets. Many major oil companies and other oil trading companies, the
primary charterers of the vessels owned or controlled by us, also operate their
own vessels and transport their own oil as well as oil for third party
charterers in direct competition with independent owners and operators.

     Competition in the Aframax spot charter market for charters is intense and
is based upon price, location, the size, age, condition and acceptability of the
vessel, and the reputation of the vessel's manager.

     We compete principally with other Aframax owners in the spot charter market
through the global tanker charter market. This market is comprised of tanker
broker companies that represent both charterers and ship owners in chartering
transactions. Within this market, some transactions, referred to as "market
cargoes," are offered by charterers through two or more brokers simultaneously
and shown to the widest possible range of owners. Other transactions, referred
to as "private cargoes," are given by the charterer to only one broker and shown
selectively to a limited number of owners whose tankers are most likely to be
acceptable to the charterer and are in position to undertake the voyage.

     We believe the other large operators of modern Aframax tonnage in the spot
charter market are as listed in the table below, which excludes newbuildings:

<TABLE>
<CAPTION>
                                                  APPROXIMATE NUMBER OF AFRAMAX
COMPANY                                            VESSELS OWNED OR CONTROLLED
- -------                                           -----------------------------
<S>                                               <C>
American Eagle Tankers Ltd. (partially owned by
  the Singapore government).....................               24
General Maritime Ship Holdings Ltd. (excluding
  10 additional vessels subject to purchase
  agreements)...................................               14
Tanker Pacific Management (Singapore) Pte.
  Ltd. .........................................               13
Overseas Shipholding Group, Inc.................               12
</TABLE>

     Competition in the Aframax market is also affected by the availability of
other size vessels that compete in our markets. Suezmax-size vessels and
Panamax-size vessels can compete for many of the same charters for which we
compete. Because of their large size, Ultra Large Crude Carriers and Very Large
Crude Carriers rarely compete directly with Aframax tankers for specific
charters. However, because Ultra and Very Large Crude Carriers comprise a
substantial portion of the total capacity of the

                                        49
<PAGE>   55

market, movements by such vessels into Suezmax trades and of Suezmax vessels
into Aframax trades would heighten the already intense competition.

     We believe we have significant competitive advantages in the Aframax tanker
market as a result of the age, quality, type and dimensions of our vessels and
our market share in the Indo-Pacific Basin and Atlantic region. Some of our
competitors, however, may have greater financial strength and capital resources
than we do.

     There currently are 61 vessels in the world shuttle tanker fleet, the
majority of which operate in the North Sea. Shuttle tankers typically operate
under long-term fixed-rate contracts for a specific offshore oil field or
contracts of affreightment for various fields. Competition for charters is based
primarily upon price, availability, the size, technical sophistication, age and
condition of the vessel, and the reputation of the vessel's manager. Technical
sophistication of the vessel is especially important in harsh operating
environments such as the North Sea. Although the size of the world shuttle
tanker fleet has been relatively unchanged in recent years, conventional tankers
could be converted to less sophisticated shuttle tankers by adding specialized
equipment to meet the requirements of the oil companies. Shuttle tanker demand
is also affected by the possible substitution of sub-sea pipelines that transfer
oil from offshore production platforms.

     We currently own 15 shuttle tankers, excluding three newbuildings. Other
shuttle tanker owners in the North Sea include Navion ASA, Knudsen O.A.S.
Shipping AS, and JJ Ugland Group, which own approximately nine, nine and six
shuttle tankers, respectively. The remaining owners in the North Sea each own
three or fewer vessels.

     We believe we have significant competitive advantages in the shuttle tanker
market as a result of the age and quality of our vessels, and our market share
in the North Sea.

RISK OF LOSS AND INSURANCE

     The operation of any ocean-going vessel carries an inherent risk of
catastrophic marine disasters and property losses caused by adverse weather
conditions, mechanical failures, human error, war, terrorism, piracy and other
circumstances or events. In addition, the transportation of crude oil is subject
to the risk of crude oil spills and business interruptions due to political
circumstances in foreign countries, hostilities, labor strikes and boycotts. The
occurrence of any of these events may result in loss of revenues or increased
costs.

     We carry protection and indemnity coverage to protect against most of the
accident-related risks involved in the conduct of our business, and we also
maintain environmental damage and pollution coverage. Except with respect to our
shuttle tanker fleet, we do not carry insurance covering the loss of revenue
resulting from vessel off-hire time. We believe that our current coverage is
adequate to protect against most of the accident-related risks involved in the
conduct of our business and that we maintain appropriate levels of environmental
damage and pollution coverage. Protection and indemnity insurance also
indemnifies us against certain liabilities incurred while operating vessels.
Currently, the available amount of coverage for pollution is $1 billion per
vessel per incident. However, we cannot assure that all covered risks are
adequately insured against, that any particular claim will be paid or that we
will be able to procure adequate insurance coverage at commercially reasonable
rates in the future. More stringent environmental regulations at times in the
past have resulted in increased costs for, and may result in the lack of
availability of, insurance against the risks of environmental damage or
pollution.

LEGAL PROCEEDINGS

     From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of our business, principally
personal injury and property casualty claims. These claims, even if lacking
merit, could result in the expenditure of significant financial and

                                        50
<PAGE>   56

managerial resources. We are not aware of any legal proceedings or claims that
we believe will have, individually or in the aggregate, a material adverse
effect on us.

REGULATION

     Our business and the operation of our vessels are materially affected by
government regulation in the form of international conventions, national, state
and local laws and regulations in force in the jurisdictions in which the
vessels operate, as well as in the country or countries of their registration.
Because such conventions, laws and regulations are often revised, we cannot
predict the ultimate cost of complying with such conventions, laws and
regulations or the impact they may have on the resale price or useful life of
our vessels. Additional conventions, laws and regulations may be adopted which
could limit our ability to do business or increase the cost of our doing
business and which may have a material adverse effect on our operations. We are
required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses and certificates with respect to our operations.
Subject to the discussion below and to the fact that the kinds of permits,
licenses and certificates required for the operations of our vessels will depend
upon a number of factors, we believe that we have been and will be able to
obtain all permits, licenses and certificates material to the conduct of our
operations.

     We believe that the heightened environmental and quality concerns of
insurance underwriters, regulators and charterers will impose greater inspection
and safety requirements on all vessels in the tanker market and will accelerate
the scrapping of older vessels throughout the industry.

     ENVIRONMENTAL REGULATION -- INTERNATIONAL MARITIME ORGANIZATION.  On March
6, 1992, the International Maritime Organization adopted regulations that set
forth new and upgraded requirements for pollution prevention for tankers. These
regulations, which went into effect on July 6, 1995 in many jurisdictions in
which our tanker fleet operates, provide that:

     -  tankers between 25 and 30 years old must be of double-hull construction
        or of a mid-deck design with double side construction, unless they have
        wing tanks or double-bottom spaces, not used for the carriage of oil,
        which cover at least 30% of the length of the cargo tank section of the
        hull, or are capable of hydrostatically balanced loading which ensures
        at least the same level of protection against oil spills in the event of
        collision or stranding;

     -  tankers 30 years old or older must be of double-hull construction or
        mid-deck design with double-side construction; and

     -  all tankers will be subject to enhanced inspections.

     Also, under International Maritime Organization regulations, a tanker must
be of double-hull construction or a mid-deck design with double side
construction or be of another approved design ensuring the same level of
protection against oil pollution in the event that such tanker (a) is the
subject of a contract for a major conversion or original construction on or
after July 6, 1993, (b) commences a major conversion or has its keel laid on or
after January 6, 1994, or (c) completes a major conversion or is a newbuilding
delivered on or after July 6, 1996.

     On April 27, 2001, the International Maritime Organization revised its
regulations relating to prevention of pollution from tankers. These regulations,
which are scheduled to take effect on September 1, 2002, generally provide that
single-hull tankers must be phased out between 2003 and 2015. These regulations
identify three categories of single-hull tankers, which include double-bottom
and double-side tankers:

     -  "Category 1 oil tanker" means any oil tanker 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 does not
        have segregated ballast tanks;

                                        51
<PAGE>   57

     -  "Category 2 oil tanker" means any oil tanker 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 has
        segregated ballast tanks; and

     -  "Category 3 oil tanker" means an oil tanker of 5,000 dwt and above but
        less than the tonnage specified for Category 1 and 2 oil tankers.

     All of the single-hull tankers we operate are Category 2 oil tankers. As
illustrated in the following table, the new regulations provide for the
phase-out on a rolling basis of Category 1 single-hull oil tankers by 2007 and
of Category 2 oil tankers by 2015.

                    PHASE-OUT DATES FOR SINGLE-HULL TANKERS

<TABLE>
<S>                                         <C>
- -------------------------------------------------------------------------------------------------------
  CATEGORY OF OIL TANKER                                  YEAR TO BE REMOVED FROM SERVICE
- -------------------------------------------------------------------------------------------------------
  Category 1............................    2003 for ships delivered in 1973 or earlier
                                            2004 for ships delivered in 1974 and 1975
                                            2005* for ships delivered in 1976 and 1977
                                            2006* for ships delivered in 1978, 1979 and 1980
                                            2007* for ships delivered in 1981 or later
- -------------------------------------------------------------------------------------------------------
  Category 2............................    2003 for ships delivered in 1973 or earlier
                                            2004 for ships delivered in 1974 and 1975
                                            2005 for ships delivered in 1976 and 1977
                                            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
                                            2011* for ships delivered in 1985
                                            2012* for ships delivered in 1986
                                            2013* for ships delivered in 1987
                                            2014* for ships delivered in 1988
                                            2015* for ships delivered in 1989 or later
- -------------------------------------------------------------------------------------------------------
</TABLE>

- ---------------
* Subject to compliance with Condition Assessment Scheme Survey.

     However, under certain conditions, Category 1 and Category 2 oil tankers
may continue in operation beyond the date set forth in the table above. Category
2 oil tankers fitted with double bottoms or double sides may continue in service
until 25 years after their delivery date. Category 1 oil tankers over 25 years
old must have double bottoms or operate with hydrostatically balanced loading.
However, a port state may declare that it does not accept entry of such vessels
after their phase-out date. The European Union, Cyprus and Malta have already
declared that they will not permit the entry of such vessels.

     Vessels must pass a Condition Assessment Scheme survey after 2005 for
Category 1 oil tankers, and after 2010 for Category 2 oil tankers. The
Conditional Assessment Scheme Survey includes surveys of the hull structure,
including cargo tanks, pump rooms, cofferdams, pipe tunnels, void spaces within
the cargo area and all ballast tanks.

     Under the current International Maritime Organization regulations, our
vessels will be able to operate for substantially all of their respective
economic lives before being required to have double-hulls. Although 13 of our
vessels are over 15 years old (including the eight oil/bulk/ore carriers we
acquired in the Bona acquisition), IMO regulations do not require any of our
vessels to be phased-out until 2007. However, compliance with the regulations
regarding inspections of all vessels may adversely affect our

                                        52
<PAGE>   58

operations. We cannot at the present time evaluate the likelihood or magnitude
of any such adverse effect on our operations due to uncertainty of
interpretation of the International Maritime Organization regulations.

     The operation of our vessels is also affected by the requirements set forth
in the International Maritime Organization's International Management Code for
the Safe Operation of Ships and Pollution Prevention (the "ISM Code"). The ISM
Code requires shipowners and bareboat charterers to develop and maintain an
extensive "Safety Management System" that includes the adoption of a safety and
environmental protection policy setting forth instructions and procedures for
safe operation and describing procedures for dealing with emergencies. The
failure of a shipowner or bareboat charterer to comply with the ISM Code may
subject that party to increased liability, may decrease available insurance
coverage for the affected vessels and may result in a denial of access to, or
detention in, certain ports. Currently, each of our applicable vessels is ISM
code-certified. However, we cannot assure that such certification will be
maintained indefinitely.

     ENVIRONMENTAL REGULATIONS -- THE UNITED STATES OIL POLLUTION ACT OF 1990
("OPA 90"). OPA 90 established an extensive regulatory and liability regime for
the protection and cleanup of the environment from oil spills. OPA 90 affects
all owners and operators whose vessels trade to the United States or its
territories or possessions or whose vessels operate in U.S. waters, which
include the U.S. territorial sea and its two hundred nautical mile exclusive
economic zone.

     Under OPA 90, vessel owners, operators and bareboat (or "demise")
charterers 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 containment and clean-up costs
and other damages arising from discharges or threatened discharges of oil from
their vessels. These other damages are defined broadly to include:

     -  natural resources damages and the costs of assessment thereof;

     -  real and personal property damages;

     -  net loss of taxes, royalties, rents, fees and other lost revenues;

     -  lost profits or impairment of earning capacity due to property or
        natural resources damage;

     -  net cost of public services necessitated by a spill response, such as
        protection from fire, safety or health hazards; and

     -  loss of subsistence use of natural resources.

     OPA 90 limits the liability of responsible parties to the greater of $1,200
per gross ton or $10 million per tanker that is over 3,000 gross tons (subject
to possible adjustment for inflation). These limits of liability would not apply
if the incident was proximately caused by violation of applicable United States
federal safety, construction or operating regulations or by the responsible
party's gross negligence or willful misconduct, or if the responsible party
fails or refuses to report the incident or to cooperate and assist in connection
with the oil removal activities. We currently plan to continue to maintain for
each of our vessels pollution liability coverage in the amount of $1 billion per
incident through protection and indemnity clubs. A catastrophic spill could
exceed the coverage available, which could materially adversely affect our
business, financial condition and result of operations.

     Under OPA 90, with limited exceptions, all newly built or converted tankers
operating in United States waters must be built with double-hulls, and existing
vessels that do not comply with the double-hull requirement must be phased out
over a 20-year period (1995-2015) based on size, age and hull construction.
Vessels with double-sides and double-bottoms are granted an additional five
years of service life before being phased out. Of our vessels, 13 are over 15
years old (including the eight oil/bulk/ore carriers we acquired in the Bona
acquisition). Twelve of those vessels have double-sides or double-bottoms, the
oldest of which would not be phased out until 2009. Our oldest single-hull
tanker is part of our shuttle tanker fleet and does not trade in the United
States. Notwithstanding the phase out

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<PAGE>   59

period, OPA 90 currently permits existing single-hull tankers to operate until
the year 2015 if their operations within United States waters are limited to
discharging at the Louisiana Off-shore Oil Platform, or off-loading by means of
lightering activities within authorized lightering zones more than 60 miles
offshore.

     OPA 90 requires owners and operators of vessels to establish and maintain
with the United States Coast Guard evidence of financial responsibility
sufficient to meet their potential liabilities under OPA 90. In December 1994,
the U.S. Coast Guard implemented regulations requiring evidence of financial
responsibility in the amount of $1,500 per gross ton for tankers, coupling the
OPA limitation on liability of $1,200 per gross ton with the Comprehensive
Environmental Response, Compensation, and Liability Act liability limit of $300
per gross ton. Under the regulations, evidence of financial responsibility may
be demonstrated by insurance, surety bond, self-insurance or guaranty. Under OPA
90, an owner or operator of a fleet of tankers is required only to demonstrate
evidence of financial responsibility in an amount sufficient to cover the tanker
in the fleet having the greatest maximum limited liability under OPA 90.

     The U.S. Coast Guard's regulations concerning certificates of financial
responsibility provide, in accordance with OPA 90, that claimants may bring suit
directly against an insurer or guarantor that furnishes certificates of
financial responsibility; and, in the event that such insurer or guarantor is
sued directly, it is prohibited from asserting any contractual defense that it
may have had against the responsible party and is limited to asserting those
defenses available to the responsible party and the defense that the incident
was caused by the willful misconduct of the responsible party. Certain
organizations that had typically provided certificates of financial
responsibility under pre-OPA 90 laws, including the major protection and
indemnity organizations, declined to furnish evidence of insurance for vessel
owners and operators if they are subject to direct actions or required to waive
insurance policy defenses.

     The U.S. Coast Guard's financial responsibility regulations may also be
satisfied by evidence of surety bond, guaranty or by self-insurance. Under the
self-insurance provisions, the ship owner or operator must have a net worth and
working capital, measured in assets located in the United States against
liabilities located anywhere in the world, that exceeds the applicable amount of
financial responsibility. We have complied with the U.S. Coast Guard regulations
by providing a financial guaranty from a related company evidencing sufficient
self-insurance for all our vessels trading into the United States. If other
vessels in our fleet trade to the United States in the future, we expect to
provide guaranties through self-insurance, or to obtain such guaranties from
third party insurers.

     OPA 90 specifically permits individual states to impose their own liability
regimes with regard to oil pollution incidents occurring within their
boundaries, and some states in the United States have enacted legislation
providing for unlimited liability for oil spills. In some cases, states that
have enacted such legislation have not yet issued implementing regulations
defining tanker owners' responsibilities under these laws. We intend to comply
with all applicable state regulations in the ports where our vessels call.

     Owners or operators of tankers operating in United States waters are
required to file vessel response plans with the U.S. Coast Guard, and their
tankers are required to operate in compliance with their Coast Guard approved
plans. The response plans must, among other things:

     -  address a "worst case" scenario and identify and ensure, through
        contract or other approved means, the availability of necessary private
        response resources to respond to a "worst case discharge;"

     -  describe crew training and drills; and

     -  identify a qualified individual with full authority to implement removal
        actions.

     We have filed vessel response plans with the U.S. Coast Guard for the
tankers we own and have received approval of such plans for all vessels in our
fleet that operate in United States waters.

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<PAGE>   60

     ENVIRONMENTAL REGULATION -- OTHER ENVIRONMENTAL INITIATIVES.  The European
Union is considering legislation that will affect the operation of tankers and
the liability of owners for oil pollution. It is impossible to predict what
legislation, if any, may be promulgated by the European Union or any other
country or authority.

     Although the United States is not a party, many countries have ratified and
follow the liability scheme adopted by the International Maritime Organization
and set out in the International Convention on Civil Liability for Oil Pollution
Damage, 1969, as amended (the "CLC"), and the Convention for the Establishment
of an International Fund for Oil Pollution of 1971, as amended. Under these
conventions, a vessel's registered owner is strictly liable for pollution damage
caused on the territorial waters of a contracting state by discharge of
persistent oil, subject to certain complete defenses. Approximately one-quarter
of the countries that have ratified the CLC have increased the liability limits
through a 1992 Protocol to the CLC. The liability limits in the countries that
have ratified this Protocol are currently approximately $3.8 million plus
approximately $528 per gross registered ton above 5,000 gross tons with an
approximate maximum of approximately $75 million, with the exact amount tied to
a unit of account which varies according to a basket of currencies. The right to
limited liability is forfeited under the CLC where the spill is caused by the
owner's actual fault or privity and, under the 1992 Protocol, where the spill is
caused by the owner's intentional or reckless conduct. Vessels trading to
contracting states must provide evidence of insurance covering the limited
liability of the owner. In jurisdictions where the CLC has not been adopted,
various legislative schemes or common law govern, and liability is imposed
either on the basis of fault or in a manner similar to the CLC.

     In addition, the International Maritime Organization, various countries and
states, such as Australia, the United States and the State of California, and
various regulators, such as port authorities, the U.S. Coast Guard and the U.S.
Environmental Protection Agency, have either adopted legislation or regulations,
or are separately considering the adoption of legislation or regulations, aimed
at regulating the discharge of ballast water as a potential pollutant.

TAXATION OF TEEKAY

     The following discussion is a summary of the principal United States,
Bahamian, Bermudan, Marshall Islands and Norwegian tax laws applicable to us.
The following discussion of tax matters, as well as the conclusions regarding
certain issues of tax law that are reflected in such discussion, are based on
current law and upon the advice received by us from our counsel. This advice is
based, in part, on representations made by our officers, some of which relate to
anticipated future factual matters and circumstances. No assurance can be given
that changes in or interpretation of existing laws will not occur or will not be
retroactive or that anticipated future factual matters and circumstances will in
fact occur. Our views and those of our counsel have no binding effect or
official status of any kind, and no assurance can be given that the conclusions
discussed below would be sustained if challenged by taxing authorities.

  UNITED STATES TAXATION

     The following discussion is based on the advice of Seward & Kissel, LLP,
special United States tax counsel to us. The following discussion is based upon
the provisions of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed U.S. Treasury Department regulations,
administrative rulings and court decisions, all as of the date of this
prospectus.

     Teekay has made, or will shortly make, a special U.S. tax election, the
effect of which is to disregard our vessel owning or operating subsidiaries as
separate taxable entities from Teekay. Therefore, for purposes of the ensuing
U.S. tax discussion, Teekay and not our subsidiaries will be treated as the
owner or operator of our vessels.

     We anticipate that Teekay will derive substantially all of its gross income
from the use and operation of vessels in international commerce and that this
income will principally consist of freights from the transportation of cargoes,
hire or lease from time or voyage charters and the performance of services

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<PAGE>   61

directly related thereto ("Shipping Income"). Unless exempt from U.S. taxation
under Section 883 of the Code, Teekay will be subject to U.S. federal income
taxation, in the manner discussed below, to the extent such Shipping Income is
considered derived from sources within the United States.

     Shipping Income that is attributable to transportation that begins or ends,
but that does not both begin and end, in the United States will be considered to
be 50% derived from sources within the United States. Shipping Income
attributable to transportation that both begins and ends in the United States
will be considered to be 100% derived from sources within the United States. All
Shipping Income attributable to transportation exclusively between non-U.S.
ports will be considered to be 100% derived from sources outside the United
States. Shipping Income derived from sources outside the United States will not
be subject to U.S. federal income tax.

     Based upon Teekay's anticipated shipping operations, Teekay's vessels will
operate in various parts of the world, including to or from U.S. ports. In the
calendar year 2000, approximately 42% of its Shipping Income was attributable to
the transportation of cargoes either to or from a U.S. port. Accordingly, only
21% of Teekay's Shipping Income would have been treated as derived from U.S.
sources for such period. Giving effect to our acquisition of UNS as if it had
occurred on January 1, 2000, approximately 40% of Teekay's pro forma Shipping
Income for the fiscal year ended December 31, 2000 would have been attributable
to transportation of cargoes either to or from a U.S. port.

  THE INTERNAL REVENUE CODE SECTION 883 EXEMPTION

     Teekay will qualify for the exemption from U.S. federal income taxation
under Section 883 of the Code if, in relevant part:

     -  Teekay is organized in a foreign country that grants an equivalent
        exemption from tax to corporations organized in the United States ("the
        country of organization requirement"); and

     -  more than 50% of the value of Teekay's shares is treated as owned,
        directly or indirectly, by individuals who are "residents" of such
        country or of another foreign country that grants an equivalent
        exemption to corporations organized in the United States (the "ownership
        requirement").

     Since the U.S. Treasury Department has recognized Teekay's country of
incorporation, the Marshall Islands, as a foreign country that grants an
equivalent exemption to U.S. corporations, Teekay satisfies the country of
organization requirement.

     There is an exemption from the ownership requirement provided by Section
883 if Teekay can satisfy a special publicly traded stock rule. Teekay will
qualify for the exemption if its common stock is considered to be "primarily and
regularly traded on an established securities market" in the United States (the
"publicly traded test").

     We have taken the position that, under the current tax regime, we qualify
under the Section 883 exemption. However, proposed regulations interpreting
Section 883 were promulgated by the U.S. Treasury Department on February 8,
2000. The proposed regulations will apply to taxable years ending 30 days or
more after the date the proposed regulations are published as final regulations
in the Federal Register. At this time, it is unclear when the proposed
regulations will be finalized and whether they will be finalized in their
present form.

     The proposed regulations provide, in pertinent part, that stock of a
foreign corporation will be considered to be "primarily traded" on an
established securities market if the number of shares that are traded during any
taxable year on that market exceeds the number of shares traded during that year
on any other established securities market. At present, the sole class of
Teekay's stock that is issued and outstanding is its common stock and its common
stock is listed on the New York Stock Exchange, which is an established
securities market in the United States. Since Teekay's common stock is not
listed or

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<PAGE>   62

quoted on any other securities market, its common stock must be considered to be
"primarily" traded on such market.

     The proposed regulations further provide that stock will be considered to
be "regularly traded" on a market if:

     -  stock representing 80% or more of the issuer's outstanding shares, by
        voting power and value, is listed on such market (the "80% test");

     -  stock is traded on such market, other than in de minimis quantities, on
        at least 60 days during the taxable year (the "trading frequency
        threshold"); and

     -  the aggregate number of shares of stock traded is at least 10% of the
        average number of shares outstanding during such year (the "trading
        volume threshold").

     Under the proposed regulations, the trading frequency threshold and the
trading volume threshold will be deemed satisfied if, as is the case here, stock
is traded on an established securities market in the United States and the stock
is regularly quoted by brokers and dealers making a market in the stock (the
"U.S. securities market exception").

     Teekay's common stock should satisfy the "regularly traded" requirement of
the proposed regulations since the 80% test is satisfied by virtue of 100% of
its common stock being listed on the New York Stock Exchange and the trading
frequency threshold and trading volume threshold tests will be deemed satisfied
as a result of the applicability of the U.S. securities market exception.

     Notwithstanding the foregoing, the proposed regulations provide, in
pertinent part, that stock will not be considered to be regularly traded on an
established securities market for any taxable year in which 50% or more of the
outstanding shares of such stock are owned, within the meaning of the
regulations, on any day during such taxable year by persons who each own 5% or
more of the value of the outstanding shares of such stock (the "5% override
rule").

     Based on its existing shareholdings, Teekay may be subject to this 5%
override rule and hence, under the proposed regulations, may not qualify for
exemption from the ownership requirement pursuant to the publicly traded test.
Without such exemption, Teekay's ability to satisfy the ownership requirement
may prove to be problematic.

     In response to an invitation for public comment on the proposed regulations
from the U.S. Treasury Department, we submitted written comments requesting
certain modifications be made to the 5% override rule which, if accepted and
reflected in the final regulations, would render Teekay not subject to the 5%
override rule based on its existing shareholdings. However, no assurance can be
given that our proposed modifications will ultimately be accepted and reflected
in the final regulations or that, even if the modifications are accepted, future
changes or shifts in the ownership of our shares will not preclude us from
obtaining the benefits of Section 883.

     Until final regulations are promulgated and come into force, however, we
intend to take the position on our U.S. tax return filings that Teekay satisfies
the publicly traded test and qualifies for exemption under Section 883.

     To the extent Teekay is unable to qualify for exemption from tax under
Section 883, its U.S. source Shipping Income will become subject to the 4% gross
basis tax regime or, alternatively, to the net basis and branch tax regime
described below.

  TAXATION IN ABSENCE OF INTERNAL REVENUE CODE SECTION 883 EXEMPTION

     4% GROSS BASIS TAX REGIME.  To the extent the benefits of Section 883 are
unavailable, Teekay's U.S. source Shipping Income that is not considered to be
"effectively connected" with the conduct of a U.S. trade or business, as
discussed below, would be subject to a 4% tax imposed by Section 887 of the Code
on a gross basis, without the benefit of deductions. As discussed above, we
expect that substantially less than half of Teekay's Shipping Income will be
considered U.S. source Shipping

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<PAGE>   63

Income. Accordingly, we believe that the maximum effective rate of U.S. federal
income tax on Teekay's gross Shipping Income would not exceed 2%.

     Based on its U.S. source Shipping Income for the calendar year 2000, Teekay
would be subject to U.S. federal income tax of approximately $7.5 million under
Section 887 in the absence of an exemption under Section 883.

     NET BASIS AND BRANCH PROFITS TAX REGIME.  To the extent the benefits of the
Section 883 exemption are unavailable and Teekay's U.S. source Shipping Income
is considered to be "effectively connected" with the conduct of a U.S. trade or
business, as described below, any such "effectively connected" U.S. source
Shipping Income, net of applicable deductions, would be subject to the U.S.
federal corporate income tax currently imposed at rates of up to 35%. In
addition, Teekay may be subject to the 30% "branch profits" taxes on earnings
effectively connected with the conduct of such trade or business, as determined
after allowance for certain adjustments, and on certain interest paid or deemed
paid attributable to the conduct of its U.S. trade or business. Teekay's U.S.
source Shipping Income would be considered "effectively connected" with the
conduct of a U.S. trade or business only if:

     -  Teekay has, or is considered to have, a fixed place of business in the
        United States involved in the earning of Shipping Income; and

     -  substantially all of Teekay's U.S. source Shipping Income is
        attributable to regularly scheduled transportation, such as the
        operation of a vessel that follows a published schedule with repeated
        sailings at regular intervals between the same points for voyages that
        begin or end in the United States.

     We do not intend to have, or permit circumstances that would result in
having any Teekay vessel operating to the United States on a regularly scheduled
basis. Based on the foregoing and on the expected mode of Teekay's shipping
operations and other activities as described in this prospectus, we believe that
none of Teekay's U.S. source Shipping Income will be "effectively connected"
with the conduct of a U.S. trade or business.

     GAIN ON SALE OF VESSELS.  To the extent any Teekay vessel makes more than
an occasional voyage to U.S. ports, Teekay may be considered to be engaged in
the conduct of a U.S. trade or business. As a result, except to the extent such
gain falls within the scope of the Section 883 exemption as income that is
incidental to Teekay's Shipping Income, any U.S. source gain on the sale of a
vessel may be partly or wholly subject to U.S. federal income tax as
"effectively connected" income (determined under rules different from those
discussed above) under the net basis and branch tax regime described above.

  BAHAMIAN TAXATION

     Based on the advice of Graham, Thompson & Co., our Bahamian counsel, we and
our subsidiaries will not be subject to taxation under the laws of the Bahamas,
and distributions by our subsidiaries to us also will not be subject to any
Bahamian tax.

  BERMUDAN TAXATION

     Based on the advice of Appleby Spurling & Kempe, our Bermudan counsel, we
and our subsidiaries will not be subject to taxation under the laws of Bermuda,
and distributions by our subsidiaries to us also will not be subject to any
Bermudan tax.

  MARSHALL ISLANDS TAXATION

     Based on the advice of Watson, Farley & Williams, our Republic of Marshall
Islands counsel, because we and our subsidiaries do not, and we do not expect
that we and our subsidiaries will, conduct business or operations in the
Republic of the Marshall Islands, we and our subsidiaries will not

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<PAGE>   64

be subject to taxation under the laws of the Republic of the Marshall Islands,
and distributions by our subsidiaries to us will not be subject to Marshall
Islands tax.

  NORWEGIAN TAXATION

     The following discussion is based on the advice of Bugge, Arentz-Hansen &
Rasmussen, our Norwegian counsel, and the tax laws of Norway and regulations,
rulings and judicial decisions thereunder, all as in effect as of the date of
this prospectus and subject to possible change on a retroactive basis. The
following discussion is for general information purposes only and does not
purport to be a comprehensive description of all of the Norwegian income tax
considerations applicable to UNS.

     In December 1996, Norway introduced a new regime for the taxation of the
shipping industry. If a company meets certain requirements, it may choose to be
taxed according to this regime, which results in deferral of taxation for income
related to shipping activities until the accumulated untaxed profits are
distributed to shareholders outside the regime or upon the company's exit from
the regime. A company that is subject to the regime will, however, be liable to
pay without the benefit of deferral a 28% tax on investment income and a
relatively insignificant tonnage tax based on the registered tonnage of its
fleet. The rates for tonnage tax are set annually by the Norwegian parliament.

     To qualify for the shipping taxation regime, the shipping activities of UNS
have been separated from other activities, such as management functions,
although, prior to Teekay's purchase of UNS, the companies engaged in shipping
activities and those providing management functions have been owned by the same
ultimate parent. While UNS as the parent company does not qualify under the
shipping tax regime, Ugland Nordic Investment AS, a wholly owned subsidiary of
UNS owns the assets and companies engaged in shipping activities (the
"Qualifying Company"). These companies engaged in shipping activities constitute
"shipping companies" under the tax regime. Under the regime, the shipping
companies may not have employees; consequently, all service and management
functions must be obtained from a related or unrelated entity that is separate
from the shipping companies. Intra-group services are required to be priced in
accordance with market terms and UNS is subject to a 28% non-deferred tax with
respect to the net income of any management services it provides.

     If the Qualifying Company were to cease to qualify for the shipping company
tax regime, it would be taxed on its accumulated untaxed profits and gains,
taking into account both value appreciations during the period it was under the
regime and any untaxed equity that may have been in the Qualifying Company upon
entry into the regime. The Qualifying Company would cease to qualify under the
regime if it sold all of its vessels and ownership interests in other shipowning
companies qualifying under the tax regime and the proceeds from such sale were
not reinvested in a shipowning company qualifying under the tax regime or a
replacement vessel, or an agreement to build a replacement vessel were not
entered into within a year from the sale. Furthermore, under certain conditions,
the Qualifying Company would also cease to qualify under the regime if one of
the shipowning companies in which the Qualifying Company holds an ownership
interest sold all of its vessels and the proceeds from such sale were not
reinvested in a replacement vessel or an agreement to build a replacement vessel
were not entered into within a year of the sale.

     To the extent untaxed profits are distributed from the Qualifying Company
to shareholders outside the regime, which would include dividends or other
distributions paid by the Qualifying Company to UNS, the Qualifying Company will
be taxed at a rate of 28% of the distributed amount as grossed-up for such
taxes. Further, dividends paid from UNS to a non-Norwegian shareholder will be
subject to a Norwegian withholding tax of 25%, unless a lower tax has been
agreed upon in an applicable tax treaty.

     We record deferred taxes under the Norwegian shipping tax regime on our
consolidated financial statements in accordance with accounting principles
generally accepted in the United States. See Note 6 to our March 31, 2001
unaudited consolidated financial statements included elsewhere in this
prospectus.

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<PAGE>   65

                                   MANAGEMENT

     Our directors, executive officers and senior management personnel are
listed below:

<TABLE>
<CAPTION>
NAME                                   AGE   POSITION
- ----                                   ---   --------
<S>                                    <C>   <C>
C. Sean Day..........................  52    Director and Chairman of the Board
Bjorn Moller.........................  43    Director, President and Chief Executive Officer
Axel Karlshoej.......................  61    Director and Chairman Emeritus
Bruce C. Bell........................  54    Director and Corporate Secretary
Dr. Ian D. Blackburne................  55    Director
Morris L. Feder......................  84    Director
Thomas Kuo-Yuen Hsu..................  54    Director
Leif O. Hoegh........................  37    Director
Eileen A. Mercier....................  54    Director
Peter S. Antturi.....................  42    VP, Treasurer and Chief Financial Officer
David Glendinning....................  47    SVP, Customer Service & Marine Project Development
Mads T. Meldgaard....................  36    VP, Chartering
Graham Westgarth.....................  47    SVP, Marine Operations
</TABLE>

     Certain biographical information about each of these individuals is set
forth below:

     C. SEAN DAY has been a director since September 1998, and has served as our
Chairman of the Board since September 1999. He has also been Chairman of the
Board of Seagin International LLC since April 1999 and was President and Chief
Executive Officer of Navios Corporation, a large bulk shipping company, from
1989 to 1999. Prior to this, Mr. Day held a number of senior management
positions in the shipping and financing industry. He is currently serving as a
Director of Genesee & Wyoming, Inc., Kirby Corporation, and Sparkling Springs
Water Group. Mr. Day is also engaged as a consultant to the trust that
constitutes the largest shareholder of Teekay. See "-- Certain Transactions with
Related Parties."

     BJORN MOLLER has served as one of our directors and as our President and
Chief Executive Officer since April 1998. Mr. Moller has over 20 years
experience in the shipping industry and has served in senior management
positions with us for more than 12 years. He has headed our overall operations
since January 1997, following his promotion to the position of Chief Operating
Officer. Prior to this, Mr. Moller headed our global chartering operations and
business development activities.

     AXEL KARLSHOEJ is President of Nordic Industries, a California general
construction firm with which he has served for the past 26 years. He is the
older brother of the late J. Torben Karlshoej, our founder. He has served as a
director since 1989 and Chairman of the Board from June 1994 to September 1999,
and Chairman Emeritus since stepping down as Chairman.

     BRUCE C. BELL has served as one of our directors and as our Corporate
Secretary since May 2000. He is the Managing Director of Oceanic Bank and Trust
Limited, a private Bahamian bank, a position he has held since March 1994. Prior
to joining Oceanic Bank and Trust Limited, Mr. Bell was engaged in the private
practice of law in Canada, specializing in corporate/commercial, banking and
international business transactions.

     DR. IAN D. BLACKBURNE has served as one of our directors since September
2000. Dr. Blackburne has over 25 years experience in petroleum refining and
marketing, and in March 2000 he retired as Managing Director and CEO of Caltex
Australia Limited, a large petroleum refining and marketing conglomerate based
in Australia. He is currently serving as a Director of CSR Limited,
Suncorp-Metway Ltd., and of Airservices Australia. In February 2001, Dr.
Blackburne was appointed as Director and Chairman of Australian Plantation
Timber Limited, positions he resigned on June 30, 2001.

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<PAGE>   66

     MORRIS L. FEDER has served as one of our directors since June 1993. He is
President of Worldwide Cargo Inc., a New York-based chartering firm. Mr. Feder
has been employed in the shipping industry for more than 49 years, 43 of which
were spent with Maritime Overseas Corporation, where he retired as Executive
Vice President and Director in December 1991. He has also served as Senior Vice
President and Director of Overseas Shipholding Group Inc. and was a member of
the Finance and Development Committee of its Board of Directors. Mr. Feder is a
member of the American Bureau of Shipping, the Connecticut Maritime Association
and the Association of Shipbrokers and Agents USA Inc., as well as a Director of
American Marine Advisors, Inc.

     THOMAS KUO-YUEN HSU has served as one of our directors since June 1993. He
has served 27 years with, and is presently Executive Director of, Expedo &
Company (London) Ltd., which is part of the Expedo Group of Companies that
manages a fleet of eight vessels, ranging in size from 20,000 dwt to 280,000
dwt. He has been a Committee Director of the Britannia Steam Ship Insurance
Association Limited since 1988.

     LEIF O. HOEGH was appointed as a director in June 1999, concurrently with
our acquisition of Bona Shipholding Ltd. He served as a director of Bona from
November 1993 to June 1999 and as its Chairman from June 1998 to June 1999. Mr.
Hoegh is Managing Director of Leif Hoegh (U.K.) Limited and Vice-Chairman of
Leif Hoegh and Co. ASA. He also serves as a Director of Dannebrog Rederi AS and
as the Chairman of Hoegh Capital Partners, Inc.

     EILEEN A. MERCIER has served as one of our directors since December 2000.
Ms. Mercier has over 30 years of experience in a wide variety of financial and
strategic planning positions, including Senior Vice President and Chief
Financial Officer for Abitibi-Price Inc. from 1990 to 1995. Since then she has
been President of Finvoy Management Inc., a management consulting firm
specializing in financial strategy, mergers and acquisitions, restructuring and
corporate governance issues. She also currently serves as a director of CGI
Group Inc., Quebecor World Inc., Reko International Group Inc., and Winpak Ltd.

     PETER S. ANTTURI joined us in September 1991 as Manager, Accounting and was
promoted to the position of Controller in March 1992, and to his current
position of Vice President, Treasurer and Chief Financial Officer in October
1997. Prior to joining us, Mr. Antturi held various accounting and finance roles
in the shipping industry since 1985.

     CAPTAIN DAVID GLENDINNING joined the Chartering Department of our London
office in January 1987. Since then, he has worked in a number of senior
positions within the organization, including Vice President, Commercial
Operations, and Vice President, Marine and Commercial Operations. Since February
1999 he has served as Senior Vice President, Customer Service and Marine Project
Development. Captain Glendinning has 18 years' sea service on oil tankers of
various types and sizes and is a Master Mariner with British Class 1 Foreign
Going Certificate of Competency.

     MADS T. MELDGAARD joined our Chartering Department in January 1986 and
served in our European and Singapore offices until December 1991, when he was
appointed Chartering Manager in the Vancouver office. In January 1994, he was
promoted to the position of General Manager, Chartering, and then to Managing
Director (Singapore) in September 1995. In July 1998, Mr. Meldgaard became Vice
President, Chartering, based in Vancouver.

     CAPTAIN GRAHAM WESTGARTH joined us in February 1999 as Vice President,
Marine Operations and was promoted to the position of Senior Vice President,
Marine Operations in December 1999. Captain Westgarth has 28 years of shipping
industry experience. Eighteen of those years were spent at sea, including five
years in a command position. He joined us from Maersk Company (U.K.), where he
joined as Master in 1987 before being promoted to General Manager in 1994.

COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

     The aggregate compensation paid to our five executive officers listed above
(the "Executive Officers") was $2,324,667 for the year ended December 31, 2000,
a portion of which was attributable to

                                        61
<PAGE>   67

payments made pursuant to bonus plans, which consider both Teekay's and
individual performance for a given period. For the year ended December 31, 2000,
we also contributed an aggregate of $209,198 to provide pension and similar
benefits for the Executive Officers. During the year ended December 31, 2000, we
granted an aggregate of 119,500 options, with an exercise price of $23.563 per
share, to the Executive Officers under our 1995 Stock Option Plan. The options
expire March 6, 2010, ten years after the date of the grant.

     During the year ended December 31, 2000, our eight non-employee directors
received, in the aggregate, approximately $120,000 for their services as
directors plus reimbursement of their out-of-pocket expenses. During that same
period, we granted an aggregate of 70,000 options, with an exercise price of
$23.563 per share, to the non-employee directors under our 1995 Stock Option
Plan. The options expire March 6, 2010, ten years after the date of the grant.

     There are no employment agreements between us and any of our officers.

OPTIONS TO PURCHASE SECURITIES

     Our 1995 Stock Option Plan (the "Plan") entitles certain of our eligible
officers, employees (including senior sea staff) and directors to receive
options to acquire our common stock. As of June 30, 2001, a total of 4,007,219
shares of common stock were reserved for issuance under the Plan. As of such
date, options to purchase a total of 2,769,635 shares of common stock were
outstanding, with options to purchase a total of 1,101,904 shares then
exercisable and with the directors and the Executive Officers holding options to
purchase a total of 946,350 shares, of which 446,250 were exercisable. The
outstanding options under the Plan are exercisable at prices ranging from
$16.875 to $41.19 per share, with a weighted average exercise price of $27.86
per share, and expire between July 19, 2005 and March 15, 2011, ten years after
the date of each grant.

BOARD PRACTICES

     Our board of directors consists of nine members. The board of directors is
divided into three classes, with members of each class elected to hold office
for a term of three years in accordance with the classification indicated below
or until his or her successor is elected and qualified. Directors Thomas
Kuo-Yuen Hsu, Axel Karlshoej, and Bjorn Moller have terms expiring in 2002.
Directors Bruce C. Bell, C. Sean Day, and Dr. Ian D. Blackburne have terms
expiring in 2003. Directors Morris L. Feder, Leif O. Hoegh, and Eileen A.
Mercier have terms expiring in 2004.

     The board of directors has standing Audit, Executive, Governance and
Resource Committees, but no standing nominating committee. The Audit Committee
oversees actions taken by our independent auditors. The Audit Committee consists
of non-employee directors Eileen A. Mercier, Morris L. Feder, and Leif O. Hoegh.
The Executive Committee is responsible for items which have been broadly
approved by the board, and which are beyond the approval levels of our Chairman
and CEO. The Executive Committee consists of our CEO and director, Bjorn Moller,
together with non-employee directors C. Sean Day, Morris L. Feder, and Axel
Karlshoej. The Governance Committee is responsible for making recommendations to
the board on corporate governance issues. The Governance Committee consists of
non-employee directors Bruce C. Bell, C. Sean Day, and Eileen A. Mercier,
together with our CEO and director, Bjorn Moller. The Resource Committee reviews
the compensation of our executive officers and makes recommendations to the
board of directors regarding compensation. The Resource Committee consists of
non-employee directors Axel Karlshoej, Thomas Kuo-Yuen Hsu, and Dr. Ian D.
Blackburne.

                                        62
<PAGE>   68

                             PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information regarding beneficial
ownership of our common stock as of June 30, 2001 by each owner of 5% or more of
our common stock and by all of our directors and officers listed above as a
group:

<TABLE>
<CAPTION>
                                                                  COMMON STOCK(1)
                                                              ------------------------
IDENTITY OF PERSON OR GROUP                                     NUMBER      PERCENTAGE
- ---------------------------                                   ----------    ----------
<S>                                                           <C>           <C>
Cirrus Trust and JTK Trust(2)...............................  16,315,690       40.7%
Neuberger Berman LLC(3).....................................   4,269,745       10.7%
All officers and directors as a group (13 persons)(4).......     472,900        1.2%
</TABLE>

- ---------------

(1) Beneficial ownership is determined in accordance with the rules of the SEC.
    For purposes of this table, a person is deemed to be the beneficial owner of
    securities that (a) can be acquired by such person within 60 days upon the
    exercise of options or warrants and (b) are held by such person's spouse or
    other immediate family member sharing such person's household. Each
    beneficial owner's percentage ownership is determined by assuming that
    options held by such person or listed group of persons (but not those held
    by any other listed person or group of persons), that are exercisable within
    60 days after June 30, 2001, have been exercised.

(2) Cirrus Trust and JTK Trust own, indirectly through wholly-owned
    subsidiaries, 13,427,397 shares (or 33.5%) of common stock and 2,888,293
    shares (or 7.2%) of common stock, respectively. These trusts are under
    common supervision of Axel Karlshoej and Thomas Hsu, both of whom are on our
    board of directors, Shigeru Matsui, President of Matsui & Company, a
    Tokyo-based ship brokerage firm, and Arthur F. Coady, Chairman of Oceanic
    Bank and Trust, an affiliate of the trusts. C. Sean Day, our Chairman of the
    Board, is also the Chairman of the Board of each wholly-owned subsidiary of
    Cirrus Trust and JTK Trust that directly owns these shares of common stock.

(3) Neuberger Berman, LLC ("Neuberger") is a registered investment advisor. In
    its capacity as investment advisor, Neuberger may have discretionary
    authority to dispose of or to vote shares that are under its management. As
    a result, Neuberger may be deemed to have beneficial ownership of such
    shares. Neuberger does not, however, have any economic interest in the
    shares. The clients are the actual owners of the shares and have the sole
    right to receive and the power to direct the receipt of dividends from or
    proceeds from the sale of such shares. Neuberger Berman Inc. is the parent
    holding company and owns 100% of Neuberger Berman, LLC and Neuberger Berman
    Management, Inc. As of June 30, 2001, of the shares set forth above,
    Neuberger had shared dispositive power with respect to 4,269,745 shares,
    sole voting power with respect to 3,023,020 shares and shared voting power
    on 1,700 shares. With regard to the shared voting power, Neuberger Berman
    Management, Inc. and Neuberger Berman Funds are deemed to be beneficial
    owners for purpose of Rule 13(d) since they have shared power to make
    decisions whether to retain or dispose of the securities. Neuberger is the
    sub-advisor to the above referenced funds. It should be further noted that
    the above mentioned shares are also included with the shared power to
    dispose calculation.

(4) Includes 446,250 shares of common stock subject to stock options exercisable
    within 60 days after June 30, 2001. Excludes (a) 500,100 shares of common
    stock subject to stock options first exercisable more than 60 days after
    June 30, 2001, (b) as of June 30th, 2001 approximately 773,000 shares of
    common stock held by Leif Hoegh & Co. ASA, an entity controlled by Leif O.
    Hoegh, one of our directors and (c) shares owned indirectly by Cirrus Trust
    and JTK Trust, which, as described in note 2 above, are under the common
    supervision of, among others, Axel Karlshoej and Thomas Kuo-Yuen Hsu, two of
    our directors.

                                        63
<PAGE>   69

                   CERTAIN TRANSACTIONS WITH RELATED PARTIES

     As of June 30, 2001, Cirrus Trust and JTK Trust owned, indirectly through
wholly-owned subsidiaries, an aggregate of 40.7% of our outstanding common
stock. The activities of Cirrus Trust and JTK Trust are under common supervision
of Axel Karlshoej and Thomas Hsu, both of whom are on our board of directors,
Shigeru Matsui, President of Matsui & Company, a Tokyo-based ship brokerage
firm, and Arthur F. Coady, Chairman of Oceanic Bank and Trust, an affiliate of
the trusts. Bruce C. Bell, a Teekay director and our Corporate Secretary, is the
Managing Director of Oceanic Bank and Trust. The beneficiaries of the trusts
include charitable institutions and affiliated trusts. C. Sean Day, our Chairman
of the Board, is also the Chairman of the Board of each wholly-owned subsidiary
of Cirrus Trust and JTK Trust that directly owns shares of our common stock.

     Mr. Day is also a consultant to the trusts. We have agreed to reimburse the
trusts for consulting fees paid to Mr. Day. We paid $200,000 and $67,000 to the
trusts as reimbursement for Mr. Day's consulting services rendered during 2000
and 1999, respectively. We did not make any payments to the trusts as
reimbursements for Mr. Day's consulting services in 1998.

                                        64
<PAGE>   70

                          DESCRIPTION OF CERTAIN DEBT

     The following is a summary of our primary debt. This summary is qualified
in its entirety by reference to the full text of the documents that govern the
transactions so summarized.

     As at June 30, 2001, our subsidiaries had obligations for outstanding debt
for borrowed money under existing credit agreements in the aggregate principal
amount of approximately $1,178 million, of which we have guaranteed $842
million, excluding $115 million of joint venture debt guaranteed by certain of
our subsidiaries. The following chart indicates, on a consolidated basis after
giving effect to the offering of the outstanding notes and the proposed
application of the net proceeds therefrom to prepay certain of our existing
debt, the aggregate principal amount of debt that would be due and payable in
our upcoming fiscal years.

<TABLE>
<CAPTION>
FISCAL YEAR                        AMOUNT
- -----------                        ------
<S>                            <C>
2001 (July 1 to Dec. 31,       $   45 million
  2001)......................
2002.........................  $   73 million
2003.........................  $   85 million
2004.........................  $   79 million
2005.........................  $  126 million
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR                        AMOUNT
- -----------                        ------
<S>                            <C>
2006.........................  $  144 million
2007.........................  $  111 million
2008.........................  $  101 million
2009.........................  $   36 million
2010.........................  $    0 million
2011.........................  $  250 million
</TABLE>

     In January 1996, we issued $225 million of our 8.32% First Preferred Ship
Mortgage Notes in a public offering registered under the Securities Act of 1933.
These notes currently are collateralized by first preferred mortgages granted on
seven of our Aframax tankers, together with other related collateral, and are
guaranteed by our subsidiaries that own the mortgaged vessels. Upon these notes
achieving investment grade status and subject to other conditions, the
guarantees of the notes will terminate, all of the collateral securing our
obligations and the guarantors under the related indenture and security
documents will be released and specified covenants under the indenture will no
longer be applicable to us. These notes are subject to a sinking fund, which
will retire $45 million principal amount of these notes on each February 1,
commencing February 1, 2004. These notes are listed for trading on the New York
Stock Exchange.

     In January 1998, we negotiated a reducing revolving credit facility with
nine commercial banks which, as of June 30, 2001, provided for borrowings of up
to $140 million in order to refinance certain debt and to provide working
capital. This facility is secured by first priority mortgages granted on eight
of our Aframax tankers, together with other related collateral, and a guarantee
from us for all amounts outstanding under the facility. Interest payments are
based on LIBOR plus a specified margin that is dependent on our capital
structure as calculated on a quarterly basis. At June 30, 2001, the margin was
+0.50%. The amount available under the facility reduces by $10 million
semi-annually with a final balloon reduction in January 2006.

     Bona has a revolving credit facility with 15 commercial banks which, as of
June 30, 2001, provided for borrowings of up to $397 million. This facility is
secured by first priority mortgages granted on 25 Bona and Teekay vessels. In
connection with the Bona acquisition, Teekay agreed to guarantee all of Bona's
obligations under this facility. The facility is subject to certain financial
covenants, including maintenance of (1) a specified minimum level of free cash,
(2) a specified ratio of liabilities to market value of assets and (3) a
specified ratio of current assets to current liabilities. As of June 30, 2001,
Bona was in compliance with all such covenants. Interest payments are based on
LIBOR plus a specified margin that depends on Bona's capital structure as
calculated on a quarterly basis. At June 30, 2001, the margin was +0.725%. The
amount available under the facility reduces by $19 million semi-annually with a
final balloon reduction in December 2008.

     At June 30, 2001, UNS had a number of single-ship mortgage and other
working capital and line of credit loans totaling $336 million. Teekay does not
guarantee any of the obligations under these

                                        65
<PAGE>   71

facilities. In April 2001, UNS completed a new $141 million credit facility to
finance the $95 million purchase price of four shuttle tankers from Awilco ASA.
The remainder of the proceeds were to refinance three existing credit
facilities. UNS term loans are collateralized by first priority mortgages
granted on the 15 vessels to which the loans relate (including three
newbuildings), together with certain other related collateral, and guarantees
from UNS. UNS credit facilities are subject to certain financial covenants which
include (1) a specified minimum level of free cash, (2) minimum equity (based on
book value), (3) minimum working capital, (4) minimum value adjusted equity or
total value adjusted assets, (5) minimum committed capital and (6) minimum
earnings to interest ratio. As of June 30, 2001, UNS was in compliance with all
such covenants.

     The indenture relating to our 8.32% First Preferred Ship Mortgage Notes due
2008 and certain of the credit agreements governing our (and our subsidiaries')
credit facilities provide that our ability to pay dividends is subject to
limitations based upon our cumulative net income plus certain additional
amounts, including the proceeds received by us from any issuance of our capital
stock. In addition, credit agreements to which some of our subsidiaries are
parties, and guarantees executed by us in connection with them, contain various
covenants which restrict our operations and those of our subsidiaries. These
credit agreements and guarantees contain covenants that require those
subsidiaries or us, as the case may be, to conduct their or our operations,
including, for those subsidiaries, the operations of their respective vessels,
in accordance with certain standards set forth in the credit agreements or
guarantees. Certain credit agreements related to our secured debt contain "hull
covenants" that require the applicable subsidiaries to deliver additional
collateral to the lenders under the applicable credit agreement, or prepay a
certain amount of the debt, in the event that the value of the subject vessels
falls below a fixed percentage of the amount of the debt then outstanding under
the credit agreement. The percentage at which the combined value of the subject
vessels must remain is 125% of the outstanding debt under the revolving credit
agreement, with the percentage increasing to 130% over the term of the facility.
We believe that as of June 30, 2001 we were in compliance with all of the
covenants in effect at that time.

                                        66
<PAGE>   72

                               THE EXCHANGE OFFER

PURPOSE OF THE EXCHANGE OFFER

     In connection with the sale of the outstanding notes, we entered into an
exchange and registration rights agreement with the initial purchasers of the
outstanding notes. In that agreement, we agreed to use our best efforts to file
and have declared effective within 180 days of the sale of the outstanding notes
this registration statement relating to an offer to exchange the exchange notes
for the outstanding notes. We also agreed to use our best efforts to complete
the exchange offer for the outstanding notes within 60 days after the effective
date of this registration statement. We are offering the exchange notes under
this prospectus in the exchange offer for the outstanding notes to satisfy our
obligations under the exchange and registration rights agreement. We refer to
our offer to exchange the exchange notes for the outstanding notes as the
"exchange offer."

RESALE OF EXCHANGE NOTES

     Based on interpretations of the SEC staff in no-action letters issued to
third parties, we believe that each exchange note issued in the exchange offer
may be offered for resale, resold and otherwise transferred by you without
compliance with the registration and prospectus delivery provisions of the
Securities Act of 1933 if, among other things:

     -  you are acquiring the exchange notes in the ordinary course of your
        business;

     -  you are not participating, do not intend to participate, and have no
        arrangement or understanding with any person to participate, in the
        distribution of the exchange notes; and

     -  you are not an affiliate of Teekay.

     If you tender your outstanding notes in the exchange offer with the
intention of participating in any manner in a distribution of the exchange notes
or you are an affiliate of Teekay, you:

     -  cannot rely on such interpretations by the SEC staff, and

     -  must comply with the registration and prospectus delivery requirements
        of the Securities Act in connection with a secondary resale transaction
        of the exchange notes and such secondary resale transaction must be
        covered by an effective registration statement under the Securities Act
        of 1933 containing the selling security holder's information required by
        Item 507 or Item 508, as applicable, of Regulation S-K under the
        Securities Act.

     This prospectus may be used for an offer to resell, resale or otherwise
transfer exchange notes only as specifically described in this prospectus. Only
those broker-dealers that acquired outstanding notes as a result of
market-making activities or other trading activities may participate in the
exchange offer. Each broker-dealer that receives exchange notes for its own
account in exchange for outstanding notes, where that broker-dealer acquired
such outstanding notes as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. Please read "Plan of Distribution" for
more details regarding the transfer of exchange notes.

TERMS OF THE EXCHANGE OFFER

     Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
notes properly tendered and not withdrawn prior to the expiration date of the
exchange offer. We will issue $1,000 principal amount of exchange notes in
exchange for each $1,000 principal amount of outstanding notes surrendered under
the exchange offer. Outstanding notes may be tendered only in integral multiples
of $1,000.

     The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.

                                        67
<PAGE>   73

     As of the date of this prospectus, $250 million principal amount of
outstanding notes is outstanding. This prospectus and the letter of transmittal
are being sent to all registered holders of outstanding notes. There will be no
fixed record date for determining registered holders of outstanding notes
entitled to participate in the exchange offer.

     We intend to conduct the exchange offer in accordance with the provisions
of the exchange and registration rights agreement, the applicable requirements
of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
rules and regulations of the SEC. Outstanding notes that are not tendered for
exchange in the exchange offer:

     -  will remain outstanding,

     -  will continue to accrue interest, and

     -  will be entitled to the rights and benefits that holders have under the
        indenture relating to the outstanding notes and, under limited
        circumstances, the exchange and registration rights agreement.

     We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent and complied with the applicable provisions of the exchange
and registration rights agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the exchange notes from us.

     If you tender outstanding notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. It is
important that you read "-- Fees and Expenses" for more details about fees and
expenses incurred in the exchange offer.

     We will return any outstanding notes that we do not accept for exchange for
any reason without expense to the tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.

EXPIRATION DATE

     The exchange offer will expire at 5:00 p.m., New York City time, on
          2001, unless in our sole discretion we extend it.

EXTENSIONS, DELAY IN ACCEPTANCE, TERMINATION OR AMENDMENT

     We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. We may delay
acceptance for exchange of any outstanding notes by giving oral or written
notice of the extension to their holders. During any such extensions, all
outstanding notes you have previously tendered will remain subject to the
exchange offer for that series, and we may accept them for exchange.

     To extend the exchange offer, we will notify the exchange agent orally or
in writing of any extension. We also will make a public announcement of the
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.

     If any of the conditions described below under "-- Conditions to the
Exchange Offer" have not been satisfied with respect to the exchange offer, we
reserve the right, in our sole discretion:

     -  to delay accepting for exchange any outstanding notes,

     -  to extend the exchange offer, or

     -  to terminate the exchange offer.

                                        68
<PAGE>   74

     We will give oral or written notice of such delay, extension or termination
to the exchange agent. Subject to the terms of the exchange and registration
rights agreement, we also reserve the right to amend the terms of the exchange
offer in any manner.

     Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly
disclose that amendment by means of a prospectus supplement. We will distribute
the supplement to the registered holders of the outstanding notes. Depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, we will extend the exchange offer if the exchange offer
would otherwise expire during such period.

     Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.

CONDITIONS TO THE EXCHANGE OFFER

     Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for any outstanding notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange, if in our reasonable judgment:

     -  the exchange offer, or the making of any exchange by a holder of
        outstanding notes, would violate applicable law or any applicable
        interpretation of the staff of the SEC, or

     -  any action or proceeding has been instituted or threatened in any court
        or by or before any governmental agency with respect to the exchange
        offer that, in our judgment, would reasonably be expected to impair our
        ability to proceed with the exchange offer.

     In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us:

     -  the representations described under "-- Your Representations to Us."

     -  such other representations as may be reasonably necessary under
        applicable SEC rules, regulations or interpretations to make available
        to us an appropriate form for registering the exchange notes under the
        Securities Act of 1933.

     We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange in the exchange offer, upon the occurrence of any of the conditions to
the exchange offer specified above. We will give oral or written notice of any
extension, amendment, nonacceptance or termination to the holders of the
outstanding notes as promptly as practicable.

     These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole discretion.
Our failure at any time to exercise any of these rights will not mean that we
have waived our rights. Each right will be deemed an ongoing right that we may
assert at any time or at various times.

     In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue exchange notes in exchange for any such outstanding
notes, if at such time any stop order has been threatened or is in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.

                                        69
<PAGE>   75

EXCHANGE AGENT

     We have appointed the United States Trust Company of New York as exchange
agent for the exchange offer. Please direct questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for the notice of guaranteed delivery to the
exchange agent. If you are not tendering under DTC's automated tender offer
program, you should send the letter of transmittal and any other required
documents to the exchange agent as follows:
                      ------------------------------------

                         BY HAND DELIVERY TO 4:30 P.M.

                    United States Trust Company of New York
                            30 Broad Street, B-Level
                            New York, NY 10004-2304

                        BY OVERNIGHT COURIER AND BY HAND
                  DELIVERY AFTER 4:30 P.M. ON EXPIRATION DATE

                    United States Trust Company of New York
                          30 Broad Street, 14th Floor
                            New York, NY 10004-2304

                        BY REGISTERED OR CERTIFIED MAIL

                    United States Trust Company of New York
                                  P.O. Box 84
                             Bowling Green Station
                            New York, NY 10274-0084

            BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):

                    United States Trust Company of New York
                            30 Broad Street, B-Level
                            New York, NY 10004-2304
                              FAX: (646) 458-8111

                             CONFIRM BY TELEPHONE:
                                 (800) 548-6565

PROCEDURES FOR TENDERING

     Only a holder of outstanding notes may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must either (1) comply
with the procedures for physical tender, described below, or (2) comply with the
automated tender offer program procedures of The Depository Trust Company, or
"DTC," described below.

     The tender by a holder that is not withdrawn prior to the expiration date
and our acceptance of that tender will constitute an agreement between the
holder and us in accordance with the terms and subject to the conditions
described in this prospectus and in the letter of transmittal.

     THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND
THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY REQUEST YOUR
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE
ABOVE TRANSACTIONS FOR YOU.

                                        70
<PAGE>   76

  HOW TO TENDER IF YOU ARE A BENEFICIAL OWNER

     If you beneficially own outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender those notes, you should contact the registered holder as soon as
possible and instruct the registered holder to tender on your behalf. If you are
a beneficial owner and wish to tender on your own behalf, you must, prior to
completing and executing the letter of transmittal and delivering your
outstanding notes, either:

     -  make appropriate arrangements to register ownership of the outstanding
        notes in your name, or

     -  obtain a properly completed bond power from the registered holder of
        your outstanding notes.

     The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.

PROCEDURES FOR PHYSICAL TENDER

     To complete a physical tender, a holder must:

     -  complete, sign and date the letter of transmittal or a facsimile of the
        letter of transmittal,

     -  have the signature on the letter of transmittal guaranteed if the letter
        of transmittal so requires,

     -  mail or deliver or facsimile the letter of transmittal to the exchange
        agent prior to the expiration date, and

     -  deliver the outstanding notes to the exchange agent prior to the
        expiration date or comply with the guaranteed delivery procedures
        described below.

     To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address provided above under "-- Exchange Agent" prior to the expiration date.

  SIGNATURES AND SIGNATURE GUARANTEES

     You must have signatures on a letter of transmittal or a notice of
withdrawal described below under "-- Withdrawal of Tenders" guaranteed by an
eligible institution unless the outstanding notes are tendered:

     -  by a registered holder who has not completed the box entitled "Special
        Issuance Instructions" or "Special Delivery Instructions" on the letter
        of transmittal, or

     -  for the account of an eligible institution.

     An eligible institution is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States, or an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, that is a member of one of
the recognized signature guarantee programs identified in the letter of
transmittal.

  WHEN ENDORSEMENTS OR BOND POWERS ARE NEEDED

     If a person other than the registered holder of any outstanding notes signs
the letter of transmittal, the outstanding notes must be endorsed or accompanied
by a properly completed bond power. The registered holder must sign the bond
power as the registered holder's name appears on the outstanding notes. An
eligible institution must guarantee that signature.

     If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact, or
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive

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<PAGE>   77

this requirement, they also must submit evidence satisfactory to us of their
authority to deliver the letter of transmittal.

TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM

     The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Accordingly, participants in the program may, instead of
physically completing and signing the letter of transmittal and delivering it to
the exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing DTC to transfer the outstanding notes
to the exchange agent in accordance with its procedures for transfer. DTC will
then send an agent's message to the exchange agent.

     An agent's message is a message transmitted by DTC to and received by the
exchange agent and forming part of the book-entry confirmation, stating that:

     -  DTC has received an express acknowledgment from a participant in DTC's
        automated tender offer program that is tendering outstanding notes that
        are the subject of such book-entry confirmation,

     -  the participant has received and agrees to be bound by the terms of the
        letter of transmittal or, in the case of an agent's message relating to
        guaranteed delivery, the participant has received and agrees to be bound
        by the applicable notice of guaranteed delivery, and

     -  we may enforce the agreement against such participant.

     To complete a tender through DTC's automated tender offer program, the
exchange agent must receive, prior to the expiration date, a timely confirmation
of book-entry transfer of such outstanding notes into the exchange agent's
account at DTC according to the procedure for book-entry transfer described
below or a properly transmitted agent's message.

DETERMINATIONS UNDER THE EXCHANGE OFFER

     We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes and
withdrawal of tendered outstanding notes. Our determination will be final and
binding. We reserve the absolute right to reject any outstanding notes not
properly tendered or any outstanding notes our acceptance of which, in the
opinion of our counsel, might be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of the exchange offer as to particular
outstanding notes. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of transmittal, will be
final and binding on all parties.

     Unless waived, any defects or irregularities in connection with tenders of
outstanding notes must be cured within such time as we determine. Neither we,
the exchange agent nor any other person will be under any duty to give
notification of defects or irregularities with respect to tenders of outstanding
notes, nor will we or those persons incur any liability for failure to give such
notification. Tenders of outstanding notes will not be deemed made until such
defects or irregularities have been cured or waived. Any outstanding notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned to
the tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.

WHEN WE WILL ISSUE EXCHANGE NOTES

     In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange in the exchange offer only after the exchange agent
timely receives:

     -  outstanding notes or a timely book-entry confirmation of transfer of
        such outstanding notes into the exchange agent's account at DTC, and

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<PAGE>   78

     -  a properly completed and duly executed letter of transmittal and all
        other required documents or a properly transmitted agent's message.

RETURN OF OUTSTANDING NOTES NOT ACCEPTED OR EXCHANGED

     If we do not accept any tendered outstanding notes for exchange for any
reason described in the terms and conditions of the exchange offer or if
outstanding notes are submitted for a greater principal amount than the holder
desires to exchange, we will return the unaccepted or nonexchanged outstanding
notes without expense to their tendering holder. In the case of outstanding
notes tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described below, such nonexchanged outstanding notes
will be credited to an account maintained with DTC. These actions will occur as
promptly as practicable after the expiration or termination of the exchange
offer.

YOUR REPRESENTATIONS TO US

     By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:

     -  any exchange notes you receive will be acquired in the ordinary course
        of your business,

     -  you have no arrangement or understanding with any person to participate
        in the distribution of the outstanding notes or the exchange notes
        within the meaning of the Securities Act of 1933,

     -  you are not our affiliate, as defined in Rule 405 under the Securities
        Act, or, if you are our affiliate, you will comply with the applicable
        registration and prospectus delivery requirements of the Securities Act,

     -  if you are not a broker-dealer, you are not engaged in and do not intend
        to engage in the distribution of the exchange notes, and

     -  if you are a broker-dealer that will receive exchange notes for your own
        account in exchange for outstanding notes that you acquired as a result
        of market-making activities or other trading activities, you will
        deliver a prospectus in connection with any resale of such exchange
        notes.

BOOK-ENTRY TRANSFER

     The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus. Any financial institution participating in
DTC's system may make book-entry delivery of outstanding notes by causing DTC to
transfer such outstanding notes into the exchange agent's account at DTC in
accordance with DTC's procedures for transfer. If you are unable to deliver
confirmation of the book-entry tender of your outstanding notes into the
exchange agent's account at DTC or all other documents required by the letter of
transmittal to the exchange agent on or prior to the expiration date, you must
tender your outstanding notes according to the guaranteed delivery procedures
described below.

GUARANTEED DELIVERY PROCEDURES

     If you wish to tender your outstanding notes but they are not immediately
available or if you cannot deliver your outstanding notes, the letter of
transmittal or any other required documents to the exchange agent or comply with
the applicable procedures under DTC's automated tender offer program prior to
the expiration date, you may tender if:

     -  the tender is made through a member firm of a registered national
        securities exchange or of the National Association of Securities
        Dealers, Inc., a commercial bank or trust company having an office or
        correspondent in the United States, or an eligible guarantor
        institution,

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<PAGE>   79

     -  prior to the expiration date, the exchange agent receives from such
        member firm of a registered national securities exchange or of the
        National Association of Securities Dealers, Inc., commercial bank or
        trust company having an office or correspondent in the United States, or
        eligible guarantor institution either a properly completed and duly
        executed notice of guaranteed delivery by facsimile transmission, mail
        or hand delivery or a properly transmitted agent's message and notice of
        guaranteed delivery:

       -  stating your name and address, the registered number(s) of your
          outstanding notes and the principal amount of outstanding notes
          tendered,

       -  stating that the tender is being made thereby,

       -  guaranteeing that, within three New York Stock Exchange trading days
          after the expiration date, the letter of transmittal or facsimile
          thereof or agent's message in lieu thereof, together with the
          outstanding notes or a book-entry confirmation, and any other
          documents required by the letter of transmittal will be deposited by
          the eligible guarantor institution with the exchange agent, and

     -  the exchange agent receives such properly completed and executed letter
        of transmittal or facsimile or agent's message, as well as all tendered
        outstanding notes in proper form for transfer or a book-entry
        confirmation, and all other documents required by the letter of
        transmittal, within three New York Stock Exchange trading days after the
        expiration date.

     Upon request to the exchange agent, the exchange agent will send a notice
of guaranteed delivery to you if you wish to tender your outstanding notes
according to the guaranteed delivery procedures described above.

WITHDRAWAL OF TENDERS

     Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to 5:00 p.m., New York City time, on the expiration
date.

     For a withdrawal to be effective:

     -  the exchange agent must receive a written notice of withdrawal at one of
        the addresses listed above under "-- Exchange Agent," or

     -  the withdrawing holder must comply with the appropriate procedures of
        DTC's automated tender offer program.

     Any notice of withdrawal must:

     -  specify the name of the person who tendered the outstanding notes to be
        withdrawn,

     -  identify the outstanding notes to be withdrawn, including the
        registration number numbers and the principal amount of such outstanding
        notes,

     -  be signed by the person who tendered the outstanding notes in the same
        manner as the original signature on the letter of transmittal used to
        deposit those outstanding notes or be accompanied by documents of
        transfer sufficient to permit the trustee to register the transfer in
        the name of the person withdrawing the tender, and

     -  specify the name in which such outstanding notes are to be registered,
        if different from that of the person who tendered the outstanding notes.

     If outstanding notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn outstanding notes
and otherwise comply with the procedures of DTC.

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<PAGE>   80

     We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any outstanding notes so withdrawn not
to have been validly tendered for exchange for purposes of the exchange offer.

     Any outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of outstanding notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described above,
such outstanding notes will be credited to an account maintained with DTC for
the outstanding notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding notes by following one of
the procedures described under "-- Procedures for Tendering" above at any time
on or prior to 5:00 p.m., New York City time, on the expiration date.

FEES AND EXPENSES

     We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
facsimile, email, telephone or in person by our officers and regular employees
and those of our affiliates.

     We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, letters of transmittal
and related documents to the beneficial owners of the outstanding notes and in
handling or forwarding tenders for exchange.

     We will pay the cash expenses to be incurred in connection with the
exchange offer. These expenses include:

     -  SEC registration fees for the exchange notes,

     -  fees and expenses of the exchange agent and trustee,

     -  accounting and legal fees,

     -  printing costs, and

     -  related fees and expenses.

TRANSFER TAXES

     If you tender your outstanding notes for exchange, you will not be required
to pay any transfer taxes. We will pay all transfer taxes, if any, applicable to
the exchange of outstanding notes in the exchange offer. The tendering holder
will, however, be required to pay any transfer taxes, whether imposed on the
registered holder or any other person, if:

     -  certificates representing exchange notes or outstanding notes for
        principal amounts not tendered or accepted for exchange are to be
        delivered to, or are to be issued in the name of, any person other than
        the registered holder of outstanding notes tendered,

     -  tendered outstanding notes are registered in the name of any person
        other than the person signing the letter of transmittal, or

     -  a transfer tax is imposed for any reason other than the exchange of
        exchange notes for outstanding notes in the exchange offer.

     If satisfactory evidence of payment of any transfer taxes payable by a
tendering holder is not submitted with the letter of transmittal, the amount of
such transfer taxes will be billed directly to that

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tendering holder. The exchange agent will retain possession of exchange notes
with a face amount equal to the amount of the transfer taxes due until it
receives payment of the taxes.

CONSEQUENCES OF FAILURE TO EXCHANGE

     If you do not exchange your outstanding notes for exchange notes in the
exchange offer, you will remain subject to the existing restrictions on transfer
of the outstanding notes. In general, you may not offer or sell the outstanding
notes unless either they are registered under the Securities Act of 1933 or the
offer or sale is exempt from or not subject to registration under the Securities
Act and applicable state securities laws. Except as required by the exchange and
registration rights agreement, we do not intend to register resales of the
outstanding notes under the Securities Act.

     The tender of outstanding notes in the exchange offer will reduce the
outstanding principal amount of the outstanding notes. Due to the corresponding
reduction in liquidity, this may have an adverse effect upon, and increase the
volatility of, the market price of any outstanding notes that you continue to
hold.

ACCOUNTING TREATMENT

     We will amortize our expenses of the exchange offer over the term of the
exchange notes under accounting principles generally accepted in the United
States.

OTHER

     Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your decision on what action, if any, to take. In the future,
we may seek to acquire untendered outstanding notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. We
have no present plan to acquire any outstanding notes that are not tendered in
the exchange offer or to file a registration statement to permit resales of any
untendered outstanding notes, except as required by the exchange and
registration rights agreement.

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<PAGE>   82

                            DESCRIPTION OF THE NOTES

     In this section, "Teekay" or the "Company" means Teekay Shipping
Corporation and not any of its subsidiaries. The exchange notes will be issued,
and the outstanding notes were issued, by Teekay pursuant to an indenture
between Teekay and U.S. Trust Company of Texas, N.A., as trustee. You may obtain
a copy of the indenture from Teekay upon request. The indenture has been filed
as an exhibit to the registration statement of which this prospectus is a part.

     The indenture is subject to and governed by the U.S. Trust Indenture Act of
1939. The statements under this section of this prospectus are summaries of the
material terms and provisions of the indenture and the notes. They do not
purport to be complete and are qualified in their entirety by reference to all
the provisions in the indenture. Therefore, we urge you to read the indenture
because it, and not this description, defines your rights as holders of the
notes. Definitions relating to certain capitalized terms are set forth under "--
Certain Definitions" and throughout this description. Capitalized terms that are
used but not otherwise defined in this description have the meanings ascribed to
them in the indenture.

     The outstanding notes and the exchange notes will constitute a single
series of debt securities under the indenture. If the exchange offer is
consummated, any holders of outstanding notes who do not exchange their
outstanding notes for exchange notes will vote together with holders of the
exchange notes for all relevant purposes under the indenture. Accordingly, in
determining whether the required holders have given any notice, consent or
waiver or taken any other action permitted under the indenture, any outstanding
notes that remain outstanding after the exchange offer will be aggregated with
the exchange notes, and the holders of the outstanding notes and the exchange
notes will vote together as a single series. All references in this prospectus
to specified percentages in aggregate principal amount of the outstanding notes
means, at any time after the exchange offer is consummated, the percentages in
aggregate principal amount of the outstanding notes and exchange notes
collectively then outstanding.

GENERAL

     The notes:

     -  are general unsecured obligations of Teekay,

     -  rank equally and ratably in right of payment with all existing and
        future unsecured senior debt of Teekay,

     -  are senior in right of payment to all existing and future subordinated
        debt of Teekay,

     -  are effectively subordinated to all of Teekay's secured debt to the
        extent of the collateral securing such debt, and

     -  are effectively subordinated to all existing and future debt and other
        liabilities and commitments of Teekay's subsidiaries because Teekay is a
        holding company and the notes will not be guaranteed by any of its
        subsidiaries.

     The indenture does not put any limitation on Teekay and its subsidiaries to
incur debt. At June 30, 2001, and giving effect to the proposed application of
the net proceeds of the issuance of the outstanding notes, the consolidated debt
of Teekay and its subsidiaries would have been approximately $1,053 million, of
which $803 million would have been secured debt that represented the obligations
of, or was guaranteed by, certain of Teekay's subsidiaries. In addition, the
outstanding notes are and the exchange notes will be effectively junior to
approximately $115 million of debt of joint ventures that are 50% owned by
certain of Teekay's subsidiaries, which is guaranteed by such subsidiaries.

