Title XI Remedies, 33581-33585 [05-11316]

Agencies

• Maritime Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 109 (Wednesday, June 8, 2005)]
[Notices]
[Pages 33581-33585]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-11316]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD-2005-21380]


Title XI Remedies

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Notice and request for comments on New Title XI Remedies.

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SUMMARY: In response to the 2004 Follow-Up Audit of the Title XI Loan 
Guarantee Program conducted by the Inspector General of the Department 
of Transportation, the Maritime Administration (MARAD) committed to 
include certain new remedies as part of the documentation for loan 
guarantees issued under Title XI of the Merchant Marine Act of 1936, as 
amended (Act). This notice sets out the remedies which MARAD has 
developed to fulfill its commitment to the Department's Office of 
Inspector General (OIG). MARAD is requesting public comments from 
parties who may wish to express their views on the proposed changes or 
who wish to suggest alternatives to the draft language developed by 
MARAD.

DATES: MARAD will consider comments received not later than July 8, 
2005.

FOR FURTHER INFORMATION CONTACT: Richard Lorr, Esq., Maritime 
Administration, telephone: (202) 366-

[[Page 33582]]

5882, fax (202) 366-3511, or e-mail Richard.Lorr@marad.dot.gov.

ADDRESSES: You may submit comments [identified by DOT DMS Docket Number 
MARAD-2005-21380] by any of the following methods:
     Web site: https://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site.
     Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 7th St., SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 7th St., SW., Washington, DC, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal Holidays.
    Instructions: All submissions must include the agency name and 
docket number for this action. Note that all comments received will be 
posted without change to https://dms.dot.gov including any personal 
information provided.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
https://dms.dot.gov.
    Docket: For access to the docket to read background documents or 
comments received, go to https://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 7th St., SW., 
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal Holidays.

SUPPLEMENTARY INFORMATION: In response to the 2004 Follow-Up Audit of 
the Title XI Loan Guarantee Program conducted by the Inspector General 
of the Department of Transportation, the Maritime Administration 
(MARAD) committed to include certain new remedies as part of the 
documentation for loan guarantees issued under Title XI of the Merchant 
Marine Act of 1936, as amended (Act). This notice sets out the remedies 
which MARAD has developed to fulfill its commitment to the Department's 
Office of Inspector General. MARAD intends that these new remedies will 
provide intermediate remedies by which MARAD can achieve compliance 
with Title XI agreements without the requirement that MARAD, on behalf 
of the United States Government, must first advance payment to obligees 
under MARAD's guarantee. These new remedies will apply to any new Title 
XI transaction and the renegotiation of existing transactions where 
appropriate.
    The proposed changes are designed to: (1) Clarify that MARAD may 
exercise a full range of creditor remedies immediately upon the 
occurrence of a default under the Security Agreement typically executed 
by a Title XI obligor in favor of MARAD, whether or not MARAD has paid 
under the Title XI guarantee or has assumed the underlying debt; (2) 
ensure that MARAD is authorized to take immediate steps to protect its 
interests fully if a Title XI company fails to make its Reserve Fund 
deposits or any other payment required by the Title XI documentation or 
fails to take any other action required by the Security Agreement for 
the benefit of MARAD; and (3) require the owners of closely held Title 
XI companies who receive funds paid in derogation of a Title XI 
company's covenants and obligations under the Title XI documents to be 
financially responsible and legally liable for the repayment of such 
funds, and require that board members and other key officials of 
publicly held Title XI companies be financially responsible and legally 
liable for the repayment of improperly disbursed funds if such persons 
have caused the publicly held Title XI company to violate its covenant 
and obligations under the Title XI documents.
    For example, MARAD has experienced a limited number of cases of 
improper distributions. The remedial changes would require that if an 
owner, at any tier, of a closely held company receives a distribution 
from the company at a time when such distributions are not allowed 
pursuant to the company's Title XI agreements with MARAD, the owner 
would be required to pay back such distribution to the company. If, on 
the other hand, the company were a publicly traded entity, the new 
remedial changes would require the board member, officer or controlling 
shareholder to reimburse the company for the improper payments caused 
by its actions, instead of requiring a potentially large number of 
innocent shareholders to return the funds. In either case, MARAD's new 
remedies would create an environment of accountability which should 
produce better compliance by Title XI companies in meeting their 
obligations under the Title XI documents.
    In addition, this notice also sets out changes to MARAD's Reserve 
Fund and Financial Agreement as it relates to distributions by certain 
closely held entities to their owners for income tax liability which 
the Federal Tax Code places on the owner and not on the business 
entity, such as the income tax treatment of Subchapter S corporations, 
limited liability companies, and other entities enjoying the benefits 
of pass-through taxation under the Federal Tax Code. Although MARAD's 
implementation of these changes was instituted as a part of its own 
review of the effectiveness of this aspect of the Title XI program, and 
was not prompted by any of the OIG audits, MARAD is also requesting 
public comment about these new tax provisions.
    No Federal statute, regulation or agency administrative practice 
requires MARAD to make any formal announcement prior to implementing 
changes to its Title XI closing documentation. Typically, MARAD 
negotiates any changes from its standard form Title XI documentation 
with the individual Title XI applicants, on a case-by-case basis. 
However, in this case, MARAD has determined it would be interested in 
receiving public comments from parties who may wish to express their 
views on the proposed changes or who wish to suggest alternatives to 
the draft language developed by MARAD. Until MARAD has fully considered 
the comments proposed in response to this Notice, MARAD will continue 
to negotiate Title XI closing agreements on a case-by-case basis, 
incorporating the proposed new remedies as appropriate. The draft 
language for the remedial changes is set forth below. Proposed 
amendments and other highlighted text are in italics and new sections 
are noted in headings.