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<PAGE>   83

  PRINCIPAL, MATURITY AND INTEREST

     In the exchange offer, Teekay will issue up to $250 million aggregate
principal amount of exchange notes. The indenture provides for the issuance of
additional notes having identical terms and conditions to the notes. The notes
and any additional notes subsequently issued under the indenture would be
treated as a single class for all purposes under the indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
Teekay will issue exchange notes in denominations of $1,000 and integral
multiples of $1,000. The exchange notes will mature on July 15, 2011.

     Interest on the notes will accrue at the rate of 8.875% per annum and will
be payable semi-annually in arrears on January 15 and July 15, commencing on
January 15, 2002. Teekay will make each interest payment to the holders of
record on the immediately preceding January 1 and July 1.

     Interest on the notes will accrue from June 22, 2002 or, if interest has
already been paid, from the date it was most recently paid. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.

                              OPTIONAL REDEMPTION

     At Teekay's option, Teekay may redeem the notes in whole or in part at any
time before their maturity date at a redemption price equal to the greater of
(i) 100% of the principal amount of the notes to be redeemed and (ii) the sum of
the present values of the remaining scheduled payments of principal and interest
on the notes to be redeemed (excluding the portion of any such interest accrued
to the redemption date) discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Yield (as defined below), plus 50 basis points, plus, in each case, accrued and
unpaid interest to the redemption date. For this purpose, the following terms
have the following meanings:

     "Treasury Yield" means, with respect to any redemption date, the rate per
year equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.

     "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes.

     "Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 Quotations for U.S. Government
Securities" or (ii) if such release (or any successor release) is not published
or does not contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations for such
redemption date, or (B) if the trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Reference Treasury Dealer
Quotations.

     "Independent Investment Banker" means Goldman, Sachs & Co. or its successor
or, if such firm is unwilling or unable to select the Comparable Treasury Issue,
one of the remaining Reference Treasury Dealers appointed by Teekay.

     "Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co. and any
other primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer") designated by, and not affiliated with, Goldman, Sachs & Co.,
provided however, that if Goldman, Sachs & Co. or any of its

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<PAGE>   84

designees shall cease to be a Primary Treasury Dealer, Teekay will appoint
another Primary Treasury Dealer as a substitute for such entity and (ii) any
other Primary Treasury Dealer selected by Teekay.

     "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee of the bid and asked prices for the Comparable Treasury Issue
(expressed, in each case, as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.

     At least 30 days but not more than 60 days before the relevant redemption
date, Teekay will send notice of redemption to each holder of notes to be
redeemed. If less than all of the notes are to be redeemed, the trustee will
select, by such method as it will deem fair and appropriate, the notes to be
redeemed in whole or in part.

     Unless Teekay defaults in payment of the redemption price, no interest will
accrue on the notes called for redemption for the period from and after the
redemption date.

                  REDEMPTION FOR CHANGES IN WITHHOLDING TAXES

     The notes will be subject to redemption in whole, but not in part, at the
option of Teekay, at any time at 100% of the principal amount thereof, together
with accrued and unpaid interest thereon to the Redemption Date, and any other
amounts owed to the holders of the notes under the terms of the indenture or the
notes, if (i) Teekay becomes obligated to pay, on the next date on which any
amount would be payable with respect to the notes, any Additional Amounts as a
result of any generally applicable change in the laws or regulations of a Taxing
Jurisdiction which becomes effective after the date of issuance of any of the
outstanding notes and (ii) Teekay cannot avoid its obligations to pay such
Additional Amounts by taking reasonable measures available to Teekay. However,
any such notice of redemption must be given within 60 calendar days of the
earliest date on which Teekay would be obligated to pay such Additional Amounts
if a payment in respect of the notes were then due. Prior to the giving of any
notice of redemption described in this paragraph, Teekay will deliver to the
trustee an officer's certificate stating that Teekay is entitled to redeem the
notes in accordance with the terms in the indenture and stating the facts
relating to such redemption. See "-- Additional Amounts."

                              MANDATORY REDEMPTION

     Except as set forth below under "Covenants -- Repurchase of Notes upon a
Change of Control Triggering Event" Teekay is not required to make sinking fund
payments or mandatory redemption payments prior to maturity with respect to the
notes.

                                   COVENANTS

REPURCHASE OF NOTES UPON A CHANGE OF CONTROL TRIGGERING EVENT

     The indenture provides that upon the occurrence of a Change of Control
Triggering Event, each holder of notes will have the right to require Teekay to
repurchase such holder's notes, in whole or in part, in integral multiples of
$1,000, at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase, in
accordance with the procedures set forth in the indenture. A "Change of Control"
also constitutes an event of default under several of Teekay's other debt
agreements. There can be no assurance that Teekay will have sufficient funds to
pay the purchase price referred to above at the time of the Change of Control
Triggering Event. The existence of a holder's right to require Teekay to
repurchase notes upon the occurrence of a Change of Control Triggering Event may
deter a third party from acquiring Teekay in a transaction which would
constitute a Change of Control.

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<PAGE>   85

CONSOLIDATION, MERGER AND SALE OF ASSETS

     Teekay may not, in a single transaction or a series of related
transactions:

     (1)   consolidate with or merge with or into any other person or permit any
        other person to consolidate with or merge with or into Teekay, or

     (2)   directly or indirectly, transfer, sell, lease or otherwise dispose of
        all or substantially all of its assets, unless, in the case of clauses
        (1) or (2) of this covenant:

        (A)  in a transaction in which Teekay does not survive or in which
             Teekay sells, leases or otherwise disposes of all or substantially
             all of its assets, the successor entity to Teekay is organized
             under (i) the laws of the United States or any State thereof or the
             District of Columbia, (ii) the laws of the Republic of Liberia,
             (iii) the laws of the Commonwealth of the Bahamas, (iv) the laws of
             the Republic of the Marshall Islands or (v) the laws of any other
             country recognized by the United States of America and which, in
             the case of any of events under subclause (i), (ii), (iii), (iv) or
             (v) of this subclause A, shall expressly assume, by a supplemental
             indenture executed and delivered to the trustee in form
             satisfactory to the trustee, all of Teekay's obligations under the
             indenture;

        (B)  immediately before and after giving effect to such transaction, no
             Default or Event of Default shall have occurred and be continuing;
             and

        (C)  certain other conditions are met.

LIMITATION ON LIENS

     Teekay may not create, incur, assume or suffer to exist any Lien on or with
respect to any property or assets now owned or hereafter acquired to secure any
present or future Relevant Debt of Teekay without making effective provision for
securing the notes:

     (1)   in the event such debt is pari passu with the notes, equally and
        ratably with such debt as to such property or assets for so long as such
        debt will be so secured, or

     (2)   in the event such debt is subordinate in right of payment to the
        notes, prior to such debt as to such property or assets for so long as
        such debt will be so secured.

     The term "Relevant Debt" shall be defined in the indenture as meaning any
debt for borrowed money in the form of bonds, notes, debentures or other debt
securities issued by way of public offering or private placement, including any
guarantee or indemnity given in respect of debt of any third party for money
borrowed in the form of bonds, notes, debentures or other debt securities issued
by way of a public offering or private placement, but, for greater clarity,
shall not include loans (or collateral debt securities relating to such loans)
made by banks or other financial institutions, customers or strategic partners.

PAYMENTS FOR CONSENT

     Teekay may not, and may not permit any of its Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of notes for or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of the
indenture or the notes unless such consideration is offered to be paid or is
paid to all holders of the notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

PROVISION OF FINANCIAL INFORMATION

     So long as any notes are outstanding, whether or not Teekay is subject to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 or any successor
provision thereto, Teekay shall file with the Securities and Exchange Commission
("SEC") within the filing time periods specified by the SEC (the

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"Required Filing Date") copies of the annual reports, quarterly reports and
other documents which Teekay would have been required to file pursuant to
Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto.
In addition, Teekay will:

     (1)   within 15 days of each Required Filing Date (A) transmit by mail to
        all holders, as their names and addresses appear in the security
        register of Teekay without cost to such holders, and (B) file with the
        trustee, copies of the annual reports, quarterly reports and other
        documents which Teekay files with the SEC pursuant to Section 13(a) or
        15(d) or any successor provision thereto or would have been required to
        file with the SEC pursuant to such Section 13(a) or 15(d) or any
        successor provisions thereto; and

     (2)   if filing such documents with the SEC is not permitted under the
        Exchange Act, promptly upon written request, Teekay will supply copies
        of such documents to any prospective holder.

                               ADDITIONAL AMOUNTS

     All payments made by Teekay under or with respect to the notes will be made
free and clear of and without withholding or deduction for or an account of any
present or future tax, duty, levy, impost, assessment or other governmental
charge (hereinafter "Taxes") imposed or levied by or on behalf of any Taxing
Jurisdiction, unless Teekay is required to withhold or deduct Taxes by law or by
the interpretation or administration thereof. If Teekay is so required to
withhold or deduct any amount of interest for or on account of Taxes from any
payment made under or with respect to the notes, Teekay will pay such additional
amounts of interest ("Additional Amounts") as may be necessary so that the net
amount received by each holder (including Additional Amounts) after such
withholding or deduction will not be less than the amount the holder would have
received if such Taxes had not been withheld or deducted; provided that Teekay
will not pay Additional Amounts in connection with any Taxes that are imposed
due to any of the following ("Excluded Additional Amounts"):

     (1)   the holder or beneficial owner has some connection with the Taxing
        Jurisdiction other than merely holding the notes or receiving principal
        or interest payments on the notes (such as citizenship, nationality,
        residence, domicile, or existence of a business, a permanent
        establishment, a dependent agent, a place of business or a place of
        management present or deemed present within the taxing jurisdiction);

     (2)   any tax imposed on, or measured by net income;

     (3)   the holder or beneficial owner fails to comply with any
        certification, identification or other reporting requirements concerning
        its nationality, residence, identity or connection with the Taxing
        Jurisdiction, if (A) such compliance is required by applicable law,
        regulation, administrative practice or treaty as a precondition to
        exemption from all or a part of the tax duty assessment or other
        governmental charge, (B) the holder or beneficial owner is able to
        comply with such requirements without undue hardship and (C) at least 30
        calendar days prior to the first payment date with respect to which such
        requirements under the applicable law, regulation, administrative
        practice or treaty shall apply, Teekay has notified such holder that
        such holder will be required to comply with such requirements;

     (4)   the holder fails to present (where presentation is required) its note
        within 30 calendar days after Teekay has made available to the holder a
        payment of principal or interest, provided that Teekay will pay
        Additional Amounts which a holder would have been entitled to had the
        note owned by such holder been present on any day (including the last
        day) within such 30-day period;

     (5)   any estate, inheritance, gift, value added, use or sales taxes or any
        similar taxes, assessments or other governmental charges;

     (6)   where any Additional Amounts are imposed on a payment on the notes to
        an individual and are required to be made pursuant to any European Union
        Directive on the taxation of savings

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<PAGE>   87

        implementing the conclusions of the Economic and Financial Council of
        Ministers of the member states of the European Union (ECOFIN) Council
        meeting of November 26-27, 2000 or any law implementing or complying
        with, or introduced in order to conform to, such Directive; or

     (7)   where the holder or beneficial owner could avoid any Additional
        Amounts by requesting that a payment on the notes be made by, or
        presenting the relevant notes for payment to, another paying agent
        located in a Member State of the European Union.

     Teekay will also (1) make such withholding or deduction and (2) remit the
full amount deducted or withheld to the relevant authority in accordance with
applicable law. Teekay will furnish to the holders of the notes, within 30 days
after the date the payment of any Taxes is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by Teekay.

     Teekay will indemnify and hold harmless each holder for the amount (other
than Excluded Additional Amounts) of (1) any Taxes not withheld or deducted by
Teekay and levied or imposed by a Taxing Jurisdiction and paid by such holder as
a result of payments made under or with respect to the notes, (2) any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, and (3) any Taxes imposed by a Taxing Jurisdiction with respect to any
reimbursement under clause (1) or (2) of this paragraph.

     At least 30 days prior to each date on which any payment under or with
respect to the notes is due and payable, if Teekay is aware that it will be
obligated to pay Additional Amounts with respect to such payment, Teekay will
deliver to the trustee an officers' certificate stating the fact that such
Additional Amounts will be payable, the amounts so payable and such other
information necessary to enable the trustee to pay such Additional Amounts to
holders on the payment date. Whenever in the indenture there is mentioned, in
any context, the payment of principal (and premium, if any), interest or any
other amount payable under or with respect to any note, such mention (except
where expressly mentioned) shall be deemed to include mention of the payment of
Additional Amounts provided for in this section to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.

     Teekay will pay any stamp, administrative, court, documentary, excise or
property taxes arising in a Taxing Jurisdiction in connection with the
Additional Amounts and will indemnify the holders of the notes for any such
taxes paid by the holders of the notes.

                               EVENTS OF DEFAULT

     The following events are defined as "Events of Default" in the indenture:

     (1)   Teekay defaults in the payment of principal of (or premium, if any,
           on) any notes when the same becomes due and payable at maturity, upon
           acceleration, redemption or otherwise;

     (2)   Teekay defaults in the payment of interest on any notes when the same
           become due and payable, and such default continues for a period of 30
           days;

     (3)   Teekay defaults in the payment of principal and interest on notes
           required to be purchased upon the occurrence of a Change of Control
           Triggering Event when due and payable;

     (4)   Teekay defaults in the performance of or breaches any other covenant
           or agreement of Teekay in the indenture or under the notes and such
           default or breach continues for a period of 30 consecutive days after
           the date on which written notice of such default or breach requiring
           Teekay to remedy the same, shall have been given to Teekay by the
           trustee, or to Teekay and the trustee by the holders of at least 25%
           in aggregate principal amount of the notes;

     (5)   there occurs with respect to any issue or issues of Debt of Teekay or
           any of its Subsidiaries having an outstanding aggregate principal
           amount of $10 million or more individually or $20 million or more in
           the aggregate for all such issues of all such Persons, whether such
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<PAGE>   88

        Debt now exists or shall hereafter be created, an event of default that
        has caused the holder thereof to declare such Debt to be due and payable
        prior to its Stated Maturity and such Debt has not been discharged in
        full or such acceleration has not been rescinded or annulled (by cure,
        waiver or otherwise) within 30 days of such acceleration; provided,
        however, that any secured Debt in excess of the limits set forth above
        shall be deemed to have been declared due and payable if the lender in
        respect thereof takes any action to enforce a security interest against,
        or an assignment of, or to collect on, seize, dispose of or apply any
        assets of Teekay or its Subsidiaries (including lock-box and other
        similar arrangements) securing such Debt, or to set off against any bank
        account of Teekay or its Subsidiaries in excess of $10 million;

     (6)   any final judgment or order (not covered by insurance) for the
           payment of money in excess of $10 million individually or $20 million
           in the aggregate for all such final judgments or orders against all
           such Persons (treating any deductibles, self-insurance or retention
           as not so covered) shall be rendered against Teekay or any Subsidiary
           and shall not be paid or discharged, and there shall be any period of
           60 consecutive days following entry of the final judgment or order in
           excess of $10 million individually or that causes the aggregate
           amount for all such final judgments or orders outstanding and not
           paid or discharged against all such Persons to exceed $20 million
           during which a stay of enforcement of such final judgment or order,
           by reason of a pending appeal or otherwise, shall not be in effect;

     (7)   Teekay or any Subsidiary shall generally not pay its debts as such
           debts become due, or shall admit in writing its inability to pay its
           debts generally, or shall make a general assignment for the benefit
           of creditors; or any proceeding shall be instituted by or against
           Teekay or any Subsidiary seeking to adjudicate it a bankrupt or
           insolvent, or seeking liquidation, winding up, reorganization,
           arrangement, adjustment, protection, relief or composition of it or
           its debts under any law relating to bankruptcy, insolvency or
           reorganization or relief of debtors, or seeking the entry of an order
           for relief or the appointment of a receiver, trustee, custodian or
           other similar official for it or for any substantial part of its
           property and, in the case of any such proceeding instituted against
           it (but not instituted by it), either such proceeding shall remain
           undismissed or unstayed for a period of 60 days, or any of the
           actions sought in such proceeding (including, without limitation, the
           entry of an order for relief against, or the appointment of a
           receiver, trustee, custodian or other similar official for, it or for
           any substantial part of its property) shall occur; or Teekay or any
           Subsidiary shall take any corporate action to authorize any of the
           actions set forth above in this subsection (7); or

     (8)   Teekay and/or one or more Subsidiaries fails to make (A) at the final
           (but not any interim) fixed maturity of any issue of Debt a principal
           payment of $10 million or more or (B) at the final (but not any
           interim) fixed maturity of more than one issue of such Debt principal
           payments aggregating $20 million or more and, in the case of clause
           (A), such defaulted payment shall not have been made, waived or
           extended within 30 days of the payment default and, in the case of
           clause (B), all such defaulted payments shall not have been made,
           waived or extended within 30 days of the payment default that causes
           the amount described in clause (B) to exceed $20 million.

     If an Event of Default (other than an Event of Default specified in clause
(7) above) occurs and is continuing under the indenture, the trustee or the
holders of at least 25% in aggregate principal amount of the notes then
outstanding, by written notice to Teekay (and to the trustee if such notice is
given by the holders (the "Acceleration Notice")), may, and the trustee at the
request of the holders shall, declare the entire unpaid principal of, premium,
if any, and accrued interest on the notes to be immediately due and payable.
Upon a declaration of acceleration, such principal of, premium, if any, and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (4)
or (8) above has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event triggering such Event
of Default pursuant to clause (4) or (8) shall be remedied or cured by Teekay
and/or the relevant Subsidiaries or
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<PAGE>   89

waived by the holders of the relevant Debt within 60 days after the declaration
of acceleration with respect thereto. If an Event of Default specified in clause
(7) above occurs, all unpaid principal of, premium, if any, and accrued interest
on the notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the trustee or any
holder. The holders of at least a majority in principal amount of the
outstanding notes by written notice to Teekay and to the trustee, may waive all
past defaults and rescind and annul a declaration of acceleration and its
consequences if:

     (1)   Teekay has paid or deposited with the trustee a sum sufficient to pay
           (A) all sums paid or advanced by the trustee under the indenture and
           the reasonable compensation, expenses, disbursements and advances of
           the trustee, its agents and counsel, (B) all overdue interest on all
           notes, (C) the principal of and premium, if any, on, any notes that
           have become due otherwise than by such declaration or occurrence of
           acceleration and interest thereon at the rate prescribed therefor by
           such notes, and (D) to the extent that payment of such interest is
           lawful, interest upon overdue interest at the rate prescribed
           therefor by such notes,

     (2)   all existing Events of Default, other than the non-payment of the
           principal of the notes that have become due solely by such
           declaration of acceleration, have been cured or waived, and

     (3)   the rescission would not conflict with any judgment or decree of a
           court of competent jurisdiction.

     For information as to the waiver of defaults, see "-- Modification and
Waiver."

     The holders of at least a majority in aggregate principal amount of the
outstanding notes may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee. However, the trustee may refuse to follow any
direction that conflicts with law or the indenture or that may expose the
trustee to personal liability. A holder may not pursue any remedy with respect
to the indenture or the notes unless:

     (1)   the holder gives to the trustee written notice of a continuing Event
           of Default;

     (2)   the holders of at least 25% in aggregate principal amount of
           outstanding notes make a written request to the trustee to pursue the
           remedy;

     (3)   such holder or holders offer to the trustee indemnity reasonably
           satisfactory to the trustee against any costs, liabilities or
           expenses to be incurred in compliance with such request;

     (4)   the trustee does not comply with the request within 60 days after
           receipt of the request and the offer of indemnity; and

     (5)   during such 60-day period, the holders of a majority in aggregate
           principal amount of the outstanding notes do not give the trustee a
           direction that is inconsistent with the request.

     However, such limitations do not apply to the right of any holder of a note
to receive payment of the principal of, premium, if any, or interest on, such
note or to bring suit for the enforcement of any such payment on or after the
due dates expressed in the notes, which right shall not be impaired or affected
without the consent of the holder.

     The indenture requires certain officers of Teekay to certify, on or before
a date not more than 120 days after the end of each fiscal year, that a review
has been conducted of the activities of Teekay and its Subsidiaries and Teekay's
and its Subsidiaries' performance under the indenture and that Teekay has
fulfilled all obligations thereunder, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature
and status thereof. Teekay is also obligated to notify the trustee of any
default or defaults in the performance of any covenants or agreements under the
indenture.

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                                   DEFEASANCE

DEFEASANCE AND DISCHARGE

     The indenture provides that Teekay will be deemed to have paid and will be
discharged from any and all obligations in respect of the notes and the
provisions of the indenture will no longer be in effect with respect to the
notes (except for, among other matters, certain obligations to register the
transfer or exchange of the notes, to replace stolen, lost or mutilated notes,
to maintain paying agencies and to hold monies for payment in trust), on the
123rd day after the date referred to below if, among other things:

     (1)   Teekay has deposited with the trustee, in trust, money and/or U.S.
           Government Securities that, through the payment of interest and
           principal in respect thereof in accordance with their terms, will
           provide money in an amount sufficient to pay the principal of,
           premium, if any, and accrued interest on the notes on the Stated
           Maturity of such payments in accordance with the terms of the
           indentures and the notes,

     (2)   Teekay has delivered to the trustee (A) either (i) an Opinion of
           Counsel to the effect that holders will not recognize income, gain or
           loss for federal income tax purposes as a result of Teekay's exercise
           of its option under this "Defeasance" provision and will be subject
           to federal income tax on the same amount and in the same manner and
           at the same times as would have been the case if such deposit,
           defeasance and discharge had not occurred, which Opinion of Counsel
           must be based upon (and accompanied by copy of) a ruling of the
           Internal Revenue Service to the same effect or based upon a change in
           applicable federal income tax law after the date of the indenture or
           (ii) a ruling directed to the trustee received from the Internal
           Revenue Service to the same effect as the aforementioned Opinion of
           Counsel and (B) an Opinion of Counsel to the effect that the creation
           of the defeasance trust does not violate the Investment Company Act
           of 1940 and, after the passage of 123 days following the deposit, the
           trust fund will not be subject to the effect of Section 547 of the
           United States Bankruptcy Code or Section 15 of the New York Debtor
           and Creditor Law,

     (3)   immediately after giving effect to such deposit on a pro forma basis,
           no Event of Default, or event that after the giving of notice or
           lapse of time or both would become an Event of Default, shall have
           occurred and be continuing on the date of such deposit or during the
           period ending on the 123rd day after the date of such deposit, and
           such deposit shall not result in a breach or violation of, or
           constitute a default under, any other agreement or instrument to
           which Teekay is a party or by which Teekay is bound and

     (4)   if at such time the notes are listed on a national securities
           exchange, Teekay has delivered to the trustee an Opinion of Counsel
           to the effect that the notes will not be delisted as a result of such
           deposit, defeasance and discharge.

DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT

     The indenture provides that certain provisions of the indenture will no
longer be in effect upon, among other things, the deposit with the trustee, in
trust, of money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the notes on the Stated Maturity of such payments in
accordance with the terms of the indenture and the notes, the satisfaction of
the provisions described in clauses (2)(B), (3) and (4) of the preceding
paragraph and the delivery by Teekay to the trustee of an Opinion of Counsel to
the effect that, among other things, the holders will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.

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<PAGE>   91

DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT

     In the event Teekay exercises its option to omit compliance with certain
covenants and provisions of the indenture with respect to the notes as described
in the immediately preceding paragraph and the notes are declared due and
payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the trustee will be sufficient to pay amounts due on the notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
notes at the time of the acceleration resulting from such Event of Default.
However, Teekay will remain liable for such payments.

MODIFICATION AND WAIVER

     Modifications and amendments of the indenture may be made by Teekay and the
trustee with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding notes; provided, however, that no such
modification or amendment may, without the consent of each holder affected
thereby:

     (1)   change the Stated Maturity of the principal of, or any installment of
           interest on, any note,

     (2)   reduce the principal amount of, or premium, if any, or interest on,
           any note,

     (3)   change the place or currency of payment of principal of, or premium,
           if any, or interest on, any note,

     (4)   impair the right to institute suit for the enforcement of any payment
           on or with respect to any note,

     (5)   reduce the percentage of aggregate principal amount of outstanding
           notes the consent of whose holders is necessary to modify or amend
           the indenture,

     (6)   modify any provisions of the indenture relating to the modification
           and amendment of the indenture, except as otherwise specified in the
           indenture, or

     (7)   reduce the percentage of aggregate principal amount of outstanding
           notes, the consent of whose holders is necessary for waiver of
           compliance with certain provisions of such indenture or for waiver of
           certain defaults.

                    NO PERSONAL LIABILITY OF INCORPORATORS,
                 SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES

     The indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on, any of the notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of Teekay in the indenture, or in any of the
notes, or because of the creation of any Debt represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee, Affiliate or
controlling person of Teekay or of any successor person thereof. Each holder, by
accepting such notes, waives and releases all such liability.

                                  THE TRUSTEE

     The trustee under the indenture is the registrar and paying agent with
regard to the notes. The indenture provides that, except during the continuance
of an Event of Default, the trustee will perform only such duties as are
specifically set forth in the indenture. During the existence of an Event of
Default, the trustee will exercise such rights and powers vested in it under the
indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.

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                                 GOVERNING LAW

     The indenture is governed by the laws of the State of New York.

                      CONSENT TO JURISDICTION AND SERVICE

     Teekay has irrevocably appointed Watson, Farley & Williams, New York, New
York, as its respective agent for service of process in any suit, action or
proceeding with respect to the indenture or the notes brought in any federal or
state court located in New York City and have submitted to such jurisdiction.

                              CERTAIN DEFINITIONS

     Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the indenture. Reference is made to the
indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.

     "Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control,"
as used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.

     "Capital Stock" is defined to mean, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such person's capital stock or ownership
interests, whether outstanding prior to or issued after the date of the
indenture, including, without limitation, all common stock and preferred stock.

     "Capitalized Lease" is defined to mean, as applied to any person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such person, as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.

     "Change of Control" is defined to mean such time as:

     (1)   a "person" or "group" (within the meaning of Sections 13(d) and
           14(d)(2) of the Securities Exchange Act of 1934), other than any
           Permitted Holder, becomes the ultimate "beneficial owner" (as defined
           in Rule 13d-3 under the Exchange Act and including by reason of any
           change in the ultimate "beneficial ownership" of the Capital Stock of
           Teekay) of more than 50% of the total voting power of the Voting
           Stock of Teekay (calculated on a fully diluted basis); or

     (2)   individuals who at the beginning of any period of two consecutive
           calendar years constituted the board of directors of Teekay (together
           with any new directors whose election by such board of directors or
           whose nomination for election was approved by a vote of at least two-
           thirds of the members of such board of directors then still in office
           who either were members of such board of directors at the beginning
           of such period or whose election or nomination for election was
           previously so approved) cease for any reason to constitute at least
           50% of the members of such board of directors then in office.

     "Change of Control Triggering Event" is defined to mean the occurrence of a
Change of Control and a Rating Decline.

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<PAGE>   93

     "Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect Teekay or any of its Subsidiaries against fluctuations in currency
values to or under which Teekay or any of its Subsidiaries is a party or a
beneficiary on the date of this indenture or becomes a party or a beneficiary
thereafter.

     "Debt" is defined to mean, with respect to any person at any date of
determination (without duplication):

     (1)   all debt of such person for borrowed money,

     (2)   all obligations of such person evidenced by bonds, debentures, notes
           or other similar instruments,

     (3)   all obligations of such person in respect of letters of credit or
           other similar instruments (including reimbursement obligations with
           respect thereto),

     (4)   all obligations of such person to pay the deferred purchase price of
           property or services, which purchase price is due more than six
           months after the date of placing such property in service or taking
           delivery thereto or the completion of such services, except trade
           payables,

     (5)   all obligations of such person as lessee under Capitalized Leases,

     (6)   all Debt of persons other than such person secured by a Lien on any
           asset of such person, whether or not such Debt is assumed by such
           person; provided that the amount of such Debt shall be the lesser of
           (A) the fair market value of such asset at such date of determination
           and (B) the amount of such Debt,

     (7)   all Debt of persons other than such person guaranteed by such person
           to the extent such Debt is guaranteed by such person, and

     (8)   to the extent not otherwise included in this definition, obligations
           under Currency Agreements and Interest Rate Agreements.

     The amount of Debt of any person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided that the
amount outstanding at any time of any Debt issued with original issue discount
is the face amount of such Debt less the remaining unamortized portion of the
original issue discount of such Debt at such time as determined in conformity
with GAAP; and provided further that Debt shall not include any liability for
federal, state, local, foreign or other taxes.

     "Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.

     "Event of Default" has the meaning set forth under "-- Events of Default."

     "GAAP" is defined to mean generally accepted accounting principles in the
United States of America as in effect as of the date of the indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the indenture shall be computed in
conformity with GAAP, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of the
indenture shall be made without giving effect to:

     (1)   except as otherwise provided, the amortization of any amounts
           required or permitted by Accounting Principles Board Opinion Nos. 16
           and 17; and

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<PAGE>   94

     (2)   any non-recurring charges associated with the adoption, after the
           date of the indenture, of Financial Accounting Standard Nos. 106 and
           109.

     "Governing Board Members" means the individuals serving as members of the
protectorate or governing boards of (x) the Trusts or their respective trustees
or (y) if the individuals serving as members of the protectorate or governing
boards of the Trusts or their respective trustees immediately prior to any
restructuring or dissolution of the Trusts or any transfer of Capital Stock of
Teekay held directly or indirectly thereby represent at least a majority of the
members of the protectorate or governing board of the trust (or trustee thereof)
or other entity replacing the Trusts as a direct or indirect owner of all, or
substantially all, of the Capital Stock of Teekay held directly or indirectly by
the Trusts immediately prior to such restructuring, dissolution or transfer,
such replacement trust (or its trustee) or entity, together with any new members
whose election or appointment was approved by at least two-thirds of the members
of such boards or board.

     "Gradation" is defined to mean a gradation within a Rating Category or a
change to another Rating Category, which shall include:

     (1)   "+" and "-" in the case of S&P's current Rating Categories (e.g., a
           decline from BB+ to BB would constitute a decrease of one gradation),

     (2)   1 and 2 in the case of Moody's current Rating Categories (e.g., a
           decline from B1 to B2 would constitute a decrease of one gradation),
           or

     (3)   the equivalent in respect of successor Rating Categories of S&P or
           Moody's or Rating Categories used by Rating Agencies other than S&P
           and Moody's.

     "Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement designed
to protect Teekay or any of its Subsidiaries against fluctuations in interest
rates to or under which Teekay or any of its Subsidiaries is a party or a
beneficiary on the date hereof or becomes a party or a beneficiary hereafter.

     "Investment Grade" is defined to mean:

     (1)   BBB- or above in the case of S&P (or its equivalent under any
           successor Rating Categories of S&P);

     (2)   Baa3 or above, in the case of Moody's (or its equivalent under any
           successor Rating Categories of Moody's); and

     (3)   the equivalent in respect of the Rating Categories of any Rating
           Agencies substituted for S&P or Moody's.

     "Lien" is defined to mean any mortgage, lien, pledge, security interest,
encumbrance or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).

     "Moody's" is defined to mean Moody's Investors Service, Inc. and its
successors.

     "Permitted Holder" is defined to mean the Trusts, a majority of the
Governing Board Members (each in his or her capacity as a Governing Board
Member), or any holding company, more than 50% of the total voting power of the
Voting Stock of which is, at the time of any transfer of Capital Stock of Teekay
by the Trusts or any such other holding company, "beneficially owned" by the
Trusts or a majority of the Governing Board Members (each in his or her capacity
as a Governing Board Member).

     "Rating Agencies" is defined to mean:

     (1)   S&P and Moody's; or

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     (2)   if S&P or Moody's or both of them are not making ratings of the notes
           publicly available, a nationally recognized U.S. rating agency or
           agencies, as the case may be, selected by Teekay, which will be
           substituted for S&P or Moody's or both, as the case may be.

     "Rating Category" is defined to mean:

     (1)   with respect to S&P, any of the following categories (any of which
           may include a "+" or "- "): AAA, AA, A, BBB, BB, B, CCC, CC, C and D
           (or equivalent successor categories);

     (2)   with respect to Moody's, any of the following categories: Aaa, Aa, A,
           Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
           and

     (3)   the equivalent of any such categories of S&P or Moody's used by
           another Rating Agency, if applicable.

     "Rating Decline" is defined to mean that at any time within 90 days (which
period shall be extended so long as the rating of the notes is under publicly
announced consideration for possible downgrade by any Rating Agency) after the
date of public notice of a Change of Control, or of the intention of Teekay or
of any person to effect a Change of Control, the rating of the notes is
decreased by both Rating Agencies by one or more Gradations and the rating by
such Rating Agencies on the notes following such downgrade is below Investment
Grade.

     "Redemption Date", when used with respect to any note to be redeemed, is
defined to mean the date fixed for such redemption by or pursuant to the
indenture.

     "S&P" is defined to mean Standard & Poor's Ratings Group, a division of
McGraw Hill Inc., a New York Corporation and its successors.

     "Stated Maturity" is defined to mean (1) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (2) with
respect to any scheduled installment of principal or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.

     "Subsidiary" is defined to mean, with respect to Teekay, any business
entity of which more than 50% of the outstanding Voting Stock is owned directly
or indirectly by Teekay and one or more other Subsidiaries of Teekay.

     "Taxing Jurisdiction" is defined to mean the Republic of the Marshall
Islands or any jurisdiction from or through which payment on the notes is made,
or any political subdivision thereof, or any authority or agency therein or
thereof having power to tax.

     "Trusts" is defined to mean, collectively, the Cirrus Trust, a trust
organized under the laws of the Turks and Caicos Islands, and the JTK Trust, a
trust organized under the laws of the Bahamas, which as of June 30, 2001 owned
(indirectly through wholly owned subsidiaries) approximately 33.5% and 7.2% of
the outstanding Common Stock of Teekay, respectively.

     "U.S. Government Securities" is defined to mean securities that are direct
obligations of the United States of America, direct obligations of the Federal
Home Loan Mortgage Corporation, direct obligations of the Federal National
Mortgage Association, securities which the timely payment of whose principal and
interest is unconditionally guaranteed by the full faith and credit of the
United States of America, trust receipts or other evidence of indebtedness of a
direct claim upon the instrument described above and money market mutual funds
that invest solely in such securities.

     "Voting Stock" of any person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the board of
directors or similar governing body of such person.

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             FORM DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER

     We will issue the exchange notes by one or more notes in registered, global
form (collectively, the "Restricted Global Notes"). The Restricted Global Notes
will be deposited on issuance with the trustee as custodian for DTC, in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as described
below.

     The Global Notes will be deposited on behalf of the acquirers of the
exchange notes for credit to the respective accounts of the acquirers or to such
other accounts as they may direct at DTC. Except as set forth below, the Global
Notes may be transferred, in whole and not in part, only to another nominee of
DTC or to a successor of DTC or its nominee. Beneficial interests in the Global
Notes may not be exchanged for notes in certificated form except in the limited
circumstances described below. See "-- Exchange of Book-Entry Notes for
Certificated Notes."

DEPOSITARY PROCEDURES

     DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodian relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and any
transfer of ownership interest of each actual purchaser of each security held by
or on behalf of DTC are recorded on the records of the Participants and Indirect
Participants.

     DTC has also advised us that, pursuant to procedures established by it,
ownership of interests in the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or records maintained by the Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
the Global Notes).

     Except as described below, owners of interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.

     Payments in respect of the Global Notes registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, the trustee will treat
the persons in whose names the notes, including the Global Notes, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the trustee nor any agent
thereof has or will have any responsibility or liability for:

     (1)   any aspect of DTC's records or any Participant's or Indirect
           Participant's records relating to or payments made on account of
           beneficial ownership interests in the Global Notes, or

     (2)   maintaining, supervising or reviewing any of DTC's records or any
           Participant's or Indirect Participant's records relating to the
           beneficial ownership interests in the Global Notes, or

     (3)   any other matter relating to the actions and practices of DTC or any
           of its Participants or Indirect Participants.

     DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the notes, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the relevant security as shown on the records of DTC. Payments by
the Participants and the Indirect Participants to the beneficial owners of the
notes will be governed by standing instructions and

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<PAGE>   97

customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the trustee or
us. Neither we nor the trustee will be liable for any delay by DTC or any of its
Participants identifying the beneficial owners of the notes, and we and the
trustee may conclusively rely on, and will be protected in relying on,
instructions from DTC or its nominee for all purposes.

     Except for trades involving only Euroclear and Clearstream participants,
interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. Transfers between participants in
Euroclear and Clearstream will be effected in the ordinary way in accordance
with their respective rules and operating procedures.

     Subject to compliance with the transfer restrictions applicable to the
notes described in this section of this prospectus, cross-market transfers
between the Participants in DTC, on the one hand, and Euroclear or Clearstream
participants, on the other hand, will be effected through DTC in accordance with
DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or Clearstream, as the case may be, by the
counter party in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Clearstream, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary or take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Notes in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Clearstream participants may deliver instructions
directly to the depositaries for Euroclear or Clearstream.

     Because of the time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of an interest in a Global Note by
or through a Euroclear or Clearstream participant to a Participant in DTC will
be received with value on the settlement date of DTC but will be available in
the relevant Euroclear or Clearstream cash account only as of the business day
for Euroclear or Clearstream following DTC's settlement date.

     DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account with DTC interests in the Global Notes are credited and only in respect
to such portion of the principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the indenture, DTC reserves the right to exchange
the Global Notes for legended notes in certificated form and to distribute such
notes to its Participants.

     The information in this section of this prospectus concerning DTC,
Euroclear and Clearstream and their book-entry systems has been obtained from
sources that Teekay believes to be reliable, but Teekay takes no responsibility
for the accuracy thereof.

     Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interest in the Global Notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.

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<PAGE>   98

EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES

     A beneficial interest in a Global Note may not be exchanged for a security
in certificated form unless

     (1)   DTC:

        (A)  notifies Teekay that it is unwilling or unable to continue as
             depositary for such Global Notes, or

        (B)  has ceased to be a clearing agency registered under the Securities
             Exchange Act of 1934,

     and in either case Teekay thereupon fails to appoint a successor
     depositary,

     (2)   Teekay, at its option, notifies the trustee in writing that it elects
           to cause the issuance of the notes in certificated form, or

     (3)   there shall have occurred and be continuing an Event of Default with
           respect to the notes.

     In all cases, certificated notes delivered in exchange for any Global Note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures). Any such exchange will be effected
through the DWAC System and an appropriate adjustment will be made in the
records of the applicable security registrar to reflect a decrease in the
principal amount of the relevant Global Note.

                              REGISTRATION RIGHTS

     We entered into an exchange and registration rights agreement with the
initial purchasers of the outstanding notes pursuant to which we agreed, for the
benefit of the holders of the outstanding notes, at our cost:

     (1)   to use our best efforts to file with the SEC within 60 days following
           the date of issuance of the outstanding notes a registration
           statement on the appropriate form relating to a registered exchange
           offer for the outstanding notes under the Securities Act of 1933.

     (2)   to use our best efforts to cause the exchange offer registration
           statement to be declared effective under the Securities Act within
           180 days following the issuance of the outstanding notes; and

     (3)   to use our best efforts to consummate the exchange offer within 60
           days after the exchange offer registration statement has been
           declared effective.

     Upon the exchange offer registration statement being declared effective, we
will offer the exchange notes in exchange for the surrender of the outstanding
notes. We will keep the exchange offer open for not less than 30 calendar days
(or longer if required by applicable law) after the date notice of the exchange
offer is mailed to the holders of the outstanding notes. For each outstanding
note surrendered to us pursuant to the exchange offer, the holder of such
outstanding note will receive an exchange note having a principal amount equal
to that of the surrendered note. The exchange notes will have terms identical in
all material aspects to the outstanding notes (except that the exchange notes
will not contain terms with respect to transfer restrictions).

     Under existing interpretations of the staff of the SEC contained in several
no-action letters to third parties, the exchange notes would in general be
freely tradable after the exchange offer without further registration under the
Securities Act of 1933. However, any purchaser of notes who is our affiliate (as
such term is defined in the indenture -- See "Description of the Notes --
Certain Definitions") or who intends to participate in the exchange offer for
the purpose of distributing the exchange notes:

     (1)   will not be able to rely on the interpretation of the staff of the
           SEC;

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<PAGE>   99

     (2)   will not be able to tender its notes in the exchange offer; and

     (3)   must comply with the registration and prospectus delivery
           requirements of the Securities Act in connection with any sale or
           transfer of the notes unless such sale or transfer is made pursuant
           to an exemption from such requirements.

     Each holder of the outstanding notes (other than certain specified holders)
who wishes to exchange outstanding notes for exchange notes in the exchange
offer will be required to represent that:

     (1)   any exchange notes that it will receive will be acquired in the
           ordinary course of your business,

     (2)   it has no arrangement or understanding with any person to participate
           in the distribution of the outstanding notes or the exchange notes,

     (3)   it is not our "affiliate," as defined in Rule 405 of the Securities
           Act of 1933, or, if it is our affiliate, it will comply with any
           applicable registration and prospectus delivery requirements of the
           Securities Act,

     (4)   if it is a broker-dealer, it is not engaged in and does not intend to
           engage in the distribution of the exchange notes, and

     (5)   if it is a broker-dealer (a "Participating Broker-Dealer") that will
           receive exchange notes for its own account in exchange for
           outstanding notes that it acquired as a result of market-making
           activities or other trading activities, it will deliver a prospectus
           meeting the requirements of the Securities Act of 1933 in connection
           with any resale of such exchange notes.

     The SEC has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to the exchange
notes (other than a resale of an unsold allotment from the original sale of the
outstanding notes) with the prospectus contained in the exchange offer
registration statement. Under the exchange and registration rights agreement, we
are required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the exchange offer registration statement in connection with the
resale of such exchange notes.

     In the event that any changes in law or the applicable interpretations of
the staff of the SEC do not permit us to effect the exchange offer, or if for
any reason the exchange offer is not consummated within 240 days following the
date of issuance of the outstanding notes, or the exchange offer is not
available to any holder of the outstanding notes, we will, at our cost:

     -  as promptly as practicable, but no later than 30 days after the time
        such obligation arises, file a shelf registration statement covering
        resales of the outstanding notes;

     -  use our best efforts to cause the shelf registration statement to be
        declared effective under the Securities Act of 1933 within 120 days
        after such shelf registration statement is filed; and

     -  use our best efforts to keep effective the shelf registration statement
        until two years after its effective date or such shorter period that
        will terminate when all outstanding notes covered by the shelf
        registration statement have been sold pursuant to the shelf registration
        statement.

     We will, in the event of the filing of a shelf registration statement,
provide to each holder of the outstanding notes copies of the prospectus which
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement for the outstanding notes has become effective and
take certain other actions as are required to generally permit unrestricted
resales of the outstanding notes. A holder of notes that sells such notes
pursuant to the shelf registration statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act of 1933 in connection with such sales and
will be bound by the provisions of the exchange and registration rights
agreement which are applicable to such holder (including certain

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<PAGE>   100

indemnification obligations). In addition, each holder of the outstanding notes
will be required to deliver information to be used in connection with the shelf
registration statement and to provide comments on the shelf registration
statement within the time periods set forth in the exchange and registration
rights agreement in order to have its notes included in the shelf registration
statement and to benefit from the provisions regarding liquidated damages set
forth in the following paragraph.

     In the event that:

     (1)   the exchange offer registration statement is not filed with the SEC
           on or prior to the 60th day following the date of issuance of the
           outstanding notes or the shelf registration statement is not filed
           with the SEC on or prior to the 30th day following the date an
           obligation to file arises;

     (2)   such exchange offer registration statement or shelf registration
           statement is not declared effective on or prior to the 180th day
           following the date of issuance of the outstanding notes or the 120th
           day after such shelf registration statement is filed, respectively;

     (3)   the exchange offer is not completed within 60 days after the initial
           effective date of the exchange registration statement; or

     (4)   the exchange offer registration statement or shelf registration
           statement is declared effective but thereafter ceases to be effective
           or usable (each such event referred to in clauses (1) through (4)
           above, a "Registration Default"),

then special interest, in addition to the interest set forth on the cover
hereof, shall accrue at a per annum rate of 0.5% for the first 90-day period
immediately following the occurrence of the first Registration Default, and the
per annum interest rate will increase by an additional 0.5% for each subsequent
90-day period during which the Registration Default remains uncured, up to a
maximum additional interest rate of 1.5% per annum in excess of the interest
rate on the cover of this prospectus. Upon the cure of the Registration Default,
the special interest shall no longer accrue and the notes will bear interest at
the original rate, provided, however, that if, after any such cure, a different
Registration Default occurs, then special interest shall again accrue in
accordance with the foregoing provisions.

     The summary herein of certain provisions of the exchange and registration
rights agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the exchange
and registration rights agreement, a copy of which is available upon request to
Teekay. The exchange and registration rights agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part.

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                               TAX CONSIDERATIONS

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

  GENERAL

     The following summary describes the material United States federal income
tax consequences relevant to the purchase, ownership, and disposition of the
exchange notes. Except where indicated, this summary deals only with notes held
as capital assets by purchasers of outstanding notes in the original offering of
the outstanding notes who receive exchange notes pursuant to the exchange offer
and does not purport to be a complete analysis of all the potential tax
considerations that may be relevant to such holders. The discussion does not
include special rules that might apply to certain holders such as dealers in
securities or currencies, financial institutions, investors in pass-through
entities, tax-exempt organizations or pension plans, life insurance companies,
persons holding notes as a part of a hedging or conversion transaction or a
straddle or United States holders whose "functional currency" is not the U.S.
dollar. In addition, the following discussion, as well as the conclusions
regarding certain issues of United States federal income tax law that are
reflected in that discussion, are based upon the provisions of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and related regulations,
rulings and judicial decisions existing as of the date of this prospectus, and
upon the advice received by us from special U.S. tax counsel. Changes in
existing laws or regulations or their interpretation may occur, which could be
retroactive. Applicable authorities may be repealed, revoked or modified so as
to result in United States federal income tax consequences different from those
discussed below. Our and our special U.S. tax counsel's views have no binding
effect or official status of any kind, and no assurance can be given that the
conclusions discussed below would be sustained by a court if challenged by the
Internal Revenue Service.

     THE DISCUSSION BELOW IS A SUMMARY FOR GENERAL INFORMATION ONLY AND DOES NOT
ADDRESS ALL POTENTIAL TAX CONSIDERATIONS THAT DEPEND UPON CIRCUMSTANCES SPECIFIC
TO EACH INVESTOR. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF
NOTES SHOULD SATISFY THEMSELVES AS TO THE OVERALL TAX CONSEQUENCES OF THEIR
OWNERSHIP OF THE NOTES, INCLUDING STATE, LOCAL AND NON-UNITED STATES TAX
CONSEQUENCES THEREOF (WHICH ARE NOT REVIEWED IN THIS DISCUSSION) AND CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES.

     As used in this section of the prospectus, a "United States holder" of a
note means a holder that is an individual citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision, an estate the
income of which is subject to United States federal income taxation regardless
of its source, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust, or a trust that was in existence on August 20, 1996, was
treated as a United States person on August 19, 1996 and elected to be treated
as a United States person at all times thereafter. A "Non-United States holder"
of a note is a holder that is not a United States holder.

THE EXCHANGE OFFER

     The exchange of an outstanding note for an exchange note in the exchange
offer will not constitute a significant modification of the outstanding note for
United States federal income tax purposes. Therefore, the exchange note received
will be treated as a continuation of the outstanding note in your hands. As a
result, there will be no United States federal income tax consequences to you
upon the exchange of an outstanding note for an exchange note in the exchange
offer and you will have the same adjusted tax basis and holding period in the
exchange note as you had in the outstanding note immediately before the
exchange.

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<PAGE>   102

UNITED STATES HOLDER

  PAYMENTS OF INTEREST

     We expect that the interest (including Additional Amounts, if any) on the
notes will be "qualified stated interest." Qualified stated interest is
generally defined as stated interest that is unconditionally payable in cash or
other property (other than debt instruments of the issuer) or that will be
constructively received, at least annually or at a single fixed rate. We expect
that the notes will not be issued with "original issue discount" within the
meaning of Section 1273 of the Code and the Treasury Department Regulations
issued under that section and other related sections of the Code relating to
original issue discount. Thus, any payment of interest on a note will generally
be taxable to a United States holder as ordinary income at the time it is paid
or accrued in accordance with the United States holder's regular method of
accounting for tax purposes. Thus, to the extent that amounts are withheld and
Additional Amounts are paid on the notes, a United States holder will be
required to report income in an amount greater than cash received on the
payments.

     Interest income from the notes will constitute foreign source income for
United States federal income tax purposes and, with certain exemptions, will be
treated separately, together with other items of "passive income" or, in the
case of certain holders, "financial services income" for purposes of computing
the foreign tax credit allowable under the Code. A United States holder may be
eligible, subject to a number of limitations, for a foreign tax credit or
deduction against such United States holder's United States federal income tax
liability for taxes withheld on the notes.

  SALE, EXCHANGE AND RETIREMENT OF NOTES

     A United States holder's tax basis in a note generally will be the United
States holder's cost for the note. Upon the sale, exchange or retirement of a
note, a United States holder will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange or retirement (less any
accrued interest, which will be taxable as such) and the adjusted tax basis of
the note. In general, such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the note has been held for more than one year. Under current law, net capital
gains of individuals are, under certain circumstances, taxed at lower rates than
items of ordinary income. The deductibility of capital losses is subject to
significant limitations. Capital gain or loss realized by a United States holder
generally will be treated as United States source income for United States
foreign tax credit limitation purposes.

     The exchange of the notes for registered notes pursuant to the exchange
offer will not constitute a material modification of the terms of the notes and
therefore will not constitute a taxable event for United States federal income
tax purposes. In that event, the exchange would have no United States federal
income tax consequences to a United States holder, so that the United States
holder's holding period and adjusted tax basis for a note would not be affected
and the United States holder would continue to take into account income in
respect of a note in the same manner as before the exchange.

  BACKUP WITHHOLDING AND INFORMATION REPORTING

     In general, information reporting will apply to certain payments of
principal and interest on the notes and to the proceeds from the sale of a note
paid to United States holders other than certain exempt recipients.
Additionally, a 31% backup withholding tax will apply to such payments if the
United States holder fails to provide a correct taxpayer identification number
or certification of exempt status or fails to report in full dividend and
interest income or otherwise fails to comply with applicable requirements of the
backup withholding rules.

     If the 31% backup withholding tax applies to a United States holder, the
United States holder may use the amounts withheld as a refund or credit against
the United States holder's United States federal income tax liability as long as
the United States holder provides certain information to the Internal Revenue
Service.

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NON-UNITED STATES HOLDER

  PAYMENTS OF INTEREST

     Payments of principal and interest on the notes will not be subject to
United States federal income tax, including United States withholding tax, if
paid to a non-United States holder, unless, in the case of interest, the
non-United States holder is: (1) a corporation that is an insurance company
carrying on a United States trade or business to which the interest is
attributable within the meaning of the Code; or (2) an individual or corporation
with an office or other fixed place of business in the United States to which
the interest is attributable, the interest either is derived in the active
conduct of a banking, financing or similar business within the United States or
is received by a corporation, the principal business of which is trading in
stock or securities for its own account, and certain other conditions exist.

  SALE, EXCHANGE AND RETIREMENT OF NOTES

     Gain, realized on the sale, retirement or other disposition of notes by a
non-United States holder, generally will not be subject to United States federal
income tax, including withholding tax, unless the gain is effectively connected
with the conduct by such holder of a trade or business within the United States;
or in the case of an individual, the non-United States holder has been present
in the United States for 183 days or more during the taxable year of the sale or
retirement and certain other conditions are satisfied.

  BACKUP WITHHOLDING AND INFORMATION REPORTING

     Information reporting and backup withholding generally will not apply to
payments of principal and interest on the notes made by a United States paying
agent to a non-United States holder of a note, provided that: (1) the beneficial
owner of such note certifies, under penalties of perjury, that it is not a
United States holder and provides its name and address; or (2) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business and holds the notes
certifies, under penalties of perjury, that such statement has been received
from the beneficial owner of such note by it or by a financial institution
between it and the beneficial owner and furnishes such paying agent with a copy
thereof. Additionally, such paying agent must not have actual knowledge that
such beneficial owner is a United States person.

     Proceeds received from the sale of a note by a non-United States holder to
or through the United States office of a broker generally are subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.

     Generally, the certification requirements will be satisfied if an
individual or corporation provides the Withholding Agent, as defined below, with
a properly completed Internal Revenue Service Form W-8BEN, or appropriate
successor form. A "Withholding Agent" is the last United States payor (or a
non-United States payor who is a qualified intermediary, United States branch of
a foreign person, or withholding foreign partnership) in the chain of payment
prior to payment to a non-United States person (which is itself not a
Withholding Agent).

     If backup withholding tax applies to a non-United States holder, the holder
may use the amounts withheld as a refund or credit against the holder's United
States federal income tax liability as long as the non-United States holder
provides certain information to the Internal Revenue Service.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF ANY INVESTMENT IN THE NOTES, INCLUDING
THE APPLICATION OF UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX
LAWS.

                                        98
<PAGE>   104

MARSHALL ISLANDS TAXATION

     Based on the advice of Watson, Farley & Williams, Republic of Marshall
Islands counsel to us, since we are not now carrying on, and in the future do
not expect to carry on, any operations within the Republic of the Marshall
Islands, and assuming that the holders of the notes are neither residents or
citizens of the Republic of the Marshall Islands, under current Marshall Islands
law no taxes or withholding will be imposed by the Republic of the Marshall
Islands on payments to be made in respect of the notes.

BAHAMIAN TAXATION

     Based on the advice of Graham, Thompson & Co., Bahamian counsel to us,
under current Bahamian law no taxes or withholding will be imposed by the
Bahamas on payments to be made in respect of the notes.

TRANSFER TAXES

     Holders who tender their outstanding notes for exchange generally will not
be obligated to pay any transfer tax in connection with the exchange. However,
holders who instruct us to register exchange notes in the name of a person other
than the registered holders of the outstanding notes not properly tendered,
withdrawn or not accepted in the exchange offer be returned to a person other
than the registered tendering holder, will be responsible for the payment of any
applicable transfer tax.

                                        99
<PAGE>   105

                              PLAN OF DISTRIBUTION

     Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for
outstanding notes only where such outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed to make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale for a period of 180 days from the date on
which the exchange offer is consummated, or such shorter period as will
terminate when all outstanding notes acquired by broker-dealers for their own
accounts as a result of market-making activities or other trading activities
have been exchanged for exchange notes and such exchange notes have been resold
by such broker-dealers.

     We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any exchange notes. Any broker-dealer that
resells exchange notes that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such exchange notes may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933 and any profit on any such resale of exchange
notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver any by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933.

     We have agreed to pay all our expenses incident to the exchange offer,
including reasonable fees of not more than one counsel retained by the holders
of outstanding notes in connection with the filing of a shelf registration
statement, if required, but excluding commissions or concessions of any brokers
or dealers and the fees of any other advisors or experts retained by the holders
of outstanding notes, except as expressly set forth in the exchange and
registration rights agreement, and will indemnify the holders of outstanding
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act of 1933.

                                       100
<PAGE>   106

                                 LEGAL MATTERS

     The validity of the exchange notes offered by this prospectus and certain
legal matters will be passed upon for us by Perkins Coie LLP, Portland Oregon,
as to United States law, and certain other legal matters will be passed upon for
us by Watson, Farley & Williams, New York, New York, as to Marshall Islands law,
by Seward & Kissel, LLP, New York, New York, as to U.S. tax law, by Graham,
Thompson & Co., Nassau, the Bahamas, as to Bahamian law, by Appleby Spurling &
Kempe, Hamilton, Bermuda, as to Bermuda law, and by Bugge, Arentz-Hansen &
Rasmussen, Oslo, Norway, as to Norwegian law.

                                    EXPERTS

     The consolidated financial statements and schedule of Teekay and its
subsidiaries as at December 31, 2000 and 1999, and for the fiscal year ended
December 31, 2000, the nine months ended December 31, 1999 and the year ended
March 31, 1999, included in this prospectus and audited by Ernst & Young,
independent chartered accountants, have been included in reliance upon the
report given upon their authority as experts in accounting and auditing.

     The consolidated financial statements of UNS and its subsidiaries as at
December 31, 2000 and 1999, and for the fiscal years ended December 31, 2000 and
1999, included in this prospectus and audited by Deloitte & Touche, independent
public accountants, have been included in reliance upon the report given upon
their authority as experts in accounting and auditing.

                                       101
<PAGE>   107

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
TEEKAY SHIPPING CORPORATION UNAUDITED HISTORICAL INTERIM
  CONSOLIDATED FINANCIAL STATEMENTS:
Independent Accountant's Review Report on Interim Financial
  Statements................................................   F-2
Unaudited Consolidated Statements of Income for the three
  months ended March 31, 2001 and 2000......................   F-3
Unaudited Consolidated Balance Sheet as at March 31, 2001...   F-4
Unaudited Consolidated Statements of Cash Flows for the
  three months ended March 31, 2001 and 2000................   F-5
Unaudited Consolidated Statement of Changes in Stockholders'
  Equity for the three months ended March 31, 2001..........   F-6
Notes to the Interim Consolidated Financial Statements......   F-7
Schedule A to the Interim Consolidated Financial
  Statements................................................  F-13
TEEKAY SHIPPING CORPORATION AUDITED HISTORICAL CONSOLIDATED
  FINANCIAL STATEMENTS:
Auditor's Report............................................  F-19
Consolidated Statements of Income for the year ended
  December 31, 2000, the nine months ended December 31, 1999
  and the year ended March 31, 1999.........................  F-20
Consolidated Balance Sheets as at December 31, 2000 and
  1999......................................................  F-21
Consolidated Statements of Cash Flows for the year ended
  December 31, 2000, the nine months ended December 31, 1999
  and the year ended March 31, 1999.........................  F-22
Consolidated Statements of Changes in Stockholders' Equity
  for the year ended December 31, 2000, the nine months
  ended December 31, 1999 and the year ended March 31,
  1999......................................................  F-23
Notes to the Consolidated Financial Statements..............  F-24
Schedule A to the Consolidated Financial Statements.........  F-35
UGLAND NORDIC SHIPPING ASA UNAUDITED HISTORICAL INTERIM
  CONSOLIDATED FINANCIAL STATEMENTS:
Unaudited Consolidated Statements of Income for the three
  months ended March 31, 2001 and 2000 and Unaudited
  Consolidated Balance Sheet as at March 31, 2001...........  F-43
UGLAND NORDIC SHIPPING ASA AUDITED HISTORICAL CONSOLIDATED
  FINANCIAL STATEMENTS:
Auditor's Reports...........................................  F-44
Consolidated Statements of Income for the years ended
  December 31, 2000 and 1999................................  F-46
Consolidated Balance Sheets as at December 31, 2000 and
  1999......................................................  F-47
Consolidated Statements of Cash Flows for the years ended
  December 31, 2000 and 1999................................  F-49
Notes to the Consolidated Financial Statements..............  F-50
TEEKAY SHIPPING CORPORATION UNAUDITED PRO FORMA CONSOLIDATED
  CONDENSED FINANCIAL STATEMENTS:
Unaudited Pro Forma Consolidated Condensed Balance Sheet as
  at March 31, 2001.........................................  F-63
Unaudited Pro Forma Consolidated Condensed Statement of
  Income for the three months ended March 31, 2001..........  F-64
Unaudited Pro Forma Consolidated Condensed Statement of
  Income for the year ended December 31, 2000...............  F-65
Notes to Unaudited Pro Forma Consolidated Condensed
  Financial Statements......................................  F-66
</TABLE>

                                       F-1
<PAGE>   108

               INDEPENDENT ACCOUNTANT'S REVIEW REPORT ON INTERIM
                              FINANCIAL STATEMENTS

To the Board of Directors of
TEEKAY SHIPPING CORPORATION

     We have reviewed the accompanying consolidated balance sheet of TEEKAY
SHIPPING CORPORATION AND SUBSIDIARIES as of March 31, 2001, and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 2001 and 2000, and the consolidated statement of changes in
stockholders' equity for the three-month period ended March 31, 2001. Our review
also included Schedule A. These financial statements and schedule are the
responsibility of the Company's management.

     We were furnished with the report of other accountants on their review of
the interim information of Ugland Nordic Shipping ASA, whose total assets as of
March 31, 2001 and whose revenues for the period from acquisition constituted 18
percent and 2 percent, respectively, of the consolidated totals.

     We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

     Based on our reviews and the report of other accountants, we are not aware
of any material modifications that should be made to the accompanying
consolidated financial statements and schedule referred to above for them to be
in conformity with accounting principles generally accepted in the United
States.

     We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Teekay Shipping
Corporation and subsidiaries as of December 31, 2000, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the year then ended, not presented herein, and in our report dated
February 16, 2001 (except for note 13 which is as of March 6, 2001), we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying consolidated balance
sheet and related schedule as of December 31, 2000, if fairly stated, in all
material respects, in relation to the consolidated balance sheet and schedule
from which they have been derived.

Nassau, Bahamas,                                               /s/ ERNST & YOUNG
April 26, 2001                                             Chartered Accountants

                                       F-2
<PAGE>   109

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
            (IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                 $          $
                                                                 (UNAUDITED)
<S>                                                           <C>        <C>
NET VOYAGE REVENUES
Voyage revenues.............................................  307,886    182,262
Voyage expenses.............................................   62,730     62,195
                                                              -------    -------
Net voyage revenues.........................................  245,156    120,067
                                                              -------    -------
OPERATING EXPENSES
Vessel operating expenses...................................   33,879     34,769
Time-charter hire expense...................................   17,183     12,966
Depreciation and amortization...............................   27,521     25,042
General and administrative..................................   10,838      9,522
                                                              -------    -------
                                                               89,421     82,299
                                                              -------    -------
INCOME FROM VESSEL OPERATIONS...............................  155,735     37,768
                                                              -------    -------
OTHER ITEMS
Interest expense............................................  (14,786)   (19,989)
Interest income.............................................    2,803      3,253
Other income (loss) (note 10)...............................      936     (1,092)
                                                              -------    -------
                                                              (11,047)   (17,828)
                                                              -------    -------
NET INCOME..................................................  144,688     19,940
                                                              =======    =======
EARNINGS PER COMMON SHARE (note 8)
  Basic.....................................................     3.69       0.52
  Diluted...................................................     3.59       0.52
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-3
<PAGE>   110

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                 AS AT               AS AT
                                                             MARCH 31, 2001    DECEMBER 31, 2000
                                                             --------------    -----------------
                                                                   $                   $
                                                              (UNAUDITED)
<S>                                                          <C>               <C>
ASSETS
CURRENT
Cash and cash equivalents..................................      296,940             181,300
Marketable securities (note 3).............................        7,270               8,081
Accounts receivable........................................       76,180              80,158
Prepaid expenses and other assets..........................       27,188              25,956
                                                               ---------           ---------
TOTAL CURRENT ASSETS.......................................      407,578             295,495
                                                               ---------           ---------
Marketable securities (note 3).............................       43,844              33,742
VESSELS AND EQUIPMENT
  At cost, less accumulated depreciation of $708,568
  (December 31, 2000 -- $680,756) (note 7).................    1,901,357           1,607,716
Advances on newbuilding contracts (notes 7 and 9)..........       42,851                  --
                                                               ---------           ---------
TOTAL VESSELS AND EQUIPMENT................................    1,944,208           1,607,716
                                                               ---------           ---------
Investment in joint ventures...............................       46,402              20,474
Other assets...............................................       17,482              16,672
Goodwill (note 4)..........................................       58,818                  --
                                                               ---------           ---------
                                                               2,518,332           1,974,099
                                                               =========           =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable...........................................       20,924              22,084
Accrued liabilities........................................       48,408              44,081
Current portion of long-term debt (note 7).................      123,058              72,170
                                                               ---------           ---------
TOTAL CURRENT LIABILITIES..................................      192,390             138,335
                                                               ---------           ---------
Long-term debt (note 7)....................................      985,636             725,314
Other long-term liabilities (note 6).......................       38,558               7,368
                                                               ---------           ---------
TOTAL LIABILITIES..........................................    1,216,584             871,017
                                                               ---------           ---------
MINORITY INTEREST..........................................       66,968               4,570
STOCKHOLDERS' EQUITY
Capital stock (note 8).....................................      458,605             452,808
Retained earnings..........................................      777,618             641,149
Accumulated other comprehensive income (loss)..............       (1,443)              4,555
                                                               ---------           ---------
TOTAL STOCKHOLDERS' EQUITY.................................    1,234,780           1,098,512
                                                               ---------           ---------
                                                               2,518,332           1,974,099
                                                               =========           =========
</TABLE>

Commitments and contingencies (note 9)

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-4
<PAGE>   111

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                 $          $
                                                                 (UNAUDITED)
<S>                                                           <C>        <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income..................................................  144,688     19,940
Non-cash items:
  Depreciation and amortization.............................   27,521     25,042
  Loss on disposition of vessels and equipment..............       --      1,009
  Gain on disposition of available-for-sale securities......   (2,707)        --
  Equity income (net of dividends received: March 31, 2001
     -- $2,500; March 31, 2000 -- $500).....................     (293)      (319)
  Future income taxes.......................................      671        500
  Other -- net..............................................    3,022       (592)
Change in non-cash working capital items related to
  operating activities......................................   (8,390)    (5,355)
                                                              -------    -------
NET CASH FLOW FROM OPERATING ACTIVITIES.....................  164,512     40,225
                                                              -------    -------
FINANCING ACTIVITIES
Proceeds from long-term debt................................  143,500         --
Scheduled repayments of long-term debt......................   (5,790)      (606)
Prepayments of long-term debt...............................  (92,118)   (10,000)
Proceeds from issuance of Common Stock......................    5,788        898
Cash dividends paid.........................................   (8,408)    (8,178)
                                                              -------    -------
NET CASH FLOW FROM FINANCING ACTIVITIES.....................   42,972    (17,886)
                                                              -------    -------
INVESTING ACTIVITIES
Expenditures for vessels and equipment......................   (1,394)      (550)
Expenditures for drydocking.................................   (2,240)    (2,500)
Proceeds from disposition of assets.........................       --      9,705
Expenditure for purchase of Ugland Nordic Shipping ASA (net
  of cash acquired of $26,605)..............................  (97,144)        --
Acquisition costs related to purchase of Bona Shipholding
  Ltd.......................................................      (20)    (1,716)
Proceeds from disposition of available-for-sale
  securities................................................    8,954         --
Purchases of available-for-sale securities..................       --     (8,911)
                                                              -------    -------
NET CASH FLOW FROM INVESTING ACTIVITIES.....................  (91,844)    (3,972)
                                                              -------    -------
INCREASE IN CASH AND CASH EQUIVALENTS.......................  115,640     18,367
Cash and cash equivalents, beginning of the period..........  181,300    220,327
                                                              -------    -------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD................  296,940    238,694
                                                              =======    =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.
                                       F-5
<PAGE>   112

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                    ACCUMULATED
                                                                       OTHER
                               THOUSANDS OF                        COMPREHENSIVE                       TOTAL
                                  COMMON      COMMON    RETAINED      INCOME       COMPREHENSIVE   STOCKHOLDERS'
                                  SHARES       STOCK    EARNINGS      (LOSS)          INCOME          EQUITY
                               ------------   -------   --------   -------------   -------------   -------------
                                    #            $         $             $               $               $
<S>                            <C>            <C>       <C>        <C>             <C>             <C>
BALANCE AS AT DECEMBER 31,
  2000.......................     39,145      452,808   641,149        4,555                         1,098,512
                                  ------      -------   -------       ------                         ---------
Net income...................                           144,688                       144,688          144,688
Other comprehensive income:
  Unrealized loss on
    available-for-sale
    securities (note 3)......                                         (1,503)          (1,503)          (1,503)
  Reclassification adjustment
    for gain on
    available-for-sale
    securities included in
    net income (note 3)......                                         (4,946)          (4,946)          (4,946)
  Cumulative effect of
    accounting change (note
    11)......................                                          4,155            4,155            4,155
  Unrealized loss on
    derivative instruments
    (note 11)................                                         (3,314)          (3,314)          (3,314)
  Reclassification adjustment
    for gain on derivative
    instruments (note 11)....                                           (390)            (390)            (390)
                                                                                      -------
Comprehensive income.........                                                         138,690
                                                                                      -------
Adjustment for equity income
  on step acquisition (note
  2).........................                               198                                            198
Dividends declared...........                            (8,417)                                        (8,417)
Reinvested dividends.........          1           9                                                         9
Exercise of stock options....        256       5,788                                                     5,788
                                  ------      -------   -------       ------                         ---------
BALANCE AS AT MARCH 31, 2001
  (UNAUDITED)................     39,402      458,605   777,618       (1,443)                        1,234,780
                                  ======      =======   =======       ======                         =========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-6
<PAGE>   113

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
       (INFORMATION AS AT MARCH 31, 2001 AND FOR THE THREE-MONTH PERIODS
                  ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)

1.  BASIS OF PRESENTATION

     The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles in the
United States and the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures required by generally
accepted accounting principles for complete annual financial statements have
been omitted and, therefore, it is suggested that these interim financial
statements be read in conjunction with the Company's audited financial
statements for the year ended December 31, 2000. In the opinion of management,
these statements reflect all adjustments (consisting only of normal recurring
accruals), necessary to present fairly, in all material respects, the Company's
consolidated financial position, results of operations, cash flows, and changes
in stockholders' equity for the interim periods presented. The results of
operations for the three-month period ended March 31, 2001 are not necessarily
indicative of those for a full fiscal year.

2.  ACQUISITION OF UGLAND NORDIC SHIPPING ASA

     As of March 31, 2001, the Company had purchased approximately a 64%
interest in Ugland Nordic Shipping ASA ("UNS") (nine percent of which was
purchased in fiscal 2000), for $143.9 million cash, including estimated
transaction expenses of $7.0 million, or at an average price of Norwegian Kroner
134 per share. UNS controls a modern fleet of 18 shuttle tankers (including four
newbuildings and four vessels purchased on April 2, 2001) that engage in the
transportation of oil from offshore production platforms to refineries.

     The acquisition of UNS has been accounted for using the purchase method of
accounting, based upon preliminary estimates of fair value. UNS' operating
results are reflected in these financial statements commencing March 6, 2001,
the date the Company acquired control. Equity income related to the Company's
nine percent interest in UNS up to December 31, 2000 has been credited as an
adjustment to retained earnings. The Company's interest in UNS for the period
from January 1, 2001 to March 5, 2001 has been included in equity income for the
corresponding period. In April 2001, the Company purchased an additional 34%
interest in UNS (see Note 12).

     The following table shows comparative summarized consolidated pro forma
financial information for the three-month periods ended March 31, 2001 and 2000
and gives effect to the acquisition of 100% of the outstanding shares in UNS as
if it had taken place January 1, 2000:

<TABLE>
<CAPTION>
                                                                  PRO FORMA
                                                                 THREE MONTHS
                                                               ENDED MARCH 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                 $          $
<S>                                                           <C>        <C>
Net voyage revenues.........................................  261,416    135,012
Net income..................................................  145,097     15,421
Net income per common share
  basic.....................................................     3.70       0.41
  diluted...................................................     3.60       0.40
</TABLE>

                                       F-7
<PAGE>   114
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
  (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
       (INFORMATION AS AT MARCH 31, 2001 AND FOR THE THREE-MONTH PERIODS
                  ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)

3.  MARKETABLE SECURITIES

     The Company's investments in marketable securities are classified as
available-for-sale securities and are carried at fair value. Net unrealized
gains or losses on available-for-sale securities, if material, are reported as a
separate component of stockholders' equity.

4.  GOODWILL

     Goodwill acquired as a result of the acquisition of UNS (see Note 2) is
amortized over 20 years using the straight-line method. Management periodically
reviews goodwill for permanent diminution in value. As at March 31, 2001,
goodwill is net of accumulated amortization of $0.2 million.

5.  CASH FLOWS

     Cash interest paid during the three-month periods ended March 31, 2001 and
2000 totalled approximately $18.0 million and $14.9 million, respectively.

6.  INCOME TAXES

     The legal jurisdictions of the countries in which Teekay and the majority
of its subsidiaries are incorporated do not impose income taxes upon
shipping-related activities. The Company's Australian ship-owning subsidiaries
and Norwegian subsidiary UNS are subject to income taxes (see Note 10). Included
in other long-term liabilities are deferred income taxes of $34.0 million at
March 31, 2001 and $4.2 million at December 31, 2000. The Company accounts for
such taxes using the liability method pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".

7.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                  MARCH 31,    DECEMBER 31,
                                                                    2001           2000
                                                                  ---------    ------------
                                                                      $             $
    <S>                                                           <C>          <C>

    Revolving Credit Facilities.................................    424,843      415,800

    First Preferred Ship Mortgage Notes (8.32%) due through
      2008......................................................    189,274      189,274

    Term Loans due through 2009.................................    494,577      192,410
                                                                  ---------      -------

                                                                  1,108,694      797,484

    Less current portion........................................    123,058       72,170
                                                                  ---------      -------

                                                                    985,636      725,314
                                                                  =========      =======
</TABLE>

     The Company has two long-term Revolving Credit Facilities (the "Revolvers")
available which, as at March 31, 2001, provided for borrowings of up to $555.8
million. Interest payments are based on LIBOR (March 31, 2001: 4.88%; December
31, 2000: 6.40%) plus a margin depending on the financial leverage of the
Company; at March 31, 2001 the margins ranged between 0.50% and 0.85% (December
31, 2000: 0.50% and 0.85%). The amount available under the Revolvers reduces
semi-annually with final balloon reductions in 2006 and 2008. The Revolvers are
collateralized by first priority mortgages granted on 33 of the Company's
vessels, together with certain other related collateral, and a guarantee from
Teekay for all amounts outstanding under the Revolvers.

     The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the
"8.32% Notes") are collateralized by first preferred mortgages on seven of the
Company's Aframax tankers, together with

                                       F-8
<PAGE>   115
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
  (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
       (INFORMATION AS AT MARCH 31, 2001 AND FOR THE THREE-MONTH PERIODS
                  ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)

certain other related collateral, and are guaranteed by seven subsidiaries of
the Company that own the mortgaged vessels (the "8.32% Notes Guarantor
Subsidiaries") to a maximum of 95% of the fair value of their net assets. As at
March 31, 2001, the fair value of these net assets approximated $233.9 million.
The 8.32% Notes are also subject to a sinking fund, which will retire $45.0
million principal amount of the 8.32% Notes on each February 1, commencing 2004.

     Condensed financial information regarding the Company, the 8.32% Notes
Guarantor Subsidiaries, and non-guarantor subsidiaries of the Company is set out
in Schedule A of these consolidated financial statements.

     The Company has several term loans outstanding, which, as at March 31,
2001, totalled $494.6 million. Interest payments are based on LIBOR plus a
margin. As at March 31, 2001, the margins ranged between 0.50% and 1.50%. The
term loans reduce in quarterly or semi-annual payments with varying maturities
through 2009. All term loans of the Company are collateralized by first
preferred mortgages on the vessels to which the loans relate, together with
certain other collateral, and guarantees from Teekay. Term loans of UNS are not
guaranteed by Teekay.

8.  CAPITAL STOCK

     The authorized capital stock of the Company at March 31, 2001 is 25,000,000
shares of Preferred Stock, with a par value of $1 per share, and 725,000,000
shares of Common Stock with a par value of $0.001 per share. As at March 31,
2001, the Company had 39,401,597 shares of Common Stock and no shares of
Preferred Stock issued and outstanding.

     As at March 31, 2001, the Company had reserved 4,655,497 shares of Common
Stock for issuance upon exercise of options granted pursuant to the Company's
1995 Stock Option Plan. As at March 31, 2001, options to purchase a total of
3,401,720 shares of the Company's Common Stock were outstanding, of which
1,196,227 options were then exercisable at prices ranging from $16.875 to $33.50
per share and a weighted average exercise price of $23.74 per share. The
remaining outstanding options have exercise prices ranging from $16.875 to
$41.19 per share and a weighted average exercise price of $26.67 per share. All
outstanding options expire between July 19, 2005 and March 15, 2011, ten years
after the date of each respective grant.

     The Company's basic earnings per share is based upon the following weighted
average number of common shares outstanding: 39,229,776 shares for the
three-month period ended March 31, 2001; and 38,069,614 shares for the
three-month period ended March 31, 2000. Diluted earnings per share is based
upon the following weighted average number of common shares outstanding adjusted
for the effect of dilution: 40,339,978 shares for the three-month period ended
March 31, 2001; and 38,255,512 shares for the three-month period ended March 31,
2000.