New Remedies and Defaults

1. Amendments to Section 6.04 of the Security Agreement

    Amend Section 6.04(a) to read as follows: Section 6.04. Remedies 
After Default. (a) In the event of a Default, the Secretary shall have 
the right to take the Vessels without legal process wherever the same 
may be (and the Shipowner or other Person in possession shall forthwith 
surrender possession of the Vessels to the Secretary upon demand) and 
hold, lay up, lease, charter, operate, or otherwise use the Vessels for 
such time and upon such terms as the Secretary may reasonably deem to 
be in the Secretary's best interest, accounting only for the net 
profits, if any, arising from the use of the Vessels, and charging 
against all receipts from the use of the Vessels, all reasonable 
charges and expenses relating to such Vessel's use.

[[Page 33583]]

    Amend Sections 6.04(b)(1) and (2) to read as follows:
    (b) In the event of a Default, the Secretary shall also have the 
right to:
    (1) Exercise all the rights and remedies in foreclosure and 
otherwise given to mortgagees by Chapter 313;
    (2) Bring suit at law, in equity or in admiralty to recover 
judgment for any and all amounts due or to enforce any right under the 
Secretary's Note, this Security Agreement, the Mortgage, the Depository 
Agreement, and the Financial Agreement to collect the same out of any 
and all of Shipowner's property, whether or not the same is subject to 
the lien of the Mortgage, and in connection therewith, obtain a decree 
ordering the sale of any Vessel in accordance with paragraph (b)(4) of 
this Section;

2. Amendments to Section 6.02 of the Security Agreement, the 
Secretary's Note and the Guaranteed Obligation To Conform to the 
Amendment of Section 6.04 of the Security Agreement

    Amend Section 6.02 to read as follows: Section 6.02. Acceleration 
of Maturity of the Secretary's Note. The Secretary may, by giving 
written notice to the Shipowner, declare the principal of the 
Secretary's Note and interest accrued thereon to be immediately due and 
payable, at any time after the Secretary determines that a Default has 
occurred and is continuing under the terms of this Security Agreement. 
Thereupon, the principal of and interest on the Secretary's Note, shall 
become immediately due and payable, together with interest at the same 
rates specified in the Secretary's Note.
    Amendment to the last paragraph of the Secretary's Note: ``The 
unpaid balance of the principal of this Secretary's Note and the 
interest may be declared or may become immediately due and payable by 
declaration of the Secretary at any time after the Secretary determines 
that a Default has occurred and is continuing under the terms of the 
Security Agreement. Thereupon, the unpaid balance of the principal of 
and the interest on this Secretary's Note shall become due and payable, 
together with interest thereon at the Obligation rate plus two 
percent.''
    Amendment to the sentence appearing in the third to last paragraph 
of the guaranteed obligation: ``So long as the Guarantee is in effect, 
the Obligees shall have no recourse against the Shipowner.''

3. Amendments to Section 8(b) of the Reserve Fund and Financial 
Agreement

    Section 8(b). Supplemental Covenants. If a Default has occurred and 
is continuing under the Security Agreement or this Agreement or unless, 
after giving effect to such transaction or transactions, during any 
fiscal year of the Company, (i) the Company's Working Capital is not 
equal to at least one dollar, (ii) the Company's Long-Term Debt is more 
than two times the Company's Net Worth, and (iii) the Company's Net 
Worth is less than the amount specified in Attachment A hereto, the 
Company shall not, without the Secretary's prior written consent:
    Amend Section 8(b)(5) to read as follows: (5) Make any investments 
in the securities of any Related Party or make any payments whatsoever 
to a Related Party, except for (i) distributions permitted by Section 
8(b)(3) above or (ii) salary paid in the ordinary course of business 
for services;

4. New Sections 8(c), 8(d) and 8(e) of the Reserve Fund and Financial 
Agreement

    Section 8(c). Closely Held Entities. In the event the Secretary 
determines that the Company, if its stock is not publicly traded, has 
paid any amounts to any Shareholder in violation of any of the 
covenants contained in this Agreement, the Secretary may, in the manner 
set forth below, require such Shareholder to repay the Company such 
amounts it has received in derogation of the Company's obligations 
hereunder, and the Shareholders, by their signatures below, agree to 
repay the Company in full any such amounts they may so receive, with 
interest at the Obligation rate plus 2%, accruing from the date of 
receipt to the date of payment. Upon receipt of a written notice from 
the Secretary, the Shareholders shall promptly pay any amounts that are 
due under this Subsection 8(c) directly to the Secretary and the 
Secretary shall deposit said sums into the Deposit Fund, as property of 
the Company and security of the Secretary. The Shareholders hereby 
waive any rights they may have against the Company for indemnification, 
contribution or reimbursement with respect to the amounts herein 
required to be repaid to the Company. The Shareholders acknowledge and 
agree that the Secretary shall have the right to maintain a civil 
action to collect the sums due hereunder in the United States District 
Court for the District of Columbia and they further agree that service 
of process on the Company will be deemed service of process on each of 
them.
    Section 8(d). Publicly Held Entities. (1) In the event the 
Secretary determines that the Company, if its stock is publicly traded, 
has paid any amounts in violation of any of the covenants contained in 
this Agreement, the Secretary may require Key Officials to repay the 
Company such amounts if they (or their delegees or appointees) have 
authorized or otherwise have permitted payments by the Company in 
derogation of the Company's obligations hereunder, and the Key 
Officials, by their signatures below, agree (i) to repay the Company in 
full any such sums they permitted to be paid, with interest at the 
Obligation rate plus 2%, accruing from the date of receipt to the date 
of payment and (ii) to be bound by the provisions of Subsection 8(e) 
below; provided, however, that Key Officials shall not be liable 
hereunder if the Company, no more than 5 business days prior to making 
such a payment, delivers to the Secretary (a) the certificate of an 
independent certified public accountant stating that the Company's 
action will not be in violation of Section 8 of this Agreement, and (b) 
a certificate from the Key Official that the Company's action will not 
violate Section 8 of this Agreement, both of which certificates must be 
in form and substance satisfactory to the Secretary.
    (2) Upon receipt of a written notice from the Secretary, the Key 
Officials shall promptly pay any amounts that are due under this 
Subsection 8(d) directly to the Secretary and the Secretary shall 
deposit said sums into the Deposit Fund, as property of the Company and 
security of the Secretary. The Key Officials hereby waive any rights 
they may have against the Company for indemnification, contribution or 
reimbursement with respect to the amounts herein required to be repaid 
to the Company. The Key Officials acknowledge and agree that the 
Secretary shall have the right to maintain a civil action to collect 
the sums due hereunder in the United States District Court for the 
District of Columbia and they further agree that service of process on 
the Company will be deemed service of process on each of them.
    Section 8(e). Shipowner agrees that no Person may be appointed as a 
Successor Key Official until that Person has agreed to be bound by the 
provisions of Subsection 8(d) hereof. Failure to provide the Secretary 
with an original signed agreement, in form and substance satisfactory 
to the Secretary, of a Successor Key Official to be bound under 
Subsection 8(d) prior to that Person's appointment, or prior to that 
Person's commencing the duties of that position, shall make the Key 
Officials who appointed the Successor Key Official, or allowed the 
Successor Key Official to commence those duties,

[[Page 33584]]

liable for the actions of the Successor Key Official under Subsection 
8(d).