9.  COMMITMENTS AND CONTINGENCIES

     As at March 31, 2001, UNS was committed to the construction of three
newbuilding shuttle tankers, having an aggregate cost of $160.8 million. A joint
venture company, 50%-owned by UNS, was committed to the construction of one
additional newbuilding shuttle tanker, having a cost of approximately $63.4
million. The newbuilding vessels are scheduled for delivery between May 2001 and
September 2003. As of March 31, 2001, there have been payments made towards
these commitments of $60.8 million (including $18.9 million made by the
50%-owned joint venture) and long-term financing arrangements exist for $122.3
million (including $44.5 million for the 50%-owned joint venture) of the
                                       F-9
<PAGE>   116
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
  (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
       (INFORMATION AS AT MARCH 31, 2001 AND FOR THE THREE-MONTH PERIODS
                  ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)

unpaid cost of these vessels. It is the Company's intention to finance the
remaining unpaid amount of $41.1 million through either additional debt
borrowings or surplus cash balances, or a combination thereof. The remaining
payments required to be made under these newbuilding contracts are as follows:
$67.0 million in 2001, $43.3 million in 2002 and $53.1 million in 2003. Of the
$67.0 million due in 2001, $44.5 million will be paid by the 50%-owned joint
venture.

     The Company has guaranteed its share of the outstanding mortgage debt in
the joint venture companies Soponata-Teekay Limited, P/R Stena Ugland
Shuttletankers I DA, and P/R Stena Ugland Shuttletankers II DA, which are
50%-owned by the Company. As of March 31, 2001, the Company has guaranteed $92.8
million of such debt, or 50% of the total $185.6 million in outstanding mortgage
debt of the joint venture companies. These joint venture companies together own
five vessels (one Aframax, two Suezmax, and two shuttle tankers).

     The Company has guaranteed its share of committed, uncalled capital in
certain limited partnerships, which own two of the Company's oil/bulk/ore
carriers. As at March 31, 2001, the Company has guaranteed $1.7 million of such
capital.

10. OTHER INCOME (LOSS)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ---------------------
                                                               2001           2000
                                                              ------         ------
                                                                $              $
<S>                                                           <C>            <C>
Loss on disposition of vessels and equipment................      --         (1,009)
Gain on disposition of available-for-sale securities........   2,707             --
Equity income from joint ventures...........................   2,793            819
Future income taxes.........................................    (671)          (500)
Miscellaneous...............................................  (3,893)          (402)
                                                              ------         ------
                                                                 936         (1,092)
                                                              ======         ======
</TABLE>

11. DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities", which establishes new
standards for recording derivatives in interim and annual financial statements.
This statement requires the recording of all derivative instruments as assets or
liabilities, measured at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
upon the nature of the hedge, changes in the fair value of the derivatives are
either offset against the fair value of assets, liabilities or firm commitments
through income, or recognized in other comprehensive income until the hedged
item is recognized into income. The ineffective portion of a derivative's change
in fair value will be immediately recognized into income. SFAS 133, as amended
by Statements of Financial Accounting Standards No. 137 and No. 138, is
effective for fiscal years beginning after June 15, 2000.

     The Company adopted SFAS 133 on January 1, 2001. The Company recognized the
fair value of its derivatives as assets of $2.2 million and liabilities of $1.3
million on its consolidated balance sheet as of January 1, 2001. These amounts
were recorded as a cumulative effect of an accounting change as an adjustment to
stockholders' equity through other comprehensive income. There was no impact on
net

                                       F-10
<PAGE>   117
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
  (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
       (INFORMATION AS AT MARCH 31, 2001 AND FOR THE THREE-MONTH PERIODS
                  ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)

income. In addition, a deferred gain of $3.2 million on unwound interest rate
swap agreements presented as other long-term liabilities at December 31, 2000,
was reclassified to accumulated other comprehensive income and will be
recognized into earnings over the hedged term of the debt.

     The Company only used derivatives for hedging purposes. The following
summarizes the Company's risk strategies with respect to market risk from
foreign currency fluctuations and changes in interest rates and the effect of
these strategies on the Company's financial statements. The Company has a
foreign currency cash flow hedging program to protect against the increase in
cost of certain forecasted foreign currency cash flows resulting from voyage,
vessel operating, drydocking and general and administrative expenditures that
have been forecasted to occur over the next three years. The Company hedges
portions of its forecasted expenditures denominated in foreign currencies with
forward contracts. As at March 31, 2001, the Company was committed to foreign
exchange contracts for the forward purchase of approximately Japanese Yen 100.0
million, Singapore Dollars 11.6 million, Norwegian Kroner 137.7 million,
Canadian Dollars 46.2 million and Euros 5.4 million for U.S. Dollars, at an
average rate of Japanese Yen 119.5 per U.S. Dollar, Singapore Dollar 1.72 per
U.S. Dollar, Norwegian Kroner 9.44 per U.S. Dollar, Canadian Dollar 1.54 per
U.S. Dollar and Euros 1.09 per U.S. Dollar, respectively.

     As at March 31, 2001, the Company was committed to a series of interest
rate swap agreements whereby $145.0 million of the Company's floating rate debt
was swapped with fixed rate obligations having a weighted average remaining term
of 1.3 years, expiring between December 2001 and May 2004. These agreements
effectively change the Company's interest rate exposure on $145.0 million of
debt from a floating LIBOR rate to an average fixed rate of 6.46%. The Company
is exposed to credit loss in the event of non-performance by the counter parties
to the interest rate swap agreements; however, the Company does not anticipate
non-performance by any of the counter parties.

     During the three-month period ended March 31, 2001, the Company recognized
a net loss of $0.5 million relating to the ineffective portion of its foreign
currency forward contracts and $0.1 million relating to the ineffective portion
of its interest rate swap agreements. The ineffective portion of the foreign
currency forward contracts and interest rate swap agreements are presented as
other income (loss) and interest expense, respectively.

     As at March 31, 2001, the Company estimates, based on current foreign
exchange and interest rates, that it will reclassify $0.1 million of net loss on
derivative instruments from accumulated other comprehensive income to earnings
during the next twelve months due to actual voyage, vessel operating, drydocking
and general and administrative expenditures and the payment of interest expense
associated with the floating-rate debt.

12. SUBSEQUENT EVENTS

     On April 2, 2001, the Company, through its subsidiary UNS, purchased four
shuttle tankers for $95.0 million. The purchase was financed with long-term debt
borrowings bearing interest at LIBOR plus 1.25% due April 2006.

     On April 25, 2001, a joint venture in which the Company owns a 50%
interest, entered into an agreement to sell its three vessels. The vessels are
scheduled for delivery between July 15, 2001 and August 30, 2001.

                                       F-11
<PAGE>   118
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
  (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
       (INFORMATION AS AT MARCH 31, 2001 AND FOR THE THREE-MONTH PERIODS
                  ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)

     On April 26, 2001, the Company purchased an additional 34% interest in UNS
for $75.2 million cash, or at a price of Norwegian Kroner 140 per share, to
bring the Company's total ownership in UNS to approximately 98%. The Company
intends to commence a compulsory acquisition of the remaining shares held by
minority shareholders, with a view to applying for a delisting of the UNS shares
from the Oslo Stock Exchange soon thereafter.

                                       F-12
<PAGE>   119

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
              CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31, 2001
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net voyage revenues...................          --           8,781         276,534         (40,159)       245,156
Operating expenses....................       2,793           8,740         118,047         (40,159)        89,421
                                           -------         -------         -------        --------        -------
  (Loss) income from vessel
    operations........................      (2,793)             41         158,487               0        155,735
Net interest expense..................      (2,746)             --          (9,237)             --        (11,983)
Equity in net income of
  subsidiaries........................     147,858              --              --        (147,858)            --
Other income..........................       2,369              --          (1,433)             --            936
                                           -------         -------         -------        --------        -------
NET INCOME............................     144,688              41         147,817        (147,858)       144,688
Retained earnings (deficit), beginning
  of the period.......................     641,149         (18,969)        671,069        (652,100)       641,149
Adjustment for equity income on step
  acquisition.........................         198              --              --              --            198
Dividends declared....................      (8,417)             --              --              --         (8,417)
                                           -------         -------         -------        --------        -------
RETAINED EARNINGS (DEFICIT), END OF
  THE PERIOD..........................     777,618         (18,928)        818,886        (799,958)       777,618
                                           =======         =======         =======        ========        =======
</TABLE>

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net voyage revenues...................          --           9,257         147,888         (37,078)       120,067
Operating expenses....................         142           7,952         104,722         (30,517)        82,299
                                           -------         -------         -------        --------        -------
  (Loss) income from vessel
    operations........................        (142)          1,305          43,166          (6,561)        37,768
Net interest (expense) income.........      (4,761)             46         (12,021)             --        (16,736)
Equity in net income of
  subsidiaries........................      24,843              --              --         (24,843)            --
Other loss............................          --              --          (1,092)             --         (1,092)
                                           -------         -------         -------        --------        -------
NET INCOME............................      19,940           1,351          30,053         (31,404)        19,940
Retained earnings (deficit), beginning
  of the period.......................     404,130         (28,950)        369,370        (340,420)       404,130
Dividends declared....................      (8,184)             --              --              --         (8,184)
                                           -------         -------         -------        --------        -------
RETAINED EARNINGS (DEFICIT), END OF
  THE PERIOD..........................     415,886         (27,599)        399,423        (371,824)       415,886
                                           =======         =======         =======        ========        =======
</TABLE>

- ---------------

(See Note 7)

                                       F-13
<PAGE>   120

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                  CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31, 2001
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net income............................     144,688             41          147,817        (147,858)       144,688
Other comprehensive income
  Unrealized loss on
    available-for-sale securities.....          --             --           (1,503)             --         (1,503)
  Reclassification adjustment for gain
    on available-for-sale securities
    included in net income............          --             --           (4,946)             --         (4,946)
  Cumulative effect of accounting
    change............................          --             --            4,155              --          4,155
  Unrealized loss on derivative
    instruments.......................          --             --           (3,314)             --         (3,314)
  Reclassification adjustment for gain
    on derivative instruments.........          --             --             (390)             --           (390)
                                           -------          -----          -------        --------        -------
COMPREHENSIVE INCOME..................     144,688             41          141,819        (147,858)       138,690
                                           =======          =====          =======        ========        =======
</TABLE>

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net income............................      19,940          1,351           30,053         (31,404)        19,940
Other comprehensive income............          --             --               --              --             --
                                           -------          -----          -------        --------        -------
COMPREHENSIVE INCOME..................      19,940          1,351           30,053         (31,404)        19,940
                                           =======          =====          =======        ========        =======
</TABLE>

- ---------------

(See Note 7)

                                       F-14
<PAGE>   121

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                            CONDENSED BALANCE SHEETS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    AS AT MARCH 31, 2001
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
ASSETS
Cash and cash equivalents.............          188             --          296,752              --        296,940
Other current assets..................        1,146            736          204,756         (96,000)       110,638
                                          ---------        -------        ---------      ----------      ---------
  Total current assets................        1,334            736          501,508         (96,000)       407,578
Vessels and equipment (net)...........           --        276,076        1,668,132              --      1,944,208
Advances due from subsidiaries........       77,002             --               --         (77,002)            --
Other assets (principally marketable
  securities and investments in
  subsidiaries).......................    1,352,411             10           61,326      (1,352,421)        61,326
Investment in joint venture...........           --             --           46,402              --         46,402
Goodwill..............................           --             --           58,818              --         58,818
                                          ---------        -------        ---------      ----------      ---------
                                          1,430,747        276,822        2,336,186      (1,525,423)     2,518,332
                                          =========        =======        =========      ==========      =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities...................        5,250          1,506          281,634         (96,000)       192,390
Long-term debt........................      189,274             --          834,920              --      1,024,194
Due to (from) affiliates..............           --        (75,086)         192,512        (117,427)            --
                                          ---------        -------        ---------      ----------      ---------
  Total liabilities...................      194,524        (73,580)       1,309,066        (213,427)     1,216,584
                                          ---------        -------        ---------      ----------      ---------
Minority Interest.....................           --             --           66,968              --         66,968
Stockholders' Equity
Capital stock.........................      458,605             23            5,943          (5,966)       458,605
Contributed capital...................           --        369,307          136,766        (506,073)            --
Retained earnings (deficit)...........      777,618        (18,928)         818,886        (799,957)       777,618
Accumulated other comprehensive loss..           --             --           (1,443)             --         (1,443)
                                          ---------        -------        ---------      ----------      ---------
  Total stockholders' equity..........    1,236,223        350,402          960,152      (1,311,996)     1,234,780
                                          ---------        -------        ---------      ----------      ---------
                                          1,430,747        276,822        2,336,186      (1,525,423)     2,518,332
                                          =========        =======        =========      ==========      =========
</TABLE>

- ---------------

(See Note 7)

                                       F-15
<PAGE>   122

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                            CONDENSED BALANCE SHEETS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   AS AT DECEMBER 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
ASSETS
Cash and cash equivalents.............          294             --          181,006              --        181,300
Other current assets..................           45            725          209,425         (96,000)       114,195
                                          ---------        -------        ---------      ----------      ---------
  Total current assets................          339            725          390,431         (96,000)       295,495
Vessels and equipment (net)...........           --        281,377        1,326,339              --      1,607,716
Advances due from subsidiaries........       58,068             --               --         (58,068)            --
Other assets (principally marketable
  securities and investments in
  subsidiaries).......................    1,229,756             --           50,414      (1,229,756)        50,414
Investment in joint venture...........           --             --           20,474              --         20,474
                                          ---------        -------        ---------      ----------      ---------
                                          1,288,163        282,102        1,787,658      (1,383,824)     1,974,099
                                          =========        =======        =========      ==========      =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities...................        4,932          1,371          228,032         (96,000)       138,335
Long-term debt........................      189,274             --          543,408              --        732,682
Due to (from) affiliates..............           --        (69,630)         193,315        (123,685)            --
                                          ---------        -------        ---------      ----------      ---------
  Total liabilities...................      194,206        (68,259)         964,755        (219,685)       871,017
                                          ---------        -------        ---------      ----------      ---------
Minority Interest.....................           --             --            4,570              --          4,570
Stockholders' Equity
Capital stock.........................      452,808             23            5,943          (5,966)       452,808
Contributed capital...................           --        369,307          136,766        (506,073)            --
Retained earnings (deficit)...........      641,149        (18,969)         671,069        (652,100)       641,149
Accumulated other comprehensive
  income..............................           --             --            4,555              --          4,555
                                          ---------        -------        ---------      ----------      ---------
  Total stockholders' equity..........    1,093,957        350,361          818,333      (1,164,139)     1,098,512
                                          ---------        -------        ---------      ----------      ---------
                                          1,288,163        282,102        1,787,658      (1,383,824)     1,974,099
                                          =========        =======        =========      ==========      =========
</TABLE>

- ---------------

(See Note 7)

                                       F-16
<PAGE>   123

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31, 2001
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Cash and cash equivalents provided by
  (used for)..........................
                                           -------          ------         -------        --------        -------
OPERATING ACTIVITIES
  Net cash flow from operating
    activities........................      21,250           6,139         137,123              --        164,512
                                           -------          ------         -------        --------        -------
FINANCING ACTIVITIES
Proceeds from long-term debt..........          --              --         143,500              --        143,500
Scheduled repayments of long-term
  debt................................          --              --          (5,790)             --         (5,790)
Prepayments of long-term debt.........          --              --         (92,118)             --        (92,118)
Other.................................     (21,555)         (6,016)         24,951              --         (2,620)
                                           -------          ------         -------        --------        -------
  Net cash flow from financing
    activities........................     (21,555)         (6,016)         70,543              --         42,972
                                           -------          ------         -------        --------        -------
INVESTING ACTIVITIES
Expenditures for vessels and
  equipment...........................          --            (114)         (3,520)             --         (3,634)
Expenditure for the purchase of Ugland
  Nordic Shipping ASA.................         199              --         (97,343)             --        (97,144)
Other.................................          --              (9)          8,943              --          8,934
                                           -------          ------         -------        --------        -------
  Net cash flow from investing
    activities........................         199            (123)        (91,920)             --        (91,844)
                                           -------          ------         -------        --------        -------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS.........................        (106)             --         115,746              --        115,640
Cash and cash equivalents, beginning
  of the period.......................         294              --         181,006              --        181,300
                                           -------          ------         -------        --------        -------
CASH AND CASH EQUIVALENTS, END OF THE
  PERIOD..............................         188              --         296,752              --        296,940
                                           =======          ======         =======        ========        =======
</TABLE>

- ---------------

(See Note 7)

                                       F-17
<PAGE>   124

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Cash and cash equivalents provided by
  (used for)..........................
                                           -------          ------         -------        --------        -------
OPERATING ACTIVITIES
  Net cash flow from operating
    activities........................      (9,679)          5,101          44,803              --         40,225
                                           -------          ------         -------        --------        -------
FINANCING ACTIVITIES
Scheduled repayments of long-term
  debt................................          --              --            (606)             --           (606)
Prepayments of long-term debt.........          --              --         (10,000)             --        (10,000)
Other.................................       9,626               2         (16,908)             --         (7,280)
                                           -------          ------         -------        --------        -------
  Net cash flow from financing
    activities........................       9,626               2         (27,514)             --        (17,886)
                                           -------          ------         -------        --------        -------
INVESTING ACTIVITIES
Expenditures for vessels and
  equipment...........................          --            (113)         (2,937)             --         (3,050)
Proceeds from disposition of assets...          --              --           9,705              --          9,705
Acquisition costs related to purchase
  of Bona Shipholding Ltd.............          --              --          (1,716)             --         (1,716)
Other.................................          --              --          (8,911)             --         (8,911)
                                           -------          ------         -------        --------        -------
  Net cash flow from investing
    activities........................          --            (113)         (3,859)             --         (3,972)
                                           -------          ------         -------        --------        -------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS.........................         (53)          4,990          13,430              --         18,367
Cash and cash equivalents, beginning
  of the period.......................         210          39,652         180,465              --        220,327
                                           -------          ------         -------        --------        -------
CASH AND CASH EQUIVALENTS, END OF THE
  PERIOD..............................         157          44,642         193,895              --        238,694
                                           =======          ======         =======        ========        =======
</TABLE>

- ---------------

(See Note 7)

                                       F-18
<PAGE>   125

                                AUDITOR'S REPORT

To the Board of Directors of
TEEKAY SHIPPING CORPORATION

     We have audited the accompanying consolidated balance sheets of TEEKAY
SHIPPING CORPORATION AND SUBSIDIARIES as of December 31, 2000 and 1999, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year ended December 31, 2000, the nine month period ended
December 31, 1999 and the year ended March 31, 1999. Our audits also included
Schedule A. These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Teekay Shipping
Corporation and subsidiaries as at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 2000, the nine month period ended December 31, 1999 and the year
ended March 31, 1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material aspects the information set forth therein.

Nassau, Bahamas,                                               /s/ ERNST & YOUNG
February 16, 2001                                          Chartered Accountants
(except for note 13 which is as of March 6, 2001)

                                       F-19
<PAGE>   126

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
            (IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                  YEAR ENDED     NINE MONTHS ENDED    YEAR ENDED
                                                 DECEMBER 31,      DECEMBER 31,       MARCH 31,
                                                     2000              1999              1999
                                                 ------------    -----------------    ----------
                                                     $                $                  $
<S>                                              <C>             <C>                  <C>
NET VOYAGE REVENUES
Voyage revenues................................    893,226            377,882          411,922
Voyage expenses................................    248,957            129,532           93,511
                                                   -------            -------          -------
Net voyage revenues............................    644,269            248,350          318,411
                                                   -------            -------          -------
OPERATING EXPENSES
Vessel operating expenses......................    125,415             98,780           84,397
Time charter hire expense......................     53,547             30,681           29,666
Depreciation and amortization..................    100,153             68,299           93,712
General and administrative.....................     37,479             27,018           25,002
                                                   -------            -------          -------
                                                   316,594            224,778          232,777
                                                   -------            -------          -------
INCOME FROM VESSEL OPERATIONS..................    327,675             23,572           85,634
                                                   -------            -------          -------
OTHER ITEMS
Interest expense...............................    (74,540)           (44,996)         (44,797)
Interest income................................     13,021              5,842            6,369
Other income (loss) (note 11)..................      3,864             (4,013)           5,506
                                                   -------            -------          -------
                                                   (57,655)           (43,167)         (32,922)
                                                   -------            -------          -------
Net income (loss) before extraordinary loss....    270,020            (19,595)          52,712
Extraordinary loss on bond redemption (note
  6)...........................................         --                 --           (7,306)
                                                   -------            -------          -------
NET INCOME (LOSS)..............................    270,020            (19,595)          45,406
                                                   =======            =======          =======
BASIC EARNINGS PER COMMON SHARE (note 9)
- - Net income (loss) before extraordinary
  loss.........................................       7.02              (0.54)            1.70
- - Net income (loss)............................       7.02              (0.54)            1.46
DILUTED EARNINGS PER COMMON SHARE (note 9)
- - Net income (loss) before extraordinary
  loss.........................................       6.86              (0.54)            1.70
- - Net income (loss)............................       6.86              (0.54)            1.46
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-20
<PAGE>   127

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                AS AT                AS AT
                                                          DECEMBER 31, 2000    DECEMBER 31, 1999
                                                          -----------------    -----------------
                                                                  $                    $
<S>                                                       <C>                  <C>
ASSETS
CURRENT
Cash and cash equivalents...............................        181,300              220,327
Marketable securities (note 4)..........................          8,081                   --
Accounts receivable.....................................         80,158               30,753
Prepaid expenses and other assets.......................         25,956               29,579
                                                              ---------            ---------
TOTAL CURRENT ASSETS....................................        295,495              280,659
                                                              ---------            ---------
Marketable securities (note 4)..........................         33,742                6,054
VESSELS AND EQUIPMENT (notes 1 and 6)
At cost, less accumulated depreciation of $680,756
  (December 31, 1999 -- $624,727).......................      1,607,716            1,663,517
Investment in joint venture.............................         20,474               19,402
Other assets............................................         16,672               13,052
                                                              ---------            ---------
                                                              1,974,099            1,982,684
                                                              =========            =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable........................................         22,084               20,431
Accrued liabilities (note 5)............................         44,081               39,515
Current portion of long-term debt (note 6)..............         72,170               66,557
                                                              ---------            ---------
TOTAL CURRENT LIABILITIES...............................        138,335              126,503
                                                              ---------            ---------
Long-term debt (note 6).................................        725,314            1,018,610
Other long-term liabilities.............................          7,368                3,400
                                                              ---------            ---------
TOTAL LIABILITIES.......................................        871,017            1,148,513
                                                              ---------            ---------
MINORITY INTEREST.......................................          4,570                2,104
STOCKHOLDERS' EQUITY
Capital stock (note 9)..................................        452,808              427,937
Retained earnings.......................................        641,149              404,130
Accumulated other comprehensive income..................          4,555                   --
                                                              ---------            ---------
TOTAL STOCKHOLDERS' EQUITY..............................      1,098,512              832,067
                                                              ---------            ---------
                                                              1,974,099            1,982,684
                                                              =========            =========
</TABLE>

Commitments and contingencies (notes 7 and 10)

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-21
<PAGE>   128

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                             YEAR ENDED        NINE MONTHS ENDED      YEAR ENDED
                                          DECEMBER 31, 2000    DECEMBER 31, 1999    MARCH 31, 1999
                                          -----------------    -----------------    --------------
                                                  $                    $                  $
<S>                                       <C>                  <C>                  <C>
Cash and cash equivalents provided by
  (used for)
OPERATING ACTIVITIES
Net income (loss).......................       270,020              (19,595)             45,406
Non-cash items:
Depreciation and amortization...........       100,153               68,299              93,712
Loss (gain) on disposition of assets....         1,004                   --              (7,117)
Loss on bond redemption.................            --                   --               7,306
Equity income (net of dividends
  received: December 31, 2000 -- $8,474;
  December 31, 1999 -- $Nil)............        (1,072)                (721)                 --
Future income taxes.....................           999                1,500               1,900
Other -- net............................        (1,173)               1,134               1,218
Change in non-cash working capital items
  related to operating activities (note
  12)...................................       (36,676)                 896              (4,717)
                                              --------              -------            --------
NET CASH FLOW FROM OPERATING
  ACTIVITIES............................       333,255               51,513             137,708
                                              --------              -------            --------
FINANCING ACTIVITIES
Proceeds from long-term debt............       206,000              100,000             230,000
Scheduled repayments of long-term
  debt..................................       (63,757)             (32,252)            (50,577)
Prepayments of long-term debt...........      (429,926)             (10,000)           (268,034)
Net proceeds from issuance of Common
  Stock.................................        24,843                   --              68,751
Cash dividends paid.....................       (32,973)             (23,150)            (26,222)
Other...................................         2,970                   --                (690)
                                              --------              -------            --------
NET CASH FLOW FROM FINANCING
  ACTIVITIES............................      (292,843)              34,598             (46,772)
                                              --------              -------            --------
INVESTING ACTIVITIES
Expenditures for vessels and
  equipment.............................       (43,512)             (23,313)            (85,445)
Expenditures for drydocking.............       (11,941)              (6,598)            (11,749)
Proceeds from disposition of assets.....         9,713                   --              23,435
Net cash acquired through purchase of
  Bona Shipholding Ltd. (note 3)........            --               51,774                  --
Acquisition costs related to purchase of
  Bona Shipholding Ltd. (note 3)........        (2,685)             (13,806)                 --
Proceeds on sale of available-for-sale
  securities............................            --               13,724              13,305
Purchases of available-for-sale
  securities............................       (31,014)              (6,000)                 --
                                              --------              -------            --------
NET CASH FLOW FROM INVESTING
  ACTIVITIES............................       (79,439)              15,781             (60,454)
                                              --------              -------            --------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS...........................       (39,027)             101,892              30,482
Cash and cash equivalents, beginning of
  the period............................       220,327              118,435              87,953
                                              --------              -------            --------
CASH AND CASH EQUIVALENTS, END OF THE
  PERIOD................................       181,300              220,327             118,435
                                              ========              =======            ========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-22
<PAGE>   129

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                              ACCUMULATED
                                         THOUSANDS OF                            OTHER       COMPREHENSIVE       TOTAL
                                            COMMON      COMMON    RETAINED   COMPREHENSIVE      INCOME       STOCKHOLDERS'
                                            SHARES       STOCK    EARNINGS      INCOME          (LOSS)          EQUITY
                                         ------------   -------   --------   -------------   -------------   -------------
                                             #             $         $           $               $                $
<S>                                      <C>            <C>       <C>        <C>             <C>             <C>
BALANCE AS AT MARCH 31, 1998...........     28,833      261,353   428,102           --                           689,455
                                            ------      -------   -------        -----                         ---------
Net income.............................                            45,406                        45,406           45,406
Other comprehensive income.............                                                              --
                                                                                                -------
Comprehensive income...................                                                          45,406
                                                                                                -------
Dividends declared.....................                           (26,611)                                       (26,611)
June 15, 1998 share offering (2,800,000
  shares at $24.7275 per share of
  common stock net of share issue
  costs) (note 9)......................      2,800      68,700                                                    68,700
Reinvested dividends...................         13         389                                                       389
Exercise of stock options..............          2          51                                                        51
                                            ------      -------   -------        -----                         ---------
BALANCE AS AT MARCH 31, 1999...........     31,648      330,493   446,897           --                           777,390
                                            ------      -------   -------        -----                         ---------
Net income (loss)......................                           (19,595)                      (19,595)         (19,595)
Other comprehensive income.............                                                              --
                                                                                                -------
Comprehensive income (loss)............                                                         (19,595)
                                                                                                -------
Dividends declared.....................                           (23,172)                                       (23,172)
June 11, 1999 common stock issued on
  acquisition of Bona Shipholding Ltd.
  (note 3).............................      6,415      97,422                                                    97,422
Reinvested dividends...................          1          22                                                        22
                                            ------      -------   -------        -----                         ---------
BALANCE AS AT DECEMBER 31, 1999........     38,064      427,937   404,130           --                           832,067
                                            ------      -------   -------        -----                         ---------
Net income.............................                           270,020                       270,020          270,020
Other comprehensive income:
  Unrealized gain on available-for-sale
    securities (note 4)                                                          4,555            4,555            4,555
                                                                                                -------
Comprehensive income...................                                                         274,575
                                                                                                -------
Dividends declared.....................                           (33,001)                                       (33,001)
Reinvested dividends...................          1          28                                                        28
Exercise of stock options..............      1,080      24,843                                                    24,843
                                            ------      -------   -------        -----                         ---------
BALANCE AS AT DECEMBER 31, 2000........     39,145      452,808   641,149        4,555                         1,098,512
                                            ======      =======   =======        =====                         =========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-23
<PAGE>   130

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. They include the
accounts of Teekay Shipping Corporation ("Teekay"), which is incorporated under
the laws of the Republic of the Marshall Islands, and its wholly owned or
controlled subsidiaries (the "Company"). Significant intercompany items and
transactions have been eliminated upon consolidation.

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

     Certain of the comparative figures have been reclassified to conform with
the presentation adopted in the current period.

REPORTING CURRENCY

     The consolidated financial statements are stated in U.S. dollars because
the Company operates in international shipping markets which utilize the U.S.
dollar as the functional currency.

CHANGE IN FISCAL YEAR END

     The Company changed its fiscal year end from March 31 to December 31,
effective December 31, 1999. The following is a summary of selected financial
information for the comparative twelve month periods ended December 31, 2000,
1999 and 1998.

<TABLE>
<CAPTION>
                                                 TWELVE MONTHS    TWELVE MONTHS    TWELVE MONTHS
                                                     ENDED            ENDED            ENDED
                                                 DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                     2000             1999             1998
                                                 -------------    -------------    -------------
                                                  (UNAUDITED)      (UNAUDITED)      (UNAUDITED)
                                                       $                $                $
<S>                                              <C>              <C>              <C>
RESULTS OF OPERATIONS
Net voyage revenues............................     644,269          318,348          327,016
Income from vessel operations..................     327,675           34,189          103,660
Net income (loss) before extraordinary loss....     270,020          (17,723)          66,451
Net income (loss)..............................     270,020          (17,723)          59,145
Net income (loss) before extraordinary loss per
  common share
  -- basic.....................................        7.02            (0.50)            2.19
  -- diluted...................................        6.86            (0.50)            2.19
Net income (loss) per common share
  -- basic.....................................        7.02            (0.50)            1.95
  -- diluted...................................        6.86            (0.50)            1.95
CASH FLOWS
Net cash flow from operating activities........     333,255           71,633          151,779
Net cash flow from financing activities........    (292,843)          76,948          (74,407)
Net cash flow from investing activities........     (79,439)           5,613         (127,372)
</TABLE>

                                       F-24
<PAGE>   131
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

OPERATING REVENUES AND EXPENSES

     Voyage revenues and expenses are recognized on the percentage of completion
method of accounting. Effective December 31, 1999 the Company refined its
estimation process from a load-to-load basis to a discharge-to-discharge basis
under the percentage of completion method to more precisely reflect net voyage
revenues. This refinement in accounting estimate resulted in a one-time increase
in net voyage revenues of $5.7 million, or 16 cents per share, for the nine
month period ended December 31, 1999.

     Estimated losses on voyages are provided for in full at the time such
losses become evident. The consolidated balance sheets reflect the deferred
portion of revenues and expenses applicable to subsequent periods.

     Voyage expenses comprise all expenses relating to particular voyages,
including bunker fuel expenses, port fees, canal tolls, and brokerage
commissions. Vessel operating expenses comprise all expenses relating to the
operation of vessels, including crewing, repairs and maintenance, insurance,
stores, lubes, communications, and miscellaneous expenses.

MARKETABLE SECURITIES

     The Company's investments in marketable securities are classified as
available-for-sale securities and are carried at fair value. Net unrealized
gains or losses on available-for-sale securities, if material, are reported as a
component of other comprehensive income.

VESSELS AND EQUIPMENT

     All pre-delivery costs incurred during the construction of newbuildings,
including interest costs and supervision and technical costs, are capitalized.
The acquisition cost and all costs incurred to restore used vessel purchases to
the standard required to properly service the Company's customers are
capitalized. Depreciation is calculated on a straight-line basis over a vessel's
useful life from the date a vessel is initially placed in service.

     Effective April 1, 1999, the Company revised the estimated useful life of
its vessels from 20 years to 25 years, consistent with most other public tanker
companies. This change in accounting estimate resulted in a reduction of
depreciation expense of $22.5 million, or 62 cents per share, for the nine month
period ended December 31, 1999.

     Interest costs capitalized to vessels and equipment for the year ended
December 31, 2000, the nine month period ended December 31, 1999 and the year
ended March 31, 1999 aggregated $Nil, $1,710,000, and $3,018,000, respectively.

     Expenditures incurred during drydocking are capitalized and amortized on a
straight-line basis over the period until the next anticipated drydocking. When
significant drydocking expenditures recur prior to the expiry of this period,
the remaining balance of the original drydocking is expensed in the month of the
subsequent drydocking. Drydocking expenses amortized for the year ended December
31, 2000, the nine month period ended December 31, 1999 and the year ended March
31, 1999 aggregated $9,208,000, $6,275,000, and $8,583,000, respectively.

INVESTMENT IN JOINT VENTURE

     The Company has a 50% participating interest in the joint venture
(Soponata-Teekay Limited) which owns two Suezmax vessels and one Aframax vessel.
The joint venture is accounted for using the

                                       F-25
<PAGE>   132
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

equity method whereby the investment is carried at the Company's original cost
plus its proportionate share of undistributed earnings.

INVESTMENT IN THE PANAMAX O/B/O POOL

     All oil/bulk/ore carriers ("O/B/O") owned by the Company are operated
through a Panamax O/B/O Pool. The participants in the Pool are the companies
contributing vessel capacity to the Pool. The voyage revenues and expenses of
these vessels have been included on a 100% basis in the consolidated financial
statements. The minority pool participants' share of the result has been
deducted as time charter hire expense.

LOAN COSTS

     Loan costs, including fees, commissions and legal expenses, which are
presented as other assets are capitalized and amortized on a straight line basis
over the term of the relevant loan. Amortization of loan costs is included in
interest expense.

INTEREST RATE SWAP AGREEMENTS

     The differential to be paid or received, pursuant to interest rate swap
agreements, is accrued as interest rates change and is recognized as an
adjustment to interest expense. Premiums and receipts, if any, are recognized as
adjustments to interest expense over the lives of the individual contracts.

FORWARD CONTRACTS

     The Company enters into forward contracts as a hedge against changes in
certain foreign exchange rates. Market value gains and losses are deferred and
recognized during the period in which the hedged transaction is recorded in the
accounts.

CASH AND CASH EQUIVALENTS

     The Company classifies all highly liquid investments with a maturity date
of three months or less when purchased as cash and cash equivalents.

     Cash interest paid during the year ended December 31, 2000, the nine month
period ended December 31, 1999 and the year ended March 31, 1999 totaled
$77,073,000, $63,086,000, and $48,527,000, respectively.

INCOME TAXES

     The legal jurisdictions of the countries in which Teekay and the majority
of its subsidiaries are incorporated do not impose income taxes upon
shipping-related activities. The Company's Australian ship-owning subsidiaries
are subject to income taxes (see Note 11). The Company accounts for such taxes
using the liability method pursuant to Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".

ACCOUNTING FOR STOCK-BASED COMPENSATION

     Under Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation", disclosures of stock-based
compensation arrangements with employees are required and companies are
encouraged (but not required) to record compensation costs associated with
employee stock option awards, based on estimated fair values at the grant dates.
The
                                       F-26
<PAGE>   133
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in APB Opinion No. 25 ("APB 25") "Accounting
for Stock Issued to Employees" and has disclosed the required pro forma effect
on net income and earning per share as if the fair value method of accounting as
prescribed in SFAS 123 had been applied (see Note 9).

COMPREHENSIVE INCOME

     The Company follows Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
displaying comprehensive income and its components in the consolidated financial
statements.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
establishes new standards for recording derivatives in interim and annual
financial statements. This statement requires recording all derivative
instruments as assets or liabilities, measured at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending upon the nature of the hedge, changes in the fair value of
the derivatives are either offset against the fair value of assets, liabilities
or firm commitments through income, or recognized in other comprehensive income
until the hedged item is recognized in income. The ineffective portion of a
derivative's change in fair value will be immediately recognized in income.
Statement No. 133, as amended by FASB Statements No. 137 and No. 138, is
effective for fiscal years beginning after June 15, 2000.

     Based upon the Company's derivative position at December 31, 2000, the
Company estimates that upon adoption of Statement No. 133 it will recognize the
fair value of all derivatives as assets of $2,252,000 and liabilities of
$1,297,000 on its consolidated balance sheet. These amounts will be recorded as
an adjustment to stockholders' equity through other comprehensive income. There
will be no impact on net income. In addition, a deferred gain of $3,200,000 on
the unwound interest rate swap agreements presented as other long-term
liabilities at December 31, 2000, will be reclassified to accumulated other
comprehensive income and will be recognized into earnings over the hedged term
of the debt.

2.  BUSINESS OPERATIONS

     The Company is engaged in the ocean transportation of petroleum cargoes
worldwide through the ownership and operation of a fleet of tankers. All of the
Company's revenues are earned in international markets.

     Two customers, both international oil companies, individually accounted for
13% ($118,306,000) and 12% ($110,241,000) of the company's consolidated voyage
revenues during the year ended December 31, 2000. During the nine months ended
December 31, 1999, a single customer, also an international oil company,
accounted for 13% ($48,140,000) of the Company's consolidated voyage revenues.
During the year ended March 31, 1999, three customers, all international oil
companies, individually accounted for 12% ($51,411,000), 12% ($50,727,000) and
10% ($42,797,000), respectively, of the Company's consolidated voyage revenues.
No other customer accounted for more than 10% of the Company's consolidated
voyage revenues during the fiscal periods presented herein.

                                       F-27
<PAGE>   134
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

3.  ACQUISITION OF BONA SHIPHOLDING LTD.

     On June 11, 1999, Teekay purchased Bona Shipholding Ltd. ("Bona") for
aggregate consideration (including estimated transaction expenses of $19.0
million) of $450.3 million, consisting of $39.9 million in cash, $294.0 million
of assumed debt (net of cash acquired of $91.7 million) and the balance of $97.4
million in shares of Teekay's Common Stock. Bona's operating results are
reflected in these financial statements commencing the effective date of the
acquisition.

     The following table shows comparative summarized condensed pro forma
financial information for the nine month period ended December 31, 1999, and for
the year ended March 31, 1999 and gives effect to the acquisition as if it had
taken place April 1, 1998:

<TABLE>
<CAPTION>
                                                                       PRO FORMA
                                                              ---------------------------
                                                              NINE MONTHS
                                                                 ENDED        YEAR ENDED
                                                              DECEMBER 31,     MARCH 31,
                                                                  1999           1999
                                                              ------------    -----------
                                                              (UNAUDITED)     (UNAUDITED)
                                                                   $               $
<S>                                                           <C>             <C>
Net voyage revenues.........................................    272,469         463,696
Income from vessel operations...............................     26,127         132,122
Net income (loss) before extraordinary loss.................    (22,482)         86,505
Net income (loss)...........................................    (22,482)         79,199
Net income (loss) before extraordinary loss per common share
  -- basic and diluted......................................      (0.59)           2.31
Net income (loss) per common share
  -- basic and diluted......................................      (0.59)           2.11
</TABLE>

4.  INVESTMENTS IN MARKETABLE SECURITIES

<TABLE>
<CAPTION>
                                                                                      APPROXIMATE
                                                              GROSS        GROSS      MARKET AND
                                                            UNREALIZED   UNREALIZED    CARRYING
                                                    COST      GAINS        LOSSES       VALUES
                                                   ------   ----------   ----------   -----------
                                                     $          $            $             $
<S>                                                <C>      <C>          <C>          <C>
DECEMBER 31, 2000
Available-for-sale equity securities.............  17,032     4,577          --         21,609
Available-for-sale debt securities...............  20,236         8         (30)        20,214
                                                   ------     -----         ---         ------
                                                   37,268     4,585         (30)        41,823
                                                   ======     =====         ===         ======
DECEMBER 31, 1999
Available-for-sale debt securities...............   6,051         6          (3)         6,054
                                                   ======     =====         ===         ======
</TABLE>

                                       F-28
<PAGE>   135
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

     The cost and approximate market value of available-for-sale debt securities
by contractual maturity, as at December 31, 2000 and December 31, 1999, are
shown as follows:

<TABLE>
<CAPTION>
                                                                        APPROXIMATE
                                                                        MARKET AND
                                                                         CARRYING
                                                               COST       VALUES
                                                              ------    -----------
                                                                $            $
<S>                                                           <C>       <C>
DECEMBER 31, 2000
Less than one year..........................................   8,081       8,081
Due after one year through five years.......................  12,155      12,133
                                                              ------      ------
                                                              20,236      20,214
                                                              ======      ======
DECEMBER 31, 1999
Less than one year..........................................      --          --
Due after one year through five years.......................   6,051       6,054
                                                              ------      ------
                                                               6,051       6,054
                                                              ======      ======
</TABLE>

5.  ACCRUED LIABILITIES

<TABLE>
<CAPTION>
                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2000            1999
                                                              ------------    ------------
                                                                   $               $
<S>                                                           <C>             <C>
Voyage and vessel...........................................     26,461          12,469
Interest....................................................      9,444          12,619
Payroll and benefits........................................      8,176          14,427
                                                                 ------          ------
                                                                 44,081          39,515
                                                                 ======          ======
</TABLE>

6.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2000            1999
                                                              ------------    ------------
                                                                   $               $
<S>                                                           <C>             <C>
Revolving Credit Facilities.................................    415,800          634,000
First Preferred Ship Mortgage Notes (8.32%)
  U.S. dollar debt due through 2008.........................    189,274          225,000
Term Loans U.S. dollar debt due through 2009................    192,410          226,167
                                                                -------        ---------
                                                                797,484        1,085,167
Less current portion........................................     72,170           66,557
                                                                -------        ---------
                                                                725,314        1,018,610
                                                                =======        =========
</TABLE>

     The Company has two long-term Revolving Credit Facilities (the "Revolvers")
available, which, as at December 31, 2000, provided for borrowings of up to
$565.8 million. Interest payments are based on LIBOR (December 31, 2000: 6.4%;
December 31, 1999: 6.0%) plus a margin depending on the financial leverage of
the Company; at December 31, 2000, the margins ranged between 0.50% and 0.85%
(December 31, 1999: between 0.60% and 0.90%). The amount available under the
Revolvers reduces semi-annually with final balloon reductions in 2006 and 2008.
The Revolvers are collateralized

                                       F-29
<PAGE>   136
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

by first priority mortgages granted on thirty-four of the Company's vessels,
together with certain other related collateral, and a guarantee from the Company
for all amounts outstanding under the Revolvers.

     The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the
"8.32% Notes") are collateralized by first preferred mortgages on seven of the
Company's Aframax tankers, together with certain other related collateral, and
are guaranteed by seven subsidiaries of Teekay that own the mortgaged vessels
(the "8.32% Notes Guarantor Subsidiaries") to a maximum of 95% of the fair value
of their net assets. As at December 31, 2000, the fair value of these net assets
approximated $231.5 million. The 8.32% Notes are also subject to a sinking fund,
which will retire $45.0 million principal amount of the 8.32% Notes on each
February 1, commencing 2004. During June 2000, the Company repurchased a
principal amount of $35.7 million of the 8.32% Notes outstanding.

     Upon the 8.32% Notes achieving Investment Grade Status (as defined in the
Indenture) and subject to certain other conditions, the guarantees of the 8.32%
Notes Guarantor Subsidiaries will terminate, all of the collateral securing the
obligations of the Company and the 8.32% Notes Guarantor Subsidiaries under the
Indenture and the Security Documents (as defined in the Indenture) will be
released (whereupon the Notes will become general unsecured obligations of the
Company) and certain covenants under the Indenture will no longer be applicable
to the Company.

     Condensed financial information regarding the Company, the 8.32% Notes
Guarantor Subsidiaries, and non-guarantor subsidiaries of the Company is set out
in Schedule A of these consolidated financial statements.

     In August 1998, the Company redeemed the remaining $98.7 million of the
9 5/8% First Preferred Ship Mortgage Notes (the "9 5/8% Notes") which resulted
in an extraordinary loss of $7.3 million, or 24 cents per share, for the year
ended March 31, 1999.

     The Company has several term loans outstanding, which, as at December 31,
2000, totalled $192.4 million. Interest payments are based on LIBOR plus a
margin. At December 31, 2000, the margins ranged between 0.55% and 1.25%. The
term loans reduce in quarterly or semi-annual payments with varying maturities
through 2009. All term loans of the Company are collateralized by first
preferred mortgages on the vessels to which the loans relate, together with
certain other collateral, and guarantees from Teekay.

     As at December 31, 2000, the Company was committed to a series of interest
rate swap agreements whereby $100.0 million of the Company's floating rate debt
was swapped with fixed rate obligations having an average remaining term of 1.5
years, expiring between December 2001 and December 2002. These arrangements
effectively change the Company's interest rate exposure on $100.0 million of
debt from a floating LIBOR rate to an average fixed rate of 6.71%. The Company
is exposed to credit loss in the event of non-performance by the counter parties
to the interest rate swap agreements; however, the Company does not anticipate
non-performance by any of the counter parties.

     Among other matters, the long-term debt agreements generally provide for
such items as maintenance of certain vessel market value to loan ratios and
minimum consolidated financial covenants, prepayment privileges (in some cases
with penalties), and restrictions against the incurrence of additional debt and
new investments by the individual subsidiaries without prior lender consent. The
amount of Restricted Payments, as defined, that the Company can make, including
dividends and purchases of its own capital stock, is limited as of December 31,
2000, to $316.6 million. Certain of the loan agreements require a minimum level
of free cash be maintained. As at December 31, 2000, this amount was $26.0
million.

                                       F-30
<PAGE>   137
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

     The aggregate annual long-term debt principal repayments required to be
made for the five fiscal years subsequent to December 31, 2000 are $72,170,000
(2001), $70,017,000 (2002), $112,131,000 (2003), $94,052,000 (2004), and
$109,025,000 (2005).

7.  LEASES

CHARTERS-OUT

     Time charters to third parties of the Company's vessels are accounted for
as operating leases. The minimum future revenues to be received on time charters
currently in place are $82,791,000 (2001), $71,993,000 (2002), $53,199,000
(2003), $42,634,000 (2004), $39,035,000 (2005), and $93,028,000 thereafter.

     The minimum future revenues should not be construed to reflect total
charter hire revenues for any of the years.

CHARTERS-IN

     Minimum commitments under vessel operating leases are $32,576,000 (2001),
$15,632,000 (2002), $11,755,000 (2003), $6,771,000 (2004) and $1,665,000 (2005).

8.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Carrying amounts of all financial instruments approximate fair market value
except for the following:

     LONG-TERM DEBT -- The fair values of the Company's fixed rate long-term
debt are based on either quoted market prices or estimated using discounted cash
flow analyses, based on rates currently available for debt with similar terms
and remaining maturities.

     INTEREST RATE SWAP AGREEMENTS AND FOREIGN EXCHANGE CONTRACTS -- The fair
value of interest rate swaps and foreign exchange contracts, used for hedging
purposes, is the estimated amount that the Company would receive or pay to
terminate the agreements at the reporting date, taking into account current
interest rates, the current credit worthiness of the swap counter parties and
foreign exchange rates.

     The estimated fair value of the Company's financial instruments is as
follows:

<TABLE>
<CAPTION>
                                                  DECEMBER 31, 2000      DECEMBER 31, 1999
                                                  ------------------   ---------------------
                                                  CARRYING    FAIR     CARRYING      FAIR
                                                   AMOUNT     VALUE     AMOUNT       VALUE
                                                  --------   -------   ---------   ---------
                                                     $          $          $           $
<S>                                               <C>        <C>       <C>         <C>
Cash, cash equivalents and marketable
  securities....................................  223,123    223,123     226,381     226,381
Long-term debt..................................  797,484    789,913   1,085,167   1,060,417
Interest rate swap agreements (note 6)..........       --     (1,297)         --       4,488
Foreign currency contracts (note 10)............       --      2,252          --         (20)
</TABLE>

     The Company transacts interest rate swap and foreign currency contracts
with investment grade rated financial institutions and requires no collateral
from these institutions.

                                       F-31
<PAGE>   138
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

9.  CAPITAL STOCK

     The authorized capital stock of the Company at December 31, 2000 is
25,000,000 shares of Preferred Stock with a par value of $1 per share and
725,000,000 shares of Common Stock with a par value of $0.001 per share. At
December 31, 2000 the Company had 39,145,219 shares of Common Stock and no
shares of Preferred Stock issued and outstanding.

     The Company's shareholders approved amendments to the Company's 1995 Stock
Option Plan (the "Plan") to increase the number of shares of Common Stock
reserved and available for future grants of options under the Plan by an
additional 1,800,000 shares in September 1998, and 2,350,000 shares in March
2000. As of December 31, 2000, the Company had reserved 4,911,622 shares of
Common Stock for issuance upon exercise of options granted pursuant to the Plan.
During the year ended December 31, 2000, the nine month period ended December
31, 1999 and the year ended March 31, 1999, the Company granted options under
the Plan to acquire up to 889,500, 1,463,500, and 573,000 shares of Common Stock
(the "Grants"), respectively, to certain eligible officers, employees (including
senior sea staff), and directors of the Company. The options have a 10-year term
and had initially vested equally over four years from the date of grant.
Effective September 8, 2000, the Company amended the Plan which reduced the
vesting period for all subsequent stock option grants from four years to three
years. In addition, the Company also accelerated the vesting period for the
existing grants by one year. The impact of the accelerated vesting for the
existing grants on compensation expense was not material for the year ended
December 31, 2000.

     A summary of the Company's stock option activity, and related information
for the year ended December 31, 2000, the nine month period ended December 31,
1999 and the year ended March 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                                   DECEMBER 31, 2000       DECEMBER 31, 1999         MARCH 31, 1999
                                                  --------------------    --------------------    --------------------
                                                             WEIGHTED-               WEIGHTED-               WEIGHTED-
                                                              AVERAGE                 AVERAGE                 AVERAGE
                                                  OPTIONS    EXERCISE     OPTIONS    EXERCISE     OPTIONS    EXERCISE
                                                  (000'S)      PRICE      (000'S)      PRICE      (000'S)      PRICE
                                                  -------    ---------    -------    ---------    -------    ---------
                                                     #           $           #           $           #           $
<S>                                               <C>        <C>          <C>        <C>          <C>        <C>
Outstanding-beginning of period.................   3,099       22.14       1,729       26.46       1,161       26.66
Granted.........................................     889       23.56       1,464       17.11         573       26.05
Exercised.......................................  (1,080)      23.00          --          --          (2)      21.50
Forfeited.......................................     (48)      22.77         (94)      21.12          (3)      30.44
                                                  ------                   -----                   -----
Outstanding-end of period.......................   2,860       22.25       3,099       22.14       1,729       26.46
                                                  ======                   =====                   =====
Exercisable at end of period....................   1,453       23.54       1,019       25.35         731       24.08
                                                  ======                   =====                   =====
Weighted-average fair value of options granted
  during the period (per option)................                6.62                    3.88                    5.93
</TABLE>

     Exercise prices for the options outstanding as of December 31, 2000 ranged
from $16.88 to $33.50. These options have a weighted-average remaining
contractual life of 7.83 years.

     As the exercise price of the Company's employee stock options equals the
market price of underlying stock on the date of grant, no compensation expense
is recognized under APB 25.

                                       F-32
<PAGE>   139
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

     Had the Company recognized compensation costs for the Grants consistent
with the methods recommended by SFAS 123 (see Note 1 -- Accounting for
Stock-Based Compensation), the Company's net income and earnings per share for
the year ended December 31, 2000, the nine month period ended December 31, 1999
and the year ended March 31, 1999 would have been stated at the pro forma
amounts as follows:

<TABLE>
<CAPTION>
                                                                      NINE MONTHS
                                                       YEAR ENDED        ENDED        YEAR ENDED
                                                      DECEMBER 31,    DECEMBER 31,    MARCH 31,
                                                          2000            1999           1999
                                                      ------------    ------------    ----------
                                                           $               $              $
<S>                                                   <C>             <C>             <C>
NET INCOME (LOSS):
As reported.........................................    270,020         (19,595)        45,406
Pro forma...........................................    264,449         (21,828)        43,715
BASIC EARNINGS (LOSS) PER COMMON SHARE:
As reported.........................................       7.02           (0.54)          1.46
Pro forma...........................................       6.87           (0.60)          1.41
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
As reported.........................................       6.86           (0.54)          1.46
Pro forma...........................................       6.72           (0.60)          1.41
</TABLE>

     Basic earnings per share is based upon the following weighted average
number of common shares outstanding: 38,468,158 shares for the year ended
December 31, 2000; 36,384,191 shares for the nine month period ended December
31, 1999; and 31,063,357 shares for the year ended March 31, 1999. Diluted
earnings per share, which gives effect to the aforementioned stock options, is
based upon the following weighted average number of common shares outstanding:
39,368,253 shares for the year ended December 31, 2000; 36,405,089 shares for
the nine month period ended December 31, 1999; and 31,063,357 shares for the
year ended March 31, 1999.

     The fair values of the Grants were estimated on the dates of grant using
the Black-Scholes option-pricing model with the following assumptions: risk-free
average interest rates of 6.6% for the year ended December 31, 2000; 5.8% for
the nine month period ended December 31, 1999; and 5.4% for the year ended March
31, 1999, respectively; dividend yield of 3.0%; expected volatility of 30% for
the year ended December 31, 2000 and 25% for the nine months ended December 31,
1999 and the year ended March 31, 1999; and expected lives of 5 years.

10. COMMITMENTS AND CONTINGENCIES

     The Company has guaranteed 50% of the outstanding mortgage debt in the
joint venture company, Soponata-Teekay Limited, totalling $26.2 million as at
December 31, 2000.

     The Company has guaranteed its share of committed, uncalled capital in
certain limited partnerships totalling $1.8 million as at December 31, 2000.

     As at December 31, 2000, the Company was committed to foreign exchange
contracts with maturities ranging from one month to three years for the forward
purchase of approximately Japanese Yen 62.0 million, Singapore Dollars 13.9
million, Norwegian Kroner 132.0 million, Euros 5.9 million and Canadian Dollars
52.8 million for U.S. Dollars, at an average rate of Japanese Yen 111.72 per
U.S. Dollar, Singapore Dollar 1.72 per U.S. dollar, Norwegian Kroner 9.54 per
U.S. Dollar, Euros 1.09 per U.S. Dollar and Canadian Dollars 1.54 per U.S.
dollar, respectively, for the purpose of hedging accounts payable, accrued
liabilities and certain general and administrative and operating expenses.

                                       F-33
<PAGE>   140
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS, OTHER THAN SHARE OR
                                PER SHARE DATA)

11. OTHER INCOME (LOSS)

<TABLE>
<CAPTION>
                                                                      NINE MONTHS
                                                       YEAR ENDED        ENDED        YEAR ENDED
                                                      DECEMBER 31,    DECEMBER 31,    MARCH 31,
                                                          2000            1999           1999
                                                      ------------    ------------    ----------
                                                           $               $              $
<S>                                                   <C>             <C>             <C>
Gain (loss) on disposition of assets................     (1,004)             --          7,117
Equity income from joint venture....................      9,546             721             --
Future income taxes.................................       (999)         (1,500)        (1,900)
Miscellaneous.......................................     (3,679)         (3,234)           289
                                                         ------          ------         ------
                                                          3,864          (4,013)         5,506
                                                         ======          ======         ======
</TABLE>

12. CHANGE IN NON-CASH WORKING CAPITAL ITEMS RELATED TO OPERATING ACTIVITIES

<TABLE>
<CAPTION>
                                                                      NINE MONTHS
                                                       YEAR ENDED        ENDED        YEAR ENDED
                                                      DECEMBER 31,    DECEMBER 31,    MARCH 31,
                                                          2000            1999           1999
                                                      ------------    ------------    ----------
                                                           $               $              $
<S>                                                   <C>             <C>             <C>
Accounts receivable.................................    (49,405)         (5,462)         1,332
Prepaid expenses and other assets...................      3,443             307         (2,409)
Accounts payable....................................      2,613          (6,571)        (4,238)
Accrued liabilities.................................      6,673          12,622            598
                                                        -------          ------         ------
                                                        (36,676)            896         (4,717)
                                                        =======          ======         ======
</TABLE>

13. SUBSEQUENT EVENT

     As of March 6, 2001, the Company had purchased a 56% interest in Ugland
Nordic Shipping ASA ("UNS"), (9% of which was purchased in 2000), for
approximately $117 million cash, or an average price of approximately NOK 134
per share. UNS controls a modern fleet of eighteen shuttle tankers (including
four newbuildings) that engage in the transportation of oil from offshore
production platforms to refineries. Shares of UNS are listed on the Oslo Stock
Exchange.

     The Company will promptly launch a mandatory bid for the remaining shares
in UNS at NOK 140 per share (for a total cost of approximately $100 million) as
required by Norwegian law.

     The acquisition of UNS will be accounted for using the purchase method of
accounting as required by accounting principles generally accepted in the United
States.

                                       F-34
<PAGE>   141

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

              CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net voyage revenues...................          --          35,137         776,291        (167,159)       644,269
Operating expenses....................         420          25,202         433,578        (142,606)       316,594
                                           -------         -------         -------        --------        -------
  (Loss) income from vessel
    operations........................        (420)          9,935         342,713         (24,553)       327,675
Net interest (expense) income.........     (17,373)             46         (44,192)             --        (61,519)
Equity in net income of
  subsidiaries........................     287,127              --              --        (287,127)            --
Other income..........................         686              --           3,178              --          3,864
                                           -------         -------         -------        --------        -------
NET INCOME............................     270,020           9,981         301,699        (311,680)       270,020
Retained earnings (deficit), beginning
  of the year.........................     404,130         (28,950)        369,370        (340,420)       404,130
Dividends declared....................     (33,001)             --              --              --        (33,001)
                                           -------         -------         -------        --------        -------
RETAINED EARNINGS (DEFICIT), END OF
  THE YEAR............................     641,149         (18,969)        671,069        (652,100)       641,149
                                           =======         =======         =======        ========        =======
</TABLE>

<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED DECEMBER 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net voyage revenues...................          --          28,589         349,222        (129,461)       248,350
Operating expenses....................         493          24,056         310,304        (110,075)       224,778
                                           -------         -------         -------        --------        -------
  (Loss) income from vessel
    operations........................        (493)          4,533          38,918         (19,386)        23,572
Net interest (expense) income.........     (14,420)             87         (24,821)             --        (39,154)
Equity in net (loss) income of
  subsidiaries........................      (4,682)             --              --           4,682             --
Other (loss) income...................          --              --          (4,013)             --         (4,013)
                                           -------         -------         -------        --------        -------
NET (LOSS) INCOME.....................     (19,595)          4,620          10,084         (14,704)       (19,595)
Retained earnings (deficit), beginning
  of the period.......................     446,897         (33,570)        359,286        (325,716)       446,897
Dividends declared....................     (23,172)             --              --              --        (23,172)
                                           -------         -------         -------        --------        -------
RETAINED EARNINGS (DEFICIT), END OF
  THE PERIOD..........................     404,130         (28,950)        369,370        (340,420)       404,130
                                           =======         =======         =======        ========        =======
</TABLE>

- ---------------

(See Note 6)

                                       F-35
<PAGE>   142

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

              CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED MARCH 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net voyage revenues...................          --          37,820         461,394        (180,803)       318,411
Operating expenses....................         356          37,214         376,010        (180,803)       232,777
                                           -------         -------         -------        --------        -------
  (Loss) income from vessel
    operations........................        (356)            606          85,384              --         85,634
Net interest (expense) income.........     (22,857)            148         (15,719)             --        (38,428)
Equity in net income of
  subsidiaries........................      75,698              --              --         (75,698)            --
Other income..........................         227              --          30,710         (25,431)         5,506
                                           -------         -------         -------        --------        -------
Net income before extraordinary
  loss................................      52,712             754         100,375        (101,129)        52,712
Extraordinary loss on bond
  redemption..........................      (7,306)             --              --              --         (7,306)
                                           -------         -------         -------        --------        -------
NET INCOME............................      45,406             754         100,375        (101,129)        45,406
Retained earnings (deficit), beginning
  of the year.........................     428,102         (34,324)        258,911        (224,587)       428,102
Dividends declared....................     (26,611)             --              --              --        (26,611)
                                           -------         -------         -------        --------        -------
RETAINED EARNINGS (DEFICIT), END OF
  THE YEAR............................     446,897         (33,570)        359,286        (325,716)       446,897
                                           =======         =======         =======        ========        =======
</TABLE>

- ---------------

(See Note 6)

                                       F-36
<PAGE>   143

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                  CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net income............................     270,020          9,981          301,699        (311,680)       270,020
Other comprehensive income
  Unrealized gain on
    available-for-sale securities.....          --             --            4,555              --          4,555
                                           -------          -----          -------        --------        -------
COMPREHENSIVE INCOME..................     270,020          9,981          306,254        (311,680)       274,575
                                           =======          =====          =======        ========        =======
</TABLE>

<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED DECEMBER 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net (loss) income.....................     (19,595)         4,620           10,084         (14,704)       (19,595)
Other comprehensive income............          --             --               --              --             --
                                           -------          -----          -------        --------        -------
COMPREHENSIVE (LOSS) INCOME...........     (19,595)         4,620           10,084         (14,704)       (19,595)
                                           =======          =====          =======        ========        =======
</TABLE>

<TABLE>
<CAPTION>
                                                                  YEAR ENDED MARCH 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Net income............................      45,406            754          100,375        (101,129)        45,406
Other comprehensive income............          --             --               --              --             --
                                           -------          -----          -------        --------        -------
COMPREHENSIVE INCOME..................      45,406            754          100,375        (101,129)        45,406
                                           =======          =====          =======        ========        =======
</TABLE>

- ---------------

(See Note 6)

                                       F-37
<PAGE>   144

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                            CONDENSED BALANCE SHEETS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                   AS AT DECEMBER 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
ASSETS
Cash and cash equivalents.............          294             --          181,006              --        181,300
Other current assets..................           45            725          209,425         (96,000)       114,195
                                          ---------        -------        ---------      ----------      ---------
  Total current assets................          339            725          390,431         (96,000)       295,495
Vessels and equipment (net)...........           --        281,377        1,326,339              --      1,607,716
Advances due from subsidiaries........       58,068             --               --         (58,068)            --
Other assets (principally marketable
  securities and investments in
  subsidiaries).......................    1,229,756             --           50,414      (1,229,756)        50,414
Investment in joint venture...........           --             --           20,474              --         20,474
                                          ---------        -------        ---------      ----------      ---------
                                          1,288,163        282,102        1,787,658      (1,383,824)     1,974,099
                                          =========        =======        =========      ==========      =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities...................        4,932          1,371          228,032         (96,000)       138,335
Long-term debt........................      189,274             --          543,408              --        732,682
Due to (from) affiliates..............           --        (69,630)         193,315        (123,685)            --
                                          ---------        -------        ---------      ----------      ---------
  Total liabilities...................      194,206        (68,259)         964,755        (219,685)       871,017
                                          ---------        -------        ---------      ----------      ---------
Minority Interest.....................           --             --            4,570              --          4,570
Stockholders' Equity
Capital stock.........................      452,808             23            5,943          (5,966)       452,808
Contributed capital...................           --        369,307          136,766        (506,073)            --
Retained earnings (deficit)...........      641,149        (18,969)         671,069        (652,100)       641,149
Accumulated other comprehensive
  income..............................           --             --            4,555              --          4,555
                                          ---------        -------        ---------      ----------      ---------
  Total stockholders' equity..........    1,093,957        350,361          818,333      (1,164,139)     1,098,512
                                          ---------        -------        ---------      ----------      ---------
                                          1,288,163        282,102        1,787,658      (1,383,824)     1,974,099
                                          =========        =======        =========      ==========      =========
</TABLE>

- ---------------

(See Note 6)

                                       F-38
<PAGE>   145

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                            CONDENSED BALANCE SHEETS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                   AS AT DECEMBER 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
ASSETS
Cash and cash equivalents.............          210         39,652          180,465              --        220,327
Other current assets..................           42            582          162,084        (102,376)        60,332
                                          ---------        -------        ---------      ----------      ---------
  Total current assets................          252         40,234          342,549        (102,376)       280,659
Vessels and equipment (net)...........           --        294,800        1,368,717              --      1,663,517
Advances due from subsidiaries........      121,415             --               --        (121,415)            --
Other assets (principally marketable
  securities and investments in
  subsidiaries).......................      943,389             --           19,111        (943,394)        19,106
Investment in joint venture...........           --             --           19,402              --         19,402
                                          ---------        -------        ---------      ----------      ---------
                                          1,065,056        335,034        1,749,779      (1,167,185)     1,982,684
                                          =========        =======        =========      ==========      =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities...................        7,989            991          227,331        (109,808)       126,503
Long-term debt........................      225,000             --          797,010              --      1,022,010
Due to (from) affiliates..............           --         (6,337)         211,255        (204,918)            --
                                          ---------        -------        ---------      ----------      ---------
  Total liabilities...................      232,989         (5,346)       1,235,596        (314,726)     1,148,513
                                          ---------        -------        ---------      ----------      ---------
Minority Interest.....................           --             --            2,104              --          2,104
Stockholders' Equity
Capital stock.........................      427,937             23            5,943          (5,966)       427,937
Contributed capital...................           --        369,307          136,766        (506,073)            --
Retained earnings (deficit)...........      404,130        (28,950)         369,370        (340,420)       404,130
Accumulated other comprehensive
  income..............................           --             --               --              --             --
                                          ---------        -------        ---------      ----------      ---------
  Total stockholders' equity..........      832,067        340,380          512,079        (852,459)       832,067
                                          ---------        -------        ---------      ----------      ---------
                                          1,065,056        335,034        1,749,779      (1,167,185)     1,982,684
                                          =========        =======        =========      ==========      =========
</TABLE>

- ---------------

(See Note 6)

                                       F-39
<PAGE>   146

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31, 2000
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Cash and cash equivalents provided by
  (used for)..........................
                                           --------        -------        --------        -------         --------
OPERATING ACTIVITIES
  Net cash flow from operating
    activities........................      (19,407)        25,048         327,614                         333,255
                                           --------        -------        --------        -------         --------
FINANCING ACTIVITIES
Proceeds from long-term debt..........           --             --         206,000                         206,000
Repayments of long-term debt..........           --             --         (63,757)                        (63,757)
Prepayments of long-term debt.........      (35,726)            --        (394,200)                       (429,926)
Other.................................       55,217        (63,293)          2,916                          (5,160)
                                           --------        -------        --------        -------         --------
  Net cash flow from financing
    activities........................       19,491        (63,293)       (249,041)                       (292,843)
                                           --------        -------        --------        -------         --------
INVESTING ACTIVITIES
Expenditures for vessels and
  equipment...........................           --         (1,407)        (54,046)                        (55,453)
Proceeds from disposition of assets...           --             --           9,713                           9,713
Acquisition costs related to purchase
  of Bona Shipholding Ltd.............           --             --          (2,685)                         (2,685)
Other.................................           --             --         (31,014)                        (31,014)
                                           --------        -------        --------        -------         --------
  Net cash flow from investing
    activities........................           --         (1,407)        (78,032)                        (79,439)
                                           --------        -------        --------        -------         --------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS.........................           84        (39,652)            541                         (39,027)
Cash and cash equivalents, beginning
  of the year.........................          210         39,652         180,465                         220,327
                                           --------        -------        --------        -------         --------
CASH AND CASH EQUIVALENTS, END OF THE
  YEAR................................          294             --         181,006                         181,300
                                           ========        =======        ========        =======         ========
</TABLE>

- ---------------

(See Note 6)

                                       F-40
<PAGE>   147

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED DECEMBER 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                                            NOTES                                          TEEKAY
                                            TEEKAY        GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                        SHIPPING CORP.   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Cash and cash equivalents provided by
  (used for)..........................
                                           --------        -------        --------        -------         --------
OPERATING ACTIVITIES
  Net cash flow from operating
    activities........................       (9,844)        16,674          44,683                          51,513
                                           --------        -------        --------        -------         --------
FINANCING ACTIVITIES
Proceeds from long-term debt..........           --             --         100,000                         100,000
Prepayments of long-term debt.........           --             --         (10,000)                        (10,000)
Repayments of long-term debt..........           --             --         (32,252)                        (32,252)
Other.................................       49,933        (10,327)        (62,756)                        (23,150)
                                           --------        -------        --------        -------         --------
  Net cash flow from financing
    activities........................       49,933        (10,327)         (5,008)                         34,598
                                           --------        -------        --------        -------         --------
INVESTING ACTIVITIES
Expenditures for vessels and
  equipment...........................           --             (8)        (29,903)                        (29,911)
Net cash flow from purchase of Bona
  Shipholding Ltd.
  (net of cash acquired of $91,658)...      (39,884)            --              --                         (39,884)
Other.................................           --             --          85,576                          85,576
                                           --------        -------        --------        -------         --------
  Net cash flow from investing
    activities........................      (39,884)            (8)         55,673                          15,781
                                           --------        -------        --------        -------         --------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS.........................          205          6,339          95,348                         101,892
Cash and cash equivalents, beginning
  of the period.......................            5         33,313          85,117                         118,435
                                           --------        -------        --------        -------         --------
CASH AND CASH EQUIVALENTS, END OF THE
  PERIOD..............................          210         39,652         180,465                         220,327
                                           ========        =======        ========        =======         ========
</TABLE>

- ---------------

(See Note 6)

                                       F-41
<PAGE>   148

                                                                      SCHEDULE A

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED MARCH 31, 1999
                                        -----------------------------------------------------------------------------
                                                            8.32%
                                            TEEKAY          NOTES                                          TEEKAY
                                           SHIPPING       GUARANTOR     NON-GUARANTOR                  SHIPPING CORP.
                                            CORP.        SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   & SUBSIDIARIES
                                        --------------   ------------   -------------   ------------   --------------
                                              $               $               $              $               $
<S>                                     <C>              <C>            <C>             <C>            <C>
Cash and cash equivalents provided by
  (used for)..........................
                                           --------        -------        --------        -------         --------
OPERATING ACTIVITIES
  Net cash flow from operating
    activities........................      (24,829)        21,261         141,276                         137,708
                                           --------        -------        --------        -------         --------
FINANCING ACTIVITIES
Proceeds from long-term debt..........           --             --         230,000                         230,000
Prepayments of long-term debt.........     (108,034)            --        (160,000)                       (268,034)
Repayments of long-term debt..........      (20,645)            --         (29,932)                        (50,577)
Net proceeds from issuance of Common
  Stock...............................       68,751             --              --                          68,751
Other.................................       84,740          3,252        (114,904)                        (26,912)
                                           --------        -------        --------        -------         --------
  Net cash flow from financing
    activities........................       24,812          3,252         (74,836)                        (46,772)
                                           --------        -------        --------        -------         --------
INVESTING ACTIVITIES
Expenditures for vessels and
  equipment...........................           --         (1,887)        (95,307)                        (97,194)
Other.................................           --             --          36,740                          36,740
                                           --------        -------        --------        -------         --------
  Net cash flow from investing
    activities........................           --         (1,887)        (58,567)                        (60,454)
                                           --------        -------        --------        -------         --------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS.........................          (17)        22,626           7,873                          30,482
Cash and cash equivalents, beginning
  of the year.........................           22         10,687          77,244                          87,953
                                           --------        -------        --------        -------         --------
CASH AND CASH EQUIVALENTS, END OF THE
  YEAR................................            5         33,313          85,117                         118,435
                                           ========        =======        ========        =======         ========
</TABLE>

- ---------------

(See Note 6)

                                       F-42
<PAGE>   149

UGLAND NORDIC SHIPPING GROUP

                            PROFIT AND LOSS ACCOUNT
                 (ALL FIGURES ARE EXPRESSED IN NOK IN MILLIONS)

<TABLE>
<CAPTION>
                                                               THREE MONTHS
                                                              ENDED MARCH 31,
                                                              ---------------
                                                              2001      2000
                                                              -----    ------
                                                                (UNAUDITED)
<S>                                                           <C>      <C>
Operating income............................................  226.0     148.9
Operating expenses..........................................  (69.5)    (47.4)
Administrative expenses.....................................   (7.3)     (4.9)
                                                              -----    ------
Result before depreciation..................................  149.2      96.6
                                                              -----    ------
Docking expenses............................................   (7.1)     (5.8)
Ordinary depreciation.......................................  (41.8)    (33.3)
                                                              -----    ------
OPERATING PROFIT............................................  100.3      57.5
                                                              -----    ------
Interest income.............................................    2.7       1.4
Currency gain/(loss) realised...............................    9.8       6.7
Other financial income......................................   40.8       6.0
Interest expenses...........................................  (49.5)    (41.0)
Other financial expenses....................................  (11.8)     (0.5)
Net financial items.........................................   (8.0)    (27.4)
                                                              -----    ------
Profit before unrealised currency items.....................   92.3      30.1
                                                              -----    ------
Unrealised currency items...................................  (85.1)   (123.1)
                                                              -----    ------
RESULT BEFORE TAX AND MINORITY INTERESTS....................    7.2     (93.0)
                                                              -----    ------
Tax.........................................................    0.0       0.0
                                                              -----    ------
RESULT BEFORE MINORITY INTERESTS............................    7.2     (93.0)
                                                              -----    ------
Minority interests..........................................  (11.0)      5.6
                                                              -----    ------
RESULT......................................................   (3.8)    (87.4)
                                                              =====    ======
</TABLE>

                                 BALANCE SHEET
                 (ALL FIGURES ARE EXPRESSED IN NOK IN MILLIONS)

<TABLE>
<CAPTION>
                                                                AS AT         AS AT
                                                              MARCH 31,    DECEMBER 31,
                                                                2001           2000
                                                              ---------    ------------
                                                              (UNAUDITED)
<S>                                                           <C>          <C>
ASSETS
Ships.......................................................   3,419.8       3,404.5
Other fixed assets..........................................     212.8         207.7
Other current assets........................................      85.1          12.7
Bank deposits...............................................     281.9         282.3
                                                               -------       -------
TOTAL ASSETS................................................   3,999.6       3,907.2
                                                               =======       =======
EQUITY AND LIABILITIES
Equity (incl. 14,169,772 shares @ NOK 5)....................     829.7         815.4
Minority interests..........................................      64.3          53.4
Long-term Debt..............................................   3,052.2       2,977.1
Current liabilities.........................................      53.4          61.3
                                                               -------       -------
TOTAL LIABILITIES AND EQUITY................................   3,999.6       3,907.2
                                                               =======       =======
</TABLE>

                                       F-43
<PAGE>   150

Deloitte & Touche
Statsautoriserte revisorer
Radhusgt, 1
N-3201 Tonsberg
Tel: 33 00 39 00
Fax: 33 00 39 01
www.deloitte.no / ww.deloitte-
legal.no                                                (Deloitte & Touche LOGO)

                                 Translation from the original Norwegian version

To the Annual Shareholders' Meeting of Ugland Nordic Shipping ASA

                           AUDITOR'S REPORT FOR 2000

     We have audited the annual financial statements of Ugland Nordic Shipping
ASA as of 31 December 2000, showing a profit of NOK 28.373.000 for the parent
company and a profit of NOK 41.320.000 for the group. We have also audited the
information in the Board of Directors' report concerning the financial
statements, the going concern assumption, and the proposal for the allocation of
the profit. The financial statements comprise the balance sheet, the statements
of income and cash flows, the accompanying notes and the group accounts. These
financial statements are the responsibility of the Company's Board of Directors
and Managing Director. Our responsibility is to express an opinion on these
financial statements and on the other information according to the requirements
of the Norwegian Act on Auditing and Auditors.

     We conducted our audit in accordance with the Norwegian Act on Auditing and
Auditors and generally accepted auditing standards in Norway. Generally accepted
auditing standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
To the extent required by law and generally accepted auditing standards, an
audit also comprises a review of the management of the Company's financial
affairs and its accounting and internal control systems. We believe that our
audit provides a reasonable basis for our opinion.

     In our opinion,

     -  the financial statements are prepared in accordance with the law and
        regulations and present the financial position of the Company and of the
        Group as of 31. December 2000, and the results of its operations and its
        cash flows for the year then ended, in accordance with generally
        accepted accounting principles in Norway.

     -  the Company's management has fulfilled its duty to maintain the
        Company's accounting process in such a proper and well-arranged manner
        that the accounting process is in accordance with the law and generally
        accepted accounting practices.

     -  the information in the Board of Directors' report concerning the
        financial statements, the going concern assumption, and the proposal for
        the allocation of the profit is consistent with the financial statements
        and complies with the law and regulations.