5. New Definitions in Schedule X To Conform to New Sections 8(c), 8(d), 
8(e) Above and 8(f) in Paragraph 12 Below

    ``Shareholders'' shall mean (i) any Person who directly or 
indirectly possesses an ownership interest in the Company, including, 
but not limited to, equity holders, members, and partners, and (ii) any 
Person who is a Related Party of the Company which has received or 
could receive, directly or indirectly, any dividends, capital 
distributions, or any other payments, including payments of any sums 
owed for services rendered by the Person or Related Party during any 
period in which the Company is in Default of its obligations under the 
Security Agreement or the Financial Agreement.
    ``Key Officials'' shall mean any Chairman of the Board of 
Directors, Member of the Board of Directors, Chief Executive Officer, 
Chief Financial Officer, Treasurer, Secretary, President, Vice-
President or other Member or Officer of the Company. Key Officials 
shall include any Shareholder who has an ownership interest in the 
Company of five percent or greater.
    ``Person'' or ``Persons'' means any individual, corporation, 
partnership, joint venture, association, limited liability company, 
joint-stock company, trust, unincorporated organization, other entity, 
government, or any agency or political subdivision thereof.
    ``Successor Key Official'' shall mean any Person who takes on the 
responsibilities or title of a Key Official who has resigned, been 
separated or otherwise is no longer carrying out the duties previously 
assigned to that Key Official.

6. Amendment to Section 2.10 of the Security Agreement

    Section 2.10. Performance of Shipowner's Agreements by the 
Secretary. (a) If the Shipowner shall fail to perform any of its 
agreements hereunder or under the Mortgage or the Financial Agreement, 
the Secretary may, in its discretion, at any time during the 
continuance of an event which by itself, with the passage of time, or 
the giving of notice, would constitute a Default, perform all acts and 
make all necessary expenditures to remedy such failure. Notwithstanding 
the foregoing, the Secretary shall not be obligated to (and shall not 
be liable for the failure to) perform such acts and make such 
expenditures. All funds advanced and expenses and damages incurred by 
the Secretary relating to such compliance shall constitute a debt due 
from the Shipowner to the Secretary and shall be secured hereunder and 
under the Mortgage prior to the Secretary's Note and shall be repaid by 
the Shipowner upon demand, together with interest at the Obligation 
rate plus 2%.
    (b). Impermissible Payments. If the Shipowner Defaults on the 
Financial Agreement by making any payments in violation of Section 8 of 
the Financial Agreement or by failing to make a Reserve Fund deposit in 
violation of Section 2 of the Financial Agreement, such sums shall 
constitute a debt owed by the Shipowner to the Secretary, and shall be 
secured hereunder and under the Mortgage prior to the Secretary's Note 
and shall be repaid by the Shipowner upon demand, together with 
interest at the Obligation rate plus 2%. The Secretary, in its sole 
discretion, may decide to hold any monies paid by the Shipowner 
hereunder as additional security, or to set off said monies against the 
Secretary's Note, or to use said monies for the payment of the 
Shipowner's Title XI debt service or for meeting its operating 
expenses.

7. Amendment to Section 6.05 of the Security Agreement To Conform to 
the Changes in Section 2.10 of the Security Agreement

    Amend Section 6.05(a)(1) to read as follows: (1) To the payment of 
all advances, reasonable charges by the Secretary, and any debt owed by 
the Shipowner to the Secretary which this Agreement states is entitled 
to be paid prior to the Secretary's Note;

8. New Section 16 of the Financial Agreement To Supplement Section 2.10 
of the Security Agreement

    Section 16. If the Company shall fail to perform punctually and 
fully any of its agreements hereunder, including but not limited to 
providing the Secretary with any audited or unaudited financial 
statements, reports, certifications or calculations required hereunder 
to be provided by the Company to the Secretary, the Secretary may, in 
its discretion, perform all acts and make all necessary expenditures to 
remedy such failure. Notwithstanding the foregoing, the Secretary shall 
not be obligated to (and shall not be liable for the failure to) 
perform such acts and make such expenditures, including, but not 
limited to, the hiring of accounting professionals to review the books 
and records of the Company to the satisfaction of the Secretary, and 
the Company hereby agrees to disclose all and any pertinent information 
determined to be necessary for the conduct of such a review by the 
Secretary or its consultants. All funds advanced and expenses and 
damages incurred by the Secretary relating to such compliance shall 
constitute a debt due from the Company to the Secretary and shall be 
secured hereunder and under the Mortgage prior to the Secretary's Note 
and shall be repaid by the Company upon demand, together with interest 
at the Obligation rate plus 2%.

9. New Definition of Default in Financial Agreement

    Section 17. Default. The Company shall be in default of this 
Agreement upon the failure or omission of the Company to observe any 
covenant, term or provision herein; provided, however, that a failure 
to satisfy the financial covenants set forth in Subsection 8(b)(i) 
through (iii) hereof shall not constitute a Default hereunder.

10. Amendment of Section 2.06(b) of the Security Agreement Relating to 
Destruction or Loss of Business Records

    Amend Section 2.06(b) to read as follows:
    (b) maintain all business and financial records for a period of at 
least six years following the termination of the Guarantee, including, 
without limitation, records of all amounts paid or obligated to be paid 
by or for the account of the Shipowner for each Vessel's construction;

11. Amendment to Section 6.01 of the Security Agreement Relating to 
Defaults

    Amend Section 6.01(b)(1) to read as follows:
    (b) The following shall constitute and each is herein called a 
``Security Default:''
    (1) Default by the Shipowner in the due and punctual observance and 
performance of any provision in Sections 2.01(b), 2.02(b) and (i), 
2.03, 2.04, 2.09, 2.10 (as it relates to a failure to pay a debt due on 
demand under Section 2.10), 2.11, 2.12, 2.14, 8.01 and 8.02;
    Amend Section 6.01(b)(4) to read as follows:
    (4) The Shipowner, or any guarantors of the Shipowner's performance 
under the Secretary's Note, the Security Agreement, Mortgage, the 
Financial Agreement, or the Depository Agreement or related document, 
shall become insolvent or bankrupt or shall cease paying or providing 
for the payment of debts generally, or the Shipowner or any guarantor 
shall be dissolved or shall, by a court of competent jurisdiction, be 
adjudged a bankrupt, or shall make a general assignment for the benefit 
of its creditors, or shall lose its charter by forfeiture or otherwise; 
or a petition for

[[Page 33585]]

reorganization of the Shipowner or any guarantor under the Bankruptcy 
Code shall be filed by the Shipowner or by any guarantor, or such 
petition be filed by creditors and the same shall be approved by such a 
court of competent jurisdiction; or a reorganization of the Shipowner 
or any guarantor under said Code shall be approved by a court, whether 
proposed by a creditor, a stockholder or any other Person whomsoever; 
or a receiver or receivers of any kind whatsoever, whether appointed in 
admiralty, bankruptcy, common law or equity proceedings, shall be 
appointed, by a decree of a court of competent jurisdiction, with 
respect to any Vessel, or all or substantially all of the Shipowner's 
or any guarantor's property, and such decree shall have continued 
unstayed, on appeal or otherwise, and in effect for a period of 60 
days;