Tonsberg, 28, March 2001
DELOITTE & TOUCHE

Alf-Anton Eid (signed)
State Authorised Public Accountant (Norway)

<TABLE>
<S>                             <C>
(Deloitte & Touche LOGO)        Bergen Floro Forde Haugesund Knarvik Kristiansand Levanger
                                Lyngdal Oslo
                                Skien Sogndal Stavanger Steinkjer Trondheim Tonsberg Orsta
                                Medlemmer av Den Norske Revisorforening
                                org.nr: 980 211 282
</TABLE>

                                       F-44
<PAGE>   151

Deloitte & Touche
Statsautoriserte revisorer
Radhusgt, 1
N-3201 Tonsberg
Tel: 33 00 39 00
Fax: 33 00 39 01
www.deloitte.no / ww.deloitte-
legal.no                                                (Deloitte & Touche LOGO)

                                 Translation from the original Norwegian version

To the Annual Shareholders' Meeting of Ugland Nordic Shipping ASA

                           AUDITOR'S REPORT FOR 1999

     We have audited the annual financial statements of Ugland Nordic Shipping
ASA as of 31 December 1999, showing a profit of NOK 32.297.000 for the parent
company and a profit of NOK 1.468.000 for the group. We have also audited the
information in the Board of Directors' report concerning the financial
statements, the going concern assumption, and the proposal for the allocation of
the profit. The financial statements comprise the balance sheet, the statements
of income and cash flows, the accompanying notes and the group accounts. These
financial statements are the responsibility of the Company's Board of Directors
and Managing Director. Our responsibility is to express an opinion on these
financial statements and on the other information according to the requirements
of the Norwegian Act on Auditing and Auditors.

     We conducted our audit in accordance with the Norwegian Act on Auditing and
Auditors and generally accepted auditing standards in Norway. Generally accepted
auditing standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
To the extent required by law and generally accepted auditing standards, an
audit also comprises a review of the management of the Company's financial
affairs and its accounting and internal control systems. We believe that our
audit provides a reasonable basis for our opinion.

     In our opinion,

     -  the financial statements are prepared in accordance with the law and
        regulations and present the financial position of the Company and of the
        Group as of 31. December 1999, and the results of its operations and its
        cash flows for the year then ended, in accordance with generally
        accepted accounting principles in Norway.

     -  the Company's management has fulfilled its duty to maintain the
        Company's accounting process in such a proper and well-arranged manner
        that the accounting process is in accordance with the law and generally
        accepted accounting practices.

     -  the information in the Board of Directors' report concerning the
        financial statements, the going concern assumption, and the proposal for
        the allocation of the profit is consistent with the financial statements
        and complies with the law and regulations.

Tonsberg, 7, April 2000
DELOITTE & TOUCHE

Alf-Anton Eid (signed)
State Authorised Public Accountant (Norway)

<TABLE>
<S>                             <C>
(Deloitte & Touche LOGO)        Bergen Floro Forde Haugesund Knarvik Kristiansand Levanger
                                Lyngdal Oslo
                                Skien Sogndal Stavanger Steinkjer Trondheim Tonsberg Orsta
                                Medlemmer av Den Norske Revisorforening
                                org.nr: 980 211 282
</TABLE>

                                       F-45
<PAGE>   152

UGLAND NORDIC SHIPPING GROUP

                             PROFIT & LOSS ACCOUNT
                           (ALL FIGURES IN NOK '000)

<TABLE>
<CAPTION>
      UGLAND NORDIC                                                                               UGLAND NORDIC
      SHIPPING ASA                                                                               SHIPPING GROUP
    -----------------                                                                          -------------------
     1999      2000                                                                    NOTE      2000       1999
    -------   -------                                                                  -----   --------   --------
<S> <C>       <C>       <C>                                                            <C>     <C>        <C>
      4,522     6,271   OPERATING INCOME............................................   11/18    817,055    601,955
    -------   -------                                                                          --------   --------
                        OPERATING COSTS/DEPRECIATION
          0         0   Operating costs vessels.....................................           (238,520)  (201,554)
          0         0   Docking costs...............................................   2        (24,439)   (25,717)
    (11,933)  (14,311)  Payroll expense.............................................   3        (14,311)   (11,933)
     (7,489)  (10,545)  Other administrative expense................................   2/3      (12,252)    (9,313)
       (554)     (624)  Ordinary depreciation.......................................   2       (134,714)  (117,103)
    -------   -------                                                                          --------   --------
    (19,976)  (25,480)  Sum operating costs.........................................           (424,236)  (365,620)
    -------   -------                                                                          --------   --------
    (15,454)  (19,209)  OPERATING PROFIT............................................            392,819    236,335
    -------   -------                                                                          --------   --------
                        FINANCIAL INCOME/FINANCIAL COSTS
     36,759    33,531   Interest income.............................................   7         21,537     16,262
     (4,787)   (6,624)  Exchange gains/losses.......................................            (34,113)     2,195
     63,416    68,911   Other financial income                                         7         65,343     21,614
    (30,324)  (17,288)  Interest expense............................................   7/14    (193,733)  (136,867)
       (307)     (704)  Other financial costs.......................................             (1,475)      (849)
    (10,055)  (18,630)  Unrealised currency loss....................................           (197,448)  (120,722)
    -------   -------                                                                          --------   --------
     54,702    59,196   NET FINANCIAL COSTS.........................................           (339,889)  (218,367)
    -------   -------                                                                          --------   --------
     39,248    39,987   PROFIT (LOSS) BEFORE TAXES AND MINORITY INTEREST............             52,930     17,968
    -------   -------                                                                          --------   --------
     (6,951)  (11,614)  Taxes.......................................................   16       (11,610)   (16,500)
    -------   -------                                                                          --------   --------
     32,297    28,373   PROFIT (LOSS) FOR THE YEAR..................................             41,320      1,468
    =======   =======                                                                          ========   ========
          0         0   Minority interest...........................................            (30,438)       368
    -------   -------                                                                          --------   --------
     32,297    28,373   PROFIT (LOSS) FOR THE YEAR AFTER MINORITY INTEREST..........             10,882      1,836
    =======   =======                                                                          ========   ========
                        Result and diluted result per share.........................   10          0.89       0.17
    (25,130)    2,242   Proposed dividend...........................................
</TABLE>

                                       F-46
<PAGE>   153

UGLAND NORDIC SHIPPING GROUP

                           BALANCE SHEET AS AT 31.12

                                     ASSETS
                           (ALL FIGURES IN NOK '000)

<TABLE>
<CAPTION>
       UGLAND NORDIC                                                                                UGLAND NORDIC
       SHIPPING ASA                                                                                SHIPPING GROUP
    -------------------                                                                         ---------------------
     1999       2000                                                                     NOTE     2000        1999
    -------   ---------                                                                  ----   ---------   ---------
<S> <C>       <C>         <C>                                                            <C>    <C>         <C>
                          FIXED ASSETS
                          INTANGIBLE FIXED ASSETS
     22,001      12,623   Deferred tax assets.........................................   16        12,905      22,213
    -------   ---------                                                                         ---------   ---------
     22,001      12,623   TOTAL INTANGIBLE FIXED ASSETS...............................             12,905      22,213
    -------   ---------                                                                         ---------   ---------
                          TANGIBLE FIXED ASSETS
          0           0   Vessels.....................................................   2/8/13 3,404,550   2,583,050
      2,706       2,333   Fixtures and fittings, office machinery, etc................   2          2,333       2,706
    -------   ---------                                                                         ---------   ---------
      2,706       2,333   TOTAL TANGIBLE FIXED ASSETS.................................          3,406,883   2,585,756
    -------   ---------                                                                         ---------   ---------
                          FINANCIAL FIXED ASSETS
    259,822     380,561   Investment in subsidiaries..................................   4              0           0
    392,319     507,875   Loans to group companies....................................   6              0           0
          0      14,320   Investments in associates...................................   4         13,912      64,865
    205,604     177,083   Investments in shares and parts of companies................   5/13     177,305     205,741
        299       1,194   Other receivables...........................................   1            194         299
    -------   ---------                                                                         ---------   ---------
    858,044   1,081,033   TOTAL FINANCIAL FIXED ASSETS................................            192,411     270,905
    -------   ---------                                                                         ---------   ---------
    882,751   1,095,989   TOTAL FIXED ASSETS..........................................          3,612,199   2,878,874
    -------   ---------                                                                         ---------   ---------
                          CURRENT ASSETS
                          DEBTORS
      8,232          52   Other debtors...............................................             11,162      17,049
    -------   ---------                                                                         ---------   ---------
      8,232          52   TOTAL DEBTORS...............................................             11,162      17,049
    -------   ---------                                                                         ---------   ---------
                          INVESTMENTS
      2,424       1,542   Marketable securities.......................................   5          1,542       2,424
    -------   ---------                                                                         ---------   ---------
      2,424       1,542   TOTAL INVESTMENTS...........................................              1,542       2,424
    -------   ---------                                                                         ---------   ---------
     36,412     137,202   Bank deposits, cash in hand, etc............................   13       282,288     176,374
    -------   ---------                                                                         ---------   ---------
     47,068     138,796   TOTAL CURRENT ASSETS........................................            294,992     195,847
    -------   ---------                                                                         ---------   ---------
    929,819   1,234,785   TOTAL ASSETS................................................          3,907,191   3,074,721
    =======   =========                                                                         =========   =========
</TABLE>

                                       F-47
<PAGE>   154

UGLAND NORDIC SHIPPING GROUP

                           BALANCE SHEET AS AT 31.12
                             EQUITY AND LIABILITIES
                           (ALL FIGURES IN NOK '000)

<TABLE>
<CAPTION>
       UGLAND NORDIC                                                                                  UGLAND NORDIC
       SHIPPING ASA                                                                                  SHIPPING GROUP
    -------------------                                                                           ---------------------
     1999       2000                                                                     NOTE       2000        1999
    -------   ---------                                                                 -------   ---------   ---------
<S> <C>       <C>         <C>                                                           <C>       <C>         <C>
                          EQUITY
                          PAID-IN CAPITAL
     54,630      69,549   Share capital (13,909,772 shares @ NOK 5)..................   9/12/17      69,549      54,630
    446,369     669,273   Share premium reserve......................................   12          669,273     420,369
    -------   ---------                                                                           ---------   ---------
    500,999     738,822   TOTAL PAID-IN CAPITAL......................................               738,822     474,999
    -------   ---------                                                                           ---------   ---------
                          RETAINED EARNINGS
    136,475     162,605   Other equity...............................................   12           76,616      92,893
    -------   ---------                                                                           ---------   ---------
    136,475     162,605   TOTAL RETAINED EARNINGS....................................                76,616      92,893
    -------   ---------                                                                           ---------   ---------
    637,474     901,427   TOTAL EQUITY BEFORE MINORITIES.............................               815,438     567,892
    -------   ---------                                                                           ---------   ---------
          0           0   Minority interest..........................................                53,375      (1,719)
    -------   ---------                                                                           ---------   ---------
    637,474     901,427   TOTAL EQUITY...............................................               868,813     566,173
    -------   ---------                                                                           ---------   ---------
                          LIABILITIES
                          OTHER LONG-TERM LIABILITIES
    195,858     250,188   Liabilities to financial institutions......................   13/14     2,977,118   2,435,756
     64,526      76,054   Loans to subsidiaries......................................   6                 0           0
    -------   ---------                                                                           ---------   ---------
    260,384     326,242   TOTAL OTHER LONG-TERM LIABILITIES..........................             2,977,118   2,435,756
    -------   ---------                                                                           ---------   ---------
                          CURRENT LIABILITIES
      3,747       3,033   Accounts payable...........................................                     0       3,746
          0           0   Taxes payable..............................................                 3,530       3,528
      3,084       4,042   Public duties payable......................................                 4,041       3,084
     25,130           0   Dividends..................................................                     0      25,130
          0          41   Other short-term liabilities...............................                53,689      37,304
    -------   ---------                                                                           ---------   ---------
     31,961       7,116   TOTAL CURRENT LIABILITIES..................................                61,260      72,792
    -------   ---------                                                                           ---------   ---------
    292,345     333,358   TOTAL LIABILITIES..........................................             3,038,378   2,508,548
    -------   ---------                                                                           ---------   ---------
    929,819   1,234,785   TOTAL EQUITY AND LIABILITIES...............................             3,907,191   3,074,721
    =======   =========                                                                           =========   =========
</TABLE>

                                       F-48
<PAGE>   155

UGLAND NORDIC SHIPPING GROUP

                               CASH FLOW ANALYSIS
                           (ALL FIGURES IN NOK '000)

<TABLE>
<CAPTION>
      UGLAND NORDIC                                                                         UGLAND NORDIC
       SHIPPING ASA                                                                        SHIPPING GROUP
    ------------------                                                                  ---------------------
     1999       2000                                                                       2000        1999
    -------   --------                                                                  ----------   --------
<S> <C>       <C>        <C>                                                            <C>          <C>
                         CASH FLOW FROM OPERATING ACTIVITIES
     39,248     39,987   Operating income before tax.................................       52,930     17,968
        554        624   Ordinary depreciation.......................................      134,714    117,103
        (25)         0   Profit from sale of non-current assets......................      (76,895)   (29,714)
          0          0   Result from associated companies............................         (222)   (14,521)
      9,340      8,465   Change in trade receivables/payables........................       20,621      1,903
    -------   --------                                                                  ----------   --------
     49,117     49,076   NET CASH PROVIDED BY OPERATING ACTIVITIES...................      131,148     92,739
    -------   --------                                                                  ----------   --------
                         CASH FLOW FROM INVESTING ACTIVITIES
        318          0   Proceeds from sale of fixed assets..........................      154,100    234,578
     (1,652)    (1,146)  Purchase of fixed assets....................................   (1,034,060)  (698,545)
          0    (14,320)  Investment in related companies.............................       75,831          0
          0          0   Payments from related companies.............................            0      1,417
     (1,888)  (120,739)  Investments in subsidiaries.................................            0          0
    (25,960)    29,403   Purchase of shares and parts in other companies.............       29,318    (25,892)
    -------   --------                                                                  ----------   --------
    (29,182)  (106,802)  NET CASH PROVIDED BY INVESTING ACTIVITIES...................     (774,811)  (488,442)
    -------   --------                                                                  ----------   --------
                         CASH FLOW FROM FINANCING ACTIVITIES
          0     70,913   Proceeds from long-term borrowings..........................      842,971    569,483
    (83,380)   (16,583)  Repayment of long-term borrowings...........................     (301,609)  (279,769)
     81,888   (104,029)  Payment on long-term account receivable (payable)...........            0    (35,523)
          0    235,587   Proceeds from issue of shares...............................      235,587          0
    (21,851)   (27,372)  Dividends paid..............................................      (27,372)   (21,851)
    -------   --------                                                                  ----------   --------
    (23,343)   158,516   NET CASH PROVIDED FROM FINANCING ACTIVITIES.................      749,577    232,340
    -------   --------                                                                  ----------   --------
     (3,408)   100,790   Net change in cash and cash equivalents.....................      105,914   (163,363)
     15,552     36,412   Cash and cash equivalents at beginning of year..............      176,374    339,737
    -------   --------                                                                  ----------   --------
     12,144    137,202   CASH AND CASH EQUIVALENTS AT END OF YEAR....................      282,288    176,374
    =======   ========                                                                  ==========   ========
</TABLE>

                                       F-49
<PAGE>   156

NOTE 1:  ACCOUNTING PRINCIPLES

     The annual accounts are showing the 2000 Profit and Loss Account and
Balance Sheet of the holding company Ugland Nordic Shipping ASA and the Ugland
Nordic Shipping Group. During 2000 merger have taken place within the Group.
Profit and Loss Account and Balance Sheet for 1999 have been restated for
comparative purposes. The financial statements are prepared in accordance with
The Norwegian Accounting Act of 1998. The accounting principles are described
below. All figures are stated in NOK 1,000. Exact figures or figures in a
different currency are specially commented.

CONSOLIDATION

     The consolidated accounts cover Ugland Nordic Shipping ASA and subsidiaries
where Ugland Nordic Shipping ASA either directly or indirectly owns more than
50% of the shares. Identical accounting principles have been applied to all
accounts within the Group.

     When consolidating the subsidiaries, the holding company's shares in
subsidiaries have been replaced by these companies' assets and liabilities. All
values in excess of the booked equity in subsidiaries have been allocated to
those assets (vessels) to which the added value relates. The added value of the
vessels is depreciated over the economical life of the vessel. All significant
transactions and inter-company balances within the Group have been eliminated.

     Investments in companies where the group owns between 20% and 50% of the
voting capital, or where it has a controlling influence (related companies), has
been consolidated according to the equity method in the consolidated accounts.
The result from these companies is treated as operating income in the
consolidated Group accounts.

     Ownership in jointly controlled companies has been entered according to the
gross method in the consolidated accounts. The gross method means that incomes,
expenses, assets and liabilities are included in the accounts pro rata according
to the percentage owned by the Group. The figures are specified per main section
in the notes to the accounts.

     Figures for foreign subsidiaries have been converted at rates prevailing at
the date of the Balance Sheet, average rates, however, have been utilized for
the profit and loss account.

MAIN RULE FOR VALUATION AND CLASSIFICATION OF ASSETS AND LIABILITIES

     Assets meant for permanent ownership or use in the business are classified
as fixed assets. Other assets are classified as current assets. Accounts
receivable, which fall due for payment within one year are classified as current
assets. The classification of current and long-term liabilities is based on the
corresponding criteria.

     Some items are valued by other principles. These are mentioned below.

OWNED ITEMS THAT ARE DEPRECIATED

     Fixed assets with a limited lifespan are being depreciated on a linear
basis. Newbuildings purchased after 1997 have an expected lifespan of 25 years.
Vessels acquired earlier than this has an expected lifespan of 23 years. In both
cases an expected residual value has been taken into account.

     Vessels are written down to their fair market value if the vessel's future
discounted cash flow is lower than its book value, however, a write-down will be
reversed if the basis for it is no longer present.

DOCKING EXPENSES

     Costs related to dry-docking are capitalised as docking costs and
depreciated on a linear basis up to the next expected dry-docking. For
newbuildings, a part of the purchase price is redefined and capitalised as
docking costs. If a vessel is sold, the capitalised docking expenses are booked
as part of the gain or loss.

                                       F-50
<PAGE>   157

REVENUE RECOGNITION

     Income and expenses related to the voyages are accrued on the basis of the
number of days that the voyage lasted in the fiscal period. A voyage is defined
as the period from the last discharge until discharge at the next port of call.

FOREIGN CURRENCY

     Monetary items denominated in a foreign currency are translated to the
exchange rate on the Balance Sheet day (USD 1 = NOK 8.85). Currency gains or
losses are booked as a financial item in the Profit and Loss account.

INTEREST SWAPS AND CURRENCY EXCHANGE FUTURES

     Effects on the result that are related to interest swaps are recorded over
the period of the contract. Currency exchange futures are valued at the market
value on the date of the Balance Sheet.

CAPITALISED INTEREST EXPENSES

     Interests associated with newbuildings under construction are capitalised
as a part of the cost price.

SHARES IN SUBSIDIARIES, JOINTLY CONTROLLED ACTIVITIES AND ASSOCIATES

     Investments in subsidiaries, jointly controlled activities and associates
are valued at cost.

OTHER LONG-TERM INVESTMENTS IN SHARES

     Other long-term investments in shares and minor investments in general and
limited partnerships, where the company does not hold substantial influence, are
carried at cost. These investments will be written down if a permanent
deterioration in the value should occur. Dividends received and other surplus
distributions from these companies are entered as financial income.

INVESTMENT IN SHARES

     Listed shares, which form part of a trading portfolio, are valued at market
value on the Balance Sheet day. Other shares are valued at the lower of average
cost and market price on the Balance Sheet day.

BANK DEPOSITS, CASH IN HAND, ETC.

     Bank deposits, cash in hand, etc., includes cash, bank deposits and other
monetary instruments with a maturity of less than three months at the date of
purchase.

DEBTORS

     Trade debtors and other debtors are carried at face value less provisions
for expected loss. Provisions for bad debts are made after evaluation of the
individual claim.

PENSIONS

     The basis for recording pension liabilities is estimated salary level upon
retirement and years of service. Deviations from estimates and effects of
changes in assumptions are amortised over expected remaining years of service if
exceeding 10% of the greater of pension liabilities and pension funds
(corridor). Changes in the plan are distributed over the remaining years of
service. The numbers include social security tax.

                                       F-51
<PAGE>   158

NEWBUILDING CONTRACTS

     Payments made according to contract as well as interest and running
expenses during the construction are capitalised. Costs, subtracted possible
incomes, during the period where the vessel is positioned in order to commence a
long-term contract are capitalised as a part of the cost price.

TAXES

     Tax expenses are matched with operating income before tax. Tax associated
with equity transactions, e.g. Group contribution, is posted directly to equity.
Tax related to recognised share of net income from Norwegian subsidiaries or
associated companies is not accounted for, due to the special Norwegian tax
legislation for adjusting tax values (RISK).

     The tax expense comprises of taxes payable (tax on this year's direct
taxable income) and change in net deferred tax. For the part of the Group's
companies that have activities outside the Norwegian tax regime for shipping
companies, deferred tax liabilities/assets are calculated as 28% of the
temporary timing differences and tax losses carried forward. Temporary timing
differences that reverse or may reverse during the same period are offset and
reported net. Net deferred tax assets considered recoverable on the basis of
future earnings are reported in the Balance Sheet as intangible fixed assets.

     The company's main activities are taxed within the special taxation scheme
for shipowning companies, which means that profits are not taxed at the time
earned. Taxation is based upon net financial income and dividends paid from
untaxed equity. The taxation scheme is providing for a tax credit. The basis for
this is that earnings should be used for reinvestment in shipping activities and
that all dividend payments in the foreseeable future are to be paid from already
taxed profits. If the company was to leave the taxation scheme the company would
be taxed after an income valuation based on the actual value of the assets. If
the market value of the assets is equal to the book value at that time, untaxed
capital at the time of exit will be taxed. Values in excess of the book values
will increase the taxable income. The present value of deferred tax relating to
the temporary timing differences at companies covered by the special tax scheme
for shipowning companies is considered immaterial as the company does not expect
the taxable income that these differences represent to materialise within the
foreseeable future. The assessment is based on the company's dividend policy,
liquidity reserve and the distributable taxed equity in those parts of the Group
not covered by the new tax scheme and the company's intention to continue its
shipping activities.

CASH FLOW

     The cash flow statement has been prepared using the indirect method. The
cash and cash equivalent figures excludes shares and financial instruments with
a maturity of more than three months from the date of acquisition.

NOTE 2:  FIXED ASSETS

<TABLE>
<CAPTION>
                                                                  VARIOUS
UNS ASA                                                       OPERATING ASSETS
- -------                                                       ----------------
<S>                                                           <C>
Acquisition cost as at 01.01.2000...........................         4,568
Additions...................................................           272
Disposals...................................................             0
                                                                 ---------
ACQUISITION COST AS AT 31.12.2000...........................         4,840
                                                                 =========
Accumulated depreciation as at 31.12.2000...................         2,507
                                                                 ---------
BOOK VALUE AS AT 31.12.2000.................................         2,333
                                                                 =========
Current year depreciation...................................           624
Useful life.................................................     3-5 years
Depreciation schedule.......................................        Linear
</TABLE>

                                       F-52
<PAGE>   159

     During 2000 the company has renovated leased offices for approximately NOK
1,000,000. The investment will be depreciated over the duration of the lease,
which is 10 years and expires in 2010. The depreciation is presented under
administration costs.

     The company has entered into agreements concerning the lease of offices and
company cars totalling NOK 1,200,000 per year.

     The amortization cost of the leased assets is included in other
administration expense in the Profit and Loss account.

<TABLE>
<CAPTION>
                                                                                       VARIOUS
                                                                       CAPITALIZED    OPERATING
UNS GROUP                                                  SHIPS         DOCKING       ASSETS
- ---------                                               -----------    -----------    ---------
<S>                                                     <C>            <C>            <C>
Acquisition cost as at 01.01.2000.....................    2,738,787        33,441         4,568
Additions.............................................    1,017,618        39,616           272
Disposals.............................................      (89,879)            0             0
                                                        -----------     ---------     ---------
ACQUISITION COST AS AT 31.12.2000.....................    3,666,526        73,057         4,840
                                                        ===========     =========     =========
Activated borrowing costs for ships...................       41,223
Accumulated depreciation as at 31.12.2000.............      310,594        24,439         2,507
                                                        -----------     ---------     ---------
Depreciations, write downs and reversed write downs...      310,594        24,439         2,507
                                                        -----------     ---------     ---------
BOOK VALUE AS AT 31.12.2000...........................    3,355,932        48,618         2,333
                                                        ===========     =========     =========
Current year depreciation.............................      134,090        24,439           624
Useful life...........................................  23-25 years     2.5 years     3-5 years
Depreciation schedule.................................       Linear        Linear        Linear
</TABLE>

NOTE 3:  SALARIES, NUMBER OF EMPLOYEES, BENEFITS, LOANS TO EMPLOYEES ETC.

<TABLE>
<CAPTION>
        UNS ASA                                                                         UNS GROUP
    ---------------                                                                  ---------------
     1999     2000    PAYROLL COSTS                                                   2000     1999
    ------   ------   -------------                                                  ------   ------
<S> <C>      <C>      <C>                                                            <C>      <C>
     8,857    9,431   Salaries....................................................    9,431    8,857
     1,863    3,083   Social security tax.........................................    3,083    1,863
       515      580   Pension costs...............................................      580      515
       698    1,217   Other benefits..............................................    1,217      698
    ------   ------                                                                  ------   ------
    11,933   14,311   Total.......................................................   14,311   11,933
    ======   ======                                                                  ======   ======
        13       14   Average number of employees.................................       14       13
</TABLE>

     The company's employees and the Managing Director are all included in the
pension plan.

MANAGING DIRECTOR/BOARD OF DIRECTORS

     The Managing Director received a remuneration of NOK 3,121,009 for 2000,
whereof NOK 1,508,400 was salary, NOK 1,436,800 was a bonus and the remaining
was other taxable benefits. The Managing Director has an agreement to receive
two years remuneration if he leaves the company. At 10 May 2000 the Board of
Directors allotted 110,000 shares to the Managing Director and 150,000 shares to
the management. The subscription price for these shares was NOK 70 per share. By
the issuing of this report all shares have been released. Remuneration to the
Board of Directors has been paid with NOK 105,000 to the Chairman, Andreas Ove
Ugland, and NOK 85,000 to the other members of the Board. No loans or guarantees
have been issued for the management. The management of the company has a bonus
scheme related to the annual results of the company. This is calculated on an
annual basis.

                                       F-53
<PAGE>   160

THE AUDITOR

     Expensed auditor fees for 2000 amounts to NOK 248,000 and NOK 477,240 for
consultancy services. For Group companies the auditor fees amounts to NOK
607,500 and NOK 663,825 for consultancy services.

NOTE 4:  SUBSIDIARIES, RELATED COMPANIES ETC.

<TABLE>
<CAPTION>
                                                                                    VOTE-AND
                                                      TIME OF                       OWNERSHIP
COMPANIES                                             PURCHASE    OFFICES             SHARE
- ---------                                             --------    -------           ---------
<S>                                                   <C>         <C>               <C>
SHARES AND PARTS IN SUBSIDIARIES
Jahre Prince AS.....................................    1998      Sandefjord         100.00%
Thorsfreddy AS......................................    1998      Sandefjord         100.00%
Ugland Nordic Investment AS.........................    1993      Sandefjord         100.00%
Nordic Akarita AS...................................    1996      Sandefjord         100.00%
Nordic Akarita Investment AS........................    1993      Sandefjord         100.00%
Nordic Apollo AS....................................    1991      Sandefjord         100.00%
Nordic Laurita AS...................................    1991      Sandefjord         100.00%
Nordic Sarita Investment AS.........................    1997      Sandefjord         100.00%
Nordic Akarita KS...................................    1996      Sandefjord          65.50%
Nordic Laurita KS...................................    1991      Sandefjord          50.50%
Nordic Apollo KS....................................    1991      Sandefjord          89.00%
Nordic Canadian Shipping Ltd........................    1992      Canada             100.00%
SHARES AND PARTS IN ASSOCIATED COMPANIES
IUM Shipmanagement AS...............................    2000      Grimstad            33.33%
SHARE OF JOINTLY CONTROLLED COMPANIES
P/R Stena Ugland Shuttle Tankers I DA...............    1998      Sandefjord          50.00%
P/R Stena Ugland Shuttle Tankers II DA..............    1998      Sandefjord          50.00%
P/R Stena Ugland Shuttle Tankers III DA.............    1998      Sandefjord          50.00%
Ugland Stena Storage AS.............................    2000      Sandefjord          50.00%
Stena Ugland Aframax Shuttle Ltd....................    1997      Cayman Islands      50.00%
</TABLE>

     The ownership of Nordic American Tanker Shipping Ltd. (NAT) shares has not
been included according to the equity method as UNS do not have the influence
required in order to define NAT as a related company.

ASSOCIATED COMPANIES THAT ARE PRESENTED BY THE GROSS METHOD

     The jointly controlled companies, Partrederiene (PR) Stena Ugland Shuttle
Tankers I, II and III DA and Stena Ugland Aframax Shuttle Ltd. are included in
the accounts according to the gross method. The Profit and Loss account and
Balance Sheet items are incorporated line by line. The table below illustrates
the main items, which have been included in the accounts. There is no added
value at the time of acquisition.

                                       F-54
<PAGE>   161

<TABLE>
<CAPTION>
                                                   PR SUST    PR SUST    PR SUST
                                                    I DA       II DA     III DA      SUAS     USS      TOTAL
                                                   -------    -------    -------    ------    ----    -------
<S>                                                <C>        <C>        <C>        <C>       <C>     <C>
Share of operating income........................  67,601     62,541          0        626      0     130,768
Share of operating costs.........................  (32,097)   (32,641)        0       (241)   (340)   (65,319)
Share of net financial items.....................  (48,033)   (49,289)        0        190    (11)    (97,143)
Share of taxes...................................       0          0          0          0     98          98
                                                   -------    -------    ------     ------    ----    -------
SHARE OF PROFIT/(LOSS) FOR THE YEAR..............  (12,529)   (19,389)        0        575    (253)   (31,596)
                                                   -------    -------    ------     ------    ----    -------
Share of fixed assets............................  296,351    300,247    85,211      1,201     98     683,108
Share of current assets..........................  22,771      9,964          0          0    267      33,002
                                                   -------    -------    ------     ------    ----    -------
SHARE OF TOTAL ASSETS............................  319,122    310,211    85,211      1,201    365     716,110
                                                   -------    -------    ------     ------    ----    -------
Share of other long-term debt....................  296,557    297,806         0          0      0     594,363
Share of short-term debt.........................     300      1,813      3,428          0    368       5,909
                                                   -------    -------    ------     ------    ----    -------
SHARE OF TOTAL DEBT..............................  296,857    299,619     3,428          0    368     600,272
                                                   -------    -------    ------     ------    ----    -------
Share capital....................................  22,264     10,591     81,783      1,201     (3)    115,836
BALANCE AS AT 01.01.2000.........................  34,793     29,980     23,591      2,580      0      90,944
                                                   -------    -------    ------     ------    ----    -------
Additions/disposals..............................       0          0          0          0    250         250
Share of profit..................................  (12,529)   (19,389)        0        575    (253)   (31,596)
Translation differences..........................       0          0          0        296      0         296
Paid-up/repaid share capital during the period...       0          0     58,192     (2,250)     0      55,942
                                                   -------    -------    ------     ------    ----    -------
BALANCE AS AT 31.12.2000.........................  22,264     10,591     81,783      1,201     (3)    115,836
                                                   =======    =======    ======     ======    ====    =======
</TABLE>

ASSOCIATED COMPANIES THAT ARE PRESENTED BY THE EQUITY METHOD

<TABLE>
<CAPTION>
                                                                     IUM
                                                                SHIPMANAGEMENT
                                                                      AS
                                                                --------------
<S>                                                             <C>
Additions during the period
Original acquisition cost...................................        13,690
Book equity at the time of acquisitions.....................        13,851
Goodwill....................................................         9,073
Balance as at 01.01.2000....................................             0
                                                                    ------
Additions/(disposals).......................................        13,690
Share of profit/(loss) of the year..........................           222
                                                                    ------
BALANCE AS AT 31.12.2000....................................        13,912
                                                                    ======
</TABLE>

NOTE 5:  SHARES AND OWNERSHIP IN OTHER COMPANIES, ETC.

<TABLE>
<CAPTION>
                                                             ACQUISITION     BOOK      MARKET
                                                OWNERSHIP       COSTS        VALUE      VALUE
                                                ---------    -----------    -------    -------
<S>                                             <C>          <C>            <C>        <C>
FIXED ASSETS
Nordic American Tanker Shipping Ltd. --
  Bermuda.....................................    18.80%       177,083      177,083    322,392
                                                               -------      -------    -------
TOTAL MARKETABLE FIXED ASSETS.................                 177,083      177,083    322,392
                                                               =======      =======    =======
CURRENT ASSETS
Shares........................................                   2,044        1,542      1,542
                                                               -------      -------    -------
TOTAL MARKETABLE CURRENT ASSETS...............                   2,044        1,542      1,542
                                                               =======      =======    =======
</TABLE>

                                       F-55
<PAGE>   162

NOTE 6:  INTER-COMPANY BALANCES

<TABLE>
<CAPTION>
                                                                  ACCOUNTS            ACCOUNTS
                                                                 RECEIVABLE           PAYABLE
                                                              -----------------   ----------------
                                                               2000      1999      2000     1999
                                                              -------   -------   ------   -------
<S>                                                           <C>       <C>       <C>      <C>
Subsidiaries................................................  507,875   392,319   76,054    64,526
                                                              -------   -------   ------   -------
TOTAL.......................................................  507,875   392,319   76,054    64,526
                                                              =======   =======   ======   =======
</TABLE>

NOTE 7:  SPECIFICATION OF FINANCIAL ITEMS

<TABLE>
<CAPTION>
                                                                                   INTEREST
                                                              INTEREST INCOME       EXPENSE
                                                              ---------------   ---------------
                                                               2000     1999     2000     1999
                                                              ------   ------   ------   ------
<S>                                                           <C>      <C>      <C>      <C>
Subsidiaries................................................  26,303   20,672        0    9,614
Others......................................................   7,228   16,087   17,288   20,710
                                                              ------   ------   ------   ------
TOTAL.......................................................  33,531   36,759   17,288   30,324
                                                              ======   ======   ======   ======
</TABLE>

OTHER FINANCIAL INCOME

<TABLE>
<CAPTION>
     UGLAND NORDIC                                                                    UGLAND NORDIC
     SHIPPING ASA                                                                    SHIPPING GROUP
    ---------------                                                                  ---------------
     1999     2000                                                                    2000     1999
    ------   ------                                                                  ------   ------
<S> <C>      <C>      <C>                                                            <C>      <C>
    27,177   45,019   Dividend....................................................   45,090   21,546
         0    2,250   Income from jointly controlled activities...................        0        0
         0        0   Income from associated companies............................      222        0
    36,171    1,160   Group contribution..........................................        0        0
        68   20,482   Gain on shares..............................................   20,031       68
    ------   ------                                                                  ------   ------
    63,416   68,911   TOTAL.......................................................   65,343   21,614
    ======   ======                                                                  ======   ======
</TABLE>

NOTE 8:  NEWBUILDING CONTRACTS

     The jointly controlled company, P/R Stena Ugland Shuttle Tankers III DA,
which is owned 50% by Ugland Nordic Investment AS, decided on June 11th, 1998 to
purchase the newbuilding contract of Hull 1166 at Tsuneishi Shipbuilding Co.,
Japan. The ship is a DP2 shuttle tanker of 107,425 dwt, which will be delivered
in May 2001. The contract amounts to USD 63,410,000 whereof USD 12,582,000 has
been paid as at December 31st, 2000. The next installment in the amount of USD
6,291,000 is due in January 2001. Final installment is USD 44,537,000 and is due
at the time of delivery.

     In July 2000 the company entered into an agreement with Golar-Nor Offshore
AS on affreightment of two new DP2 shuttle tankers of 92,500 dwt. The contracts
are on a bareboat basis and have a timespan of seven years. They will commence
in the 4th quarter 2002 and the 1st quarter 2003, respectively. The contracts
amount to USD 48,500,000 per vessel.

     In November 2000 the company entered into an agreement with Navion on
affreightment of a shuttle tanker of 147,500 dwt during a time period of ten
years. The agreement includes options to increase the timespan to a maximum of
25 years and amounts to USD 70,000,000. The charterer has call options during
the contract time period.

NOTE 9:  AUTHORISATION TO ISSUE SHARES

     At the Ordinary General Meeting held on 10 May 2000, the Board was given
unanimous authority to issue up to 2,000,000 new shares, each of NOK 5 value, at
a subscription price to be set by the Board in each instance. The shares will be
used in connection with the acquisition of shares, participation in companies
including limited partnerships, ships and other assets. Mergers are also
included in this authorisation framework. The authorisation comprises share
issues against cash deposits. Existing

                                       F-56
<PAGE>   163

shareholders' preferential participation in the capital increase is withdrawn.
The authorisation was given until the next Ordinary General Meeting. At the time
of issuing this report, a total of 1,985,000 shares are issued in accordance
with the mentioned authority. At the Extraordinary General Meeting held on 28
September 1993, the Board authorised to issue 225,000 shares to a total nominal
value of NOK 1,125,000 against cash payment of NOK 50 per share. In accordance
with detailed conditions, the company's management is entitled to subscribe for
these shares. The authorisation runs until 28 September 2001. At present,
110,000 of the options are remaining, of which Herbjrn Hansson is entitled to
all, at a nominal value of NOK 81.75. The authorisation given at the
Extraordinary General Meeting held on 28 September 1993 was at the Ordinary
General Meeting replaced with a new authorisation. It authorises the Board to
issue 110,000 shares to CEO Herbjrn Hansson and 150,000 shares to the company
management at a price set by the Board. The authorisation is given until 10 May
2002 but the General Meeting agreed that the authorisation was to be valid until
28 September 2003. On 10 May 2000 the Board set the subscription price of the
CEO's 110,000 shares and the management's 150,000 shares to NOK 70 per share. At
the time of issuing this report, all the shares are issued in accordance with
the authorisation.

NOTE 10:  EARNINGS PER SHARE

     Earnings per share is calculated by dividing net profit by the average
number of outstanding shares.

<TABLE>
<CAPTION>
                                                                 1999          2000
                                                              ----------    ----------
<S>                                                           <C>           <C>
Net profit after minority interests.........................   1,836,000    10,882,000
Average number of outstanding shares........................  10,926,063    12,204,349
Net profit and diluted profit per share.....................        0.17          0.89
</TABLE>

NOTE 11:  MAJOR TRANSACTIONS

<TABLE>
<CAPTION>
                                                               1999       2000
                                                              -------    ------
<S>                                                           <C>        <C>
Gain on sale of Newbuilding Halla...........................   41,736         0
Gain on sale of M/T Jahre Prince............................        0    76,895
Loss on sale of M/T Nordic Liberita.........................  (12,022)        0
                                                              -------    ------
TOTAL.......................................................   29,714    76,895
                                                              =======    ======
</TABLE>

NOTE 12:  EQUITY

UGLAND NORDIC SHIPPING ASA

<TABLE>
<CAPTION>
                                                              SHARE      SHARE     OTHER EQUITY
                                                             CAPITAL    PREMIUM      RESERVES
                                                             -------    -------    ------------
<S>                                                          <C>        <C>        <C>
Equity as at 31.12.1999....................................  54,630     420,369      136,131
Equity issue...............................................  14,919     222,904
Merger.....................................................              26,000          344
Dividend...................................................                           (2,243)
Net profit.................................................                           28,373
                                                             ------     -------      -------
EQUITY AS AT 31.12.2000....................................  69,549     669,273      162,605
                                                             ======     =======      =======
</TABLE>

                                       F-57
<PAGE>   164

UGLAND NORDIC SHIPPING GROUP

<TABLE>
<CAPTION>
                                                              SHARE       SHARE     OTHER EQUITY
                                                             CAPITAL     PREMIUM      RESERVES
                                                             --------    -------    ------------
<S>                                                          <C>         <C>        <C>
Equity as at 31.12.1999....................................   54,630     420,369       92,892
Equity issue...............................................   14,919     222,904
Merger.....................................................               26,000      (26,000)
Dividend...................................................                            (2,243)
Translation differences....................................                             1,085
Net profit.................................................                            10,882
                                                              ------     -------      -------
EQUITY AS AT 31.12.2000....................................   69,549     669,273       76,616
                                                              ======     =======      =======
</TABLE>

NOTE 13:  GUARANTEES AND PLEDGED ASSETS

<TABLE>
<CAPTION>
      UGLAND NORDIC                                                                        UGLAND NORDIC
      SHIPPING ASA                                                                        SHIPPING GROUP
    -----------------                                                                  ---------------------
     1999      2000                                                                      2000        1999
    -------   -------                                                                  ---------   ---------
<S> <C>       <C>       <C>                                                            <C>         <C>
                        Total debt secured by pledged assets, etc.
    195,858   250,188   Debt to financial institutions..............................   2,977,118   2,435,756
    -------   -------                                                                  ---------   ---------
    195,858   250,188   TOTAL.......................................................   2,977,118   2,435,756
    =======   =======                                                                  =========   =========
                        Book value of pledged assets:
          0         0   Vessels.....................................................   3,404,550   2,583,050
      5,765    21,331   Dividends...................................................      21,331       5,765
    206,648         0   Shares in subsidiaries......................................           0           0
    205,604   177,083   Other shares................................................     177,305     205,741
    -------   -------                                                                  ---------   ---------
    418,017   198,414   TOTAL.......................................................   3,603,186   2,794,556
    -------   -------                                                                  ---------   ---------
     35,000    48,232   Guarantees..................................................      48,232      35,000
    =======   =======                                                                  =========   =========
</TABLE>

     The total guarantees to lenders of subsidiaries, jointly owned companies,
and associated companies amount to NOK 1,936,000,000.

     The total debt of the Group consists of a number of loans that are secured
by pledged assets, assignments of earnings, bank accounts for freight revenues
and assignment of assurance of the respective vessel.

NOTE 14:  LONG TERM DEBT

<TABLE>
<CAPTION>
                                                              UGLAND NORDIC    UGLAND NORDIC
                                                              SHIPPING ASA     SHIPPING GROUP
INSTALLMENT PROFILE                                               2000              2000
- -------------------                                           -------------    --------------
<S>                                                           <C>              <C>
2001........................................................     131,686           507,840
2002........................................................      35,931           298,909
2003........................................................      40,356           426,747
2004........................................................      42,215           386,037
2005 and thereafter.........................................           0         1,357,585
                                                                 -------         ---------
TOTAL DEBT TO FINANCIAL INSTITUTIONS........................     250,188         2,977,118
                                                                 =======         =========
</TABLE>

     There have been no loans taken at a discount. The average interest rate in
2000 has been 7.12%. The loan agreements include a number of financial and
non-financial covenants. Significant covenants are related to change in
ownership structure, contract signings or change of existing contracts, minimum
value adjusted equity and minimum liquidity. The company satisfies all covenants
as at 31 December 2000.

                                       F-58
<PAGE>   165

NOTE 15:  RELATED PARTIES

     Andreas Ove Ugland, the Chairman of UNS, owns a controlling stake in Ugland
International Holding, which is a company that owns 2/3 of the shares in IUM
Shipmanagement AS. The costs associated with these services are based on
competitive rates. UNS is utilising technical management resources from IUM for
ten vessels and four newbuildings. Total management-fee paid to IUM for 2000
amounts to USD 1,621,000. As at 31 December 2000 IUM has accounts receivable
against UNS Group of USD 581,000.

     Ulf G. Ryder, a Boardmember of UNS, is the President of Stena Bulk AB. The
Stena Group owns 500,000 shares in UNS as well as having ownership in three of
our vessels, Stena Alexita (50%), Stena Sirita (50%) and the newbuilding with
delivery in 2001 (50%). Additionally, Stena owns 50% of Ugland Stena Storage AS
and 50% of a company that is chartering in and timechartering out the Stena
Akarita.

NOTE 16:  TAX EXPENSE

<TABLE>
<CAPTION>
     UGLAND NORDIC                                                                    UGLAND NORDIC
     SHIPPING ASA                                                                     SHIPPING GROUP
    ---------------                                                                  ----------------
     1999     2000    THE TAX EXPENSE COMPRISES FROM                                  2000      1999
    ------   ------   ------------------------------                                 -------   ------
<S> <C>      <C>      <C>                                                            <C>       <C>
         0        0   Tax payable.................................................       112      698
     6,951   11,614   Change in deferred taxes....................................    11,498   15,802
         0        0   Effect of tax law changes...................................         0        0
    ------   ------                                                                  -------   ------
     6,951   11,614   Tax expense -- ordinary result, Norway......................    11,610   16,500
    ======   ======                                                                  =======   ======
</TABLE>

<TABLE>
<CAPTION>
     UGLAND NORDIC                                                                    UGLAND NORDIC
     SHIPPING ASA                                                                     SHIPPING GROUP
    ---------------                                                                  ----------------
     1999     2000    RECONCILIATION OF NOMINAL TO ACTUAL TAX RATE                    2000      1999
    ------   ------   --------------------------------------------                   -------   ------
<S> <C>      <C>      <C>                                                            <C>       <C>
    39,248   39,987   Ordinary result after taxes.................................    52,930   17,968
         0        0   Extraordinary result before taxes...........................         0        0
    ------   ------                                                                  -------   ------
    39,248.. 39,987   NET PROFIT BEFORE TAXES.....................................    52,930   17,968
    ======   ======                                                                  =======   ======
    10,990   11,197   Expected income tax according to nominal tax rate (28%).....    14,820    5,031
    ------   ------                                                                  -------   ------
                      Tax effect from the following items
    336...      269   Non-tax-deductible expenses.................................       667      356
    (4,506)       0   Non-taxable revenue.........................................      (161)  (4,506)
         0        0   Results from tax scheme for ship owning companies...........    15,941   19,247
        (5)      (5)  Effect of dividend..........................................         0       (5)
    0.....        0   Change in deferred tax asset................................   (13,267)     271
       136      153   Other items.................................................    (6,390)  (3,894)
    ------   ------                                                                  -------   ------
     6,951   11,614   Tax expense.................................................    11,610   16,500
    ------   ------                                                                  -------   ------
     17.7%    29.0%   Effective tax rate..........................................     21.9%    91.8%
    ======   ======                                                                  =======   ======
</TABLE>

                                       F-59
<PAGE>   166

UGLAND NORDIC SHIPPING ASA

     Specification of tax effect from temporary differences and tax losses
carried forward

<TABLE>
<CAPTION>
                                                                 2000                 1999
                                                          ------------------   ------------------
                                                          ASSETS   LIABILITY   ASSETS   LIABILITY
                                                          ------   ---------   ------   ---------
<S>                                                       <C>      <C>         <C>      <C>
Operating assets........................................                           11
Intangible fixed assets.................................       2
Fixed financial assets..................................     618                  230
Receivables.............................................                                     84
Investments.............................................      44                2,699
Current liabilities.....................................              84
Profit & Loss Account...................................   7,579                9,468
Tax losses carry forward................................   4,464                9,677
                                                          ------      --       ------    ------
TOTAL...................................................  12,707      84       22,085        84
                                                          ======      ==       ======    ======
Deferred tax assets/liabilities.........................  12,623               22,001
Off-balance sheet deferred tax asset
                                                          ------      --       ------    ------
NET DEFERRED TAX ASSET/LIABILITY........................  12,623       0       22,001         0
                                                          ======      ==       ======    ======
</TABLE>

     The deferred tax asset is based on future income.

UGLAND NORDIC SHIPPING GROUP

     Specification of tax effect from temporary differences and tax losses
carried forward

<TABLE>
<CAPTION>
                                                                 2000                 1999
                                                          ------------------   ------------------
                                                          ASSETS   LIABILITY   ASSETS   LIABILITY
                                                          ------   ---------   ------   ---------
<S>                                                       <C>      <C>         <C>      <C>
Operating assets........................................       2                  452
Intangible fixed assets.................................     618
Fixed financial assets..................................               478        230
Receivables.............................................                                   83
Investments.............................................      37                2,215
Current liabilities.....................................                86
Profit & Loss Account...................................             2,316      9,086
Tax losses carry forward................................  15,134               23,580
                                                          ------     -----     ------      --
TOTAL...................................................  15,791     2,880     35,563      83
                                                          ======     =====     ======      ==
Deferred tax asset......................................  12,911               35,480
Off-balance sheet deferred tax asset....................       6               13,267
                                                          ------     -----     ------      --
NET DEFERRED TAX ASSET..................................  12,905         0     22,213       0
                                                          ======     =====     ======      ==
</TABLE>

     The Group has NOK 486,215 in untaxed equity covered by the special taxation
scheme for shipowners.

     The deferred tax asset is based on future income.

     As at 31 December 2000 UNS and the UNS Group have tax losses to be carried
forward amounting to NOK 15,942 and NOK 54,049, respectively.

     The tax losses to be carried forward expire in 2004.

                                       F-60
<PAGE>   167

NOTE 17:  SHARE CAPITAL AND SHAREHOLDERS

     As at 31 December 2000 the share capital of UNS consists of 13,909,772
A-class shares at a nominal value of NOK 5. Refer to page 32 for a list of
shareholders as at 26 March 2001. All shares give equal voting rights.

THE 20 LARGEST SHAREHOLDERS AS AT 31 DECEMBER 2000

<TABLE>
<CAPTION>
NAME                                                            NO. OF SHARES    % OF TOTAL
- ----                                                            -------------    ----------
<S>                                                             <C>              <C>
1   Andreas Ugland family...................................      2,667,753        19.18%
2   Knut Axel Ugland Holding................................      1,377,809         9.91%
3   ABBC Asset Management...................................      1,242,867         8.94%
4   L. Gill-Johannessen AS..................................        640,000         4.60%
5   Odin Norge..............................................        596,300         4.29%
6   Orkla ASA...............................................        515,964         3.71%
7   Stena Bulk AB...........................................        500,000         3.59%
8   Folketrygdfondet........................................        460,000         3.31%
9   Tine Pensjonskasse......................................        434,950         3.13%
10  First Olsen Tankers.....................................        361,500         2.60%
11  Storebrand Livsforsikring...............................        308,300         2.22%
12  Aksjefondet Gambak......................................        300,000         2.16%
13  Verdipapirfondet Skagen.................................        300,000         2.16%
14  DnB Markets.............................................        288,300         2.07%
15  Hartog & Co. AS.........................................        210,000         1.51%
16  Vital Forsikring ASA....................................        200,700         1.44%
17  Ugland Capital Partners.................................        185,000         1.33%
18  K-Holding AS............................................        166,000         1.19%
19  Euroclear Bank AS.......................................        150,900         1.08%
20  Gezina AS...............................................        145,200         1.04%
     Others.................................................      2,858,229        20.55%
                                                                 ----------       -------
TOTAL.......................................................     13,909,772       100.00%
                                                                 ==========       =======
</TABLE>

SHARES IN UNS AS OWNED/CONTROLLED BY THE COMPANY'S DIRECTORS AS AT 31 DECEMBER
2000

<TABLE>
<CAPTION>
                                                                NO. OF SHARES
                                                                -------------
<S>                                                             <C>
Tharald Brvig...............................................        145,200
Herbjrn Hansson (CEO.)......................................         90,000
Njal Hansson................................................        128,000
Ulf G. Ryder................................................              0
Christian Rytter jr.........................................        641,000
Andreas Ove Ugland (Chairman)...............................        185,000
Johan Benad Ugland..........................................      2,667,753
                                                                  ---------
TOTAL.......................................................      3,856,953
                                                                  =========
</TABLE>

NOTE 18:  AREA OF BUSINESS

     The UNS Group has only one area of business, which is oceangoing
transportation. The company operating income is split between 86% sales in
Norway and 14% in Finland.

                                       F-61
<PAGE>   168

NOTE 19:  FORWARD RATE AGREEMENTS

     The following forward rate agreements have been entered

<TABLE>
<CAPTION>
AMOUNT                                                      INTEREST RATE    START DATE    DURATION
- ------                                                      -------------    ----------    --------
<S>                                                         <C>              <C>           <C>
USD 10 m..................................................     6.030%         19.12.97     4 years
USD 15 m..................................................     6.030%         12.05.98     4 years
USD 10 m..................................................     5.940%         19.05.98     3 years
USD 10 m..................................................     5.700%         17.03.99     3 years
</TABLE>

     In addition, USD 67,000,000 relating to debt on two vessels has been
secured through regulations in the time charter rate as a result of interest
changes.

NOTE 20:  CONDITIONAL OUTCOME

     There are no events with conditional outcome at the end of the financial
year and no events have taken place subsequent to the balance sheet date that
will affect the given financial statements.

                                       F-62
<PAGE>   169

                          TEEKAY SHIPPING CORPORATION

            UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
                              AS AT MARCH 31, 2001
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                               PRO FORMA                PRO FORMA
                                                  TEEKAY(I)   ADJUSTMENTS   NOTES   CONSOLIDATED(II)
                                                  ---------   -----------   -----   -----------------
<S>                                               <C>         <C>           <C>     <C>
ASSETS
Current
Cash and cash equivalents.......................    296,940     (79,399)      (4)         217,541
Marketable securities...........................      7,270          --                     7,270
Accounts receivable.............................     76,180          --                    76,180
Prepaid expenses and other assets...............     27,188          --                    27,188
                                                  ---------     -------                 ---------
Total current assets............................    407,578     (79,399)                  328,179
                                                  ---------     -------                 ---------
Marketable securities...........................     43,844          --                    43,844
Vessels and equipment (including advances on new
  building contracts)...........................  1,944,208          --                 1,944,208
Investment in joint ventures....................     46,402          --                    46,402
Other assets....................................     17,482          --                    17,482
Goodwill........................................     58,818      31,688       (4)          90,506
                                                  ---------     -------                 ---------
                                                  2,518,332     (47,711)                2,470,621
                                                  =========     =======                 =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable................................     20,924          --                    20,924
Accrued liabilities.............................     48,408          --                    48,408
Current portion of long-term debt...............    123,058          --                   123,058
                                                  ---------     -------                 ---------
Total current liabilities.......................    192,390          --                   192,390
                                                  ---------     -------                 ---------
Long-term debt..................................    985,636          --                   985,636
Other long-term liabilities.....................     38,558          --                    38,558
                                                  ---------     -------                 ---------
Total liabilities...............................  1,216,584          --                 1,216,584
                                                  ---------     -------                 ---------
Minority interest...............................     66,968     (47,711)      (4)          19,257
Stockholders' equity............................    458,605          --                   458,605
Capital stock...................................    777,618          --                   777,618
Accumulated other comprehensive loss............     (1,443)         --                    (1,443)
                                                  ---------     -------                 ---------
Total stockholders' equity......................  1,234,780          --                 1,234,780
                                                  ---------     -------                 ---------
                                                  2,518,332     (47,711)                2,470,621
                                                  =========     =======                 =========
</TABLE>

- ---------------

(i)  Reflects the acquisition of a 64% interest in UNS on March 6, 2001.

(ii)  Pro Forma as though the remaining 36% interest in UNS was purchased on
      March 31, 2001.

     The accompanying notes are an integral part of the unaudited pro forma
                  consolidated condensed financial statements

                                       F-63
<PAGE>   170

                          TEEKAY SHIPPING CORPORATION

         UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
                   FOR THE THREE MONTHS ENDED MARCH 31, 2001
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                           UNS
                                                       (JANUARY 1 -    PRO FORMA             PRO FORMA
                                           TEEKAY(I)   MARCH 5/01)    ADJUSTMENTS   NOTES   CONSOLIDATED
                                           ---------   ------------   -----------   -----   ------------
<S>                                        <C>         <C>            <C>           <C>     <C>
NET VOYAGE REVENUES
Voyage revenues..........................   307,886       17,188                              325,074
Voyage expenses..........................    62,730          928                               63,658
                                            -------       ------        ------                -------
Net voyage revenues......................   245,156       16,260                              261,416
                                            -------       ------        ------                -------
OPERATING EXPENSES
Vessel operating expenses................    33,879        4,371                               38,250
Time charter hire expense................    17,183           --                               17,183
Depreciation and amortization............    27,351        4,206                               31,557
Goodwill amortization....................       170           --           948       (5a)       1,118
General and administrative...............    10,838        1,207                               12,045
                                            -------       ------        ------                -------
                                           89,421..        9,784           948                100,153
                                            -------       ------        ------                -------
Income from vessel operations............   155,735        6,476          (948)               161,263
                                            -------       ------        ------                -------
OTHER ITEMS
Interest expense.........................   (14,786)      (3,717)       (2,840)      (5b)     (21,343)
Interest income..........................     2,803          197                                3,000
Equity income............................     2,793          481            94       (5c)       3,368
Other income (loss)......................    (1,857)         455           211       (5d)      (1,191)
                                            -------       ------        ------                -------
                                            (11,047)      (2,584)       (2,535)               (16,166)
                                            -------       ------        ------                -------
NET INCOME...............................   144,688        3,892        (3,483)               145,097
                                            =======       ======        ======                =======
Proforma Basic Earnings per Common
  Share..................................                                                     $  3.70
Proforma Diluted Earnings per Common
  Share..................................                                                     $  3.60
Weighted average number of shares
  outstanding (thousands)................                                                      39,230
</TABLE>

- ---------------

(i)  Includes results of UNS (64% interest) for the period March 6, 2001 to
     March 31, 2001.

     The accompanying notes are an integral part of the unaudited pro forma
                  consolidated condensed financial statements

                                       F-64
<PAGE>   171

                          TEEKAY SHIPPING CORPORATION

         UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
                      FOR THE YEAR ENDED DECEMBER 31, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                               PRO FORMA             PRO FORMA
                                          TEEKAY      UNS     ADJUSTMENTS   NOTES   CONSOLIDATED
                                          -------   -------   -----------   -----   ------------
<S>                                       <C>       <C>       <C>           <C>     <C>
NET VOYAGE REVENUES
Voyage revenues.........................  893,226    69,081                            962,307
Voyage expenses.........................  248,957        --                            248,957
                                          -------   -------     -------              ---------
Net voyage revenues.....................  644,269    69,081                            713,350
                                          -------   -------     -------              ---------
OPERATING EXPENSES
Vessel operating expenses...............  125,415    20,660                            146,075
Time charter hire expense...............   53,547        --                             53,547
Depreciation and amortization...........  100,153    18,610                            118,763
Goodwill amortization...................       --        --       4,534      (5a)        4,534
General and administrative..............   37,479     5,966                             43,445
                                          -------   -------     -------              ---------
                                          316,594    45,236       4,534                366,364
                                          -------   -------     -------              ---------
Income from vessel operations...........  327,675    23,845      (4,534)               346,986
                                          -------   -------     -------              ---------
OTHER ITEMS
Interest expense........................  (74,540)  (16,641)    (15,319)     (5b)     (106,500)
Interest income.........................   13,021     2,069                             15,090
Equity income                               9,546     2,240                             11,786
Other income (loss).....................   (5,682)    3,874                             (1,808)
                                          -------   -------     -------              ---------
                                          (57,055)   (8,458)    (15,319)               (81,432)
                                          -------   -------     -------              ---------
Net income..............................  270,020    15,387     (19,853)               265,554
                                          =======   =======     =======              =========
Pro forma Basic Earnings per Common
  Share.................................                                             $    6.90
Pro forma Diluted Earnings per
  Common Share..........................                                             $    6.75
Weighted average number of shares
  outstanding (thousands)...............                                                38,468
</TABLE>

     The accompanying notes are an integral part of the unaudited pro forma
                  consolidated condensed financial statements

                                       F-65
<PAGE>   172

                          TEEKAY SHIPPING CORPORATION
              NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
                              FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

     The unaudited pro forma consolidated condensed financial statements (the
"Financial Statements") give effect to the acquisition (the "Acquisition") of
100% of the issued and outstanding shares of Ugland Nordic Shipping ASA ("UNS")
by Teekay Shipping Corporation ("Teekay"). The Financial Statements have been
prepared by management in accordance with accounting principles generally
accepted in the United States from the information derived from the audited
historical financial statements of Teekay and UNS (adjusted as indicated in Note
3 below) for the year ended December 31, 2000 and the unaudited historical
financial statements for the three months ended March 31, 2001. In the opinion
of management, the Financial Statements include all adjustments necessary for
fair presentation.

     As of March 31, 2001, Teekay had purchased approximately 64% of the issued
and outstanding shares of UNS. Subsequent to March 31, 2001, Teekay acquired the
remaining 36% of the issued and outstanding shares in UNS. Accordingly, the
Financial Statements contained herein give effect to the acquisition of 100% of
the issued and outstanding shares of UNS.

     The unaudited pro forma consolidated condensed statements of income for the
three months ended March 31, 2001 and the year ended December 31, 2000 give
effect to the Acquisition as though it had taken place on January 1, 2000. The
unaudited pro forma consolidated condensed balance sheet as at March 31, 2001 is
based on the unaudited consolidated balance sheets of Teekay and UNS as of that
date and gives effect to the Acquisition as though the remaining 36% of the
issued and outstanding shares in UNS were purchased on March 31, 2001.

     The Financial Statements are not necessarily indicative of what the results
of operations and financial position would have been, nor do they purport to
project Teekay's results of operations for any future periods. The Financial
Statements also do not include any expected benefits or cost savings arising
from the Acquisition. The Financial Statements should be read in conjunction
with the consolidated financial statements of Teekay and UNS referred to above.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting policies followed in preparing the Financial Statements are
those used by Teekay as set out in the consolidated financial statements
contained in Teekay's Annual Report on Form 20-F as at and for the year ended
December 31, 2000, and in Teekay's Quarterly Report on Form 6-K for the three
months ended March 31, 2001.

3.  ACCOUNTING TREATMENT FOR THE ACQUISITION

     The Acquisition has been accounted for using the purchase method of
accounting. The results of operations of UNS are included from the assumed date
of acquisition. UNS' accounting policies have been adjusted to be consistent
with those of Teekay.

                                       F-66
<PAGE>   173
                          TEEKAY SHIPPING CORPORATION
              NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
                      FINANCIAL STATEMENTS -- (CONTINUED)

4.  PRO FORMA GENERAL ASSUMPTIONS AND PURCHASE PRICE ALLOCATION

GENERAL ASSUMPTIONS

     Teekay purchased all of the issued and outstanding shares of Ugland Nordic
Shipping ASA ("UNS Shares") at an average price per share of Norwegian Kroner
136 in cash or U.S. $15.26 per share. The Financial Statements reflect the
following:

     -  100% of outstanding UNS Shares were exchanged for cash;

     -  all common shareholders of UNS at March 31, 2001 have tendered their
        shares, representing 14,169,772 UNS Shares;

<TABLE>
    <S>                                                           <C>

    -  total purchase consideration (in millions of U.S.
       dollars):

            Cash paid -- prior to March 31, 2001................  $136.9

            Cash paid -- subsequent to March 31, 2001...........    79.4

            Estimated transaction and integration costs included
             in accounts payable and accrued liabilities........     7.0
                                                                  ------

                                                                  $223.3
                                                                  ======
</TABLE>

PURCHASE PRICE ALLOCATION

     The excess of the purchase price over the fair market value of the net
assets of UNS has been allocated to goodwill. The purchase price includes an
accrual of $7.0 million for estimated transaction and integration costs.

     The following table describes the allocation of the purchase price as at
March 31, 2001 (in millions of U.S. dollars):

<TABLE>
<CAPTION>
                                                                64%         36%
                                                              INTEREST    INTEREST    TOTAL
                                                              --------    --------    -----
                                                                 $           $          $
<S>                                                           <C>         <C>         <C>
Net assets acquired.........................................    84.9        47.7      132.6
Goodwill....................................................    59.0        31.7       90.7
                                                               -----        ----      -----
                                                               143.9        79.4      223.3
                                                               =====        ====      =====
</TABLE>

     The pro forma consolidated condensed balance sheet incorporates the
following adjustments:

     -  the purchase price consideration and allocation adjustments as described
        above, including the following adjustment to minority interest (in
        millions of U.S. dollars):

<TABLE>
       <S>                                                           <C>

       Net assets acquired.........................................  $132.6

       Ownership interest as of March 31, 2001.....................     64%

       Minority interest portion of net assets acquired............  $ 47.7
                                                                     ======
</TABLE>

                                       F-67
<PAGE>   174
                          TEEKAY SHIPPING CORPORATION
              NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
                      FINANCIAL STATEMENTS -- (CONTINUED)

5.  UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME

     The unaudited pro forma consolidated condensed statements of income
incorporates the following adjustments:

     (a)   Goodwill amortization related to the Acquisition of UNS is calculated
           on a straight-line basis over a 20 year period. As a result, goodwill
           amortization increased by $0.9 million for the three months ended
           March 31, 2001 and by $4.5 million for the year ended December 31,
           2000.

     (b)   Interest expense at 6.5% and 7.1% (the average historical cost of
           debt on outstanding debt for the three months ended March 31, 2001
           and the year ended December 31, 2000, respectively) has been
           increased by $2.8 million for the three months ended March 31, 2001
           and by $15.3 million for the year ended December 31, 2000 to reflect
           the additional interest expense that would have been incurred had the
           Acquisition occurred on January 1, 2000.

     (c)   Teekay's equity income for the three months ended March 31, 2001 has
           been adjusted to reverse the equity loss earned from the 9% ownership
           in UNS for the period from January 1, 2001 to March 5, 2001 so that
           the results for the three months ended March 31, 2001 give effect to
           the Acquisition as if it had it taken place on January 1, 2000.

     (d)   Teekay's other income (loss) for the three months ended March 31,
           2001 has been adjusted to reverse the minority interest portion of
           UNS' results for the period from March 6, 2001 to March 31, 2001 so
           that the results for the three months ended March 31, 2001 give
           effect to the Acquisition as if it had it taken place on January 1,
           2000.

6.  UNAUDITED PRO FORMA CONSOLIDATED EARNINGS PER SHARE

     The unaudited pro forma consolidated earnings per share have been
calculated based upon the weighted average number of Teekay Shares outstanding
during the periods presented.

                                       F-68
<PAGE>   175

                                   EXHIBIT A

                         DEFINITIONS OF SHIPPING TERMS

     The following is a set of definitions for shipping terms that are used
throughout this prospectus:

        "AFRAMAX TANKER" An oil tanker of 80,000 to 120,000 dwt. Certain
     external statistical compilations define an "Aframax Tanker" slightly
     differently, some going as high as 125,000 dwt and others as low as 70,000
     dwt. External data used in this prospectus has been adjusted so that the
     definition of "Aframax Tanker" is consistent throughout.

        "ANNUAL SURVEY" An annual inspection of a vessel by a classification
     society surveyor to ensure that the vessel meets the standards of that
     society.

        "BALLAST" A vessel is in ballast when it is steaming without cargo, and
     is instead loaded down with sea water for stability. Given that oil
     production is concentrated in certain parts of the world, a vessel will
     generally spend a significant amount of time "ballasting" as it returns
     from discharge port to load port.

        "BAREBOAT CHARTER" The leasing of an empty ship for a specified period
     of time for a specific fee. In this arrangement, the shipowner virtually
     relinquishes all rights and responsibilities in respect of the vessel and
     the charterer becomes the de facto ("disponent") owner for this period. The
     charterer is generally responsible for all operating expenses including
     crewing and insurance.

        "BUNKER" Fuel oil used to operate a vessel's engines and generators.

        "CHARTER" The hiring of a vessel for either (1) a specified period of
     time or (2) a specific voyage or set of voyages.

        "CHARTERER" The entity hiring the vessel from the shipowner.

        "CHARTER-PARTY" The contract between the owner and the charterer,
     stipulating in detail each party's responsibilities in the transaction.

        "CLASSIFICATION" In order for a vessel to obtain both insurance and
     employment with most oil majors, the vessel must belong to a classification
     society, an independent body run under the direction of various shipping
     professionals. In order to maintain classification, a vessel must meet the
     standards of that society and be inspected on a regular basis.

        "CRUDE CARRIER" A tanker vessel designed to carry crude oil or other
     dirty products.

        "DEMURRAGE" Compensation paid by the charterer to the ship owner when
     loading and discharging time exceed the stipulated time in the voyage
     charter-party. This rate of compensation is generally explicitly stated in
     the charter-party.

        "DOUBLE BOTTOM OR DOUBLE HULL" Hull construction technique by which a
     ship has an inner and outer bottom or hull separated by void space, usually
     several feet in width.

        "DWT" Deadweight ton. A unit of a vessel's capacity, for cargo, fuel
     oil, stores and crew, measured in metric tons of 1,000 kg. A vessel's dwt
     or total deadweight is the total weight the vessel can carry when loaded to
     a particular load line.

        "HEAVY PETROLEUM PRODUCTS" Certain products derived from crude oil that
     crude carriers are capable of carrying.

        "IDLE-TIME" or "WAITING DAYS" Period during which a vessel is able to be
     employed but is not earning revenue.

        "IMO" International Maritime Organization, a United Nations agency that
     issues international trade standards for shipping.

                                       A-1
<PAGE>   176

        "INTERMEDIATE SURVEY" The inspection of a vessel by a classification
     society surveyor which takes place approximately two and a half years
     before and after each Special Survey. This survey is more rigorous than the
     "Annual Survey" and is meant to ensure that the vessel meets the standards
     of the classification society.

        "LADEN" A vessel is laden when it is carrying cargo.

        "LAY-UP" Mooring a ship at a protected anchorage, shutting down
     substantially all of its operating systems and taking measures to protect
     against corrosion and other deterioration. Generally, a ship enters lay-up
     for a period when its owner does not consider it profitable to continue
     trading that vessel for that period.

        "LIGHT PETROLEUM PRODUCTS" Products of crude oil that have passed
     through an extensive refining process. It is generally not possible for
     crude carriers to carry these products.

        "M/T" Motor Tanker. A tanker propelled by diesel engines.

        "NEWBUILDING" A new vessel under construction.

        "OFF-HIRE" Period during which a vessel is temporarily incapable of
     trading due to drydocking, maintenance, repair or breakdown or other causes
     for which the owner is deemed to be responsible.

        "OIL/BULK/ORE CARRIER" or "O/B/O" An ocean-going vessel designed to
     carry either oil or dry bulk cargoes.

        "OPA 90" The United States Oil Pollution Act of 1990.

        "PANAMAX TANKER" A vessel of approximately 60,000 to 80,000 dwt, of
     maximum length and breadth and draught capable of passing through the
     Panama Canal.

        "PROTECTION AND INDEMNITY INSURANCE" Insurance obtained through a mutual
     association formed by ship owners to provide protection from liability to
     third parties to one member by contribution towards that loss by all
     members as well as the proceeds of reinsurance maintained by the mutual
     associations.

        "SCRAP" At the end of its life, a vessel is sold to a shipbreaker who
     strips the ship and sells the steel. When charter rates are low, the scrap
     value of the vessel may exceed the present trading value of that vessel,
     especially if the vessel must incur significant costs to pass special
     surveys.

        "SHUTTLE TANKER" A vessel generally of 80,000 to 150,000 dwt that
     contains sophisticated equipment designed to transport oil from offshore
     production platforms to onshore storage and refinery facilities in harsh
     environmental conditions.

        "SMALL TANKER" A tanker generally of less than 60,000 dwt.

        "SPECIAL SURVEY" The inspection of a vessel by a classification society
     surveyor which takes place every four to five years. A shipowner often must
     incur a great deal of repair expense in order to pass his fourth and fifth
     special survey and as a result may choose to simply scrap the vessel
     beforehand.

        "SPOT MARKET" The market for chartering a vessel for single voyages.

        "STORAGE" The use of a vessel for the storage rather than the
     transportation of cargo. When spot market rates are low, a vessel can earn
     comparable net cash flow from storage.

        "SUEZMAX TANKER" A vessel of approximately 120,000 to 200,000 dwt of
     maximum length and breadth and draft capable of passing through the Suez
     Canal.

        "TCE" or "TIME CHARTER EQUIVALENT" A measure of revenue performance
     based on a spot market rate, measured in $/ton, adjusted to equate to a
     time charter rate, measured in dollars per ship per day. TCE is calculated
     as gross revenue less the voyage specific expenses that the
                                       A-2
<PAGE>   177

     owner would not have incurred had the vessel been time-chartered, divided
     by the number of voyage days. Consistent with industry data, such as that
     produced by Clarkson, the TCE rates used in this prospectus do not account
     for brokerage commissions or off-hire and idle time.

        "TANKER" Ship designed for the carriage of liquid cargoes in bulk, her
     cargo space consisting of many tanks. Tankers carry a variety of products
     including crude oil, refined products, liquid chemicals, liquid gas and
     wine. Tankers load their cargo by gravity from the shore or by shore pumps
     and discharge using their own pumps.

        "TIME CHARTER" The hire of a ship for a specified period of time. The
     owner provides the ship with crew, stores and provisions, ready in all
     aspects to load cargo and proceed on a voyage as directed by the charterer.
     The charterer pays for bunkering and all voyage related expenses including
     canal tolls and port charges.

        "TON-MILES" A measure of tanker demand. Tons carried by a vessel
     multiplied by the distance traveled.

        "ULCC" Ultra Large Crude Carrier. An ocean-going tanker vessel of more
     than 320,000 dwt, designed to carry crude oil cargoes.

        "VLCC" Very Large Crude Carrier. An ocean-going tanker vessel of between
     200,000 and 320,000 dwt, designed to carry crude oil cargoes.

        "VOYAGE CHARTER" Contract of carriage in which the charterer pays for
     the use of a ship's cargo capacity for one, or sometimes more than one,
     voyage between specified ports. Under this type of charter, the ship owner
     pays all the operating costs of the ship (including bunkers, canal and port
     charges, pilotage, towage and ship's agency) while payment for cargo
     handling charges are subject of agreement between the parties. Freight is
     generally paid per unit of cargo, such as a ton, based on an agreed
     quantity, or as a lump sum irrespective of the quantity loaded.

                                       A-3
<PAGE>   178

- ------------------------------------------------------
- ------------------------------------------------------
     NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER ONLY TO SELL THE NOTES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND
IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
                            ------------------------
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Where You Can Find More Information...    i
Special Note Regarding Forward-Looking
  Statements..........................   ii
Service of Process and Enforcement of
  Liabilities.........................  iii
Prospectus Summary....................    1
Risk Factors..........................   12
Use of Proceeds.......................   21
Capitalization........................   22
Selected Consolidated Financial and
  Other Data..........................   23
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   27
Business..............................   38
Management............................   60
Principal Stockholders................   63
Certain Transactions with Related
  Parties.............................   64
Description of Certain Debt...........   65
The Exchange Offer....................   67
Description of the Notes..............   77
Form Denomination, Book-Entry
  Procedures and Transfer.............   91
Registration Rights...................   93
Tax Considerations....................   96
Plan of Distribution..................  100
Legal Matters.........................  101
Experts...............................  101
Index to Financial Statements.........  F-1
Definitions of Shipping Terms.........  A-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
                                  $250,000,000
                         ------------------------------

                                      LOGO
                         ------------------------------
                          TEEKAY SHIPPING CORPORATION
                          OFFER TO EXCHANGE ALL 8.875%
                         SENIOR NOTES DUE JULY 15, 2011
                          FOR 8.875% SENIOR NOTES DUE
                           JULY 15, 2011, WHICH HAVE
                           BEEN REGISTERED UNDER THE
                             SECURITIES ACT OF 1933
                          ---------------------------
                                   PROSPECTUS
                          ---------------------------
                                          , 2001
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>   179

                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Teekay Shipping Corporation ("Teekay") is a Marshall Islands corporation.
The Marshall Islands Business Corporation Act ("MIBCA") provides that a Marshall
Islands corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of no contest, or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.

     A Marshall Islands corporation also has the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.

     To the extent that a director or officer of a Marshall Islands corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding paragraph, or in the defense of a claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid in advance of the final disposition of such action, suit
or proceeding as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in the MIBCA.

     In addition, a Marshall Islands corporation has the power to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director or officer against any liability asserted against him and incurred by
him in such capacity whether or not the corporation would have the power to
indemnify him against such liability under the provisions of the MIBCA.

     Section J of Teekay's Articles of Incorporation, as amended, provides that
to the fullest extent permitted under the MIBCA, a director of Teekay shall not
be liable to Teekay or its shareholders for monetary damages for breach of
fiduciary duty as a director. Section 10.00 of Teekay's Bylaws provides
                                       II-1
<PAGE>   180

that any person who is made party to a proceeding by virtue of being an officer
or director of Teekay or, being or having been such a director or officer or an
employee of Teekay, serving at the request of Teekay as a director, officer,
employee or agent of another corporation or other enterprise, shall be
indemnified and held harmless to the fullest extent permitted by the MIBCA
against any and all expense, liability, loss (including attorneys' fees,
judgments, fines or penalties and amounts paid in settlement) actually incurred
or suffered by such person in connection with the proceeding.

     In addition, Teekay has entered into separate Indemnification Agreements
with each of Teekay officers and directors listed in the Registration Statement
which provide for indemnification of the director or officer against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative except to the extent that such person is otherwise indemnified,
such action, suit or proceeding arose out of such person's intentional
misconduct, knowing violation of law or out of a transaction in which such
director or officer is finally judicially determined to have derived an improper
personal benefit or if it shall be determined by a final judgment or other final
adjudication that such indemnification was not lawful.

ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT NO:                           DESCRIPTION
- -----------                           -----------
<C>           <S>

    3.1       Amended and Restated Articles of Incorporation of Teekay
              Shipping Corporation.(1)

    3.2       Articles of Amendment of Articles of Incorporation of Teekay
              Shipping Corporation.(1)

    3.3       Amended and Restated Bylaws of Teekay Shipping
              Corporation.(1)

    4.1       Registration Rights Agreement among Teekay Shipping
              Corporation, Tradewinds Trust Co. Ltd., as Trustee for the
              Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee
              for the JTK Trust.(2)

    4.2       Specimen of Teekay Shipping Corporation Common Stock
              Certificate.(2)

    4.3       Indenture dated January 29, 1996 among Teekay Shipping
              Corporation, VSSI Oceans Inc., VSSI Atlantic Inc., VSSI
              Appian Inc., Senang Spirit Inc., Exuma Spirit Inc., Nassau
              Spirit Inc., Andros Spirit Inc. and United States Trust
              Company of New York, as Trustee.(3)

    4.4       Specimen of Teekay Shipping Corporation's 8.32% First
              Preferred Ship Mortgage Notes Due 2008.(3)

    4.5       Bahamian Statutory Ship Mortgage dated January 29, 1996 by
              Nassau Spirit Inc. to United States Trust Company of New
              York.(3)(4)

    4.6       Deed of Covenants dated January 29, 1996 by Nassau Spirit
              Inc. to United States Trust Company of New York.(3)(4)

    4.7       First Preferred Ship Mortgage dated January 29, 1996 by VSSI
              Oceans Inc. to United States Trust Company of New York, as
              Trustee.(5)

    4.8       Assignment of Time Charter dated January 29, 1996 by Nassau
              Spirit Inc. to United States Trust Company of New York, as
              Trustee.(3)(4)

    4.9       Assignment of Insurance dated January 29, 1996 by Nassau
              Spirit Inc. to United States Trust Company of New York, as
              Trustee.(3)(4)

    4.10      Pledge Agreement and Irrevocable Proxy dated January 29,
              1996 by Teekay Shipping Corporation in favor of United
              States Trust Company of New York, as Trustee.(3)

    4.11      Guarantee dated January 29, 1996 by Nassau Spirit Inc. in
              favor of United States Trust Company of New York, as
              Trustee.(3)(4)

    4.12      Assignment of Freights and Hires dated January 29, 1996 by
              Nassau Spirit Inc. to United States Trust Company of New
              York, as Trustee.(3)(4)
</TABLE>

                                       II-2
<PAGE>   181

<TABLE>
<CAPTION>
EXHIBIT NO:                           DESCRIPTION
- -----------                           -----------
<C>           <S>

    4.13      Cash Collateral Account Agreement dated January 29, 1996
              between Nassau Spirit Inc. and United States Trust Company
              of New York, as Trustee.(3)(4)

    4.14      Investment Account Agreement dated January 29, 1996 between
              Teekay Shipping Corporation and United States Trust Company
              of New York, as Trustee.(3)

    4.15      Indenture dated June 22, 2001 among Teekay Shipping
              Corporation and U.S. Trust Company of Texas, N.A.

    4.16      Exchange and Registration Rights Agreement dated June 22,
              2001 among Teekay Shipping Corporation and Goldman, Sachs &
              Co., Morgan Stanley & Co. Incorporated, Salomon Smith Barney
              Inc., Deutsche Banc Alex. Brown Inc., J.P. Morgan Securities
              Inc., Fleet Securities, Inc. and Scotia Capital (USA) Inc.

    4.17      Specimen of Teekay Shipping Corporation's 8.875% Senior
              Notes due 2011.

    5.1       Opinion of Perkins Coie LLP, special counsel to the
              registrant, as to the legality under U.S. law of the notes
              being offered by Teekay Shipping Corporation.

    8.1       Opinion of Perkins Coie LLP, regarding certain U.S. tax
              matters (contained in opinion filed as Exhibit 5.1).

    8.2       Opinion of Seward and Kissel, LLP, regarding certain U.S.
              tax matters.

    8.3       Opinion of Watson, Farley & Williams LLP, regarding Marshall
              Islands tax matters.

    8.4       Opinion of Graham, Thompson & Co., regarding Bahamian tax
              matters.

    8.5       Opinion of Appleby Spurling & Kempe, regarding Bermuda tax
              matters.

    8.6       Opinion of Bugge, Arentz-Hansen & Rasmussen, regarding
              Norwegian tax matters.

   10.1       1995 Stock Option Plan.(2)

   10.2       Amendment to 1995 Stock Option Plan.(6)

   10.3       Amended 1995 Stock Option Plan.(7)

   10.4       Form of Indemnification Agreement between Teekay Shipping
              Corporation and each of its officers and directors.(2)

   10.5       Charter Party, as amended, dated September 21, 1989 between
              Palm Shipping Inc. and BP Shipping Limited.(8)

   10.6       Time Charter, as amended, dated July 3, 1995 between VSSI
              Oceans Inc. and Palm Shipping Inc.(5)

   10.7       Time Charter, as amended, dated January 4, 1994 between VSSI
              Atlantic Inc. and Palm Shipping Inc.(5)

   10.8       Time Charter, as amended, dated February 1, 1992 between
              VSSI Appian Inc. and Palm Shipping Inc.(5)

   10.9       Time Charter, as amended, dated December 1, 1993 between
              Senang Spirit Inc. and Palm Shipping Inc.(5)

   10.10      Time Charter, as amended, dated August 1, 1992 between Exuma
              Spirit Inc. and Palm Shipping Inc.(5)

   10.11      Time Charter, as amended, dated May 1, 1992 between Nassau
              Spirit Inc. and Palm Shipping Inc.(5)

   10.12      Time Charter, as amended, dated November 1, 1992 between
              Andros Spirit Inc. and Palm Shipping Inc.(5)

   10.13      Management Agreement, as amended, dated June 1, 1992 between
              Teekay Shipping Limited and Nassau Spirit Inc.(5)(4)

   10.14      Agreement, dated October 3, 1996, for a U.S. $90,000,000
              Term Loan Facility to be made available to certain
              subsidiaries of Teekay Shipping Corporation by Christiania
              Bank og Kreditkasse, acting through its New York Branch, The
              Bank of Nova Scotia, and Banque Indosuez.(9)
</TABLE>

                                       II-3
<PAGE>   182

<TABLE>
<CAPTION>
EXHIBIT NO:                           DESCRIPTION
- -----------                           -----------
<C>           <S>

   10.15      Agreement, dated October 18, 1996, for a U.S. $120,000,000
              Term Loan Facility to be made available to certain
              subsidiaries of Teekay Shipping Corporation by Den Norske
              Bank ASA, Nederlandse Scheepshypothesbank N.V., The Bank of
              New York, and Midland Bank plc.(9)

   10.16      Agreement, dated January 26, 1998, for a U.S. $200,000,000
              Reducing Revolving Credit Facility to be made available to
              certain wholly-owned subsidiaries of Teekay Shipping
              Corporation by Den Norske Bank ASA, Christiania Bank og
              Kreditkasse ASA, New York Branch, and the Bank of Nova
              Scotia.(10)

   10.17      Agreement, dated March 26, 1999, for the amalgamation of
              Northwest Maritime Inc., a 100% owned subsidiary of Teekay
              Shipping Corporation, and Bona Shipholding Ltd.(11)

   10.18      Agreement, dated April 16, 1998, for a U.S. $30,000,000 Term
              Loan Facility to be made available to VSSI Australia Limited
              by Rabo Australia Limited.(1)

   10.19      Agreement, dated December 18, 1997, for a U.S. $44,000,000
              Term Loan Facility to be made available to Barrington
              (Australia) Pty Limited and Palmerston (Australia) Pty
              Limited by Rabo Australia Limited.(1)

   10.20      Amended and Restated Reimbursement Agreement, dated April
              16, 1998, Among Barrington (Australia) Pty Limited,
              Palmerston (Australia) Pty Limited, VSSI Australia Limited,
              VSSI Transport Inc. and Alliance Chartering Pty Limited and
              Nedship Bank (America) N.V., The Bank of New York and
              Landesbank Schleswig-Holstein.(1)

   10.21      Amendment No. 1, dated May 1999, to Amended and Restated
              Reimbursement Agreement dated April 16, 1998 among
              Barrington (Australia) Pty Limited, Palmerston (Australia)
              Pty Limited, VSSI Australia Limited, VSSI Transport Inc. and
              Alliance Chartering Pty Limited and Nedship Bank (America)
              N.V., The Bank of New York and Landesbank
              Schleswig-Holstein.(1)

   10.22      Amended and Restated Agreement, date June 11, 1999, for a
              $500,000,000 Revolving Loan between Bona Shipholding Ltd.,
              Chase Manhattan plc, Citibank International plc and various
              other banks.(1)

   10.23      Amendment and Restatement Agreement, dated June 11, 1999,
              relating to a U.S. $500,000,000 Revolving Loan Agreement
              between Bona Shipholding Ltd., Chase Manhattan plc, Citibank
              International plc and various other banks.(1)

   10.24      Rights Agreement, dated as of September 8, 2000, between
              Teekay Shipping Corporation and The Bank of New York, as
              Rights Agent.(12)

   10.25      Reimbursement Agreement, dated January 1, 2000, between
              Fleet Management Inc. and Teekay Shipping Corporation.(10)

   10.26      Reimbursement Agreement, dated February 16, 2001, between
              Karratha Spirit Pty Ltd and Nedship Bank (America) N.V.(13)

   10.27      Agreement, dated February 16, 2001, for a U.S. $34,000,000
              Term Loan Facility to be made available to Karratha Spirit
              Pty Ltd by Rabo Australia Limited.(13)

   10.28      Form of Exchange Agent Agreement between United States Trust
              Company of New York, as exchange agent, and Teekay Shipping
              Corporation.*

   12.1       Statement regarding the computation of ratio of earnings to
              fixed charges for Teekay Shipping Corporation.

   15.1       Letter from Ernst & Young, as independent chartered
              accountants, regarding unaudited interim financial
              information.

   21.1       List of Significant Subsidiaries of Teekay Shipping Company.

   23.1       Consent of Perkins Coie, LLP (contained in Exhibit 5.1).

   23.2       Consent of Seward and Kissel, LLP (contained in Exhibit
              8.2).

   23.3       Consent of Watson, Farley & Williams LLP (contained in
              Exhibit 8.3).
</TABLE>

                                       II-4
<PAGE>   183

<TABLE>
<CAPTION>
EXHIBIT NO:                           DESCRIPTION
- -----------                           -----------
<C>           <S>

   23.4       Consent of Graham, Thompson & Co. (contained in Exhibit
              8.4).

   23.5       Consent of Appleby Spurling & Kempe (contained in Exhibit
              8.5)

   23.6       Consent of Bugge, Arentz-Hansen & Rasmussen (contained in
              Exhibit 8.6)

   23.7       Consent of Ernst & Young LLP.

   23.8       Consent of Deloitte & Touche LLP.

   24.1       Power of Attorney (contained on signature pages).

   25.1       Statement of Eligibility of U.S. Trust Company of Texas,
              N.A., as trustee.

   99.1       Form of Letter of Transmittal.

   99.2       Form of Notice of Guaranteed Delivery.
</TABLE>

- ---------------

*    To be filed as an amendment.

(1) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on March 30, 2000, and hereby incorporated by reference
    to such Annual Report.

(2) Previously filed as an exhibit to the Company's Registration Statement on
    Form F-1 (Registration No. 33-7573-4), filed with the SEC on July 14, 1995,
    and hereby incorporated by reference to such Registration Statement.

(3) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on June 4, 1996, and hereby incorporated by reference to
    such Annual Report.

(4) A schedule attached to this exhibit identifies all other documents not
    required to be filed as exhibits because such other documents are
    substantially identical to this exhibit. The schedule also sets forth
    material details by which the omitted documents differ from this exhibit.

(5) Previously filed as an exhibit to the Company's Registration Statement on
    Form F-3 (Registration No. 33-65139), filed with the SEC on January 19,
    1996, and hereby incorporated by reference to such Registration Statement.

(6) Previously filed as an exhibit to the Company's Report on Form 6-K, filed
    with the SEC on May 2, 2000, and hereby incorporated by reference to such
    Report.

(7) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on April 2, 2001, and hereby incorporated by reference to
    such Annual Report.

(8) Previously filed as an exhibit to the Company's Registration Statement on
    Form F-1 (Registration No. 33-68680), as declared effective by the SEC on
    November 29, 1993, and hereby incorporated by reference to such Registration
    Statement.

(9) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on June 11, 1997, and hereby incorporated by reference to
    such Annual Report.

(10) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
     filed with the SEC on May 20, 1998, and hereby incorporated by reference to
     such Annual Report.

(11) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
     filed with the SEC on June 11, 1999, and hereby incorporated by reference
     to such Annual Report.

(12) Previously filed as an exhibit to the Company's Form 8-A, filed with the
     SEC on September 11, 2000, and hereby incorporated by reference to such
     filing.

(13) Previously filed as an exhibit to the Company's Report on Form 6-K filed
     with the SEC on May 24, 2001, and hereby incorporated by reference to such
     report.

                                       II-5
<PAGE>   184

ITEM 22.  UNDERTAKINGS

     (a) The undersigned registrant hereby undertakes:

        (1) To file, during any period in which offers for sales are being made,
     a post-effective amendment to this registration statement:

           (i) To include any prospectus required by section 10(a)(3) of the
        Securities Act of 1933

           (ii) To reflect in the prospectus any facts or events arising after
        the effective date of the registration statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the registration statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation form the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than a 20% change in the
        maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement.

           (iii) To include any material information with respect to the plan of
        distribution not previously disclosed in the registration statement or
        any material change to such information in the registration statement.

        Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
     section do not apply if the registration statement is on Form S-3, Form S-8
     or Form F-3, and the information required to be included in a
     post-effective amendment by those paragraphs is contained in periodic
     reports filed with or furnished to the Commission by the registrant
     pursuant to section 13 or section 15(d) of the Securities Exchange Act of
     1934 that are incorporated by reference in the registration statement.

        (2) That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be the initial bona fide offering thereof.

        (3) To remove from registration by means of a post-effective amendment
     any of the securities being registered which remain unsold at the
     termination of the offering.

        (4) If the registrant is a foreign private issuer, to file a
     post-effective amendment to the registration statement to include any
     financial statement required by Item 8.A of Form 20-F at the start of any
     delayed offering or throughout a continuous offering. Financial statements
     and information otherwise required by Section 10(a)(3) of the Act need not
     be furnished, provided that the registrant includes in the prospectus, by
     means of a post-effective amendment, financial statements required pursuant
     to this paragraph (a)(4) and other information necessary to ensure that all
     other information in the prospectus is at least as current as the date of
     those financial statements. Notwithstanding the foregoing, with respect to
     registration statements on Form F-3, a post-effective amendment need not be
     filed to include financial statements and information required by Section
     10(a)(3) of the Act or sec.210.3-19 of this chapter if such financial
     statements and information are contained in periodic reports filed with or
     furnished to the Commission by the registrant pursuant to section 13 or
     section 15(d) of the Securities Exchange Act of 1934 that are incorporated
     by reference in the Form F-3.

     (b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), that is incorporated by reference in this
registration statement shall be deemed to be a new
                                       II-6
<PAGE>   185

registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

     (c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

     (d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form F-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

     (e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

                                       II-7
<PAGE>   186

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Vancouver,
British Columbia, Canada, on the 10th day of July, 2001.

                                          TEEKAY SHIPPING CORPORATION

                                                     /s/ BJORN MOLLER
                                          By:
                                          --------------------------------------

                                                Bjorn Moller, President and
                                                  Chief Executive Officer

                                       II-8
<PAGE>   187

                               POWER OF ATTORNEY

     Each person whose individual signature appears below hereby authorizes and
appoints Bjorn Moller and Peter Antturi, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his or her name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments, and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 10th day of July, 2001.

<TABLE>
<CAPTION>
                  SIGNATURE                                            TITLE
                  ---------                                            -----
<C>                                            <S>
              /s/ BJORN MOLLER                 President, Chief Executive Officer and Director
- ---------------------------------------------
                Bjorn Moller

              /s/ PETER ANTTURI                Chief Financial Officer, Vice President, Treasurer
- ---------------------------------------------  and Principal Financial and Accounting Officer
                Peter Antturi

               /s/ C. SEAN DAY                 Director and Chairman of the Board
- ---------------------------------------------
                 C. Sean Day

             /s/ ALEX KARLSHOEJ                Director and Authorized Representative in
- ---------------------------------------------  the United States
               Alex Karlshoej

              /s/ BRUCE C. BELL                Director and Corporate Secretary
- ---------------------------------------------
                Bruce C. Bell

          /s/ DR. IAN D. BLACKBURNE            Director
- ---------------------------------------------
            Dr. Ian D. Blackburne

                                               Director
- ---------------------------------------------
               Morris L. Feder

                                               Director
- ---------------------------------------------
             Thomas Kuo-Yuen Hsu

              /s/ LEIF O. HOEGH                Director
- ---------------------------------------------
                Leif O. Hoegh

                                               Director
- ---------------------------------------------
              Eileen A. Mercier
</TABLE>

                                       II-9
<PAGE>   188

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO:                           DESCRIPTION
- -----------                           -----------
<C>           <S>
    3.1       Amended and Restated Articles of Incorporation of Teekay
              Shipping Corporation. (1)
    3.2       Articles of Amendment of Articles of Incorporation of Teekay
              Shipping Corporation. (1)
    3.3       Amended and Restated Bylaws of Teekay Shipping Corporation.
              (1)
    4.1       Registration Rights Agreement among Teekay Shipping
              Corporation, Tradewinds Trust Co. Ltd., as Trustee for the
              Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee
              for the JTK Trust. (2)
    4.2       Specimen of Teekay Shipping Corporation Common Stock
              Certificate. (2)
    4.3       Indenture dated January 29, 1996 among Teekay Shipping
              Corporation, VSSI Oceans Inc., VSSI Atlantic Inc., VSSI
              Appian Inc., Senang Spirit Inc., Exuma Spirit Inc., Nassau
              Spirit Inc., Andros Spirit Inc. and United States Trust
              Company of New York, as Trustee. (3)
    4.4       Specimen of Teekay Shipping Corporation's 8.32% First
              Preferred Ship Mortgage Notes Due 2008. (3)
    4.5       Bahamian Statutory Ship Mortgage dated January 29, 1996 by
              Nassau Spirit Inc. to United States Trust Company of New
              York. (3)(4)
    4.6       Deed of Covenants dated January 29, 1996 by Nassau Spirit
              Inc. to United States Trust Company of New York. (3)(4)
    4.7       First Preferred Ship Mortgage dated January 29, 1996 by VSSI
              Oceans Inc. to United States Trust Company of New York, as
              Trustee. (5)
    4.8       Assignment of Time Charter dated January 29, 1996 by Nassau
              Spirit Inc. to United States Trust Company of New York, as
              Trustee. (3)(4)
    4.9       Assignment of Insurance dated January 29, 1996 by Nassau
              Spirit Inc. to United States Trust Company of New York, as
              Trustee. (3)(4)
    4.10      Pledge Agreement and Irrevocable Proxy dated January 29,
              1996 by Teekay Shipping Corporation in favor of United
              States Trust Company of New York, as Trustee. (3)
    4.11      Guarantee dated January 29, 1996 by Nassau Spirit Inc. in
              favor of United States Trust Company of New York, as
              Trustee. (3)(4)
    4.12      Assignment of Freights and Hires dated January 29, 1996 by
              Nassau Spirit Inc. to United States Trust Company of New
              York, as Trustee. (3)(4)
    4.13      Cash Collateral Account Agreement dated January 29, 1996
              between Nassau Spirit Inc. and United States Trust Company
              of New York, as Trustee. (3)(4)
    4.14      Investment Account Agreement dated January 29, 1996 between
              Teekay Shipping Corporation and United States Trust Company
              of New York, as Trustee. (3)
    4.15      Indenture dated June 22, 2001 among Teekay Shipping
              Corporation and U.S. Trust Company of Texas, N.A.
    4.16      Exchange and Registration Rights Agreement dated June 22,
              2001 among Teekay Shipping Corporation and Goldman, Sachs &
              Co., Morgan Stanley & Co. Incorporated, Salomon Smith Barney
              Inc., Deutsche Banc Alex. Brown Inc., J.P. Morgan Securities
              Inc., Fleet Securities, Inc. and Scotia Capital (USA) Inc.
    4.17      Specimen of Teekay Shipping Corporation's 8.875% Senior
              Notes due 2011.
    5.1       Opinion of Perkins Coie LLP, special counsel to the
              registrant, as to the legality under U.S. law of the notes
              being offered by Teekay Shipping Corporation.
    8.1       Opinion of Perkins Coie LLP, regarding certain U.S. tax
              matters (contained in opinion filed as Exhibit 5.1).
</TABLE>
<PAGE>   189

<TABLE>
<CAPTION>
EXHIBIT NO:                           DESCRIPTION
- -----------                           -----------
<C>           <S>
    8.2       Opinion of Seward and Kissel, LLP, regarding certain U.S.
              tax matters.
    8.3       Opinion of Watson, Farley & Williams LLP, regarding Marshall
              Islands tax matters.
    8.4       Opinion of Graham, Thompson & Co., regarding Bahamian tax
              matters.
    8.5       Opinion of Appleby Spurling & Kempe, regarding Bermuda tax
              matters.
    8.6       Opinion of Bugge, Arentz-Hansen & Rasmussen, regarding
              Norwegian tax matters.
   10.1       1995 Stock Option Plan. (2)
   10.2       Amendment to 1995 Stock Option Plan. (6)
   10.3       Amended 1995 Stock Option Plan. (7)
   10.4       Form of Indemnification Agreement between Teekay Shipping
              Corporation and each of its officers and directors. (2)
   10.5       Charter Party, as amended, dated September 21, 1989 between
              Palm Shipping Inc. and BP Shipping Limited. (8)
   10.6       Time Charter, as amended, dated July 3, 1995 between VSSI
              Oceans Inc. and Palm Shipping Inc. (5)
   10.7       Time Charter, as amended, dated January 4, 1994 between VSSI
              Atlantic Inc. and Palm Shipping Inc. (5)
   10.8       Time Charter, as amended, dated February 1, 1992 between
              VSSI Appian Inc. and Palm Shipping Inc. (5)
   10.9       Time Charter, as amended, dated December 1, 1993 between
              Senang Spirit Inc. and Palm Shipping Inc. (5)
   10.10      Time Charter, as amended, dated August 1, 1992 between Exuma
              Spirit Inc. and Palm Shipping Inc. (5)
   10.11      Time Charter, as amended, dated May 1, 1992 between Nassau
              Spirit Inc. and Palm Shipping Inc. (5)
   10.12      Time Charter, as amended, dated November 1, 1992 between
              Andros Spirit Inc. and Palm Shipping Inc. (5)
   10.13      Management Agreement, as amended, dated June 1, 1992 between
              Teekay Shipping Limited and Nassau Spirit Inc. (5)(4)
   10.14      Agreement, dated October 3, 1996, for a U.S. $90,000,000
              Term Loan Facility to be made available to certain
              subsidiaries of Teekay Shipping Corporation by Christiania
              Bank og Kreditkasse, acting through its New York Branch, The
              Bank of Nova Scotia, and Banque Indosuez. (9)
   10.15      Agreement, dated October 18, 1996, for a U.S. $120,000,000
              Term Loan Facility to be made available to certain
              subsidiaries of Teekay Shipping Corporation by Den Norske
              Bank ASA, Nederlandse Scheepshypothesbank N.V., The Bank of
              New York, and Midland Bank plc. (9)
   10.16      Agreement, dated January 26, 1998, for a U.S. $200,000,000
              Reducing Revolving Credit Facility to be made available to
              certain wholly-owned subsidiaries of Teekay Shipping
              Corporation by Den Norske Bank ASA, Christiania Bank og
              Kreditkasse ASA, New York Branch, and the Bank of Nova
              Scotia. (10)
   10.17      Agreement, dated March 26, 1999, for the amalgamation of
              Northwest Maritime Inc., a 100% owned subsidiary of Teekay
              Shipping Corporation, and Bona Shipholding Ltd. (11)
   10.18      Agreement, dated April 16, 1998, for a U.S. $30,000,000 Term
              Loan Facility to be made available to VSSI Australia Limited
              by Rabo Australia Limited. (1)
</TABLE>
<PAGE>   190

<TABLE>
<CAPTION>
<C>           <S>
   10.19      Agreement, dated December 18, 1997, for a U.S. $44,000,000
              Term Loan Facility to be made available to Barrington
              (Australia) Pty Limited and Palmerston (Australia) Pty
              Limited by Rabo Australia Limited. (1)

   10.20      Amended and Restated Reimbursement Agreement, dated April
              16, 1998, Among Barrington (Australia) Pty Limited,
              Palmerston (Australia) Pty Limited, VSSI Australia Limited,
              VSSI Transport Inc. and Alliance Chartering Pty Limited and
              Nedship Bank (America) N.V., The Bank of New York and
              Landesbank Schleswig-Holstein. (1)

   10.21      Amendment No. 1, dated May 1999, to Amended and Restated
              Reimbursement Agreement dated April 16, 1998 among
              Barrington (Australia) Pty Limited, Palmerston (Australia)
              Pty Limited, VSSI Australia Limited, VSSI Transport Inc. and
              Alliance Chartering Pty Limited and Nedship Bank (America)
              N.V., The Bank of New York and Landesbank
              Schleswig-Holstein. (1)

   10.22      Amended and Restated Agreement, date June 11, 1999, for a
              $500,000,000 Revolving Loan between Bona Shipholding Ltd.,
              Chase Manhattan plc, Citibank International plc and various
              other banks. (1)

   10.23      Amendment and Restatement Agreement, dated June 11, 1999,
              relating to a U.S. $500,000,000 Revolving Loan Agreement
              between Bona Shipholding Ltd., Chase Manhattan plc, Citibank
              International plc and various other banks. (1)

   10.24      Rights Agreement, dated as of September 8, 2000, between
              Teekay Shipping Corporation and The Bank of New York, as
              Rights Agent. (12)

   10.25      Reimbursement Agreement, dated January 1, 2000, between
              Fleet Management Inc. and Teekay Shipping Corporation. 10)

   10.26      Reimbursement Agreement, dated February 16, 2001, between
              Karratha Spirit Pty Ltd and Nedship Bank (America) N.V. (13)

   10.27      Agreement, dated February 16, 2001, for a U.S. $34,000,000
              Term Loan Facility to be made available to Karratha Spirit
              Pty Ltd by Rabo Australia Limited. (13)

   10.28      Form of Exchange Agent Agreement between United States Trust
              Company of New York, as exchange agent, and Teekay Shipping
              Corporation.*

   12.1       Statement regarding the computation of ratio of earnings to
              fixed charges for Teekay Shipping Corporation.

   15.1       Letter from Ernst & Young, as independent chartered
              accountants, regarding unaudited interim financial
              information.

   21.1       List of Significant Subsidiaries of Teekay Shipping Company.

   23.1       Consent of Perkins Coie, LLP (contained in Exhibit 5.1).

   23.2       Consent of Seward and Kissel, LLP (contained in Exhibit
              8.2).

   23.3       Consent of Watson, Farley & Williams LLP (contained in
              Exhibit 8.3).

   23.4       Consent of Graham, Thompson & Co. (contained in Exhibit
              8.4).

   23.5       Consent of Appleby Spurling & Kempe (contained in Exhibit
              8.5)

   23.6       Consent of Bugge, Arentz-Hansen & Rasmussen (contained in
              Exhibit 8.6)

   23.7       Consent of Ernst & Young LLP.

   23.8       Consent of Deloitte & Touche LLP.

   24.1       Power of Attorney (contained on signature pages).

   25.1       Statement of Eligibility of U.S. Trust Company of Texas,
              N.A., as trustee.

   99.1       Form of Letter of Transmittal.

   99.2       Form of Notice of Guaranteed Delivery.
</TABLE>

- ---------------

* To be filed as an amendment.
<PAGE>   191

(1) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on March 30, 2000, and hereby incorporated by reference
    to such Annual Report.

(2) Previously filed as an exhibit to the Company's Registration Statement on
    Form F-1 (Registration No. 33-7573-4), filed with the SEC on July 14, 1995,
    and hereby incorporated by reference to such Registration Statement.

(3) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on June 4, 1996, and hereby incorporated by reference to
    such Annual Report.

(4) A schedule attached to this exhibit identifies all other documents not
    required to be filed as exhibits because such other documents are
    substantially identical to this exhibit. The schedule also sets forth
    material details by which the omitted documents differ from this exhibit.

(5) Previously filed as an exhibit to the Company's Registration Statement on
    Form F-3 (Registration No. 33-65139), filed with the SEC on January 19,
    1996, and hereby incorporated by reference to such Registration Statement.

(6) Previously filed as an exhibit to the Company's Report on Form 6-K, filed
    with the SEC on May 2, 2000, and hereby incorporated by reference to such
    Report.

(7) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on April 2, 2001, and hereby incorporated by reference to
    such Annual Report.

(8) Previously filed as an exhibit to the Company's Registration Statement on
    Form F-1 (Registration No. 33-68680), as declared effective by the SEC on
    November 29, 1993, and hereby incorporated by reference to such Registration
    Statement.

(9) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
    filed with the SEC on June 11, 1997, and hereby incorporated by reference to
    such Annual Report.

(10) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
     filed with the SEC on May 20, 1998, and hereby incorporated by reference to
     such Annual Report.

(11) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
     filed with the SEC on June 11, 1999, and hereby incorporated by reference
     to such Annual Report.

(12) Previously filed as an exhibit to the Company's Form 8-A, filed with the
     SEC on September 11, 2000, and hereby incorporated by reference to such
     filing.

(13) Previously filed as an exhibit to the Company's Report on Form 6-K filed
     with the SEC on May 24, 2001, and hereby incorporated by reference to such
     report.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.15
<SEQUENCE>2
<FILENAME>o05789ex4-15.txt
<DESCRIPTION>EXHIBIT 4.15
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 4.15


                           TEEKAY SHIPPING CORPORATION

                      8.875% SENIOR NOTES DUE JULY 15, 2011

                   EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

                                                                   June 22, 2001

Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Deutsche Banc Alex. Brown Inc.
J.P. Morgan Securities Inc.
Fleet Securities, Inc.
Scotia Capital (USA) Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

Ladies and Gentlemen:

               Teekay Shipping Corporation, a Marshall Islands corporation (the
"Company"), proposes to issue and sell to the Purchasers (as defined herein)
upon the terms set forth in the Purchase Agreement (as defined herein) its
8.875% Senior Notes due July 15, 2011. As an inducement to the Purchasers to
enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company agrees with the Purchasers
for the benefit of holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:

               1. Certain Definitions. For purposes of this Exchange and
Registration Rights Agreement, the following terms shall have the following
respective meanings:

          "Base Interest" shall mean the interest that would otherwise accrue on
     the Securities under the terms thereof and the Indenture, without giving
     effect to the provisions of this Agreement.

          The term "broker-dealer" shall mean any broker or dealer registered
     with the Commission under the Exchange Act.

          "Closing Date" shall mean the date on which the Securities are
     initially issued.

          "Commission" shall mean the United States Securities and Exchange
     Commission, or any other federal agency at the time administering the
     Exchange Act or the Securities Act, whichever is the relevant statute for
     the particular purpose.

          "Effective Time," in the case of (i) an Exchange Registration, shall
     mean the time and date as of which the Commission declares the Exchange
     Registration Statement effective or as of which the Exchange Registration
     Statement otherwise becomes effective and (ii) a


<PAGE>   2

     Shelf Registration, shall mean the time and date as of which the Commission
     declares the Shelf Registration Statement effective or as of which the
     Shelf Registration Statement otherwise becomes effective.

          "Electing Holder" shall mean any holder of Registrable Securities that
     has returned a completed and signed Notice and Questionnaire to the Company
     in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, or any
     successor thereto, as the same shall be amended from time to time.

          "Exchange Offer" shall have the meaning assigned thereto in Section
     2(a) hereof.

          "Exchange Registration" shall have the meaning assigned thereto in
     Section 3(c) hereof.

          "Exchange Registration Statement" shall have the meaning assigned
     thereto in Section 2(a) hereof.

          "Exchange Securities" shall have the meaning assigned thereto in
     Section 2(a) hereof.

          The term "holder" shall mean each of the Purchasers and other persons
     who acquire Registrable Securities from time to time (including any
     successors or assigns), in each case for so long as such person owns any
     Registrable Securities.

          "Indenture" shall mean the Indenture, dated as of June 22, 2001,
     between the Company and U. S. Trust Company of Texas, N.A., as Trustee, as
     the same shall be amended from time to time.

          "Notice and Questionnaire" means a Notice of Registration Statement
     and Selling Securityholder Questionnaire substantially in the form of
     Exhibit A hereto and as may be supplemented in any manner advisable to meet
     the requirements of the Securities Act, including items 507 and 508 of
     Regulation S-K.

          The term "person" shall mean a corporation, association, partnership,
     organization, business, individual, government or political subdivision
     thereof or governmental agency.

          "Purchase Agreement" shall mean the Purchase Agreement, dated as of
     June 18, 2001, between the Purchasers and the Company relating to the
     Securities.

          "Purchasers" shall mean the Purchasers named in Schedule I to the
     Purchase Agreement.

          "Registrable Securities" shall mean the Securities; provided, however,
     that a Security shall cease to be a Registrable Security when (i) in the
     circumstances contemplated by Section 2(a) hereof, the Security has been
     exchanged for an Exchange Security in an Exchange Offer as contemplated in
     Section 2(a) hereof (provided that any Exchange Security that, pursuant to
     the last two sentences of Section 2(a), is included in a prospectus for use
     in connection with resales by broker-dealers shall be deemed to be a
     Registrable Security with



                                       2
<PAGE>   3

     respect to Sections 5, 6 and 9 until resale, if any, of such Registrable
     Security has been effected within the 180-day period referred to in Section
     2(a)); (ii) in the circumstances contemplated by Section 2(b) hereof, a
     Shelf Registration Statement registering such Security under the Securities
     Act has been declared or becomes effective and such Security has been sold
     or otherwise transferred by the holder thereof pursuant to and in a manner
     contemplated by such effective Shelf Registration Statement; (iii) such
     Security is sold pursuant to Rule 144 under circumstances in which any
     legend borne by such Security relating to restrictions on transferability
     thereof, under the Securities Act or otherwise, is removed by the Company
     or pursuant to the Indenture; (iv) such Security is eligible to be sold
     pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to
     be outstanding.

          "Registration Default" shall have the meaning assigned thereto in
     Section 2(c) hereof.

          "Registration Expenses" shall have the meaning assigned thereto in
     Section 4 hereof.

          "Resale Period" shall have the meaning assigned thereto in
     Section 2(a) hereof.

          "Restricted Holder" shall mean (i) a holder that is an affiliate of
     the Company within the meaning of Rule 405, (ii) a holder who acquires
     Exchange Securities outside the ordinary course of such holder's business,
     (iii) a holder who has arrangements or understandings with any person to
     participate in the Exchange Offer for the purpose of distributing Exchange
     Securities and (iv) a holder that is a broker-dealer, but only with respect
     to Exchange Securities received by such broker-dealer pursuant to an
     Exchange Offer in exchange for Registrable Securities acquired by the
     broker-dealer directly from the Company.

          "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
     rule promulgated under the Securities Act (or any successor provision), as
     the same shall be amended from time to time.

          "Securities" shall mean, collectively, the 8.875% Senior Notes due
     July 15, 2011 of the Company to be issued and sold to the Purchasers
     pursuant to the Purchase Agreement, and securities issued in exchange
     therefor or in lieu thereof pursuant to the Indenture.

          "Securities Act" shall mean the Securities Act of 1933, or any
     successor thereto, as the same shall be amended from time to time.

          "Shelf Registration" shall have the meaning assigned thereto in
     Section 2(b) hereof.

          "Shelf Registration Statement" shall have the meaning assigned thereto
     in Section 2(b) hereof.

          "Special Interest" shall have the meaning assigned thereto in
     Section 2(c) hereof.

          "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
     any successor thereto, and the rules, regulations and forms promulgated
     thereunder, all as the same shall be amended from time to time.


                                       3
<PAGE>   4

               Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.

               2. Registration Under the Securities Act.

          (a) Except as set forth in Section 2(b) below, the Company agrees to
     file under the Securities Act, as soon as practicable, but no later than 60
     days after the Closing Date, a registration statement relating to an offer
     to exchange (such registration statement, the "Exchange Registration
     Statement", and such offer, the "Exchange Offer") any and all of the
     Registrable Securities for a like aggregate principal amount of debt
     securities issued by the Company, which debt securities are substantially
     identical to the Securities (and are entitled to the benefits of a trust
     indenture which is substantially identical to the Indenture or is the
     Indenture and which has been qualified under the Trust Indenture Act),
     except that they have been registered pursuant to an effective registration
     statement under the Securities Act and do not contain provisions for the
     additional interest contemplated in Section 2(c) below (such new debt
     securities hereinafter called "Exchange Securities"). The Company agrees to
     use its best efforts to cause the Exchange Registration Statement to become
     effective under the Securities Act as soon as practicable, but no later
     than 180 days after the Closing Date. The Exchange Offer will be registered
     under the Securities Act on the appropriate form and will comply with all
     applicable tender offer rules and regulations under the Exchange Act. The
     Company further agrees to use its best efforts to commence and complete the
     Exchange Offer promptly, but no later than 60 days after such registration
     statement has become effective, hold the Exchange Offer open for at least
     30 days and exchange Exchange Securities for all Registrable Securities
     that have been properly tendered and not withdrawn on or prior to the
     expiration of the Exchange Offer. The Exchange Offer will be deemed to have
     been "completed" only if the debt securities received by holders other than
     Restricted Holders in the Exchange Offer for Registrable Securities are,
     upon receipt, transferable by each such holder without restriction under
     the Securities Act and the Exchange Act and without material restrictions
     under the blue sky or securities laws of a substantial majority of the
     States of the United States of America. The Exchange Offer shall be deemed
     to have been completed upon the earlier to occur of (i) the Company having
     exchanged the Exchange Securities for all outstanding Registrable
     Securities pursuant to the Exchange Offer and (ii) the Company having
     exchanged, pursuant to the Exchange Offer, Exchange Securities for all
     Registrable Securities that have been properly tendered and not withdrawn
     before the expiration of the Exchange Offer, which shall be on a date that
     is at least 30 days following the commencement of the Exchange Offer. The
     Company agrees (x) to include in the Exchange Registration Statement a
     prospectus for use in any resales by any holder of Exchange Securities that
     is a broker-dealer and (y) to keep such Exchange Registration Statement
     effective for a period (the "Resale Period") beginning when Exchange
     Securities are first issued in the Exchange Offer and ending upon the
     earlier of the expiration of the 180th day after the Exchange Offer has
     been completed or such time as such broker-dealers no longer own any
     Registrable Securities. With respect to such Exchange Registration
     Statement, such holders shall have the benefit of the rights of
     indemnification and contribution set forth in Sections 6(a), (c), (d) and
     (e) hereof.


                                       4
<PAGE>   5

          (b) If (i) on or prior to the time the Exchange Offer is completed,
     existing Commission interpretations are changed such that the debt
     securities received by holders other than Restricted Holders in the
     Exchange Offer for Registrable Securities are not or would not be, upon
     receipt, transferable by each such holder without restriction under the
     Securities Act, (ii) the Exchange Offer has not been completed within 240
     days following the Closing Date, or (iii) the Exchange Offer is not
     available to any holder of the Securities, the Company shall, in lieu of
     (or, in the case of clause (iii), in addition to) conducting the Exchange
     Offer contemplated by Section 2(a), file under the Securities Act as soon
     as practicable, but no later than the later of 30 days after the time such
     obligation to file arises, a "shelf" registration statement providing for
     the registration of, and the sale on a continuous or delayed basis by the
     holders of, all of the Registrable Securities, pursuant to Rule 415 or any
     similar rule that may be adopted by the Commission (such filing, the "Shelf
     Registration" and such registration statement, the "Shelf Registration
     Statement"). The Company agrees to use its best efforts (x) to cause the
     Shelf Registration Statement to become or be declared effective no later
     than 120 days after such Shelf Registration Statement is filed and to keep
     such Shelf Registration Statement continuously effective for a period
     ending on the earlier of the second anniversary of the Effective Time or
     such time as there are no longer any Registrable Securities outstanding,
     provided, however, that no holder shall be entitled to be named as a
     selling securityholder in the Shelf Registration Statement or to use the
     prospectus forming a part thereof for resales of Registrable Securities
     unless such holder is an Electing Holder, and (y) after the Effective Time
     of the Shelf Registration Statement, reasonably promptly upon the request
     of any holder of Registrable Securities that is not then an Electing
     Holder, to take any action reasonably necessary to enable such holder to
     use the prospectus forming a part thereof for resales of Registrable
     Securities, including, without limitation, any action reasonably necessary
     to identify such holder as a selling securityholder in the Shelf
     Registration Statement, provided, however, that nothing in this Clause (y)
     shall relieve any such holder of the obligation to return a completed and
     signed Notice and Questionnaire to the Company in accordance with Section
     3(d)(iii) hereof. The Company further agrees to supplement or make
     amendments to the Shelf Registration Statement, as and when required by the
     rules, regulations or instructions applicable to the registration form used
     by the Company for such Shelf Registration Statement or by the Securities
     Act or rules and regulations thereunder for shelf registration, and the
     Company agrees to furnish to each Electing Holder copies of any such
     supplement or amendment prior to its being used or promptly following its
     filing with the Commission.

          (c) In the event that with respect to Registrable Securities (i) the
     Company has not filed the Exchange Registration Statement or Shelf
     Registration Statement on or before the date on which such registration
     statement is required to be filed pursuant to Section 2(a) or 2(b),
     respectively, or (ii) such Exchange Registration Statement or Shelf
     Registration Statement has not become effective or been declared effective
     by the Commission on or before the date on which such registration
     statement is required to become or be declared effective pursuant to
     Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has not
     been completed within 60 days after the initial effective date of the
     Exchange Registration Statement relating to the Exchange Offer (if the
     Exchange Offer is then required to be made), or (iv) any Exchange
     Registration Statement or Shelf Registration Statement required by Section
     2(a) or 2(b) hereof is filed and declared effective but shall thereafter
     either be withdrawn by the Company or shall become subject to an effective
     stop order issued pursuant to Section 8(d) of the Securities Act suspending
     the effectiveness of such registration



                                       5
<PAGE>   6

     statement (except as specifically permitted herein) without being succeeded
     immediately by an additional registration statement filed and declared
     effective (each such event referred to in clauses (i) through (iv), a
     "Registration Default" and each period during which a Registration Default
     has occurred and is continuing, a "Registration Default Period"), then, as
     liquidated damages for such Registration Default, subject to the provisions
     of Section 9(b), special interest ("Special Interest"), in addition to the
     Base Interest, shall accrue at a per annum rate of 0.5% for the first 90
     days of the Registration Default Period and at a per annum rate of 1.0% for
     the second 90 days of the Registration Default Period and at a per annum
     rate of 1.5% thereafter for the remaining portion of the Registration
     Default Period. Upon the cure of the Registration Default, including as a
     result of Registrable Securities ceasing to be Registrable Securities, the
     Special Interest shall no longer accrue, provided, however, that if, after
     any such cure, a different Registration Default occurs, then the Special
     Interest shall again accrue in accordance with this Section 2(c).

          (d) The Company shall take all actions necessary or advisable to be
     taken by it to ensure that the transactions contemplated herein are
     effected as so contemplated.

          (e) Any reference herein to a registration statement as of any time
     shall be deemed to include any document incorporated, or deemed to be
     incorporated, therein by reference as of such time and any reference herein
     to any post-effective amendment to a registration statement as of any time
     shall be deemed to include any document incorporated, or deemed to be
     incorporated, therein by reference as of such time.

               3. Registration Procedures.

               If the Company files a registration statement pursuant to
Section 2(a) or Section 2(b), the following provisions shall apply:

          (a) At or before the Effective Time of the Exchange Offer or the Shelf
     Registration, as the case may be, the Company shall qualify the Indenture
     under the Trust Indenture Act.

          (b) In the event that such qualification would require the appointment
     of a new trustee under the Indenture, the Company shall appoint a new
     trustee thereunder pursuant to the applicable provisions of the Indenture.

          (c) In connection with the Company's obligations with respect to the
     registration of Exchange Securities as contemplated by Section 2(a) (the
     "Exchange Registration"), if applicable, the Company shall, as soon as
     practicable (or as otherwise specified):

               (i) prepare and file with the Commission, as soon as practicable
          but no later than 60 days after the Closing Date, an Exchange
          Registration Statement on any form which may be utilized by the
          Company and which shall permit the Exchange Offer and resales of
          Exchange Securities by broker-dealers during the Resale Period to be
          effected as contemplated by Section 2(a), and use its best efforts to
          cause such Exchange Registration Statement to become effective as soon
          as practicable thereafter, but no later than 180 days after the
          Closing Date;

                                       6
<PAGE>   7

               (ii) as soon as practicable prepare and file with the Commission
          such amendments and supplements to such Exchange Registration
          Statement and the prospectus included therein as may be necessary to
          effect and maintain the effectiveness of such Exchange Registration
          Statement for the periods and purposes contemplated in Section 2(a)
          hereof and as may be required by the applicable rules and regulations
          of the Commission and the instructions applicable to the form of such
          Exchange Registration Statement, and promptly provide each
          broker-dealer holding Exchange Securities with such number of copies
          of the prospectus included therein (as then amended or supplemented),
          in conformity in all material respects with the requirements of the
          Securities Act and the Trust Indenture Act and the rules and
          regulations of the Commission thereunder, as such broker-dealer
          reasonably may request prior to the expiration of the Resale Period,
          for use in connection with resales of Exchange Securities;

               (iii) promptly notify each broker-dealer that has requested or
          received copies of the prospectus included in such registration
          statement, and confirm such advice in writing, (A) when such Exchange
          Registration Statement or the prospectus included therein or any
          prospectus amendment or supplement or post-effective amendment has
          been filed, and, with respect to such Exchange Registration Statement
          or any post-effective amendment, when the same has become effective,
          (B) of the receipt of any comments by the Commission and by the blue
          sky or securities commissioner or regulator of any state with respect
          thereto or any request by the Commission for amendments or supplements
          to such Exchange Registration Statement or prospectus or for
          additional information, (C) of the issuance by the Commission of any
          stop order suspending the effectiveness of such Exchange Registration
          Statement or the initiation or threatening of any proceedings for that
          purpose, (D) if at any time the representations and warranties of the
          Company contemplated by Section 5 cease to be true and correct in all
          material respects, (E) of the receipt by the Company of any
          notification with respect to the suspension of the qualification of
          the Exchange Securities for sale in any jurisdiction or the initiation
          or threatening of any proceeding for such purpose, or (F) at any time
          during the Resale Period when a prospectus is required to be delivered
          under the Securities Act, that such Exchange Registration Statement,
          prospectus, prospectus amendment or supplement or post-effective
          amendment does not conform in all material respects to the applicable
          requirements of the Securities Act and the Trust Indenture Act and the
          rules and regulations of the Commission thereunder or contains an
          untrue statement of a material fact or omits to state any material
          fact required to be stated therein or necessary to make the statements
          therein not misleading in light of the circumstances then existing;

               (iv) in the event that the Company would be required, pursuant to
          Section 3(e)(iii)(F) above, to notify any broker-dealers holding
          Exchange Securities, promptly prepare and furnish to each such holder
          a reasonable number of copies of a prospectus supplemented or amended
          so that, as thereafter delivered to purchasers of such Exchange
          Securities during the Resale Period, such prospectus shall conform in
          all material respects to the applicable requirements of the Securities
          Act and the Trust Indenture Act and the rules and regulations of the
          Commission thereunder and shall not contain an untrue statement of a
          material fact or omit to state a material fact




                                       7
<PAGE>   8

          required to be stated therein or necessary to make the statements
          therein not misleading in light of the circumstances then existing;

               (v) use its best efforts to obtain the withdrawal of any order
          suspending the effectiveness of such Exchange Registration Statement
          or any post-effective amendment thereto at the earliest practicable
          date;

               (vi) use its best efforts to (A) register or qualify the Exchange
          Securities under the securities laws or blue sky laws of such
          jurisdictions as are contemplated by Section 2(a) no later than the
          commencement of the Exchange Offer, (B) keep such registrations or
          qualifications in effect and comply with such laws so as to permit the
          continuance of offers, sales and dealings therein in such
          jurisdictions until the expiration of the Resale Period and (C) take
          any and all other actions as may be reasonably necessary or advisable
          to enable each broker-dealer holding Exchange Securities to consummate
          the disposition thereof in such jurisdictions; provided, however, that
          the Company shall not be required for any such purpose to (1) qualify
          as a foreign corporation in any jurisdiction wherein it would not
          otherwise be required to qualify but for the requirements of this
          Section 3(c)(vi), (2) consent to general service of process in any
          such jurisdiction or (3) make any changes to its certificate of
          incorporation or by-laws or any agreement between it and its
          stockholders;

               (vii) use its best efforts to obtain the consent or approval of
          each governmental agency or authority, whether federal, state or
          local, which may be required to effect the Exchange Registration, the
          Exchange Offer and the offering and sale of Exchange Securities by
          broker-dealers during the Resale Period;

               (viii) provide a CUSIP number for all Exchange Securities, not
          later than the applicable Effective Time;

               (ix) comply with all applicable rules and regulations of the
          Commission, and make generally available to its securityholders as
          soon as practicable but no later than eighteen months after the
          effective date of such Exchange Registration Statement, an earning
          statement of the Company and its subsidiaries complying with Section
          11(a) of the Securities Act (including, at the option of the Company,
          Rule 158 thereunder).

          (d) In connection with the Company's obligations with respect to the
     Shelf Registration, if applicable, the Company shall, as soon as
     practicable (or as otherwise specified):

               (i) prepare and file with the Commission, as soon as practicable
          but in any case within the time periods specified in Section 2(b), a
          Shelf Registration Statement on any form which may be utilized by the
          Company and which shall register all of the Registrable Securities for
          resale by the holders thereof in accordance with such method or
          methods of disposition as may be specified by such of the holders as,
          from time to time, may be Electing Holders and use its best efforts to
          cause such Shelf Registration Statement to become effective as soon as
          practicable but in any case within the time periods specified in
          Section 2(b);


                                       8
<PAGE>   9

               (ii) not less than 30 calendar days prior to the Effective Time
          of the Shelf Registration Statement, mail the Notice and Questionnaire
          to the holders of Registrable Securities; no holder shall be entitled
          to be named as a selling securityholder in the Shelf Registration
          Statement as of the Effective Time, and no holder shall be entitled to
          use the prospectus forming a part thereof for resales of Registrable
          Securities at any time, unless such holder has returned a completed
          and signed Notice and Questionnaire to the Company by the deadline for
          response set forth therein; provided, however, holders of Registrable
          Securities shall have at least 28 calendar days from the date on which
          the Notice and Questionnaire is first mailed to such holders to return
          a completed and signed Notice and Questionnaire to the Company;

               (iii) after the Effective Time of the Shelf Registration
          Statement, upon the request of any holder of Registrable Securities
          that is not then an Electing Holder, promptly send a Notice and
          Questionnaire to such holder; provided that the Company shall not be
          required to take any action to name such holder as a selling
          securityholder in the Shelf Registration Statement or to enable such
          holder to use the prospectus forming a part thereof for resales of
          Registrable Securities until such holder has returned a completed and
          signed Notice and Questionnaire to the Company;

               (iv) as soon as practicable prepare and file with the Commission
          such amendments and supplements to such Shelf Registration Statement
          and the prospectus included therein as may be necessary to effect and
          maintain the effectiveness of such Shelf Registration Statement for
          the period specified in Section 2(b) hereof and as may be required by
          the applicable rules and regulations of the Commission and the
          instructions applicable to the form of such Shelf Registration
          Statement, and furnish to the Electing Holders copies of any such
          supplement or amendment simultaneously with or prior to its being used
          or filed with the Commission;

               (v) comply with the provisions of the Securities Act with respect
          to the disposition of all of the Registrable Securities covered by
          such Shelf Registration Statement in accordance with the intended
          methods of disposition by the Electing Holders provided for in such
          Shelf Registration Statement;

               (vi) provide (A) the Electing Holders, (B) the underwriters
          (which term, for purposes of this Exchange and Registration Rights
          Agreement, shall include a person deemed to be an underwriter within
          the meaning of Section 2(a)(11) of the Securities Act), if any,
          thereof, (C) any sales or placement agent therefor, (D) counsel for
          any such underwriter or agent and (E) not more than one counsel for
          all the Electing Holders the opportunity to review and comment on such
          Shelf Registration Statement, each prospectus included therein or
          filed with the Commission and each amendment or supplement thereto for
          a period of at least ten calendar days;

               (vii) for a reasonable period prior to the filing of such Shelf
          Registration Statement, and throughout the period specified in Section
          2(b), make available at




                                       9
<PAGE>   10

          reasonable times at the Company's principal place of business or such
          other reasonable place for inspection by the persons referred to in
          Section 3(d)(vi) who shall certify to the Company that they have a
          current intention to sell the Registrable Securities pursuant to the
          Shelf Registration such financial and other information and books and
          records of the Company, and cause the officers, employees, counsel and
          independent certified public accountants of the Company to respond to
          such inquiries, as shall be reasonably necessary, in the judgment of
          the respective counsel referred to in such Section, to conduct a
          reasonable investigation within the meaning of Section 11 of the
          Securities Act; provided, however, that each such party shall be
          required to maintain in confidence and not to disclose to any other
          person any information or records reasonably designated by the Company
          as being confidential, until such time as (A) such information becomes
          a matter of public record (whether by virtue of its inclusion in such
          registration statement or otherwise), or (B) such person shall be
          required so to disclose such information pursuant to a subpoena or
          order of any court or other governmental agency or body having
          jurisdiction over the matter (subject to the requirements of such
          order, and only after such person shall have given the Company prompt
          prior written notice of such requirement), or (C) such information is
          required to be set forth in such Shelf Registration Statement or the
          prospectus included therein or in an amendment to such Shelf
          Registration Statement or an amendment or supplement to such
          prospectus in order that such Shelf Registration Statement,
          prospectus, amendment or supplement, as the case may be, complies with
          applicable requirements of the federal securities laws and the rules
          and regulations of the Commission and does not contain an untrue
          statement of a material fact or omit to state therein a material fact
          required to be stated therein or necessary to make the statements
          therein not misleading in light of the circumstances then existing;

               (viii) promptly notify each of the Electing Holders, any sales or
          placement agent therefor and any underwriter thereof (which
          notification may be made through any managing underwriter that is a
          representative of such underwriter for such purpose) and confirm such
          advice in writing, (A) when such Shelf Registration Statement or the
          prospectus included therein or any prospectus amendment or supplement
          or post-effective amendment has been filed, and, with respect to such
          Shelf Registration Statement or any post-effective amendment, when the
          same has become effective, (B) of the receipt of any comments by the
          Commission and by the blue sky or securities commissioner or regulator
          of any state with respect thereto or any request by the Commission for
          amendments or supplements to such Shelf Registration Statement or
          prospectus or for additional information, (C) of the issuance by the
          Commission of any stop order suspending the effectiveness of such
          Shelf Registration Statement or the initiation or threatening of any
          proceedings for that purpose, (D) if at any time the representations
          and warranties of the Company contemplated by Section 3(d)(xvii) or
          Section 5 cease to be true and correct in all material respects, (E)
          of the receipt by the Company of any notification with respect to the
          suspension of the qualification of the Registrable Securities for sale
          in any jurisdiction or the initiation or threatening of any proceeding
          for such purpose, or (F) if at any time when a prospectus is required
          to be delivered under the Securities Act, that such Shelf Registration
          Statement, prospectus, prospectus amendment or supplement or
          post-effective amendment does not conform in all material respects to
          the applicable requirements of the Securities Act and the Trust
          Indenture Act and the rules and regulations of the Commission


                                       10
<PAGE>   11

          thereunder or contains an untrue statement of a material fact or omits
          to state any material fact required to be stated therein or necessary
          to make the statements therein not misleading in light of the
          circumstances then existing;

               (ix) use its best efforts to obtain the withdrawal of any order
          suspending the effectiveness of such registration statement or any
          post-effective amendment thereto at the earliest practicable date;

               (x) if requested by any managing underwriter or underwriters, any
          placement or sales agent or any Electing Holder, promptly incorporate
          in a prospectus supplement or post-effective amendment such
          information as is required by the applicable rules and regulations of
          the Commission and as such managing underwriter or underwriters, such
          agent or such Electing Holder specifies should be included therein
          relating to the terms of the sale of such Registrable Securities,
          including information with respect to the principal amount of
          Registrable Securities being sold by such Electing Holder or agent or
          to any underwriters, the name and description of such Electing Holder,
          agent or underwriter, the offering price of such Registrable
          Securities and any discount, commission or other compensation payable
          in respect thereof, the purchase price being paid therefor by such
          underwriters and with respect to any other terms of the offering of
          the Registrable Securities to be sold by such Electing Holder or agent
          or to such underwriters; and make all required filings of such
          prospectus supplement or post-effective amendment promptly after
          notification of the matters to be incorporated in such prospectus
          supplement or post-effective amendment;

               (xi) furnish to each Electing Holder, each placement or sales
          agent, if any, therefor, each underwriter, if any, thereof and the
          respective counsel referred to in Section 3(d)(vi) a conformed copy of
          such Shelf Registration Statement, each such amendment and supplement
          thereto (in each case including all exhibits thereto (in the case of
          an Electing Holder of Registrable Securities, upon request) and, to
          the extent requested, documents incorporated by reference therein) and
          such number of copies of such Shelf Registration Statement (excluding
          exhibits thereto and documents incorporated by reference therein
          unless specifically so requested by such Electing Holder, agent or
          underwriter, as the case may be) and of the prospectus included in
          such Shelf Registration Statement (including each preliminary
          prospectus and any summary prospectus), in conformity in all material
          respects with the applicable requirements of the Securities Act and
          the Trust Indenture Act and the rules and regulations of the
          Commission thereunder, and such other documents, as such Electing
          Holder, agent, if any, and underwriter, if any, may reasonably request
          in order to facilitate the offering and disposition of the Registrable
          Securities owned by such Electing Holder, offered or sold by such
          agent or underwritten by such underwriter and to permit such Electing
          Holder, agent and underwriter to satisfy the prospectus delivery
          requirements of the Securities Act; and the Company hereby consents to
          the use of such prospectus (including such preliminary and summary
          prospectus) and any amendment or supplement thereto by each such
          Electing Holder and by any such agent and underwriter, in each case in
          the form most recently provided to such person by the Company, in
          connection with the offering and sale of


                                       11
<PAGE>   12

          the Registrable Securities covered by the prospectus (including such
          preliminary and summary prospectus) or any supplement or amendment
          thereto;

               (xii) use best efforts to (A) register or qualify the Registrable
          Securities to be included in such Shelf Registration Statement under
          such securities laws or blue sky laws of such jurisdictions as any
          Electing Holder and each placement or sales agent, if any, therefor
          and underwriter, if any, thereof shall reasonably request, (B) keep
          such registrations or qualifications in effect and comply with such
          laws so as to permit the continuance of offers, sales and dealings
          therein in such jurisdictions during the period the Shelf Registration
          is required to remain effective under Section 2(b) above and for so
          long as may be necessary to enable any such Electing Holder, agent or
          underwriter to complete its distribution of Securities pursuant to
          such Shelf Registration Statement and (C) take any and all other
          actions as may be reasonably necessary or advisable to enable each
          such Electing Holder, agent, if any, and underwriter, if any, to
          consummate the disposition in such jurisdictions of such Registrable
          Securities; provided, however, that the Company shall not be required
          for any such purpose to (1) qualify as a foreign corporation in any
          jurisdiction wherein it would not otherwise be required to qualify but
          for the requirements of this Section 3(d)(xii), (2) consent to general
          service of process in any such jurisdiction or (3) make any changes to
          its certificate of incorporation or by-laws or any agreement between
          it and its stockholders;

               (xiii) use its best efforts to obtain the consent or approval of
          each governmental agency or authority, whether federal, state or
          local, which may be required to effect the Shelf Registration or the
          offering or sale in connection therewith or to enable the selling
          holder or holders to offer, or to consummate the disposition of, their
          Registrable Securities;

               (xiv) Unless any Registrable Securities shall be in book-entry
          only form, cooperate with the Electing Holders and the managing
          underwriters, if any, to facilitate the timely preparation and
          delivery of certificates representing Registrable Securities to be
          sold, which certificates, if so required by any securities exchange
          upon which any Registrable Securities are listed, shall be penned,
          lithographed or engraved, or produced by any combination of such
          methods, on steel engraved borders, and which certificates shall not
          bear any restrictive legends; and, in the case of an underwritten
          offering, enable such Registrable Securities to be in such
          denominations and registered in such names as the managing
          underwriters may request at least two business days prior to any sale
          of the Registrable Securities;

               (xv) provide a CUSIP number for all Registrable Securities, not
          later than the applicable Effective Time;

               (xvi) enter into one or more underwriting agreements, engagement
          letters, agency agreements, "best efforts" underwriting agreements or
          similar agreements, as appropriate, including customary provisions
          relating to indemnification and contribution, and take such other
          actions in connection therewith as any Electing Holders aggregating at
          least 20% in aggregate principal amount of the Registrable



                                       12
<PAGE>   13

          Securities at the time outstanding shall request in order to expedite
          or facilitate the disposition of such Registrable Securities;

               (xvii) whether or not an agreement of the type referred to in
          Section 3(d)(xvi) hereof is entered into and whether or not any
          portion of the offering contemplated by the Shelf Registration is an
          underwritten offering or is made through a placement or sales agent or
          any other entity, (A) make such representations and warranties to the
          Electing Holders and the placement or sales agent, if any, therefor
          and the underwriters, if any, thereof in form, substance and scope as
          are customarily made in connection with an offering of debt securities
          pursuant to any appropriate agreement or to a registration statement
          filed on the form applicable to the Shelf Registration; (B) obtain an
          opinion of counsel to the Company in customary form and covering such
          matters, of the type customarily covered by such an opinion, as the
          managing underwriters, if any, or as any Electing Holders of at least
          20% in aggregate principal amount of the Registrable Securities at the
          time outstanding may reasonably request, addressed to such Electing
          Holder or Electing Holders and the placement or sales agent, if any,
          therefor and the underwriters, if any, thereof and dated the effective
          date of such Shelf Registration Statement (and if such Shelf
          Registration Statement contemplates an underwritten offering of a part
          or all of the Registrable Securities, dated the date of the closing
          under the underwriting agreement relating thereto) (it being agreed
          that the matters to be covered by such opinion shall include the due
          incorporation and good standing of the Company and its subsidiaries;
          the qualification of the Company and its subsidiaries to transact
          business as foreign corporations; the due authorization, execution and
          delivery of the relevant agreement of the type referred to in Section
          3(d)(xvi) hereof; the due authorization, execution, authentication and
          issuance, and the validity and enforceability, of the Securities; the
          absence of material legal or governmental proceedings involving the
          Company; the absence of a breach by the Company or any of its
          subsidiaries of, or a default under, material agreements binding upon
          the Company or any subsidiary of the Company; the absence of
          governmental approvals required to be obtained in connection with the
          Shelf Registration, the offering and sale of the Registrable
          Securities, this Exchange and Registration Rights Agreement or any
          agreement of the type referred to in Section 3(d)(xvi) hereof, except
          such approvals as may be required under state securities or blue sky
          laws; the material compliance as to form of such Shelf Registration
          Statement and any documents incorporated by reference therein and of
          the Indenture with the requirements of the Securities Act and the
          Trust Indenture Act and the rules and regulations of the Commission
          thereunder, respectively; and, as of the date of the opinion and of
          the Shelf Registration Statement or most recent post-effective
          amendment thereto, as the case may be, a statement as to the absence
          from such Shelf Registration Statement and the prospectus included
          therein, as then amended or supplemented, and from the documents
          incorporated by reference therein (in each case other than the
          financial statements and other financial information contained
          therein) of an untrue statement of a material fact or the omission to
          state therein a material fact necessary to make the statements therein
          not misleading (in the case of such documents, in the light of the
          circumstances existing at the time that such documents were filed with
          the Commission under the Exchange Act)); (C) obtain a "cold comfort"
          letter or letters from the independent certified public accountants of
          the Company addressed to the selling Electing Holders, the placement
          or sales agent,


                                       13
<PAGE>   14

          if any, therefor or the underwriters, if any, thereof, dated (i) the
          effective date of such Shelf Registration Statement and (ii) the
          effective date of any prospectus supplement to the prospectus included
          in such Shelf Registration Statement or post-effective amendment to
          such Shelf Registration Statement which includes unaudited or audited
          financial statements as of a date or for a period subsequent to that
          of the latest such statements included in such prospectus (and, if
          such Shelf Registration Statement contemplates an underwritten
          offering pursuant to any prospectus supplement to the prospectus
          included in such Shelf Registration Statement or post-effective
          amendment to such Shelf Registration Statement which includes
          unaudited or audited financial statements as of a date or for a period
          subsequent to that of the latest such statements included in such
          prospectus, dated the date of the closing under the underwriting
          agreement relating thereto), such letter or letters to be in customary
          form and covering such matters of the type customarily covered by
          letters of such type; and (D) deliver such documents and certificates,
          including officers' certificates, as may be reasonably requested by
          any Electing Holders of at least 20% in aggregate principal amount of
          the Registrable Securities at the time outstanding or the placement or
          sales agent, if any, therefor and the managing underwriters, if any,
          thereof to evidence the accuracy of the representations and warranties
          made pursuant to clause (A) above or those contained in Section 5(a)
          hereof and the compliance with or satisfaction of any agreements or
          conditions contained in the underwriting agreement or other agreement
          entered into by the Company and (E) undertake such obligations
          relating to expense reimbursement, indemnification and contribution as
          are provided in Section 6 hereof;

               (xviii) notify in writing each holder of Registrable Securities
          of any proposal by the Company to amend or waive any provision of this
          Exchange and Registration Rights Agreement pursuant to Section 9(h)
          hereof and of any amendment or waiver effected pursuant thereto, each
          of which notices shall contain the text of the amendment or waiver
          proposed or effected, as the case may be;

               (xix) in the event that any broker-dealer registered under the
          Exchange Act shall underwrite any Registrable Securities or
          participate as a member of an underwriting syndicate or selling group
          or "assist in the distribution" (within the meaning of the Conduct
          Rules (the "Conduct Rules) of the National Association of Securities
          Dealers, Inc. ("NASD") or any successor thereto, as amended from time
          to time) thereof, whether as a holder of such Registrable Securities
          or as an underwriter, a placement or sales agent or a broker or dealer
          in respect thereof, or otherwise, assist such broker-dealer in
          complying with the requirements of such Conduct Rules, including by
          (A) if such Conduct Rules shall so require, engaging a "qualified
          independent underwriter" (as defined in such Conduct Rules) to
          participate in the preparation of the Shelf Registration Statement
          relating to such Registrable Securities, to exercise usual standards
          of due diligence in respect thereto and, if any portion of the
          offering contemplated by such Shelf Registration Statement is an
          underwritten offering or is made through a placement or sales agent,
          to recommend the yield of such Registrable Securities, (B)
          indemnifying any such qualified independent underwriter to the extent
          of the indemnification of underwriters provided in Section 6 hereof
          (or to such other customary extent as may be requested by such
          underwriter), and (C) providing such information to such broker-dealer
          as may be


                                       14
<PAGE>   15

          required in order for such broker-dealer to comply with the
          requirements of the Conduct Rules; and

               (xx) comply with all applicable rules and regulations of the
          Commission, and make generally available to its securityholders as
          soon as practicable but in any event not later than eighteen months
          after the effective date of such Shelf Registration Statement, an
          earning statement of the Company and its subsidiaries complying with
          Section 11(a) of the Securities Act (including, at the option of the
          Company, Rule 158 thereunder).

          (e) In the event that the Company would be required, pursuant to
     Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement
     or sales agent, if any, therefor and the managing underwriters, if any,
     thereof, the Company shall without delay prepare and furnish to each of the
     Electing Holders, to each placement or sales agent, if any, and to each
     such underwriter, if any, a reasonable number of copies of a prospectus
     supplemented or amended so that, as thereafter delivered to purchasers of
     Registrable Securities, such prospectus shall conform in all material
     respects to the applicable requirements of the Securities Act and the Trust
     Indenture Act and the rules and regulations of the Commission thereunder
     and shall not contain an untrue statement of a material fact or omit to
     state a material fact required to be stated therein or necessary to make
     the statements therein not misleading in light of the circumstances then
     existing. Each Electing Holder agrees that upon receipt of any notice from
     the Company pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder
     shall forthwith discontinue the disposition of Registrable Securities
     pursuant to the Shelf Registration Statement applicable to such Registrable
     Securities until such Electing Holder shall have received copies of such
     amended or supplemented prospectus, and if so directed by the Company, such
     Electing Holder shall deliver to the Company (at the Company's expense) all
     copies, other than permanent file copies, then in such Electing Holder's
     possession of the prospectus covering such Registrable Securities at the
     time of receipt of such notice.

          (f) In the event of a Shelf Registration, in addition to the
     information required to be provided by each Electing Holder in its Notice
     and Questionnaire, the Company may require such Electing Holder to furnish
     to the Company such additional information regarding such Electing Holder
     and such Electing Holder's intended method of distribution of Registrable
     Securities as may be required in order to comply with the Securities Act.
     Each such Electing Holder agrees to notify the Company as promptly as
     practicable of any inaccuracy or change in information previously furnished
     by such Electing Holder to the Company or of the occurrence of any event in
     either case as a result of which any prospectus relating to such Shelf
     Registration contains or would contain an untrue statement of a material
     fact regarding such Electing Holder or such Electing Holder's intended
     method of disposition of such Registrable Securities or omits to state any
     material fact regarding such Electing Holder or such Electing Holder's
     intended method of disposition of such Registrable Securities required to
     be stated therein or necessary to make the statements therein not
     misleading in light of the circumstances then existing, and promptly to
     furnish to the Company any additional information required to correct and
     update any previously furnished information or required so that such
     prospectus shall not contain, with respect to such Electing Holder or the
     disposition of such Registrable Securities, an untrue statement of a
     material fact or omit to



                                       15
<PAGE>   16

     state a material fact required to be stated therein or necessary to make
     the statements therein not misleading in light of the circumstances then
     existing.

          (g) Until the expiration of two years after the Closing Date, the
     Company, its Subsidiaries and other "affiliates" (as defined in Rule 144
     under the Securities Act) (i) will not acquire any Securities which
     constitute "restricted securities" under Rule 144 and (ii) will comply with
     Rule 144 if they reacquire any of the Securities which constitute
     "restricted securities" under Rule 144.

               4. Registration Expenses.

               The Company agrees to bear and to pay or cause to be paid
promptly all expenses incident to the Company's performance of or compliance
with this Exchange and Registration Rights Agreement, including (a) all
Commission and any NASD registration, filing and review fees and expenses
including reasonable fees and disbursements of counsel for the placement or
sales agent or underwriters in connection with such registration, filing and
review, (b) all fees and expenses in connection with the qualification of the
Securities for offering and sale under the State securities and blue sky laws
referred to in Section 3(d)(xii) hereof and determination of their eligibility
for investment under the laws of such jurisdictions as any managing underwriters
or the Electing Holders may designate, including any reasonable fees and
disbursements of counsel for the Electing Holders or underwriters in connection
with such qualification and determination, (c) all expenses relating to the
preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Securities for
delivery and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Securities to be disposed of (including certificates
representing the Securities), (d) messenger, telephone and delivery expenses
relating to the offering, sale or delivery of Securities and the preparation of
documents referred in clause (c) above, (e) fees and expenses of the Trustee
under the Indenture, any agent of the Trustee and any counsel for the Trustee
and of any collateral agent or custodian, (f) internal expenses (including all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), (g) reasonable fees, disbursements and expenses of
counsel and independent certified public accountants of the Company (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xix)
hereof, (i) reasonable fees, disbursements and expenses of one counsel for the
Electing Holders retained in connection with a Shelf Registration, as selected
by the Electing Holders of at least a majority in aggregate principal amount of
the Registrable Securities held by Electing Holders (which counsel shall be
reasonably satisfactory to the Company), (j) any fees charged by securities
rating services for rating the Securities, and (k) fees, expenses and
disbursements of any other persons, including special experts, retained by the
Company in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being



                                       16
<PAGE>   17

registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registrable Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly), other than the counsel and experts
specifically referred to above.

               5. Representations and Warranties.

               The Company represents and warrants to, and agrees with, each
Purchaser and each of the holders from time to time of Registrable Securities
that:

          (a) Each registration statement covering Registrable Securities and
     each prospectus (including any preliminary or summary prospectus) contained
     therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and
     any further amendments or supplements to any such registration statement or
     prospectus, when it becomes effective or is filed with the Commission, as
     the case may be, and, in the case of an underwritten offering of
     Registrable Securities, at the time of the closing under the underwriting
     agreement relating thereto, will conform in all material respects to the
     requirements of the Securities Act and the Trust Indenture Act and the
     rules and regulations of the Commission thereunder and will not contain an
     untrue statement of a material fact or omit to state a material fact
     required to be stated therein or necessary to make the statements therein
     not misleading; and at all times subsequent to the Effective Time when a
     prospectus would be required to be delivered under the Securities Act,
     other than from (i) such time as a notice has been given to holders of
     Registrable Securities pursuant to Section 3(d)(viii)(F) or Section
     3(c)(iii)(F) hereof until (ii) such time as the Company furnishes an
     amended or supplemented prospectus pursuant to Section 3(e) or Section
     3(c)(iv) hereof, each such registration statement, and each prospectus
     (including any summary prospectus) contained therein or furnished pursuant
     to Section 3(d) or Section 3(c) hereof, as then amended or supplemented,
     will conform in all material respects to the requirements of the Securities
     Act and the Trust Indenture Act and the rules and regulations of the
     Commission thereunder and will not contain an untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading in the
     light of the circumstances then existing; provided, however, that this
     representation and warranty shall not apply to any statements or omissions
     made in reliance upon and in conformity with information furnished in
     writing to the Company by a holder of Registrable Securities expressly for
     use therein.

          (b) Any documents incorporated by reference in any prospectus referred
     to in Section 5(a) hereof, when they become or became effective or are or
     were filed with the Commission, as the case may be, will conform or
     conformed in all material respects to the requirements of the Securities
     Act or the Exchange Act, as applicable, and none of such documents will
     contain or contained an untrue statement of a material fact or will omit or
     omitted to state a material fact required to be stated therein or necessary
     to make the statements therein not misleading; provided, however, that this
     representation and warranty shall not apply to any statements or omissions
     made in reliance upon and in conformity with information furnished in
     writing to the Company by a holder of Registrable Securities expressly for
     use therein.

          (c) The compliance by the Company with all of the provisions of this
     Exchange and Registration Rights Agreement and the consummation of the
     transactions herein contemplated will not conflict with or result in a
     breach of any of the terms or provisions of,



                                       17
<PAGE>   18

     or constitute a default under, any indenture, mortgage, deed of trust, loan
     agreement or other agreement or instrument to which the Company or any
     subsidiary of the Company is a party or by which the Company or any
     subsidiary of the Company is bound or to which any of the property or
     assets of the Company or any subsidiary of the Company is subject, nor will
     such action result in any violation of the provisions of the certificate of
     incorporation, as amended, or the by-laws of the Company or any statute or
     any order, rule or regulation of any court or governmental agency or body
     having jurisdiction over the Company or any subsidiary of the Company or
     any of their properties; and no consent, approval, authorization, order,
     registration or qualification of or with any such court or governmental
     agency or body is required for the consummation by the Company of the
     transactions contemplated by this Exchange and Registration Rights
     Agreement, except the registration under the Securities Act of the
     Securities, qualification of the Indenture under the Trust Indenture Act
     and such consents, approvals, authorizations, registrations or
     qualifications as may be required under State securities or blue sky laws
     in connection with the offering and distribution of the Securities.

          (d) This Exchange and Registration Rights Agreement has been duly
     authorized, executed and delivered by the Company.