12. New Section 8(f) of the Reserve Fund and Financial Agreement

    (f) Distributions for the Payment of Taxes. Provided that the 
Company is not then in Default under the Security Agreement and 
continues to retain its status as a Subchapter S Corporation, limited 
liability company, or other entity which enjoys the benefits of pass-
through taxation under the Internal Revenue Code (collectively, a 
``Pass-Through Entity''), the Company may distribute to its 
Shareholders, for the purpose of assisting them in their efforts to pay 
their estimated and final federal income taxes with respect to the 
current or immediately preceding fiscal year (or any prior fiscal year 
under audit) of Company operations, funds sufficient to cover the 
aggregate federal income taxes owed by the Company's Shareholders 
desiring a distribution in respect of the net income earned by the 
Company, to be calculated in the following manner:
    (1) In the case of year-end final tax returns:
    (A) Each Shareholder desiring a distribution for federal income 
taxes shall calculate its federal income tax return (the Return) based 
on all of the Shareholder's deductions, credits and other adjustments, 
including, but not limited to, all of the Shareholder's allocable share 
of the Company's net income and other tax attributes. The Return shall 
be the income tax return that the Shareholder actually files with the 
Internal Revenue Service (IRS). The Shareholder shall also calculate 
its federal income tax return (the Pro Forma Return) based on all of 
the Shareholder's deductions, credits and other adjustments, excluding 
all of the Shareholder's allocable share of the Company's net income 
and other tax attributes;
    (B) The Shareholder shall subtract the Pro Forma Return from the 
Return and certify, in writing, to MARAD and the Company, the 
difference as the amount of federal income tax for which the 
Shareholder is liable with respect to the Shareholder's ownership 
interest in the Company (the Amount Due) and shall attach a copy of IRS 
Form K-1 to the certification. The certification required by this 
subsection may be based on advice from the Shareholder's accountant or 
other tax advisor. The sum of each requesting Shareholder's Amount Due 
with respect to a particular fiscal year of the Company shall be 
referred to as the Total Amount Due for such fiscal year; and
    (C) The Company may distribute to its Shareholders, with respect to 
each fiscal year, an amount not to exceed the Total Amount Due for such 
fiscal year in a manner consistent with the Company's continued 
retention of its status as a Subchapter S Corporation or other Pass-
Through Entity.
    (2) In the case of quarterly estimated tax payments:
    (A) Each Shareholder desiring a distribution for the payment of 
quarterly estimated federal income taxes shall calculate its estimated 
quarterly federal income tax payment then due to be paid based on all 
of the Shareholder's estimated deductions, credits and other 
adjustments, including but not limited to all of the Shareholder's 
allocable share of the Company's net income and other tax attributes 
(Estimated Tax) and shall also calculate its estimate of what the 
quarterly estimated federal income tax payment would be based on all of 
the Shareholder's estimated deductions, credits and other adjustments, 
excluding all of the Shareholder's allocable share of the Company's net 
income and other tax attributes (Pro Forma Estimated Tax);
    (B) The Shareholder shall subtract the Pro Forma Estimated Tax from 
the Estimated Tax and certify, in writing, to MARAD and the Company, 
the difference as the amount of estimated federal income tax for which 
the Shareholder is liable with respect to the Shareholder's ownership 
interest in the Company (the Estimated Amount Due), and shall attach a 
copy of the relevant IRS Estimated Tax Worksheet. The sum of each 
requesting Shareholder's Estimated Amount Due for any given fiscal 
quarter of the Company shall be referred to as the Total Estimated 
Amount Due for that fiscal quarter; and
    (C) With respect to each fiscal quarter, the Company may distribute 
to its Shareholders an aggregate amount not to exceed the Total 
Estimated Amount Due for such fiscal quarter in a manner consistent 
with the Company's continued retention of its status as a Subchapter S 
Corporation or other Pass-Through Entity.
    (3) If the total amount distributed for estimated and final income 
taxes with respect to any fiscal year of the Company exceeds the Total 
Amount Due for that fiscal year, no further distributions shall be 
allowed under this Section 8(f) until all the Shareholders shall have 
remitted to the Company their proportional share of the excessive 
distribution.
    (4) To the extent a Shareholder is required by law to pay state and 
local taxes in lieu of the Company's paying those taxes, distributions 
may be made by the Company to its Shareholders in the same manner, and 
subject to the same restrictions, as distributions with respect to 
federal income taxes are permitted hereunder.
    (5) No distributions may be accomplished under this Section 8(f) 
prior to the receipt by MARAD of all the certifications required of 
Shareholders herein. Upon the request of MARAD in writing, a 
Shareholder shall provide MARAD such additional information (including, 
but not limited to, copies of the Shareholder's relevant income tax 
returns as filed with the Internal Revenue Service) as MARAD may 
reasonably request (which information MARAD shall hold in confidence 
pursuant to 5 U.S.C. 552(b)(4) and subject to 18 U.S.C. 1905) to 
determine the validity of the Shareholder's certification. Upon the 
failure of any Shareholder to provide MARAD with such additional 
information (including the aforementioned income tax returns) within 30 
days of a written request from MARAD, no further distributions shall be 
allowed under this Section 8(f) above for final or estimated taxes 
until the requested information has been provided to MARAD.
(Authority: 49 CFR 1.66)

By Order of the Maritime Administrator.

    Dated: June 2, 2005.
Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 05-11316 Filed 6-7-05; 8:45 am]
BILLING CODE 4910-81-P