               6. Indemnification.

          (a) Indemnification by the Company. The Company will indemnify and
     hold harmless each of the holders of Registrable Securities included in an
     Exchange Registration Statement, each of the Electing Holders of
     Registrable Securities included in a Shelf Registration Statement and each
     person who participates as a placement or sales agent or as an underwriter
     in any offering or sale of such Registrable Securities against any losses,
     claims, damages or liabilities, joint or several, to which such holder,
     agent or underwriter may become subject under the Securities Act or
     otherwise, insofar as such losses, claims, damages or liabilities (or
     actions in respect thereof) arise out of or are based upon an untrue
     statement or alleged untrue statement of a material fact contained in any
     Exchange Registration Statement or Shelf Registration Statement, as the
     case may be, under which such Registrable Securities were registered under
     the Securities Act, or any preliminary, final or summary prospectus
     contained therein or furnished by the Company to any such holder, Electing
     Holder, agent or underwriter, or any amendment or supplement thereto, or
     arise out of or are based upon the omission or alleged omission to state
     therein a material fact required to be stated therein or necessary to make
     the statements therein not misleading, and will reimburse such holder, such
     Electing Holder, such agent and such underwriter for any legal or other
     expenses reasonably incurred by them in connection with investigating or
     defending any such action or claim as such expenses are incurred; provided,
     however, that the Company shall not be liable to any such person in any
     such case to the extent that any such loss, claim, damage or liability
     arises out of or is based upon an untrue statement or alleged untrue
     statement or omission or alleged omission made in such registration
     statement, or preliminary, final or summary prospectus, or amendment or
     supplement thereto, in reliance upon and in conformity with written
     information furnished to the Company by such person expressly for use
     therein.

          (b) Indemnification by the Holders and any Agents and Underwriters.
     The Company may require, as a condition to including any Registrable
     Securities in any registration



                                       18
<PAGE>   19

     statement filed pursuant to Section 2(b) hereof and to entering into any
     underwriting agreement with respect thereto, that the Company shall have
     received an undertaking reasonably satisfactory to it from the Electing
     Holder of such Registrable Securities and from each underwriter named in
     any such underwriting agreement, severally and not jointly, to (i)
     indemnify and hold harmless the Company and all other holders of
     Registrable Securities, against any losses, claims, damages or liabilities
     to which the Company or such other holders of Registrable Securities may
     become subject, under the Securities Act or otherwise, insofar as such
     losses, claims, damages or liabilities (or actions in respect thereof)
     arise out of or are based upon an untrue statement or alleged untrue
     statement of a material fact contained in such registration statement, or
     any preliminary, final or summary prospectus contained therein or furnished
     by the Company to any such Electing Holder, agent or underwriter, or any
     amendment or supplement thereto, or arise out of or are based upon the
     omission or alleged omission to state therein a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading, in each case to the extent, but only to the extent, that such
     untrue statement or alleged untrue statement or omission or alleged
     omission was made in reliance upon and in conformity with written
     information furnished to the Company by such Electing Holder, agent or
     underwriter expressly for use therein, and (ii) reimburse the Company for
     any legal or other expenses reasonably incurred by the Company in
     connection with investigating or defending any such action or claim as such
     expenses are incurred; provided, however, that no such Electing Holder
     shall be required to undertake liability to any person under this Section
     6(b) for any amounts in excess of the dollar amount of the proceeds to be
     received by such Electing Holder from the sale of such Electing Holder's
     Registrable Securities pursuant to such registration.

          (c) Notices of Claims, Etc. Promptly after receipt by an indemnified
     party under subsection (a) or (b) above of written notice of the
     commencement of any action, such indemnified party shall, if a claim in
     respect thereof is to be made against an indemnifying party pursuant to the
     indemnification provisions of or contemplated by this Section 6, notify
     such indemnifying party in writing of the commencement of such action; but
     the omission so to notify the indemnifying party shall not relieve it from
     any liability which it may have to any indemnified party otherwise than
     under the indemnification provisions of or contemplated by Section 6(a) or
     6(b) hereof. In case any such action shall be brought against any
     indemnified party and it shall notify an indemnifying party of the
     commencement thereof, such indemnifying party shall be entitled to
     participate therein and, to the extent that it shall wish, jointly with any
     other indemnifying party similarly notified, to assume the defense thereof,
     with counsel reasonably satisfactory to such indemnified party (who shall
     not, except with the consent of the indemnified party, be counsel to the
     indemnifying party), and, after notice from the indemnifying party to such
     indemnified party of its election so to assume the defense thereof, such
     indemnifying party shall not be liable to such indemnified party for any
     legal expenses of other counsel or any other expenses, in each case
     subsequently incurred by such indemnified party, in connection with the
     defense thereof other than reasonable costs of investigation. No
     indemnifying party shall, without the written consent of the indemnified
     party, effect the settlement or compromise of, or consent to the entry of
     any judgment with respect to, any pending or threatened action or claim in
     respect of which indemnification or contribution may be sought hereunder
     (whether or not the indemnified party is an actual or potential party to
     such action or claim) unless such settlement, compromise or judgment (i)
     includes an unconditional release of the indemnified party from all
     liability arising out of such action or claim and (ii) does not include a


                                       19
<PAGE>   20

     statement as to or an admission of fault, culpability or a failure to act
     by or on behalf of any indemnified party.

          (d) Contribution. If for any reason the indemnification provisions
     contemplated by Section 6(a) or Section 6(b) are unavailable to or
     insufficient to hold harmless an indemnified party in respect of any
     losses, claims, damages or liabilities (or actions in respect thereof)
     referred to therein or if the indemnified party failed to give notice as
     required under subsection (c) of this Section, then each indemnifying party
     shall contribute to the amount paid or payable by such indemnified party as
     a result of such losses, claims, damages or liabilities (or actions in
     respect thereof) in such proportion as is appropriate to reflect the
     relative fault of the indemnifying party and the indemnified party in
     connection with the statements or omissions which resulted in such losses,
     claims, damages or liabilities (or actions in respect thereof), as well as
     any other relevant equitable considerations. The relative fault of such
     indemnifying party and indemnified party shall be determined by reference
     to, among other things, whether the untrue or alleged untrue statement of a
     material fact or omission or alleged omission to state a material fact
     relates to information supplied by such indemnifying party or by such
     indemnified party, and the parties' relative intent, knowledge, access to
     information and opportunity to correct or prevent such statement or
     omission. The parties hereto agree that it would not be just and equitable
     if contributions pursuant to this Section 6(d) were determined by pro rata
     allocation (even if the holders or any agents or underwriters or all of
     them were treated as one entity for such purpose) or by any other method of
     allocation which does not take account of the equitable considerations
     referred to in this Section 6(d). The amount paid or payable by an
     indemnified party as a result of the losses, claims, damages, or
     liabilities (or actions in respect thereof) referred to above shall be
     deemed to include any legal or other fees or expenses reasonably incurred
     by such indemnified party in connection with investigating or defending any
     such action or claim. Notwithstanding the provisions of this Section 6(d),
     no holder shall be required to contribute any amount in excess of the
     amount by which the dollar amount of the proceeds received by such holder
     from the sale of any Registrable Securities (after deducting any fees,
     discounts and commissions applicable thereto) exceeds the amount of any
     damages which such holder has otherwise been required to pay by reason of
     such untrue or alleged untrue statement or omission or alleged omission,
     and no underwriter shall be required to contribute any amount in excess of
     the amount by which the total price at which the Registrable Securities
     underwritten by it and distributed to the public were offered to the public
     exceeds the amount of any damages which such underwriter has otherwise been
     required to pay by reason of such untrue or alleged untrue statement or
     omission or alleged omission. No person guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the Securities
     Act) shall be entitled to contribution from any person who was not guilty
     of such fraudulent misrepresentation. The holders' and any underwriters'
     obligations in this Section 6(d) to contribute shall be several in
     proportion to the principal amount of Registrable Securities registered or
     underwritten, as the case may be, by them and not joint.

          (e) The obligations of the Company under this Section 6 shall be in
     addition to any liability which the Company may otherwise have and shall
     extend, upon the same terms and conditions, to each officer, director and
     partner of each holder, agent and underwriter and each person, if any, who
     controls any holder, agent or underwriter within the meaning of the
     Securities Act; and the obligations of the holders and any agents or
     underwriters contemplated by this Section 6 shall be in addition to any
     liability which the respective



                                       20
<PAGE>   21

     holder, agent or underwriter may otherwise have and shall extend, upon the
     same terms and conditions, to each officer and director of the Company
     (including any person who, with his consent, is named in any registration
     statement as about to become a director of the Company) and to each person,
     if any, who controls the Company within the meaning of the Securities Act.

               7. Underwritten Offerings.

          (a) Selection of Underwriters. If any of the Registrable Securities
     covered by the Shelf Registration are to be sold pursuant to an
     underwritten offering, the managing underwriter or underwriters thereof
     shall be designated by Electing Holders holding at least a majority in
     aggregate principal amount of the Registrable Securities to be included in
     such offering, provided that such designated managing underwriter or
     underwriters is or are reasonably acceptable to the Company.

          (b) Participation by Holders. Each holder of Registrable Securities
     hereby agrees with each other such holder that no such holder may
     participate in any underwritten offering hereunder unless such holder (i)
     agrees to sell such holder's Registrable Securities on the basis provided
     in any underwriting arrangements approved by the persons entitled hereunder
     to approve such arrangements and (ii) completes and executes all
     questionnaires, powers of attorney, indemnities, underwriting agreements
     and other documents reasonably required under the terms of such
     underwriting arrangements.

               8. Rule 144.

               The Company covenants to the holders of Registrable Securities
that, to the extent it shall be required to do so under the Exchange Act, the
Company shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Company shall deliver to such holder a written statement as to whether
it has complied with such requirements.

               9. Miscellaneous.

          (a) No Inconsistent Agreements. The Company represents, warrants,
     covenants and agrees that it has not granted, and shall not grant,
     registration rights with respect to Registrable Securities or any other
     securities which would be inconsistent with the terms contained in this
     Exchange and Registration Rights Agreement.

          (b) Specific Performance. The parties hereto acknowledge that there
     would be no adequate remedy at law if the Company fails to perform any of
     its obligations hereunder and that the Purchasers and the holders from time
     to time of the Registrable Securities may be



                                       21
<PAGE>   22

     irreparably harmed by any such failure, and accordingly agree that the
     Purchasers and such holders, in addition to any other remedy to which they
     may be entitled at law or in equity, shall be entitled to compel specific
     performance of the obligations of the Company under this Exchange and
     Registration Rights Agreement in accordance with the terms and conditions
     of this Exchange and Registration Rights Agreement, in any court of the
     United States or any State thereof having jurisdiction.

          (c) Notices. All notices, requests, claims, demands, waivers and other
     communications hereunder shall be in writing and shall be deemed to have
     been duly given when delivered by hand, if delivered personally or by
     courier, or three days after being deposited in the mail (registered or
     certified mail, postage prepaid, return receipt requested) as follows: If
     to the Company, to it at Suite 1400, One Bentall Centre, 505 Burrard
     Street, Vancouver, British Columbia, Canada V7X 1M5, and if to a holder, to
     the address of such holder set forth in the security register or other
     records of the Company, or to such other address as the Company or any such
     holder may have furnished to the other in writing in accordance herewith,
     except that notices of change of address shall be effective only upon
     receipt.

          (d) Parties in Interest. All the terms and provisions of this Exchange
     and Registration Rights Agreement shall be binding upon, shall inure to the
     benefit of and shall be enforceable by the parties hereto and the holders
     from time to time of the Registrable Securities and the respective
     successors and assigns of the parties hereto and such holders. In the event
     that any transferee of any holder of Registrable Securities shall acquire
     Registrable Securities, in any manner, whether by gift, bequest, purchase,
     operation of law or otherwise, such transferee shall, without any further
     writing or action of any kind, be deemed a beneficiary hereof for all
     purposes and such Registrable Securities shall be held subject to all of
     the terms of this Exchange and Registration Rights Agreement, and by taking
     and holding such Registrable Securities such transferee shall be entitled
     to receive the benefits of, and be conclusively deemed to have agreed to be
     bound by all of the applicable terms and provisions of this Exchange and
     Registration Rights Agreement. If the Company shall so request, any such
     successor, assign or transferee shall agree in writing to acquire and hold
     the Registrable Securities subject to all of the applicable terms hereof.

          (e) Survival. The respective indemnities, agreements, representations,
     warranties and each other provision set forth in this Exchange and
     Registration Rights Agreement or made pursuant hereto shall remain in full
     force and effect regardless of any investigation (or statement as to the
     results thereof) made by or on behalf of any holder of Registrable
     Securities, any director, officer or partner of such holder, any agent or
     underwriter or any director, officer or partner thereof, or any controlling
     person of any of the foregoing, and shall survive delivery of and payment
     for the Registrable Securities pursuant to the Purchase Agreement and the
     transfer and registration of Registrable Securities by such holder and the
     consummation of an Exchange Offer.

          (f) GOVERNING LAW. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
     SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
     OF NEW YORK.

          (g) Headings. The descriptive headings of the several Sections and
     paragraphs of this Exchange and Registration Rights Agreement are inserted
     for convenience only, do not



                                       22
<PAGE>   23

     constitute a part of this Exchange and Registration Rights Agreement and
     shall not affect in any way the meaning or interpretation of this Exchange
     and Registration Rights Agreement.

          (h) Entire Agreement; Amendments. This Exchange and Registration
     Rights Agreement and the other writings referred to herein (including the
     Indenture and the form of Securities) or delivered pursuant hereto which
     form a part hereof contain the entire understanding of the parties with
     respect to its subject matter. This Exchange and Registration Rights
     Agreement supersedes all prior agreements and understandings between the
     parties with respect to its subject matter. This Exchange and Registration
     Rights Agreement may be amended and the observance of any term of this
     Exchange and Registration Rights Agreement may be waived (either generally
     or in a particular instance and either retroactively or prospectively) only
     by a written instrument duly executed by the Company and the holders of at
     least a majority in aggregate principal amount of the Registrable
     Securities at the time outstanding. Each holder of any Registrable
     Securities at the time or thereafter outstanding shall be bound by any
     amendment or waiver effected pursuant to this Section 9(h), whether or not
     any notice, writing or marking indicating such amendment or waiver appears
     on such Registrable Securities or is delivered to such holder.

          (i) Inspection. For so long as this Exchange and Registration Rights
     Agreement shall be in effect, this Exchange and Registration Rights
     Agreement and a complete list of the names and addresses of all the holders
     of Registrable Securities shall be made available for inspection and
     copying on any business day by any holder of Registrable Securities for
     proper purposes only (which shall include any purpose related to the rights
     of the holders of Registrable Securities under the Securities, the
     Indenture and this Agreement) at the offices of the Company at the address
     thereof set forth in Section 9(c) above and at the office of the Trustee
     under the Indenture.

          (j) Counterparts. This agreement may be executed by the parties in
     counterparts, each of which shall be deemed to be an original, but all such
     respective counterparts shall together constitute one and the same
     instrument.



                                       23
<PAGE>   24


     If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and one for each of the Representatives, plus
one for each counsel counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.

                                        Very truly yours,

                                        Teekay Shipping Corporation

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:
Accepted as of the date hereof:

Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Deutsche Banc Alex. Brown Inc.
J.P. Morgan Securities Inc.
Fleet Securities, Inc.
Scotia Capital (USA) Inc.

By:
    ---------------------------------
         (Goldman, Sachs & Co.)

On behalf of each of the Purchasers


                                       24
<PAGE>   25


                                                                       EXHIBIT A

                           TEEKAY SHIPPING CORPORATION

                         INSTRUCTION TO DTC PARTICIPANTS

                                (Date of Mailing)

                     URGENT - IMMEDIATE ATTENTION REQUESTED

                          DEADLINE FOR RESPONSE: [DATE]

The Depository Trust Company ("DTC") has identified you as a DTC Participant
through which beneficial interests in the Teekay Shipping Corporation (the
"Company") 8.875% Senior Notes due July 15, 2011 (the "Securities") are held.

The Company is in the process of registering the Securities under the Securities
Act of 1933 for resale by the beneficial owners thereof. In order to have their
Securities included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.

It is important that beneficial owners of the Securities receive a copy of the
enclosed materials as soon as possible as their rights to have the Securities
included in the registration statement depend upon their returning the Notice
and Questionnaire by [Deadline For Response]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact Teekay Shipping
Corporation, Suite 1400, One Bentall Centre, 505 Burrard Street, Vancouver,
British Columbia, Canada V7X 1M5, telephone: (604) 683-3529.


                                      A-1

<PAGE>   26

                           TEEKAY SHIPPING CORPORATION

                        NOTICE OF REGISTRATION STATEMENT

                                       AND

                      SELLING SECURITYHOLDER QUESTIONNAIRE

                                     (DATE)

Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between Teekay Shipping
Corporation (the "Company") and the Purchasers named therein. Pursuant to the
Exchange and Registration Rights Agreement, the Company has filed with the
United States Securities and Exchange Commission (the "Commission") a
registration statement on Form F-4 (the "Shelf Registration Statement") for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended
(the "Securities Act"), of the Company's 8.875% Senior Notes due July 15, 2011
(the "Securities"). A copy of the Exchange and Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Exchange and Registration Rights Agreement.

Each beneficial owner of Registrable Securities (as defined below) is entitled
to have the Registrable Securities beneficially owned by it included in the
Shelf Registration Statement. In order to have Registrable Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the address set
forth herein for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners
of Registrable Securities who do not complete, execute and return this Notice
and Questionnaire by such date (i) will not be named as selling securityholders
in the Shelf Registration Statement and (ii) may not use the Prospectus forming
a part thereof for resales of Registrable Securities.

Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related Prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related Prospectus.

The term "Registrable Securities" is defined in the Exchange and Registration
Rights Agreement.

                                      A-2

<PAGE>   27



                                    ELECTION

The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.

Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.

The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:


                                      A-3

<PAGE>   28



                                  QUESTIONNAIRE

(1)  (a)  Full Legal Name of Selling Securityholder:

          ----------------------------------------------------------------------

     (b)  Full Legal Name of Registered Holder (if not the same as in (a) above)
          of Registrable Securities Listed in Item (3) below:

          ----------------------------------------------------------------------

     (c)  Full Legal Name of DTC Participant (if applicable and if not the same
          as (b) above) Through Which Registrable Securities Listed in Item (3)
          below are Held:

          ----------------------------------------------------------------------


(2)       Address for Notices to Selling Securityholder:

                          ------------------------------------------------

                          ------------------------------------------------

                          ------------------------------------------------
          Telephone:
                          ------------------------------------------------
          Fax:
                          ------------------------------------------------
          Contact Person:
                          ------------------------------------------------


(3)       Beneficial Ownership of Securities:

          Except as set forth below in this Item (3), the undersigned does not
          beneficially own any Securities.

     (a)  Principal amount of Registrable Securities beneficially owned:

          ----------------------------------------------------------------------

          CUSIP No(s). of such Registrable Securities:
                                                      --------------------------

     (b)  Principal amount of Securities other than Registrable Securities
          beneficially owned:

          ----------------------------------------------------------------------

          CUSIP No(s). of such other Securities:
                                                --------------------------------

     (c)  Principal amount of Registrable Securities which the undersigned
          wishes to be included in the Shelf Registration Statement:

          ----------------------------------------------------------------------
          CUSIP No(s). of such Registrable Securities to be included in the
          Shelf Registration Statement:
                                        ----------------------------------------

(4)       Beneficial Ownership of Other Securities of the Company:

          Except as set forth below in this Item (4), the undersigned Selling
          Securityholder is not the beneficial or registered owner of any other
          securities of the Company, other than the Securities listed above in
          Item (3).

          State any exceptions here:

                                      A-4
<PAGE>   29

(5)       Relationships with the Company:

          Except as set forth below, neither the Selling Securityholder nor any
          of its affiliates, officers, directors or principal equity holders (5%
          or more) has held any position or office or has had any other material
          relationship with the Company (or its predecessors or affiliates)
          during the past three years.

          State any exceptions here:



(6)       Plan of Distribution:

          Except as set forth below, the undersigned Selling Securityholder
          intends to distribute the Registrable Securities listed above in Item
          (3) only as follows (if at all): Such Registrable Securities may be
          sold from time to time directly by the undersigned Selling
          Securityholder or, alternatively, through underwriters, broker-dealers
          or agents. Such Registrable Securities may be sold in one or more
          transactions at fixed prices, at prevailing market prices at the time
          of sale, at varying prices determined at the time of sale, or at
          negotiated prices. Such sales may be effected in transactions (which
          may involve crosses or block transactions) (i) on any national
          securities exchange or quotation service on which the Registered
          Securities may be listed or quoted at the time of sale, (ii) in the
          over-the-counter market, (iii) in transactions otherwise than on such
          exchanges or services or in the over-the-counter market, or (iv)
          through the writing of options. In connection with sales of the
          Registrable Securities or otherwise, the Selling Securityholder may
          enter into hedging transactions with broker-dealers, which may in turn
          engage in short sales of the Registrable Securities in the course of
          hedging the positions they assume. The Selling Securityholder may also
          sell Registrable Securities short and deliver Registrable Securities
          to close out such short positions, or loan or pledge Registrable
          Securities to broker-dealers that in turn may sell such securities.

          State any exceptions here:



By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.

In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.

By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling

                                      A-5
<PAGE>   30

Securityholder understands that such information will be relied upon by the
Company in connection with the preparation of the Shelf Registration Statement
and related Prospectus.

In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:

     (i) To the Company:


                                                       -------------------------

                                                       -------------------------

                                                       -------------------------

                                                       -------------------------

                                                       -------------------------



     (ii) With a copy to:

                                                       -------------------------

                                                       -------------------------

                                                       -------------------------

                                                       -------------------------

                                                       -------------------------




Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Company's counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Company and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above. This
Agreement shall be governed in all respects by the laws of the State of New
York.


                                      A-6
<PAGE>   31


IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

Dated:
        ----------------------------



                ----------------------------------------------------------------

                Selling Securityholder
                (Print/type full legal name of beneficial owner of Registrable
                Securities)



                By:
                    ------------------------------------------------------------
                Name:
                Title:



PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:

                                    -------------------------

                                    -------------------------

                                    -------------------------

                                    -------------------------

                                    -------------------------


                                      A-7
<PAGE>   32


                                                                       EXHIBIT B


              NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT

U.S. Trust Company of Texas, N.A.
Teekay Shipping Corporation
c/o  U.S. Trust Company of Texas, N.A.
114 West 47th Street
New York, New York
10036-1552

Attention:        Trust Officer
Re:               Teekay Shipping Corporation (the "Company")
                  8.875% Senior Notes due July 15, 2011


Dear Sirs:

Please be advised that _________________________ has transferred
$____________________ aggregate principal amount of the above-referenced Notes
pursuant to an effective Registration Statement on Form F-4 (File No. 333-     )
filed by the Company.

We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated _________, 2001 or in supplements thereto, and that the aggregate
principal amount of the Notes transferred are the Notes listed in such
Prospectus opposite such owner's name.

Dated:  ____________ , 2001

                                       Very truly yours,

                                            (Name)

                                       By:
                                           -------------------------------------
                                           (Authorized Signature)




                                      B-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.16
<SEQUENCE>3
<FILENAME>o05789ex4-16.txt
<DESCRIPTION>EXHIBIT 4.16
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 4.16

                     TEEKAY SHIPPING CORPORATION, as Issuer

                                       TO

                  U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee

                                    INDENTURE

                            Dated as of June 22, 2001

                                  $250,000,000

                      8.875% Senior Notes Due July 15, 2011


<PAGE>   2



                           TEEKAY SHIPPING CORPORATION

               Reconciliation and tie between Trust Indenture Act
                of 1939 and Indenture, dated as of June 22, 2001

<TABLE>
<CAPTION>
Trust Indenture                     Indenture
Act Section                         Section
- ---------------                     ---------
<S>                                  <C>
ss.310(a)(1)                        6.09

      (a)(2)                        6.09

      (a)(3)                        Not Applicable

      (a)(4)                        Not Applicable

      (b)                           6.08, 6.10

ss.311(a)                           6.13

      (b)                           6.13

ss.312(a)                           7.01, 7.02

      (b)                           7.02

      (c)                           7.02

      (b)                           7.03

      (c)                           7.03

      (d)                           7.03

ss.314(a)                           7.04

      (a)(4)                        10.11

      (b)                           Not Applicable

      (c)(1)                        1.02

      (c)(2)                        1.02

      (c)(3)                        Not Applicable

      (d)                           Not Applicable

      (e)                           10.11
</TABLE>
                                       i

<PAGE>   3

<TABLE>
<CAPTION>
Trust Indenture                     Indenture
Act Section                         Section
- ---------------                     ---------
<S>                                  <C>

ss.315(a)                           6.01

      (b)                           6.02

      (c)                           6.03

      (d)                           6.01

      (d)(1)                        6.01

      (e)                           5.14

ss.316(a)                           1.01

      (a)(l)(A)                     5.02, 5.12

      (a)(l)(B)                     5.13

      (a)(2)                        Not Applicable

      (b)                           5.08

ss.317(a)(1)                        5.03

      (a)(2)                        5.04

      (b)                           10.03

ss.318(a)                           1.07
</TABLE>

                                       ii

<PAGE>   4


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                                          <C>
RECITALS OF THE COMPANY....................................................    1

ARTICLE I    DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.......    1

     SECTION 1.01      Definitions.........................................    1
     SECTION 1.02      Compliance Certificates and Opinions................   14
     SECTION 1.03      Form of Documents Delivered to Trustee..............   15
     SECTION 1.04      Acts of Holders; Record Date........................   15
     SECTION 1.05      Notices, Etc., to Trustee and Company...............   17
     SECTION 1.06      Notice to Holders: Waiver...........................   17
     SECTION 1.07      Conflict with Trust Indenture Act...................   18
     SECTION 1.08      Effect of Headings and Table of Contents............   18
     SECTION 1.09      Successors and Assigns..............................   18
     SECTION 1.10      Separability Clause.................................   18
     SECTION 1.11      Benefits of Indenture...............................   18
     SECTION 1.12      Governing Law.......................................   18
     SECTION 1.13      Legal Holidays......................................   18
     SECTION 1.14      Consent to Service; Jurisdiction....................   19
     SECTION 1.15      Conversion of Currency..............................   19

ARTICLE II   FORMS OF SECURITY.............................................   20

     SECTION 2.01      Forms Generally.....................................   20
     SECTION 2.02      Form of Face of Security............................   21
     SECTION 2.03      Form of Reverse of Security.........................   25
     SECTION 2.04      Form of Trustee's Certificate of Authentication.....   28

ARTICLE III  THE SECURITIES................................................   29

     SECTION 3.01      Title and Terms.....................................   29
     SECTION 3.02      Denominations.......................................   30
     SECTION 3.03      Execution, Authentication, Delivery and Dating......   30
     SECTION 3.04      Temporary Securities................................   31
     SECTION 3.05      Registration, Registration of Transfer and
                         Exchange Generally; Restrictions on Transfer and
                         Exchange; Securities Act Legends..................   31
     SECTION 3.06      Mutilated, Destroyed, Lost and Stolen Securities....   36
     SECTION 3.07      Payment of Interest; Interest Rights Preserved......   37
     SECTION 3.08      Persons Deemed Owners...............................   38
     SECTION 3.09      Cancellation........................................   38
     SECTION 3.10      Computation of Interest.............................   38
     SECTION 3.11      CUSIP Numbers.......................................   38
</TABLE>


                                      iii
<PAGE>   5


<TABLE>
<CAPTION>

<S>                                                                          <C>
ARTICLE IV   SATISFACTION AND DISCHARGE....................................   39

     SECTION 4.01      Satisfaction and Discharge of Indenture.............   39
     SECTION 4.02      Application of Trust Money..........................   40

ARTICLE V    REMEDIES......................................................   40

     SECTION 5.01      Events of Default...................................   40
     SECTION 5.02      Acceleration of Maturity; Rescission and Annulment..   42
     SECTION 5.03      Collection of Indebtedness and Suits for
                         Enforcement by Trustee............................   42
     SECTION 5.04      Trustee May File Proofs of Claim....................   43
     SECTION 5.05      Trustee May Enforce Claims Without Possession of
                         Securities........................................   43
     SECTION 5.06      Application of Money Collected......................   44
     SECTION 5.07      Limitation on Suits.................................   44
     SECTION 5.08      Unconditional Right of Holders to Receive Stated
                         Amount at Maturity, Premium and Interest..........   44
     SECTION 5.09      Restoration of Rights and Remedies..................   45
     SECTION 5.10      Rights and Remedies Cumulative......................   45
     SECTION 5.11      Delay or Omission Not Waiver........................   45
     SECTION 5.12      Control by Holders..................................   45
     SECTION 5.13      Waiver of Past Defaults.............................   45
     SECTION 5.14      Undertaking for Costs...............................   46
     SECTION 5.15      Waiver of Stay or Extension Laws....................   46
     SECTION 5.16      No Personal Liability of Incorporators,
                         Shareholders, Officers, Directors or Employees....   46

ARTICLE VI   THE TRUSTEE...................................................   46

     SECTION 6.01      Certain Duties and Responsibilities.................   46
     SECTION 6.02      Notice of Defaults..................................   47
     SECTION 6.03      Certain Rights of Trustee...........................   47
     SECTION 6.04      Not Responsible for Recitals or Issuance of
                         Securities........................................   48
     SECTION 6.05      May Hold Securities.................................   48
     SECTION 6.06      Money Held in Trust.................................   48
     SECTION 6.07      Compensation and Reimbursement......................   48
     SECTION 6.08      Disqualification: Conflicting Interests.............   49
     SECTION 6.09      Corporate Trustee Required; Eligibility.............   49
     SECTION 6.10      Resignation and Removal; Appointment of Successor...   49
     SECTION 6.11      Acceptance of Appointment by Successor..............   50
     SECTION 6.12      Merger, Conversion, Consolidation or Succession to
                         Business..........................................   50
     SECTION 6.13      Preferential Collection of Claims Against Company...   51
     SECTION 6.14      Appointment of Authenticating Agent.................   51
</TABLE>


                                       iv
<PAGE>   6

<TABLE>
<CAPTION>

<S>                                                                          <C>
ARTICLE VII  HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.............   52

     SECTION 7.01      Company to Furnish Trustee Names and Addresses of
                         Holders...........................................   52
     SECTION 7.02      Preservation of Information; Communications to
                         Holders...........................................   52
     SECTION 7.03      Reports by Trustee..................................   53
     SECTION 7.04      Reports by Company..................................   53

ARTICLE VIII CONSOLIDATIONS, MERGERS AND CERTAIN SALES OF ASSETS...........   53

     SECTION 8.01      The Company May Consolidate, Etc. Only on Certain
                         Terms.............................................   53
     SECTION 8.02      Successor Substituted...............................   54

ARTICLE IX   SUPPLEMENTAL INDENTURES.......................................   54

     SECTION 9.01      Supplemental Indentures Without Consent of Holders..   54
     SECTION 9.02      Supplemental Indentures with Consent of Holders.....   55
     SECTION 9.03      Execution of Supplemental Indentures................   56
     SECTION 9.04      Effect of Supplemental Indentures...................   56
     SECTION 9.05      Conformity with Trust Indenture Act.................   56
     SECTION 9.06      Reference in Securities to Supplemental Indentures..   56

ARTICLE X    COVENANTS.....................................................   56

     SECTION 10.01     Payment of Stated Amount at Maturity, Premium and
                         Interest..........................................   56
     SECTION 10.02     Maintenance of Office or Agency.....................   56
     SECTION 10.03     Money for Security Payments to be Held in Trust.....   57
     SECTION 10.04     Corporate Existence.................................   58
     SECTION 10.05     Maintenance of Properties...........................   58
     SECTION 10.06     Payment of Taxes and Other Claims...................   58
     SECTION 10.07     Maintenance of Insurance............................   59
     SECTION 10.08     Limitation on Liens.................................   59
     SECTION 10.09     Change of Control Triggering Event..................   59
     SECTION 10.10     Provision of Financial Information..................   60
     SECTION 10.11     Statement By Officers as to Default; Compliance
                         Certificates......................................   60
     SECTION 10.12     Waiver of Certain Covenants.........................   61
     SECTION 10.13     Indemnification of Judgment Currency................   61
     SECTION 10.14     Payments for Consent................................   61
     SECTION 10.15     Additional Amounts..................................   61

ARTICLE XI   REDEMPTION OF SECURITIES......................................   63

     SECTION 11.01     Right of Redemption.................................   63
     SECTION 11.02     Applicability of Article............................   64
     SECTION 11.03     Election to Redeem; Notice to Trustee...............   64
     SECTION 11.04     Selection by Trustee of Securities to Be Redeemed...   64

</TABLE>
                                       v

<PAGE>   7


<TABLE>
<CAPTION>

<S>                                                                          <C>
     SECTION 11.05     Notice of Redemption................................   64
     SECTION 11.06     Deposit of Redemption Price.........................   65
     SECTION 11.07     Securities Payable on Redemption Date...............   65
     SECTION 11.08     Securities Redeemed in Part.........................   65

ARTICLE XII  DEFEASANCE AND COVENANT DEFEASANCE............................   66

     SECTION 12.01     Company's Option to Effect Defeasance or Covenant
                         Defeasance........................................   66
     SECTION 12.02     Defeasance and Discharge............................   66
     SECTION 12.03     Covenant Defeasance.................................   66
     SECTION 12.04     Conditions to Defeasance or Covenant Defeasance.....   67
     SECTION 12.05     Deposited Money and United States Government
                         Obligations to be Held in Trust: Other
                         Miscellaneous Provisions..........................   68
     SECTION 12.06     Reinstatement.......................................   69

                                     ANNEXES

Annex A      Form of Regulation S Certificate..............................  A-1

Annex B      Form of Restricted Securities Certificate.....................  B-1
</TABLE>


                                       vi
<PAGE>   8


               INDENTURE, dated as of June 22, 2001, between Teekay Shipping
Corporation, a corporation duly incorporated and existing under the laws of the
Republic of the Marshall Islands, as issuer (herein called the "Company"),
having its principal operating office at 505 Burrard Street, Suite 1400,
Vancouver, British Columbia, Canada, V7X IM5, and U.S. Trust Company of Texas,
N.A., a national banking association duly organized and existing under the laws
of the United States of America, as Trustee (herein called the "Trustee").

                             RECITALS OF THE COMPANY

               The Company has duly authorized the creation of an issue of its
8.875% Senior Notes due July 15, 2011 of substantially the tenor and amount
hereinafter set forth (the "Securities"), and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture. The Securities
may consist of either or both Original Securities or Exchange Securities each as
defined herein. The Original Securities and the Exchange Securities shall rank
pari passu with one another and will vote as one series of Securities under this
Indenture.

               All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.

               Upon the effectiveness of an effective registration statement
under the Securities Act, this Indenture will be subject to, and shall be
governed by, applicable provisions of the Trust Indenture Act.

                  NOW, THEREFORE, THIS INDENTURE WITNESSETH:

               For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:

                                   ARTICLE I
             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

               SECTION 1.01 Definitions.

               (a) For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:

                    (1) the terms defined in this Article have the meanings
               assigned to them in this Article and include the plural as well
               as the singular;

                    (2) all other terms used herein which are defined in the
               Trust Indenture Act of 1939, as amended (the "Trust Indenture
               Act"), either directly or by reference therein, have the meanings
               assigned to them therein;

                    (3) all accounting terms not otherwise defined herein have
               the meanings assigned to them in accordance with generally
               accepted accounting principles in the United States (whether or
               not such is indicated herein), and, except as otherwise herein
               expressly provided, the term "generally accepted accounting
               principles" with respect to any computation required or permitted
               hereunder shall mean such accounting principles

                                           1

<PAGE>   9

               as are generally accepted in the United States as consistently
               applied by the Company at the date of such computation;

                    (4) unless the context otherwise requires, any reference to
               an "Article" or a "Section", or to an "Annex" or a "Schedule",
               refers to an Article or Section of, or to an Annex or a Schedule
               attached to, this Indenture, as the case may be;

                    (5) unless the context otherwise requires, any reference to
               a statute, rule or regulation refers to the same (including any
               successor statute, rule or regulation thereto) as it may be
               amended from time to time; and

                    (6) the words "herein", "hereof" and "hereunder" and other
               words of similar import refer to this Indenture as a whole and
               not to any particular Article, Section or other subdivision.

               (b) Certain terms, used principally in Article Six, are defined
in that Article. Other terms are defined as follows:

               "Acquired Debt" means Debt of a Person existing at the time such
Person became a Subsidiary and not Incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary.

               "Additional Amounts" has the meaning specified in Section 10.15.

               "Additional Interest" has the meaning specified in Section 2.02.

               "Additional Securities" means any additional Securities that may
be issued under a supplemental indenture after the date that the Securities are
first issued by the Company and authenticated by the Trustee under this
Indenture, which shall rank pari passu with the Securities initially issued in
all respects.

               "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling", "controlled by" and "under
common control with" have meanings correlative to the foregoing.

               "Agent Members" has the meaning specified in Section 3.05.

               "Applicable Procedures" has the meaning specified in
Section 3.05.

               "Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities.

               "Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board authorized to act for it
in respect thereof.

                                       2
<PAGE>   10

               "Board Resolution" means a copy of a resolution certified by the
Corporate Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.

               "Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York, New York or such other city in which the Corporate Trust Office of the
Trustee is located, are authorized or obligated by law or executive order to
close.

               "Capitalized Lease" is defined to mean, as applied to any Person,
any lease of any property (whether real, personal or mixed) of which the
discounted present value of the rental obligations of such Person, as lessee, in
conformity with GAAP, is required to be capitalized on the balance sheet of such
Person; and "Capitalized Lease Obligation" is defined to mean the rental
obligations, as aforesaid, under such lease.

               "Capital Stock" is defined to mean, with respect to any Person,
any and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of such Person's capital stock or
ownership interests, whether outstanding prior to or issued after the date of
this Indenture, including, without limitation, all Common Stock and Preferred
Stock.

               "Change of Control" has the meaning specified in Section 10.09.

               "Change of Control Triggering Event" is defined to mean the
occurrence of a Change of Control and a Rating Decline.

               "Clearstream" has the meaning specified in Section 2.01.

               "Closing Date" has the meaning specified in Section 2.02.

               "Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act, or
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.

               "Common Stock" of any Person means Capital Stock of such Person
that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.

               "Company Request" or "Company Order" means a written request or
order signed in the name of the Company (or its successor Person) by its Chief
Executive Officer, its President or a Vice-President, and by its Chief Financial
Officer, its Vice-President, Finance, its Treasurer, an Assistant Treasurer, its
Controller, its Corporate Secretary or an Assistant Secretary, and delivered to
the Trustee.

               "Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a Maturity
comparable to the remaining term of the Securities that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable Maturity to the
remaining term of the Securities.

                                       3
<PAGE>   11

               "Comparable Treasury Price" means, with respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 Quotations for United States
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations for
such Redemption Date, or (B) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations.

               "Corporate Trust Office" means the office of the Trustee or its
affiliate at which at any particular time its corporate trust business may be
administered and any additional office it may designate in writing to the
Company. At the date of this Indenture, the Corporate Trust Office of the
Trustee is located at 114 West 47th Street, New York, NY 10036, Attention:
Corporate Trust Administration.

               "corporation" means a corporation, association, company,
joint-stock company, limited liability company, partnership or business trust.

               "Currency Agreement" is defined to mean any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement
designed to protect the Company or any of its Subsidiaries against fluctuations
in currency values to or under which the Company or any of its Subsidiaries is a
party or a beneficiary on the date of this indenture or becomes a party or a
beneficiary thereafter.

               "Debt" is defined to mean, with respect to any Person at any date
of determination (without duplication):

               (1) all debt of such Person for borrowed money,

               (2) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,

               (3) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement obligations with
respect thereto),

               (4) all obligations of such Person to pay the deferred purchase
price of property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery thereto or
the completion of such services, except trade payables,

               (5) all obligations of such Person as lessee under Capitalized
Leases,

               (6) all Debt of Persons other than such Person secured by a Lien
on any asset of such person, whether or not such Debt is assumed by such Person;
provided that the amount of such Debt shall be the lesser of (A) the fair market
value of such asset at such date of determination and (B) the amount of such
Debt,

               (7) all Debt of Persons other than such Person guaranteed by such
Person to the extent such Debt is guaranteed by such Person, and

                                       4
<PAGE>   12

               (8) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.

The amount of Debt of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided that the amount outstanding
at any time of any Debt issued with original issue discount is the face amount
of such Debt less the remaining unamortized portion of the original issue
discount of such Debt at such time as determined in conformity with GAAP; and
provided further that Debt shall not include any liability for federal, state,
local, foreign or other taxes.

               "Default" is defined to mean any event that is, or after the
passage of time or both would be, an Event of Default.

               "Defaulted Interest" has the meaning specified in Section 3.07.

               "Euroclear" has the meaning specified in Section 2.01.

               "Event of Default" has the meaning specified in Section 5.01.

               "Exchange Act" refers to the Securities Exchange Act of 1934 as
it may be amended and any successor act thereto.

               "Exchange and Registration Rights Agreement" has the meaning
specified in Section 2.02.

               "Exchange Offer" has the meaning specified in Section 2.02.

               "Exchange Registration Statement" has the meaning specified in
Section 2.02.

               "Exchange Securities" means the 8.875% Senior Notes due July 15,
2011 of the Company, issued pursuant to the Exchange Offer and their Successor
Securities.

               "Expiration Date" has the meaning specified in Section 1.04.

               "generally accepted accounting principles" and "GAAP" are defined
to mean generally accepted accounting principles in the United States as in
effect as of the date of this Indenture, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of this Indenture shall be made without
giving effect to:

               (1) except as otherwise provided, the amortization of any amounts
required or permitted by Accounting Principles Board Opinion Nos. 16 and 17; and

               (2) any non-recurring charges associated with the adoption, after
the date of the indenture, of Financial Accounting Standard Nos. 106 and 109.

                                       5
<PAGE>   13

               "Global Security" means a Security that is registered in the
Security Register in the name of the United States Depository or its nominee.

               "Governing Board Members" means the individuals serving as
members of the protectorate or governing boards of (x) the Trusts or their
respective trustees or (y) if the individuals serving as members of the
protectorate or governing boards of the Trusts or their respective trustees
immediately prior to any restructuring or dissolution of the Trusts or any
transfer of Capital Stock of the Company held directly or indirectly thereby
represent at least a majority of the members of the protectorate or governing
board of the trust (or trustee thereof) or other entity replacing the Trusts as
a direct or indirect owner of all, or substantially all, Capital Stock of the
Company held directly or indirectly by the Trusts immediately prior to such
restructuring, dissolution or transfer, such replacement trust (or its trustee)
or entity, together with any new members whose election or appointment was
approved by at least two-thirds of the members of such boards or board.

               "Gradation" is defined to mean a gradation within a Rating
Category or a change to another Rating Category, which shall include:

               (1) "+" and "-" in the case of S&P's current Rating Categories
(e.g., a decline from BB+ to BB would constitute a decrease of one gradation),

               (2) 1 and 2 in the case of Moody's current Rating Categories
(e.g., a decline from B1 to B2 would constitute a decrease of one gradation), or

               (3) the equivalent in respect of successor Rating Categories of
S&P or Moody's or Rating Categories used by Rating Agencies other than S&P and
Moody's.

               "Holder" means a person in whose name a Security is registered in
the Security Register.

               "Incur" means with respect to any Debt, to incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Debt, including
an incurrence of Acquired Debt by reason of the acquisition of more than 50% of
the Capital Stock of any Person; provided that neither the accrual of interest
nor the accretion of original issue discount shall be considered an Incurrence
of Debt.

               "Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the Annexes attached to this instrument.

               "Independent Investment Banker" means Goldman, Sachs & Co. or its
successor or, if such firm is unwilling or unable to select the Comparable
Treasury Issue, one of the remaining Reference Treasury Dealers appointed by the
Company.

               "Interest Payment Date" has the meaning specified in
Section 2.02.

               "Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect the Company or any of its Subsidiaries against
fluctuations in interest rates to or under which the Company or any of its
Subsidiaries is a party or a beneficiary on the date hereof or becomes a party
or a beneficiary hereafter.



                                       6
<PAGE>   14

               "Investment Grade" is defined to mean:

               (1) BBB- or above in the case of S&P (or its equivalent under any
successor Rating Categories of S&P);

               (2) Baa3 or above, in the case of Moody's (or its equivalent
under any successor Rating Categories of Moody's); and

               (3) the equivalent in respect of the Rating Categories of any
Rating Agencies substituted for S&P or Moody's.


               "Lien" is defined to mean, any mortgage, lien, pledge, security
interest, encumbrance or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).

               "Maturity", when used with respect to any Security, means the
date on which the stated amount at Maturity of such Security becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption, exercise of the repurchase
right or otherwise.

               "Moody's" is defined to mean Moody's Investors Service, Inc. and
its successors.

               "Notice of Default" means a written notice of the kind specified
in Section 5.01(a)(4).

               "Offer" has the meaning specified in the definition of Offer to
Purchase.

               "Offer Expiration Date" has the meaning specified in the
definition of Offer to Purchase.

               "Offer to Purchase" means a written offer (the "Offer") sent by
the Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Security Register on the date of the Offer offering to purchase
up to the principal amount of Securities specified in such Offer at the purchase
price specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Offer Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Securities within five Business Days after the Offer
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders of the Securities to
make an informed decision with respect to the Offer to Purchase (which at a
minimum will include):

               (1) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the documents required to be filed with the Trustee
pursuant to this Indenture (which requirements may be satisfied by delivery of
such documents together with the Offer),


                                       7
<PAGE>   15

               (2) a description of material developments in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (1) (including a description of the events requiring the
Company to make the Offer to Purchase),

               (3) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Company to make
the Offer to Purchase and

               (4) any other information required by applicable law to be
included therein.

The Offer shall contain all instructions and materials necessary to enable such
Holders of the Securities to tender Securities pursuant to the Offer to
Purchase. The Offer shall also state:

               (1) the section of this Indenture pursuant to which the Offer to
Purchase is being made;

               (2) the Expiration Date and the Purchase Date;

               (3) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such has been determined
pursuant to the Section hereof requiring the Offer to Purchase) (the "Purchase
Amount");

               (4) the purchase price to be paid by the Company for each
U.S.$1,000 aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture) (the "Purchase Price");

               (5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion of a
Security tendered must be tendered in an integral multiple of U.S.$1,000
principal amount;

               (6) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;

               (7) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;

               (8) that on the Purchase Date, the Purchase Price will become due
and payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;

               (9) that each Holder of the Securities electing to tender a
Security pursuant to the Offer to Purchase will be required to surrender such
Security at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Security being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing);

               (10) that Holders of the Securities will be entitled to withdraw
all or any portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business on the Expiration Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the




                                       8
<PAGE>   16

Holder, the principal amount of the Security the Holder tendered, the
certificate number of the Security the Holder tendered and a statement that such
Holder is withdrawing all or a portion of his tender;

               (11) that (a) if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Securities having an aggregate principal
amount equal to the Purchase Amount on a pro rata basis (with such adjustments
as may be deemed appropriate so that only Securities in denominations of $1,000
or integral multiples thereof shall be purchased); and

               (12) that in the case of any Holder whose Security is purchased
only in part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased portion
of the Security so tendered.

Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.

               "Officers' Certificate" means a certificate signed by the Chief
Executive Officer, the President or a Vice President, and by the Chief Financial
Officer, the Vice President, Finance, the Treasurer, an Assistant Treasurer, the
Controller, the Corporate Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee.

               "Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, including an employee of the Company, and who shall
be reasonably acceptable to the Trustee.

               "Original Securities" means the Securities sold by the Company to
the Purchasers pursuant to the Purchase Agreement.

               "Outstanding" when used with respect to Securities, means, as of
the date of determination, all Securities therefore authenticated and delivered
under this Indenture, except:

               (1) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;

               (2) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;

               (3) Securities, except to the extent provided in Sections 12.02
and 12.03, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Twelve; and

               (4) Securities which have been paid pursuant to Section 3.06 or
in exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to



                                       9
<PAGE>   17

it that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver or other action, only Securities which the Trustee knows to be
so owned by written notice delivered at its notice address specified in Section
1.05 hereof, shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or of such other obligor.

               "pari passu", when used with respect to the ranking of any Debt
of any Person in relation to other Debt of such Person, means that each such
Debt (a) either (i) is not subordinated in right of payment to any other Debt of
such Person or (ii) is subordinate in right of payment to the same Debt of such
Person as is the other and is so subordinate to the same extent and (b) is not
subordinate in right of payment to the other or to any Debt of such Person as to
which the other is not so subordinate.

               "Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Securities on behalf
of the Company, which initially shall be the Trustee.

               "Permitted Holder" is defined to mean the Trusts, a majority of
the Governing Board Members (each in his or her capacity as a Governing Board
Member), or any holding company, more than 50% of the total voting power of the
Voting Stock of which is, at the time of any transfer of Capital Stock of the
Company by the Trusts or any such other holding company, "beneficially owned" by
the Trusts or a majority of the Governing Board Members (each in his or her
capacity as a Governing Board Member).

               "Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.

               "Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.06 in exchange for or in
lieu of a mutilated, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

               "Preferred Stock" of any Person means Capital Stock of such
Person of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.

               "Purchase Agreement" means the Purchase Agreement dated June 18,
2001 between the Company and the Purchasers.

               "Purchase Amount" has the meaning specified in the definition of
Offer to Purchase.

                                       10
<PAGE>   18

               "Purchase Date" has the meaning specified in the definition of
Offer to Purchase.

               "Purchase Price" has the meaning specified in the definition of
Offer to Purchase.

               "Purchasers" means Goldman, Sachs & Co., Morgan Stanley & Co
Incorporated, Salomon Smith Barney Inc., Deutsche Banc Alex. Brown Inc., J.P.
Morgan Securities Inc., Fleet Securities, Inc., and Scotia Capital (USA) Inc.

               "Rating Agencies" is defined to mean:

               (1) S&P and Moody's; or

               (2) if S&P or Moody's or both of them are not making ratings of
the Securities publicly available, a nationally recognized United States rating
agency or agencies, as the case may be, selected by the Company, which will be
substituted for S&P or Moody's or both, as the case may be.

               "Rating Category" is defined to mean:

               (1) with respect to S&P, any of the following categories (any of
which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or
equivalent successor categories);

               (2) with respect to Moody's, any of the following categories:
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and

               (3) the equivalent of any such categories of S&P or Moody's used
by another Rating Agency, if applicable.

               "Rating Decline" is defined to mean that at any time within 90
days (which period shall be extended so long as the rating of the Securities is
under publicly announced consideration for possible downgrade by any Rating
Agency) after the date of public notice of a Change of Control, or of the
intention of the Company or of any person to effect a Change of Control, the
rating of the Securities is decreased by both Rating Agencies by one or more
Gradations and the rating by such Rating Agencies on the Securities following
such downgrade is below Investment Grade.

               "Redemption Date" when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.

               "Redemption Price" when used with respect to any Security to be
redeemed, in whole or in part, means the price at which it is to be redeemed
pursuant to this Indenture.

               "Reference Treasury Dealer" means (i) each of Goldman, Sachs &
Co. and any other primary United States Government securities dealer in New York
City (a "Primary Treasury Dealer") designated by, and not affiliated with,
Goldman, Sachs & Co., provided however, that if Goldman, Sachs & Co. or any of
its designees shall cease to be a Primary Treasury Dealer, the Company will
appoint another Primary Treasury Dealer as a substitute for such entity and (ii)
any other Primary Treasury Dealer selected by the Company.

               "Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Trustee of the bid and asked prices for the Comparable
Treasury Issue (expressed, in each case, as a percentage of its principal
amount)



                                       11
<PAGE>   19

quoted in writing to the trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such Redemption Date.

               "Registration Default" has the meaning specified in Section 2.02.

               "Regular Record Date" has the meaning specified in Section 2.02.

               "Regulation S" means Regulation S under the Securities Act.

               "Regulation S Certificate" means a certificate substantially in
the form set forth in Annex A.

               "Regulation S Global Security" has the meaning specified in
Section 2.01.

               "Regulation S Legend" means a legend substantially in the form of
the legend required in the form of Security set forth in Section 2.02 to be
placed upon a Regulation S Security.

               "Regulation S Securities" means all Securities required pursuant
to Section 3.05(c) to bear a Regulation S Legend. Such term includes the
Regulation S Global Security.

               "Relevant Debt" means any debt for borrowed money in the form of
bonds, notes, debentures or other debt securities issued by way of public
offering or private placement, including any guarantee or indemnity given in
respect of debt of any third party for money borrowed in the form of bonds,
notes, debentures or other debt securities issued by way of a public offering or
private placement, but, for greater clarity, shall not include loans (or
collateral debt securities relating to such loans) made by banks or other
financial institutions, customers or strategic partners.

               "Restricted Global Security" has the meaning specified in
Section 2.01.

               "Restricted Securities" means a restricted security within the
meaning of Rule 144 and all Securities required pursuant to Section 3.05(c) to
bear a Restricted Securities Legend. Such term includes the Restricted Global
Security.

               "Restricted Securities Certificate" means a certificate
substantially in the form set forth in Annex B.

               "Restricted Securities Legend" means a legend substantially in
the form of the legend required in the form of Security set forth in Section
2.02 to be placed upon a Restricted Security.

               "Rule 144" means Rule 144 under the Securities Act.

               "Rule 144A" means Rule 144A under the Securities Act.

               "S&P" is defined to mean Standard & Poor's Ratings Group, a
division of McGraw Hill Inc., a New York Corporation and its successors.

               "Securities Act" means the United States Securities Act of 1933,
as amended, and (unless the context otherwise requires) includes the rules and
regulations of the Commission promulgated thereunder.

               "Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.

                                       12
<PAGE>   20

               "Security" and "Securities" have the meaning set forth in the
first recital of this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture. For all purposes of this
Indenture, the term "Securities" shall include any Additional Securities that
may be issued under a supplemental indenture and, for purposes of this
Indenture, both the Securities and the Additional Securities shall vote together
as one series of Securities under this Indenture.

               "Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.05.

               "Shelf Registration Statement" has the meaning specified in
Section 2.02.

               "Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.07.

               "Stated Maturity" is defined to mean (1) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(2) with respect to any scheduled installment of principal or interest on any
debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.

               "Subsidiary" is defined to mean, with respect to the Company, any
business entity of which more than 50% of the outstanding Voting Stock is owned
directly or indirectly by the Company and one or more other Subsidiaries of the
Company.

               "Successor Company" has the meaning specified in Section 8.02.

               "Successor Security" of any particular Security means every
Security issued after, and evidencing all or a portion of the same debt as that
evidenced by, such particular Security; and for the purposes of this definition,
any Security authenticated and delivered under Section 3.06 in exchange for or
in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.

               "Taxing Jurisdiction" is defined to mean the Republic of the
Marshall Islands or any jurisdiction from or through which payment on the
Securities is made, or any political subdivision thereof, or any authority or
agency therein or thereof having power to tax.

               "Treasury Yield" means, with respect to any Redemption Date, the
rate per year equal to the semi-annual equivalent yield to Maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.

               "Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.

               "Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1933.

               "Trusts" is defined to mean, collectively, the Cirrus Trust, a
trust organized under the laws of the Turks and Caicos Islands, and the JTK
Trust, a trust organized under the laws of the Bahamas, which as of May 25, 2001
owned approximately 36.1% and 7.2% of the outstanding Common Stock of the
Company, respectively.



                                       13
<PAGE>   21

               "United States" means the United States of America (including the
States thereof and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction.

               "United States Depositary" means The Depository Trust Company
until a successor United States Depositary shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "United States
Depositary" shall mean each successor United States Depositary.

               "U.S. Dollars" and "$" means such coin or currency of the United
States which is legal tender for payment of public and private debts.

               "United States Government Obligations" has the meaning specified
in Section 12.04.

               "United States Government Securities" is defined to mean
securities that are direct obligations of the United States, direct obligations
of the Federal Home Loan Mortgage Corporation, direct obligations of the Federal
National Mortgage Association, securities which the timely payment of whose
principal and interest is unconditionally guaranteed by the full faith and
credit of the United States, trust receipts or other evidence of indebtedness of
a direct claim upon the instrument described above and money market mutual funds
that invest solely in such securities.

               "Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".

               "Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
board of directors or similar governing body of such Person.

               SECTION 1.02 Compliance Certificates and Opinions.

               (a) Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.

               (b) Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture (other than pursuant to
Section 10.11(a)) shall include

                    (1) a statement that each individual signing such
               certificate or opinion has read such covenant or condition and
               the definitions herein relating thereto;

                    (2) a brief statement as to the nature and scope of the
               examination or investigation upon which the statements or
               opinions contained in such certificate or opinion are based;

                    (3) a statement that, in the opinion of each such
               individual, he has made such examination or investigation as is
               necessary to enable him to express an informed opinion as to
               whether or not such covenant or condition has been complied with
               (which, in the case of an Opinion of Counsel, may be limited to
               reliance on an Officers' Certificate as to matters of fact); and



                                       14
<PAGE>   22

                    (4) a statement as to whether, in the opinion of each such
               individual, such condition or covenant has been complied with
               (provided that, with respect to matters of fact in Opinions of
               Counsel, counsel may rely on Officers Certificates or
               certificates of public officials.

               SECTION 1.03 Form of Documents Delivered to Trustee.

               (a) In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.

               (b) Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, that the
certificate or opinion or representations with respect to the matters upon which
such certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Company stating that the information with respect to such factual matters is
in the possession of the Company, unless such counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.

               (c) Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.

               SECTION 1.04 Acts of Holders; Record Date.

               (a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments and the Holders bound thereby. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.

               (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.

                                       15
<PAGE>   23

               (c) The ownership of Securities (including the stated amount at
Maturity and serial numbers of Securities held by any Person, and the date of
holding the same) shall be proved by the Security Register.

               (d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.

               (e) The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders of Securities, provided that the Company may not set a record date
for, and the provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to in
the next paragraph. If not set by the Company prior to the first solicitation of
a Holder made by any Person in respect of any such matter referred to in the
foregoing sentence, the record date for any such matter shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 7.01) prior to such first solicitation. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; provided that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of the requisite
stated amount at Maturity of Outstanding Securities on such record date. Nothing
in this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite stated amount at Maturity of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Trustee in writing and to each
Holder of Securities in the manner set forth in Section 1.06.

               (f) The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to join in the
giving or making of (1) any Notice of Default, (2) any declaration of
acceleration referred to in Section 5.02, (3) any request to institute
proceedings referred to in Section 5.07(b) or (4) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite stated amount at Maturity of
Outstanding Securities on such record date. Nothing in this paragraph shall be
construed to prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this paragraph
shall be construed to render ineffective any action taken by Holders of the
requisite stated amount at Maturity of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the Company's expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Company in writing and to each Holder of Securities in the
manner set forth in Section 1.06.



                                       16
<PAGE>   24

               (g) With respect to any record date set pursuant to this Section,
the party hereto which sets such record date may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
1.06, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.

               (h) Without limiting the foregoing, a Holder entitled hereunder
to take any action hereunder with regard to any particular Security may do so
with regard to all or any part of the stated amount at Maturity of such Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal amount.

               SECTION 1.05 Notices, Etc., to Trustee and Company.

               Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,

               (a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office in the City of New
York, Attention: Trust Administration in each case.

               (b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the first
paragraph of this instrument or at any other address previously furnished in
writing to the Trustee by the Company.

               SECTION 1.06 Notice to Holders: Waiver.

               (a) Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.

               (b) In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.



                                       17
<PAGE>   25

               SECTION 1.07 Conflict with Trust Indenture Act.

               Until such time as this Indenture shall be qualified under the
Trust Indenture Act, this Indenture, the Company and the Trustee shall be deemed
for all purposes hereof to be subject to and governed by the Trust Indenture Act
to the same extent as would be the case if this Indenture were so qualified on
the date hereof. If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.

               SECTION 1.08 Effect of Headings and Table of Contents.

               The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.

               SECTION 1.09 Successors and Assigns.

               All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.

               SECTION 1.10 Separability Clause.

               In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

               SECTION 1.11 Benefits of Indenture.

               Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent, any Securities Registrar and their successors hereunder and the Holders
of Securities, any benefit or any legal or equitable right, remedy or claim
under this Indenture.

               SECTION 1.12 Governing Law.

               THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

               SECTION 1.13 Legal Holidays.

               In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or stated amount at Maturity (and premium, if
any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or Purchase Date, or at the Stated Maturity, provided that
no interest shall accrue for the period from and after such Interest Payment
Date, Redemption Date or Purchase Date or Stated Maturity, as the case may be.

                                       18
<PAGE>   26

               SECTION 1.14 Consent to Service; Jurisdiction.

               (a) The Company and the Trustee agree that any legal suit, action
or proceeding arising out of or relating to this Indenture, and the Company
agrees that any legal suit, action or proceeding arising out of or relating to
the Securities, may be instituted in any federal or state court in the Borough
of Manhattan, the City of New York, waives any objection which it may now or
hereafter have to the laying of the venue of any such legal suit, action or
proceeding, waives any immunity from jurisdiction or to service of process in
respect of any such suit, action or proceeding, and irrevocably submits to the
exclusive jurisdiction of any such court in any such suit, action or proceeding.

               (b) The Company hereby designates and appoints Watson, Farley &
Williams, New York, New York as its authorized agent upon which process may be
served in any legal suit, action or proceeding arising out of or relating to
this Indenture or the Securities which may be instituted in any federal or state
court in the Borough of Manhattan, the City of New York, New York, and agrees
that service of process upon such agent, and written notice of said service to
the Company by the Person serving the same, shall be deemed in every respect
effective service of process upon the Company in any such suit, action or
proceeding and further designates its domicile, the domicile of New York, New
York specified above and any domicile it may have in the future as its domicile
to receive any notice hereunder (including service of process). Service of
process, to be effective upon the Trustee, must be served at the Trustee's
Corporate Trust Office in The City of New York. If for any reason Watson, Farley
& Williams, New York, New York (or any successor agent for this purpose) shall
cease to act as agent for service of process as provided above, the Company will
promptly appoint a successor agent for this purpose reasonably acceptable to the
Trustee. The Company agrees to take any and all actions as may be necessary to
maintain such designation and appointment of such agent in full force and
effect.

               SECTION 1.15 Conversion of Currency.

               The Company covenants and agrees that the following provisions
shall apply to conversion of currency in the case of the Securities and this
Indenture in the event the Company is in default under the terms of this
Indenture:

               (a) If for the purpose of obtaining judgment in, or enforcing the
judgment of, any court in any country, it becomes necessary to convert into a
currency (the "judgment currency") an amount due in U.S. Dollars, then the
conversion shall be made at the rate of exchange prevailing on the Business Day
before the day on which the judgment is given or the order of enforcement is
made, as the case may be (unless a court shall otherwise determine).

               (b) If there is a change in the rate of exchange prevailing
between the Business Day before the day on which the judgment is given or an
order of enforcement is made, as the case may be (or such other date as a court
shall determine), and the date of receipt of the amount due, the Company will
pay such additional amount (or, as the case may be, be refunded such lesser
amount), if any, as may be necessary so that the amount paid in the judgment
currency when converted at the rate of exchange prevailing on the date of
receipt will produce the amount in U.S. Dollars originally due.

               (c) In the event of the winding-up of the Company at any time
while any amount or damages owing under the Securities of this Indenture, or any
judgment or order rendered in respect thereof, shall remain outstanding, the
Company shall indemnify and hold the Holders and the Trustees harmless against
any deficiency arising or resulting from any variation in rates of exchange
between (1) the date as of which the equivalent of the amount in U.S. Dollars
due or contingently due under the Securities and this Indenture (other than
under this Subsection (c)) is calculated for the purposes of such



                                       19
<PAGE>   27

winding-up and (2) the final date for the filing of proofs of claim in such
winding-up. For the purpose of this Subsection (c), the final date for the
filing of proofs of claim in the winding-up of the Company shall be the date
fixed by the liquidator or otherwise in accordance with the relevant provisions
of applicable law as being the latest practicable date as at which liabilities
of the Company may be ascertained for such winding-up prior to payment by the
liquidator or otherwise in respect thereto.

               (d) The obligations contained in Subsections (b) and (c) of this
Section 1.15 shall constitute separate and independent obligations of the
Company from its other obligations under the Securities and this Indenture,
shall give rise to separate and independent causes of action against the
Company, shall apply irrespective of any waiver or extension granted by any
Holders or the Trustees or any of them from time to time and shall continue in
full force and effect notwithstanding any judgment or order or the filing of any
proof of claim in the winding-up of the Company for a liquidated sum in respect
of amounts due hereunder (other than under subsection (c) above) or under any
such judgment or order. Any such deficiency as aforesaid shall be deemed to
constitute a loss suffered by the Holders or the Trustee, as the case may be,
and no proof or evidence of any actual loss shall be required by the Company or
the liquidator or otherwise or any of them which shall be liable for such
deficiency. In the case of Subsection (c) above, the amount of such deficiency
shall not be deemed to be reduced by any variation in rates of exchange
occurring between the said final date and the date of any liquidating
distribution.

               (e) The term "rate(s) of exchange" shall mean the rate of
exchange quoted by The Bank of New York as its central foreign exchange desk in
its head office in New York, New York at 12:00 noon (New York City time) for the
purchases of U.S. Dollars with the judgment currency other than U.S. Dollars
referred to in subsections (a) and (c) above and includes any premiums and costs
of exchange payable.

               (f) The Trustee shall have no duty or liability with respect to
monitoring or enforcing this Section 1.15 and shall have no liability to the
Holders due to fluctuations in currency rates.

                                   ARTICLE II
                                FORMS OF SECURITY

               SECTION 2.01 Forms Generally.

               (a) The Securities and the Trustee's certificates of
authentication shall be in substantially the forms set forth in this Article,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.

               (b) The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner, provided that such manner is
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.

               (c) In certain cases described elsewhere herein, the legends set
forth in the first, second and third paragraphs of Section 2.02 may be omitted
from Securities issued hereunder.

                                       20
<PAGE>   28

               (d) Original Securities offered and sold in their original
distribution in reliance on Rule 144A shall be issued in the form of one or more
Global Securities in definitive, fully registered form without interest coupons,
substantially in the form of Security set forth in Sections 2.02 and 2.03, with
such applicable legends as are provided for in Section 2.02, except as otherwise
permitted herein, and shall be registered in the name of the United States
Depositary or its nominee and deposited with the Trustee, at its Corporate Trust
Office, as custodian for the United States Depositary, or such other office of
the Trustee or its affiliate at which its corporate trust operations as
custodian for the United States Depositary are conducted, duly executed by the
Company and authenticated by the Trustee as hereinafter provided, for credit by
the United States Depositary to the respective accounts of beneficial owners of
the Securities represented thereby (or such other accounts as they may direct).
Such Global Securities, together with their Successor Securities which are
Global Securities other than the Regulation S Global Security (as defined
herein), are collectively herein called the "Restricted Global Security." The
aggregate stated amount at Maturity of the Restricted Global Security may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the United States Depositary, in connection with a
corresponding decrease or increase in the aggregate stated amount at Maturity of
the Regulation S Global Security, as hereinafter provided.

               (e) Original Securities offered and sold in reliance on
Regulation S shall be issued in the form of one or more Global Securities
(collectively, the "Regulation S Global Security") in definitive, fully
registered form without interest coupons, substantially in the form of Security
set forth in Sections 2.02 and 2.03, with such applicable legends as are
provided for in Section 2.02, except as otherwise permitted herein. Such Global
Securities shall be registered in the name of the United States Depositary or
its nominee and deposited with the Trustee, at its Corporate Trust Office, as
custodian for the United States Depositary, or such other office of the Trustee
or its affiliate at which its corporate trust operations as custodian for the
United States Depositary are conducted, duly executed by the Company and
authenticated by the Trustee as hereinafter provided, for credit to the
respective accounts at the United States Depositary of the depositories for
Morgan Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear Clearance System ("Euroclear"), or for Clearstream Banking, societe
anonyme ("Clearstream"), in turn for credit to the respective accounts of
beneficial owners of the Securities represented thereby (or such other accounts
as they may direct) in accordance with the rules thereof. The aggregate stated
amount at Maturity of the Regulation S Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the United States Depositary, in connection with a corresponding
decrease or increase in the aggregate stated amount at Maturity of the
Restricted Global Security, as hereinafter provided.

               SECTION 2.02 Form of Face of Security.

               [INCLUDE IF SECURITY IS A RESTRICTED SECURITY OR A REGULATION S
SECURITY - THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN



                                       21
<PAGE>   29

EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN EACH CASE,
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES.

               THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
THAT THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.

               THIS SECURITY WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER
UNLESS THE REGISTRAR OR TRANSFER AGENT IS SATISFIED THAT THE RESTRICTIONS ON
TRANSFER SET FORTH ABOVE HAVE BEEN COMPLIED WITH, ALL AS PROVIDED IN THE
INDENTURE. ]

               [INCLUDE IF SECURITY IS A GLOBAL SECURITY - THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

               [INCLUDE IF SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY
TRUST COMPANY IS THE UNITED STATES DEPOSITARY - UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 55
WATER STREET, NEW YORK, NEW YORK 10004, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF CEDE & CO., AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL BECAUSE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]



                                       22
<PAGE>   30




                           TEEKAY SHIPPING CORPORATION

                      8.875% Senior Notes due July 15, 2011

CUSIP NO.____
ISIN NO.

No.                        $

               Teekay Shipping Corporation, a corporation duly incorporated and
existing under the laws of the Republic of the Marshall Islands (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
__________, or registered assigns, the stated amount at maturity of __________
U.S. Dollars [IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT -, which stated
amount at maturity may from time to time be increased or decreased to such other
stated amounts at maturity, as may be set forth in the records of the Trustee
hereinafter referred to in accordance with the Indenture,] on July 15, 2011, and
to pay interest thereon at a rate of 8.875% per annum in cash semi-annually to
the Holder of record at the close of business on January 1 and July 1, as the
case may be, (the "Regular Record Date") immediately preceding the applicable
Interest Payment Date, on January 15 and July 15 of each year (the "Interest
Payment Dates"), commencing on January 15, 2002. This Security will bear
interest on the overdue stated amount at maturity and premium, if any, and to
the extent permitted by law, overdue interest at a rate of 8.875% plus 1% per
annum; [IF THE SECURITY IS AN ORIGINAL SECURITY, THEN INSERT -- provided that if
(i) the Company has not filed a registration statement (the "Exchange
Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), registering a security substantially similar to this Security
(except that such Security will not contain terms with respect to transfer
restrictions or provision for the additional interest described below) pursuant
to an exchange offer (the "Exchange Offer") within 60 days following the date of
original issuance of this Security (the "Closing Date"), or, if applicable, a
registration statement registering this Security for resale (a "Shelf
Registration Statement") within 30 days following the Company's obligation to
file as more particularly set forth in the exchange and registration rights
agreement entered into as of June 22, 2001, by the Company and the initial
purchasers of the Original Securities (the "Exchange and Registration Rights
Agreement"), (ii) such Exchange Registration Statement, if applicable, has not
become effective within 180 days following the Closing Date or the Shelf
Registration Statement has not become effective within 120 days after being
filed, or (iii) the Exchange Offer has not been completed within 60 days after
the initial effective date of the Exchange Registration Statement or (iv) any
Exchange Registration Statement or Shelf Registration Statement required by the
Exchange and Registration Rights Agreement is filed and declared effective but
shall thereafter cease to be effective or usable (except as specifically
permitted therein) without being succeeded promptly by an additional
registration statement filed and declared effective (any such event referred to
in clauses (i) through (iv), a "Registration Default"), then, with respect to
each Holder to which such Registration Default applies, the per annum interest
rate borne by this Security shall increase (such increase referred to as
"Additional Interest") by adding 0.5% for the first 90 day period from the
occurrence of the Registration Default and by an additional 0.5% thereafter for
each subsequent 90-day period (to a maximum additional interest rate of 1.5%)
until such time as the Registration Default is no longer in effect with respect
to such Holder, at which time such interest rate shall be reduced to 8.875% per
annum.



                                       23
<PAGE>   31

               The cash interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
next preceding such Interest Payment Date [IF THE SECURITY IS AN ORIGINAL
SECURITY, THEN INSERT --; provided that any accrued and unpaid interest
(including Additional Interest) on this Security upon the issuance of any
Exchange Security in exchange for this Security shall cease to be payable to the
Holder hereof and shall be payable on the next Interest Payment Date for such
Exchange Security to the Holder thereof on the related Regular Record Date]. Any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice of
which states the Special Record Date, the payment date (which shall be not less
than five nor more than 10 days after the Special Record Date), and the amount
to be paid, and such notice shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Interest on this Security shall be computed on the basis set forth in the
Indenture.

               Payment of the stated amount at maturity of (and premium, if any)
and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, the City of New
York, in such coin or currency of the United States as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Company, payment of interest on this Security may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.

               Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

               Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

               IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.

Dated:

                                        TEEKAY SHIPPING CORPORATION


                                        By:
                                            ------------------------------------
                                            Title:






                                       24
<PAGE>   32





               SECTION 2.03 Form of Reverse of Security.

               This Security is one of a duly authorized issue of Securities of
the Company designated as its 8.875% Senior Notes due July 15, 2011 (herein
called the "Securities"), issued and to be issued under an indenture dated as of
June 22, 2001 (herein called the "Indenture"), between the Company and U.S.
Trust Company of Texas, N.A., as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.

               As provided for in the Indenture, the Company may, subject to
certain limitations, from time to time, without notice or other consent of the
Holders, create and issue Additional Securities ranking pari passu with the
Securities issued the date hereof so that such Additional Securities shall be
consolidated and form a single series with the Securities initially issued by
the Company and shall have the same terms as to status, redemption or otherwise
as Securities originally issued. Any Additional Securities shall be issued with
the benefit of any indenture supplemental to the Indenture.

               At the Company's option, the Company may redeem the Securities in
whole or in part at any time at a redemption price equal to the greater of (i)
100% of the principal amount of the Securities to be redeemed and (ii) the sum
of the present values of the remaining scheduled payments of principal and
interest on the Securities to be redeemed (excluding the portion of any such
interest accrued to the Redemption Date) discounted to the Redemption Date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Yield, plus 50 basis points, plus, in each case, accrued and
unpaid interest to the Redemption Date.

               The Securities shall be subject to redemption, at the option of
the Company, as a whole but not in part, at any time upon not fewer than 30 nor
more than 60 days' notice mailed to each Holder of Securities at the addresses
appearing in the Security Register at a redemption price equal to 100% of the
principal amount of the Securities plus accrued interest to but excluding the
Redemption Date if the Company has become or would become obligated to pay on
the next date on which any amount would be payable under or with respect to the
Securities, any Additional Amounts as a result of any change or amendment to the
laws (including any regulations promulgated thereunder) of any Taxing
Jurisdiction, or any change in or amendment to any official position regarding
the application or interpretation of such laws or regulations, which change or
amendment is announced or becomes effective on or after June 22, 2001.

               If less than all of the Securities are to be redeemed at any
time, the Trustee shall select the Securities to be redeemed by such method as
the Trustee shall deem fair and appropriate in the aggregate principal amount
specified by the Company. The Trustee may select for redemption Securities and
portions of Securities in amounts of U.S.$1,000 or whole multiples of
U.S.$1,000.

               The Securities do not have the benefit of any sinking fund
obligations.

               In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.



                                       25
<PAGE>   33

               If an Event of Default shall occur and be continuing, the stated
amount at maturity of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.

               The Indenture provides that, subject to certain conditions, if a
Change of Control Triggering Event occurs, the Company shall be required to make
an Offer to Purchase for all or a specified portion of the Securities.

               The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Security or (ii) certain restrictive
covenants and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.

               The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of a majority in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

               The Holder of this Security (and any Person that has a beneficial
interest in this Security) is entitled to the benefits of the Exchange and
Registration Rights Agreement. The Exchange and Registration Rights Agreement
provides that the rate of interest borne by the Securities is subject to
increase for specified periods if the Company does not comply with certain of
its obligations thereunder. Such provisions of the Exchange and Registration
Rights Agreement are hereby incorporated by reference and made a part hereof,
and the Company shall promptly notify the Trustee of the occurrence of any
Registration Default under the Exchange and Registration Rights Agreement.

               No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the stated amount at
maturity of (and premium, if any) and interest on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.

               As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, the City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
stated amount at maturity, will be issued to the designated transferee or
transferees.

               The Securities are issuable only in registered form without
coupons in stated amounts of $1,000 at maturity and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate stated amount at
maturity of Securities of a different authorized denomination, as requested by
the Holder surrendering the same.

                                       26
<PAGE>   34

               No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

               Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

               Interest on this Security shall be computed on the basis of a
360-day year of twelve 30-day months.

               All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

               The Indenture and this Security shall be governed by and
construed in accordance with the laws of the State of New York.


                                       27
<PAGE>   35




                       OPTION OF HOLDER TO ELECT PURCHASE

               If you want to elect to have this Security purchased in its
entirety by the Company pursuant to Section 10.09 of the Indenture, check the
box:

                  r

               If you want to elect to have only a part of this Security
purchased by the Company pursuant to Section 10.09 of the Indenture, state the
amount (which must be in multiples of $1,000):

                  $
                   --------------


Dated:                     Your Signature:
                                           -------------------------------------
                                           (Sign exactly as name appears on the
                                           other side of this Security)

Signature Guarantee:
                     ------------------------------------
                     (Signature must be guaranteed by
                     a member firm of the New York Stock
                     Exchange or a commercial bank or
                     trust company)


               SECTION 2.04 Form of Trustee's Certificate of Authentication.

               This is one of the Securities referred to in the within-mentioned
               Indenture.

                                        U.S. TRUST COMPANY OF TEXAS, N.A.,
                                        as Trustee



                                        By:
                                            ------------------------------------
                                            Authorized Signatory



                                       28
<PAGE>   36

                                  ARTICLE III
                                 THE SECURITIES

               SECTION 3.01 Title and Terms.

               (a) The aggregate stated amount at Maturity of Securities which
may be authenticated and delivered under this Indenture is not limited. The
Company may issue Exchange Securities from time to time pursuant to an Exchange
Offer, in each case pursuant to a Board Resolution and subject to Section 3.03,
in authorized denominations in exchange for a like stated amount at Maturity of
Original Securities. Upon any such exchange such Original Securities shall be
cancelled in accordance with Section 3.09 and shall no longer be deemed
Outstanding for any purpose.

               (b) The Securities shall be known and designated as the "8.875%
Senior Notes due July 15, 2011" of the Company. Their Stated Maturity shall be
July 15, 2011 and they shall bear interest thereon at a rate of 8.875% per annum
in cash semi-annually to the Holder of record at the close of business on the
Regular Record Date immediately preceding the applicable Interest Payment Date,
on the Interest Payment Date, commencing on January 15, 2002. This Security will
bear interest on overdue stated amount at Maturity and premium, if any, and to
the extent permitted by law, overdue interest at a rate of 8.875% plus 1% per
annum. This Security will also bear additional interest in certain circumstances
as provided in the Exchange and Registration Rights Agreement, which is hereby
incorporated by reference herein. The Company shall promptly notify the Trustee
of any Registration Default, as such term is defined in the Exchange and
Registration Rights Agreement;

               (c) The stated amount at Maturity of (and premium, if any) and
interest on the Securities shall be payable at the office or agency of the
Company in the Borough of Manhattan, City of New York, New York maintained for
such purpose or at any other office or agency maintained by the Company for such
purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.

               (d) The Securities shall be subject to repurchase by the Company
pursuant to an Offer to Purchase as provided in Section 10.09.

               (e) The Securities shall be redeemable as provided in Article XI.

               (f) The Securities shall be subject to defeasance at the option
of the Company as provided in Article XII.

               (g) Unless the context otherwise requires, the Original
Securities and the Exchange Securities shall constitute one series for all
purposes under this Indenture, including with respect to any amendment, waiver,
acceleration or other Act of Holders, redemption or Offer to Purchase.

               (h) Additional Securities ranking pari passu with the Securities
issued the date hereof may be created and issued from time to time by the
Company without notice to or consent of the Holders and shall be consolidated
with and form a single series with the Securities initially issued and shall
have the same terms as to status, redemption or otherwise as the Securities
originally issued. Any Additional Securities shall be issued with the benefit of
an indenture supplemental to this Indenture.

                                       29
<PAGE>   37

               SECTION 3.02 Denominations.

               The Securities shall be issuable only in registered form without
coupons and only in stated amounts of $1,000 at Maturity and any integral
multiple thereof.

               SECTION 3.03 Execution, Authentication, Delivery and Dating.

               (a) The Securities shall be executed on behalf of the Company by
its Chief Executive Officer, its President, its Chief Financial Officer or
Corporate Secretary. The signature of any of these officers on the Securities
may be manual or facsimile.

               (b) Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.

               (c) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Original Securities executed
by the Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Original Securities; and the Trustee
in accordance with such Company Order shall authenticate and deliver such
Original Securities as in this Indenture provided and not otherwise.

               (d) At any time and from time to time after the execution and
delivery of this Indenture and after the effectiveness of a registration
statement under the Securities Act with respect thereto, the Company may deliver
Exchange Securities executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery of such
Exchange Securities and like stated amount at Maturity of Original Securities,
and the Trustee in accordance with the Company Order shall authenticate and
deliver such Securities. Each such Company Order shall state, among other
things, that all conditions hereunder precedent to the authentication and
delivery of such Exchange Securities have been complied with and shall be
accompanied by an Opinion of Counsel stating in substance that such Exchange
Securities have been duly executed and, when such Securities have been duly
authenticated and delivered by the Trustee, will be duly issued and delivered
and will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to the effect of general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether enforcement is considered in
a proceeding in equity or at law).

               (e) Each Security shall be dated the date of its authentication.

               (f) No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.

               (g) In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of substantially all of its properties and assets to
any Person, and the successor Person resulting from such consolidation, or


                                       30
<PAGE>   38

surviving such merger, or into which the Company shall have been merged, or the
successor Person which shall have received a conveyance, transfer, lease or
other disposition as aforesaid, shall have executed an indenture supplemental
hereto with the Trustee pursuant to Article Eight, any of the Securities
authenticated or delivered prior to such consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Securities executed in the name of
the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee upon
Company Order of the successor Person, shall authenticate and deliver
replacement Securities as specified in such request for the purpose of such
exchange. If replacement Securities shall at any time be authenticated and
delivered in any new name of a successor Person pursuant to this Section in
exchange or substitution for or upon registration of transfer of any Securities,
such successor Person, at the option of any Holder but without expense to such
Holder, shall provide for the exchange of all Securities at the time outstanding
held by such Holder for Securities authenticated and delivered in such new name.

               SECTION 3.04 Temporary Securities.

               (a) Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.

               (b) If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
10.02, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.

               SECTION 3.05 Registration, Registration of Transfer and Exchange
Generally; Restrictions on Transfer and Exchange; Securities Act Legends.

               (a) Registration, Registration of Transfer and Exchange
Generally.

                    (1) The Company shall cause to be kept at the Corporate
               Trust Office of the Trustee a register (the register maintained
               in such office and in any other office or agency designated
               pursuant to Section 10.02 being herein sometimes collectively
               referred to as the "Security Register") in which, subject to such
               reasonable regulations as it may prescribe, the Company shall
               provide for the registration of Securities and of transfers and
               exchanges of Securities. The Trustee is hereby appointed
               "Security Registrar" for the purpose of registering Securities
               and transfers and exchanges of Securities as herein provided.
               Such Security Register shall distinguish between Original
               Securities and Exchange Securities.

                    (2) Upon surrender for registration of transfer of any
               Security at an office or agency of the Company designated
               pursuant to Section 10.02 for such purpose, the



                                       31
<PAGE>   39

               Company shall execute, and the Trustee shall authenticate and
               deliver, in the name of the designated transferee or transferees,
               one or more new Securities of any authorized denominations and of
               a like aggregate stated amount at Maturity bearing such
               restrictive legends as may be required by this Indenture.

                    (3) At the option of the Holder, and subject to the other
               provisions of this Section 3.05, Securities may be exchanged for
               other Securities of any authorized denominations and of a like
               aggregate stated amount at Maturity, upon surrender of the
               Securities to be exchanged at such office or agency. Whenever any
               Securities are so surrendered for exchange, and subject to the
               other provisions of this Section 3.05, the Company shall execute,
               and the Trustee shall authenticate and deliver, the Securities
               which the Holder making the exchange is entitled to receive.

                    (4) All Securities issued upon any registration of transfer
               or exchange of Securities shall be the valid obligations of the
               Company, evidencing the same debt, and (except for the
               differences between Original Securities and Exchange Securities
               provided for in this Indenture) entitled to the same benefits
               under this Indenture, as the Securities surrendered upon such
               registration of transfer or exchange.

                    (5) Every Security presented or surrendered for registration
               of transfer or for exchange shall (if so required by the Company
               or the Security Registrar) be duly endorsed, or be accompanied by
               a written instrument of transfer in form satisfactory to the
               Company and the Security Registrar duly executed, by the Holder
               thereof or his attorney duly authorized in writing.

                    (6) No service charge shall be made for any registration of
               transfer or exchange of Securities, but the Company may require
               payment of a sum sufficient to cover any tax or other
               governmental charge that may be imposed in connection with any
               registration of transfer or exchange of Securities, other than
               exchanges pursuant to Section 3.04, 9.06 or 11.08 or in
               accordance with any Offer to Purchase pursuant to Section 10.09
               not involving any transfer.

                    (7) The Company shall not be required (i) to issue, register
               the transfer of or exchange any Security during a period
               beginning at the opening of business 15 days before the day of
               the mailing of a notice of redemption of Securities selected for
               redemption under Section 11.04 and ending at the close of
               business on the day of such mailing, or (ii) to register the
               transfer of or exchange any Security so selected for redemption
               in whole or in part, except the unredeemed portion of any
               Security being redeemed in part.

               (b) Certain Transfers and Exchanges.

                    (1) Notwithstanding any other provisions of this Indenture
               or the Securities, transfers and exchanges of Securities and
               beneficial interests in a Global Security of the kinds specified
               in this Subsection 3.05(b) shall be made only in accordance with
               this Subsection 3.05(b). Transfers and exchanges subject to this
               Subsection 3.05(b) shall also be subject to the other provisions
               of this Indenture that are not inconsistent with this Subsection
               3.05(b).


                                       32
<PAGE>   40

                    (2) Unless and until (A) an Original Security is sold under
               an effective Registration Statement, or (B) an Original Security
               is exchanged for an Exchange Security in connection with an
               effective registration statement, pursuant to the Exchange and
               Registration Rights Agreement, the following provisions shall
               apply:

                         (i) Restricted Global Security to Regulation S Global
                    Security. If the holder of a beneficial interest in the
                    Restricted Global Security wishes at any time to transfer
                    such interest to a Person who is required or permitted to
                    take delivery thereof in the form of a beneficial interest
                    in the Regulation S Global Security, such transfer may be
                    effected, subject to the rules and procedures of the United
                    States Depositary, Euroclear and Clearstream, in each case
                    to the extent applicable (the "Applicable Procedures"), only
                    in accordance with the provisions of this Clause. Upon
                    receipt by the Trustee, as Security Registrar, of (A)
                    written instructions given in accordance with the Applicable
                    Procedures from any member of, or direct participants in,
                    the United States Depositary ("Agent Members") directing the
                    Trustee to credit or cause to be credited to a specified
                    Agent Member's account a beneficial interest in the
                    Regulation S Global Security in a principal amount equal to
                    that of the beneficial interest in the Restricted Global
                    Security to be so transferred, (B) a written order given in
                    accordance with the Applicable Procedures containing
                    information regarding the account of the Agent Member (and
                    the Euroclear or Clearstream account, as the case may be) to
                    be credited with, and the account of the Agent Member to be
                    debited for, such beneficial interest and (C) a Regulation S
                    Certificate, substantially in the form of Annex A hereto
                    given by the holder of such beneficial interest, the
                    principal amount of the Restricted Global Security shall be
                    reduced, and the principal amount of the Regulation S Global
                    Security shall be increased, by the principal amount of the
                    beneficial interest in the Restricted Global Security to be
                    so transferred, in each case by means of an appropriate
                    adjustment on the records of the Trustee, as Security
                    Registrar, and the Trustee, as Security Registrar, shall
                    instruct the United States Depositary or its authorized
                    representative to make a corresponding adjustment to its
                    records and to credit or cause to be credited to the account
                    of the Person specified in such instructions (which shall be
                    the Agent Member for Euroclear or Clearstream or both, as
                    the case may be) a beneficial interest in the Regulation S
                    Global Security having a principal amount equal to the
                    amount so transferred.

                         (ii) Regulation S Global Security to Restricted Global
                    Security. If the holder of a beneficial interest in the
                    Regulation S Global Security wishes at any time to transfer
                    such interest to a Person who is required or permitted to
                    take delivery thereof in the form of a beneficial interest
                    in the Restricted Global Security, such transfer may be
                    effected, subject to the Applicable Procedures, only in
                    accordance with this Clause. Upon receipt by the Trustee, as
                    Security Registrar, of (A) written instructions given in
                    accordance with the Applicable Procedures from an Agent
                    Member directing the Trustee to credit or cause to be
                    credited to a specified Agent Member's account a beneficial
                    interest in the Restricted Global Security in a principal
                    amount equal to that of the beneficial interest in the
                    Regulation S Global Security to be so transferred, (B) a
                    written order given in accordance with the Applicable
                    Procedures containing information regarding the account of
                    the Agent Member to be credited with, and the account of the
                    Agent Member (and, if applicable, the Euroclear or
                    Clearstream account,



                                       33
<PAGE>   41

                    as the case may be) to be debited for, such beneficial
                    interest and (C) a Restricted Securities Certificate,
                    substantially in the form of Annex B hereto given by the
                    holder of such beneficial interest, the principal amount of
                    the Regulation S Global Security shall be reduced, and the
                    principal amount of the Restricted Global Security shall be
                    increased, by the principal amount of the beneficial
                    interest in the Regulation S Global Security to be so
                    transferred, in each case by means of an appropriate
                    adjustment on the records of the Trustee, as Security
                    Registrar, and the Trustee, as Security Registrar, shall
                    instruct the United States Depositary or its authorized
                    representative to make a corresponding adjustment to its
                    records and to credit or cause to be credited to the account
                    of the Person specified in such instructions a beneficial
                    interest in the Restricted Global Security having a
                    principal amount equal to the amount so transferred.

                         (iii) Non-Global Security for Non-Global Security. A
                    Security that bears a Securities Act Legend that it is not a
                    Global Security may be transferred, in whole or in part, to
                    a Person who takes delivery in the form of another Security
                    that is not a Global Security as provided in Section
                    3.05(a), provided that, if the Security to be transferred in
                    whole or in part is a Restricted Security, or is a
                    Regulation S Security, then the Trustee shall have received
                    (A) a Restricted Securities Certificate substantially in the
                    form attached hereto as Annex B and duly executed by the
                    transferor holder or his attorney duly authorized in
                    writing, in which case the transferee Holder shall take
                    delivery in the form of a Restricted Security, or (B) a
                    Regulation S Certificate, substantially in the form attached
                    hereto as Annex A and duly executed by the transferee holder
                    of his attorney duly authorized in writing, in which case
                    the transferee holder shall take delivery in the form of a
                    Regulation S Security (subject in each case to Section
                    3.05(c)).

                         (iv) Interests in Regulation S Global Security to be
                    Held Through Euroclear or Clearstream. Interests in the
                    Regulation S Global Security may be held only through Agent
                    Members acting for and on behalf of Euroclear and
                    Clearstream, provided that this clause (iv) shall not
                    prohibit any transfer in accordance with Subsection
                    3.05(b)(2)(ii) hereof.

               (c) Securities Act Legends. Restricted Securities and their
Successor Securities shall bear a Restricted Securities Legend and Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:

               (1) subject to the following clauses of this Section 3.05(c), a
          Security or any portion thereof which is exchanged, upon transfer or
          otherwise, for a Global Security or any portion thereof shall bear the
          Securities Act Legend borne by such Global Security while represented
          thereby;

               (2) subject to the following clauses of this Section 3.05(c), a
          new Security which is not a Global Security and is issued in exchange
          for another Security (including a Global Security) or any portion
          thereof, upon transfer or otherwise, shall bear the Securities Act
          legend borne by such other Security, provided that, if such new
          Security is required pursuant to Section 3.05(b)(2)(iii) to be issued
          in the form of a Restricted Security, it shall bear a Restricted
          Securities Legend and, if such new Security is so



                                       34
<PAGE>   42

          required to be issued in the form of a Regulation S Security, it shall
          bear a Regulation S Legend;

               (3) Securities that are sold or otherwise disposed of pursuant to
          an effective registration statement under the Securities Act
          (including any shelf registration contemplated by the Exchange and
          Registration Rights Agreement) shall not bear a Securities Act Legend;

               (4) notwithstanding the foregoing provisions of this Section
          3.05(c), a Successor Security of a Security that does not bear a
          particular form of Securities Act Legend shall not bear such form of
          legend unless the Company has reasonable cause to believe that such
          Successor Security is a "restricted security" within the meaning of
          Rule 144, in which case the Trustee, at the direction of the Company,
          shall authenticate and deliver a new Security bearing a Restricted
          Securities Legend in exchange for such Successor Security as provided
          in this Article Three;

               (5) the Securities may not be reoffered, resold, pledged or
          otherwise transferred except (A)(i) to a person reasonably believed by
          the seller to be a qualified institutional buyer in a transaction
          meeting the requirements of Rule 144A, (ii) in an offshore transaction
          complying with Rule 903 or Rule 904 of Regulation S, (iii) pursuant to
          an exemption from registration under the Securities Act provided by
          Rule 144 thereunder (if available), (iv) to an institutional
          accredited investor in a transaction exempt from the registration
          requirements of the Securities Act or (v) pursuant to an effective
          registration statement under the Securities Act, and (B) in each case,
          in accordance with applicable securities laws of the United States.
          The Trustee shall have no duty or liability with respect to any
          Holder's or beneficial owner's compliance with Rule 144A or Regulation
          S, as applicable; and

               (6) Exchange Securities and their respective Successor Securities
          shall not bear a Securities Act Legend.

               (d) The provisions of clauses (1), (2), (3), (4) and (5) of this
Subsection (d) shall apply only to Global Securities:

               (1) Each Global Security authenticated under this Indenture shall
          be registered in the name of the United States Depositary or a nominee
          thereof and delivered to the United States Depositary or a nominee
          thereof or custodian therefor, and each such Global Security shall
          constitute a single Security for all purposes of this Indenture.

               (2) Notwithstanding any other provision in this Indenture or the
          Securities, no Global Security may be exchanged in whole or in part
          for Securities registered, and no transfer of a Global Security in
          whole or in part may be registered, in the name of any Person other
          than the United States Depositary or a nominee thereof unless (A) the
          United States Depositary (i) has notified the Company that it is
          unwilling or unable to continue as United States Depositary for such
          Global Security or (ii) has ceased to be a clearing agency registered
          under the Exchange Act, and in either case the Company thereupon fails
          to appoint a successor depositary within 120 days of such notice, (B)
          the Company, at its option, executes and delivers to the Trustee a
          Company Order that such Global Security shall be exchanged in whole
          for Securities that are not Global Securities,



                                       35
<PAGE>   43

          or (C) there shall have occurred and be continuing an Event of Default
          with respect to such Global Security.

               (3) Securities issued in exchange for a Global Security or any
          portion thereof pursuant to clause (2) of this Subsection (d) shall be
          issued in definitive, fully registered form, without interest coupons,
          shall have an aggregate principal amount equal to that of such Global
          Security or portion thereof to be so exchanged, shall be registered in
          such names and be in such authorized denominations as the United
          States Depositary shall designate and shall bear any legends required
          hereunder. Any Global Security to be exchanged in whole shall be
          surrendered by the United States Depositary to the Trustee, as
          Security Registrar. With regard to any Global Security to be exchanged
          in part, either such Global Security shall be so surrendered for
          exchange or, if the Trustee is acting as custodian for the United
          States Depositary or its nominee with respect to such Global Security,
          the principal amount thereof shall be reduced, by an amount equal to
          the portion thereof to be so exchanged, by means of an appropriate
          adjustment made on the records of the Trustee and the United States
          Depositary. Upon any such surrender or adjustment, the Trustee shall
          authenticate and deliver the Security issuable on such exchange to or
          upon the order of the United States Depositary or an authorized
          representative thereof.

               (4) In the event of the occurrence of any of the events specified
          in clause (2) of this Subsection (d), the Company will promptly make
          available to the Trustee a reasonable supply of certificated
          Securities in definitive, fully registered form, without interest
          coupons.

               (5) Neither any Agent Members nor any other Persons on whose
          behalf Agent Members may act (including Euroclear and Clearstream and
          account holders and participants therein) shall have any rights under
          this Indenture with respect to any Global Security, or under any
          Global Security, and the United States Depositary or such nominee, as
          the case may be, may be treated by the Company, the Trustee and any
          agent of the Company or the Trustee as the absolute owner and Holder
          of such Global Security for all purposes whatsoever. Notwithstanding
          the foregoing, nothing herein shall prevent the Company, the Trustee
          or any agent of the Company or the Trustee from giving effect to any
          written certification, proxy or other authorization furnished by the
          United States Depositary or such nominee, as the case may be, or
          impair, as between the United States Depositary, its Agent Members and
          any other person on whose behalf an Agent Member may act, the
          operation of customary practices of such Persons governing the
          exercise of the rights of a Holder of any Security.

               SECTION 3.06 Mutilated, Destroyed, Lost and Stolen Securities.

               (a) If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and stated amount at Maturity and bearing
a number not contemporaneously outstanding.

               (b) (1) If there shall be delivered to the Company and the
Trustee (A) evidence to their satisfaction of the destruction, loss or theft of
any Security and (B) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the absence
of notice to the Company or the Trustee that such Security has been acquired by
a bona fide purchaser, the Company shall execute and upon its request the
Trustee shall authenticate and deliver, in



                                       36
<PAGE>   44

lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and stated amount at Maturity and bearing a number not contemporaneously
outstanding.

                    (2) In case any such mutilated, destroyed, lost or stolen
                    Security has become or is about to become due and payable,
                    the Company in its discretion may, instead of issuing a new
                    Security, pay such Security.

               (c) Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

               (d) Every new Security issued pursuant to this Section in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.

               (e) The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.

               SECTION 3.07 Payment of Interest; Interest Rights Preserved.

               (a) Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.

               (b) Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) of this Subsection (b):

                    (1) The Company may elect to make payment of any Defaulted
               Interest to the Persons in whose names the Securities (or their
               respective Predecessor Securities) are registered at the close of
               business on a Special Record Date for the payment of such
               Defaulted Interest, which shall be fixed in the following manner.
               The Company shall notify the Trustee in writing of the amount of
               Defaulted Interest proposed to be paid on each Security and the
               date of the proposed payment, and at the same time the Company
               shall deposit with the Trustee an amount of money equal to the
               aggregate amount proposed to be paid in respect of such Defaulted
               Interest or shall make arrangements satisfactory to the Trustee
               for such deposit prior to the date of the proposed payment, such
               money when deposited to be held in trust for the benefit of the
               Persons entitled to such Defaulted Interest as in this clause
               provided. Thereupon the Trustee shall fix a Special Record Date
               for the payment of such Defaulted Interest which shall be not
               more than 15 days and not less than 10 days prior to the date of
               the proposed payment and not less than 10 days after the receipt
               by the Trustee of the notice of the proposed payment. The Trustee
               shall promptly notify the Company of such Special Record Date
               and, in the name and at the expense of the Company, shall cause
               notice of the proposed payment of such Defaulted Interest and the
               Special Record Date therefor to be mailed, first-class postage
               prepaid, to each Holder at his address as it appears in the
               Security Register, not less than 10 days prior to such Special
               Record Date. Notice of the proposed payment of



                                       37
<PAGE>   45

               such Defaulted Interest and the Special Record Date therefor
               having been so mailed, such Defaulted Interest shall be paid to
               the Persons in whose names the Securities (or their respective
               Predecessor Securities) are registered at the close of business
               on such Special Record Date and shall no longer be payable
               pursuant to clause (2) of this Subsection (b).

                    (2) The Company may make payment of any Defaulted Interest
               in any other lawful manner not inconsistent with the requirements
               of any securities exchange on which the Securities may be listed,
               and upon such notice as may be required by such exchange, if,
               after notice given by the Company to the Trustee of the proposed
               payment pursuant to this clause, such manner of payment shall be
               deemed practicable by the Trustee.

               (c) Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.

               SECTION 3.08 Persons Deemed Owners.

               Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered on the Securities
Register as the owner of such Security for the purpose of receiving payment of
stated amount at Maturity of (and premium, if any) and (subject to Section 3.07)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary.

               SECTION 3.09 Cancellation.

               All Securities surrendered for payment, redemption, registration
of transfer or exchange or for credit against any Offer to Purchase pursuant to
Section 10.09 shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company
shall deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly cancelled
by the Trustee. No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of by the Trustee in accordance with its customary procedures and
certification of their disposal delivered to the Company unless by Company Order
the Company shall direct that cancelled Securities be returned to it.

               SECTION 3.10 Computation of Interest.

               Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.

               SECTION 3.11 CUSIP Numbers.

               The Company in issuing the Securities may use "CUSIP" numbers
and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and
other notices to Holders as a convenience to




                                       38
<PAGE>   46

Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption or other notice
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption or notice shall not be affected by
any defect in or such omission of such numbers.

                                   ARTICLE IV
                           SATISFACTION AND DISCHARGE

               SECTION 4.01 Satisfaction and Discharge of Indenture.

               (a) This Indenture shall cease to be of further effect (except as
to any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, upon a Company Order and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture (including, but not limited to,
Article Twelve), when

                    (1) either

                         (i) all Securities theretofore authenticated and
                    delivered (other than (i) Securities which have been
                    destroyed, lost or stolen and which have been replaced or
                    paid as provided in Section 3.06 and (ii) Securities for
                    whose payment money has theretofore been deposited in trust
                    or segregated and held in trust by the Company and
                    thereafter repaid to the Company or discharged from such
                    trust, as provided in Section 10.03) have been delivered to
                    the Trustee for cancellation; or

                         (ii) all such Securities not theretofore delivered to
                    the Trustee for cancellation

                             (a) have become due and payable, or

                             (b) will become due and payable at their Stated
                         Maturity within one year, or

                             (c) are to be called for redemption within one year
                         under arrangements satisfactory to the Trustee for the
                         giving of notice of redemption by the Trustee in the
                         name, and at the expense, of the Company,

                         and the Company, in the case of subclause (a), (b) or
                         (c) of this Subsection (a)(1)(ii), has deposited or
                         caused to be deposited with the Trustee as trust funds
                         in trust for the purpose an amount sufficient to pay
                         and discharge the entire indebtedness on such
                         Securities not theretofore delivered to the Trustee for
                         cancellation, for stated amount at Maturity (and
                         premium, if any) and interest to the date of such
                         deposit (in the case of Securities which have become
                         due and payable) or to the Stated Maturity or
                         Redemption Date, as the case may be;

                    (2) the Company has paid or caused to be paid all other sums
               payable hereunder by the Company; and

                                       39
<PAGE>   47

                    (3) the Company has delivered to the Trustee an Officers'
               Certificate and an Opinion of Counsel, each stating, as
               appropriate, that all conditions precedent herein provided for
               relating to the satisfaction and discharge of this Indenture have
               been complied with.

               (b) Notwithstanding the satisfaction and discharge of this
Indenture pursuant to this Article Four, the obligations of the Company to the
Trustee under Section 6.07 and, if money shall have been deposited with the
Trustee pursuant to subclause (ii) of Subsection (a)(1) of this Section, the
obligations of the Trustee under Section 4.02 and Section 10.03(e) shall
survive.

               SECTION 4.02 Application of Trust Money.

               Subject to the provisions of the last paragraph of Section 10.03,
all money deposited with the Trustee pursuant to Section 4.01 shall be held in
trust and applied by it, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the stated amount at Maturity
(and premium, if any) and interest for whose payment such money has been
deposited with the Trustee.

                                   ARTICLE V
                                    REMEDIES

               SECTION 5.01 Events of Default.

               (a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):

                    (1) default in the payment of the principal of (or premium,
               if any, on) any Security at its Maturity; or

                    (2) default in the payment of any interest upon any Security
               when it becomes due and payable, and continuance of such default
               for a period of 30 days; or

                    (3) default in the payment of principal and interest on
               Securities required to be purchased upon the occurrence of a
               Change of Control Triggering Event when due and payable; or

                    (4) default in the performance, or breach, of any covenant
               or agreement of the Company in this Indenture (other than a
               covenant or agreement a default in whose performance or whose
               breach is elsewhere in this Section specifically dealt with), and
               continuance of such default or breach for a period of 30
               consecutive days after there has been given, by registered or
               certified mail, to the Company by the Trustee or to the Company
               and the Trustee by the Holders of at least 25% in aggregate
               principal amount of the Outstanding Securities a written notice
               specifying such default or breach and requiring it to be remedied
               and stating that such notice is a "Notice of Default"; or

                    (5) a default or defaults with respect to any issue or
               issues of Debt of the Company or any Subsidiary having an
               outstanding aggregate principal amount of $10 million or more
               individually or $20 million or more in the aggregate for all such
               issues of

                                       40
<PAGE>   48

               all such Persons, whether such Debt now exists or shall hereafter
               be created, which default or defaults shall constitute a failure
               to pay all or any portion of the principal of such Debt when due
               and payable or shall have resulted in such Debt becoming or being
               declared due and payable prior to the date on which it would
               otherwise have become due and payable and such Debt has not been
               discharged in full or such acceleration has not been rescinded or
               annulled (by cure, waiver or otherwise) within 30 days of such
               acceleration; provided, however, that any secured Debt in excess
               of the limits set forth above shall be deemed to have been
               declared due and payable if the lender in respect thereof takes
               any action to enforce a security interest against, or an
               assignment of, or to collect on, seize, dispose of or apply any
               assets of the Company or its Subsidiaries (including lock-box and
               other similar arrangements) securing such Debt, or to set off
               against any bank account of the Company or its Subsidiaries in
               excess of $10 million; or

                    (6) any final judgment or order (not covered by insurance)
               for the payment of money in excess of $10 million individually or
               $20 million in the aggregate for all such final judgments or
               orders against all such Persons (treating any deductibles,
               self-insurance or retention as not so covered) shall be rendered
               against the Company or any Subsidiary and shall not be paid or
               discharged, and there shall be any period of 60 consecutive days
               following entry of the final judgment or order in excess of $10
               million individually or that causes the aggregate amount for all
               such final judgments or orders outstanding and not paid or
               discharged against all such Persons to exceed $20 million during
               which a stay of enforcement of such final judgment or order, by
               reason of a pending appeal or otherwise, shall not be in effect;
               or

                    (7) the Company or any Subsidiary shall generally not pay
               its debts as such debts become due, or shall admit in writing its
               inability to pay its debts generally, or shall make a general
               assignment for the benefit of creditors; or any proceeding shall
               be instituted by or against the Company or any Subsidiary seeking
               to adjudicate it a bankrupt or insolvent, or seeking liquidation,
               winding up, reorganization, arrangement, adjustment, protection,
               relief or composition of it or its debts under any law relating
               to bankruptcy, insolvency or reorganization or relief of debtors,
               or seeking the entry of an order for relief or the appointment of
               a receiver, trustee, custodian or other similar official for it
               or for any substantial part of its property and, in the case of
               any such proceeding instituted against it (but not instituted by
               it), either such proceeding shall remain undismissed or unstayed
               for a period of 60 days, or any of the actions sought in such
               proceeding (including, without limitation, the entry of an order
               for relief against, or the appointment of a receiver, trustee,
               custodian or other similar official for, it or for any
               substantial part of its property) shall occur; or the Company or
               any Subsidiary shall take any corporate action to authorize any
               of the actions set forth above in this Subsection (7);

                    (8) the Company and/or one or more Subsidiaries fails to
               make (A) at the final (but not any interim) fixed maturity of any
               issue of Debt a principal payment of $10 million or more or (B)
               at the final (but not any interim) fixed maturity of more than
               one issue of such Debt principal payments aggregating $20 million
               or more and, in the case of clause (A), such defaulted payment
               shall not have been made, waived or extended within 30 days of
               the payment default and, in the case of clause (B), all such
               defaulted payments shall not have been made, waived or extended
               within 30 days of the payment default that causes the amount
               described in clause (B) to exceed $20 million.

                                       41
<PAGE>   49

               SECTION 5.02 Acceleration of Maturity; Rescission and Annulment.

               (a) If an Event of Default (other than an Event of Default
specified in Subsection 5.01(a)(7)) shall occur and be continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities may, and the Trustee at the
request of such Holders shall, declare the entire unpaid principal of, premium,
if any, and accrued interest on the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal of, premium, if any,
and accrued interest on the Securities shall become immediately due and payable.
If an Event of Default specified in Subsection 5.01(a)(4) or (8) occurs, such
declaration of acceleration shall be automatically rescinded and annulled if the
event triggering such Event of Default pursuant to Subsection 5.01(a)(4) or (8)
shall be remedied or cured by the Company and/or the relevant Subsidiaries or
waived by the Holders of the Relevant Debt within 60 days after the declaration
of acceleration with respect thereto.

               (b) If an Event of Default specified in Subsection 5.01(a)(7)
above occurs, all unpaid principal of, premium, if any, and accrued interest on
the Securities then outstanding shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. The Holders of at least a majority in principal amount of the
outstanding Securities by written notice to the Company and to the Trustee, may
waive all past defaults and rescind and annul a declaration of acceleration and
its consequences if:

                    (1) the Company has paid or deposited with the Trustee a sum
               sufficient to pay (A) all sums paid or advanced by the Trustee
               under this Indenture and the reasonable compensation, expenses,
               disbursements and advances of the Trustee, its agents and
               counsel, (B) all overdue interest on all Securities, (C) the
               principal of (and premium, if any, on), any Securities that have
               become due otherwise than by such declaration or occurrence of
               acceleration and interest thereon at the rate prescribed therefor
               by such Securities, and (D) to the extent that payment of such
               interest is lawful, interest upon overdue interest at the rate
               prescribed therefor by such Securities,

                    (2) all existing Events of Default, other than the
               non-payment of the principal of the Securities that have become
               due solely by such declaration of acceleration, have been cured
               or waived, and

                    (3) the rescission would not conflict with any judgment or
               decree of a court of competent jurisdiction.

               SECTION 5.03 Collection of Indebtedness and Suits for Enforcement
by Trustee.

               (a) The Company covenants that if

                    (1) default is made in the payment of any interest on any
               Security when such interest becomes due and payable and such
               default continues for a period of 30 days, or

                    (2) default is made in the payment of the stated amount at
               Maturity of (or premium, if any, on) any Security at the Maturity
               thereof or, with respect to any Security required to have been
               purchased pursuant to an Offer to Purchase made by the Company,
               at the Purchase Date thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities, including, as applicable, the stated amount at



                                       42
<PAGE>   50

Maturity (and premium, if any) and interest, and, to the extent that payment of
such interest shall be legally enforceable, interest on any overdue stated
amount at Maturity (and premium, if any) and on any overdue interest, at the
rate provided by the Securities, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.

               (b) If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.

               (c) If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.

               SECTION 5.04 Trustee May File Proofs of Claim.

               (a) In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07.

               (b) No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

               SECTION 5.05 Trustee May Enforce Claims Without Possession of
Securities.

               All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.

                                       43
<PAGE>   51

               SECTION 5.06 Application of Money Collected.

               Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of stated amount at Maturity (or premium, if any) or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:

               FIRST: To the payment of all amounts due the Trustee under
               Section 6.07; and

               SECOND: To the payment of the amounts then due and unpaid for
               stated amount at Maturity of (and premium, if any) and interest
               on the Securities in respect of which or for the benefit of which
               such money has been collected, ratably, without preference or
               priority of any kind, according to the amounts due and payable on
               such Securities for stated amount at Maturity (and premium, if
               any) and interest, respectively.

               SECTION 5.07 Limitation on Suits.

               No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless

               (a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;

               (b) the Holders of not less than 25% in aggregate stated amount
at Maturity of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;

               (c) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;

               (d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and

               (e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
aggregate stated amount at Maturity of the Outstanding Securities;

it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.

               SECTION 5.08 Unconditional Right of Holders to Receive Stated
Amount at Maturity, Premium and Interest.

               Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional, to
receive payment of the stated amount at Maturity



                                       44
<PAGE>   52

of (and premium, if any) and (subject to Section 3.07) interest on such Security
on the respective Stated Maturities expressed in such Security (or, in the case
of redemption, on the Redemption Date or in the case of an Offer to Purchase
made by the Company and required to be accepted as to such Security, on the
Purchase Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired or affected without the consent of such
Holder.

               SECTION 5.09 Restoration of Rights and Remedies.

               If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.

               SECTION 5.10 Rights and Remedies Cumulative.

               Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.06, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

               SECTION 5.11 Delay or Omission Not Waiver.

               No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.

               SECTION 5.12 Control by Holders.

               The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that

               (a) such direction shall not be in conflict with any rule of law
or with this Indenture and shall not expose the Trustee to personal liability,
and (b) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.

               SECTION 5.13 Waiver of Past Defaults.

               (a) The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities may, on behalf of the Holders of
all the Securities, waive any past default hereunder and its consequences,
except a default

                                       45
<PAGE>   53

                    (1) in the payment of the principal amount of (or premium,
               if any) or interest on any Security, or

                    (2) in respect of a covenant or provision hereof which under
               Article Nine cannot be modified or amended without the consent of
               the Holder of each Outstanding Security affected.

               (b) Upon any such waiver described in Subsection (a) of this
Section, such default shall cease to exist and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; provided that no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

               SECTION 5.14 Undertaking for Costs.

               In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee.

               SECTION 5.15 Waiver of Stay or Extension Laws.

               The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage or any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

               SECTION 5.16 No Personal Liability of Incorporators,
Shareholders, Officers, Directors or Employees.

               No recourse for the payment of the principal of, premium, if any,
or interest on, any of the Securities, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture, or in any of the
Securities, or because of the creation of any Debt represented thereby, shall be
had against any incorporator, shareholder, officer, director, employee,
Affiliate or controlling person of the Company or of any successor Person
thereof.

                                   ARTICLE VI
                                   THE TRUSTEE

               SECTION 6.01 Certain Duties and Responsibilities.

               The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not



                                       46
<PAGE>   54

reasonably assured to it. Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.

               SECTION 6.02 Notice of Defaults.

               The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
5.01(a)(5), no such notice to Holders shall be given until at least 30 days
after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default.

               SECTION 6.03 Certain Rights of Trustee.

               (a) Except during the continuance of an Event of Default, the
Trustee undertakes to perform such functions and duties and only such functions
and duties as are specifically set forth in this Indenture, and no implied
duties or obligations shall be read into this Indenture against the Trustee.
During the continuance of an Event of Default, the Trustee shall exercise the
same degree of care and skill as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. No provision of this
Indenture shall be construed to relieve the Trustee from its duties, except to
the extent permitted by the Trust Indenture Act. Subject to the provisions of
Section 6.01, whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.

               (b)

                    (1) the Trustee may rely and shall be protected in acting or
               refraining from acting upon any resolution, certificate,
               statement, instrument, opinion, report, notice, request,
               direction, consent, order, bond, debenture, note, other evidence
               of indebtedness or other paper or document believed by it to be
               genuine and to have been signed or presented by the proper party
               or parties;

                    (2) any request or direction of the Company mentioned herein
               shall be sufficiently evidenced by a Company Request or Company
               Order and any resolution of the Board of Directors may be
               sufficiently evidenced by a Board Resolution;

                    (3) whenever in the administration of this Indenture the
               Trustee shall deem it desirable that a matter be proved or
               established prior to taking, suffering or omitting any action
               hereunder, the Trustee (unless other evidence be herein
               specifically prescribed) may, in the absence of bad faith on its
               part, rely upon an Officers' Certificate;

                    (4) the Trustee may consult with counsel and the oral or
               written advice of such counsel or any Opinion of Counsel shall be
               full and complete authorization and protection in respect of any
               action taken, suffered or omitted by it hereunder in good faith
               and in reliance thereon;

                    (5) the Trustee shall be under no obligation to exercise any
               of the rights or powers vested in it by this Indenture at the
               request or direction of any of the Holders pursuant to this
               Indenture, unless such Holders shall have offered to the Trustee
               reasonable security or indemnity against the costs, expenses and
               liabilities which might be incurred by it in compliance with such
               request or direction;



                                       47
<PAGE>   55

                    (6) the Trustee shall not be bound to make any investigation
               into the facts or matters stated in any resolution, certificate,
               statement, instrument, opinion, report, notice, request,
               direction, consent, order, bond, debenture, note, other evidence
               of indebtedness or other paper or document, but the Trustee, in
               its discretion, may make such further inquiry or investigation
               into such facts or matters as it may see fit, and, if the Trustee
               shall determine to make such further inquiry or investigation, it
               shall be entitled to examine the books, records and premises of
               the Company, personally or by agent or attorney; and

                    (7) the Trustee may execute any of the trusts or powers
               hereunder or perform any duties hereunder either directly or by
               or through agents or attorneys and the Trustee shall not be
               responsible for any misconduct or negligence on the part of any
               agent or attorney appointed with due care by it hereunder.

               SECTION 6.04 Not Responsible for Recitals or Issuance of
Securities.

               The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof. The Trustee
shall not have any responsibility or liability for any information provided to
Holders or any other Person, including without limitation in the solicitation of
any consent or waiver hereunder, or pursuant to any offering documents, or
pursuant to any Offer to Purchase.

               SECTION 6.05 May Hold Securities.

               The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.

               SECTION 6.06 Money Held in Trust.

               Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.

               SECTION 6.07 Compensation and Reimbursement.

               The Company agrees

               (a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);

               (b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses



                                       48
<PAGE>   56

and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, willful
misconduct or bad faith; and

               (c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence, willful
misconduct or bad faith on its part (subject to the provisions of Sections 6.01
and 6.03), arising out of or in connection with the acceptance or administration
of this trust, including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
notify the Company shall not relieve the Company of its obligations hereunder.

               SECTION 6.08 Disqualification: Conflicting Interests.

               If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.

               SECTION 6.09 Corporate Trustee Required; Eligibility.

               There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.

               SECTION 6.10 Resignation and Removal; Appointment of Successor.

               (a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.

               (b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

               (c) The Trustee may be removed at any time by Act of the Holders
of a majority in aggregate stated amount at Maturity of the Outstanding
Securities, delivered to the Trustee and to the Company.

               (d) If at any time:

                    (1) the Trustee shall fail to comply with Section 6.08 after
               written request therefor by the Company or by any Holder who has
               been a bona fide Holder of a Security for at least six months, or

                    (2) the Trustee shall cease to be eligible under Section
               6.09 and shall fail to resign after written request therefor by
               the Company or by any such Holder, or

                                       49
<PAGE>   57

                    (3) the Trustee shall become incapable of acting or shall be
               adjudged a bankrupt or insolvent or a receiver of the Trustee or
               of its property shall be appointed or any public officer shall
               take charge or control of the Trustee or of its property or
               affairs for the purpose of rehabilitation, conservation or
               liquidation,

                    then, in any such case, (A) the Company by a Board
                    Resolution may remove the Trustee, or (B) subject to Section
                    5.14, any Holder who has been a bona fide Holder of a
                    Security for at least six months may, on behalf of himself
                    and all others similarly situated, petition any court of
                    competent jurisdiction for the removal of the Trustee and
                    the appointment of a successor Trustee.

               (e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in stated amount at Maturity of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.

               (f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.06. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.

               SECTION 6.11 Acceptance of Appointment by Successor.

               (a) Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.

               (b) No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.

               SECTION 6.12 Merger, Conversion, Consolidation or Succession to
Business.

               Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall



                                       50
<PAGE>   58

be otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case any Securities shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities.

               SECTION 6.13 Preferential Collection of Claims Against Company.

               If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).

               SECTION 6.14 Appointment of Authenticating Agent.

               (a) The Trustee may appoint an Authenticating Agent or Agents
which shall be authorized to act on behalf of the Trustee to authenticate
Securities issued upon original issue and upon exchange, registration of
transfer, partial conversion or partial redemption or pursuant to Section 3.06,
and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States, any State thereof or the District of
Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or State authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions to this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.

               (b) Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall
otherwise be eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.

               (c) An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon


                                       51
<PAGE>   59

acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.

               (d) The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section, and
the Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.07.

               (e) If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the following
form:

               "This is one of the Securities described in the within-mentioned
Indenture.

                                        U.S. TRUST COMPANY OF TEXAS, N.A.
                                          As Trustee

                                        By
                                           -------------------------------------
                                           As Authenticating Agent


                                        By
                                           -------------------------------------
                                           Authorized Signatory


                                  ARTICLE VII
                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

               SECTION 7.01 Company to Furnish Trustee Names and Addresses of
Holders.

               The Company will furnish or cause to be furnished to the Trustee

               (a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and

               (b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;

excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.

               SECTION 7.02 Preservation of Information; Communications to
Holders.

               (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 7.01 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.

                                       52
<PAGE>   60

               (b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.

               (c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to the names and addresses of Holders made
pursuant to Section 3.12 of the Trust Indenture Act.

               SECTION 7.03 Reports by Trustee.

               (a) Within 60 days after March 1 of each year commencing with the
first March 1 after the first issuance of the Securities, the Trustee shall
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant thereto.

               (b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.

               SECTION 7.04 Reports by Company.

               The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.

                                  ARTICLE VIII
               CONSOLIDATIONS, MERGERS AND CERTAIN SALES OF ASSETS

               SECTION 8.01 The Company May Consolidate, Etc. Only on Certain
Terms

               (a) The Company may not, in a single transaction or a series of
related transactions,

                    (i) consolidate or merge with or into any other Person or
               permit any other Person to consolidate or merge with or into the
               Company, or

                    (ii) directly or indirectly transfer, sell, lease or
               otherwise dispose of all or substantially all of its assets,

               unless, in the case of clauses (i) or (ii) of this covenant:

               (1)  in a transaction in which the Company does not survive or in
                    which the Company sells, leases or otherwise disposes of all
                    or substantially all of its assets, the successor entity to
                    the Company is organized under (i) the laws of the United
                    States or any State thereof or the District of Columbia,
                    (ii) the laws of the Republic of Liberia, (iii) the laws of
                    the Commonwealth of the Bahamas, (iv) the laws of the
                    Republic of the



                                       53
<PAGE>   61

                    Marshall Islands or (v) the laws of any other country
                    recognized by the United States and which, in the case of
                    any of the events under subclause (i), (ii), (iii), (iv) or
                    (v), shall expressly assume, by a supplemental indenture
                    executed and delivered to the Trustee in form satisfactory
                    to the Trustee, all of the Company's obligations under the
                    Indenture;

                    (2) immediately before and after giving effect to such
               transaction, no Event of Default or event that with the passing
               of time or the giving of notice, or both, would constitute an
               Event of Default shall have occurred and be continuing; and

                    (3) the Company, or if applicable, the Successor Company has
               delivered to the Trustee an Officers' Certificate and an Opinion
               of Counsel, each stating that such consolidation, merger,
               conveyance, transfer, lease or acquisition and, if a supplemental
               indenture is required in connection with such transaction, such
               supplemental indenture, complies with this Article and that all
               conditions precedent herein provided for relating to such
               transaction have been complied with.

               SECTION 8.02 Successor Substituted.

               Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any transfer, conveyance, sale, lease or other
disposition of all or substantially all of the properties and assets of the
Company in accordance with Section 8.01(in each such case the successor entity
shall be known as the "Successor Company"), the Successor Company shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Securities.

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

               SECTION 9.01 Supplemental Indentures Without Consent of Holders.

               (a) Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:

                    (1) to evidence the succession of another Person to the
               Company and the assumption by any such successor of the covenants
               of the Company herein and in the Securities; or

                    (2) to add to the covenants of the Company for the benefit
               of the Holders, or to surrender any right or power herein
               conferred upon the Company; or

                    (3) to secure the Securities pursuant to the requirements of
               Section 10.08 or otherwise; or

                    (4) to comply with any requirements of the Commission in
               order to effect and maintain the qualification of this Indenture
               under the Trust Indenture Act in connection with the issuance of
               the Exchange Securities and thereafter maintain the qualification
               of this Indenture under the Trust Indenture Act; or



                                       54
<PAGE>   62

                    (5) to cure any ambiguity, to correct or supplement any
               provision herein which may be inconsistent with any other
               provision herein, or to make any other provisions with respect to
               matters or questions arising under this Indenture which shall not
               be inconsistent with the provisions of this Indenture, provided
               such action pursuant to this clause (5) shall not adversely
               affect the interests of the Holders in any material respect; or

                    (6) to issue Additional Securities as provided in Section
               3.01;

                    (7) to evidence and provide for the acceptance of
               appointment hereunder by a successor Trustee pursuant to the
               requirements of Section 6.11; or

                    (8) to make any change that does not materially and
               adversely affect the rights of any Holder.

               SECTION 9.02 Supplemental Indentures with Consent of Holders.

               (a) With the consent of the Holders of not less than a majority
in aggregate principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,

                    (1) change the Stated Maturity of the principal amount of,
               or any installment of interest on, any Security, or

                    (2) reduce the principal amount of, any premium payable, or
               the rate of interest on, any Security, or

                    (3) change the place of payment where, or the coin or
               currency in which, the principal amount of, any premium, or
               interest on, any Security is payable, or

                    (4) impair the right to institute suit for the enforcement
               of any such payment on, or with respect to, any Security, or

                    (5) reduce the percentage of the aggregate principal amount
               of the Outstanding Securities, the consent of whose Holders is
               necessary to modify or amend this Indenture, or

                    (6) modify any provision of this Indenture relating to the
               modification or amendment of the Indenture, except as otherwise
               specified in this Indenture, or

                    (7) reduce the percentage of the aggregate principal amount
               of the Outstanding Securities, the consent of whose Holders is
               required for any waiver of compliance with certain provisions of
               this Indenture or certain defaults hereunder and their
               consequences provided for in this Indenture.

                                       55
<PAGE>   63

               (b) It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

               SECTION 9.03 Execution of Supplemental Indentures.

               In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Sections 6.01 and 6.03) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.

               SECTION 9.04 Effect of Supplemental Indentures.

               Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

               SECTION 9.05 Conformity with Trust Indenture Act.

               Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.

               SECTION 9.06 Reference in Securities to Supplemental Indentures.

               Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.

                                   ARTICLE X
                                   COVENANTS

               SECTION 10.01 Payment of Stated Amount at Maturity, Premium and
Interest.

               The Company will duly and punctually pay the stated amount at
Maturity of (and premium, if any) and interest on the Securities in accordance
with the terms of the Securities and this Indenture.

               SECTION 10.02 Maintenance of Office or Agency.

               (a) The Company will maintain in the Borough of Manhattan, The
City of New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or



                                       56
<PAGE>   64

agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee in New York, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.

               (b) The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City of
New York) where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.

               SECTION 10.03 Money for Security Payments to be Held in Trust.

               (a) If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the stated amount at Maturity of (and
premium, if any) or interest on any of the Securities, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the stated amount at Maturity (and premium, if any) or interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.

               (b) Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the stated amount at Maturity of (and premium,
if any) or interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay the stated amount at Maturity (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such stated amount at Maturity, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.

               (c) The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:

                    (1) hold all sums held by it for the payment of the stated
               amount at Maturity of (and premium, if any) or interest on
               Securities in trust for the benefit of the Persons entitled
               thereto until such sums shall be paid to such Persons or
               otherwise disposed of as herein provided;

                    (2) give the Trustee notice of any Default by the Company
               (or any other obligor upon the Securities) in the making of any
               payment of the stated amount at Maturity (and premium, if any) or
               interest; and

                    (3) at any time during the continuance of any such Default,
               upon the written request of the Trustee, forthwith pay to the
               Trustee all sums so held in trust by such Paying Agent.

               (d) The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such



                                       57
<PAGE>   65

Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.

               (e) Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the stated amount at
Maturity of (and premium, if any) or interest on any Security and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.

               SECTION 10.04 Corporate Existence.

               Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors in good faith shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holders.

               SECTION 10.05 Maintenance of Properties.

               The Company will cause all material properties used or useful in
the conduct of its business or the business of any Subsidiary of the Company to
be maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Board of Directors in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.

               SECTION 10.06 Payment of Taxes and Other Claims.

               The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.

                                       58
<PAGE>   66

               SECTION 10.07 Maintenance of Insurance.

               The Company shall, and shall cause its Subsidiaries to, keep at
all times all of their properties which are of an insurable nature insured
against loss or damage with insurers believed by the Company to be responsible
to the extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties in accordance with
good business practice.

               SECTION 10.08 Limitation on Liens.

               The Company may not, directly or indirectly, Incur, assume or
suffer to exist any Lien on or with respect to any property or assets, now owned
or hereafter acquired, to secure any present or future Relevant Debt without
making effective provision for securing the Securities:

                    (1) in the event such Debt is pari passu with the
               Securities, equally and ratably with such Debt as to such
               property or assets for so long as such Debt will be so secured,
               or

                    (2) in the event such Debt is subordinate in right of
               payment to the Securities, prior to such Debt as to such property
               or assets for so long as such Debt will be so secured.

               SECTION 10.09 Change of Control Triggering Event.

               (a) Within 30 days of the occurrence of a Change of Control
Triggering Event, the Company will be required to make an Offer to Purchase all
Outstanding Securities at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest (including any Additional Interest), if
any, to the date of purchase.

               (b) A "Change of Control" will be deemed to occur at such time as
either:

                    (1) a "person" or "group" (within the meaning of Sections
               13(d) and 14(d)(2) of the Exchange Act), other than any Permitted
               Holder, becomes the ultimate "beneficial owner" (as defined in
               Rule 13d-3 under the Exchange Act and including by reason of any
               change in the ultimate "beneficial ownership" of the Capital
               Stock of the Company) of more than 50% of the total voting power
               of the Voting Stock of the Company (calculated on a fully diluted
               basis); or

                    (2) individuals who at the beginning of any period of two
               consecutive calendar years constituted the Board of Directors of
               the Company (together with any new directors whose election by
               such Board of Directors or whose nomination for election was
               approved by a vote of at least two-thirds of the members of such
               Board of Directors then still in office who either were members
               of such Board of Directors at the beginning of such period or
               whose election or nomination for election was previously so
               approved) cease for any reason to constitute at least 50% of the
               members of such Board of Directors then in office.

               (c) The Company will not be required to make an Offer to Purchase
any Securities upon a Change of Control Triggering Event if it has exercised its
right to redeem all of the Securities as described under Article X1 in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Indenture applicable to an Offer to Purchase made by the Company and
purchases all of the Securities validly tendered and not withdrawn under such an
Offer to Purchase.

                                       59
<PAGE>   67

               (d) If the Company fails to make the Offer to Purchase or fails
to pay the purchase price and accrued interest described above on the date
specified therefor, the Trustee and the Holders of Securities will have the
rights described under Section 5.01.

               (e) In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act.

               SECTION 10.10 Provision of Financial Information.

               (a) Whether or not the Company is required to be subject to
Section 13(a) or 15(d) of the Exchange Act, the Company shall file with the
Commission copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to such Section 13(a) or 15(d) or any successor provision thereto if the Company
were so required, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required to file such documents if the Company were so required. The
Company shall also in any event:

                    (1) within 15 days of each Required Filing Date,

                         (i) transmit by mail to all Holders of the Securities,
                    as their names and addresses appear in the Security
                    Register, without cost to such Holders, and

                         (ii) file with the Trustee, copies of the annual
                    reports, quarterly reports and other documents which the
                    Company files with the Commission pursuant to such Section
                    13(a) or 15(d) or any successor provision thereto or would
                    have been required to file with the Commission pursuant to
                    such Section 13(a) or 15(d) or any successor provisions
                    thereto if the Company were required to be subject to such
                    Sections, and

                    (2) if filing such documents by the Company with the
               Commission is not permitted under the Exchange Act, promptly upon
               written request, supply copies of such documents to any
               prospective Holder of Securities'.

               SECTION 10.11 Statement By Officers as to Default; Compliance
Certificates.

               (a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year (which is currently December 31), of the
Company ending after the date hereof an Officers' Certificate, stating that,
after conducting a review of the activities of the Company and its Subsidiaries
and of the Company's and its Subsidiaries performance under this Indenture, the
Company has fulfilled all obligations thereunder, or whether the Company is in
default in the performance and observance of any of the terms, provisions and
conditions of this Indenture, and if the Company shall be in Default, specifying
all such Defaults and the nature and status thereof of which it has knowledge.

               (b) The Company shall deliver to the Trustee, as soon as possible
and in any event within 10 days after the Company becomes aware of the
occurrence of an Event of Default or an event which, with notice or the lapse of
time or both, would constitute an Event of Default, an Officers' Certificate
setting forth the details of such Event of Default or default, and the action
which the Company proposes to take with respect thereto.



                                       60
<PAGE>   68

               SECTION 10.12 Waiver of Certain Covenants.

               The Company may omit in any particular instance to comply with
any covenant or condition set forth in Section 8.01, Sections 10.04 to 10.11,
inclusive, and Sections 10.13 to 10.14, inclusive, if before the time for such
compliance the Holders of at least a majority in stated amount at Maturity of
the Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect; provided, however, with respect to an Offer to Purchase as to which an
Offer has been mailed, no such waiver may be made or shall be effective against
any Holder tendering Securities pursuant to such Offer, and the Company may not
omit to comply with the terms of such Offer as to such Holder.

               SECTION 10.13 Indemnification of Judgment Currency.

               The Company shall indemnify the Trustee and any Holder against
any loss incurred by the Trustee or such Holder, as the case may be, as a result
of any judgment or order being given or made for any amount due under this
Indenture or such Security (by reason of the Company being in default under this
Indenture) and being expressed and paid in a currency (the "Judgment Currency")
other than U.S. Dollars, and as a result of any variation between (i) the rate
of exchange at which the U.S. Dollar amount is converted into the Judgment
Currency for the purpose of such judgment or order and (ii) the spot rate of
exchange in The City of New York at which the Trustee or such Holder, as the
case may be, on the date that the amount of the Judgment Currency is actually
received by the Trustee or such Holder. The foregoing indemnity shall constitute
a separate and independent obligation of the Company and shall continue in full
force and effect notwithstanding any such judgment or order as aforesaid. The
term "spot rate of exchange" shall include any premiums and costs of exchange
payable in connection with the purchase of, or conversion into, U.S. Dollars as
quoted by The Bank of New York at its central foreign exchange desk in its head
office in New York City at 12:00 noon.

               SECTION 10.14 Payments for Consent.

               The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
the Securities for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid or is paid to all Holders of the Securities
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.

               SECTION 10.15 Additional Amounts.

               (a) All payments made by the Company under or with respect to the
Securities shall be made free and clear of and without withholding or deduction
for or on account of any present or future tax, duty, levy, impost, assessment
or other governmental charge (hereinafter "Taxes") imposed or levied by or on
behalf of any Taxing Jurisdiction, unless the Company is required to withhold or
deduct Taxes by law or by the interpretation or administration thereof. If the
Company is so required to withhold or deduct any amount of interest for or on
account of Taxes from any payment made under or with respect to the Securities,
the Company shall pay such additional amounts of interest ("Additional Amounts")
as may be necessary so that the net amount received by each Holder (including
Additional Amounts) after such withholding or deduction shall not be less than
the amount the Holder would have received if such Taxes



                                       61
<PAGE>   69

had not been withheld or deducted; provided, however, that the Company will not
pay any Additional Amounts in connection with any Taxes that are imposed due to
any of the following ("Excluded Additional Amounts"):

                    (1) the Holder or beneficial owner has some connection with
               the Taxing Jurisdiction other than merely holding the Securities
               or receiving principal or interest payments on the Securities
               (such as citizenship, nationality, residence, domicile, or
               existence of a business, a permanent establishment, a dependent
               agent, a place of business or a place of management present or
               deemed present within the Taxing Jurisdiction);

                    (2) any tax imposed on, or measured by net income;

                    (3) the Holder or beneficial owner fails to comply with any
               certification, identification or other reporting requirements
               concerning its nationality, residence, identity or connection
               with the Taxing Jurisdiction, if (A) such compliance is required
               by applicable law, regulation, administrative practice or treaty
               as a precondition to exemption from all or a part of the Tax, (B)
               the Holder or beneficial owner is able to comply with such
               requirements without undue hardship, and (C) at least 30 calendar
               days prior to the first payment date with respect to which such
               requirements under the applicable law, regulation, administrative
               practice or treaty shall apply, the Company has notified such
               Holder that such Holder will be required to comply with such
               requirements;

                    (4) the Holder fails to present (where presentation is
               required) its Security within 30 calendar days after the Company
               has made available to the Holder a payment of principal or
               interest, provided that the Company will pay Additional Amounts
               which a Holder would have been entitled to had the Security owned
               by such Holder been presented on any day (including the last day)
               within such 30-day period;

                    (5) any estate, inheritance, gift, value added, use or sales
               Taxes or any similar Taxes;

                    (6) where any Additional Amounts are imposed on a payment on
               the Securities to an individual and are required to be made
               pursuant to any European Union Directive on the taxation of
               savings implementing the conclusions of the Economic and
               Financial Council of Ministers of the member states of the
               European Union (ECOFIN) Council meeting of November 26-27, 2000
               or any law implementing or complying with, or introduced in order
               to conform to, such Directive; or

                    (7) where the Holder or beneficial owner could avoid any
               Additional Amounts by requesting that a payment on the Securities
               be made by, or presenting the relevant Securities for payment to,
               another Paying Agent located in a Member State of the European
               Union.

               (b) The Company shall also (1) make such withholding or deduction
and (2) remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. The Company shall furnish to the Holders of the
Securities, within 30 days after the date the payment of any Taxes are due
pursuant to applicable law, certified copies of tax receipts evidencing such
payment by the Company.



                                       62
<PAGE>   70

               (c) The Company shall indemnify and hold harmless each Holder for
the amount (other than Excluded Additional Amounts) of (1) any Taxes not
withheld or deducted by the Company and levied or imposed and paid by such
Holder as a result of payments made under or with respect to the Securities, (2)
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, and (3) any Taxes imposed with respect to any
reimbursement under clause (1) or (2) of this paragraph (c) of this Section
10.15.

               (d) At least 30 days prior to each date on which any payment
under or with respect to the Securities is due and payable, if the Company is
aware that it will be obligated to pay Additional Amounts with respect to such
payment, the Company shall deliver to the Trustee an Officers' Certificate
stating the fact that such Additional Amounts will be payable, the amounts so
payable and such other information necessary to enable the Trustee to pay such
Additional Amounts to Holders on the payment date. Whenever in this Indenture
there is mentioned, in any context, the payment of principal (and premium, if
any), interest or any other amount payable under or with respect to any
Security, such mention (except where expressly mentioned) shall be deemed to
include mention of the payment of Additional Amounts provided for in this
Section 10.15 to the extent that, in such context, Additional Amounts are, were
or would be payable in respect thereof.

                                   ARTICLE XI
                            REDEMPTION OF SECURITIES

               SECTION 11.01 Right of Redemption.

               (a) At the Company's option, the Company may redeem the
Securities in whole or in part at any time at a redemption price equal to the
greater of (i) 100% of the principal amount of the Securities to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest on the Securities to be redeemed (excluding the portion
of any such interest accrued to the Redemption Date) discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Yield, plus 50 basis points, plus, in each
case, accrued and unpaid interest to the Redemption Date.

               (b) At the Company's option, the Company may redeem the
Securities in whole, but not in part, at any time at a redemption price equal to
100% of the principal amount of the Securities to be redeemed together with
accrued and unpaid interest thereon to the Redemption Date, and any other
amounts owed to the Holders of the Securities under the terms of this Indenture
or the Securities, upon notice mailed to each Holder of Securities at the
addresses appearing in the Security Register, if, as a result of any change or
amendment to the laws (or regulations promulgated thereunder) of any Taxing
Jurisdiction, or any change in or amendment to any official position or
administration or assessing practices regarding the application or
interpretation of such laws or regulations, which change or amendment is
announced or becomes effective on or after June 22, 2001, the Company has become
or would become obligated to pay, on the next date on which any amount would be
payable under or with respect to the Securities, any Additional Amounts, to a
Holder in accordance with Section 10.15 hereof, provided that the Company
determines, in its business judgment, that the obligation to pay such Additional
Amounts cannot be avoided by the use of reasonable measures available to the
Company which would not involve any liability of any kind to the Company, except
for any cost or expense which is minimal, not including substitution of the
obligor under the Securities.

                                       63
<PAGE>   71

               SECTION 11.02 Applicability of Article.

               Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.

               SECTION 11.03 Election to Redeem; Notice to Trustee.

               The election of the Company to redeem the Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company, the Company shall, not less than 30 days nor more than 60 days
prior to the Redemption Date fixed by it (unless a shorter notice period shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed. Such notice shall be
accompanied by an Officers' Certificate and an Opinion of Counsel from the
Company to the effect that such redemption shall comply with the conditions
herein.

               SECTION 11.04 Selection by Trustee of Securities to Be Redeemed.

               (a)  If less than all the Securities are to be redeemed, the
                    particular Securities to be redeemed shall be selected not
                    more than 60 days prior to the Redemption Date by the
                    Trustee, from the Outstanding Securities not previously
                    called for redemption, by such method as the Trustee shall
                    deem fair and appropriate and which may provide for the
                    selection for redemption of portions of the principal of
                    Securities; provided, however, that no such partial
                    redemption shall reduce the portion of the principal amount
                    of a Security not redeemed to less than $1,000. Securities
                    and any portions of such Securities selected by the Trustee
                    shall be in amounts of $1,000 or integral multiples thereof.

               (b)  The Trustee shall promptly notify the Company in writing of
                    the Securities selected for redemption and, in the case of
                    any Securities selected for partial redemption, the
                    principal amount thereof to be redeemed.

               (c)  For all purposes of this Indenture, unless the context
                    otherwise requires, all provisions relating to redemption of
                    Securities shall relate, in the case of any Security
                    redeemed or to be redeemed only in part, to the portion of
                    the principal amount of such Security which has been or is
                    to be redeemed.

               SECTION 11.05 Notice of Redemption.

               Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.

               All notices of redemption shall state:

               (a)  the principal amount of each Security held by such Holder to
                    be redeemed;

               (b)  the Redemption Date;

               (c)  the Redemption Price;



                                       64
<PAGE>   72

               (d)  that on the Redemption Date the Redemption Price will become
                    due and payable upon each such Security, and that interest
                    thereon shall cease to accrue on and after said date;

               (e)  the CUSIP number;

               (f)  if fewer than all of the Outstanding Securities are to be
                    redeemed, then the identification and principal amounts at
                    Maturity of the particular Securities to be redeemed; and

               (g)  the place or places where such Securities are to be
                    surrendered for payment of the Redemption Price.

               Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at their request, by the
Trustee in the name and at the expense of the Company.

               SECTION 11.06 Deposit of Redemption Price.

               On or prior to any Redemption Date, the Company shall deposit or
cause to be deposited with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money in same day funds (or New York
Clearing House funds if such deposit is made prior to the applicable Redemption
Date) sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.

               SECTION 11.07 Securities Payable on Redemption Date.

               (a)  Notice of redemption having been given as aforesaid, the
                    Securities so to be redeemed shall, on the Redemption Date,
                    become due and payable at the Redemption Price therein
                    specified and from and after such date (unless the Company
                    shall default in the payment of the Redemption Price and
                    accrued interest) such Securities shall cease to bear
                    interest. Upon surrender of any such Security for redemption
                    in accordance with said notice, such Security shall be paid
                    by the Company at the Redemption Price together with accrued
                    interest to the Redemption Date; provided, however, that
                    installments of interest whose Stated Maturity is on or
                    prior to the Redemption Date shall be payable to the Holders
                    of such Securities, or one or more Predecessor Securities,
                    registered as such on the relevant Regular Record Dates
                    according to the terms and the provisions of Section 3.07.

               (b)  If any Security called for redemption shall not be so paid
                    upon surrender thereof for redemption, the principal thereof
                    (and premium, if any, thereon) shall, until paid, bear
                    interest from the Redemption Date at the rate borne by such
                    Security.

               SECTION 11.08 Securities Redeemed in Part.

               Any Security that is to be redeemed only in part shall be
surrendered to the Paying Agent at the office of the Paying Agent or to the
office or agency referred to in Section 10.02 (with, if the Company or the
Trustee so require, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holder's



                                       65
<PAGE>   73

attorney duly authorized in writing) and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security, without
service charge, a replacement Security or Securities, of any authorized
denomination as requested by such Holder in an aggregate principal amount equal
to, and in exchange for, the principal amount of the Security so surrendered
that is not redeemed.

                                  ARTICLE XII
                       DEFEASANCE AND COVENANT DEFEASANCE

               SECTION 12.01 Company's Option to Effect Defeasance or Covenant
Defeasance.

               The Company may at its option by Board Resolution, at any time,
elect to have either Section 12.02 or Section 12.03 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
Twelve.

               SECTION 12.02 Defeasance and Discharge.

               Upon the Company's exercise of the option provided in Section
12.01 applicable to this Section, on the 123rd day after the deposit of funds
with the Trustee (as more fully discussed below), the Company shall be deemed to
have been discharged from its obligations with respect to the Outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Securities to receive, solely from the trust fund described in
Section 12.04 and as more fully set forth in such Section, payments in respect
of the stated amount at Maturity of (and premium, if any) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 3.04, 3.05, 3.06, 10.02 and 10.03, (C)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
(D) this Article Twelve. Subject to compliance with this Article Twelve, the
Company may exercise its option under this Section 12.02 notwithstanding the
prior exercise of its option under Section 12.03.

               SECTION 12.03 Covenant Defeasance.

               Upon the Company's exercise of the option provided in Section
12.01 applicable to this Section, (a) the Company shall be released from its
obligations under Sections 10.05 through 10.10, inclusive and 10.15, and clauses
(2) and (3) of Section 8.01(a), (b) the occurrence of an event specified in
Sections 5.01(a)(3), 5.01(a)(4) (with respect to any of Sections 10.05 through
10.10, inclusive and Section 10.15), 5.01(a)(5), 5.01(a)(6) and 5.01(a)(8) shall
not be deemed to be an Event of Default (hereinafter, "covenant defeasance").
For this purpose, such covenant defeasance means that the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such Section, Clause or Article, whether directly or
indirectly by reason of any reference elsewhere herein to any such Section,
Clause or Article or by reason of any reference in any such Section, Clause or
Article to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.

                                       66
<PAGE>   74

               SECTION 12.04 Conditions to Defeasance or Covenant Defeasance.

               (a) The following shall be the conditions to application of
Section 12.02 to the then Outstanding Securities:

                    (1) The Company shall irrevocably have deposited or caused
               to be deposited with the Trustee (or another trustee satisfying
               the requirements of Section 6.09 who shall agree to comply with
               the provisions of this Article Twelve applicable to it) as trust
               funds in trust for the purpose of making the following payments,
               specifically pledged as security for, and dedicated solely to,
               the benefit of the Holders of such Securities, (A) money in an
               amount, or (B) United States Government Obligations which through
               the scheduled payment of principal and interest in respect
               thereof in accordance with their terms will provide, not later
               than one day before the due date of any payment, money in an
               amount, or (C) a combination thereof, sufficient, in the opinion
               of a nationally recognized firm of independent certified public
               accountants expressed in a written certification thereof
               delivered to the Trustee, to pay and discharge, and which shall
               be applied by the Trustee (or other qualifying trustee) to pay
               and discharge, the principal of (premium, if any) and each
               installment of interest, if any, on the Outstanding Securities on
               the Stated Maturity (or Redemption Date, if applicable) of such
               principal or installment of interest in accordance with the terms
               of this Indenture and of such Securities. For this purpose,
               "United States Government Obligations" means securities that are
               (x) direct obligations of the United States for the payment of
               which its full faith and credit is pledged or (y) obligations of
               a Person controlled or supervised by and acting as an agency or
               instrumentality of the United States the payment of which is
               unconditionally guaranteed as a full faith and credit obligation
               by the United States, which, in either case, are not callable or
               redeemable at the option of the issuer thereof, and shall also
               include a depository receipt issued by a bank (as defined in
               Section 3(a)(2) of the Securities Act) as custodian with respect
               to any such United States Government Obligation or a specific
               payment of principal of or interest on any such United States
               Government Obligation held by such custodian for the account of
               the Holder of such depository receipt, provided that (except as
               required by law) such custodian is not authorized to make any
               deduction from the amount payable to the Holder of such
               depository receipt from any amount received by the custodian in
               respect of the United States Government Obligation or the
               specific payment of principal of or interest on the United States
               Government Obligation evidenced by such depository receipt.

                    (2) In the case of an election under Section 12.02, the
               Company has delivered to the trustee (A) either (i) an Opinion of
               Counsel to the effect that Holders will not recognize income,
               gain or loss for U.S. federal income tax purposes as a result of
               such deposit, defeasance and discharge and will be subject to
               U.S. federal income tax on the same amount and in the same manner
               and at the same times as would have been the case if such
               deposit, defeasance and discharge had not occurred, which Opinion
               of Counsel must be based upon (and accompanied by copy of) a
               ruling of the Internal Revenue Service to the same effect or
               based upon a change in applicable U.S. federal income tax law
               after the date of the indenture or (ii) a ruling directed to the
               trustee received from the Internal Revenue Service to the same
               effect as the aforementioned Opinion of Counsel and (B) an
               Opinion of Counsel to the effect that the creation of the
               defeasance trust does not violate the Investment Company Act of
               1940, as amended, and, after the passage of 123 days following
               the deposit, the trust fund will not be subject to



                                       67
<PAGE>   75

               the effect of Section 547 of the United States Bankruptcy Code or
               Section 15 of the New York Debtor and Creditor Law.

                    (3) Immediately after giving effect to such deposit on a pro
               forma basis, no Event of Default, or event that after the giving
               of notice or lapse of time or both would become an Event of
               Default, shall have occurred and be continuing on the date of
               such deposit or during the period ending on the 123rd day after
               the date of such deposit, and such deposit shall not result in a
               breach or violation of, or constitute a default under, any other
               agreement or instrument to which The Company is a party or by
               which the Company is bound.

                    (4) If at such time the Securities are listed on a national
               securities exchange, the Company has delivered to the trustee an
               Opinion of Counsel to the effect that the Securities will not be
               delisted as a result of such deposit, defeasance and discharge.

                    (5) Such deposit, defeasance or covenant defeasance and
               discharge shall not result in a breach or violation of, or
               constitute a default under, any other agreement or instrument to
               which the Company or any Subsidiary is a party or by which the
               Company or any Subsidiary is bound.

                    (6) The Company shall have delivered to the Trustee an
               Officers' Certificate and an Opinion of Counsel, each stating
               that all conditions precedent provided for relating to either the
               defeasance under Section 12.02 or the covenant defeasance under
               Section 12.03 (as the case may be) have been complied with.

               (b) (i) The provisions described in clauses (1), (2)(B), (3) and
(4) in Subsection (a) and (ii) the delivery by the Company or the Trustee of an
Opinion of Counsel to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and Events of Default and will
be subject to U.S. federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred, shall be conditions to the application of Section 12.03 to the
then Outstanding Securities.

               SECTION 12.05 Deposited Money and United States Government
Obligations to be Held in Trust: Other Miscellaneous Provisions.

               (a) Subject to the provisions of the last paragraph of Section
10.03, all money and United States Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying
trustee--collectively, for purposes of this Section 12.05, the "Trustee")
pursuant to Section 12.04 in respect of the Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.

               (b) The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the United States
Government Obligations deposited pursuant to Section 12.04 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Outstanding
Securities.

                                       68
<PAGE>   76

               (c) Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or United States Government Obligations held
by it as provided in Section 12.04 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
defeasance or covenant defeasance.

               SECTION 12.06 Reinstatement.

               If the Trustee or the Paying Agent is unable to apply any money
in accordance with Section 12.02 or 12.03 by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Twelve until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 12.02 or 12.03; provided, however, that if the Company makes any payment
of stated amount at Maturity of (and premium, if any) or interest on any
Security following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or the Paying Agent.

                             ---------------------

               This Indenture may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

                                       69
<PAGE>   77

               IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the day and year first above written.

                                        TEEKAY SHIPPING CORPORATION



                                        By:
                                            ------------------------------------
                                            Title:



                                        By:
                                            ------------------------------------
                                            Title:







                                        U.S. TRUST COMPANY OF TEXAS, N.A.,
                                        AS TRUSTEE



                                        By:
                                            ------------------------------------
                                            Title:





                                       70
<PAGE>   78
                                                              ANNEX A -- Form of
                                                        Regulation S Certificate

                            REGULATION S CERTIFICATE

U.S. Trust Company of Texas, N.A.,
                  As Trustee



               Re: Teekay Shipping Corporation

                   8.875% Senior Notes due July 15, 2011 (the "Securities")

               Reference is hereby made to the Indenture, dated as of June 22,
2001 (the "Indenture"), between Teekay Shipping Corporation and U.S. Trust
Company of Texas, N.A., as Trustee. Terms used but not defined herein and
defined in Regulation S or in the Indenture shall have the meanings given to
them in Regulation S or the Indenture, as the case may be.

               This certificate relates to U.S. $_______________ stated amount
at Maturity of Securities, which are evidenced by the following certificate(s)
(the "Specified Securities"):

               ISIN No(s).
                           -----------------------------------------------------

               CERTIFICATE No(s).
                                  ----------------------------------------------

The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the United States Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.

               The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Regulation S Security or an interest therein. In connection with such
transfer, the Owner hereby certifies that, unless such transfer is being
effected pursuant to an effective registration statement under the Securities
Act, such transfer is being effected in accordance with Rule 904 or Rule 144
under the Securities Act and with all applicable securities laws of the states
of the United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as follows:

               (1) the Owner is not a distributor of the Securities, an
          affiliate of the Company or any such distributor or a person acting on
          behalf of any of the foregoing;

               (2)  the offer of the Specified Securities was not made to a
                    person in the United States;


                                      A-1

<PAGE>   79

               (3) either:

                         (i) at the time the buy order was originated, the
                    Transferee was outside the United States or the Owner and
                    any person acting on its behalf reasonably believed that the
                    Transferee was outside the United States, or

                         (ii) the transaction is being executed in, on or
                    through the facilities of the Eurobond market, as regulated
                    by the Association of International Bond Dealers, or another
                    designated offshore securities market and neither the Owner
                    nor any person acting on its behalf knows that the
                    transaction has been prearranged with a buyer in the United
                    States;

               (4)  no directed selling efforts in contravention of the
                    requirements of Rule 904(b) have been made in the United
                    States by or on behalf of the Owner or any affiliate
                    thereof; and

               (5)  the transaction is not part of a plan or scheme to evade the
                    registration requirements of the Securities Act.

               This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Purchasers under the
Purchase Agreement.

Dated:
       ------------------

                                        (Print the name of the Undersigned, as
                                        such term is defined in the second
                                        paragraph of this certificate.)

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        (If the Undersigned is a corporation,
                                        partnership or fiduciary, the title of
                                        the person signing on behalf of the
                                        Undersigned must be stated.)

                                      A-2
<PAGE>   80



                                                              ANNEX B -- Form of
                                               Restricted Securities Certificate

                        RESTRICTED SECURITIES CERTIFICATE

U.S. Trust Company of Texas, N.A.,
                  As Trustee





               Re: Teekay Shipping Corporation
                   8.875% Senior Notes due July 15, 2011 (the "Securities")

               Reference is hereby made to the Indenture, dated as of June 22,
2001 (the "Indenture"), among Teekay Shipping Corporation and U.S. Trust Company
of Texas, N.A., as Trustee. Terms used but not defined herein and defined in
Rule 144A or in the Indenture shall have the meanings given to them in Rule 144A
or the Indenture, as the case may be.

               This certificate relates to U.S. $_______________ stated amount
at maturity of Securities, which are evidenced by the following certificate(s)
(the "Specified Securities"):

               CUSIP No(s).
                            ----------------------------------------------------

               CERTIFICATE No(s).
                                  ----------------------------------------------

The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the United States Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.

               The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security or an interest therein. In connection with such transfer,
the Owner hereby certifies that such transfer is being effected in accordance
with Rule 144A under the Securities Act and all applicable securities laws of
the states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as:

               (1)  the Specified Securities are being transferred to a person
                    that the Owner and any person acting on its behalf
                    reasonably believe is a "qualified institutional buyer"
                    within the meaning of Rule 144A, acquiring for its own
                    account or for the account of a qualified institutional
                    buyer; and

                                      B-1

<PAGE>   81

               (2)  the Owner and any person acting on its behalf have taken
                    reasonable steps to ensure that the Transferee is aware that
                    the Owner may be relying on Rule 144A in connection with the
                    transfer.

               Upon giving effect to this request to exchange a beneficial
interest in Regulation S Global Securities for a beneficial interest in the
Restricted Global Security, the resulting beneficial interest shall be subject
to the restrictions on transfer applicable to the Restricted Global Securities
pursuant to the Indenture and the Securities Act.


                                      B-2

<PAGE>   82


     This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers under the Purchase
Agreement.

Dated:
       ------------------

                                        (Print the name of the Undersigned, as
                                        such term is defined in the second
                                        paragraph of this certificate.)

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        (If the Undersigned is a corporation,
                                        partnership or fiduciary, the title of
                                        the person signing on behalf of the
                                        Undersigned must be stated.)


                                      B-3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.17
<SEQUENCE>4
<FILENAME>o05789ex4-17.txt
<DESCRIPTION>EXHIBIT 4.17
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 4.17


       FORM OF 8.875% SENIOR NOTE DUE 2011 OF TEEKAY SHIPPING CORPORATION

                                 [Face of Note]

               [INCLUDE IF SECURITY IS A GLOBAL SECURITY - THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

               [INCLUDE IF SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY
TRUST COMPANY IS THE UNITED STATES DEPOSITARY - UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 55
WATER STREET, NEW YORK, NEW YORK 10004, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF CEDE & CO., AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL BECAUSE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]


<PAGE>   2


                           TEEKAY SHIPPING CORPORATION

                      8.875% Senior Notes due July 15, 2011

CUSIP NO.____
ISIN NO.

No.                        $

               Teekay Shipping Corporation, a corporation duly incorporated and
existing under the laws of the Republic of the Marshall Islands (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
__________, or registered assigns, the stated amount at maturity of __________
U.S. Dollars [IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT -, which stated
amount at maturity may from time to time be increased or decreased to such other
stated amounts at maturity, as may be set forth in the records of the Trustee
hereinafter referred to in accordance with the Indenture,] on July 15, 2011, and
to pay interest thereon at a rate of 8.875% per annum in cash semi-annually to
the Holder of record at the close of business on January 1 and July 1, as the
case may be, (the "Regular Record Date") immediately preceding the applicable
Interest Payment Date, on January 15 and July 15 of each year (the "Interest
Payment Dates"), commencing on January 15, 2002; interest on this Security will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from June 22, 2001. This Security will bear interest on
the overdue stated amount at maturity and premium, if any, and to the extent
permitted by law, overdue interest at a rate of 8.875% plus 1% per annum.

               The cash interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice of which states the Special Record Date, the
payment date (which shall be not less than five nor more than 10 days after the
Special Record Date), and the amount to be paid, and such notice shall be given
to Holders of Securities not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Interest on this Security shall be computed on
the basis set forth in the Indenture.

               Payment of the stated amount at maturity of (and premium, if any)
and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, the City of New
York, in such coin or currency of the United States as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Company, payment of interest on this Security may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.

               Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.


<PAGE>   3

               Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

               IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.

Dated:

                                        TEEKAY SHIPPING CORPORATION


                                        By:
                                            ------------------------------------
                                            Title:






<PAGE>   4


                                [Reverse of Note]

               This Security is one of a duly authorized issue of Securities of
the Company designated as its 8.875% Senior Notes due July 15, 2011 (herein
called the "Securities"), issued and to be issued under an indenture dated as of
June 22, 2001 (herein called the "Indenture"), between the Company and U.S.
Trust Company of Texas, N.A., as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.

               As provided for in the Indenture, the Company may, subject to
certain limitations, from time to time, without notice or other consent of the
Holders, create and issue Additional Securities ranking pari passu with the
Securities issued the date hereof so that such Additional Securities shall be
consolidated and form a single series with the Securities initially issued by
the Company and shall have the same terms as to status, redemption or otherwise
as Securities originally issued. Any Additional Securities shall be issued with
the benefit of any indenture supplemental to the Indenture.

               At the Company's option, the Company may redeem the Securities in
whole or in part at any time at a redemption price equal to the greater of (i)
100% of the principal amount of the Securities to be redeemed and (ii) the sum
of the present values of the remaining scheduled payments of principal and
interest on the Securities to be redeemed (excluding the portion of any such
interest accrued to the Redemption Date) discounted to the Redemption Date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Yield, plus 50 basis points, plus, in each case, accrued and
unpaid interest to the Redemption Date.

               The Securities shall be subject to redemption, at the option of
the Company, as a whole but not in part, at any time upon not fewer than 30 nor
more than 60 days' notice mailed to each Holder of Securities at the addresses
appearing in the Security Register at a redemption price equal to 100% of the
principal amount of the Securities plus accrued interest to but excluding the
Redemption Date if the Company has become or would become obligated to pay on
the next date on which any amount would be payable under or with respect to the
Securities, any Additional Amounts as a result of any change or amendment to the
laws (including any regulations promulgated thereunder) of any Taxing
Jurisdiction, or any change in or amendment to any official position regarding
the application or interpretation of such laws or regulations, which change or
amendment is announced or becomes effective on or after June 22, 2001.

               If less than all of the Securities are to be redeemed at any
time, the Trustee shall select the Securities to be redeemed by such method as
the Trustee shall deem fair and appropriate in the aggregate principal amount
specified by the Company. The Trustee may select for redemption Securities and
portions of Securities in amounts of U.S.$1,000 or whole multiples of
U.S.$1,000.

               The Securities do not have the benefit of any sinking fund
obligations.

               In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.

               If an Event of Default shall occur and be continuing, the stated
amount at maturity of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.
<PAGE>   5

               The Indenture provides that, subject to certain conditions, if a
Change of Control Triggering Event occurs, the Company shall be required to make
an Offer to Purchase for all or a specified portion of the Securities.

               The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Security or (ii) certain restrictive
covenants and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.

               The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of a majority in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

               No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the stated amount at
maturity of (and premium, if any) and interest on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.

               As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, the City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
stated amount at maturity, will be issued to the designated transferee or
transferees.

               The Securities are issuable only in registered form without
coupons in stated amounts of $1,000 at maturity and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate stated amount at
maturity of Securities of a different authorized denomination, as requested by
the Holder surrendering the same.

               No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

               Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

               Interest on this Security shall be computed on the basis of a
360-day year of twelve 30-day months.
<PAGE>   6

               All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

               The Indenture and this Security shall be governed by and
construed in accordance with the laws of the State of New York.


<PAGE>   7




                       OPTION OF HOLDER TO ELECT PURCHASE

               If you want to elect to have this Security purchased in its
entirety by the Company pursuant to Section 10.09 of the Indenture, check the
box:

                  [ ]

               If you want to elect to have only a part of this Security
purchased by the Company pursuant to Section 10.09 of the Indenture, state the
amount (which must be in multiples of $1,000):

                  $
                   --------------


Dated:                     Your Signature:
                                           -------------------------------------
                                           (Sign exactly as name appears on the
                                           other side of this Security)

Signature Guarantee:
                    ---------------------------------------------------
                           (Signature must be guaranteed by
                           a member firm of the New York Stock
                           Exchange or a commercial bank or
                           trust company)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>5
<FILENAME>o05789ex5-1.txt
<DESCRIPTION>EXHIBIT 5.1
<TEXT>

<PAGE>   1
                                                                     EXHIBIT 5.1

                                PERKINS COIE LLP

      1211 SOUTHWEST FIFTH AVENUE, SUITE 1500 - PORTLAND, OREGON 97204-3715
              TELEPHONE: (503) 727-2000 - FACSIMILE: (503) 727-2222


                                  July 11, 2001



Teekay Shipping Corporation
TK House
Bayside Executive Park
West Bay Street and Blake Road
P.O. Box AP-59213
Nassau, Commonwealth of the Bahamas

         RE:      TEEKAY SHIPPING CORPORATION
                  REGISTRATION STATEMENT ON FORM F-4

Dear Sirs:

     We have acted as counsel to Teekay Shipping Corporation, a Republic of The
Marshall Islands corporation (the "Company"), in connection with its offer to
exchange $1,000 principal amount of 8.875% Senior Notes due 2011 of the Company
(the "Exchange Notes"), for each $1,000 principal amount of the outstanding
unregistered 8.875% Senior Notes due 2011 of the Company (the "Private Notes"),
which Exchange Notes are the subject of the Registration Statement on Form F-4
(as amended, the "Registration Statement"), filed by the Company today with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations promulgated thereunder
(the "Rules"). The Exchange Notes will be issued pursuant to an Indenture (the
"Indenture") dated June 22, 2001, between the Company and U.S. Trust Company of
Texas, N.A., as Trustee (the "Trustee"). You have asked us to render our opinion
as to the matters hereinafter set forth. Capitalized terms used but not defined
herein shall have the same meaning as in the Registration Statement.

     In the course of our representation as described above, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the documents described in Schedule A hereto. The documents listed in Schedule A
are herein collectively referred to as the "Documents." Our opinions are based
solely

- --------------------------------------------------------------------------------
ANCHORAGE BELLEVUE BOISE DENVER HONG KONG LOS ANGELES MENLO PARK OLYMPIA
PORTLAND SAN FRANCISCO SEATTLE SPOKANE TAIPEI WASHINGTON, D.C.

<PAGE>   2
Teekay Shipping Corporation
July 11, 2001
Page 2


upon a review of the Documents and, with your consent, we have reviewed no other
documents, corporate records, certificates or other statements as a basis for
the opinions expressed herein.

     As to matters of fact bearing upon the opinions expressed herein, we have,
with your consent and without further investigation, relied upon information in
certificates provided to us by the Company's directors and officers.

     In rendering the opinions expressed herein, we have further relied upon the
following assumptions, the accuracy of which we have not independently verified:

(a)  Each document submitted to us for review is accurate and complete, each
     such document that is an original is authentic, each such document that is
     a copy conforms to an authentic original, and all signatures on each such
     document are genuine.

(b)  The Company is validly existing under applicable law.

(c)  The Company has the power, authority and legal right to execute and
     deliver, and to perform its obligations under, the Indenture and the
     Exchange Securities.

(d)  The Company has duly authorized, executed and delivered the Indenture and
     any other certificates, instruments or documents (other than the Exchange
     Notes) required to be executed and delivered in connection therewith.

(e)  The Exchange Notes have been duly authorized, executed and issued by the
     Company and duly authenticated by the Trustee.

(f)  Each of the Company and the Trustee has satisfied those legal requirements
     applicable to it that are necessary to make the Indenture and any other
     certificates, instruments or documents (other than, with respect to the
     Company, the Exchange Notes) required to be executed and delivered by it in
     connection therewith enforceable against such party in accordance with
     their respective terms.

OPINION

     Based upon the foregoing examinations and assumptions and subject to the
qualifications and exclusions stated below, we are of the opinion that:

<PAGE>   3
Teekay Shipping Corporation
July 11, 2001
Page 3


     1.   Upon (a) the Registration Statement becoming effective under the
Securities Act, (b) qualification of the Indenture under the Trust Indenture Act
of 1939, as amended, and (c) delivery of the Exchange Notes in exchange for the
Private Notes as contemplated by the Registration Statement, the Exchange Notes
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms.

     2.   The summary set forth under the heading "Tax Considerations -- United
States Federal Income Tax Considerations" in the final prospectus forming a part
of the Registration Statement is accurate and describes the material United
States federal income tax consequences expected to be relevant to the recipients
of Exchange Notes in exchange for Private Notes who were initial purchasers of
the Private Notes, acquired the Private Notes as a capital asset, are United
States persons and are not among particular categories of investors subject to
special treatment under certain United States federal income tax laws. This
opinion is based on provisions of the United States Internal Revenue Code of
1986, as amended, applicable United States Treasury Department Regulations,
published administrative positions and judicial decisions, all existing as of
the date hereof.

EXCLUSIONS AND QUALIFICATIONS

     The opinions expressed above are subject to the following exclusions and
qualifications:

          a.   Our opinions are as of the date hereof and we have no
responsibility to update this opinion for events and circumstances occurring
after the date hereof or as to facts relating to prior events that are
subsequently brought to our attention. We disavow any undertaking to advise you
of any changes in law.

          b.   We express no opinion as to enforceability of any right or
obligation to the extent such right or obligation is subject to and limited by
(i) the effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium, fraudulent transfer or other laws
affecting or relating to the rights of creditors generally or (ii) the rules
governing the availability of specific performance, injunctive relief or other
equitable remedies and general principles of equity, regardless of whether
arising prior to, or after, the date hereof or considered in a proceeding in
equity or at law.

<PAGE>   4
Teekay Shipping Corporation
July 11, 2001
Page 4


          c.   We are qualified to practice law in the state of New York and do
not express any opinions herein concerning any laws other than the laws in their
current forms of the state of New York and the federal laws of the United States
of America, and we express no opinion with respect to the laws of any other
jurisdiction.

         We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the prospectus made
part of the Registration Statement under the caption "Legal Matters." In giving
this consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act or related
Rules.

                                         Very truly yours,

                                         /s/ Perkins Coie LLP

                                         PERKINS COIE LLP

<PAGE>   5

                                  SCHEDULE A


(a)      The Registration Statement

(b)      The Indenture

(c)      The form of the Private Notes

(d)      The form of the Exchange Notes

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.2
<SEQUENCE>6
<FILENAME>o05789ex8-2.txt
<DESCRIPTION>EXHIBIT 8.2
<TEXT>

<PAGE>   1

                                                                     EXHIBIT 8.2

                              SEWARD & KISSELL LLP
                             ONE BATTERY PARK PLAZA
                            NEW YORK, NEW YORK 10004

                           TELEPHONE: (212) 574-1200
                           FACSIMILE: (212) 480-8421
                                 WWW.SEWKIS.COM


                                                       July 11, 2001


Teekay Shipping Corporation
TK House, Bayside Executive Park
West Bay and Blake Road
P.O. Box AP-59213
Nassau, Commonwealth of the Bahamas



Re:  Registration on Form F-4 of 8.875% Senior Notes Due July 15, 2011 of Teekay
     Shipping Corporation


Ladies and Gentlemen:

     In connection with the Registration Statement on Form F-4 filed by Teekay
Shipping Corporation, a Republic of The Marshall Islands corporation (the
"Company"), with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, and the rules and regulations thereunder,
prepared in connection with the exchange offer of US$250 million Senior Notes
due 2011 of Teekay (the "Registration Statement"), we have been requested to
render our opinion as to the matters hereinafter set forth.

     In formulating our opinion as to the United States tax matters described
below, we have examined such documents as we have deemed appropriate, including
the Registration Statement and the prospectus (the "Prospectus") that forms a
part thereof. We also have obtained such additional information as we have
deemed relevant and necessary from representatives of the Company.

     Based on the facts as set forth in the Prospectus and, in particular, on
the representations, covenants, assumptions, conditions and qualifications
described in the Prospectus under the caption "Business-Taxation of Teekay -
United States Taxation", we hereby confirm that the statements contained in the
Prospectus under the caption "Business-Taxation of Teekay - United States
Taxation" fairly summarize the legal matters referred to therein and fairly
present the information called for with respect to such legal matters.

<PAGE>   2

July 11, 2001
Page 2

     We hereby consent to the use of our name in the Registration Statement and
in the Prospectus as the same appears under the captions "Business-Taxation of
Teekay - United States Taxation" and "Legal Matters," and to the use of this
opinion as an exhibit to the Registration Statement.

     Our opinions and the tax discussion as set forth in the Prospectus under
the caption "Business-Taxation of Teekay - United States Taxation" are based on
the Internal Revenue Code of 1986, as amended, existing and proposed Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service which may be cited or used as precedents, and the published
opinions of the United States Tax Court and other United States Federal Courts,
each as they exist as of the date hereof, and any of which may be changed at any
time with retroactive effect. No opinion is expressed on any matters other than
those specifically referred to above by reference to the Prospectus.

                                                        Very truly yours,



                                                        /s/ Seward & Kissell
                                                        ------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.3
<SEQUENCE>7
<FILENAME>o05789ex8-3.txt
<DESCRIPTION>EXHIBIT 8.3
<TEXT>

<PAGE>   1

                                                                     EXHIBIT 8.3

(212) 922-2200                                                        2375.20034

July 11, 2001

Teekay Shipping Corporation
TK House, Bayside Executive Park
West Bay and Blake Road
P.O. Box AP-59213
Nassau, Commonwealth of the Bahamas


Dear Sirs:

TEEKAY SHIPPING CORPORATION, REGISTRATION STATEMENT ON FORM F-4

         We have acted as special counsel for Teekay Shipping Corporation, a
Marshall Islands corporation (the "Company") on matters of Marshall Islands law
in connection with the Registration Statement on Form F-4 (the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, and the rules and
regulations thereunder, in connection with the exchange offering by the Company
of an aggregate principal amount of $250,000,000 of the Company's 8.875% Senior
Notes due 2011 (the "Notes"). The Notes are being issued under the indenture
dated as of June 22, 2001 (the "Indenture") between the Company and U.S. Trust
Company of Texas, N.A., as trustee.

         As such counsel, we have examined the Registration Statement and such
other papers, documents and certificates of public officials and certificates of
officers of the Company and its subsidiaries as we have deemed relevant and
necessary as the basis for the opinions hereafter expressed. In such
examinations, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as conformed or photostatic
copies.

         This opinion is limited to the law of the Republic of The Marshall
Islands. Insofar as Marshall Islands law is involved in the rendering of this
opinion, we have relied on opinions of counsel in the Marshall Islands rendered
in transactions which we consider to be sufficiently similar to those
contemplated by the Registration Statement in order to afford a satisfactory
basis for such opinion, and upon our independent examinations of the
Associations Law of the Republic of the Marshall Islands and our knowledge and
interpretation of analogous laws of the United States.

<PAGE>   2

         Based on the foregoing and having regard to legal considerations which
we deem relevant, we are of the opinion that the statements in the Prospectus
under the captions "Tax Consideration - Marshall Islands Taxation", "Business -
Taxation of Teekay - Marshall Islands Taxation" and "Business Regulation"
insofar as such statements constitute summaries of the legal matters, documents
or proceedings referred to therein, fairly present the information expected to
be relevant to the holders of the notes offered pursuant to the Prospectus, and
fairly summarize the matters referred to therein.

         We consent to the reference of our Firm under the captions "Tax
Consideration - Marshall Islands Taxation", "Business - Taxation of Teekay -
Marshall Islands Taxation" and "Legal Matters" in the Registration Statement and
the related Prospectus, and to the use of this opinion as an exhibit to the
Registration Statement.

         This opinion is solely for the benefit of and may be relied upon by the
Company. This opinion may not be relied upon by any other person or entity
without the prior written approval of the undersigned.

Very truly yours,

/s/ Watson, Farley & Williams

WATSON, FARLEY & WILLIAMS

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.4
<SEQUENCE>8
<FILENAME>o05789ex8-4.txt
<DESCRIPTION>EXHIBIT 8.4
<TEXT>

<PAGE>   1

                                                                     EXHIBIT 8.4

Writer's Direct:
Telephone:         (242) 328-6287
Telefax:           (242) 328-0386
E-Mail:            gaw@gtclaw.com

VIA TELEFAX: 503-795-4086
VIA E-MAIL: BOSLD@PerkinsCoie.com

Our Ref: GAW/ml/T-185/5565/23

Teekay Shipping Corporation
TK House, Bayside Executive Park
West Bay and Blake Road
P.O. Box AP-59213
Nassau, Commonwealth of the Bahamas

Dear Sirs:

RE: REGISTRATION STATEMENT ON FORM F-4

In connection with the Registration Statement on Form F-4 filed by Teekay
Shipping Corporation, a Republic of The Marshall Islands corporation ("Teekay"),
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended, and the rules and regulations thereunder, prepared in
connection with the exchange offer of US$250 million Senior Notes due 2011 of
Teekay (the "Registration Statement"), we have been requested to render our
opinion as to the matters hereinafter set forth.

In this regard, we have examined a draft as at July 11th, 2001, identified to
our satisfaction, of the Registration Statement and the related Prospectus (the
"Documents"), and in our examination of same, we have assumed, without
independent investigation, the authenticity of all such Documents, the power,
authority and legal right of all parties thereto to enter into and perform their
respective obligations under the said Documents and the due authorization,
execution and delivery of the said Documents by all of the parties to those
Documents to which they are a party. We have also assumed the accuracy and
completeness of all factual representations made in the Documents.

Based upon and subject to the foregoing we are of the opinion that the summary
set forth under the heading "Business - Taxation of Teekay - Bahamian Taxation"
and "Tax Considerations - Bahamian Taxation" in the Prospectus forming a part of
the Registration Statement is accurate and describes the Bahamian tax
consequences expected to be relevant to the prospective initial purchasers of
the Senior Notes Due 2011 offered pursuant to the Prospectus.

We hereby consent to the use of our name in the Registration Statement and in
the related Prospectus as the same appears under the captions "Business -
Taxation of Teekay - Bahamian Taxation" and "Tax Considerations - Bahamian
Taxation" and "Legal Matters," and to the use of this opinion as an exhibit to
the Registration Statement.

Our opinion expressed above is limited to the laws of the Commonwealth of The
Bahamas as in effect on the date hereof. Insofar as the Registration Statement
and the related Prospectus are expressed to be governed by any other system of
law, we have

<PAGE>   2

assumed with your approval the validity and enforceability of same under the
applicable system of law.

This opinion is solely for the benefit of and may be relied upon by Teekay. This
opinion may not be relied upon by any other person or entity without the prior
written approval of the undersigned.

Yours faithfully,
GRAHAM, THOMPSON & CO.

/s/ Gilbert A. Ward

PER:  Gilbert A. Ward

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.5
<SEQUENCE>9
<FILENAME>o05789ex8-5.txt
<DESCRIPTION>EXHIBIT 8.5
<TEXT>

<PAGE>   1

                                                                     EXHIBIT 8.5

                                                   JK/skd/6860.16
                                                   Direct Tel: +441 298 3559
                                                   Direct Fax: +441 298-4154
                                                   Direct e-mail: cknight@ask.bm

                                                   11 July 2001
Teekay Shipping Corporation
TK House, Bayside Executive Park
West Bay and Blake Road
P.O. Box AP-59213
Nassau, Commonwealth of the Bahamas


Dear Sirs

TEEKAY SHIPPING CORPORATION (THE "COMPANY") AND
BONA SHIPHOLDING LTD. (THE "BERMUDA SUBSIDIARY")

We have acted as legal counsel in Bermuda to the Company and the Bermuda
Subsidiary and have been requested to provide this opinion to you in connection
with the draft Registration Statement (as defined in the Schedule to this
opinion).

For the purposes of this opinion we have examined and relied upon the documents
listed, and in some cases defined, in the Schedule to this opinion (the
"Documents").

ASSUMPTIONS

In stating our opinion we have assumed: -

(a)  the authenticity, accuracy and completeness of all Documents and other
     documentation examined by us submitted to us as originals and the
     conformity to authentic original documents of all Documents and other such
     documentation submitted to us as certified, conformed, notarised, faxed or
     photostatic copies;

(b)  that each of the Documents and all other such documentation which was
     received by electronic means is complete, intact and in conformity with the
     transmission as sent;

(c)  the genuineness of all signatures on the Documents;

(d)  the authority, capacity and power of each of the persons signing the
     Documents;

(e)  that any representation, warranty or statement of fact or law, other than
     as to the laws of Bermuda, made in any of the Documents is true, accurate
     and complete;

(f)  that the Bermuda Subsidiary is not carrying on investment business in or
     from within Bermuda under the provisions of the Investment Business Act
     1998 as amended from time to time; and

<PAGE>   2

                                      -2-

(g)  that, when completed, signed and delivered, the Registration Statement will
     be in a form which does not differ in any material respect from the draft
     which we have examined for the purposes of this opinion.

OPINION

Based upon and subject to the foregoing and subject to the reservation set out
below and to any matters not disclosed to us, we are of the opinion that the
statements in the Prospectus that forms part of the Registration Statement under
the captions "Business - Taxation of Teekay - Bermuda Taxation" insofar as they
purport to describe the provisions of the laws of Bermuda referred to therein or
legal conclusions with respect thereto, have been reviewed by us and are
accurate and correct in all material respects and fairly present the information
disclosed in all material respects.

RESERVATION

We have the following reservation: -

We express no opinion as to any law other than Bermuda law and the opinion
expressed herein does not relate to compliance with or matters governed by the
laws of any jurisdiction except Bermuda. This opinion is limited to Bermuda law
as applied by the Courts of Bermuda at the date hereof.

DISCLOSURE

We consent to the reference of our Firm under the captions "Business - Taxation
of Teekay - Bermuda Taxation" and "Legal Matters" in the Registration Statement
and the related Prospectus, and to the use of this opinion as an exhibit to the
Registration Statement. This consent may be incorporated by reference in any
registration statement of the Company filed pursuant to the United States
Securities Act of 1933, as amended, in connection with the exchange offer of the
notes.

This opinion speaks as of its date and is strictly limited to the matters stated
herein and we assume no obligation to review or update this opinion if
applicable law or the existing facts or circumstances should change. This
opinion is governed by and is to be construed in accordance with Bermuda law. It
is given on the basis that it will not give rise to any legal proceedings with
respect thereto in any jurisdiction other than Bermuda.

This opinion is solely for the benefit of and may be relied upon by the Company.
This opinion may not be relied upon by any other person or entity without the
prior written approval of the undersigned.

Yours faithfully

/s/  Appleby Spurling & Kempe

APPLEBY SPURLING & KEMPE


<PAGE>   3

                                      -3-


                                    SCHEDULE

1.   A certified copy of the "TAX ASSURANCE", dated 21 September 1990, issued by
     the Registrar of Companies for the Minister of Finance in relation to the
     Bermuda Subsidiary

2.   A draft Registration Statement dated 11 July 2001 on Form F-4 and related
     Prospectus to be filed by the Company with the Securities and Exchange
     Commission pursuant to The Securities Act of 1933 of the United States of
     America, as amended, and the rules and regulations thereunder, prepared in
     connection with the exchange offer of US$250 million Senior Notes of the
     Company (the "REGISTRATION STATEMENT").



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.6
<SEQUENCE>10
<FILENAME>o05789ex8-6.txt
<DESCRIPTION>EXHIBIT 8.6
<TEXT>

<PAGE>   1

                                                                     EXHIBIT 8.6



Teekay Shipping Corporation
TK House, Bayside Executive Park
West Bay and Blake Road
P.O.Box AP-59213
Nassau
COMMONWEALTH OF THE BAHAMAS


Your ref:         Our ref:             Lawyer in charge:      Date:
                  tso07004.b01/TVE     Rolf Johan Ringdal     Oslo, 11 July 2001




REGISTRATION STATEMENT ON FORM F-4 - NORWEGIAN LEGAL OPINION

We act as special Norwegian counsel for Teekay Shipping Corporation (the
"Company") in matters pertaining to Norwegian law in connection with the
Registration Statement on Form F-4 filed by the Company (the "Registration
Statement") with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, and the rules and regulations thereunder, in
connection with the exchange offering by the Company of an aggregate principal
amount of $250,000,000 of the Company's 8.875% Senior Notes due 2011 (the
"Notes"). The Notes are being issued under the indenture dated as of June 22,
2001 (the "Indenture") between the Company and U.S. Trust Company of Texas,
N.A., as trustee. You have asked us to render our opinion as to the matters
hereinafter set forth.

For the purpose of rendering this opinion we have examined the Registration
Statement, the prospectus which forms part of the Registration Statement (the
"Prospectus") and such publicly available documents in relation to the corporate
existence of Ugland Nordic Shipping ASA ("UNS"), Ugland Nordic Investment AS
(together the "Corporations"), KS Nordic Laurita, KS Bona Fortuna, KS Bona
Freighter, KS Nordic Akarita and KS Nordic Apollo (collectively the
"Partnerships", and together with the Corporations the "Companies") as we have
deemed necessary.

In rendering this opinion we have assumed that documents submitted to us as
copies conform to the originals thereof, and all signatures thereon are
authentic.

We express no opinion as to the laws of any jurisdiction other than those of the
Kingdom of Norway in force and effect as at the date hereof.

Based on the foregoing and subject to the qualifications set out herein, we are
of the opinion that the statements in the Prospectus under the captions
"Business-Taxation of

<PAGE>   2

Teekay - Norwegian Taxation" insofar as such statements constitute summaries of
the legal matters, documents or proceedings referred to therein, fairly present
the information called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein.

We consent to the reference of our Firm under the captions "Business-Taxation of
Teekay - Norwegian Taxation" and "Legal Matters" in the Registration Statement
and the related Prospectus, and to the use of this opinion as an exhibit to the
Registration Statement.

The Opinions given herein are as of the date hereof, and we assume no obligation
to update or supplement this opinion to reflect any facts of circumstances which
may hereafter come to our attention or to any changes in law which may occur.

This Opinion is strictly limited to the matters set out above, and is not to be
extended by implication to any of the matters. This Opinion is furnished by us
for the benefit of the Company and may not be relied upon by any other person or
entity for any other purpose without the prior written permission of the
undersigned.


Yours sincerely,
BUGGE, ARENTZ-HANSEN & RASMUSSEN

/s/ Terje Sommer

Terje Sommer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>11
<FILENAME>o05789ex12-1.txt
<DESCRIPTION>EXHIBIT 12.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 12.1

                    Statement Regarding Computation of Ratios
                           Teekay Shipping Corporation
                Computation of Ratio of Earnings to Fixed Charges
                          (In Thousands Except Ratios)

<TABLE>
<CAPTION>
                                                Three Months Ended March 31,
                                          ---------------------------------------   Pro Forma
                                           Pro Forma                                 Dec. 31,
                                              2001          2001          2000         2000
                                          -----------   -----------   -----------  -----------
                                          (unaudited)   (unaudited)   (unaudited)  (unaudited)
<S>                                       <C>           <C>             <C>        <C>
Fixed Charges:
Interest expense and amortization of
  deferred financing costs                   21,343        14,786        19,989      106,500
Capitalized interest                            487            --            --          474
                                            -------       -------        ------      -------
Total Fixed Charges (A)                      21,830        14,786        19,989      106,974
                                            -------       -------        ------      -------
Earnings:
Net income (loss)                           145,097       144,688        19,940      265,554
Add (deduct):
  Extraordinary items                            --            --            --           --
  Income taxes                                1,186           671           500        6,016
  Minority interest expense                   2,481         1,396           199        3,546
  Equity income                              (3,368)       (2,793)         (819)     (11,786)
  Interest expense and amortization of
    deferred financing costs                 21,343        14,786        19,989      106,500
  Amortization of capitalized interest          298           260           248          893
                                            -------       -------        ------      -------
  Total Earnings Available To Cover
    Fixed Charges (B)                       167,037       159,008        40,057      370,723
                                            -------       -------        ------      -------
Ratio of Earnings to Fixed Charges (B/A)        7.6x         10.8x          2.0x         3.5x
                                            =======       =======        ======      =======
</TABLE>



<TABLE>
<CAPTION>
                                                               Fiscal Years Ended
                                            ------------------------------------------------------
                                            Dec. 31,   Dec. 31,      Mar. 31,  Mar. 31,   Mar. 31,
                                              2000       1999          1999      1998       1997
                                            --------   --------      --------  --------   --------

<S>                                         <C>        <C>           <C>       <C>        <C>
Fixed Charges:
Interest expense and amortization of
  deferred financing costs                    74,540     44,996        44,797    56,269    60,810
Capitalized interest                              --      1,710         3,018       283       232
                                             -------    -------       -------   -------    -------
Total Fixed Charges (A)                       74,540     46,706        47,815    56,552    61,042
                                             -------    -------       -------   -------    -------
Earnings:
Net income (loss)                            270,020    (19,595)       45,406    70,504     42,630
Add (deduct):
  Extraordinary items                             --         --         7,306        --         --
  Income taxes                                   999      1,500         1,900        --         --
  Minority interest expense                    1,874         --            --        --         --
  Equity income                               (9,546)      (721)           --        --         --
  Interest expense and amortization of
    deferred financing costs                  74,540     44,996        44,797    56,269     60,810
  Amortization of capitalized interest           999        668         1,146     1,135      1,119
                                             -------    -------       -------   -------    -------
  Total Earnings Available To Cover
    Fixed Charges (B)                        338,886     26,848       100,555   127,908    104,559
                                             -------    -------       -------   -------    -------
Ratio of Earnings to Fixed Charges (B/A)         4.6x       0.6x (A)      2.1x      2.3x       1.7x
                                             =======    =======       =======   =======    =======
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.1
<SEQUENCE>12
<FILENAME>o05789ex15-1.txt
<DESCRIPTION>EXHIBIT 15.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 15.1


July 10, 2001


Board of Directors
Teekay Shipping Corporation


We are aware of the inclusion in the Registration Statement (Form F-4 No.
33-0000) of Teekay Shipping Corporation for the registration of $250,000,000
Senior Notes due 2011 of our report dated April 26, 2001, relating to the
unaudited consolidated interim financial statements of Teekay Shipping
Corporation for the quarter ended March 31, 2001.

Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>13
<FILENAME>o05789ex21-1.txt
<DESCRIPTION>EXHIBIT 21.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 21.1


The following is a list of the of Company's significant subsidiaries as at
June 1, 2001.

<TABLE>
<CAPTION>

                                    NAME OF STATE OR               PROPORTION OF
SIGNIFICANT                         JURISDICTION OF                OWNERSHIP
SUBSIDIARY                          INCORPORATION                  INTEREST
- ----------                          -------------                  -------------
<S>                                <C>                            <C>

BONA SHIPHOLDING LTD.               BERMUDA                         100%

SINGLE SHIP COMPANIES (2)           AUSTRALIA                       100%

SINGLE SHIP LIMITED
LIABILITY COMPANIES (42)            MARSHALL ISLANDS                100%

SOPONATA TEEKAY LIMITED             BERMUDA                          50%

TEEKAY CHARTERING LIMITED           MARSHALL ISLANDS                100%

TEEKAY SHIPPING LIMITED             BAHAMAS                         100%

UGLAND NORDIC SHIPPING ASA          NORWAY                          100%
</TABLE>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.7
<SEQUENCE>14
<FILENAME>o05789ex23-7.txt
<DESCRIPTION>EXHIBIT 23.7
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 23.7


                  CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS



We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 16, 2001 (except for note 13, which is as of
March 6, 2001), with respect to the consolidated financial statements and
schedule of Teekay Shipping Corporation ("Teekay") and subsidiaries included in
the Registration Statement (Form F-4 No. 33-XXXX) and related Prospectus of
Teekay for the registration of $250,000,000 of its Senior Notes due 2011.

We also consent to the incorporation by reference therein of our report dated
February 16, 2001 (except for note 13 which is as of March 6, 2001), with
respect to the consolidated financial statements and schedule of Teekay and its
subsidiaries included in its Annual Report (Form 20-F), for the fiscal year
ended December 31, 2000, filed with the Securities and Exchange Commission.



Nassau, Bahamas,                                /s/ Ernst & Young
July 11, 2001.                                  Chartered Accountants


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.8
<SEQUENCE>15
<FILENAME>o05789ex23-8.txt
<DESCRIPTION>EXHIBIT 23.8
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 23.8


INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Teekay Shipping
Corporation on Form F-4 and related Prospectus of our reports dated April 7,
2000 and March 28, 2001 related to the financial statements of Ugland Nordic
Shipping ASA.

We also consent to the reference to us under the heading "Experts" in such
Registration Statement.


Oslo, Norway
July 11, 2001


/s/ Deloitte & Touche

DELOITTE & TOUCHE
STATSAUTORISERTE REVISORER AS
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-25.1
<SEQUENCE>16
<FILENAME>o05789ex25-1.txt
<DESCRIPTION>EXHIBIT 25.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 25.1

                                    FORM T-1

                 ==============================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               ------------------

                            STATEMENT OF ELIGIBILITY
                    UNDER THE TRUST INDENTURE ACT OF 1939 OF
                   A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                               ------------------

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                            SECTION 305(B)(2) _______

                               ------------------

                     UNITED STATES TRUST COMPANY OF NEW YORK
               (Exact name of trustee as specified in its charter)

                  New York                                     13-3818954
       (Jurisdiction of incorporation                       (I.R.S. employer
        if not a U.S. national bank)                       identification No.)

            114 West 47th Street                               10036-1532
                New York, NY                                   (Zip Code)
           (Address of principal
             executive offices)
                               ------------------
                           TEEKAY SHIPPING CORPORATION
               (Exact name of obligor as specified in its charter)

      Republic of the Marshall Islands                             N/A
      (State or other jurisdiction of                       (I.R.S. employer
       incorporation or organization)                      identification No.)

                               ------------------

      TK House, Bayside Executive Park
        West Bay Street and Blake Road                             N/A
          P.O. Box AP-59213, Nassau                             (Zip Code)
         Commonwealth of the Bahamas

                               ------------------
                      8.875% Senior Notes due July 15, 2011
                       (Title of the indenture securities)


<PAGE>   2


                                      - 2 -

                                     GENERAL

1.   GENERAL INFORMATION

     Furnish the following information as to the trustee:

     (a)  Name and address of each examining or supervising authority to which
          it is subject.

          Federal Reserve Bank of New York (2nd District), New York, New York
               (Board of Governors of the Federal Reserve System)
          Federal Deposit Insurance Corporation, Washington, D.C.
          New York State Banking Department, Albany, New York

     (b)  Whether it is authorized to exercise corporate trust powers.

          The trustee is authorized to exercise corporate trust powers.

2.   AFFILIATIONS WITH THE OBLIGOR

     If the obligor is an affiliate of the trustee, describe each such
     affiliation.

             None

3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:

     Teekay Shipping Corporation currently is not in default under any of its
     outstanding securities for which United States Trust Company of New York is
     Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
     13, 14 and 15 of Form T-1 are not required under General Instruction B.

16.  LIST OF EXHIBITS
<TABLE>
<CAPTION>

<S>              <C>       <C>
     T-1.1       --        Organization Certificate, as amended, issued by
                           the State of New York Banking Department to transact
                           business as a Trust Company, is incorporated by
                           reference to Exhibit T-1.1 to Form T-1 filed on
                           September 15, 1995 with the Commission pursuant to
                           the Trust Indenture Act of 1939, as amended by the
                           Trust Indenture Reform Act of 1990 (Registration No.
                           33-97056).

     T-1.2        --       Included in Exhibit T-1.1.

     T-1.3        --       Included in Exhibit T-1.1.
</TABLE>


<PAGE>   3


                                      - 3 -

16.  LIST OF EXHIBITS
     (cont'd)

<TABLE>
<CAPTION>

<S>              <C>       <C>
     T-1.4       --        The By-Laws of United States Trust Company of New
                           York, as amended, is incorporated by reference to
                           Exhibit T-1.4 to Form T-1 filed on September 15, 1995
                           with the Commission pursuant to the Trust Indenture
                           Act of 1939, as amended by the Trust Indenture Reform
                           Act of 1990 (Registration No. 33-97056).

     T-1.6       --        The consent of the trustee required by Section
                           321(b) of the Trust Indenture Act of 1939, as amended
                           by the Trust Indenture Reform Act of 1990.

     T-1.7       --        A copy of the latest report of condition of the
                           trustee pursuant to law or the requirements of its
                           supervising or examining authority.
</TABLE>

NOTE

As of July 5, 2001, the trustee had 2,999,029 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.

In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.

                               ------------------

Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of July 2001.

UNITED STATES TRUST COMPANY
   OF NEW YORK, Trustee

By:      /s/Cynthia Chaney
         -----------------
         Cynthia Chaney
         Assistant Vice President


<PAGE>   4





                                                                   EXHIBIT T-1.6

        The consent of the trustee required by Section 321(b) of the Act.

                     United States Trust Company of New York
                              114 West 47th Street
                               New York, NY 10036

March 10, 2000



Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC  20549

Gentlemen:

Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.

Very truly yours,


UNITED STATES TRUST COMPANY
        OF NEW YORK


         /s/Gerard F. Ganey
         --------------------------------------------
By:      Gerard F. Ganey
         Senior Vice President


<PAGE>   5


                                                                   EXHIBIT T-1.7

                     UNITED STATES TRUST COMPANY OF NEW YORK
                       CONSOLIDATED STATEMENT OF CONDITION
                                 MARCH 31, 2001
                                ($ IN THOUSANDS)


<TABLE>
<CAPTION>
<S>                                                                  <C>
ASSETS
Cash and Due from Banks                                              $    60,744
Short-Term Investments                                                    61,956

Securities, Available for Sale                                           687,786

Loans                                                                  2,866,204
Less:  Allowance for Credit Losses                                        17,858
                                                                     -----------
      Net Loans                                                        2,848,346
Premises and Equipment                                                    65,105
Other Assets                                                             264,387
                                                                     -----------
      TOTAL ASSETS                                                   $ 3,988,324
                                                                     ===========

LIABILITIES
Deposits:

      Non-Interest Bearing                                           $   635,939
      Interest Bearing                                                 2,338,442
                                                                     -----------
         Total Deposits                                                2,974,381

Short-Term Credit Facilities                                             383,958
Accounts Payable and Accrued Liabilities                                 300,828
                                                                     -----------
      TOTAL LIABILITIES                                              $ 3,659,167
                                                                     ===========

STOCKHOLDER'S EQUITY

Common Stock                                                              14,995
Capital Surplus                                                          208,551
Retained Earnings                                                        123,254
Accumulated Other comprehensive Income                                   (17,643)
                                                                     -----------
TOTAL STOCKHOLDER'S EQUITY                                               329,157
                                                                     -----------
   TOTAL LIABILITIES AND
   STOCKHOLDER'S EQUITY                                              $ 3,988,324
                                                                     ===========
</TABLE>

I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.

Richard E. Brinkmann, Managing Director & Controller

April 16, 2001

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>17
<FILENAME>o05789ex99-1.txt
<DESCRIPTION>EXHIBIT 99.1
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 99.1


                           TEEKAY SHIPPING CORPORATION

                              LETTER OF TRANSMITTAL
                          FOR TENDER OF ALL OUTSTANDING

                          8.875% SENIOR NOTES DUE 2011
                                 IN EXCHANGE FOR
                     REGISTERED 8.875% SENIOR NOTES DUE 2011

- --------------------------------------------------------------------------------


       THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
          _________ __, 2001, UNLESS EXTENDED (THE "EXPIRATION DATE").


 NOTES TENDERED IN SUCH EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME
        PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.


- --------------------------------------------------------------------------------

     The Exchange Agent is: UNITED STATES TRUST COMPANY OF NEW YORK

     YOU CAN DELIVER THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTATION TO THE EXCHANGE AGENT AT THE ADDRESSES AS FOLLOWS:

                          BY HAND DELIVERY TO 4:30 P.M.

                     United States Trust Company of New York
                            30 Broad Street, B-Level
                             New York, NY 10004-2304

                        BY OVERNIGHT COURIER AND BY HAND
                   DELIVERY AFTER 4:30 P.M. ON EXPIRATION DATE

                     United States Trust Company of New York
                           30 Broad Street, 14th Floor
                             New York, NY 10004-2304

                         BY REGISTERED OR CERTIFIED MAIL

                     United States Trust Company of New York
                                   P.O. Box 84
                              Bowling Green Station
                             New York, NY 10274-0084



<PAGE>   2


             BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):

                     United States Trust Company of New York
                            30 Broad Street, B-Level
                             New York, NY 10004-2304
                               FAX: (646) 458-8111

                              CONFIRM BY TELEPHONE:
                                 (800) 548-6565


- --------------------------------------------------------------------------------

     DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THE LETTER OF TRANSMITTAL
IS COMPLETED.

     The undersigned hereby acknowledges receipt and review of the prospectus
dated _________ __, 2001 of Teekay Shipping Corporation (the "Company") and this
letter of transmittal. These two documents together constitute the Company's
offer to exchange its 8.875% Senior Notes due 2011 (the "Exchange Notes"), the
issuance of which has been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its issued and
outstanding 8.875% Senior Notes due 2011 (the "Original Notes") (the "Exchange
Offer").

     The Company reserves the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer for the Original Notes is
open, at its discretion, in which event the term "Expiration Date" shall mean
the latest date to which such Exchange Offer is extended. The Company shall
notify United States Trust Company of New York (the "Exchange Agent") of any
extension by oral or written notice and shall make a public announcement thereof
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.

     This letter of transmittal is to be used by a holder of Original Notes
(i) if certificates of Original Notes are to be forwarded herewith or (ii) if
delivery of Original Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the "DTC")
pursuant to the procedures set forth in the prospectus under the caption "The
Exchange Offer--Book-Entry Transfer" and an "agent's message" is not delivered
as described in the prospectus under the caption "The Exchange Offer--Tendering
Through DTC's Automated Tender Offer Program." Tenders by book-entry transfer
may also be made by delivering an agent's message in lieu of this letter of
transmittal. Holders of Original Notes whose Original Notes are not immediately
available, or who are unable to deliver their Original Notes, this letter of
transmittal and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date for the Exchange Offer, or who are unable to
complete the procedure for book-entry transfer on a timely basis, must tender
their Original Notes according to the guaranteed delivery procedures set forth
in the prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2. DELIVERY OF DOCUMENTS TO THE DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

     The term "holder" with respect to the Exchange Offer for Original Notes
means any person in whose name such Original Notes are registered on the books
of the Company, any person who holds such Original Notes and has obtained a
properly completed bond power from the registered holder or any participant in
the DTC system whose name appears on a security position listing as the holder
of such


                                      -2-
<PAGE>   3

Original Notes and who desires to deliver such Original Notes by book-entry
transfer at DTC. The undersigned has completed, executed and delivered this
letter of transmittal to indicate the action the undersigned desires to take
with respect to such Exchange Offer. Holders who wish to tender their Original
Notes must complete this letter of transmittal in its entirety (unless such
Original Notes are to be tendered by book-entry transfer and an agent's message
is delivered in lieu hereof).

     PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.

     THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.

     List below the Original Notes to which this letter of transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this letter of
transmittal.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
                          DESCRIPTION OF ORIGINAL NOTES TENDERED
- ------------------------------------------------------------------------------------------------------
  Name(s) and Address(es) of Registered         Registered    Aggregate Principal   Principal Amount
Holder(s) Exactly as Name(s) Appear(s) on       Number(s)*          Amount               Tendered**
(Please Fill In, If Blank) Original Notes                       Represented by
                                                                    Note(s)
<S>                                             <C>           <C>                   <C>
- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------
                                                     Total
- ------------------------------------------------------------------------------------------------------
</TABLE>

*  Need not be completed by book-entry holders.

** Unless otherwise indicated, any tendering holder of Original Notes will be
   deemed to have tendered the entire aggregate principal amount represented by
   such Original Notes. All tenders must be in integral multiples of $1,000.

[ ]   CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.

[ ]   CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED ORIGINAL NOTES ARE BEING
      DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
      EXCHANGE AGENT WITH THE DTC (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):


Name of Tendering Institution:
                               -------------------------------------------------
DTC Account Number(s):
                       ---------------------------------------------------------



                                      -3-
<PAGE>   4


Transaction Code Number(s):
                            ----------------------------------------------------

[ ]   CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED ORIGINAL NOTES ARE BEING
      DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY EITHER ENCLOSED
      HEREWITH OR PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT (COPY ATTACHED)
      (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):


Name(s) of Registered holder(s) of Original Notes:
                                                   -----------------------------

Date of Execution of Notice of Guaranteed Delivery:
                                                    ----------------------------

Window Ticket Number (if available):
                                     -------------------------------------------

Name of Eligible Institution that Guaranteed Delivery:
                                                       ------------------------

DTC Account Number(s) (if delivered by book-entry transfer):
                                                             -------------------

Transaction Code Number(s) (if delivered by book-entry transfer):
                                                                  --------------
Name of Tendering Institution (if delivered by book-entry transfer):
                                                                     -----------

[ ]   CHECK HERE AND COMPLETE THE FOLLOWING IF YOU ARE A BROKER-DEALER AND WISH
      TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
      AMENDMENTS OR SUPPLEMENTS THERETO:

Name:
         -----------------------------------------------------------------------

Address:
         -----------------------------------------------------------------------


         -----------------------------------------------------------------------

     If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Original Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

                SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE
                      ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

     Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Original
Notes indicated above. Subject to and effective upon the acceptance for exchange
of the principal amount of Original Notes tendered in accordance with this
letter of transmittal, the undersigned hereby exchanges, assigns and transfers
to, or upon the order of, the Company all right, title and interest in and to
such Original Notes tendered for exchange hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact for the undersigned (with full knowledge that said
Exchange Agent also acts as the


                                      -4-
<PAGE>   5

agent for the Company in connection with the Exchange Offer) with respect to the
tendered Original Notes with full power of substitution to (i) deliver such
Original Notes, or transfer ownership of such Original Notes on the account
books maintained by the DTC, to the Company and deliver all accompanying
evidences of transfer and authenticity, and (ii) present such Original Notes for
transfer on the books of the Company and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Original Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.

     The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Original
Notes tendered hereby and to acquire the Exchange Notes issuable upon the
exchange of such tendered Original Notes, and that the Company will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.

     The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretations set forth in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley & Co. Incorporated (available June 5, 1991), Mary Kay Cosmetics, Inc.
(available June 5, 1991) and similar no-action letters (the "Prior No-Action
Letters"), that the Exchange Notes issued in exchange for the Original Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, PROVIDED that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders are not
engaging in, do not intend to engage in and have no arrangement or understanding
with any person to participate in a distribution of such Exchange Notes. The SEC
has not, however, considered the Exchange Offer in the context of a no-action
letter, and there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer as in other
circumstances.

     The undersigned hereby further represents to the Company that (i) any
Exchange Notes received are being acquired in the ordinary course of business of
the person receiving such Exchange Notes, whether or not the undersigned, (ii)
neither the undersigned nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the Original
Notes or the Exchange Notes within the meaning of the Securities Act and (iii)
neither the holder nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company or, if it is such an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.

     If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Original Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned acknowledges that if the
undersigned is tendering Original Notes in the Exchange Offer with the intention
of participating in any manner in a distribution of the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC set forth in the
Prior No-Action Letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary


                                      -5-
<PAGE>   6

resale transaction of the Exchange Notes, in which case the registration
statement must contain the selling security holder information required by
Item 507 or Item 508, as applicable, of Regulation S-K of the SEC, and
(ii) failure to comply with such requirements in such instance could result in
the undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company.

     The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Original
Notes tendered hereby, including the transfer of such Original Notes on the
account books maintained by the DTC.

     For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Original Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Original Notes that are not accepted for exchange pursuant to such Exchange
Offer for any reason will be returned, without expense, to the undersigned as
promptly as practicable after the Expiration Date for such Exchange Offer.

     All authority conferred or agreed to be conferred by this letter of
transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this letter of
transmittal shall be binding upon the undersigned's successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives.

     The undersigned acknowledges that the Company's acceptance of properly
tendered Original Notes pursuant to the procedures described under the caption
"The Exchange Offer--Procedures for Tendering" in the prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.

     The Exchange Offer is subject to certain conditions set forth in the
prospectus under the caption "The Exchange Offer--Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), the Company may not be
required to exchange any of the Original Notes tendered hereby.

     Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Original Notes accepted for
exchange, and return any Original Notes not tendered or not exchanged, in the
name(s) of the undersigned (or, in the case of a book-entry delivery of Original
Notes, please credit the account indicated above maintained at the DTC).
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail or deliver the Exchange Notes issued in exchange for the Original
Notes accepted for exchange and any Original Notes not tendered or not exchanged
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are completed, please
issue the Exchange Notes issued in exchange for the Original Notes accepted for
exchange in the name(s) of, and return any Original Notes not tendered or not
exchanged to, the person(s) (or account(s)) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Original Notes
from the name of the registered holder(s) thereof if the Company does not accept
for exchange any of the Original Notes so tendered for exchange.



                                      -6-
<PAGE>   7

- --------------------------------------------------------------------------------


                          SPECIAL ISSUANCE INSTRUCTIONS
                           (SEE INSTRUCTIONS 5 AND 6)

         To be completed ONLY (i) if Original Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Original Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned, or
(ii) if Original Notes tendered by book-entry transfer which are not exchanged
are to be returned by credit to an account maintained at the DTC other than the
DTC Account Number set forth above. Issue Exchange Notes and/or Original Notes
to:

Name:
         -----------------------------------------------------------------------

Address:
         -----------------------------------------------------------------------


         -----------------------------------------------------------------------

                               (INCLUDE ZIP CODE)


- --------------------------------------------------------------------------------

                 (Tax Identification or Social Security Number)

                             (PLEASE TYPE OR PRINT)

                          SPECIAL DELIVERY INSTRUCTIONS
                           (SEE INSTRUCTIONS 5 AND 6)

     To be completed ONLY if Original Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Original Notes accepted for exchange,
are to be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature. Mail or deliver Exchange Notes and/or Original Notes to:


Name:
         -----------------------------------------------------------------------

Address:
         -----------------------------------------------------------------------


         -----------------------------------------------------------------------

                               (INCLUDE ZIP CODE)

- --------------------------------------------------------------------------------

                 (Tax Identification or Social Security Number)

                             (PLEASE TYPE OR PRINT)

[ ]   Credit unexchanged Original Notes delivered by book-entry transfer to the
      DTC set forth below:

DTC Account Number:
                     -----------------------------------------



                                      -7-
<PAGE>   8

                                    IMPORTANT

                         PLEASE SIGN HERE WHETHER OR NOT
                            ORIGINAL NOTES ARE BEING
                           PHYSICALLY TENDERED HEREBY
                (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW)

- ->
      --------------------------------------------------------------------------

- ->
      --------------------------------------------------------------------------

            (Signature(s) of Registered Holder(s) of Original Notes)

Dated ________________, 2001

(The above lines must be signed by the registered holder(s) of Original Notes as
your name(s) appear(s) on the Original Notes or on a security position listing,
or by person(s) authorized to become registered holder(s) by a properly
completed bond power from the registered holder(s), a copy of which must be
transmitted with this letter of transmittal. If Original Notes to which this
letter of transmittal relate are held of record by two or more joint holders,
then all such holders must sign this letter of transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of this
letter of transmittal, printed below.)


Name(s):
          ----------------------------------------------------------------------

                             (Please Type or Print)

Capacity:
          ----------------------------------------------------------------------

Address:
          ----------------------------------------------------------------------

                               (Include Zip Code)


Area Code and Telephone Number:
                                ------------------------------------------------

Taxpayer Identification or Social Security Number:
                                                   -----------------------------

                               SIGNATURE GUARANTEE

                         (IF REQUIRED BY INSTRUCTION 5)

        Certain signatures must be guaranteed by an Eligible Institution.

Signature(s) Guaranteed by an Eligible Institution:
                                                    ----------------------------
                                                       (Authorized Signature)

                                      -8-
<PAGE>   9


- --------------------------------------------------------------------------------
                                     (Title)


- --------------------------------------------------------------------------------
                                 (Name of Firm)


- -------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
                           (Address, Include Zip Code)


- --------------------------------------------------------------------------------
                        (Area Code and Telephone Number)


Dated ________________, 2001


                                  INSTRUCTIONS

            FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE
                                     OFFER

     1.  DELIVERY OF THIS LETTER OF TRANSMITTAL AND ORIGINAL NOTES OR AGENT'S
MESSAGE AND BOOK-ENTRY CONFIRMATIONS. All physically delivered Original Notes or
any confirmation of a book-entry transfer to the Exchange Agent's account at the
DTC of Original Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
letter of transmittal or facsimile hereof (or an agent's message in lieu
hereof), and any other documents required by this letter of transmittal, must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date for the Exchange Offer, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. THE METHOD OF DELIVERY OF THE TENDERED ORIGINAL NOTES, THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY.

     2.  GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Original Notes and (a) whose Original Notes are not immediately available,
(b) who cannot deliver their Original Notes, this letter of transmittal or any
other documents required hereby to the Exchange Agent prior to the applicable
Expiration Date or (c) who are unable to comply with the applicable procedures
under the DTC's Automated Tender Offer Program on a timely basis, must tender
their Original Notes according to the guaranteed delivery procedures set forth
in the prospectus. Pursuant to such procedures: (i) such tender must be made by
or through a firm which is a member of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
a trust


                                      -9-
<PAGE>   10

company having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution"); (ii) prior to the applicable Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed notice of guaranteed delivery (by facsimile
transmission, mail or hand delivery) or a properly transmitted agent's message
and notice of guaranteed delivery setting forth the name and address of the
holder of the Original Notes, the registration number(s) of such Original Notes
and the total principal amount of Original Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York Stock
Exchange trading days after such Expiration Date, this letter of transmittal (or
facsimile hereof or an agent's message in lieu hereof) together with the
Original Notes in proper form for transfer (or a Book-Entry Confirmation) and
any other documents required hereby, will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) this letter of transmittal (or
facsimile hereof or an agent's message in lieu hereof) together with the
certificates for all physically tendered Original Notes in proper form for
transfer (or Book-Entry Confirmation, as the case may be) and all other
documents required hereby are received by the Exchange Agent within three New
York Stock Exchange trading days after such Expiration Date.

     Any holder of Original Notes who wishes to tender Original Notes pursuant
to the guaranteed delivery procedures described above must ensure that the
Exchange Agent receives the notice of guaranteed delivery prior to 5:00 p.m.,
New York City time, on the applicable Expiration Date. Upon request of the
Exchange Agent, a notice of guaranteed delivery will be sent to holders who wish
to tender their Original Notes according to the guaranteed delivery procedures
set forth above.

     See "The Exchange Offer--Guaranteed Delivery Procedures" section of the
prospectus.

     3.  TENDER BY HOLDER. Only a holder of Original Notes may tender such
Original Notes in the Exchange Offer. Any beneficial holder of Original Notes
who is not the registered holder and who wishes to tender should arrange with
the registered holder to execute and deliver this letter of transmittal on his
behalf or must, prior to completing and executing this letter of transmittal and
delivering his Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such holder's name or obtain a properly
completed bond power from the registered holder.

     4.  PARTIAL TENDERS. Tenders of Original Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Original Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of
Original Notes Tendered" above. The entire principal amount of Original Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Original Notes is not
tendered, then Original Notes for the principal amount of Original Notes not
tendered and Exchange Notes issued in exchange for any Original Notes accepted
will be returned to the holder as promptly as practicable after the Original
Notes are accepted for exchange.

     5.  SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this letter of transmittal (or facsimile hereof) is
signed by the record holder(s) of the Original Notes tendered hereby, the
signature(s) must correspond exactly with the name(s) as written on the face of
the Original Notes without alteration, enlargement or any change whatsoever. If
this letter of transmittal (or facsimile hereof) is signed by a participant in
the DTC, the signature must correspond with the name as it appears on the
security position listing as the holder of the Original Notes.

     If this letter of transmittal (or facsimile hereof) is signed by the
registered holder(s) of Original Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or


                                      -10-
<PAGE>   11

any untendered principal amount of Original Notes is to be reissued) to the
registered holder(s), the said holder(s) need not and should not endorse any
tendered Original Notes, nor provide a separate bond power. In any other case,
such holder(s) must either properly endorse the Original Notes tendered or
transmit a properly completed separate bond power with this letter of
transmittal, with the signatures on the endorsement or bond power guaranteed by
an Eligible Institution.

     If this letter of transmittal (or facsimile hereof) or any Original Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this letter of transmittal.

     NO SIGNATURE GUARANTEE IS REQUIRED IF (i) THIS LETTER OF TRANSMITTAL (OR
FACSIMILE HEREOF) IS SIGNED BY THE REGISTERED HOLDER(S) OF THE ORIGINAL NOTES
TENDERED HEREIN (OR BY A PARTICIPANT IN THE DTC WHOSE NAME APPEARS ON A SECURITY
POSITION LISTING AS THE OWNER OF THE TENDERED ORIGINAL NOTES) AND THE EXCHANGE
NOTES ARE TO BE ISSUED DIRECTLY TO SUCH REGISTERED HOLDER(S) (OR, IF SIGNED BY A
PARTICIPANT IN THE DTC, DEPOSITED TO SUCH PARTICIPANT'S ACCOUNT AT THE DTC) AND
NEITHER THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" NOR THE BOX ENTITLED
"SPECIAL REGISTRATION INSTRUCTIONS" HAS BEEN COMPLETED, OR (ii) SUCH ORIGINAL
NOTES ARE TENDERED FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION. IN ALL OTHER
CASES, ALL SIGNATURES ON THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) MUST
BE GUARANTEED BY AN ELIGIBLE INSTITUTION.

     6.  SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Notes or substitute Original Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this letter of transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Holders tendering Original
Notes by book-entry transfer may request that Original Notes not exchanged be
credited to such account maintained at the DTC as such noteholder may designate
hereon. If no such instructions are given, such Original Notes not exchanged
will be returned to the name and address (or account number) of the person
signing this letter of transmittal.

     7.  TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Original Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Original Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Original
Notes tendered hereby, or if tendered Original Notes are registered in the name
of any person other than the person signing this letter of transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this letter of transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder and the
Exchange Agent will retain possession of an amount of Exchange Notes with a face
amount at least equal to the amount of such transfer taxes due by such tendering
holder pending receipt by the Exchange Agent of the amount of such taxes.



                                      -11-
<PAGE>   12


     8.  TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Original Notes or Exchange Notes must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual is his or her social security number. If
the Company is not provided with the correct TIN, the holder may be subject to a
$50 penalty imposed by the Internal Revenue Service and backup withholding of
31% on interest payments on the Exchange Notes.

     To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Exchange Notes will be registered in more than one name or will not be in
the name of the actual owner, consult the instructions on Internal Revenue
Service Form W-9, which may be obtained from the Exchange Agent, for information
on which TIN to report.

     Certain foreign individuals and entities will not be subject to backup
withholding or information reporting if they submit a Form W-8, signed under
penalties of perjury, attesting to their foreign status. A Form W-8 can be
obtained from the Exchange Agent.

     If such holder does not have a TIN, such holder should consult the
instructions on Form W-9 concerning applying for a TIN, check the box in Part 3
of the Substitute Form W-9, write "applied for" in lieu of its TIN and sign and
date the form and the Certificate of Awaiting Taxpayer Identification Number.
Checking this box, writing "applied for" on the form and signing such
certificate means that such holder has already applied for a TIN or that such
holder intends to apply for one in the near future. If such holder does not
provide its TIN to the Company within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to the Company.

     The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.

     9.  VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility, time of receipt, acceptance and withdrawal of tendered Original
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Company's acceptance of which might, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive any
conditions of the Exchange Offer or defects or irregularities of tenders as to
particular Original Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including this letter of transmittal and the
instructions hereto) shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Original Notes must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Original
Notes nor shall any of them incur any liability for failure to give such
notification.

     10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
prospectus.

     11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Original Notes will be accepted.



                                      -12-
<PAGE>   13


     12. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES. Any holder whose
Original Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions. This
letter of transmittal and related documents cannot be processed until the
procedures for replacing lost, stolen or destroyed Original Notes have been
followed.

     13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or for additional copies of the prospectus or this letter of transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this letter of transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.

     14. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."

     IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
OR AN AGENT'S MESSAGE IN LIEU HEREOF (TOGETHER WITH THE ORIGINAL NOTES DELIVERED
BY BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) MUST BE RECEIVED BY THE
EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT, PRIOR TO THE EXPIRATION DATE.



                                      -13-
<PAGE>   14


<TABLE>
<S>                                   <C>                                         <C>
- -------------------------------------------------------------------------------------------------------------------------

             SUBSTITUTE               Name:  ___________________________________
              FORM W-9
                                      -----------------------------------------------------------------------------------

                                      PART I--PLEASE PROVIDE YOUR TIN IN THE        Social Security Number OR
     DEPARTMENT OF THE TREASURY       BOX AT RIGHT AND CERTIFY BY SIGNING AND       Employer Identification Number
      INTERNAL REVENUE SERVICE        DATING BELOW.                                 (if awaiting TIN write "Applied For")

    PAYER'S REQUEST FOR TAXPAYER                                                    ____________________________________
  IDENTIFICATION NUMBER (TIN) AND
           CERTIFICATION

- -------------------------------------------------------------------------------------------------------------------------
</TABLE>


PART II CERTIFICATION.  Under penalties of perjury, I certify that:

(1) The Number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and

(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or the
IRS has notified me that I am no longer subject to backup withholding.

CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreported interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2).

<TABLE>
<S>                                                                    <C>
- -------------------------------------------------------------------------------------------------------------------------

Signature                                                              Date
          ----------------------------------------------------              ---------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------

PART III.  [  ]  Awaiting TIN.
- -------------------------------------------------------------------------------------------------------------------------

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
      OF 31% OF ANY PAYMENT MADE TO YOU IN RESPECT OF CLICK2LEARN COMMON STOCK.
      PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
      IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU
      MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

                 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION

     You must complete this certificate if you wrote "applied for" in Part I of
the substitute form W-9. I certify under penalties of perjury that a TIN has not
been issued to me, and either (a) I have mailed or delivered an application to
receive a TIN to the appropriate IRS Center or Social Security Administration
Office or (b) I intend to mail or deliver such an application in the near
future. I understand that if I do not provide a TIN by the time of payment, all
reportable payments made to me thereafter will be subject to a 31% backup
withholding tax.

<TABLE>
<S>                                                                    <C>
Signature                                                              Date
          ----------------------------------------------------              ---------------------------------------------


- -------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      -14-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>18
<FILENAME>o05789ex99-2.txt
<DESCRIPTION>EXHIBIT 99.2
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 99.2

                           TEEKAY SHIPPING CORPORATION

                          NOTICE OF GUARANTEED DELIVERY
                          FOR TENDER OF ALL OUTSTANDING

                          8/875% SENIOR NOTES DUE 2011
                                 IN EXCHANGE FOR
                     REGISTERED 8.875% SENIOR NOTES DUE 2011

         This form, or one substantially equivalent hereto, must be used by a
holder to accept the Exchange Offer of Teekay Shipping Corporation (the
"Company") and to tender 8.875% Senior Notes due 2011 (the "Original Notes") to
the Exchange Agent pursuant to the guaranteed delivery procedures described in
"The Exchange Offer - Guaranteed Delivery Procedures" of the Company's
prospectus dated ______ __, 2001 and in Instruction 2 to the related letter of
transmittal. Any holder who wishes to tender Original Notes pursuant to such
guaranteed delivery procedures must ensure that United States Trust Company of
New York, as exchange agent (the "Exchange Agent"), receives this notice of
guaranteed delivery, properly completed and duly executed, prior to the
Expiration Date (as defined below) of the Exchange Offer for such series.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the letter of transmittal.

- --------------------------------------------------------------------------------

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______ __,
2001, UNLESS EXTENDED (THE "EXPIRATION DATE"). NOTES TENDERED IN SUCH EXCHANGE
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE.

- --------------------------------------------------------------------------------

                  THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:

                    UNITED STATES TRUST COMPANY OF NEW YORK.

   YOU CAN DELIVER THIS NOTICE OF GUARANTEED DELIVERY TO THE EXCHANGE AGENT AT
                           THE ADDRESSES AS FOLLOWS:

                          BY HAND DELIVERY TO 4:30 P.M.

                     United States Trust Company of New York
                            30 Broad Street, B-Level
                             New York, NY 10004-2304

                        BY OVERNIGHT COURIER AND BY HAND
                   DELIVERY AFTER 4:30 P.M. ON EXPIRATION DATE

                     United States Trust Company of New York
                           30 Broad Street, 14th Floor
                             New York, NY 10004-2304


<PAGE>   2



                         BY REGISTERED OR CERTIFIED MAIL

                     United States Trust Company of New York
                                  P.O. Box 84
                              Bowling Green Station
                             New York, NY 10274-0084

             BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):

                     United States Trust Company of New York
                            30 Broad Street, B-Level
                             New York, NY 10004-2304
                               FAX: (646) 458-8111

                              CONFIRM BY TELEPHONE:
                                 (800) 548-6565

         If you deliver by facsimile transmission, you must confirm your
delivery by telephone and you must deliver the original notice of guaranteed
delivery by guaranteed overnight courier to the exchange agent.

- --------------------------------------------------------------------------------

         DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
NOTICE OF GUARANTEED DELIVERY SHOULD BE READ CAREFULLY BEFORE THE NOTICE OF
GUARANTEED DELIVERY IS COMPLETED.

         This notice of guaranteed delivery is not to be used to guarantee
signatures. If a signature on a letter of transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space in the box provided on
the letter of transmittal for guarantee of signatures.

         Ladies and Gentlemen:

         The undersigned hereby tenders to the Company, in accordance with the
Company's offer, upon the terms and subject to the conditions set forth in the
prospectus and the related letter of transmittal, receipt of which is hereby
acknowledged, the principal amount of Original Notes set forth below pursuant to
the guaranteed delivery procedures set forth in the prospectus under the caption
"The Exchange Offer - Guaranteed Delivery Procedures" and in Instruction 2 of
the letter of transmittal.

         The undersigned hereby tenders the Original Notes listed below:

<TABLE>
<CAPTION>
 Certificate Number(s) (if known) of
 Original Notes or Account Number at      Aggregate Principal Amount      Aggregate Principal Amount
               the DTC                        Represented                         Tendered*
<S>                                          <C>                                    <C>

- --------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------

</TABLE>

                                      -2-
<PAGE>   3

- --------------------------------------------------------------------------------

                            PLEASE SIGN AND COMPLETE


Names of Record Holder(s):                     Signature(s):

- ----------------------------------             ---------------------------------

- ----------------------------------             ---------------------------------




Address:
        ------------------------------------------------------------------------

        ------------------------------------------------------------------------



                               (Include Zip Code)

Area Code and Telephone Number:
                               -------------------------------------------------

Dated: _____________________________________, 2001

*Unless otherwise indicated, any tendering holder of Original Notes will
 be deemed to have tendered the entire aggregate principal amount
 represented by such Original Notes. All tenders must be in integral
 multiples of $1,000.

- --------------------------------------------------------------------------------


         THIS NOTICE OF GUARANTEED DELIVERY MUST BE SIGNED BY THE REGISTERED
HOLDER(S) OF ORIGINAL NOTES EXACTLY AS THE NAME(S) OF SUCH PERSON(S) APPEAR(S)
ON CERTIFICATES FOR ORIGINAL NOTES OR ON A SECURITY POSITION LISTING AS THE
OWNER OF ORIGINAL NOTES, OR BY PERSON(S) AUTHORIZED TO BECOME HOLDER(S) BY
ENDORSEMENTS AND DOCUMENTS TRANSMITTED WITH THIS NOTICE OF GUARANTEED DELIVERY.
IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN,
ATTORNEY-IN-FACT, OFFICER OR OTHER PERSON ACTING IN A FIDUCIARY OR
REPRESENTATIVE CAPACITY, SUCH PERSON MUST PROVIDE THE FOLLOWING INFORMATION:

PLEASE PRINT NAME(S) AND ADDRESS(ES)

Name(s):
             -------------------------------------------------------------------

             -------------------------------------------------------------------

Capacity:
             -------------------------------------------------------------------

Address(es):
             -------------------------------------------------------------------

             -------------------------------------------------------------------



- --------------------------------------------------------------------------------


                                    GUARANTEE

                                      -3-
<PAGE>   4

                    (Not to be used for signature guarantee)

         The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or a trust company having an office or correspondent in the
United States, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, hereby guarantees deposit
with the Exchange Agent of the letter of transmittal (or facsimile thereof or
agent's message in lieu thereof), together with the Original Notes of the series
tendered hereby in proper form for transfer (or confirmation of the book-entry
transfer of such Original Notes into the Exchange Agent's account at the DTC
described in the prospectus under the caption "The Exchange Offer - Book-Entry
Transfer" and in the letter of transmittal) and any other required documents,
all by 5:00 p.m., New York City time, within three New York Stock Exchange
trading days following the Expiration Date for such series.

<TABLE>
<S>                                           <C>
Name of Firm:
              -----------------------------    ---------------------------------
                                                      (AUTHORIZED SIGNATURE)

Address:                                       Name:
          ---------------------------------           --------------------------

                                               Title:
          ---------------------------------           --------------------------
                    (INCLUDE ZIP CODE)                 (PLEASE TYPE OR PRINT)

Area Code and Telephone Number:

- -------------------------------------------    Date: ___________________, 2001
</TABLE>


         DO NOT SEND ORIGINAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF ORIGINAL
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.

                 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY

      1.   DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this notice of guaranteed delivery (or facsimile
hereof or an agent's message and notice of guaranteed delivery in lieu hereof)
and any other documents required by this notice of guaranteed delivery with
respect to the Original Notes must be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date of the Exchange Offer.
Delivery of such notice of guaranteed delivery may be made by facsimile
transmission, mail or hand delivery. THE METHOD OF DELIVERY OF THIS NOTICE OF
GUARANTEED DELIVERY AND ANY OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT
THE ELECTION AND SOLE RISK OF THE HOLDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
As an alternative to delivery by mail, the holders may wish to consider using an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the letter of transmittal.

       2.   SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this notice of
guaranteed delivery (or facsimile hereof) is signed by the registered holder(s)
of the Original Notes referred to herein, the signature(s) must correspond
exactly with the name(s) as written on the face of the Original Notes without
alteration, enlargement or any change whatsoever. If this notice of guaranteed

                                      -4-
<PAGE>   5

delivery (or facsimile hereof) is signed by a participant in the DTC whose name
appears on a security position listing as the owner of the Original Notes, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Original Notes.

         If this notice of guaranteed delivery (or facsimile hereof) is signed
by a person other than the registered holder(s) of any Original Notes listed or
a participant of the DTC, this notice of guaranteed delivery must be accompanied
by appropriate bond powers, signed as the name(s) of the registered holder(s)
appear(s) on the Original Notes or signed as the name(s) of the participant
appears on the DTC's security position listing.

         If this notice of guaranteed delivery (or facsimile hereof) is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and submit herewith evidence
satisfactory to the Exchange Agent of such person's authority to so act.

      3.   REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the prospectus and this
notice of guaranteed delivery may be directed to the Exchange Agent at the
address set forth on the cover page hereof. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.


                                      -5-





</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
